NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview
Elite
Pharmaceuticals, Inc. (the “Company” or “Elite”) was incorporated on October 1, 1997 under the laws of
the State of Delaware, and its wholly-owned subsidiary Elite Laboratories, Inc. (“Elite Labs”) which was incorporated
on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under
the laws of the State of Nevada. Elite Labs engages primarily in researching, developing and licensing proprietary orally administered,
controlled-release drug delivery systems and products with abuse deterrent capabilities and the manufacture of generic, oral dose
pharmaceuticals. The Company is equipped to manufacture controlled-release products on a contract basis for third parties and
itself, if and when the products are approved. These products include drugs that cover therapeutic areas for pain, allergy, bariatric
and infection. Research and development activities are done so with an objective of developing products that will secure marketing
approvals from the United States Food and Drug Administration (“FDA”), and thereafter, commercially exploiting such
products.
Principles
of Consolidation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) and in conformity with the instructions on Form 10-Q and Rule 8-03 of Regulation
S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Elite Laboratories, Inc.
All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated
financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management,
necessary for a fair presentation of such statements. The results of operations for the three months ended June 30, 2019 are not
necessarily indicative of the results that may be expected for the entire year.
Reclassifications
Certain
reclassifications have been made to the prior period financial statements to conform to the current period financial statement
presentation. These reclassifications had no effect on net earnings or cash flows as previously reported.
Going
Concern
At
June 30, 2019, the Company had unrestricted cash balances totaling $2.6 million. The Company has incurred losses and negative
cash flows from operations every, including operating losses of $1.1 million and $1.9 million for the three months ended June
30, 2019 and 2018, respectively. In addition, overall working capital, defined as current assets minus current liabilities decreased
by approximately $1.1 million during the three months ended June 30, 2019.
Based
on the foregoing, the Company has determined that there did appear to be evidence of substantial doubt of its ability to continue
as a going concern. To continue as a going concern, the Company will need to do some or all of the following, without limitation:
obtain additional financing, increase sales of existing products, bring additional products in the pipeline to market and/or reduce
expenses. The successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the
attainment of profitable operations are necessary for the Company to continue operations.
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements
included herein do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that
might be necessary if the Company is unable to continue as a going concern.
Segment
Information
Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 280”),
Segment Reporting
, establishes standards for reporting information about operating segments. Operating segments are defined as components of
an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision
maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief
operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of
the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the
Company.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
Company has determined that its reportable segments are products whose marketing approvals were secured via an Abbreviated New
Drug Applications (“ANDA”) and products whose marketing approvals were secured via a New Drug Application (“NDA”).
ANDA products are referred to as generic pharmaceuticals and NDA products are referred to as branded pharmaceuticals.
There
are currently no intersegment revenues. Asset information by operating segment is not presented below since the chief operating
decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in
the preparation of the Company’s condensed unaudited consolidated financial statements. Please see Note 15 for further details.
Revenue
Recognition
The
Company generates revenue from the development of pain management products, manufacturing of a line of generic pharmaceutical
products with approved ANDA, commercialization of products either by license and the collection of royalties, or through the manufacture
of formulations and the development of new products and the expansion of licensing agreements with other pharmaceutical companies,
including co-development projects, joint ventures and other collaborations. The Company also generates revenue through its focus
on the development of various types of drug products, including branded drug products which require NDAs.
Under
ASC 606,
Revenue from Contacts with Customers
(“ASC 606”), the Company recognizes revenue when the customer
obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in
exchange for those goods or services. The Company recognize revenues following the five-step model prescribed under ASC 606: (i)
identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or
as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable
that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services
promised within each contract and determines those that are performance obligations and assesses whether each promised good or
service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective
performance obligation when (or as) the performance obligation is satisfied. Sales, value add, and other taxes collected on behalf
of third parties are excluded from revenue.
Nature
of goods and services
The
following is a description of the Company’s goods and services from which the Company generates revenue, as well as the
nature, timing of satisfaction of performance obligations, and significant payment terms for each, as applicable:
a)
Manufacturing Fees
The
Company is equipped to manufacture controlled-release products on a contract basis for third parties, if, and when, the products
are approved. These products include products using controlled-release drug technology and products utilizing abuse deterrent
technologies. The Company also develops and markets (either on its own or by license to other companies) generic and proprietary
controlled-release and abuse deterrent pharmaceutical products.
The
Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping
terms of the contract. Revenue on product are presented gross because the Company is primarily responsible for fulfilling the
promise to provide the product, is responsible to ensure that the product is produced in accordance with the related supply agreement
and bears risk of loss while the inventory is in-transit to the commercial partner. Revenue is measured as the amount of consideration
the Company expects to receive in exchange for transferring products to a customer.
b)
License Fees
The
Company enters into licensing and development agreements, which may include multiple revenue generating activities, including
milestones payments, licensing fees, product sales and services. The Company analyzes each element of its licensing and development
agreements in accordance with ASC 606 to determine appropriate revenue recognition. The terms of the license agreement may include
payment to the Company of licensing fees, non-refundable upfront license fees, milestone payments if specified objectives are
achieved, and/or royalties on product sales.
If
the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated
relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines
standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling
price is not observable through past transactions, the Company estimates the standalone selling price taking into account available
information such as market conditions and internally approved pricing guidelines related to the performance obligations.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
Company recognizes revenue from non-refundable upfront payments at a point in time, typically upon fulfilling the delivery of
the associated intellectual property to the customer. For those milestone payments which are contingent on the occurrence of particular
future events (for example, payments due upon a product receiving FDA approval), the Company determined that these need to be
considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration
using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind
achieving each milestone. Given the inherent uncertainty of the occurrence of future events, the Company will not recognize revenue
from the milestone until there is not a high probability of a reversal of revenue, which typically occurs near or upon achievement
of the event.
Significant
management judgment is required to determine the level of effort required under an arrangement and the period over which the Company
expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance
obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably
make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up
method.
When
determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly
before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in
ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the
Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s
contracts contained a significant financing component as of June 30, 2019.
In
accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the customer’s products occurs.
Disaggregation
of revenue
In
the following table, revenue is disaggregated by type of revenue generated by the Company and timing of revenue recognition. The
table also includes a reconciliation of the disaggregated revenue with the reportable segments:
|
|
For the Three Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
NDA:
|
|
|
|
|
|
|
Licensing fees
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
Total NDA revenue
|
|
|
250,000
|
|
|
|
250,000
|
|
ANDA:
|
|
|
|
|
|
|
|
|
Manufacturing fees
|
|
$
|
2,927,358
|
|
|
$
|
1,541,858
|
|
Licensing fees
|
|
|
181,882
|
|
|
|
375,840
|
|
Total ANDA revenue
|
|
|
3,109,240
|
|
|
|
1,917,698
|
|
Total revenue
|
|
$
|
3,359,240
|
|
|
$
|
2,167,698
|
|
Collaborative
Arrangements
Contracts
are considered to be collaborative arrangements when they satisfy the following criteria defined in ASC 808,
Collaborative
Arrangements
:
|
●
|
The
parties to the contract must actively participate in the joint operating activity; and,
|
|
|
|
|
●
|
The
joint operating activity must expose the parties to the possibility of significant risk and rewards, based on whether or not
the activity is successful.
|
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
Company entered into a sales and distribution licensing agreement with Epic Pharma LLC, (“Epic”) dated June 4, 2015
(the “2015 Epic License Agreement”), which has been determined to satisfy the criteria for consideration as a collaborative
agreement, and is accounted for accordingly, in accordance with GAAP.
The
Company entered into a Master Development and License Agreement with SunGen Pharma LLC dated August 24, 2016 (the “SunGen
Agreement”), which has been determined to satisfy the criteria for consideration as a collaborative agreement, and is accounted
for accordingly, in accordance with GAAP.
Cash
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash
and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash
equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances.
Restricted
Cash
As
of June 30, 2019, and March 31, 2019, the Company had $398,125 of restricted cash, related to debt service reserve in regard to
the New Jersey Economic Development Authority (“NJEDA”) bonds (see Note 5).
Accounts
Receivable
Accounts
receivable are comprised of balances due from customers, net of estimated allowances for uncollectible accounts. In determining
collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate
allowances.
Inventory
Inventory
is recorded at the lower of cost or market on specific identification by lot number basis.
Long-Lived
Assets
The
Company periodically evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever
events or changes in circumstances indicate that its carrying amounts may not be recoverable.
Property
and equipment are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of
the respective assets which range from three to forty years. Major repairs or improvements are capitalized. Minor replacements
and maintenance and repairs which do not improve or extend asset lives are expensed currently.
Upon
retirement or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the
resulting gain or loss, if any, is recognized in income.
Intangible
Assets
The
Company capitalizes certain costs to acquire intangible assets; if such assets are determined to have a finite useful life they
are amortized on a straight-line basis over the estimated useful life. Costs to acquire indefinite lived intangible assets, such
as costs related to ANDAs are capitalized accordingly.
The
Company tests its intangible assets for impairment at least annually (as of March 31st) and whenever events or circumstances change
that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment
has occurred. Such indicators may include, among others and without limitation: a significant decline in the Company’s expected
future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant
adverse change in legal factors or in the business climate of the Company’s segments; unanticipated competition; and slower
growth rates.
As
of June 30, 2019, the Company did not identify any indicators of impairment.
Please
also see Note 4 for further details on intangible assets.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Research
and Development
Research
and development expenditures are charged to expense as incurred.
Contingencies
Occasionally,
the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records
a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be
reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the
Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of
the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation
allowance to reduce any deferred tax assets that it determines will not be realizable in the future.
Warrants
and Preferred Shares
The
accounting treatment of warrants and preferred share series issued is determined pursuant to the guidance provided by ASC 470,
Debt
, ASC 480,
Distinguishing Liabilities from Equity
, and ASC 815,
Derivatives and Hedging
, as applicable.
Each feature of a freestanding financial instruments including, without limitation, any rights relating to subsequent dilutive
issuances, dividend issuances, equity sales, rights offerings, forced conversions, optional redemptions, automatic monthly conversions,
dividends and exercise are assessed with determinations made regarding the proper classification in the Company’s financial
statements.
Stock-Based
Compensation
The
Company accounts for stock-based compensation in accordance with ASC 718,
Compensation-Stock Compensation
. Under the fair
value recognition provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award
and is recognized as an expense on a straight-line basis over the requisite service period, based on the terms of the awards.
The cost of the stock-based payments to nonemployees that are fully vested and non-forfeitable as at the grant date is measured
and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized
over the contractual term.
In
accordance with the Company’s Director compensation policy and certain employment contracts, director’s fees and a
portion of employee’s salaries are to be paid via the issuance of shares of the Company’s common stock, in lieu of
cash, with the valuation of such share being calculated on a quarterly basis and equal to the average closing price of the Company’s
common stock.
Earnings
(Loss) Per Share Attributable to Common Shareholders’
The
Company follows ASC 260,
Earnings Per Share
, which requires presentation of basic and diluted earnings (loss) per share
(“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.
In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the period. Diluted EPS excluded all potential dilutive shares if
their effect was anti-dilutive.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
following is the computation of earnings (loss) per share applicable to common shareholders for the periods indicated:
|
|
For the Three Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Numerator
|
|
|
|
|
|
|
Net loss attributable to common shareholders - basic
|
|
$
|
279,702
|
|
|
$
|
(1,687,766
|
)
|
Effect of dilutive instrument on net loss
|
|
|
(1,522,031
|
)
|
|
|
-
|
|
Net loss attributable to common shareholders - diluted
|
|
$
|
(1,242,329
|
)
|
|
$
|
(1,687,766
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding - basic
|
|
|
827,524,981
|
|
|
|
803,049,238
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options, warrants and convertible securities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding - diluted
|
|
|
827,524,981
|
|
|
|
803,049,238
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to common shareholders
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Fair
Value of Financial Instruments
ASC
820,
Fair Value Measurements and Disclosures
(“ASC 820”) provides a framework for measuring fair value in accordance
with generally accepted accounting principles.
ASC
820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that distinguishes between (1)
market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an
entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances
(unobservable inputs).
The
fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the
fair value hierarchy under ASC 820 are described as follows:
|
●
|
Level
1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement
date.
|
|
●
|
Level
2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable
for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation
or other means.
|
|
●
|
Level
3 – Inputs that are unobservable for the asset or liability.
|
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Measured
on a Recurring Basis
The
following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level
in the fair value hierarchy within which those measurements fell:
|
|
Amount at
|
|
|
Fair Value Measurement Using
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments – warrants
|
|
$
|
965,799
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
965,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments – warrants
|
|
$
|
2,487,830
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,487,830
|
|
See
Note 11, for specific inputs used in determining fair value.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses
and other current assets, accounts payable and accrued expenses, approximate their fair values because of the short maturity of
these instruments. Based upon current borrowing rates with similar maturities the carrying value of long-term debt approximates
fair value.
Non-Financial
Assets that are Measured at Fair Value on a Non-Recurring Basis
Non-financial
assets such as intangible assets, and property and equipment are measured at fair value only when an impairment loss is recognized.
The Company did not record an impairment charge related to these assets in the periods presented.
Treasury
Stock
The
Company records treasury stock at the cost to acquire it and includes treasury stock as a component of shareholders’ deficit.
Recently
Adopted Accounting Pronouncements
The
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,
Leases
(Topic 842
) in February 2016 and subsequent ASUs in 2018 and 2019 (collectively referred to as “Topic 842”) on
the treatment of leases, which guidance is effective for annual reporting periods beginning after December 15, 2019 and early
adoption is permitted. Under Topic 842, lessees will be required to recognize the following for all leases (with the exception
of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents
the lessee’s right to use, or control the use of, a specified asset for the lease term. Entities are allowed to apply Topic
842 using a modified retrospective approach either (1) retrospectively to each reporting period presented in the financial statements
with the cumulative effect adjustment recognized at the beginning of the earliest comparative period; or (2) retrospectively at
the beginning of the period of adoption through a cumulative-effective adjustment. The modified retrospective approach
includes a number of optional practical expedients that entities may elect to apply.
On
April 1, 2019, the Company adopted Topic 842 using the modified retrospective basis with a cumulative-effect adjustment at the
beginning of the period of adoption and therefore did not revise prior period information or disclosure. Further, the
Company elected the package of practical expedients upon transition that allows the Company not to reassess the lease classification
for expired and existing leases, whether initial direct costs qualify for capitalization for any expired or existing leases or
whether any expired contracts are or contain leases. The adoption of ASU 2016-02 resulted in the recognition of operating
leases and lease liabilities of approximately $0.5 million on the condensed consolidated balance sheet as of April 1, 2019.
The operating leases and lease liabilities relate to a real estate lease.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
impact of the adoption of Topic 842 on the accompanying condensed consolidated balance sheet as of April 1, 2019 was as follows:
|
|
March 31,
2019
|
|
|
Adoption adjustment
|
|
|
April 1,
2019
|
|
Operating lease – right to use asset
|
|
$
|
-
|
|
|
$
|
554,088
|
|
|
$
|
554,088
|
|
Deferred rent liability
|
|
|
13,022
|
|
|
|
(13,022
|
)
|
|
|
-
|
|
Lease obligation – operating lease
|
|
|
-
|
|
|
|
191,817
|
|
|
|
191,817
|
|
Lease obligation – operating lease, net of current portion
|
|
|
-
|
|
|
|
375,293
|
|
|
|
375,293
|
|
See
additional lease disclosures in Note 9.
Recently
Issued Accounting Pronouncements
In
May 2019, the FASB issued ASU 2019-05,
Financial Instruments - Credit Losses (Topic 326), Targeted Transition Relief
. The
ASU allows companies to elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that were previously
recorded at amortized cost and are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under
ASC 825-10. The ASU is effective when the entity adopts ASU 2016-13.
In
November 2018, the FASB issued ASU 2018-19,
Codification Improvements to Topic 326, Financial Instruments - Credit Losses
.
The ASU changes the effective date of ASU 2016-13, Financial Instruments - Credit Losses, to fiscal years beginning after December
15, 2019, including interim periods within those fiscal years.
In
June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on
Financial Instruments
(“ASU 2016-13”). The standard changes the methodology for measuring credit losses on financial
instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those
years, beginning after December 15, 2018. The Company is currently evaluating the impact the standard will have on our consolidated
financial statements.
Management
has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have
a significant impact on our consolidated financial statements and related disclosures.
NOTE
2. INVENTORY
Inventory
consisted of the following:
|
|
June 30,
2019
|
|
|
March 31,
2019
|
|
Finished goods
|
|
$
|
142,097
|
|
|
$
|
575,699
|
|
Work-in-progress
|
|
|
271,724
|
|
|
|
189,069
|
|
Raw materials
|
|
|
4,125,893
|
|
|
|
3,750,955
|
|
|
|
|
4,539,714
|
|
|
|
4,515,723
|
|
Less: Inventory reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
4,539,714
|
|
|
$
|
4,515,723
|
|
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE
3. PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following:
|
|
June 30,
2019
|
|
|
March 31, 2019
|
|
Land, building and improvements
|
|
$
|
5,260,524
|
|
|
$
|
5,260,523
|
|
Laboratory, manufacturing, warehouse and transportation equipment
|
|
|
12,101,219
|
|
|
|
12,078,340
|
|
Office equipment and software
|
|
|
373,601
|
|
|
|
373,601
|
|
Furniture and fixtures
|
|
|
383,103
|
|
|
|
383,103
|
|
|
|
|
18,118,447
|
|
|
|
18,095,567
|
|
Less: Accumulated depreciation
|
|
|
(9,979,126
|
)
|
|
|
(9,651,718
|
)
|
|
|
$
|
8,139,321
|
|
|
$
|
8,443,849
|
|
Depreciation
expense was $327,408 and $300,167 for the three months ended June 30, 2019 and 2018, respectively.
NOTE
4. INTANGIBLE ASSETS
The
following table summarizes the Company’s intangible assets:
|
|
June 30, 2019
|
|
|
Estimated
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
Carrying
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
Life
|
|
Amount
|
|
|
Additions
|
|
|
Reductions
|
|
|
Amortization
|
|
|
Value
|
|
Patent application costs
|
|
*
|
|
$
|
465,684
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
|
|
|
$
|
465,684
|
|
ANDA acquisition costs
|
|
Indefinite
|
|
|
6,168,351
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,168,351
|
|
|
|
|
|
$
|
6,634,035
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,634,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
|
Estimated
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Net
Book
|
|
|
|
Life
|
|
|
Amount
|
|
|
|
Additions
|
|
|
|
Reductions
|
|
|
|
Amortization
|
|
|
|
Value
|
|
Patent application costs
|
|
*
|
|
$
|
465,684
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
465,684
|
|
ANDA acquisition costs
|
|
Indefinite
|
|
|
7,247,317
|
|
|
|
-
|
|
|
|
(1,078,966
|
)
|
|
|
-
|
|
|
|
6,168,351
|
|
|
|
|
|
$
|
7,713,001
|
|
|
$
|
-
|
|
|
$
|
(1,078,966
|
)
|
|
$
|
-
|
|
|
$
|
6,634,035
|
|
Patent
application costs were incurred in relation to the Company’s abuse deterrent opioid technology. Amortization of the patent
costs will begin upon the issuance of marketing authorization by the FDA. Amortization will then be calculated on a straight-line
basis through the expiry of the related patent(s).
NOTE
5. NJEDA BONDS
During
August 2005, the Company refinanced a bond issue occurring in 1999 through the issuance of Series A and B Notes tax-exempt bonds
(the “NJEDA Bonds” and/or “Bonds”). During July 2014, the Company retired all outstanding Series B Notes,
at par, along with all accrued interest due and owed.
In
relation to the Series A Notes, the Company is required to maintain a debt service reserve. The debt serve reserve is classified
as restricted cash on the accompanying unaudited condensed consolidated balance sheets. The NJEDA Bonds require the Company to
make an annual principal payment on September 1
st
based on the amount specified in the loan documents and semi-annual
interest payments on March 1
st
and September 1
st
, equal to interest due on the outstanding principal. The
annual interest rate on the Series A Note is 6.5%. The NJEDA Bonds are collateralized by a first lien on the Company’s facility
and equipment acquired with the proceeds of the original and refinanced bonds.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
following tables summarize the Company’s bonds payable liability:
|
|
June 30,
2019
|
|
|
March 31, 2019
|
|
Gross bonds payable
|
|
|
|
|
|
|
NJEDA Bonds - Series A Notes
|
|
$
|
1,670,000
|
|
|
$
|
1,670,000
|
|
Less: Current portion of bonds payable (prior to deduction of bond offering costs)
|
|
|
(95,000
|
)
|
|
|
(95,000
|
)
|
Long-term portion of bonds payable (prior to deduction of bond offering costs)
|
|
$
|
1,575,000
|
|
|
$
|
1,575,000
|
|
|
|
|
|
|
|
|
|
|
Bond offering costs
|
|
$
|
354,453
|
|
|
$
|
354,453
|
|
Less: Accumulated amortization
|
|
|
(196,136
|
)
|
|
|
(192,591
|
)
|
Bond offering costs, net
|
|
$
|
158,317
|
|
|
$
|
161,862
|
|
|
|
|
|
|
|
|
|
|
Current portion of bonds payable - net of bond offering costs
|
|
|
|
|
|
|
|
|
Current portions of bonds payable
|
|
$
|
95,000
|
|
|
$
|
95,000
|
|
Less: Bonds offering costs to be amortized in the next 12 months
|
|
|
(14,178
|
)
|
|
|
(14,178
|
)
|
Current portion of bonds payable, net of bond offering costs
|
|
$
|
80,822
|
|
|
$
|
80,822
|
|
|
|
|
|
|
|
|
|
|
Long term portion of bonds payable - net of bond offering costs
|
|
|
|
|
|
|
|
|
Long term portion of bonds payable
|
|
$
|
1,575,000
|
|
|
$
|
1,575,000
|
|
Less: Bond offering costs to be amortized subsequent to the next 12 months
|
|
|
(144,140
|
)
|
|
|
(147,685
|
)
|
Long term portion of bonds payable, net of bond offering costs
|
|
$
|
1,430,860
|
|
|
$
|
1,427,315
|
|
Amortization
expense was $3,545 and $3,544 for the three months ended June 30, 2019 and 2018, respectively.
