AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 2004
REGISTRATION NO. 333 - 116356
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
AMENDMENT NO.1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ELITE PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 2834 22-3542636
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
-----------
BERNARD BERK, CHIEF EXECUTIVE OFFICER
ELITE PHARMACEUTICALS, INC.
165 LUDLOW AVENUE
NORTHVALE, NEW JERSEY 07647
(201) 750-2646
(Name, address, including zip code, and telephone number,
including area code,
of registrant's principal executive offices
and agent for service)
With copies to:
SCOTT H. ROSENBLATT, ESQ.
REITLER BROWN & ROSENBLATT, LLC
800 THIRD AVENUE, 21ST FLOOR
NEW YORK, NEW YORK 10022-4611
(212) 209-3050
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |X|
If this Form is filed to register additional securities pursuant to
Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. |_|
-------------------------------
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. |_|
---------------------------------
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement for the same offering.
|_|
---------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE (1) REGISTRATION FEE
Common Stock, $.01 par value 1,580,000 (1) $3.00 (3) $4,740,000 (4) $600.56
Common Stock, $.01 par value 100,000 (2) $3.00 (3) $300,000 $38.00
Total $638.56
(1) 1,530,000 shares acquired in a private placement and 50,000 shares to
be offered upon exercise of warrants issued to the Placement Agent and
its associates.
(2) Shares to be offered upon exercise of stock options held by a former
Chief Executive Officer at the exercise price of $1.00 per share.
ii
(3) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as
amended, and based on the average of the high and low sale price per
share of shares of the Common Stock on the American Stock Exchange on
June 7, 2004.
-----------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
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iii
PROSPECTUS
1,680,000 SHARES
ELITE PHARMACEUTICALS
COMMON STOCK
------------------
This is an offering of shares of Common Stock, $.01 par value, of Elite
Pharmaceuticals, Inc. (the "Company" or "Elite"), by the selling stockholders
named in this prospectus of 1,530,000 shares acquired from the Company in a
private placement; 50,000 shares by the Placement Agent and its associates upon
exercise of warrants received in the private placement, and 100,000 shares upon
exercise of options expiring June 13, 2005 by a former Chief Executive Officer
of the Company.
The Common Stock is listed on the American Stock Exchange under the
symbol "ELI." On June 28, 2004, the closing sale price of our Common Stock on
the American Stock Exchange was $2.34 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF FACTORS THAT
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We will receive no proceeds from the sale of the shares of Common Stock
sold by the selling stockholders.
---------------------
The date of this prospectus is July 2, 2004.
TABLE OF CONTENTS
Page
----
WHERE YOU CAN FIND MORE INFORMATION ABOUT US...................................1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION....................1
PROSPECTUS SUMMARY.............................................................2
OUR BUSINESS...................................................................2
RISK FACTORS...................................................................4
USE OF PROCEEDS...............................................................12
DESCRIPTION OF CAPITAL STOCK..................................................12
PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND POLICY...........................14
MANAGEMENT....................................................................15
SELLING STOCKHOLDERS..........................................................25
PLAN OF DISTRIBUTION..........................................................31
LEGAL MATTERS.................................................................33
EXPERTS.......................................................................33
INCORPORATION BY REFERENCE....................................................33
i
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy this information, for a copying fee, at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information in its public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services, from the American Stock Exchange and at the web site maintained by the
SEC at http://www.sec.gov.
Elite has not authorized anyone to give any information or make any
representation about the Offering that differs from, or adds to, the information
in this prospectus or in its documents that are publicly filed with the SEC and
that are incorporated in this prospectus. Therefore, if anyone does give you
different or additional information, you should not rely on it. The delivery of
this prospectus does not mean that there have not been any changes in Elite's
condition since the date of this prospectus. If you are in a jurisdiction where
it is unlawful to offer the securities offered by this prospectus, or if you are
a person to whom it is unlawful to direct such activities, then the offer
presented by this prospectus does not extend to you. This prospectus speaks only
as of its date except where it indicates that another date applies. Documents
that are incorporated by reference in this prospectus speak only as of their
date, except where they specify that other dates apply.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Certain information contained in or incorporated by reference into this
prospectus includes forward-looking statements (as defined in Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act) that reflect
Elite's current views with respect to future events and financial performance.
Certain factors, such as unanticipated technological difficulties, the outcome
of our negotiations to effect a major acquisition, the volatile and competitive
environment for drug delivery products, changes in domestic and foreign
economic, market and regulatory conditions, the inherent uncertainty of
financial estimates and projections, the degree of success, if any, in
concluding business partnerships or licenses with viable pharmaceutical
companies, instabilities arising from terrorist actions and responses thereto,
and other considerations described as "Risk Factors" in this prospectus could
cause actual results to differ materially from those in the forward-looking
statements. We assume no obligation to update the matters discussed in this
prospectus.
1
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM, OR
INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS AND MAY NOT CONTAIN ALL THE
INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND OUR BUSINESS AND THIS
OFFERING FULLY, YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES AND THE DOCUMENTS
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO
THE "COMPANY," "ELITE," "WE," "OUR," AND "US" REFER TO ELITE PHARMACEUTICALS,
INC., A DELAWARE CORPORATION, TOGETHER WITH OUR SUBSIDIARIES. PLEASE SEE
"INCORPORATION BY REFERENCE" FOR A DESCRIPTION OF PUBLIC FILINGS DEEMED
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
OUR BUSINESS
Elite engages primarily in researching, developing and licensing
proprietary controlled release drug delivery systems and products. We are also
equipped to manufacture controlled release products on a contract basis for
third parties and for ourselves if, and when, our products are approved.
Controlled release drug delivery of a pharmaceutical compound offers a safer and
more effective means of administering drugs through releasing a drug into the
bloodstream or delivering it to a certain site in the body at predetermined
rates or predetermined times. The goal is to provide more effective drug therapy
while reducing or eliminating many of the side effects associated with
conventional drug therapy and/or to reduce the frequency of administration.
We have concentrated on developing orally administered controlled
release products. These products include drugs that cover therapeutic areas for
pain, angina, hypertension, allergy and infection. The Food and Drug
Administration ("FDA") has not yet approved any of our products and, therefore,
currently we do not market any products. Our products are at various stages of
development.
We are focusing our efforts on the following areas: (i) obtaining FDA
approval for one or more of six oral controlled release pharmaceutical products
already in development, either directly or through other companies; (ii)
commercial exploitation of these products by license and the collection of
royalties and (iii) development of new products and the expansion of our
licensing agreements with other pharmaceutical companies, including contract
research and development projects, joint ventures and other collaborations.
In an effort to reduce costs and improve focus and efficiency, we have
continued to limit the number of products that we are actively developing to six
(a reduction from fifteen). The six products that continue in development were
deemed by us to be the most suitable for continued development given our limited
resources.
We are also focusing on the development of both branded drug products
(which require new drug applications ("NDA")) and generic drug products (which
require abbreviated new drug applications ("ANDA")).
We intend to continue to collaborate in the development of products
with our current partners. We also plan to seek additional collaborations to
develop more products.
2
We believe that our business strategy enables us to reduce our risk by:
o having a product portfolio that includes both branded and generic
products in various therapeutic categories; and
o building collaborations and establishing licensing agreements with
companies with greater resources thereby allowing us to share costs of
development and to improve cash-flow.
Our common stock is traded on the American Stock Exchange under the
symbol "ELI". The market for our stock has historically been characterized
generally by low volume and broad price and volume volatility. We cannot give
any assurance that a stable trading market will develop for our stock.
Our executive offices are located at 165 Ludlow Avenue, Northvale,
New Jersey 07647. Phone No.: (201)750-2646; Facsimile No.: (201) 750-2755.
PROPOSED ACQUISITION
Our Board of Directors authorized in August 2003 the negotiation of an
agreement to acquire Nostrum Pharmaceuticals Inc., a privately held corporation
engaged in the development of drug delivery products and systems ("Nostrum"), by
means of a merger with our wholly-owned subsidiary.
If the merger is effected on the terms as initially proposed, the
outstanding shares of Nostrum will be converted into (i) shares of our Common
Stock which will represent in the aggregate 75% of the shares of our Common
Stock to be outstanding immediately after such merger and (ii) options to
purchase a substantial number of additional shares of our Common Stock
exercisable upon satisfaction of certain conditions. No assurance can be given
that the acquisition will be consummated or if consummated will be effected on
materially the same terms. If an agreement is executed, it is to contain several
conditions to the consummation of the merger, including approval by our
stockholders and that the Company will have immediately prior to effectiveness
of the merger liquid assets of at least $8,000,000. No assurance can be given
that the agreement will be executed or if executed that the foregoing terms will
not be materially changed adversely to the Company or that it will be approved
by the Company's stockholders.