NOTE
6. LOANS PAYABLE
Loans
payable consisted of the following:
|
|
June 30,
2019
|
|
|
March 31, 2019
|
|
Equipment and insurance financing loans payable, between 3.5% and 12.73% interest and maturing between July 2019 and December 2023
|
|
$
|
1,065,911
|
|
|
$
|
1,272,298
|
|
Less: Current portion of loans payable
|
|
|
(458,807
|
)
|
|
|
(573,029
|
)
|
Long-term portion of loans payable
|
|
$
|
607,104
|
|
|
$
|
699,269
|
|
The
interest expense associated with the loans payable was $24,087 and $24,043 for the three months ended June 30, 2019 and 2018,
respectively.
NOTE
7. RELATED PARTY SECURED PROMISSORY NOTE WITH MIKAH PHARMA LLC
For
consideration of the assets acquired on May 15, 2017, the Company issued a Secured Promissory Note (the “Note”) to
Mikah for the principal sum of $1,200,000. The Note matures on December 31, 2020 in which the Company shall pay the outstanding
principal balance of the Note. Interest shall be computed on the unpaid principal amount at the per annum rate of ten percent
(10%); provided, upon the occurrence of an Event of Default as defined within the Note, the principal balance shall bear interest
from the date of such occurrence until the date of actual payment at the per annum rate of fifteen percent (15%). All interest
payable hereunder shall be computed on the basis of actual days elapsed and a year of 360 days. Installment payments of interest
on the outstanding principal shall be paid as follows: quarterly commencing August 1, 2017 and on November 1, February 1, May
1 and August 1 of each year thereafter. No principal or interest payments have been made on the Note since its issuance. All unpaid
principal and accrued but unpaid interest shall be due and payable in full on the Maturity Date. The interest expense associated
with the Note was $30,000 and $15,000 for the three months ended June 30, 2019 and 2018, respectively. Accrued interest due and
owing on this note was $255,000 and $225,000 as of June 30, 2019 and March 31, 2019, respectively.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE
8. DEFERRED REVENUE
Deferred
revenues in the aggregate amount of $998,890 as of June 30, 2019, were comprised of a current component of $930,000 and a long-term
component of $68,890. Deferred revenues in the aggregate amount of $1,252,223 as of March 31, 2019, were comprised of a current
component of $1,013,333 and a long-term component of $238,890. These line items represent the unamortized amounts of a $200,000
advance payment received for a TAGI licensing agreement with a fifteen-year term beginning in September 2010 and ending in August
2025 and the $5,000,000 advance payment Epic Collaborative Agreement with a five-year term beginning in June 2015 and ending in
May 2020. These advance payments were recorded as deferred revenue when received and are earned, on a straight-line basis over
the life of the licenses. The current component is equal to the amount of revenue to be earned during the 12-month period immediately
subsequent to the balance date and the long-term component is equal to the amount of revenue to be earned thereafter.
NOTE
9. COMMITMENTS AND CONTINGENCIES
Occasionally,
the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records
a provision for a liability when it believes that is both probable that a liability has been incurred, and the amount can be reasonably
estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s
condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can
involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
Operating
Leases – 135 Ludlow Ave.
The
Company entered into an operating lease for a portion of a one-story warehouse, located at 135 Ludlow Avenue, Northvale, New Jersey
(the “135 Ludlow Ave. lease”). The 135 Ludlow Ave. lease is for approximately 15,000 square feet of floor space and
began on July 1, 2010. During July 2014, the Company modified the 135 Ludlow Ave. lease in which the Company was permitted to
occupy the entire 35,000 square feet of floor space in the building (“135 Ludlow Ave. modified lease”).
The
135 Ludlow Ave. modified lease includes an initial term, which expired on December 31, 2016 with two tenant renewal options of
five years each, at the sole discretion of the Company. On June 22, 2016, the Company exercised the first of these renewal options,
with such option including a term that begins on January 1, 2017 and expires on December 31, 2021.
The
135 Ludlow Ave. property required significant leasehold improvements and qualifications, as a prerequisite, for its intended future
use. Manufacturing, packaging, warehousing and regulatory activities are currently conducted at this location. Additional renovations
and construction to further expand the Company’s manufacturing resources are in progress.
The
Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases
or that contain a lease that is accounted for separately, the Company determines the classification and initial measurement of
the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes
available for use. The Company has elected to account for non-lease components associated with our leases and lease
components as a single lease component.
The
Company recognizes a right-of use asset, which represents the Company’s right to use the underlying asset for the lease
term, and a lease liability, which represents the present value of the Company’s obligation to make payments arising over
the lease term. The present value of the lease payments is calculated using either the implicit interest rate in the
lease or an incremental borrowing rate.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Lease
assets and liabilities are classified as follows on the condensed consolidated balance sheet at June 30, 2019:
Lease
|
|
Classification
|
|
|
Balance at June 30, 2019
|
|
Assets
|
|
|
|
|
|
|
Operating
|
|
Operating lease – right to use asset
|
|
$
|
507,452
|
|
Total leased assets
|
|
|
|
$
|
507,452
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Operating
|
|
Lease obligation – operating lease
|
|
$
|
195,812
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
|
|
|
|
Operating
|
|
Lease obligation – operating lease, net of current portion
|
|
|
324,684
|
|
Total lease liabilities
|
|
|
|
$
|
520,496
|
|
Rent
expense is recorded on the straight-line basis. Rent expense under the 135 Ludlow Ave. modified lease for the three months ended
June 30, 2019 and 2018 was $54,888. Rent expense is recorded in general and administrative expense in the unaudited condensed
consolidated statements of operations. The table below show the future minimum rental payments, exclusive of taxes, insurance
and other costs, under the 135 Ludlow Ave. modified lease:
Years ending March 31,
|
|
Amount
|
|
2020
|
|
$
|
165,762
|
|
2021
|
|
|
225,063
|
|
2022
|
|
|
171,315
|
|
Total future minimum lease payments
|
|
|
562,140
|
|
Less: interest
|
|
|
(41,644
|
)
|
Present value of lease payments
|
|
$
|
520,496
|
|
The
weighted-average remaining lease term and the weighted-average discount rate of our lease was as follows:
Lease Term and Discount Rate
|
|
June 30, 2019
|
|
Remaining lease term (years)
|
|
|
|
Operating leases
|
|
|
2.5
|
|
|
|
|
|
|
Discount rate
|
|
|
|
|
Operating leases
|
|
|
6
|
%
|
The
Company has an obligation for the restoration of its leased facility and the removal or dismantlement of certain property and
equipment as a result of its business operation in accordance with ASC 410,
Asset Retirement and Environmental Obligations
– Asset Retirement Obligations
. The Company records the fair value of the asset retirement obligation in the period
in which it is incurred. The Company increases, annually, the liability related to this obligation. The liability is accreted
to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, the Company records either a gain or loss. As of June 30, 2019, and March 31, 2019, the Company had a liability
of $46,908 and $33,383, respectively and recorded as a component of other long-term liabilities.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE
10. MEZZANINE EQUITY
Series
J convertible preferred stock
On
April 28, 2017, the Company created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction
with the Certificate of Designations (“Series J COD”). A total of 50 shares of Series J Preferred were authorized,
24.0344 shares are issued and outstanding, with a stated value of $1,000,000 per share and a par value of $0.01 as of June 30,
2019.
The
issued shares were pursuant to an Exchange Agreement with Nasrat Hakim, (“Hakim”) a related party and the Company’s
President, CEO and Chairman of the Board of Directors Pursuant to the Exchange Agreement the Company exchanged 158,017,321 shares
of Common Stock for 24.0344 shares of Series J Preferred and warrants to purchase 79,008,661 shares of common stock at $0.1521
per share. The aggregate stated value of the Series J Preferred issued was equal to the aggregate value of the shares of common
stock exchanged, with such value of each share of Common Stock exchanged being equal to the closing price of the Common Stock
on April 27, 2017. In connection with the Exchange Agreement, the Company also issued warrants to purchase 79,008,661 shares of
common stock at $0.1521 per share, and such warrants are classified as liabilities on the accompanying unaudited condensed consolidated
balance sheet as of June 30, 2019 (See Note 11).
Each
Series J Preferred is convertible at the option of the holder into shares of common stock, that is the earlier of (i) the date
that shareholder approval is obtained, and the requisite corporate action has been effected regarding a Fundamental Transaction
(as defined in the Series J COD); or (ii) not less than three years subsequent to the Original Issue Date (the date of the first
issuance of any shares of the Series J Preferred Stock) (the “Conversion Date”). The number of common shares is calculated
by dividing the Stated Value of such share of Series J Preferred by the Conversion Price. The conversion price for the Series
J Preferred shall equal $0.1521, subject to adjustment as discussed below.
Based
on the current conversion price, the Series J Preferred is convertible into 158,017,321 shares of common stock. The conversion
price is subject to the following adjustments: (i) stock dividends and splits, (ii) sale or grant of shares below the conversion
price, (iii) pro rata distributions; or (iv) fundamental changes (merger, consolidation, or sale of all or substantially all assets).
If
upon any Conversion Date there is not a sufficient number of authorized shares of Common Stock (that are not issued, outstanding
or reserved for issuance) available to effect the entire conversion of the then outstanding shares of Series J Preferred Stock
and the then outstanding common stock purchase warrants issued in conjunction therewith (an “Authorized Share Deficiency”),
such conversion shall not exceed the Issuable Maximum (as defined in the Series J COD); however, the Company shall use its best
efforts to obtain shareholder approval within two (2) years of the date of first issuance of Series J Preferred Stock to permit
the balance of the conversion. If shareholder approval is not obtained due to an insufficient number of shareholder votes for
passage, the Company shall continue to solicit for shareholder approval annually thereafter. As of June 30, 2019, the Company
does not have a sufficient number of unreserved authorized shares to effect the entire conversion, notwithstanding that the earliest
possible Conversion Date is April 28, 2020.
Solely
during any period of time during which an Authorized Share Deficiency exists commencing on or after the fourth anniversary of
the Original Issue Date (“Dividend Commencement Date” and collectively the “Dividend Entitlement Period”),
holders of Series J Preferred shall be entitled to receive, and the Company shall pay, dividends at the rate per share (as a percentage
of the Stated Value per share) of 20% per annum, payable quarterly, in arrears, on January 1, April 1, July 1 and October 1, in
cash or duly authorized, validly issued, fully paid and non-assessable shares of Series J Preferred, or a combination thereof
(the amount to be paid in shares of Series J Preferred, the “Dividend Share Amount”). The form of dividend payments
to each holder shall be made, at the option of the Holders, (i) in cash, to the extent that funds are legally available for the
payment of dividends in cash, (ii) in shares of Series J Preferred Stock, or (iii) a combination thereof. The Series J Preferred
shall rank senior to the common stock with respect to payment of dividends and pari passu to the common stock with respect to
liquidation, dissolution or winding up of the Company.
The
holders of the Series J Preferred shall have voting rights on any matter presented to the shareholders of the Company for their
action or consideration at any meeting of shareholders of the Company (or by written consent of shareholders in lieu of meeting).
Each holder shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares
of Series J Preferred held by the holder are convertible as of the record date for determining the shareholders entitled to vote
on such matter regardless of whether an Authorized Share Deficiency Exists.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
Company has determined that the Series J Preferred host instrument was more akin to equity than debt and that the above identified
conversion feature, subject to adjustments, was clearly and closely related to the host instrument, and accordingly bifurcation
and classification of the conversion feature as a derivative liability was not required. The Company has accounted for the Series
J Preferred as contingently redeemable preferred stock for which redemption is not probable. Accordingly, the Series J Preferred
is presented in mezzanine equity based on their initial measurement amount (fair value), as required by ASC 480-10-S99,
Distinguishing
Liabilities from Equity – SEC Materials
. No subsequent adjustment of the initial measurement amounts for these contingently
redeemable Series J Preferred is necessary unless the redemption of the Series J Preferred becomes probable. Accordingly, the
amount presented as temporary equity for the contingently redeemable Series J Preferred outstanding is its issuance-date fair
value. The Series J Preferred was initially measured at its fair value, $13,903,960 at April 28, 2017.
The
fair value of the Series J Preferred issued by the Company pursuant to the exchange agreement was calculated using a Monte Carlo
Simulation of stock price and expected future behaviors related to shareholder approval provisions. The following are the key
assumptions used in the Monte Carlo Simulation:
|
|
April 28,
2017
|
|
Fair value of the Company’s common stock
|
|
$
|
0.1521
|
|
Conversion price
|
|
$
|
0.1521
|
|
Number of Series J Preferred issued
|
|
|
24.0344
|
|
Fully diluted shares outstanding as of measurement date
|
|
|
923,392,780
|
|
Risk-free rate
|
|
|
2.30
|
%
|
Volatility
|
|
|
90
|
%
|
Shareholder approval threshold
|
|
$
|
0.1521
|
|
Probability of approval is ending stock price is greater than threshold - midpoint
|
|
|
82.50
|
%
|
Probability of approval is ending stock price is less than threshold - midpoint
|
|
|
17.50
|
%
|
Trials
|
|
|
200,000
|
|
Authorized, issued and
outstanding shares, along with carrying value and change in value are as follows:
|
|
June 30,
2019
|
|
|
March 31,
2019
|
|
Shares authorized
|
|
|
50.000
|
|
|
|
50.000
|
|
Shares outstanding
|
|
|
24.0344
|
|
|
|
24.0344
|
|
Par value
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Stated value
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
Conversion price
|
|
$
|
0.1521
|
|
|
$
|
0.1521
|
|
Common Stock to be issued upon conversion
|
|
|
158,017,321
|
|
|
|
158,017,321
|
|
Carrying value of Series J convertible preferred stock
|
|
$
|
13,903,960
|
|
|
$
|
13,903,960
|
|
NOTE
11. DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS
The
Company evaluates and accounts for its freestanding instruments in accordance with ASC 815,
Accounting for Derivative Instruments
and Hedging Activities
.
The
Company issued warrants, with terms of five to seven years, to various corporations and individuals, in connection with the sale
of securities, loan agreements and consulting agreements.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
A
summary of warrant activity is as follows:
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
|
|
Warrant Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Warrant Shares
|
|
|
Weighted Average Exercise Price
|
|
Balance at beginning of period
|
|
|
79,008,661
|
|
|
$
|
0.1521
|
|
|
|
79,008,661
|
|
|
$
|
0.1521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted pursuant to the issuance of Series J convertible preferred shares
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercised, forfeited and/or expired, net
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
|
79,008,661
|
|
|
$
|
0.1521
|
|
|
|
79,008,661
|
|
|
$
|
0.1521
|
|
The
fair value of the warrants issued prior to Fiscal 2018, all was calculated using the Black-Scholes model and the following assumptions:
|
|
March 31,
2017
|
|
Fair value of the Company’s common stock
|
|
$0.15
|
|
Volatility (based on the Company’s historical volatility)
|
|
72.5% - 73.1
%
|
|
Exercise price
|
|
$0.0625
|
|
Estimated life (in years)
|
|
1.0 - 1.1
|
|
Risk free interest rate (based on 1-year treasury rate)
|
|
1.02% - 1.03
%
|
|
On
April 28, 2017, the Company entered into an exchange agreement (the
“Exchange Agreement”
) with Nasrat
Hakim, the Chairman of the Board, President, and Chief Executive Officer of the Company, pursuant to which the Company issued
to Mr. Hakim 23.0344 shares of its newly designated Series J Convertible Preferred Stock (
“Series J
Preferred
”) and Warrants to purchase an aggregate of 79,008,661 shares of its Common Stock (the “Series J
Warrants” and, along with the Series J Preferred issued to Mr. Hakim, the “
Securities”
) in exchange
for 158,017,321 shares of Common Stock owned by Mr. Hakim. The fair value of the Series J Warrants was determined to be
$6,474,674 upon issuance at April 28, 2017.
The
Series J Warrants are exercisable for a period of 10 years from the date of issuance, commencing on the earlier of (i) the date
that Shareholder Approval is obtained, and the requisite corporate action has been effected; or (ii) April 28, 2020. The initial
exercise price is $0.1521 per share and the Series J Warrants can be exercised for cash or on a cashless basis. The exercise price
is subject to adjustment for any issuances or deemed issuances of common stock or common stock equivalents at an effective price
below the then exercise price. Such exercise price adjustment feature prohibits the Company from being able to conclude the warrants
are indexed to its own stock and thus such warrants are classified as liabilities and measured initially and subsequently at fair
value. The Series J Warrants also provide for other standard adjustments upon the happening of certain customary events. The Series
J Warrants are not exercisable during any period when an Authorized Share Deficiency exists and will expire on the expiry date,
without regards to the existence of an Authorized Shares Deficiency (see Note 10). As of June 30, 2019, the Company does not have
a sufficient number of unreserved authorized shares to effect the entire conversion of the Series J Preferred, therefore the Series
J Warrants are not currently exercisable. Please also see Note 10.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
fair value of the warrants issued by the Company pursuant to the issuance of Series J convertible preferred shares (79,008,661
warrant shares) was calculated using a Monte Carlo Simulation because of the probability assumptions associated with the Shareholder
Approval provisions. The following are the key assumptions used in the Monte Carlo Simulation:
|
|
June 30,
2019
|
|
|
March 31, 2019
|
|
Fair value of the Company’s common stock
|
|
$
|
0.0440
|
|
|
$
|
0.9900
|
|
Initial exercise price
|
|
$
|
0.1521
|
|
|
$
|
0.1521
|
|
Number of common warrants
|
|
|
79,008,661
|
|
|
|
79,008,661
|
|
Fully diluted shares outstanding as of measurement date
|
|
|
828,993,695
|
|
|
|
824,946,559
|
|
Warrant term (in years)
|
|
|
7.83
|
|
|
|
8.08
|
|
Risk-free rate
|
|
|
1.91
|
%
|
|
|
2.35
|
%
|
Volatility
|
|
|
90.00
|
%
|
|
|
90.00
|
%
|
Shareholder approval threshold
|
|
$
|
0.1580
|
|
|
$
|
0.1580
|
|
Probability of approval is ending stock price is greater than threshold - midpoint
|
|
|
82.50
|
%
|
|
|
82.50
|
%
|
Probability of approval is ending stock price is greater than threshold - midpoint
|
|
|
17.50
|
%
|
|
|
17.50
|
%
|
Trials
|
|
|
100,000
|
|
|
|
100,000
|
|
Fair value of derivative financial instruments - warrants
|
|
$
|
965,799
|
|
|
$
|
2,487,830
|
|
The
changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the three months ended June
30, 2019 were as follows:
Outstanding at March 31, 2019
|
|
$
|
2,487,830
|
|
Change in fair value of derivative financial instruments - warrants
|
|
|
(1,522,031
|
)
|
Balance at June 30, 2019
|
|
$
|
965,799
|
|
NOTE
12. SHAREHOLDERS’ EQUITY
Lincoln
Park Capital – April 10, 2014 Purchase Agreement
In
April 2014, the Company entered into a Purchase Agreement (the “
Lincoln Park Purchase Agreement
” and/or “
Purchase
Agreement
”) and a Registration Rights Agreement (the “
Registration Rights Agreement
”) with Lincoln
Park Capital Fund, LLC (“
Lincoln Park
”). Pursuant to the terms of the Purchase Agreement, Lincoln Park agreed
to purchase from the Company up to $40 million of common stock (subject to certain limitations) from time to time over a 36-month
period that ended June 1, 2017. Pursuant to the terms of the Registration Rights Agreement, the Company filed with the SEC registration
statements to register for resale under the Securities Act the shares that have been or may be issued to Lincoln Park under the
Purchase Agreement.
Upon
execution of the Purchase Agreement, the Company issued 1,928,641 shares of common stock to Lincoln Park pursuant to the Purchase
Agreement as consideration for its commitment to purchase additional shares of common stock under that agreement and the Company
was obligated to issue up to an additional 1,928,641 commitment shares to Lincoln Park pro rata as up to $40.0 million of common
stock purchased by Lincoln Park.
The
Purchase Agreement expired on June 1, 2017. During the term of the Purchase Agreement, the Company sold an aggregate of 110.6
million shares to Lincoln Park, for aggregate gross proceeds of approximately $27.0 million. In addition, the Company issued an
aggregate of 3.2 million commitment shares.
Lincoln
Park Capital – May 1, 2017 Purchase Agreement
On
May 1, 2017, the Company entered into a purchase agreement (the “
2017 LPC Purchase Agreement
”), together with
a registration rights agreement (the “
2017 LPC Registration Rights Agreement
”), with Lincoln Park.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Under
the terms and subject to the conditions of the 2017 LPC Purchase Agreement, the Company has the right to sell to and Lincoln Park
is obligated to purchase up to $40 million in shares of common stock, subject to certain limitations, from time to time, over
the 36-month period commencing on June 5, 2017. The Company may direct Lincoln Park, at its sole discretion and subject to certain
conditions, to purchase up to 500,000 shares of common stock on any business day, provided that at least one business day has
passed since the most recent purchase, increasing to up to 1,000,000 shares, depending upon the closing sale price of the common
stock (such purchases, “
Regular Purchases
”). However, in no event shall a Regular Purchase be more than $1,000,000.
The purchase price of shares of common stock related to the future funding will be based on the prevailing market prices of such
shares at the time of sales. In addition, the Company may direct Lincoln Park to purchase additional amounts as accelerated purchases
under certain circumstances. In the case of both Regular Purchases and accelerated purchases, the purchase price per share will
be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar
transaction occurring during the business days used to compute the purchase price. Sales of shares of common stock to Lincoln
Park under the 2017 LPC Purchase Agreement are limited to no more than the number of shares that would result in the beneficial
ownership by Lincoln Park and its affiliates, at any single point in time, of more than 4.99% of the then outstanding shares of
common stock.
In
connection with the 2017 LPC Purchase Agreement, the Company issued to Lincoln Park 5,540,551 shares of common stock and is required
to issue up to 5,540,551 additional shares of Common Stock pro rata as the Company requires Lincoln Park to purchase shares under
the 2017 LPC Purchase Agreement over the term of the agreement. Lincoln Park has represented to the Company, among other things,
that it is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act
of 1933, as amended (the “Securities Act”)). The Company sold the securities in reliance upon an exemption from registration
contained in Section 4(a)(2) under the Securities Act. The securities sold may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
The
2017 LPC Purchase Agreement and the 2017 LPC Registration Rights Agreement contain customary representations, warranties, agreements
and conditions to completing future sale transactions, indemnification rights and obligations of the parties. The Company has
the right to terminate the 2017 LPC Purchase Agreement at any time, at no cost or penalty. Actual sales of shares of common stock
to Lincoln Park under the 2017 LPC Purchase Agreement will depend on a variety of factors to be determined by us from time to
time, including, among others, market conditions, the trading price of the Common Stock and determinations by us as to the appropriate
sources of funding for us and our operations. There are no trading volume requirements or, other than the limitation on beneficial
ownership discussed above, restrictions under the 2017 LPC Purchase Agreement. Lincoln Park has no right to require any sales
by the Company but is obligated to make purchases from the Company as directed in accordance with the 2017 LPC Purchase Agreement.
Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of
the Company’s shares.
The
net proceeds received by the Company under the 2017 LPC Purchase Agreement will depend on the frequency and prices at which the
Company sells shares of common stock to Lincoln Park. A registration statement on
form S-3
was filed with the SEC on
May 10, 2017 and was declared effective on June 5, 2017.
During
the three months ended June 30, 2019, a total of 4,000,000 shares were sold to Lincoln Park pursuant to the 2017 LPC Agreement
for net proceeds totaling $340,300. In addition, 47,136 shares were issued to Lincoln Park as additional commitment shares, pursuant
to the 2017 LPC Agreement. During the three months ended June 30, 2018, a total of 2,000,000 shares were sold to Lincoln Park
pursuant to the 2017 LPC Agreement for net proceeds totaling $168,
200
. In addition, 23,297 shares were issued to Lincoln Park
as additional commitment shares, pursuant to the 2017 LPC Agreement.
NOTE
13. STOCK-BASED COMPENSATION
Part
of the compensation paid by the Company to its Directors and employees consists of the issuance of common stock or via the granting
of options to purchase common stock.
Stock-based
Director Compensation
The
Company’s Director compensation policy was instituted in October 2009 and further revised in January 2016, includes provisions
that a portion of director’s fees are to be paid via the issuance of shares of the Company’s common stock, in lieu
of cash, with the valuation of such shares being calculated on quarterly basis and equal to the average closing price of the Company’s
common stock.
During
the three months ended June 30, 2019, the Company did not issue any shares of common stock to its Directors in payment of director’s
fees.
During the three months
ended June 30, 2019, the Company accrued director’s fees totaling $22,500, which will be paid via cash payments totaling
$7,500 and the issuance of 185,124 shares of Common Stock.
As of June 30, 2019, the
Company owed its Directors a total of $45,000 in cash payments and 978,740 shares of Common Stock in payment of director fees
totaling $135,000 due and owing. The Company anticipates that these shares of Common Stock will be issued prior to the end of
the current fiscal year.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Stock-based
Employee/Consultant Compensation
Employment
contracts with the Company’s President and Chief Executive Officer, Chief Financial Officer and certain other employees
and engagement contracts with certain consultants include provisions for a portion of each employee’s salaries or consultant’s
fees to be paid via the issuance of shares of the Company’s Common Stock, in lieu of cash, with the valuation of such shares
being calculated on a quarterly basis and equal to the average closing price of the Company’s Common Stock.
During
the three months ended June 30, 2019, the Company did not issue any shares pursuant to employment contracts with the Company’s
President and Chief Executive Officer, Chief Financial Officer or certain other employees. During the three months ended June
30, 2019, the Company did not issue any shares pursuant to the engagement contracts with certain consultants.
During the three months
ended June 30, 2019, the Company accrued salaries totaling $201,250 owed to the Company’s President and Chief Executive Officer,
Chief Financial Officer and certain other employees which will be paid via the issuance of 2,483,740 shares of Common Stock.
As of June 30, 2019, the
Company owed its President and Chief Executive Officer, Chief Financial Officer and certain other employees’ salaries totaling
$1,707,500 which will be paid via the issuance of 17,166,262 shares of Common Stock.
Options
Under
its 2014 Stock Option Plan and prior options plans, the Company may grant stock options to officers, selected employees, as well
as members of the Board of Directors and advisory board members. All options have generally been granted at a price equal to or
greater than the fair market value of the Company’s Common Stock at the date of the grant. Generally, options are granted
with a vesting period of up to three years and expire ten years from the date of grant.
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Shares
Underlying
|
|
|
Weighted
Average
|
|
|
Remaining Contractual
|
|
|
Aggregate Intrinsic
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Term (in years)
|
|
|
Value
|
|
Outstanding at April 1, 2019
|
|
|
6,158,000
|
|
|
$
|
0.15
|
|
|
|
5.0
|
|
|
$
|
87,330
|
|
Forfeited and expired
|
|
|
(60,000
|
)
|
|
$
|
0.15
|
|
|
|
7.76
|
|
|
|
-
|
|
Outstanding at June 30, 2019
|
|
|
6,098,000
|
|
|
$
|
0.15
|
|
|
|
4.7
|
|
|
$
|
87,330
|
|
Exercisable at June 30, 2019
|
|
|
5,615,002
|
|
|
$
|
0.15
|
|
|
|
5
|
|
|
$
|
87,330
|
|
The
aggregate intrinsic value for outstanding options is calculated as the difference between the exercise price of the underlying
awards and the quoted price of the Company common stock as of June 30, 2019 and March 31, 2019 of $0.11 and $0.10, respectively.
NOTE
14. CONCENTRATIONS AND CREDIT RISK
Revenues
Four
customers accounted for substantially all the Company’s revenues for the three months ended June 30, 2019. These four customers
accounted for approximately 39%, 30%, 14%, and 12% of revenues each, respectively.
Three
customers accounted for substantially all the Company’s revenues for the three months ended June 30, 2018. These three customers
accounted for approximately 56%, 29% and 11% of revenues each, respectively.
Accounts
Receivable
Four
customers accounted for all of the Company’s accounts receivable as of June 30, 2019. These four customers accounted for
approximately 35%, 32%, 20%, and 13% of accounts receivable each, respectively.
Four
customers accounted for substantially all the Company’s accounts receivable as of March 31, 2019. These four customers accounted
for approximately 38%, 34%, 19%, and 4% of accounts receivable each, respectively.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Purchasing
Three
suppliers accounted for more than 83% of the Company’s purchases of raw materials for the three months ended June 30, 2019.
These three suppliers accounted for approximately 49%, 19% and 15% of purchases each, respectively.
Four
suppliers accounted for more than 90% of the Company’s purchases of raw materials for the three months ended June 30, 2018.
These four suppliers accounted for approximately 40%, 19%, 17% and 14% of purchases each, respectively.
NOTE
15. SEGMENT RESULTS
FASB
ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based
on the way a company’s management organized segments within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner
in which management disaggregates a company.
The
Company has determined that its reportable segments are Abbreviated New Drug Applications for generic products and NDAs for branded
products. The Company identified its reporting segments based on the marketing authorization relating to each and the financial
information used by its chief operating decision maker to make decisions regarding the allocation of resources to and the financial
performance of the reporting segments.
Asset
information by operating segment is not presented below since the chief operating decision maker does not review this information
by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s unaudited
condensed consolidated financial statements.
The
following represents selected information for the Company’s reportable segments:
|
|
For the Three Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Operating Income (Loss) by Segment
|
|
|
|
|
|
|
ANDA
|
|
$
|
(652,395
|
)
|
|
$
|
(135,921
|
)
|
NDA
|
|
|
207,704
|
|
|
|
(237,362
|
)
|
|
|
$
|
(444,691
|
)
|
|
$
|
(373,283
|
)
|
The
table below reconciles the Company’s operating loss by segment to (loss) income from operations before provision for income
taxes as reported in the Company’s unaudited condensed consolidated statements of operations.
|
|
For the Three Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Operating loss by segment
|
|
$
|
(444,691
|
)
|
|
$
|
(373,283
|
)
|
Corporate unallocated costs
|
|
|
(207,117
|
)
|
|
|
(1,022,359
|
)
|
Interest income
|
|
|
3,046
|
|
|
|
1,255
|
|
Interest expense and amortization of debt issuance costs
|
|
|
(97,670
|
)
|
|
|
(83,138
|
)
|
Depreciation and amortization expense
|
|
|
(330,953
|
)
|
|
|
(203,704
|
)
|
Significant non-cash items
|
|
|
(164,944
|
)
|
|
|
(259,048
|
)
|
Change in fair value of derivative instruments
|
|
|
1,522,031
|
|
|
|
252,511
|
|
Income (loss) from operations
|
|
$
|
279,702
|
|
|
$
|
(1,687,766
|
)
|
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE
16. COLLABORATIVE AGREEMENT WITH EPIC PHARMA LLC
On
June 4, 2015, the Company entered into the 2015 Epic License Agreement, which provides for the exclusive right to market, sell
and distribute, by Epic Pharma LLC (“
Epic”)
of SequestOx™, an abuse deterrent opioid which employs
the Company’s proprietary pharmacological abuse-deterrent technology. Epic will be responsible for payment of product development
and pharmacovigilance costs, sales, and marketing of SequestOx™, and Elite will be responsible for the manufacture of the
product. Under the 2015 Epic License Agreement, Epic will pay Elite non-refundable payments totaling $15 million, with such amount
representing the cost of an exclusive license to ELI-200, the cost of developing the product and certain filings and a royalty
based on an amount equal to 50% of profits derived from net product sales as defined in the 2015 Epic License Agreement. The initial
term of the exclusive right to product development sales and distribution is five years (“
Epic Exclusivity Period
”);
the license is renewable upon mutual agreement at the end of the initial term.
In
June 2015, Elite received non-refundable payments totaling $5.0 million from Epic for the exclusive right to product development
sales and distribution of SequestOx™ pursuant to the Epic Collaborative Agreement, under which it agreed to not permit marketing
or selling of SequestOx™ within the United States of America to any other party. Such exclusive rights are considered a
significant deliverable element of the Epic Collaborative Agreement pursuant to ASC 605-25,
Revenue Recognition –
Multiple Element Arrangements
. These nonrefundable payments represent consideration for certain exclusive rights to ELI-200
and will be recognized ratably over the Epic Exclusivity Period.
In
addition, in January 2016, a New Drug Application for SequestOx™ was filed, thereby earning the Company a non-refundable
$2.5 million milestone, pursuant to the 2015 Epic License Agreement. The filing of this NDA represents a significant deliverable
element as defined within the Epic Collaborative pursuant to ASC 605-25,
Revenue Recognition – Multiple Element
Arrangements
. Accordingly, the Company has recognized the $2.5 million milestone, which was paid by Epic and related to this
deliverable as income during the year ended March 31, 2016.
To
date, the Company received payments totaling $7.5 million pursuant to the 2015 Epic License Agreement, with all amounts being
non-refundable. An additional $7.5 million is due upon approval by the FDA of the NDA filed for SequestOx™, and license
fees based on commercial sales of SequestOx™. Revenues relating to these additional amounts due under the 2015 Epic License
Agreement will be recognized as the defined elements are completed and collectability is reasonably assured.
Please
note that on July 15, 2016, the FDA issued a Complete Response Letter, or CRL, regarding the NDA. The CRL stated that the review
cycle for the SequestOx™ NDA is complete and the application is not ready for approval in its present form.
On
July 7, 2017, the Company reported topline results from a pivotal bioequivalence fed study for or SequestOx™. The mean Tmax
(the amount of time that a drug is present at the maximum concentration in serum) of SequestOx
TM
was 4.6 hr. with
a range of 0.5 hr. to 12 hr. and the mean Tmax of the comparator, Roxicodone®, was 3.4 hr. with a range of 0.5 hr. to 12 hr.
A key objective for the study was to determine if the reformulated SequestOx
TM
had a similar Tmax to the comparator
when taken with a high fat meal. Based on these results, the Company paused clinical trials for this formulation of SequestOx™.
On January 30, 2018, the Company reported positive topline results from a pilot study conducted for a modified SequestOx™
wherein, based on the results of this pilot study, the modified SequestOx™ formulation is expected to achieve bioequivalence
with a Tmax range equivalent to the reference product when conducted in a pivotal trial under fed conditions. The Company has
provided the pilot data to the FDA, requesting clarification as to the requirements for resubmission of the NDA. The FDA has provided
guidance for repeated bio-equivalence studies in order to bridge the new formulation to the original SequestOx studies and also
extended our filing fee waiver until July 2020. Due to the prohibitive cost of such repeated bio-equivalence studies, the Company
has paused development of this product.
The
2015 Epic License Agreement expires on June 4, 2020, and Epic has previously advised the Company of their desire to extend this
agreement. While discussions are ongoing, they are directly correlated to the regulatory status of SequestOx™. Furthermore,
there can be no assurances that the parties will reach mutual agreement to extend the term of this agreement and no assurances
that the terms and conditions of the agreement will be similar in all material aspects in the event that the agreement is extended
by mutual consent of the parties. Non-receipt by the Company of the remaining $7.5 million milestone will have a material adverse
effect on the Company’s financial condition.
NOTE
17. COLLABORATIVE AGREEMENT WITH SUNGEN PHARMA LLC
On
August 24, 2016, the Company entered into the SunGen Agreement. The SunGen Agreement provides that Elite and SunGen Pharma LLC
will engage in the research, development, sales, and marketing of four generic pharmaceutical products. Two of the products are
classified as CNS stimulants (the “
CNS Products
”) and two of the products are classified as beta blockers (the
“Beta Blocker Products”).
Under
the terms of the SunGen Agreement, Elite and SunGen will share in the responsibilities and costs in the development of these products
and will share in the profits from sales of the Products. Upon approval, the know-how and intellectual property rights to the
products will be owned jointly by Elite and SunGen. SunGen shall have the exclusive right to market and sell the Beta Blocker
Products using SunGen’s label and Elite shall have the exclusive right to market and sell the CNS Products using Elite’s
label. Elite will manufacture and package all four products on a cost-plus basis.
On
December 1, 2016 and July 24, 2017, Elite Labs and SunGen executed an amendment to the parties’ 2016 Development and License
Agreement (the “
Amended Agreement
”), to undertake and engage in the research, development, sales and marketing
of four additional generic pharmaceutical products bringing the total number of products under the amended agreement to eight.
The product classes for the additional four products include antidepressants, antibiotics, and antispasmodics.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Under
the terms of the Amended Agreement, Elite and SunGen will share in the responsibilities and costs in the development of these
products and will share substantially in the profits from sales of the products. Upon approval, the know-how and intellectual
property rights to the products will be owned jointly by Elite and SunGen. Three products will be owned jointly by Elite and SunGen;
three shall be owned by SunGen while Elite shall have the marketing rights once the products are approved by the FDA; and two
shall be owned by Elite while SunGen shall have the marketing rights once the products are approved by the FDA. Elite will manufacture
and package all eight products on a cost-plus basis.
On
December 10, 2018, the Company received approval from the FDA for an ANDA filed for a generic version of Adderall®, an immediate-release
mixed salt of a single entity amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate,
Amphetamine Sulfate), with strengths of 5mg, 7.5mg. 10mg, 12.5mg, 15mg, 20mg, and 30mg tablets. The product is indicated for the
treatment of Attention Deficit Hyperactivity Disorder (ADHD) and Narcolepsy. This approval represents the first FDA approval received
for a product co-developed with SunGen under the SunGen Agreement. The first commercial shipment of this product occurred in April
2019. The product is currently marketed by Lannett Company Inc. (“Lannett”) under license granted pursuant a strategic
marketing alliance dated March 11, 2019 (“the Lannett Alliance”).
On
May 24, 2018, the Company filed an ANDA with the FDA for a generic version of an extended release CNS stimulant. The ANDA represents
the second filing for a product co-developed with SunGen under the SunGen Agreement. This product will also be marketed by Lannett
pursuant to the Lannett Alliance.
On
January 3, 2019, the Company filed an ANDA with the FDA for a generic version of an antibiotic product. The ANDA represents the
third filing for a product co-developed with SunGen under the SunGen Agreement.
There
can be no assurances that any of these products, even those for which ANDAs have been filed, will receive marketing authorization
and achieve commercialization within a reasonable time period, or at all. In addition, even if marketing authorization is received,
including the product for which such marketing authorization has already been received, there can be no assurances that there
will be future revenues of profits, or that any such future revenues or profits would be in amounts that provide adequate return
on the significant investments made to secure these marketing authorizations.
NOTE
18. RELATED PARTY TRANSACTION AGREEMENTS WITH EPIC PHARMA LLC
The
Company has entered into two agreements with Epic which constitute agreements with a related party due to the management of Epic
including a member on our Board of Directors at the time such agreements were executed.
On
June 4, 2015, the Company entered into the 2015 Epic License Agreement (please see Note 16 above). The 2015 Epic License
Agreement includes milestone payments totaling $10 million upon the filing with and approval of an NDA with the FDA. The Company
has determined these milestones to be substantive, with such assessment being made at the inception of the 2015 Epic License Agreement,
and based on the following:
|
●
|
The
Company’s performance is required to achieve each milestone; and
|
|
|
|
|
●
|
The
milestones will relate to past performance, when achieved; and
|
|
|
|
|
●
|
The
milestones are reasonable relative to all of the deliverables and payment terms within the 2015 Epic License Agreement
|
After
marketing authorization is received from the FDA, Elite will receive a license fee which is based on profits achieved from the
commercial sales of ELI-200. On January 14, 2016, the Company filed an NDA with the FDA for SequestOx™, thereby earning
a $2.5 million milestone pursuant to the 2015 Epic License Agreement. The Company has received payment of this amount from Epic.
An additional $7.5 million is due upon approval by the FDA of the NDA filed for SequestOx™. Please note that on July 15,
2016, the FDA issued a Complete Response Letter, or CRL, regarding the NDA. The CRL stated that the review cycle for the SequestOx™
NDA is complete and the application is not ready for approval in its present form. On December 21, 2016, the Company met with
the FDA for an end-of-review meeting to discuss steps that it could take to obtain approval of SequestOx™. Based on this
and the meeting minutes received from the FDA on January 23, 2017, the Company formulated a plan to address the issues cited by
the FDA in the CRL, with such plan including, without limitation, modifying the SequestOx™ formulation, conducting bioequivalence
and bioavailability fed and fasted studies, comparing the modified formulation to the original formulation. On July 7, 2017, the
Company reported topline results from a pivotal bioequivalence fed study for SequestOx™. This study resulted in a mean Tmax
of 4.6 hours, with a range of 0.5 hour to 12 hours and a mean Tmax of the comparator, Roxicodone
®
of 3.4 hours
with a range of 0.5 hour to 12 hours. A key objective of this study was to determine if the reformulated SequestOx™ had
a similar Tmax to the comparator when taken with a high fat meal. Based on these results, the Company will pause, not proceed,
with the rest of the clinical trials, and seek clarity from the FDA before deciding on the next steps for immediate release SequestOx™.
There can be no assurances of the success of any future clinical trials, or if such trials are successful, there can be no assurances
that an intended future resubmission of the NDA product filing, if made, will be accepted by or receive marketing approval from
the FDA, and accordingly, there can be no assurances that the Company will earn and receive the additional $7.5 million or future
license fees. If the Company does not receive these payments or fees, it will materially and adversely affect our financial condition.
In addition, even if marketing authorization is received, there can be no assurances that there will be future revenues of profits,
or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments made
to secure this marketing authorization.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
On
October 2, 2013, Elite executed the Epic Pharma Manufacturing and License Agreement (the “Epic Generic Agreement”).
The Epic Generic Agreement, which expired on October 2, 2018 granted rights to Epic to manufacture twelve generic products whose
ANDA’s are owned by Elite, and to market, in the United States and Puerto Rico, six of these products on an exclusive basis,
and the remaining six products on a non-exclusive basis. These products were to be manufactured at Epic, with Epic being responsible
for the manufacturing site transfer supplements that are a prerequisite to each product being approved for commercial sale. In
addition, Epic was to be responsible for all regulatory and pharmacovigilance matters, as well as all marketing and distribution
activities. Elite has no further obligations or deliverables under the Epic Generic Agreement.
Pursuant
to the Epic Generic Agreement, Elite was to receive $1.8 million, payable in increments that require the commercialization of
all six exclusive products if the full amount is to be received, plus license fees equal to a percentage that is not less than
50% and not greater than 60% of profits achieved from commercial sales of the products, as defined in the Epic Generic Agreement.
The Epic Generic Agreement expired on October 2, 2018 with Epic launching four of the six exclusive products and Elite collecting
$1.0 million of the total $1.8 million fee.