Nostrum is a specialty pharmaceutical company engaged in the
formulation and commercialization of controlled-release orally-administered
generic drugs utilizing Nostrum's proprietary drug delivery technologies.
3
RISK FACTORS
In addition to the other information contained in this prospectus, the
following risk factors should be considered carefully in evaluating an
investment in Elite and in analyzing our forward-looking statements.
OUR CONTINUING LOSSES ENDANGER OUR VIABILITY AS A GOING-CONCERN AND HAVE CAUSED
OUR AUDITORS TO ISSUE A "GOING CONCERN" ANNUAL AUDIT REPORT.
We reported net losses of $6,514,217, $4,061,422, $1,774,527 and
$13,964,981 for the fiscal years ended March 31, 2004, 2003, 2002 and 2001,
respectively. At March 31, 2004, we had an accumulated deficit of approximately
$35.1 million, consolidated assets of approximately $7.9 million, stockholders'
equity of approximately $4.0 million, and working capital of approximately $1.3
million. Our products are in the development and early deployment stage and have
not generated any significant revenue to date. Our independent auditors have
issued a "going concern" audit reports for our financial statements for the
fiscal years ended March 31, 2004 and 2003.
WE HAVE A RELATIVELY LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO
EVALUATE OUR FUTURE PROSPECTS.
Although we have been in operation since 1990, we have a relatively
short operating history and limited financial data upon which you may evaluate
our business and prospects. In addition, our business model is likely to
continue to evolve as we attempt to expand our product offerings and enter new
markets. As a result, our potential for future profitability must be considered
in light of the risks, uncertainties, expenses and difficulties frequently
encountered by companies that are attempting to move into new markets and
continuing to innovate with new and unproven technologies. Some of these risks
relate to our potential inability to:
o develop new products;
o obtain regulatory approval of our products;
o manage our growth, control expenditures and align costs with revenues;
o attract, retain and motivate qualified personnel; and
o respond to competitive developments.
If we do not effectively address the risks we face, our business model may
become unworkable and we may not achieve or sustain profitability or
successfully develop any products.
WE HAVE NOT BEEN PROFITABLE AND EXPECT FUTURE LOSSES.
4
To date, we have not been profitable, and since our inception in 1990,
we have not generated any significant revenues. We may never be profitable or,
if we become profitable, we may be unable to sustain profitability. We have
sustained losses in each year since our incorporation in 1990. We incurred net
losses of $6,514,217, $4,061,422, $1,774,527 and $13,964,981 for the years ended
March 31, 2004, 2003, 2002 and 2001, respectively. We expect to realize
significant losses for the current year of operation. We expect to continue to
incur losses until we are able to generate sufficient revenues to support our
operations and offset operating costs.
OUR FOUNDER AND FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER RESIGNED IN JUNE
2003 ALL OF HIS POSITIONS WITH ELITE, WHICH MAY HAVE A MATERIAL ADVERSE EFFECT
ON US.
On June 3, 2003, Dr. Atul M. Mehta, our founder and former President
and Chief Executive Officer resigned from all of his positions with Elite. In
the past, we have been reliant on Dr. Mehta's scientific expertise in developing
our products. There can be no assurance that we will successfully replace Dr.
Mehta's expertise. In addition, the loss of Dr. Mehta's services may adversely
affect our relationships with our contract partners.
Under the settlement of a litigation initiated by Dr. Mehta in July
2003 for alleged breach of his employment agreement we paid Dr. Mehta $400,000
and certain expense reimbursements, and the Company received a short term option
for it or its designees to acquire all of the shares of Common Stock owned by
Dr. Mehta and his affiliate at $2.00 per share. As part of the settlement the
Company also extended the expiration date of options to purchase 770,000 shares
of Common Stock held by Dr. Mehta and he relinquished any rights to the
Company's intellectual property and agreed to certain non-disclosure and
non-competition covenants. The Company also provided him with certain
"piggyback" registration rights with respect to the 770,000 shares issuable upon
exercise of the foregoing options granted by the Company including the 100,000
shares which have been registered by the Registration Statement of which this
prospectus is a part.