The
2015 Epic License Agreement contains license fees that will be earned and payable to the Company, after the FDA has issued marketing
authorization(s) for the related product(s). License fees are based on commercial sales of the products achieved by Epic and calculated
as a percentage of net sales dollars realized from such commercial sales. Net sales dollars consist of gross invoiced sales less
those costs and deductions directly attributable to each invoiced sale, including, without limitation, cost of goods sold, cash
discounts, Medicaid rebates, state program rebates, price adjustments, returns, short date adjustments, charge backs, promotions,
and marketing costs. The rate applied to the net sales dollars to determine license fees due to the Company is equal to an amount
negotiated and agreed to by the parties to each agreement, with the following significant factors, inputs, assumptions, and methods,
without limitation, being considered by either or both parties:
|
●
|
Assessment
of the opportunity for each product in the market, including consideration of the following, without limitation: market size,
number of competitors, the current and estimated future regulatory, legislative, and social environment for abuse deterrent
opioids and the other generic products to which the underlying contracts are relevant;
|
|
●
|
Assessment
of various avenues for monetizing SequestOx™ and the twelve ANDA’s owned by the Company, including the various
combinations of sites of manufacture and marketing options;
|
|
●
|
Elite’s
resources and capabilities with regards to the concurrent development of abuse deterrent opioids and expansion of its generic
business segment, including financial and operational resources required to achieve manufacturing site transfers for twelve
approved ANDA’s;
|
|
●
|
Capabilities
of each party with regards to various factors, including, one or more of the following: manufacturing, marketing, regulatory
and financial resources, distribution capabilities, ownership structure, personnel, assessments of operational efficiencies
and entity stability, company culture and image;
|
|
●
|
Stage
of development of SequestOx™ and manufacturing site transfer and regulatory requirements relating to the commercialization
of the generic products at the time of the discussions/negotiations, and an assessment of the risks, probability, and time
frames for achieving marketing authorizations from the FDA for each product.
|
|
●
|
Assessment
of consideration offered; and
|
|
●
|
Comparison
of the above factors among the various entities with whom the Company was engaged in discussions relating to the commercialization
of SequestOx™ and the manufacture/marketing of the twelve generics related to the Epic Generic Agreement.
|
This
transaction is not to be considered as an arms-length transaction.
Please
also note that, effective April 7, 2016, all Directors on the Company’s Board of Directors that were also owners/managers
of Epic had resigned as Directors of the Company and all current members of the Company’s Board of Directors have no relationship
to Epic. Accordingly, Epic no longer qualifies as a party that is related to the Company.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE
19. MANUFACTURING, LICENSE AND DEVELOPMENT AGREEMENTS
The
Company has entered into the following active agreements:
|
●
|
License
agreement with Precision Dose, dated September 10, 2010 (the “Precision Dose License Agreement”);
|
|
●
|
Development
and License Agreement with SunGen (the “SunGen Agreement”);
|
|
●
|
Strategic
Marketing Alliance with Glenmark Pharmaceuticals, Inc. USA dated May 29, 2018 (the “Glenmark Alliance”).
|
|
●
|
Strategic
Marketing Alliance with Lannett Company. Inc. dated March 11, 2019 (the “Lannett-SunGen Product Alliance”)
|
|
●
|
Strategic
Marketing Alliance with Lannett Company. Inc. dated April 9, 2019 (the “Lannett-Elite Product Alliance”)
|
The
Precision Dose Agreement provides for the marketing and distribution, by Precision Dose and its wholly owned subsidiary, TAGI
Pharma, of Phentermine 37.5mg tablets (launched in April 2011), Phentermine 15mg capsules (launched in April 2013), Phentermine
30mg capsules (launched in April 2013), Hydromorphone 8mg tablets (launched in March 2012), Naltrexone 50mg tablets (launched
in September 2013) and certain additional products that require approval from the FDA which has not been received. Precision Dose
will have the exclusive right to market these products in the United States and Puerto Rico and a non-exclusive right to market
the products in Canada. Pursuant to the Precision Dose License Agreement, Elite received $200k at signing, and is receiving milestone
payments and a license fee which is based on profits achieved from the commercial sale of the products included in the agreement.
Revenue
from the $200k payment made upon signing of the Precision Dose Agreement is being recognized over the life of the Precision Dose
Agreement.
The
milestones, totaling $500k (with $405k already received), consist of amounts due upon the first shipment of each identified product,
as follows: Phentermine 37.5mg tablets ($145k), Phentermine 15 & 30mg capsules ($45k), Hydromorphone 8mg ($125k), Naltrexone
50mg ($95k) and the balance of $95k due in relation to the first shipment of generic products which still require marketing authorizations
from the FDA, and to which there can be no assurances of such marketing authorizations being granted and accordingly there can
be no assurances that the Company will earn and receive these milestone amounts. These milestones have been determined to be substantive,
with such determination being made by the Company after assessments based on the following:
|
●
|
The
Company’s performance is required to achieve each milestone; and
|
|
●
|
The
milestones will relate to past performance, when achieved; and
|
|
●
|
The
milestones are reasonable relative to all of the deliverables and payment terms within the Precision Dose License Agreement.
|
The
license fees provided for in the Precision Dose Agreement are calculated as a percentage of net sales dollars realized from commercial
sales of the related products. Net sales dollars consist of gross invoiced sales less those costs and deductions directly attributable
to each invoiced sale, including, without limitation, cost of goods sold, cash discounts, Medicaid rebates, state program rebates,
price adjustments, returns, short date adjustments, charge backs, promotions, and marketing costs. The rate applied to the net
sales dollars to determine license fees due to the Company is equal to an amount negotiated and agreed to by the parties to the
Precision Dose License Agreement, with the following significant factors, inputs, assumptions, and methods, without limitation,
being considered by either or both parties:
|
●
|
Assessment
of the opportunity for each generic product in the market, including consideration of the following, without limitation: market
size, number of competitors, the current and estimated future regulatory, legislative, and social environment for each generic
product, and the maturity of the market;
|
|
●
|
Assessment
of various avenues for monetizing the generic products, including the various combinations of sites of manufacture and marketing
options;
|
|
●
|
Capabilities
of each party with regards to various factors, including, one or more of the following: manufacturing resources, marketing
resources, financial resources, distribution capabilities, ownership structure, personnel, assessment of operational efficiencies
and stability, company culture and image;
|
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
|
●
|
Stage
of development of each generic product, all of which did not have FDA approval at the time of the discussions/negotiations
and an assessment of the risks, probability, and time frame for achieving marketing authorizations from the FDA for the products;
|
|
●
|
Assessment
of consideration offered by Precision and other entities with whom discussions were conducted; and
|
|
●
|
Comparison
of the above factors among the various entities with whom the Company was engaged in discussions relating to the commercialization
of the generic products.
|
The
SunGen Agreement provides for the research, development, sales and marketing of eight generic pharmaceutical products. Two of
the products are classified as CNS stimulants (the “CNS Products”), two of the products are classified as beta blockers
and the remaining four products consist of antidepressants, antibiotics and antispasmodics. To date, the Company has filed ANDAs
with the FDA for the two CNS Products and one antibiotic identified in the SunGen Agreement. The Company received FDA approval
of the ANDA filed for the first CNS Product in December 2018 and achieved commercial launch in April 2019, with such product being
marketed pursuant to the Lannett Alliance.
Under
the terms of the SunGen Agreement, Elite and SunGen will share in the responsibilities and costs in the development of these products
and will share substantially in the profits from sales. Upon approval, the know-how and intellectual property rights to the products
will be owned jointly by Elite and SunGen. Three of the eight products will be jointly owned, three products will be owned by
SunGen, with Elite having exclusive marketing rights and the remaining two products will be owned by Elite, with SunGen having
exclusive marketing rights. Elite will manufacture and package all eight products on a cost-plus basis.
The
Glenmark Alliance, provides for the manufacture by Elite and marketing by Glenmark of identified generic products under license
from Elite. In addition to the purchase prices for the products, Elite will receive license fees well in excess of 50% of gross
profits. Gross profit is defined as net sales less the price paid to Elite for the products, distribution fees (less than 10%)
and shipping costs. Glenmark will have semi-exclusive marketing rights to the ANDA approved generic product, phendimetrazine 35mg
tablets, and exclusive marketing rights to generic Methadone HCl. Collectively, the brand products and their generic equivalents
had total annual sales of approximately $33.6 million in 2017, according to Quintiles IMS Health data. The Agreement has an initial
term of three years and automatically renews for one-year periods absent prior written notice of non-renewal. In addition to customary
termination provisions, the Agreement permits Glenmark to terminate with regard to a product on at least three months’ prior
written notice if it determines to stop marketing and selling such product, and it permits Elite to terminate with regard to a
product if at any time after the first twelvemonths from the first commercial sale, the average license fee paid by Glenmark for
such product is less than $100,000 for a six-month sales period.
Pursuant
to Lannett-SunGen Product Alliance with Lannett Company Inc. (“Lannett”), Lannett will be the exclusive U.S.
marketer and distributor for two generic products co-developed and co-owned by Elite and SunGen – Amphetamine IR
Tablets and a second product which is an extended release CNS stimulant that is currently under review by the FDA. Elite will
manufacture and Lannett will purchase the products from Elite and then sell and distribute them. In addition to the purchase
prices for the products, Elite will receive license fees in excess of 50% of net profits, which will be shared equally with
SunGen, pursuant to the SunGen Agreement. The Lannett-SunGen Product Alliance has an initial term of three years and
automatically renews for one year periods absent prior written notice of non-renewal. In addition to customary termination
provisions, the Agreement permits Lannett to terminate with regard to a product on at least six months’ prior written
notice, and it permits Elite or Lannett to terminate with regard to a product if at any time after the first twelve months
from the first commercial sale, the average license fee paid by Lannett for such product is less than $300,000 for a six
month sales period. In addition to manufacturing fees and license fees, Lannett will also pay a milestone, of $750,000 upon
commercial launch of the extended release CNS stimulant product that is currently under review by the FDA. This milestone
payment will be shared equally by Elite and SunGen, pursuant to the SunGen Agreement.
The
first commercial shipment of Amphetamine IR Tablets, a generic version of Adderall
®
, with strengths of 5mg, 7.5mg,
10mg, 12.5mg, 15mg, 20mg and 30mg, pursuant to the Lannett-SunGen Product Alliance occurred in April 2019.
Pursuant
to the Lannett-Elite Product Alliance, Lannett will be the exclusive U.S. marketer and distributor for Dantrolene Capsules.
Elite will manufacture and Lannett will purchase Dantrolene Capsules from Elite and then sell and distribute them. In
addition to the purchase prices for the products, Elite will receive license fees in excess of 50% of net profits. Net
profits is defined as net sales less the price paid to Elite for the products, distribution fees (less than 10%) and shipping
costs. The Lannett-Elite Product Alliance has an initial term of three years and automatically renews for one year
periods absent prior written notice of non-renewal. In addition to customary termination provisions, the Agreement permits
Lannett to terminate with regard to a product on at least six months’ prior written notice and it permits Elite or
Lannett to terminate with regard to a product if at any time after the first twelve months from the first commercial sale,
the average license fee paid by Lannett for such product is less than $300,000 for a six month sales period.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE
20. RELATED PARTY AGREEMENTS WITH MIKAH PHARMA LLC
Pursuant
to an asset acquisition, on May 17, 2017, Elite Labs, executed an assignment agreement with Mikah, pursuant to which the
Company acquired all rights, interests, and obligations under a supply and distribution agreement (the “Reddy’s Distribution
Agreement”) with Dr. Reddy’s Laboratories, Inc. (“Dr. Reddy’s”) originally entered into by Mikah
on May 7, 2017 and relating to the supply, sale and distribution of generic Trimipramine Maleate Capsules 25mg, 50mg and 100mg
(“Trimipramine”).
On
May 22, 2017, the Company executed an assignment agreement with Mikah, pursuant to which the Company acquired all rights, interests
and obligations under a manufacturing and supply agreement with Epic originally entered into by Mikah on June 30, 2015 and relating
to the manufacture and supply of Trimipramine (the “Epic Trimipramine Manufacturing Agreement”). Pursuant to this
agreement, Epic manufactured Trimipramine under license from Elite. In September 2018, Elite successfully transferred manufacturing
of Trimipramine to the Northvale Facility, resulting in the irrelevance of the Epic Trimipramine Manufacturing Agreement. Trimipramine
is currently manufactured by Elite.
Mikah
is owned by Nasrat Hakim, the CEO, President and Chairman of the Board of the Company.
The
Reddy’s Distribution Agreement was concluded by mutual consent in August 2018.
Trimipramine
is one of the products included in the Glenmark Strategic Alliance and is currently marketed and distributed by Glenmark.
On December 3, 2018,
the Company executed a development agreement with Mikah, pursuant to which Mikah and the Company will collaborate to develop and
commercialize generic products including formulation development, analytical method development, bioequivalence studies and manufacture
of development batches of generic products.
The Company received $150,000
from Mikah in January of 2019 as an advance payment for the purchase of pharmaceutical materials relating to future product development
conducted pursuant to this agreement. This amount was recorded as a deposit and contained within the customer deposits financial
statement line item on the condensed consolidated balance sheet. As of the date of this report, the Company has purchased raw materials
with an aggregate cost of $67,500 pursuant to this agreement. As of June 30, 2019, the balance of the customer deposit from Mikah
was $82,500 and was included in the financial statement line of customer deposits on the accompanying condensed consolidated balance
sheet.
NOTE
21. SUBSEQUENT EVENTS
The Company has evaluated
subsequent events from the condensed consolidated balance sheet date through August 9, 2019 and determined that there were no material
subsequent events.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE
MONTHS ENDED JUNE 30, 2019 (UNAUDITED)
COMPARED
TO THE
THREE
MONTHS ENDED JUNE 30, 2018 (UNAUDITED)
The
following discussion of our financial condition and results of operations for the three months ended June 30, 2019 and 2018 should
be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are
included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve
risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those
set forth under Item 1A. Risk Factors appearing in our Annual Report on
Form 10-K
for the year ended March 31, 2019, as filed
on June 21, 2019 with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,”
“continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,”
“will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Unless
expressly indicated or the context requires otherwise, the terms “Elite”, the “Company”, “we”,
“us”, and “our” refer to Elite Pharmaceuticals, Inc. and subsidiary.
Background
Elite
Pharmaceuticals, Inc., a Nevada corporation (the “Company”, “Elite”, “Elite Pharmaceuticals”,
the “registrant”, “we”, “us” or “our”) was incorporated on October 1, 1997 under
the laws of the State of Delaware, and its wholly-owned subsidiary, Elite Laboratories, Inc. (“Elite Labs”), was incorporated
on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under
the laws of the State of Nevada.
We
are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products,
using proprietary know-how and technology, particularly as it relates to abuse resistant products and the manufacture of generic
pharmaceuticals. Our strategy includes improving off-patent drug products for life cycle management, developing generic versions
of controlled-release drug products with high barriers to entry and the development of branded and generic products that utilize
our proprietary and patented abuse resistance technologies.
We
occupy manufacturing, warehouse, laboratory and office space at 165 Ludlow Avenue and 135 Ludlow Avenue in Northvale, NJ (the
“Northvale Facility”). The Northvale Facility operates under Current Good Manufacturing Practice (“cGMP”)
and is a United States Drug Enforcement Agency (“DEA”) registered facility for research, development and manufacturing.
Strategy
We
focus our efforts on the following areas: (i) development of our pain management products; (ii) manufacturing of a line of generic
pharmaceutical products with approved Abbreviated New Drug Applications (“ANDAs”); (iii) development of additional
generic pharmaceutical products; (iv) development of the other products in our pipeline including the products with our partners;
(v) commercial exploitation of our products either by license and the collection of royalties, or through the manufacture of our
formulations; and (vi) development of new products and the expansion of our licensing agreements with other pharmaceutical companies,
including co-development projects, joint ventures and other collaborations.
Our
focus is on the development of various types of drug products, including branded drug products which require New Drug Applications
(“NDAs”) under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration Act of 1984
(the “Drug Price Competition Act”) as well as generic drug products which require ANDAs.
We
believe that our business strategy enables us to reduce its risk by having a diverse product portfolio that includes both branded
and generic products in various therapeutic categories and to build collaborations and establish licensing agreements with companies
with greater resources thereby allowing us to share costs of development and improve cash-flow.
Commercial
Products
We
own, license or contract manufacture the following products currently being sold commercially:
Product
|
|
Branded
Product
Equivalent
|
|
Therapeutic
Category
|
|
Launch
Date
|
Phentermine HCl 37.5mg tablets
(“Phentermine 37.5mg”)
|
|
Adipex-P®
|
|
Bariatric
|
|
April 2011
|
Hydromorphone HCl 8mg tablets
(“Hydromorphone 8mg”)
|
|
Dilaudid®
|
|
Pain
|
|
March 2012
|
Phendimetrazine Tartrate 35mg tablets
(“Phendimetrazine 35mg”)
|
|
Bontril®
|
|
Bariatric
|
|
November 2012
|
Phentermine HCl 15mg and 30mg capsules
(“Phentermine 15mg” and “Phentermine 30mg”)
|
|
Adipex-P®
|
|
Bariatric
|
|
April 2013
|
Naltrexone HCl 50mg tablets
(“Naltrexone 50mg”)
|
|
Revia®
|
|
Pain
|
|
September 2013
|
Isradipine 2.5mg and 5mg capsules
(“Isradipine 2.5mg” and “Isradipine 5mg”)
|
|
n/a
|
|
Cardiovascular
|
|
January 2015
|
Oxycodone HCl Immediate Release 5mg, 10mg, 15mg, 20mg and 30mg tablets (“OXY IR 5mg”, “Oxy IR 10mg”, “Oxy IR 15mg”, “OXY IR 20mg” and “Oxy IR 30mg”)
|
|
Roxycodone®
|
|
Pain
|
|
March 2016
|
Trimipramine Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine 100mg”)
|
|
Surmontil®
|
|
Antidepressant
|
|
May 2017
|
Methadone HCl 5mg and 10mg tablets
(“Methadone 5mg” and “Methadone 10mg”)
|
|
Dolophine®
|
|
Pain
|
|
November 2018
|
Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg” and “Amphetamine IR 30mg”)
|
|
Adderall
|
|
Central Nervous System (“CNS”) Stimulant
|
|
April 2019
|
Dantrolene Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”
|
|
|
|
|
|
|
Note: Phentermine 37.5mg is also referred
to as “Phentermine Tablets”. Phentermine 15mg and Phentermine 30mg are collectively and individually referred to as
“Phentermine Capsules”. Hydromorphone 8mg is also referred to as “Hydromorphone Tablets”. Phendimetrazine
35mg is also referred to as “Phendimetrazine Tablets”. Naltrexone 50mg is also referred to as “Naltrexone Tablets”.
Isradipine 2.5mg and Isradipine 5mg are collectively and individually referred to as “Isradipine Capsules”. Oxy IR
5mg, Oxy IR 10mg, Oxy IR 15mg Oxy IR 20mg and Oxy IR 30mg are collectively and individually referred to as “Oxy IR”.
Trimipramine 25mg, Trimipramine 50mg, and Trimipramine 100mg are collectively and individually referred to as “Trimipramine
Capsules”. Methadone 5mg and Methadone 10mg are collectively and individually referred to as “Methadone Tablets”.
Amphetamine IR 5mg, Amphetamine IR 7.5mg, Amphetamine IR 10mg, Amphetamine IR 12.5mg, Amphetamine IR 15mg, Amphetamine IR 20mg
and Amphetamine IR 30mg are collectively and individually referred to as “Amphetamine IR Tablets”. Dantrolene 25mg,
Dantrolene 50mg and Dantrolene 100mg are collectively and individually referred to as “Dantrolene Capsules”.
Phentermine
37.5mg
The
approved ANDA for Phentermine 37.5mg was acquired pursuant to an asset purchase agreement with Epic Pharma LLC (“
Epic
”)
dated September 10, 2010 (the “
Phentermine Purchase Agreement
”).
Sales
and marketing rights for Phentermine 37.5mg are included in the licensing agreement between the Company and Precision Dose Inc.
(“
Precision Dose
”) dated September 10, 2010 (the “
Precision Dose License Agreement
”). Please
see the section below titled “
Precision Dose License Agreement
” for further details of this agreement.
The
first shipment of Phentermine 37.5mg was made to Precision Dose’s wholly owned subsidiary, TAGI Pharmaceuticals Inc. (“
TAGI
”),
pursuant to the Precision Dose License Agreement, with such initial shipment triggering a milestone payment under this agreement.
Phentermine 37.5mg is currently being manufactured by Elite and distributed by TAGI under the Precision Dose License Agreement.
Hydromorphone
8mg
The
approved ANDA for Hydromorphone 8mg was acquired pursuant to an asset purchase agreement with Mikah Pharma LLC (“
Mikah
Pharma
”) dated May 18, 2010 (the “
Hydromorphone Purchase Agreement
”). Transfer of the manufacturing
process of Hydromorphone 8mg to the Northvale Facility, a prerequisite of the Company’s commercial launch of the product,
was approved by the FDA on January 23, 2012.
Sales
and marketing rights for Hydromorphone 8mg are included in the Precision Dose License Agreement. Please see the section below
titled “
Precision Dose License Agreement
” for further details of this agreement.
The
first shipment of Hydromorphone 8mg was made to TAGI, pursuant to the Precision Dose License Agreement, in March 2012, with such
initial shipment triggering a milestone payment under this agreement. Hydromorphone 8mg is currently being manufactured by Elite
and distributed by TAGI under the Precision Dose License Agreement.
Phendimetrazine
Tartrate 35mg
The
ANDA for Phendimetrazine 35mg was acquired by Elite as part of the asset purchase agreement between the Company and Mikah Pharma,
dated August 1, 2013 (the “
Mikah ANDA Purchase
”). Please see “2013 ANDA Purchase Agreement” below
for more information on this agreement. The Northvale Facility was already an approved manufacturing site for this product as
of the date of the Mikah ANDA Purchase. Prior to the acquisition of this ANDA, Elite had been manufacturing this product on a
contract basis pursuant to a manufacturing and supply agreement with Mikah Pharma, dated June 1, 2011.
Phendimetrazine
35mg is currently a commercial product being manufactured by Elite and distributed by Glenmark Pharmaceuticals Inc., USA (“Glenmark”)
on a non-exclusive basis, and by Elite.
On
January 2, 2018, the Company announced that it received approval of its abbreviated new drug application (“
ANDA
”)
from the FDA for Phendimetrazine Tartrate Tablets USP, 35mg. This product approval is from an ANDA that the Company filed approximately
six years ago. This approval resulted in the Company having a second, approved ANDA for this product. The Company has been selling
this product pursuant to the marketing authorization achieved from the first approved ANDA. The Company is currently considering
strategic options for utilization of this approved ANDA, with such options including, without limitation, divestiture.
Phentermine
15mg and Phentermine 30mg
Phentermine
15mg capsules and Phentermine 30mg capsules were developed by the Company, with Elite receiving approval of the related ANDA in
September 2012.
Sales
and marketing rights for Phentermine 15mg and Phentermine 30mg are included in the Precision Dose License Agreement. Please see
the section below titled “
Precision Dose License Agreement
” for further details of this agreement.
The
first shipments of Phentermine 15mg and Phentermine 30mg were made to TAGI, pursuant to the Precision Dose License Agreement,
in April 2013, with such initial shipments triggering a milestone payment under this agreement. Phentermine 15mg and Phentermine
30mg are currently being manufactured by Elite and distributed by TAGI under the Precision Dose License Agreement.
Naltrexone
50mg
The approved ANDA for Naltrexone 50mg was acquired by the Company pursuant to an asset purchase agreement between
the Company and Mikah Pharma dated August 27, 2010 (the “
Naltrexone Acquisition Agreement
”) for aggregate consideration
of $200,000.
Sales
and marketing rights for Naltrexone 50mg are included in the Precision Dose License Agreement. Please see the section below titled
“
Precision Dose License Agreement
” for further details of this agreement.
The
first shipment of Naltrexone 50mg was made to TAGI, pursuant to the Precision Dose License Agreement, in September 2013, with
such initial shipment triggering a milestone payment under this agreement. Naltrexone 50mg is currently being manufactured by
Elite and distributed by TAGI under the Precision Dose License Agreement.
Isradipine
2.5 mg and Isradipine 5mg
The
approved ANDAs for Isradipine 2.5mg and Isradipine 5mg were acquired by Elite as part of the Mikah ANDA Purchase.
Isradipine
2.5mg and Isradipine 5mg are currently a commercial product being manufactured by Elite and distributed by Glenmark, on an exclusive
basis.
Oxycodone
5mg, Oxycodone 10mg, Oxycodone 15mg, Oxycodone 20mg and Oxycodone 30mg (“Oxy IR”)
We
received notification from Epic in October 2015 of the approval by the FDA of Epic’s ANDA for Oxy IR. This product was an
Identified IR Product in the Epic Strategic Alliance Agreement Dated March 18, 2009 (the “
Epic Strategic Alliance
”).
Oxy IR was developed at the Northvale Facility pursuant to the Epic Strategic Alliance, in which we are entitled to a Product
Fee of 15% of Profits as defined in the Epic Strategic Alliance. The first commercial sale of Oxy IR occurred in March 2016, and
sales by Epic of this product are ongoing.
Trimipramine
25mg, Trimipramine 50mg, and Trimipramine 100mg
Through
Elite Labs, Elite acquired an approved and currently marketed ANDA for Trimipramine Maleate Capsules (“
Trimipramine
”)
25, 50 and 100 mg, from Mikah Pharma.
Trimipramine
25mg, Trimipramine 50mg and Trimipramine 100mg are currently a commercial product being manufactured by Elite and distributed
by Glenmark, on an exclusive basis.
Amphetamine
IR Tablets
On December 10, 2018, the
Company received approval from the FDA for Amphetamine IR Tablets, a generic version of Adderall
®
, an immediate-release
mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate,
Amphetamine Sulfate) with strengths of 5 mg, 7.5 mg, 10 mg, 12.5 mg, 15 mg, 20 mg, and 30 mg tablets. The product is a central
nervous system stimulant and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD) and Narcolepsy.
According to QVIA (formerly QuintilesIMS Health) data the branded product and its equivalents had total U.S. sales of $365 million
for the twelve months ending September 30, 2018. This is the first product approval for our Elite and SunGen Pharma LLC (“SunGen”)
collaboration. The product is jointly owned. Elite manufactures and packages the product on a cost-plus basis. Amphetamine
IR Tablets are currently sold pursuant to the Lannett Alliance, with first commercial shipment of this product occurring in April
2019. Please see the section below titled “Strategic Marketing Alliance with Lannett Company Inc.” for further details
on the Lannett Alliance.
Dantrolene 25mg, Dantrolene
50mg and Dantrolene 100mg
The approved ANDAs for
Isradipine 2.5mg and Isradipine 5mg were acquired by Elite as part of the Mikah ANDA Purchase. Elite manufactures and packages
Dantrolene Capsules on a cost-plus basis. Dantrolene Capsules are currently sold pursuant to the Lannett Alliance, with the
first commercial shipment of this product occurring in June 2019. Please see the section below titled “Strategic Marketing
Alliance with Lannett Company Inc.” for further details on the Lannett Alliance.
Filed
products under FDA review
SequestOx™
- Immediate Release Oxycodone with sequestered Naltrexone
SequestOx™
is our lead abuse-deterrent candidate for the management of moderate to severe pain where the use of an opioid analgesic is appropriate.
SequestOx™ is an immediate-release Oxycodone Hydrochloride containing sequestered Naltrexone which incorporates 5mg, 10mg,
15mg, 20mg and 30mg doses of oxycodone into capsules.
In
January 2016, the Company submitted a 505(b)(2) New Drug Application for SequestOx™, after receiving a waiver of the $2.3
million filing fee from the FDA. In March 2016, the Company received notification of the FDA’s acceptance of this filing
and that such filing has been granted priority review by the FDA with a target action under the Prescription Drug User Fee Act
(“
PDUFA
”) of July 14, 2016.
On
July 15, 2016, the FDA issued a Complete Response Letter, or CRL, regarding the NDA. The CRL stated that the review cycle for
the SequestOx™ NDA is complete and the application is not ready for approval in its present form.
On
July 7, 2017, the Company reported topline results from a pivotal bioequivalence fed study for or SequestOx™. The mean Tmax
(the amount of time that a drug is present at the maximum concentration in serum) of SequestOx
TM
was 4.6 hr. with
a range of 0.5 hr. to 12 hr. and the mean Tmax of the comparator, Roxicodone®, was 3.4 hr. with a range of 0.5 hr. to 12 hr.
A key objective for the study was to determine if the reformulated SequestOx
TM
had a similar Tmax to the comparator
when taken with a high fat meal. Based on these results, the Company paused clinical trials for this formulation of SequestOx™.
On January 30, 2018, the Company reported positive topline results from a pilot study conducted for a modified SequestOx™
wherein, based on the results of this pilot study, the modified SequestOx™ formulation is expected to achieve bioequivalence
with a Tmax range equivalent to the reference product when conducted in a pivotal trial under fed conditions. The Company has
provided the pilot data to the FDA, requesting clarification as to the requirements for resubmission of the NDA. The FDA has provided
guidance for repeated bio-equivalence studies in order to bridge the new formulation to the original SequestOx studies and also
extended our filing fee waiver until July 2020. Due to the prohibitive cost of such repeated bio-equivalence studies, the Company
has paused development of this product.
There
can be no assurances of the Company conducting future clinical trials, or if such trials are conducted, there can be no assurances
of the success of any future clinical trials, or if such trials are successful, there can be no assurances that an intended future
resubmission of the NDA product filing, if made, will be accepted by or receive marketing approval from the FDA, and accordingly,
there can be no assurances that the Company will earn and receive the additional $7.5 million or future license fees (see “Licensing,
Manufacturing and Development Agreements; Sales and Distribution Licensing Agreement with Epic Pharma LLC for SequestOx™”
below). If the Company does not receive these payments or fees, it will materially and adversely affect our financial condition.
In addition, even if marketing authorization is received, there can be no assurances that there will be future revenues or profits,
or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments made
to secure this marketing authorization.
Oxycodone
Hydrochloride extended release (generic version of Oxycontin®)
On
September 20, 2017, the Company filed an ANDA with the FDA for generic version of Oxycontin® (extended release Oxycodone Hydrochloride).
OxyContin® is approved for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment
and for which alternative treatment options are inadequate. IMS reported approximately $2.3 billion in revenue for OxyContin®
and its equivalents in 2016. The FDA requested additional information relating to this filing, compliance with which would require
significant resources. Development of this product is currently paused, with the Company evaluating the feasibility of the continued
development of this product.
Generic
version of extended release Central Nervous System stimulant
On
May 24, 2018, the Company filed an ANDA with the FDA for a generic version of an extended release CNS stimulant. The ANDA represents
the second filing for a product co-developed with SunGen under the SunGen Agreement. According to IMS Health data, the branded
product and its equivalents had total U.S. sales of approximately $1.6 billion for the twelve months ended September 30, 2017.
The Company received a request from the FDA for additional information to which the Company has responded. The response is under
review by the FDA.
Under the terms of the
SunGen Agreement, the product will be owned jointly by the Company and SunGen. Elite will also manufacture and package the product
on a cost-plus basis. This product is included in the Lannett Alliance and accordingly, upon approval, will be marketed and distributed
by Lannett. Please see the section below titled “Strategic Marketing Alliance with Lannett Company Inc.” for further
details on the Lannett Alliance.
Please also see the section
below titled “
Master Development and License Agreement with SunGen Pharma LLC
” for further details on the SunGen
Agreement.
Acetaminophen
and Codeine Phosphate
On
September 18, 2018, the Company filed an ANDA with the FDA for a generic version of Tylenol® with Codeine (acetaminophen and
codeine phosphate) 300mg/7.5mg, 300mg/15mg, 300mg/30mg and 300mg/60mg tablets. Acetaminophen with codeine is a combination
medication indicated for the management of mild to moderate pain, where treatment with an opioid is appropriate and for which
alternative treatments are inadequate. Acetaminophen with codeine products have annual U.S. sales of approximately $45 million
according to IQVIA (formerly QuintilesIMS Health Data).
There
can be no assurances that any of these products will receive marketing authorization and achieve commercialization within this
time period, or at all. In addition, even if marketing authorization is received, there can be no assurances that there will be
future revenues of profits, or that any such future revenues or profits would be in amounts that provide adequate return on the
significant investments made to secure these marketing authorizations.
Approved
Products Not Yet Commercialized
Oxycodone
Hydrochloride and Acetaminophen, USP CII (generic version of Percocet®)
On
August 9, 2016, the Company filed an ANDA with the FDA for a generic version of Percocet® (oxycodone hydrochloride and acetaminophen,
USP CII) 5mg, 7.5mg and 10mg tablets with 325mg of acetaminophen. Percocet® is a combination medication and is used to help
relieve moderate to severe pain. The Company received approval of this ANDA in July 2018. Elite has not yet launched this product
and is seeking a partner for this product.
Hydrocodone
bitartrate and acetaminophen tablets USP CII (generic version of Norco)
In
December 2016, the Company filed an ANDA with the FDA for a generic version of Norco
®
(hydrocodone bitartrate
and acetaminophen tablets USP CII) 2.5mg/325mg, 5mg/325mg, 7.5mg/325mg and 10mg/325mg tablets. The Company received approval of
this ANDA in November 2018. Norco is a combination medication and is used to help relieve moderate to moderately severe pain.
The combination products of hydrocodone and acetaminophen have total annual US sales of approximately $700 million, according
to IMS Health Data. . Elite has not yet launched this product and is seeking a partner for this product.
Loxapine
5mg, 10mg, 25mg and 50mg capsules (“Loxapine Capsules”)
A
PAS has been filed with the FDA for transfer of manufacturing of this product to the Northvale Facility, with such PAS being under
review by the FDA. The approved ANDAs for Loxapine Capsules were acquired as part of the 2013 ANDA acquisition between the Company
and Mikah Pharma. Please see the section below titled “Asset Acquisition Agreements” for further details on the 2013
ANDA acquisition agreement.
Discontinued
and Transferred Products
The
FDA’s Generic Drug User Fee Amendment (“GDUFA”) fee structure includes fee brackets that are based on the number
of ANDAs owned as of the April 1st annual measurement date. As of the measurement date in 2018, the Company qualified as a medium
sized company, which is defined as an entity that owns between 6 and 19 ANDAs. During the fiscal year ending March 31, 2019, the
Company received approval for several ANDAs, which, when added to those approved in prior periods resulted in the Company owning
in excess of 19 ANDA’s and would have required classification as a large sized company as of the 2019 measurement date.
Based on the latest fee schedule published by the FDA in August 2018, the annual fee for a large company is $1.1 million higher
than the fee we paid as a qualified medium company. Qualifying as a large sized company would accordingly result in a significant
increase in annual regulatory fees.
Prior
to the April 1, 2019 measurement date, the Company conducted an evaluation of all ANDAs owned to determine the feasibility of
incurring such increased annual fees in relation to the value and place of each ANDA in the company’s current and future
operations and strategic plans. Based on this study, the Company identified the following ANDAs for sale and, if sale was not
possible prior to the measurement date, discontinuance, so as to ensure that total ANDAs owned at the measurement date were not
greater than 19, allowing the Company to qualify as a medium sized entity, as opposed to a large sized entity, which would have
resulted in increased regulatory costs in excess of $1 million annually.
Hydroxyzine
HCl
Approved ANDAs for Hydroxyzine
HCl 10mg, 25mg and 50mg tablets (“Hydroxyzine Tablets”) were sold to Epic Pharma LLC for cash consideration totaling
$450,000. The three related approved ANDA’s had an aggregate carrying value of $787,000, with such sale resulting in a recognized
loss of $337,000 during the fiscal year ended March 31, 2019.
Phentermine
Capsules
Approved
ANDAs for Phentermine 30mg and 15mg capsules and Phentermine 30mg seeded capsules were discontinued in March 2019. These three
ANDAs had an aggregate carrying value of $291,000, which was recognized as a loss during the fiscal year ended March 31, 2019.
Asset
Acquisition Agreements
Generic
Phentermine Capsules
On
September 10, 2010, together with our wholly owned subsidiary, Elite Laboratories, Inc., executed a purchase agreement (the “
Phentermine
Purchase Agreement
”) with Epic for the purpose of acquiring from Epic, an ANDA for a generic phentermine product (the
“
Phentermine ANDA
”), with such being filed with the FDA at the time the Phentermine Purchase Agreement was
executed. On February 4, 2011, the FDA approved the Phentermine ANDA. The acquisition of the Phentermine ANDA closed on March
31, 2011 and Elite paid the full acquisition price of $450,000 from the purchase agreement with Epic Pharma.
This
product is being marketed and distributed by Precision Dose and its wholly owned subsidiary, TAGI, pursuant to the Precision Dose
License Agreement, a description of which is set forth below.
Generic
Hydromorphone HCl Product
On
May 18, 2010, we executed an asset purchase agreement with Mikah Pharma (the “
Hydromorphone Purchase Agreement
”).
Pursuant to the Hydromorphone Purchase Agreement, the Company acquired from Mikah Pharma an approved ANDA for Hydromorphone 8
mg for aggregate consideration of $225,000, comprised of an initial payment of $150,000, which was made on May 18, 2010. A second
payment of $75,000 was due to be paid to Mikah Pharma on June 15, 2010, with the Company having the option to make this payment
in cash or by issuing to Mikah Pharma 937,500 shares of our common stock. We elected and did issue 937,500 shares of Common Stock
during the quarter ended December 31, 2010, in full payment of the $75,000 due to Mikah Pharma pursuant to the Hydromorphone Purchase
Agreement dated May 18, 2010.
This
product is currently being marketed and distributed by Precision Dose and its wholly owned subsidiary, TAGI, pursuant to the Precision
Dose License Agreement, a description of which is set forth below.
Generic
Naltrexone Product
On
August 27, 2010, we executed an asset purchase with Mikah Pharma (the “
Naltrexone Acquisition Agreement
”).
Pursuant to the Naltrexone Acquisition Agreement, Elite acquired from Mikah Pharma the ANDA number 75-274 (Naltrexone Hydrochloride
Tablets USP, 50 mg), and all amendments thereto, that have to date been filed with the FDA seeking authorization and approval
to manufacture, package, ship and sell the products described in this ANDA within the United States and its territories (including
Puerto Rico) for aggregate consideration of $200,000. In lieu of cash, Mikah Pharma agreed to accept product development services
to be performed by us.
This
product is being marketed and distributed by Precision Dose and its wholly owned subsidiary, TAGI, pursuant to the Precision Dose
License Agreement, a description of which is set forth below.
2013
ANDA Purchase Agreement
On
August 1, 2013, Elite executed a purchase agreement with Mikah (the “2013 ANDA Purchase Agreement”) pursuant to which,
Elite acquired, for aggregated consideration of $10,000,000, inclusive of imputed interest, approved ANDAs for the following products:
Hydroxyzine HCl 10mg, 25mg and 50mg tablets (“Hydroxyzine Tablets”), Phentermine Capsules, Phentermine Tablets, Phendimetrazine
Tablets, Isradipine Capsules, Dantrolene Capsules and Loxapine 5mg, 10mg, 25mg and 50mg capsules (“Loxapine Capsules”).
In addition, Elite acquired one ANDA under review by the FDA, which is not expected to be approved and for which no value was
assigned.
The Company issued a
secured, non-interest bearing, convertible note for the aggregate consideration, with such note being due in August 2016. This
note was amended on February 7, 2014 to make it convertible into shares of the Company’s Series I Convertible Preferred Stock.
On February 7, 2014, this note was converted into 100 shares of the Company’s Series I Preferred Stock and retired.
On
August 16, 2016, these 100 shares of Series I Preferred Stock were converted into 142,857,143 shares of Common Stock, with such
shares being included in the exchange agreement dated April 28, 2017 pursuant to which shares were returned to the company, in
exchange for shares of Series J Preferred Stock and Warrants, both of which are still outstanding. Please see
“Certain
Relationships And Related Transactions, And Director Independence”
, below for further details of these transactions.
The
following is a summary of the status of the ANDAs acquired pursuant to the 2013 ANDA Purchase Agreement:
Product
|
|
Status
|
Hydroxyzine
Tablets
|
|
Transferred
to Epic Pharma
|
Phentermine
Capsules
|
|
Discontinued
|
Phentermine
Tablets
|
|
Commercial
|
Phendimetrazine
Tablets
|
|
Commercial
|
Isradipine
Capsules
|
|
Commercial
|
Dantrolene
Capsules
|
|
Commercial
|
Loxapine
Capsules
|
|
Manufacturing
site transfer in progress
|
Trimipramine
In
May 2017, through Elite Labs, we acquired from Mikah Pharma an FDA approved ANDA for Trimipramine for aggregate consideration
of $1,200,000. Trimipramine is currently manufactured by Elite and marketed by Glenmark pursuant to the Glenmark Strategic Alliance.
Trimipramine is a generic version of Surmontil®, a tricyclic antidepressant. Surmontil® and generic Trimipramine have
total US sales of approximately $2 million in 2016 according to IMS Health Data. The ANDA purchased by Elite is currently the
only marketed generic Trimipramine product.
Licensing,
Manufacturing and Development Agreements
Sales
and Distribution Licensing Agreement with Epic Pharma LLC for SequestOx™
On
June 4, 2015, we executed an exclusive License Agreement (the “
2015 SequestOx™ License Agreement
”) with
Epic, to market and sell in the U.S., SequestOx™, an immediate release oxycodone with sequestered naltrexone capsule, owned
by us. Epic will have the exclusive right to market ELI-200 and its various dosage forms as listed in Schedule A of the Agreement.
Epic is responsible for all regulatory and pharmacovigilance matters related to the products. Pursuant to the 2015 SequestOx™
License Agreement, Epic will pay us non-refundable payments totaling $15 million, with such amount representing the cost of an
exclusive license to SequestOx™, the cost of developing the product, the filing of an NDA with the FDA and the receipt of
the approval letter for the NDA from the FDA. As of the date of filing of this quarterly report on Form 10-Q, the Company has
received $7.5 million of the $15 million in non-refundable payments due pursuant to the 2015 SequestOx™ License Agreement,
with such amount consisting of $5 million being due and owing on the execution date of the 2015 SequestOx™ License Agreement,
and $2.5 million being earned as of January 14, 2016, the date of Elite’s filing of an NDA with the FDA for the relevant
product. Both of these non-refundable fees (i.e., the $5 million fee and the $2.5 million fee), have been paid by Epic.
The
remaining $7.5 million in non-refundable payments due pursuant to the 2015 SequestOx™ License Agreement is due on the FDA’s
approval of SequestOx™ for commercial sale in the United States of America (please see the paragraph below for further details).
In addition, we will receive a license fee computed as a percentage (50%) of net sales of the products as defined in the 2015
SequestOx™ License Agreement and is entitled to multi-million-dollar minimum annual license fees we will manufacture the
product for sale by Epic on a cost-plus basis and both parties agree to execute a separate Manufacturing and Supply Agreement.
The license fee is payable quarterly for the term of the 2015 SequestOx™ License Agreement. The term of the 2015 SequestOx™
License Agreement is five years and may be extended for an additional five years upon mutual agreement of the parties. Elite can
terminate the 2015 SequestOx™ License Agreement on 90 days’ written notice in the event that Epic does not pay us
certain minimum annual license fees over the initial five-year term of the 2015 SequestOx™ License Agreement. Either party
may terminate this 2015 SequestOx™ License Agreement upon a material breach and failure to cure that breach by the other
party within a specified period.
Please
see the above section titled
“SequestOx™ - Immediate Release Oxycodone with sequestered Naltrexone”
for
further details on this product and especially note that, as of the date of filing of this Quarterly Report on Form 10-Q, the
NDA filed for this product has not been approved by the FDA. Furthermore, the 2015 SequestOx™ License Agreement has a five-year
term, expiring on June 4, 2020, and Epic has previously advised the Company of their desire to extend this agreement. While discussions
are ongoing, they are directly correlated to the regulatory status of SequestOx
™
. Furthermore, there can be no assurances
that the parties will reach mutual agreement to extend the term of this agreement and no assurances that the terms and conditions
of the agreement will be similar in all material aspects in the event that the agreement is extended by mutual agreement of the
parties.
Manufacturing
and License Agreement with Epic Pharma LLC
On
October 2, 2013, we executed the Epic Pharma Manufacturing and License Agreement (the “
Epic Manufacturing and License
Agreement
”). This agreement, which expired on October 2, 2018, granted Epic certain rights to manufacture, market and
sell in the United States and Puerto Rico the twelve approved ANDAs acquired by us pursuant to the 2013 ANDA Purchase Agreement.