WE HAVE NOT YET SUCCESSFULLY DEVELOPED A PRODUCT FOR COMMERCIAL USE, AND IF WE
ARE UNABLE TO DO SO OUR BUSINESS MAY NOT CONTINUE.
We have not yet developed a product to the stage of generating
commercial sales. Our research activities are characterized by the inherent risk
that the research will not yield results that will receive FDA approval or
otherwise be suitable for commercial exploitation. Of the products currently
under development and on which we are devoting substantial attention, we have
one product in a prelaunch stage, one product in a pilot Phase I study, two
products in a bioequivalence stage and two additional products in preclinical
testing. Additional studies including either pivotal bioequivalence or efficacy
studies will be required before commercialization.
Successful completion of pivotal biostudies is required for us to file
an ANDA with the FDA, and successful completion of pivotal clinical trials is
required for us to file a NDA with the FDA. ANDAs are filed with respect to
generic versions of existing FDA approved products
5
while NDAs are filed with respect to new products. In order for any of our
products to be commercialized, FDA approval is required.
IF WE NEED ADDITIONAL FINANCING IN ORDER TO SATISFY OUR SIGNIFICANT CAPITAL
REQUIREMENTS AND ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, IT WOULD IMPAIR OUR
ABILITY TO CONTINUE TO DO BUSINESS.
We completed a private placement in December, 2003 of shares of our
Common Stock yielding gross proceeds of $3,290,000 before commissions and
expenses. (See "Selling Stockholders") We anticipate, based on our currently
proposed plans and assumptions relating to our operations, and assuming the
successful consummation of at least one of the proposed financings referred to
below, that we have sufficient capital to satisfy our contemplated cash
requirements through March 31, 2005. In particular, we expect to make
substantial expenditures as we further develop and seek to commercialize our
products. We also expect that our rate of spending will accelerate as the result
of increased costs and expenses associated with seeking regulatory approval and
commercialization of products now in development. One of the conditions to
consummation of a proposed acquisition (see "Our Business - Proposed
Acquisition") as currently proposed is that we have liquid assets of
approximately $8,000,000. We have no current arrangements for financings;
however, (i) we are currently negotiating an equipment purchase financing
agreement, which we anticipate closing in the reasonably foreseeable future;
(ii) we have entered into a non-binding agreement in principle with a
broker-dealer to effect a private placement of shares of our Common Stock and
(iii) there is the potential exercise of options and warrants that are currently
outstanding. We have no way of knowing whether any of the options or warrants
will be exercised. We do not currently have commitments for financings, and so
do not know whether additional financing would be available to us on favorable
terms, or at all. Our inability to obtain additional financing when needed would
impair our ability to continue our business and to consummate the proposed
acquisition on the terms proposed. If any future financing involves the sale of
our securities, our then-existing stockholders' equity could be substantially
diluted. On the other hand, if we incurred debt, we would be subject to risks
associated with indebtedness, including the risk that interest rates might
fluctuate and cash flow would be insufficient to pay principal and interest on
such indebtedness. If our plans change, or our assumptions change or prove to be
inaccurate, or our cash flow proves to be insufficient to fund our operations
due to unanticipated expenses or problems, we would be required to seek
additional financing sooner than anticipated.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND AVOID CLAIMS
THAT WE INFRINGED ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, OUR ABILITY TO
CONDUCT BUSINESS MAY BE IMPAIRED.
Our success, competitive position and amount of royalty income will
depend in part on our ability to obtain patent protection in various
jurisdictions related to our technologies, processes and products. We intend to
file patent applications seeking such protection, but we cannot be certain that
these applications will result in the issuance of patents. If patents are
issued, third parties may sue us to challenge such patent protection, and
although we know of no reason why they should prevail, it is possible that they
could. It is likewise possible that our patents may not prevent third parties
from developing similar or competing products. In addition,
6
although we are not aware of any threatened or pending actions by third parties
asserting that we have infringed on their patents, and are not aware of any
actions we have taken that would lead to such a claim, it is possible that we
might be sued for infringement. The cost involved in bringing suits against
others for infringement of our patents, or in defending any suits brought
against us, can be substantial. We may not possess sufficient funds to prosecute
or defend such suits. If our products were found to infringe upon patents issued
to others, we would be prohibited from manufacturing or selling such products
and we could be required to pay substantial damages.