Of the twelve approved ANDAs, Epic had an exclusive right to market six products as listed in Schedule A of the Epic Manufacturing
and License Agreement, and a non-exclusive right to market six products as listed in Schedule D of the Epic Manufacturing and
License Agreement. Pursuant to the Epic Manufacturing and License Agreement, we received a license fee and milestone payments.
The license fee was computed as a percentage of the gross profit, as defined in the Epic Manufacturing and License Agreement,
earned by Epic from the sale of the products. The manufacturing cost used for the calculation of the license fee was a predetermined
amount per unit plus the cost of the active pharmaceutical ingredient (“
API
”) and the sales cost for the calculation
was predetermined based on net sales.
The
Epic Manufacturing and License Agreement expired on October 2, 2018, in accordance with terms and conditions therein.
Trimipramine
Acquisition
On
May 16, 2017, we executed an asset purchase agreement with Mikah Pharma, and acquired from Mikah Pharma (the “
Trimipramine
Acquisition
”) an FDA approved ANDA for Trimipramine for aggregate consideration of $1,200,000, payable pursuant to a
senior secured note due on December 31, 2020 (the “
Trimipramine Note
”). Mikah Pharma is owned by Nasrat Hakim,
the CEO, President, and a director of the Company.
The
Trimipramine Note bears interest at the rate of 10% per annum, payable quarterly. All principal and unpaid interest is due and
payable on December 31, 2020. Pursuant to a security agreement, repayment of the Note is secured by the ANDA acquired in the Acquisition.
Trimipramine
Distribution Agreement with Dr. Reddy’s Laboratories, Inc. and Manufacturing Agreement with Epic
On
May 17, 2017, in conjunction with the Trimipramine Acquisition, the Company executed an assignment agreement with Mikah Pharma,
pursuant to which the Company acquired all rights, interests, and obligations under a supply and distribution agreement (the “
Reddy’s
Trimipramine Distribution Agreement
”) with Dr. Reddy’s Laboratories, Inc. (“
Dr. Reddy’s
”)
originally entered into by Mikah Pharma on May 7, 2017 and relating to the supply, sale and distribution of generic Trimipramine
Maleate Capsules 25mg, 50mg and 100mg.
On
May 22, 2017, the Company executed an assignment agreement with Mikah Pharma, pursuant to which the Company acquired all rights,
interests and obligations under a manufacturing and supply agreement with Epic originally entered into by Mikah in 2011 and amended
on June 30, 2015 and relating to the manufacture and supply of Trimipramine (the “
Trimipramine Manufacturing Agreement
”).
Under
the Trimipramine Manufacturing Agreement, Epic manufactured Trimipramine under license from the Company pursuant to the FDA approved
and currently marketed Abbreviated New Drug Application that was acquired in conjunction with the Company’s entry into these
agreements.
Under
the Reddy’s Trimipramine Distribution Agreement, the Company supplied Trimipramine on an exclusive basis to Dr. Reddy’s
and Dr. Reddy’s was responsible for all marketing and distribution of Trimipramine in the United States, its territories,
possessions, and commonwealth. The Trimipramine was manufactured by Epic and transferred to Dr. Reddy’s at cost, without
markup.
Dr.
Reddy’s paid the Company a share of the profits, calculated without any deduction for cost of sales and marketing, derived
from the sale of Trimipramine. The Company’s share of these profits was in excess of 50%.
The
Reddy’s Trimipramine Distribution Agreement was terminated by mutual consent of the parties on August 1, 2018.
Ascend
Methadone Manufacturing and Supply Agreement
On
June 23, 2011 and as amended on September 24, 2012, January 19, 2015, July 20, 2015 and as extended on August 9, 2016, we entered
into an agreement to manufacture and supply Methadone 10mg tablets (the “Ascend Methadone”) to ThePharmaNetwork LLC
(the “Ascend
Methadone Manufacturing and Supply Agreement
”). ThePharmaNetwork LLC was subsequently acquired
by Alkem Laboratories Ltd (“
Alkem
”) and now goes by the name Ascend Laboratories LLC (“
Ascend
”)
and is a wholly owned subsidiary of Alkem.
Ascend
is the owner of the approved ANDA for Ascend Methadone, and the Northvale Facility is an approved manufacturing site for this
ANDA. The Ascend Methadone Manufacturing and Supply Agreement provides for the manufacturing and packaging by the Company of Ascend
Methadone.
The
initial shipment of Ascend Methadone pursuant to the Ascend Methadone Manufacturing and Supply Agreement occurred in January 2012.
On
August 26, 2016, the Ascend Methadone Manufacturing and Supply Agreement was amended and extended through December 31, 2017.
Subsequent
to the expiration of the Ascend Methadone Manufacturing and Supply Agreement, the Company honored purchase orders from Ascend,
to manufacture Ascend Methadone. The commercial terms on those purchase orders honored were similar to those included in the expired
agreement. The last shipment of Ascend Methadone pursuant to purchase orders honored subsequent to the expiration of the Ascend
Methadone Manufacturing and Supply Agreement occurred in April 2018 and there will be no further manufacture or shipments of Ascend
Methadone.
Precision
Dose License Agreement
On
September 10, 2010, we executed a License Agreement with Precision Dose (the “
Precision Dose License Agreement
”)
to market and distribute Phentermine 37.5mg, Phentermine 15mg, Phentermine 30mg, Hydromorphone 8mg, Naltrexone 50mg, and certain
additional products that require approval from the FDA, through its wholly-owned subsidiary, TAGI, in the United States, Puerto
Rico and Canada. Phentermine 37.5mg was launched in April 2011. Hydromorphone 8mg was launched in March 2012. Phentermine 15mg
and Phentermine 30mg were launched in April 2013. Naltrexone 50mg was launched in September 2013. Precision Dose will have the
exclusive right to market these products in the United States and Puerto Rico and a non-exclusive right to market the products
in Canada.
Pursuant
to the Precision Dose License Agreement, Elite will receive a license fee and milestone payments. The license fee will be computed
as a percentage of the gross profit, as defined in the Precision Dose License Agreement, earned by Precision Dose as a result
of sales of the products. The license fee is payable monthly for the term of the Precision Dose License Agreement. The milestone
payments will be paid in six installments. The first installment was paid upon execution of the Precision Dose License Agreement.
The remaining installments are to be paid upon FDA approval and initial shipment of the products to Precision Dose. The term of
the Precision Dose License Agreement is 15 years and may be extended for 3 successive terms, each of 5 years.
Master
Development and License Agreement with SunGen Pharma LLC
On
August 24, 2016, as amended we entered into an agreement with SunGen Pharma LLC (“SunGen”) (the “SunGen Agreement”)
to undertake and engage in the research, development, sales and marketing of eight generic pharmaceutical products. Two of the
products are classified as CNS stimulants (the “CNS Products”), two of the products are classified as beta blockers
and the remaining four products consist of antidepressants, antibiotics and antispasmodics. To date, the Company has received
approval from the FDA for Amphetamine IR Tablets (the first of the two CNS Products) and has filed ANDA’s for the second
CNS Product as well as ANDA filed for an antibiotic product.
Under
the terms of the SunGen Agreement, Elite and SunGen will share in the responsibilities and costs in the development of these products
and will share substantially in the profits from sales. Upon approval, the know-how and intellectual property rights to the products
will be owned jointly by Elite and SunGen. Three of the eight products will be jointly owned, three products will be owned by
SunGen, with Elite having exclusive marketing rights and the remaining two products will be owned by Elite, with SunGen having
exclusive marketing rights. Elite will manufacture and package all eight products on a cost-plus basis.
On
January 10, 2018, the Company reported positive topline results from pivotal bioequivalence studies for an undisclosed extended-release
generic product in co-development with SunGen Pharma. The topline results indicate that the generic product is bioequivalent to
the branded product. The studies were single dose crossover comparative bioavailability studies in healthy male and female volunteers
in both the fed and fasting states. A fasting study with product beads sprinkled on to applesauce also demonstrated bioequivalence
to the branded product. MS Health reported approximately $1.6 billion in revenue for the generic market for this product in 2017.
On
May 24, 2018, the Company filed an ANDA with the FDA for a generic version of an extended release CNS stimulant. The ANDA represents
the second filing for a product co-developed with SunGen under the SunGen Agreement. According to IMS Health data, the branded
product and its equivalents had total U.S. sales of approximately $1.6 billion for the twelve months ended September 30, 2017.
The Company received a request from the FDA for additional information to which the Company has responded. The filing is under
review by the FDA.
On
December 10, 2018, the Company received approval from the FDA for Amphetamine IR Tablets, a generic version of Adderall
®
,
an immediate-release mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine
Sulfate, Amphetamine Sulfate) with strengths of 5 mg, 7.5 mg, 10 mg, 12.5 mg, 15 mg, 20 mg, and 30 mg tablets. The product
is a central nervous system stimulant and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD) and
Narcolepsy. According to QVIA (formerly QuintilesIMS Health) data the branded product and its equivalents had total U.S.
sales of $365 million for the twelve months ending September 30, 2018. This is the first product approval for our Elite and SunGen
Pharma LLC (“SunGen”) collaboration. The product is jointly owned. Elite will manufacture and package
the product on a cost-plus basis and the parties are negotiating an agreement for sales of the product. Amphetamine IR Tablets
is currently sold pursuant to the Lannett Alliance, with first commercial shipment of this product occurring in April 2019. Please
see the section below titled “Strategic Marketing Alliance with Lannett Company Inc.” for further details on the Lannett
Alliance
On
January 3, 2019, the Company filed an ANDA with the FDA for a generic version of an antibiotic product. According to QVIA (formerly
QuintilesIMS Health) data, the branded product for this antibiotic and its equivalents had total annual U.S. sales of approximately
$94 million for the twelve months ending September 30, 2018. The product is jointly owned by Elite and SunGen. Upon approval by
the FDA of this ANDA, Elite will manufacture and package the product on a cost-plus basis. The ANDA is currently under review
by the FDA.
There
can be no assurances that any of these products will receive marketing authorization and achieve commercialization within this
time period, or at all. In addition, even if marketing authorization is received, and even for those products for which marketing
authorization has already been received, there can be no assurances that there will be future revenues of profits, or that any
such future revenues or profits would be in amounts that provide adequate return on the significant investments made to secure
these marketing authorizations or provide sufficient financial contributions to support costs of operations and overheads
Strategic
Marketing Alliance with Glenmark Pharmaceuticals, Inc. USA
On
May 29, 2018, and as amended on August 1, 2018, we entered into a license, manufacturing and supply agreement with Glenmark Pharmaceuticals
Inc. USA (“
Glenmark
”) to market the two Elite generic products described below in the United States with the
option to add products in the future (the “
Glenmark Alliance
”).
Pursuant
to the Glenmark Alliance, Glenmark will purchase the products from Elite and then sell and distribute them. In addition to
the purchase prices for the products, Elite will receive license fees well in excess of 50% of gross profits. Gross profits
is defined as net sales less the price paid to Elite for the products, distribution fees (less than 10%) and shipping costs.
Glenmark will have semi-exclusive marketing rights to the ANDA approved generic product, phendimetrazine 35mg tablets,
and exclusive marketing rights to the following ANDA approved generic products: Methadone 10mg, Methadone 5mg, Trimipramine
25mg, Trimipramine 50mg, Trimipramine 100mg, and effective October 2, 2018, upon expiration of the Epic Manufacturing and
License Agreement, exclusive marketing rights to the following ANDA approved generic products: Isradipine 2.5mg and
Isradipine 5mg. The Glenmark Alliance has an initial term of three years and automatically renews for one year periods absent
prior written notice of non-renewal. In addition to customary termination provisions, the Agreement permits Glenmark to
terminate with regard to a product on at least three months’ prior written notice if it determines to stop marketing
and selling such product, and it permits Elite to terminate with regard to a product if at any time after the first
twelvemonths from the first commercial sale, the average license fee paid by Glenmark for such product is less than $100,000
for a six month sales period.
The
first commercial shipment of Methadone Tablets pursuant to the Glenmark Alliance occurred in November 2018. The first commercial
shipment of Isradipine Capsules pursuant to the Glenmark Alliance occurred in March 2019. The first commercial shipment of Trimipramine
Capsules occurred in April 2019.
There
can be no assurances that there will be future revenues of profits, earned pursuant to the Glenmark Alliance, or that any such
future revenues or profits would be in amounts that provide adequate return on the significant investments made to secure the
marketing authorizations for products included in the Glenmark Alliance or provide sufficient financial contributions to support
costs of operations and overheads.
Strategic
Marketing Alliances with Lannett Company Inc.
The
Company has entered into two separate license, supply and distribution agreements with Lannett Company Inc. (“Lannett”).
The first agreement, dated March 6, 2019 relates to products that were co-developed with SunGen (the “Lannett-SunGen Product
Alliance”). The second agreement, dated April 9, 2019 relates to products that were solely developed by Elite (the “Lannett-Elite
Product Alliance”). Both agreements are collectively and individually referred to as the “Lannett Alliance”)
Pursuant
to Lannett-SunGen Product Alliance with Lannett, Lannett will be the exclusive U.S. marketer and distributor for two generic
products co-developed and co-owned by Elite and SunGen – Amphetamine IR Tablets and a second product which is an
extended release CNS stimulant that is currently under review by the FDA. Elite will manufacture and Lannett will purchase
the products from Elite and then sell and distribute them. In addition to the purchase prices for the products, Elite will
receive license fees in excess of 50% of net profits, which will be shared equally with SunGen, pursuant to the SunGen
Agreement. The Lannett-SunGen Product Alliance has an initial term of three years and automatically renews for one year
periods absent prior written notice of non-renewal. In addition to customary termination provisions, the Agreement permits
Lannett to terminate with regard to a product on at least six months’ prior written notice, and it permits Elite or
Lannett to terminate with regard to a product if at any time after the first twelve months from the first commercial sale,
the average license fee paid by Lannett for such product is less than $300,000 for a six month sales period. In addition to
manufacturing fees and license fees, Lannett will also pay a milestone, of $750,000 upon commercial launch of the extended
release CNS stimulant product that is currently under review by the FDA. This milestone payment will be shared equally by
Elite and SunGen, pursuant to the SunGen Agreement.
The
first commercial shipment of Amphetamine IR Tablets, a generic version of Adderall
®
, with strengths of 5mg, 7.5mg,
10mg, 12.5mg, 15mg, 20mg and 30mg, pursuant to the Lannett-SunGen Product Alliance occurred in April 2019.
Pursuant
to the Lannett-Elite Product Alliance, Lannett will be the exclusive U.S. marketer and distributor for Dantrolene Capsules.
Elite will manufacture and Lannett will purchase Dantrolene Capsules from Elite and then sell and distribute them. In
addition to the purchase prices for the products, Elite will receive license fees in excess of 50% of net profits. Net
profits is defined as net sales less the price paid to Elite for the products, distribution fees (less than 10%) and shipping
costs. The Lannett-Elite Product Alliance has an initial term of three years and automatically renews for one year periods
absent prior written notice of non-renewal. In addition to customary termination provisions, the Agreement permits Lannett to
terminate with regard to a product on at least six months’ prior written notice and it permits Elite or Lannett to
terminate with regard to a product if at any time after the first twelve months from the first commercial sale, the average
license fee paid by Lannett for such product is less than $300,000 for a six month sales period.
Products
Under Development
Elite’s
research and development activities include developing its proprietary abuse deterrent technology and the development of a range
of abuse deterrent opioid products that utilize this technology or other approaches to abuse deterrence.
Elite’s
proprietary abuse-deterrent technology utilizes the pharmacological approach to abuse deterrence and consists of a multi-particulate
capsule which contains an opioid agonist in addition to naltrexone, an opioid antagonist used primarily in the management of alcohol
dependence and opioid dependence. When this product is taken as intended, the naltrexone is designed to pass through the body
unreleased while the opioid agonist releases over time providing therapeutic pain relief for which it is prescribed. If the multi-particulate
beads are crushed or dissolved, the opioid antagonist, naltrexone, is designed to release. The absorption of the naltrexone is
intended to block the euphoria by preferentially binding to same receptors in the brain as the opioid agonist and thereby reducing
the incentive for abuse or misuse by recreational drug abusers.
We
filed an NDA for the first product to utilize our abuse deterrent technology, Immediate Release Oxycodone 5mg, 10mg, 15mg, 20mg
and 30mg with sequestered Naltrexone (collectively and individually referred to as “
SequestOx™
”), on
January 14, 2016. Please see “
Filed products under FDA review; SequestOx™ - Immediate Release Oxycodone with sequestered
Naltrexone
” above and please note that continued development of this product is currently paused.
On
September 20, 2017, the Company filed an ANDA with the FDA for generic version of OxyContin® (extended release Oxycodone Hydrochloride).
Please see “
Filed products under FDA review; Oxycodone Hydrochloride extended release (generic version of OxyContin
®”
above. Please note that there can be no assurances of this product receiving marketing authorization or achieving commercialization.
In addition, even if marketing authorization is received and the product is commercialized, there can be no assurances of future
revenues or profits in such amounts that would provide adequate return on the significant investments made to secure marketing
authorization for this product.
On
May 30, 2018, the Company filed an ANDA with the FDA for a generic version of an extended release CNS stimulant. The ANDA represents
the second filing for a product co-developed with SunGen under the SunGen Agreement. Please see “
Filed products under
FDA review Generic version of extended release Central Nervous System stimulant
” above. Please note that there can be
no assurances of this product receiving marketing authorization or achieving commercialization. In addition, even if marketing
authorization is received and the product is commercialized, there can be no assurances of future revenues or profits in such
amounts that would provide adequate return on the significant investments made to secure marketing authorization for this product.
Please also see the section below titled “
Master Development and License Agreement with SunGen Pharma LLC
”.
On
September 18, 2018, the Company filed an Abbreviated New Drug Application with the US Food and Drug Administration (the “FDA”)
for a generic version of Tylenol® with Codeine (acetaminophen and codeine phosphate) 300mg/7.5mg, 300mg/15mg, 300mg/30mg and
300mg/60mg tablets. Please see “
Filed products under FDA review
” above. Please note that there can
be no assurances of this product receiving marketing authorization or achieving commercialization. In addition, even if marketing
authorization is received and the product is commercialized, there can be no assurances of future revenues or profits in such
amounts that would provide adequate return on the significant investments made to secure marketing authorization for this product.
On
January 3, 2019, the Company filed an Abbreviated New Drug Application with the US Food and Drug Administration for a generic
version of an antibiotic product. Please see “
Filed products under FDA review
” above. Please note that
there can be no assurances of this product receiving marketing authorization or achieving commercialization. In addition, even
if marketing authorization is received and the product is commercialized, there can be no assurances of future revenues or profits
in such amounts that would provide adequate return on the significant investments made to secure marketing authorization for this
product. Please also see the section below titled “
Master Development and License Agreement with SunGen Pharma LLC
”.
The
Company believes that the abuse deterrent technology can be applied to and incorporated into a wide range of opioids used today
for pain management and has, to date, identified additional products for potential development. All of these products are at early
stages of development, with research and development activities mainly consisting of in-house process development and laboratory
studies. Extensive efficacy and safety studies, similar to those conducted for SequestOx™, Generic Oxy/APAP and Generic
Hydrocodone/APAP, have not yet been conducted for these other products. As a result, costs incurred in relation to the development
of these products have not been material.
Research
and development costs were $7.6 million and $9.6 million for years ended March 31, 2019 and 2018, respectively. Costs incurred
relate to the development of the abuse deterrent opioid product, SequestOx™ , the ongoing development of our abuse deterrent
opioid and other products in addition to a focus on clinical trials for generic products.
Please
note that, while the FDA is required to review applications within certain timeframes, during the review process, the FDA frequently
requests that additional information be submitted. The effect of such request and subsequent submission can significantly extend
the time for the NDA review process. Until an NDA is actually approved, there can be no assurances that the information requested
and submitted will be considered adequate by the FDA to justify approval. The packaging and labeling of our developed products
are also subject to FDA regulation. Based on the foregoing, it is impossible to anticipate the amount of time that will be needed
to obtain FDA approval to market any product. In addition, there can be no assurances of the Company filing the required application(s)
with the FDA or of the FDA approving such application(s) if filed, and the Company’s ability to successfully develop and
commercialize products incorporating its abuse deterrent technology is subject to a high level of risk as detailed in “
Item
1A-Risk Factors-Risks Related to our Business
” of the Annual Report on
Form 10-K
filed with the SEC on June 21, 2019.
Abuse-Deterrent
and Sustained Release Opioids
The
abuse-deterrent opioid products utilize our patented abuse-deterrent technology that is based on a pharmacological approach. These
products are combinations of a narcotic agonist formulation intended for use in patients with pain, and an antagonist, formulated
to deter abuse of the drug. Both, agonist and antagonist, have been on the market for a number of years and sold separately in
various dose strengths. We have filed INDs for two abuse resistant products under development and have tested products in various
pharmacokinetic and efficacy studies. Products utilizing the pharmacological approach to deter abuse such as Suboxone®, a
product marketed in the United States by Reckitt Benckiser Pharmaceuticals, Inc., and Embeda®, a product marketed in the United
States by Pfizer, Inc., have been approved by the FDA and are being marketed in the United States.
We
have developed, licensed to Epic the marketing rights to SequestOx™, immediate release Oxycodone with Naltrexone, and retain
the rights to the remainder of these abuse resistant and sustained release opioid products. We may license these products at a
later date to a third party who could provide funding for the remaining clinical studies and who could provide sales and distribution
for the product.
We
also developed controlled release technology for oxycodone under a joint venture with Elan which terminated in 2002. According
to the Elan Termination Agreement, we acquired all proprietary, development and commercial rights for the worldwide markets for
the products developed by the joint venture, including the sustained release opioid products. Upon licensing or commercialization
of an oral controlled release formulation of oxycodone for the treatment of pain, we will pay a royalty to Elan pursuant to the
Elan Termination Agreement. If we were to sell the product itself, we will pay a 1% royalty to Elan based on the product’s
net sales, and if we enter into an agreement with another party to sell the product, we will pay a 9% royalty to Elan based on
our net revenues from this product. We are allowed to recoup all development costs including research, process development, analytical
development, clinical development and regulatory costs before payment of any royalties to Elan.
Patents
Since
our incorporation, we have secured the following patents, of which two have been assigned for a fee to another pharmaceutical
company. Our patents are:
PATENT
|
|
EXPIRATION DATE
|
|
|
|
U.S. patent 6,620,439
|
|
October 2020
|
U.S. patent 6,926,909
|
|
April 2023
|
U.S. patent 8,182,836
|
|
April 2024
|
U.S. patent 8,425,933
|
|
April 2024
|
U.S. patent 8,703,186
|
|
April 2024
|
Canadian patent 2,521,655
|
|
April 2024
|
Canadian patent 2,541,371
|
|
September 2024
|
U.S. patent 9,056,054
|
|
June 2030
|
E.P. patent 1615623
|
|
April 2024
|
U.S. patent 10213388
|
|
April 2030
|
We
also have pending applications for two additional U.S. patents non-provisional patents and one provisional patent application
and one foreign patent application. We intend to apply for patents for other products in the future; however, there can be no
assurance that any of the pending applications or other applications which we may file will be granted. We have also filed corresponding
foreign applications for key patents.
Prior
to the enactment in the United States of new laws adopting certain changes mandated by the General Agreement on Tariffs and Trade
(“
GATT
”), the exclusive rights afforded by a U.S. Patent were for a period of 17 years measured from the date
of grant. Under GATT, the term of any U.S. Patent granted on an application filed subsequent to June 8, 1995 terminates 20 years
from the date on which the patent application was filed in the United States or the first priority date, whichever occurs first.
Future patents granted on an application filed before June 8, 1995, will have a term that terminates 20 years from such date,
or 17 years from the date of grant, whichever date is later.
Under
the Drug Price Competition Act, a U.S. product patent or use patent may be extended for up to five years under certain circumstances
to compensate the patent holder for the time required for FDA regulatory review of the product. Such benefits under the Drug Price
Competition Act are available only to the first approved use of the active ingredient in the drug product and may be applied only
to one patent per drug product. There can be no assurance that we will be able to take advantage of this law.
Also,
different countries have different procedures for obtaining patents, and patents issued by different countries provide different
degrees of protection against the use of a patented invention by others. There can be no assurance, therefore, that the issuance
to us in one country of a patent covering an invention will be followed by the issuance in other countries of patents covering
the same invention, or that any judicial interpretation of the validity, enforceability, or scope of the claims in a patent issued
in one country will be similar to the judicial interpretation given to a corresponding patent issued in another country. Furthermore,
even if our patents are determined to be valid, enforceable, and broad in scope, there can be no assurance that competitors will
not be able to design around such patents and compete with us using the resulting alternative technology.
Trademarks
SequestOx™
is a trademark owned by Elite, for which United States trademark registration is being sought.
We
currently plan to license at least some of our products to other entities in the marketing of pharmaceuticals but may also sell
products under our own brand name in which case we may register trademarks for those products.
Terminated
Agreements
Terminated
Agreement – Methadone Manufacturing and Supply Agreement
On
December 31, 2017, the Methadone Manufacturing and Supply Agreement terminated in accordance with the terms of the agreement.
Other
Business Factors and Details
Government
Regulation and Approval
The
design, development, and marketing of pharmaceutical compounds, on which our success depends, are intensely regulated by governmental
regulatory agencies, in particular the FDA. Non-compliance with applicable requirements can result in fines and other judicially
imposed sanctions, including product seizures, injunction actions and criminal prosecution based on products or manufacturing
practices that violate statutory requirements. In addition, administrative remedies can involve voluntary withdrawal of products,
as well as the refusal of the FDA to approve ANDAs and NDAs. The FDA also has the authority to withdraw approval of drugs in accordance
with statutory due process procedures.
Before
a drug may be marketed, it must be approved by the FDA either by an NDA or an ANDA, each of which is discussed below.
NDAs
and NDAs under Section 505(b) of the Drug Price Competition Act
The
FDA approval procedure for an NDA is generally a two-step process. During the Initial Product Development stage, an investigational
new drug application (“
IND
”) for each product is filed with the FDA. A 30-day waiting period after the filing
of each IND is required by the FDA prior to the commencement of initial clinical testing. If the FDA does not comment on or question
the IND within such 30-day period, initial clinical studies may begin. If, however, the FDA has comments or questions, they must
be answered to the satisfaction of the FDA before initial clinical testing may begin. In some instances, this process could result
in substantial delay and expense. Initial clinical studies generally constitute Phase I of the NDA process and are conducted to
demonstrate the product tolerance/safety and pharmacokinetic in healthy subjects.
After
Phase I testing, extensive efficacy and safety studies in patients must be conducted. After completion of the required clinical
testing, an NDA is filed, and its approval, which is required for marketing in the United States, involves an extensive review
process by the FDA. The NDA itself is a complicated and detailed application and must include the results of extensive clinical
and other testing, the cost of which is substantial. However, the NDA filings contemplated by us, which are already marketed drugs,
would be made under Sections 505 (b)(1) or 505 (b)(2) of the Drug Price Competition Act, which do not require certain studies
that would otherwise be necessary; accordingly, the development timetable should be shorter. While the FDA is required to review
applications within a certain timeframe, during the review process, the FDA frequently requests that additional information be
submitted. The effect of such request and subsequent submission can significantly extend the time for the NDA review process.
Until an NDA is actually approved, there can be no assurance that the information requested and submitted will be considered adequate
by the FDA to justify approval. The packaging and labeling of our developed products are also subject to FDA regulation. It is
impossible to anticipate the amount of time that will be needed to obtain FDA approval to market any product.
Whether
or not FDA approval has been obtained, approval of the product by comparable regulatory authorities in any foreign country must
be obtained prior to the commencement of marketing of the product in that country. We intend to conduct all marketing in territories
other than the United States through other pharmaceutical companies based in those countries. The approval procedure varies from
country to country, can involve additional testing, and the time required may differ from that required for FDA approval. Although
there are some procedures for unified filings for certain European countries, in general each country has its own procedures and
requirements, many of which are time consuming and expensive. Thus, there can be substantial delays in obtaining required approvals
from both the FDA and foreign regulatory authorities after the relevant applications are filed. After such approvals are obtained,
further delays may be encountered before the products become commercially available.
ANDAs
The
FDA approval procedure for an ANDA differs from the procedure for an NDA in that the FDA waives the requirement of conducting
complete clinical studies, although it normally requires bioavailability and/or bioequivalence studies. “
Bioavailability
”
indicates the rate and extent of absorption and levels of concentration of a drug product in the blood stream needed to produce
a therapeutic effect. “
Bioequivalence
” compares the bioavailability of one drug product with another, and when
established, indicates that the rate of absorption and levels of concentration of the active drug substance in the body are equivalent
for the generic drug and the previously approved drug. An ANDA may be submitted for a drug on the basis that it is the equivalent
of a previously approved drug or, in the case of a new dosage form, is suitable for use for the indications specified.
The
timing of final FDA approval of an ANDA depends on a variety of factors, including whether the applicant challenges any listed
patents for the drug and whether the brand-name manufacturer is entitled to one or more statutory exclusivity periods, during
which the FDA may be prohibited from accepting applications for, or approving, generic products. In certain circumstances, a regulatory
exclusivity period can extend beyond the life of a patent, and thus block ANDAs from being approved on the patent expiration date.
In
May 1992, Congress enacted the Generic Drug Enforcement Act of 1992, which allows the FDA to impose debarment and other penalties
on individuals and companies that commit certain illegal acts relating to the generic drug approval process. In some situations,
the Generic Drug Enforcement Act requires the FDA to not accept or review ANDAs for a period of time from a company or an individual
that has committed certain violations. It also provides for temporary denial of approval of applications during the investigation
of certain violations that could lead to debarment and also, in more limited circumstances, provides for the suspension of the
marketing of approved drugs by the affected company. Lastly, the Generic Drug Enforcement Act allows for civil penalties and withdrawal
of previously approved applications. Neither we nor any of our employees have ever been subject to debarment. We do not believe
that we receive any services from any debarred person.
Controlled
Substances
We
are also subject to federal, state, and local laws of general applicability, such as laws relating to working conditions. We are
also licensed by, registered with, and subject to periodic inspection and regulation by the Drug Enforcement Agency (“
DEA
”)
and New Jersey state agencies, pursuant to federal and state legislation relating to drugs and narcotics. Certain drugs that we
currently develop or may develop in the future may be subject to regulations under the Controlled Substances Act and related statutes.
As we manufacture such products, we may become subject to the Prescription Drug Marketing Act, which regulates wholesale distributors
of prescription drugs.
cGMP
All
facilities and manufacturing techniques used for the manufacture of products for clinical use or for sale must be operated in
conformity with cGMP regulations issued by the FDA. We engage in manufacturing on a commercial basis for distribution of products
and operate our facilities in accordance with cGMP regulations. If we hire another company to perform contract manufacturing for
us, we must ensure that our contractor’s facilities conform to cGMP regulations.
Compliance
with Environmental Laws
We
are subject to comprehensive federal, state and local environmental laws and regulations that govern, among other things, air
polluting emissions, wastewater discharges, solid and hazardous waste disposal, and the remediation of contamination associated
with current or past generation handling and disposal activities, including the past practices of corporations as to which we
are the legal successor or in possession. We do not expect that compliance with such environmental laws will have a material effect
on our capital expenditures, earnings, or competitive position in the foreseeable future. There can be no assurance, however,
that future changes in environmental laws or regulations, administrative actions or enforcement actions, or remediation obligations
arising under environmental laws will not have a material adverse effect on our capital expenditures, earnings, or competitive
position.
Competition
We
have competition with respect to our principal areas of operation. We develop and manufacture generic products, products using
controlled-release drug technology, products utilizing abuse deterrent technologies, and we develop and market (either on our
own or by license to other companies) generic and proprietary controlled-release and abuse deterrent pharmaceutical products.
In both areas, our competition consists of those companies which develop controlled-release, abuse deterrent drugs and alternative
drug delivery systems. We do not represent a significant presence in the pharmaceutical industry.
An
increasing number of pharmaceutical companies have become interested in the development and commercialization of products incorporating
advanced or novel drug delivery systems. Some of the major pharmaceutical companies have invested and are continuing to invest
significant resources in the development of their own drug delivery systems and technologies and some have invested funds in such
specialized drug delivery companies. Many of these companies have greater financial and other resources as well as more experience
than we do in commercializing pharmaceutical products. Certain companies have a track record of success in developing controlled-release
drugs. Significant among these are, without limitation, Pfizer, Sandoz (a Novartis company), Mylan Laboratories, Inc., Endo Pharmaceuticals,
Inc., Teva Pharmaceuticals Industries Ltd., Amneal Laboratories, Inc., Mallinckrodt, and Aurobindo. Each of these companies has
developed expertise in certain types of drug delivery systems, although such expertise does not carry over to developing a controlled-release
version of all drugs. Such companies may develop new drug formulations and products or may improve existing drug formulations
and products more efficiently than we can. In addition, almost all of our competitors have vastly greater resources than we do.
While our product development capabilities and, if obtained, patent protection may help us to maintain our market position in
the field of advanced drug delivery, there can be no assurance that others will not be able to develop such capabilities or alternative
technologies outside the scope of our patents, if any, or that even if patent protection is obtained, such patents will not be
successfully challenged in the future.
In
addition to competitors that are developing products based on drug delivery technologies, there are also companies that have announced
that they are developing opioid abuse-deterrent products that might compete directly or indirectly with Elite’s products.
These include, but are not limited to Pfizer Inc., Collegium Pharmaceuticals, Inc., and Purdue Pharma LP
We
also face competition in the generic pharmaceutical market. The principal competitive factors in the generic pharmaceutical market
include: (i) introduction of other generic drug manufacturers’ products in direct competition with our products under development,
(ii) introduction of authorized generic products in direct competition with any of our products under development, particularly
if such products are approved and sold during exclusivity periods, (iii) consolidation among distribution outlets through mergers
and acquisitions and the formation of buying groups, (iv) ability of generic competitors to quickly enter the market after the
expiration of patents or exclusivity periods, diminishing the amount and duration of significant profits, (v) the willingness
of generic drug customers, including wholesale and retail customers, to switch among pharmaceutical manufacturers, (vi) pricing
pressures and product deletions by competitors, (vii) a company’s reputation as a manufacturer and distributor of quality
products, (viii) a company’s level of service (including maintaining sufficient inventory levels for timely deliveries),
(ix) product appearance and labeling and (x) a company’s breadth of product offerings.
Sources
and Availability of Raw Materials; Manufacturing
A
significant portion of our raw materials may be available only from foreign sources. Foreign sources can be subject to the special
risks of doing business abroad, including:
|
●
|
greater
possibility for disruption due to transportation or communication problems;
|
|
●
|
the
relative instability of some foreign governments and economies;
|
|
●
|
interim
price volatility based on labor unrest, materials or equipment shortages, export duties, restrictions on the transfer of funds,
or fluctuations in currency exchange rates; and
|
|
●
|
uncertainty
regarding recourse to a dependable legal system for the enforcement of contracts and other rights.
|
While
we currently obtain the raw materials that we need from over 20 suppliers, some materials used in our products are currently available
from only one supplier or a limited number of suppliers. The FDA requires identification of raw material suppliers in applications
for approval of drug products. If raw materials were unavailable from a specified supplier, FDA approval of a new supplier could
delay the manufacture of the drug involved.
We
have acquired pharmaceutical manufacturing equipment for manufacturing our products. We have registered our facilities with the
FDA and the DEA.
Dependence
on One or a Few Major Customers
Each
year we have had one or a few customers that have accounted for a large percentage of our limited revenues, therefore the termination
or restructuring of a contract with a customer may result in the loss of material amount or substantially all of our revenues.
We are constantly working to develop new relationships with existing or new customers, but despite these efforts we may not, at
the time that any of our current contracts expire, have other contracts in place generating similar or material revenue. We have
agreements with Epic, Precision Dose and Ascend for the licensing, sales and distribution of products that we manufacture. We
are currently renegotiating a licensing contract with Epic, which may result in the termination of an existing contract or an
amended licensing contract that is materially different from that already in place. We receive revenues to manufacture these products
and also receive a profit split or royalties based on in-market sales of the products.
Critical
Accounting Policies and Estimates
The
preparation of the unaudited condensed consolidated financial statements and related disclosures in conformity with GAAP, and
our discussion and analysis of its financial condition and operating results require our management to make judgments, assumptions
and estimates that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Note
1
–
Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements of
this Quarterly Report on Form 10-Q describes the significant accounting policies and methods used in the preparation of our unaudited
condensed consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions
it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.
Results
of Operations
The
following set forth our results of operations for the periods presented. The period-to-period comparison of financial results
is not necessarily indicative of future results.
Three
months ended June 30,2019 compared to June 30, 2018
Revenue,
Cost of revenue and Gross profit:
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2019
|
|
|
2018
|
|
|
Dollars
|
|
|
Percentage
|
|
Manufacturing fees
|
|
$
|
2,927,358
|
|
|
$
|
1,541,858
|
|
|
$
|
1,385,500
|
|
|
|
90
|
%
|
Licensing fees
|
|
|
431,882
|
|
|
|
625,840
|
|
|
|
(193,958
|
)
|
|
|
-31
|
%
|
Total revenue
|
|
|
3,359,240
|
|
|
|
2,167,698
|
|
|
|
1,191,542
|
|
|
|
55
|
%
|
Cost of revenue
|
|
|
2,060,286
|
|
|
|
1,576,399
|
|
|
|
483,887
|
|
|
|
31
|
%
|
Gross profit
|
|
$
|
1,298,954
|
|
|
$
|
591,299
|
|
|
$
|
707,655
|
|
|
|
120
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit - percentage
|
|
|
39
|
%
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
Total revenues for the
three-month period ended June 30, 2019 increased by $1.2 million or 55%, to $3.4 million, as compared to $2.2 million, for the
corresponding period in 2018 primarily due to the launch of Amphetamine IR Tablets in April 2019 and increased sales of Naltrexone
during the three month period ended June 30, 2019 as compared to the three month period ended June 30, 2018.
Manufacturing fees increased
by $1.4 million, or 90%, due to the launch of Amphetamine IR Tablets in April 2019 and increased sales of Naltrexone during the
three month period ended June 30, 2019 as compared to the three month period ended June 30, 2018.
Licensing fees decreased
by $0.2 million, or 31%. This decrease is primarily due to the timing of in market sales of Phentermine and Naltrexone, which are
the primary drivers of licensing fees.
Costs of revenue consists
of manufacturing and assembly costs. Our costs of revenue increased by $0.5 million or 31%, to $2.1 million as compared to $1.6
million for the corresponding period in 2018. This increase was due in large part to the launch of Amphetamine IR Tablets in April
2019 and increased sales of Naltrexone during the three month period ended June 30, 2019 as compared to the three month period
ended June 30, 2018.
Our gross profit margin was 39% during the three months ended June 30, 2019 as compared to 27% during
the three months ended June 30, 2018. The increase in gross margin is due to margins earned on Amphetamine IR Tablets.
Operating
expenses:
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2019
|
|
|
2018
|
|
|
Dollars
|
|
|
Percentage
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
1,408,036
|
|
|
$
|
1,326,628
|
|
|
$
|
81,408
|
|
|
|
6
|
%
|
General and administrative
|
|
|
681,476
|
|
|
|
882,812
|
|
|
|
(201,336
|
)
|
|
|
-23
|
%
|
Non-cash compensation
|
|
|
26,194
|
|
|
|
36,549
|
|
|
|
(10,355
|
)
|
|
|
-28
|
%
|
Depreciation and amortization
|
|
|
330,953
|
|
|
|
203,704
|
|
|
|
127,249
|
|
|
|
62
|
%
|
Total operating expenses
|
|
$
|
2,446,659
|
|
|
$
|
2,449,693
|
|
|
$
|
(3,034
|
)
|
|
|
0
|
%
|
Operating
expenses consist of research and development costs, general and administrative, non-cash compensation and depreciation and amortization
expenses. Total operating expenses for the three-month period ended June 30, 2019 and 2018 remained relatively the same as the
corresponding period in 2018 of $2.4 million.
Research and development
costs for the three months ended June 30, 2019 was $1.4 million, an increase of $.01 million, or 6%, from $1.3 million of such
costs for the comparable period of the prior year. The increase was a result of the timing and nature of product development activities
during the three months ended June 30, 2019 as compared to the comparable period of the prior year.
General and administrative
expenses for the three months ended June 30, 2019 were $0.7 million, a decrease of $0.2 million or 23% from $0.9 million of such
costs for the comparable period of the prior year with such decrease being attributed in large part to reduced overhead headcounts
and the effects of ongoing cost reduction and control initiatives.
Non-cash
compensation expense for the three months ended June 30, 2019 and 2018 was $0.03 million and $0.04 million, respectively.
Depreciation and amortization
expenses for the three months ended June 30, 2019 was $0.3 million, an increase of $0.1 million or 62% from $.2 million of such
costs for the comparable period of the prior year. The increase was due to The increase was due to acquisitions of additional
fixed assets as well as additional equipment being placed into service during the current fiscal year, in particular equipment
required for compliance with new serialization regulations.
As
a result of the foregoing, our loss from operations for the three months ended June 30, 2019 was $1.1 million, compared to a loss
from operations of $1.7 million for the three months ended June 30, 2018.
Other
income (expense):
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2019
|
|
|
2018
|
|
|
Dollars
|
|
|
Percentage
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense and amortization of debt issuance costs
|
|
$
|
(97,670
|
)
|
|
$
|
(83,138
|
)
|
|
$
|
(14,532
|
)
|
|
|
17
|
%
|
Change in fair value of derivative instruments
|
|
|
1,522,031
|
|
|
|
252,511
|
|
|
|
1,269,520
|
|
|
|
503
|
%
|
Interest income
|
|
|
3,046
|
|
|
|
1,255
|
|
|
|
1,791
|
|
|
|
143
|
%
|
Other income (expense), net
|
|
$
|
1,427,407
|
|
|
$
|
170,628
|
|
|
$
|
1,256,779
|
|
|
|
737
|
%
|
Other
income, net for the three months ended June 30, 2019 was a net other income of $1.4 million, an increase in net other income of
$1.3 million from the net other income of $0.2 million for the comparable period of the prior year. The increase in other income
was due to derivative income relating to changes in the fair value of our outstanding warrants during the quarter ended June 30,
2019. Please note that the change in the fair value of derivative instruments is determined in large part by the change in the
closing price of the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning
of the period, with a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing
price of the Company’s Common Stock.
As
a result of the foregoing, our net income for the three months ended June 30, 2019 was $0.3 million, compared to a net loss of
$1.7 million for the comparable period of the prior year.
Change
in value of convertible preferred share mezzanine equity:
There
were no changes in the value of our convertible preferred stock, which is included in the calculation of net loss attributable
to common shareholders for the three months ended June 30, 2019, and June 30, 2018.
Liquidity
and Capital Resources
Capital
Resources
|
|
June 30,
2019
|
|
|
March 31,
2019
|
|
|
Change
|
|
Current assets
|
|
$
|
8,531,974
|
|
|
$
|
8,856,542
|
|
|
$
|
(324,568
|
)
|
Current liabilities
|
|
$
|
7,611,460
|
|
|
$
|
6,906,132
|
|
|
$
|
705,328
|
|
Working capital
|
|
$
|
920,514
|
|
|
$
|
1,950,410
|
|
|
$
|
(1,029,896
|
)
|
The Company’s
condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States applicable
to a going concern, which contemplated the realization of assets and the satisfaction of liabilities in the normal course of business.
For the three months ended June 30, 2019 and 2018, the Company recorded a net loss from operations of approximately $1.1 million
and $1.9 million, respectively. For the three months ended June 30, 2019 and 2018, the Company recorded a net increase in cash
of approximately $0.3 million and a net decrease in cash of $1.5 million, respectively. Furthermore, during the three months ended
March 31, 2019, the Company realized a net decrease in working capital, defined as current assets less current liabilities, of
approximately $1.1 million. The Company has not yet established an ongoing source of revenue sufficient to cover its operating
costs and allow it to continue as a going concern.