In addition, we may be required to obtain licenses to patents, or other
proprietary rights of third parties, in connection with the development and use
of our products and technologies as they relate to other persons' technologies.
At such time as we discover a need to obtain any such license, we will need to
establish whether we will be able to obtain such a license on favorable terms.
The failure to obtain the necessary licenses or other rights could preclude the
sale, manufacture or distribution of our products.
We also rely upon trade secrets and proprietary know-how. We seek to
protect this know-how in part by confidentiality agreements. We consistently
require our employees and potential business partners to execute confidentiality
agreements prior to doing business with us. However, it is possible that an
employee would disclose confidential information in violation of his or her
agreement, or that our trade secrets would otherwise become known or be
independently developed in such a manner that we will have no practical
recourse.
We are not engaged in any litigation, nor contemplating any, with
regard to a claim that someone has infringed one of our patents, revealed any of
our trade secrets, or otherwise misused our confidential information.
See also the risk under the heading "OUR FOUNDER AND FORMER PRESIDENT
AND CHIEF EXECUTIVE OFFICER RESIGNED IN JUNE 2003 ALL OF HIS POSITIONS WITH
ELITE, WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON US".
THE PHARMACEUTICAL INDUSTRY IS SUBJECT TO EXTENSIVE FDA REGULATION AND FOREIGN
REGULATION, WHICH PRESENTS NUMEROUS RISKS TO US.
The manufacturing and marketing of pharmaceutical products in the
United States and abroad are subject to stringent governmental regulation. The
sale of any of our products for use in humans in the United States will require
the prior approval of the FDA. Similar approvals by comparable agencies are
required in most foreign countries. The FDA has established mandatory procedures
and safety standards that apply to the clinical testing, manufacture and
marketing of pharmaceutical products. Obtaining FDA approval for a new
therapeutic product may take several years and involve substantial expenditures.
None of our products has been approved for sale or use in humans in the United
States or elsewhere.
If we or our licensees fail to obtain or maintain requisite
governmental approvals or fail to obtain or maintain approvals of the scope
requested, it will delay or preclude us or our
7
licensees or marketing partners from marketing our products. It could also limit
the commercial use of our products.
THE PHARMACEUTICAL INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID AND
SIGNIFICANT TECHNOLOGICAL CHANGE, WHICH COULD IMPAIR OUR ABILITY TO IMPLEMENT
OUR BUSINESS MODEL.
The pharmaceutical industry is highly competitive, and we may be unable
to compete effectively. In addition, it is undergoing rapid and significant
technological change, and we expect competition to intensify as technical
advances in each field are made and become more widely known. An increasing
number of pharmaceutical companies have been or are becoming interested in the
development and commercialization of products incorporating advanced or novel
drug delivery systems. We expect that competition in the field of drug delivery
will increase in the future as other specialized research and development
companies begin to concentrate on this aspect of the business. 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 our competitors have longer operating histories and greater financial,
research and development, marketing and other resources than we do. Such
companies may develop new formulations and products, or may improve existing
ones, more efficiently than we can. Our success, if any, will depend in part on
our ability to keep pace with the changing technology in the fields in which we
operate.
IF OTHER KEY PERSONNEL WERE TO LEAVE ELITE OR IF WE ARE UNSUCCESSFUL IN
ATTRACTING QUALIFIED PERSONNEL, OUR ABILITY TO DEVELOP PRODUCTS COULD BE
MATERIALLY HARMED.
Our success depends in large part on our ability to attract and retain
highly qualified scientific, technical and business personnel experienced in the
development, manufacture and marketing of controlled release drug delivery
systems and products. Our business and financial results could be materially
harmed by the inability to attract or retain qualified personnel.
WE HAVE BEEN DEPENDENT ON CONTRACTS WITH A FEW MAJOR CUSTOMERS FOR SUBSTANTIALLY
ALL OF OUR REVENUES, AND IF THOSE CONTRACTS TERMINATE OR EXPIRE, WE WILL BE
WITHOUT THE STREAMS OF REVENUE THAT THEY HAVE REPRESENTED, UNLESS WE ARE ABLE TO
NEGOTIATE OTHER CONTRACTS WITH OTHER CUSTOMERS THAT GENERATE SIMILAR REVENUES.