In connection with the
preparation of the financial statements for the three months ended March 31, 2019, the Company conducted an evaluation as to whether
there were conditions and events, considered in the aggregate, which raised substantial doubt as to its ability to continue as
a going concern within one year after the date of the issuance, or the date the financial statements were available for issuance,
noting that there did appear to be evidence of substantial doubt of its ability to continue as a going concern. To continue as
a going concern, the Company will need to do some or all of the following, without limitation: obtain additional financing, increase
sales of existing products, bring additional products in the pipeline to market and/or reduce expenses. the successful development
of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations
are necessary for the Company to continue operations.
The
accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts and classification of liabilities should we be unable to continue as a going concern.
Please
also note that while the equity line available under the 2017 LPC Purchase Agreement had approximately $36 million available for
purchase of shares of Common Stock, the ability of the Company to access these funds is strongly and directly correlated to the
trading price of Common Stock in the OTC Market. Accordingly, absent an increase in the such trading price of Common Stock, to
a price that is significantly above the closing price of $0.044 on June 30, 2019, the Company will be unable to realize a significant
portion of the remaining equity line through sales of Common Stock to Lincoln Park pursuant to the 2017 LPC Purchase Agreement,
resulting in substantial doubt as to the availability of adequate financial resources required for continued operations on a going
concern basis.
Our working capital
(total current assets less total current liabilities) decreased by $1.1 million from $2.0 million as of March 31, 2019 to $0.9
million as of June 30, 2019, with such decrease being primarily related to the loss from operations of $1.1 million.
The
Company does not anticipate being profitable for the fiscal year ending March 31, 2020, due in large part to manufacture revenues
and license fees not being at volumes and contributions sufficient to fund increased operating and product development costs.
In order to finance these significant costs, the Company entered into the 2017 LPC Purchase Agreement. Due to the factors described
above, the Company’s ability to access funds available under the 2017 LPC Purchase Agreement may be limited, resulting in
an adverse effect on the Company’s liquidity and ability to operate. Please see below for further details on the financing
transactions with Lincoln Park.
In
addition, the Company had previously received Notices of Default from the Trustee of the NJEDA Bonds as a result of the utilization
of the debt service reserve being used to pay interest payments as well as the company’s failure to make scheduled principal
payments. All monetary defaults were cured during Fiscal 2015 and the Company is current on all NJEDA Bond interest and principal
payments. See “
NJEDA Bonds
” below and the Risk Factor in Part I, Item 1A entitled “
A notice of default
was issued by the New Jersey Economic Development Authority in relation to prior obligations of our tax-exempt bonds. Although
we are current in our payments under these bonds, If the principal balances due under these bonds are accelerated pursuant to
the notice of default, our ability to operate in the future will be materially and adversely affected
”.
Summary
of Cash Flows:
|
|
For the Three Months
Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Net cash provided by (used in) operating activities
|
|
$
|
188,273
|
|
|
$
|
(1,709,595
|
)
|
Net cash used in investing activities
|
|
|
(2,978
|
)
|
|
|
(178,558
|
)
|
Net cash provided by financing activities
|
|
|
114,010
|
|
|
|
354,223
|
|
Net
cash used in operating activities for the three months ended June 30, 2019 was $0.2 million, which included net income of $0.3
million and change in fair value of derivative financial instruments – warrants of $1.5 million (non-cash). These instances
of increases in cash are offset by non-cash expenses including depreciation and amortization of $0.3 million, non-cash compensation
accrued of $0.2 million, non-cash compensation from the issuance of options of $0.03 million, as well as changed in operating
assets and liabilities of $0.9 million.
Net
cash provided by financing activities was $0.1 million for the three months ended June 30, 2019 which consist primarily from proceeds
from the issuance of common stock pursuant to the 2017 LPC Purchase Agreement (see below).
Lincoln
Park Capital – May 1, 2017 Purchase Agreement
On
May 1, 2017, the Company entered into a purchase agreement (the “2017 LPC Purchase Agreement”), together with a registration
rights agreement (the “2017 LPC Registration Rights Agreement”), with Lincoln Park.
Under
the terms and subject to the conditions of the 2017 LPC Purchase Agreement, the Company has the right to sell to and Lincoln Park
is obligated to purchase up to $40 million in shares of common stock, subject to certain limitations, from time to time, over
the 36-month period commencing on June 5, 2017.
The
Company may direct Lincoln Park, at its sole discretion and subject to certain conditions, to purchase up to 500,000 shares of
Common Stock on any business day, provided that at least one business day has passed since the most recent purchase, increasing
to up to 1,000,000 shares, depending upon the closing sale price of the Common Stock (such purchases, “Regular Purchases”).
However, in no event shall a Regular Purchase be more than $1,000,000. The purchase price of shares of common stock related to
the future funding will be based on the prevailing market prices of such shares at the time of sales. In addition, the Company
may direct Lincoln Park to purchase additional amounts as accelerated purchases under certain circumstances. In the case of both
Regular Purchases and accelerated purchases, the purchase price per share will be equitably adjusted for any reorganization, recapitalization,
non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the business days used to compute
the purchase price. Sales of shares of common stock to Lincoln Park under the 2017 LPC Purchase Agreement are limited to no more
than the number of shares that would result in the beneficial ownership by Lincoln Park and its affiliates, at any single point
in time, of more than 4.99% of the then outstanding shares of common stock.
In
connection with the 2017 LPC Purchase Agreement, the Company issued to Lincoln Park 5,540,551 shares of common stock and the Company
is required to issue up to 5,540,551 additional shares of common stock pro rata as the Company requires Lincoln Park to purchase
shares under the 2017 LPC Purchase Agreement over the term of the agreement. Lincoln Park has represented to us, among other things,
that it is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act
of 1933, as amended (the “Securities Act”)). We sold the securities in reliance upon an exemption from registration
contained in Section 4(a)(2) under the Securities Act. The securities sold may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
The
2017 LPC Purchase Agreement and the 2017 LPC Registration Rights Agreement contain customary representations, warranties, agreements
and conditions to completing future sale transactions, indemnification rights and obligations of the parties. The Company has
the right to terminate the 2017 LPC Purchase Agreement at any time, at no cost or penalty. Actual sales of shares of common stock
to Lincoln Park under the 2017 LPC Purchase Agreement will depend on a variety of factors to be determined by us from time to
time, including, among others, market conditions, the trading price of the common stock and determinations by us as to the appropriate
sources of funding for us and our operations. There are no trading volume requirements or, other than the limitation on beneficial
ownership discussed above, restrictions under the 2017 LPC Purchase Agreement. Lincoln Park has no right to require any sales
by the Company but is obligated to make purchases from the Company as directed in accordance with the 2017 LPC Purchase Agreement
Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of
the Company’s shares.
The
net proceeds received by under the 2017 LPC Purchase Agreement will depend on the frequency and prices at which the Company sells
shares of common stock to Lincoln Park.
A
registration statement on
form S-3
was filed with the SEC on May 10, 2017 and was declared effective on June 5, 2017.
As
of June 30, 2019, the Company sold 4,000,000 shares of its common stock for proceeds totaling $340,300 in connection with the
2017 LPC Purchase Agreement with Lincoln Park. In addition, as of June 30, 3019, the Company issued 47,136 shares of its Common
Stock as additional commitment shares pursuant to the 2017 LPC Purchase Agreement.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
believe that our market risk exposures are immaterial as we do not have instruments for trading purposes, and reasonable possible
near-term changes in market rates or prices will not result in material near-term losses in earnings, material changes in fair
values or cash flows for all instruments.
We
maintain all our cash, cash equivalents and restricted cash in three financial institutions, and we perform periodic evaluations
of the relative credit standing of these institutions. However, no assurances can be given that the third-party institutions will
retain acceptable credit ratings or investment practices.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and
Procedures
We maintain “disclosure
controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, our management recognized
that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and
procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions.
As of the end of the period
covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act. Based on the controls evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that as of the date of their evaluation, our disclosure controls
and procedures were not effective due to material weaknesses in internal control over financial reporting, specifically with respect
to insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting
functions due to limited personnel and resources that were disclosed in our Annual Report on
Form 10-K
for the fiscal year ended
March 31, 2019.
Changes in Internal Controls
There were no changes
in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during
the end of the period covered by this Quarterly Report. As of March 31, 2019, we identified a material weakness related to the
ineffective review and verification of internally prepared reports and analyses utilized in the financial closing process, that
was disclosed in our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2019.
Remediation Efforts to Address Material
Weaknesses
We intend to revise the
existing control environment documentation, designing and implementing controls, policies and procedure documentation that is consistent
with our current personnel, resources and capabilities. Please note that these material weaknesses cannot be considered remediated
until the applicable remedial controls operate for a sufficient period of time, allowing management, through testing, to reach
a conclusion on such controls design and operational efficacy. There is also a strong direct correlation between resources and
our ability to remediate, in accordance with COSO criteria, the above referenced material weaknesses in internal controls. Accordingly,
improvement in our financial position is a critical component of our ability to achieve effective disclosure controls and procedures.
As such, the Company has taken steps to hire additional resources for the accounting and finance function to help remediate identified
material weaknesses.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEDURES
Pending
Litigation
There
have been no material developments in any of the legal proceedings discussed in Item 3 of our Annual Report on
Form 10-K
for the
fiscal year ended March 31, 2019.
ITEM
1A. RISK FACTORS
None.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
ITEM
5. OTHER INFORMATION
Annual Shareholders’
Meeting
. The Company will be holding an annual shareholders’ meeting on or about December 3, 2019 (the “2019 Annual
Meeting”). Shareholders may submit written proposals to the Company on matters appropriate for shareholder action at the
2019 Annual Meeting by following the rules of the SEC and the requirements of the Company’s Amended and Restated Bylaws (the
“Bylaws”). The Company must receive proposals intended for inclusion in its proxy statement and proxy card for the
2019 Annual Meeting no later than September 3, 2019. Any such proposal when submitted must be in full compliance with applicable
law, including Rule 14a-8 of the Exchange Act, and the Company’s Bylaws. Additionally, the Company’s Bylaws permit
shareholders to propose business to be considered and to nominate Directors for election by the shareholders at future annual meetings.
To propose business or to nominate a Director for the 2019 Annual Meeting pursuant to the provisions of the Bylaws not for inclusion
in the proxy statement and proxy card for that meeting, the Shareholder must deliver written notice to the Company on or before
August 19, 2019 setting forth the information required to be included in such notice under the Company’s. Any such proposal
or nomination when submitted must be in full compliance with the Company’s Bylaws.
If a Shareholder gives
notice of a proposal or a nomination after the applicable deadline specified above, the notice will not be considered timely, and
the Shareholder will not be permitted to present the proposal or the nomination to the Shareholders for a vote at the meeting.
ITEM
6. EXHIBITS
Exhibit
No.
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Description
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3.1(a)
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Articles of Incorporation of Elite-Nevada, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on January 9, 2012.
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3.1(b)
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Certificate of Designations of the Series G Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on April 18, 2013, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated April 18, 2013 and filed with the SEC on April 22, 2013.
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3.1(c)
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Certificate of Designation of the Series H Junior Participating Preferred Stock, incorporated by reference to Exhibit 2 (contained in Exhibit 1) to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013.
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3.1(d)
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Certificate of Designations of the Series I Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on February 6, 2014, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated February 6, 2014 and filed with the SEC on February 7, 2014.
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3.1(e)
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Certificate of Designations of the Series J Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on May 3, 2017, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated April 28, 2017 and filed with the SEC on April 28, 2017.
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3.2(a)
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Amended and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated March 17, 2014 and filed with the SEC on March 18, 2014.
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4.3
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Rights Agreement, dated as of November 15, 2013, between the Company and American Stock Transfer & Trust Company, LLC., incorporated by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013.
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4.4
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Form of Series H Preferred Stock Certificate, incorporated by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013.
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4.5
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Warrant to purchase shares of Common Stock issued to Nasrat Hakim dated April 28, 2017 incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated April 28, 2017, and filed with the SEC on April 28, 2017.
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10.1
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Elite Pharmaceuticals, Inc. 2014 Equity Incentive Plan, incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement for its Annual Meeting of Shareholders, filed with the SEC on April 3, 2014.
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10.2
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Form of Confidentiality Agreement (corporate), incorporated by reference to Exhibit 10.7 to the Form SB-2.
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10.3
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Form of Confidentiality Agreement (employee), incorporated by reference to Exhibit 10.8 to the Form SB-2.
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10.4
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Loan Agreement, dated as of August 15, 2005, between New Jersey Economic Development Authority (“NJEDA”) and the Company, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005.
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10.5
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Series A Note in the aggregate principal amount of $3,660,000.00 payable to the order of the NJEDA, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005.
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10.6
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Series B Note in the aggregate principal amount of $495,000.00 payable to the order of the NJEDA, incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005.
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10.7
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Mortgage from the Company to the NJEDA, incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005.
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10.8
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Indenture between NJEDA and the Bank of New York as Trustee, dated as of August 15, 2005, incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005.
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10.9
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Strategic Alliance Agreement, dated as of March 18, 2009, by and among the Company, Epic Pharma, LLC and Epic Investments, LLC, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated March 18, 2009 and filed with the SEC on March 23, 2009.
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10.10
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Amendment to Strategic Alliance Agreement, dated as of April 30, 2009, by and among the Company, Epic Pharma, LLC and Epic Investments, LLC, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated April 30, 2009 and filed with the SEC on May 6, 2009.
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10.11
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Second Amendment to Strategic Alliance Agreement, dated as of June 1, 2009, by and among the Company, Epic Pharma, LLC and Epic Investments, LLC, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated June 1, 2009, and filed with the SEC on June 5, 2009.
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10.12
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Third Amendment to Strategic Alliance Agreement, dated as of Aug 18, 2009, by and among the Company, Epic Pharma LLC and Epic Investments, LLC, incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q, for the period ending June 30, 2009 and filed with the SEC on August 19, 2009.
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10.13
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Employment Agreement, dated as of November 13, 2009, by and between the Company and Carter J. Ward, incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, for the period ending September 30, 2009 and filed with the SEC on November 16, 2009.
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10.14
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Elite Pharmaceuticals Inc. 2009 Equity Incentive Plan, as adopted November 24, 2009, incorporated by reference to Exhibit 10.1 to the Registration Statement Under the Securities Act of 1933 on Form S-8, dated December 18, 2009 and filed with the SEC on December 22, 2009.
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10.15
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License Agreement, dated as of September 10, 2010, by and among Precision Dose Inc. and the Company, incorporated by reference to Exhibit 10.8 to the Quarterly Report on Form 10-Q, for the period ended September 30, 2010 and filed with the SEC on November 15, 2010 (Confidential Treatment granted with respect to portions of the Agreement).
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10.17
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Manufacturing & Supply Agreement between the Company and ThePharmaNetwork, LLC, dated as of June 23, 2011, incorporated by reference to Exhibit 10.71 to the Annual Report on Form 10-K, for the period ended March 31, 2011 and filed with the SEC on June 29, 2011 (Confidential Treatment granted with respect to portions of the Agreement).
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10.18
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Letter Agreement between the Company and ThePharmaNetwork LLC, dated September 21, 2012 incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed with the SEC on November 14, 2012 (Confidential Treatment granted with respect to portions of the Agreement).
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10.19
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August 1, 2013 Employment Agreement with Nasrat Hakim, incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013.
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10.20
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August 1, 2013 Mikah LLC Asset Purchase Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013. (Confidential Treatment granted with respect to portions of the Agreement).
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10.21
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August 1, 2013 Secured Convertible Note from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013.
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10.22
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August 1, 2013 Security Agreement from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013.
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10.23
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October 15, 2013 Hakim Credit Line Agreement, incorporated by reference to Exhibit 10.16 to the Quarterly Report on Form 10-Q for the period ended September 30, 2013.
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10.24
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October 2, 2013 Manufacturing and Licensing Agreement with Epic Pharma LLC, incorporated by reference to Exhibit 10.17 to the Amended Quarterly Report on Form 10-Q/A for the period ended September 30, 2013 and filed with the SEC on April 25, 2014. Confidential Treatment granted with respect to portions of the Agreement.
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10.25
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February 7, 2014 Amendment to Secured Convertible Note from the Company to Mikah, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated February 7, 2014 and filed with the SEC on February 7, 2014.
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10.26
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Employment Agreement with Dr. G. Kenneth Smith, dated October 20, 2014, incorporated by reference to Exhibit 10.82 to the Quarterly Report on Form 10-Q for the period ended September 30, 2014 and filed with the SEC on November 14, 2014.
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10.27
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January 19, 2015 Second Amendment to TPN-Elite Manufacturing and Supply Agreement dated June 23, 2011 and First Amendment to the TPN-Elite Manufacturing and Supply Agreement dated September 21, 2012, incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q/A for the period ended September 30, 2012, and filed with the SEC on November 17, 2016. Confidential Treatment granted with respect to portions of the Agreement.
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10.28
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January 28, 2015 First Amendment to the Loan Agreement between Nasrat Hakim and Elite Pharmaceuticals dated October 15, 2013, incorporated by reference to Exhibit 10.83 to the Quarterly Report on Form 10-Q for the period ended December 31, 2014 and filed with the SEC on February 17, 2015.
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10.29
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January 28, 2015 Termination of Development and License Agreement for Mikah-001 between Elite Pharmaceuticals, Inc. and Mikah Pharma LLC and Transfer of Payment, incorporated by reference to Exhibit 10.84 to the Quarterly Report on Form 10-Q for the period ended December 31, 2014 and filed with the SEC on February 17, 2015.
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10.30
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June 4, 2015 License Agreement with Epic Pharma LLC, incorporated by reference to Exhibit 10.85 to Amendment No. 1 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2015 and filed with the SEC on July 11, 2016. (Confidential Treatment granted with respect to portions of the Agreement).
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10.31
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Amendment No. 1 to Hakim Employment Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 29, 2016.
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10.32
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August 24, 2016 Master Development and License Agreement between Elite and SunGen Pharma LLC. incorporated by reference to Exhibit 10.44 to the Quarterly Report on Form 10-Q for the period ended September 30, 2016 and filed with the SEC on November 9, 2016. (Confidential Treatment granted with respect to portions of the Agreement).
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10.33
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August 9, 2016 Amendment to Manufacturing and Supply Agreement between the Company and ThePharmaNetwork, LLC, dated as of June 23, 2011 incorporated by reference to Exhibit 10.45 to the Quarterly Report on Form 10-Q for the period ended September 30, 2016 and filed with the SEC on November 9, 2016.
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10.34
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July 20, 2015 Third Amendment to TPN-Elite Manufacturing and Supply Agreement dated June 23, 2011 incorporated by reference to Exhibit 10.46 to the Quarterly Report on Form 10-Q for the period ended September 30, 2016 and filed with the SEC on November 9, 2016. (Confidential Treatment granted with respect to portions of the Agreement).
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10.35
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Purchase Agreement between the Company and Lincoln Park Capital LLC dated May 1, 2017, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated May 2, 2017 and filed with the SEC on May 2, 2017.
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10.36
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Registration Rights Agreement between the Company and Lincoln Park Capital LLC dated May 1, 2017, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated May 2, 2017 and filed with the SEC on May 2, 2017.
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10.37
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April 28, 2017 Exchange Agreement between the Company and Nasrat Hakim, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated April 28, 2017 and filed with the SEC on April 28. 2017.
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10.38
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May 2017 Trimipramine Acquisition Agreement from Mikah Pharma, incorporated by reference to Exhibit 10.50 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.
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10.39
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May 2017 Secured Promissory Note from the Company to Mikah Pharma, incorporated by reference to Exhibit 10.51 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.
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10.40
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May 2017 Security Agreement between the Company to Mikah Pharma, incorporated by reference to Exhibit 10.52 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.
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10.41
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May 2017 Assignment of Supply and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference to Exhibit 10.53 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.
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10.42
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May 2017 Assignment of Manufacturing and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.54 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017.
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10.43
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Supply and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment granted with respect to portions of the Agreement).
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10.44
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Manufacturing and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment granted with respect to portions of the Agreement).
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10.45
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Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. And SunGen dated July 6, 2017, incorporated by reference to Exhibit 10.57 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement).
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10.46
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Second Amendment To Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated by reference to Exhibit 10.58 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement).
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10.47
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First Amendment To Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated by reference to Exhibit 10.59 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement).
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10.48
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May 29, 2018 License, Manufacturing and Supply Agreement with Glenmark Pharmaceuticals Inc. USA, incorporated by reference to Exhibit 10.60 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and filed with the SEC on June 14, 2018. (Confidential treatment granted with respect to portions of the Agreement).
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10.49
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License, Supply And Distribution Agreement effective April 9, 2019 by and between Elite Pharmaceuticals, Inc., and Elite Laboratories, Inc. and Lannett Company, Inc., USA, incorporated by reference to Exhibit 10.49 to the Annual Report on Form 10-K for the period ended March 31, 2019 and filed with the SEC on June 21, 2019 (portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).
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10.50
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License, Supply And Distribution Agreement effective March 6, 2019 by and between Elite Pharmaceuticals, Inc., and Elite Laboratories, Inc. and Lannett Company, Inc., USA, incorporated by reference to Exhibit 10.50 to the Annual Report on Form 10-K for the period ended March 31, 2019 and filed with the SEC on June 21, 2019 (portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
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ELITE
PHARMACEUTICALS, INC.
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|
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August
9, 2019
|
By:
|
/s/
Nasrat Hakim
|
|
|
Nasrat
Hakim
Chief
Executive Officer, President and
Chairman
of the Board of Directors
(Principal
Executive Officer)
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August
9, 2019
|
By:
|
/s/
Carter J. Ward
|
|
|
Carter
J. Ward
Chief
Financial Officer, Treasurer and Secretary
(Principal
Financial and Accounting Officer)
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26