Each year we have had some customers that accounted for a large
percentage of our sales. If our contracts with these customers terminate or
expire, we will lose substantially all of our revenues. As a result of
inadequate funds to conduct research and development we were unable to generate
material revenues under existing contracts - for the year ended March 31, 2004
we had only $258,250 of revenue, of which $108,250 were research and development
fees earned in conjunction with our distinct development, license and
manufacture agreements. There can be no assurance that at the time that any of
our current contracts expire, other contracts will be inplace generating
material revenue.
8
IF WE WERE SUED ON A PRODUCT LIABILITY CLAIM, AN AWARD COULD EXCEED OUR
INSURANCE COVERAGE AND COST US SIGNIFICANTLY.
The design, development and manufacture of our products involve an
inherent risk of product liability claims. We have procured product liability
insurance having a maximum limit of $1,000,000; however, a successful claim
against us in excess of the policy limits could be very expensive to us,
damaging our financial position. Our insurance coverage may be materially below
the coverage maintained by many of the other companies engaged in similar
activities. To the best of our knowledge, no product liability claim has been
made against us as of May 31, 2004.
OUR STOCK PRICE HAS BEEN VOLATILE AND MAY FLUCTUATE IN THE FUTURE.
There has been significant volatility in the market prices for publicly
traded shares of pharmaceutical companies, including ours. For the twelve months
ended March 31, 2004, the closing sale price on the American Stock Exchange of
our Common Stock fluctuated from a high of $3.80 per share to a low of $1.34 per
share. The per share price of our Common Stock may not remain at or exceed
current levels. The market price for our Common Stock, and for the stock of
pharmaceutical companies generally, has been highly volatile. The market price
of our Common Stock may be affected by:
o Results of our clinical trials;
o Approval or disapproval of abbreviated new drug applications or new
drug applications;
o Announcements of innovations, new products or new patents by us or by
our competitors;
o Governmental regulation;
o Patent or proprietary rights developments;
o Proxy contests or litigation;
o News regarding the efficacy of, safety of or demand for drugs or drug
technologies;
o Economic and market conditions, generally and related to the
pharmaceutical industry;
o Healthcare legislation;
o Changes in third-party reimbursement policies for drugs; and
o Fluctuations in our operating results.
9
IF ADDITIONAL AUTHORIZED SHARES OF OUR COMMON STOCK ARE AVAILABLE FOR ISSUANCE
OR SHARES ELIGIBLE FOR FUTURE SALE WERE INTRODUCED INTO THE MARKET, IT COULD
HURT OUR STOCK PRICE AND MAKE A CHANGE OF CONTROL MORE DIFFICULT TO ACHIEVE.
As of June 21,2004, there were 25,000,000 shares of our Common Stock
authorized, of which 12,104,423 shares were outstanding. In addition, as of that
date there were 5,071,289 shares eligible for issuance upon exercise of
currently outstanding options and warrants, although options for 790,000 of
those shares of stock had not yet vested. If every warrant and option holder
exercised his or her rights, once all the currently unvested options vested,
there would be 17,175,712 shares of Common Stock outstanding. The stockholders
are being asked at the adjourned Annual Meeting of Stockholders scheduled to be
held on July 21, 2004 to approve a proposed amendment to the Company's
Certificate of Incorporation to increase the authorized shares of capital stock
from 25,000,000 shares of Common Stock to 65,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock. No assurance can be given that the
amendment will be approved.
Currently, more than 9,500,000 outstanding shares are eligible for
resale in addition to the 1,530,000 shares which are to be offered by the
selling stockholders and the 150,000 shares which are registered for resale upon
exercise of outstanding warrants and options. We are unable to estimate the
amount, timing or nature of future sales of outstanding Common Stock. Sales of
substantial amounts of the Common Stock in the public market by these holders or
perceptions that such sales may take place may lower the Common Stock's market
price.
If the proposed amendment of the Certificate of Incorporation to
increase the authorized capital stock is approved by our shareholders, our Board
of Directors will be authorized to issue additional shares on such terms as it
may determine.
The additional authorized but unissued shares of the Company's Common
Stock or the issuance of one or more series of Preferred Shares that would
become available for issuance if the amendment is approved could be used to make
a change of control of the Company more difficult and expensive. Under certain
circumstances, such shares could be used to create impediments to or frustrate
persons seeking to cause a takeover or to gain control of the Company. Such
shares could be sold to purchasers who might side with the Board in opposing a
takeover bid that the Board determines not to be in the best interests of its
stockholders. The amendment might also have the effect of discouraging an
attempt by another person or entity, through the acquisition of a substantial
number of shares of the Company's Common Stock to acquire control of the Company
with a view to consummating a merger, sale of all or part of the Company's
assets, or a similar transaction, since the issuance of new shares could be used
to dilute the stock ownership of such person or entity.
IF PENNY STOCK REGULATIONS BECOME APPLICABLE TO OUR COMMON STOCK THEY WILL
IMPOSE RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON STOCK AND THE ABILITY OF
OUR STOCKHOLDERS TO SELL SHARES OF OUR STOCK COULD BE IMPAIRED.
The SEC has adopted regulations that generally define a "penny stock"
to be an equity security that has a market price of less than
10
$5.00 per share or an exercise price of less than $5.00 per share subject to
certain exceptions. Exceptions include equity securities issued by an issuer
that has (i) net tangible assets of at least $2,000,000, if such issuer has been
in continuous operation for more than three years, or (ii) net tangible assets
of at least $5,000,000, if such issuer has been in continuous operation for less
than three years, or (iii) average revenue of at least $6,000,000 for the
preceding three years. Unless an exception is available, the regulations require
that prior to any transaction involving a penny stock, a risk of disclosure
schedule must be delivered to the buyer explaining the penny stock market and
its risks. Our Common Stock is currently trading at under $5.00 per share.
Although we currently fall under one of the exceptions, if at a later time we
fail to meet one of the exceptions, our Common Stock will be considered a penny
stock. As such the market liquidity for our Common Stock will be limited to the
ability of broker-dealers to sell it in compliance with the above-mentioned
disclosure requirements.
You should be aware that, according to the SEC, the market for penny stocks has
suffered in recent years from patterns of fraud and abuse. Such patterns
include:
o Control of the market for the security by one or a few broker-dealers;
o "Boiler room" practices involving high-pressure sales tactics;
o Manipulation of prices through prearranged matching of purchases and
sales;
o The release of misleading information;
o Excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
o Dumping of securities by broker-dealers after prices have been
manipulated to a desired level, which hurts the price of the stock and
causes investors to suffer loss.
We are aware of the abuses that have occurred in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, we will strive within
the confines of practical limitations to prevent such abuses with respect to our
Common Stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW MAY DETER A THIRD PARTY FROM
ACQUIRING US.
Section 203 of the Delaware General Corporation Law prohibits a merger
with a 15% shareholder within three years of the date such shareholder acquired
15%, unless the merger meets one of several exceptions. The exceptions include,
for example, approval by the holders of two-thirds of the outstanding shares
(not counting the 15% shareholder), or approval by the Board prior to the 15%
shareholder acquiring its 15% ownership. This provision makes it difficult for a
potential acquirer to force a merger with or takeover of the Company, and could
thus limit the price that certain investors might be willing to pay in the
future for shares of our Common Stock.
11
THE ACQUISITION OF NOSTRUM, IF EFFECTED, WILL RESULT IN ADDITIONAL RISK FACTORS.
NO REPRESENTATION CAN BE MADE THAT A PROPOSAL TO ACQUIRE NOSTRUM WILL
BE APPROVED BY OUR BOARD AND IF SO APPROVED, WILL BE APPROVED BY OUR
STOCKHOLDERS, OR THAT IF EFFECTED IT WILL BE CONSUMMATED ON NO LESS FAVORABLE
TERMS THAN INITIALLY PROPOSED.
The business of Nostrum is subject to most of the risks set forth above
with respect to our business. (Note that a claim of patent infringement was
filed against Nostrum in September 2003.) If the proposed transaction is
effected, the Company and our stockholders will also be subject to additional
risk factors including:
A. We would depend on the efforts of Dr. Nirmal Mulye, Ph.D., its
president and holder of approximately 90% of its outstanding shares. A loss or
diminution of his services would have a material adverse effect on the operating
results and financial condition of the Company.
B. We would have to expand our staff. No assurance can be given that we
would be successful in hiring additional key personnel or that the additional
staff would prove beneficial.
C. Nostrum's principal operations to date derive from development and
distribution agreements with three pharmaceutical companies. In the event of a
termination of the agreements by a pharmaceutical company or Nostrum, payments
under the related agreement by the pharmaceutical company to Nostrum are
recoverable by the pharmaceutical company, primarily as credits or setoffs
against royalty obligations,.
D. The proposed acquisition of Nostrum by means of a merger of a wholly
owned subsidiary of Elite with Nostrum would, if effected on the terms initially
proposed, result in the issuance of three times the number of all shares then
outstanding and options to purchase a substantial number of additional shares.
In such event the holders of our Common Stock will suffer material dilution in
their equity and voting rights and Dr. Mulye will have the power to elect all of
our directors, except that it is currently proposed that the agreement will
provide for the current management of the Company to designate initially three
of the seven directors which are to constitute the Board of Directors;
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares by
this prospectus.
DESCRIPTION OF CAPITAL STOCK
As of June 21, 2004, there were outstanding 12,104,423 shares of Common
Stock and options and warrants to purchase a total of 5,071,289 shares of our
Common Stock including the 50,000 shares to be offered upon exercise of warrants
held by the Placement Agent and its associates and 100,000 shares to be offered
upon exercise of options held by the former Chief Executive Officer of Elite,
but exclusive of options to purchase up to 1,500,000 shares which
12
may be granted under the 2004 Elite Option Plan approved by our stockholders at
the June 22, 2004 Annual Meeting.
Our stockholders at the adjourned Annual Meeting scheduled to be held
on July 21, 2004 are being asked to approved an amendment of our Certificate of
Incorporation which would increase our authorized capital stock from 25,000,000
shares of Common Stock to 65,000,000 shares of Common Stock, par value $.01 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share. No
representation can be made that the proposed amendment, approval of which will
require the affirmative vote of a majority of the outstanding shares, will be
approved.
COMMON STOCK
The holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefore at such times and in
such amounts as our Board of Directors may from time to time determine.
Each stockholder is entitled to one vote for each share of Common Stock
held on all matters submitted to a vote of stockholders.
The Common Stock is not entitled to preemptive rights and is not
subject to conversion or redemption. Upon liquidation, dissolution or winding up
of Elite, subject if the proposed amendment is approved to the rights of the
holders of any shares of Preferred Stock which may be outstanding, the remaining
assets legally available for distribution to stockholders, after payment of
claims or creditors, are distributable ratably among the holders of the Common
Stock outstanding at that time. Each outstanding share of Common Stock is fully
paid and nonassessable.
PREFERRED STOCK
If the proposed amendment to the Company's Certificate of Incorporation
is approved, the Company's Board of Directors will have the authority to issue
5,000,00 shares of Preferred Stock in one or more series and to fix the powers,
designations, rights, preferences and restrictions thererof, including dividend
rights, conversion rights, voting rights, redemption terms, liquidation
preferences and the number of shares constituting each such series, without any
further vote or action by the Company's stockholders. The Company currently has
no plans to issue any shares of Preferred Stock.
ANTI-TAKEOVER PROVISIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 of the Delaware Law provides, subject to a number
of exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person or an affiliate, or an associate of
an affiliate, who is an "interested stockholder" for a period of three years
from the date that person became an interested stockholder unless:
13
o the transaction resulting in a person becoming an interested
stockholder, or the business combination, is approved by the
board of directors of the corporation before the person
becomes an interested stockholder,
o the interested stockholder acquired 85% or more of the
outstanding voting stock of the corporation in the same
transaction that makes this person an interested stockholder,
excluding shares owned by persons who are both officers and
directors of the corporation, and the shares held by certain
employee stock ownership plans, or
o on or after the date the person becomes an interested
stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at
least 66-2/3% of the corporations outstanding voting stock at
an annual or special meeting, excluding the shares owned by
the interested stockholder.
Under Section 203 of the Delaware Law, an "interested stockholder" is
defined as any person who is either the owner of 15% or more of the outstanding
voting stock of the corporation or an affiliate or associate of the corporation
and who was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to the
date on which it is sought to be determined whether such person is an interested
stockholder.
A corporation may, at its option, exclude itself from coverage of
Section 203 of the Delaware Law by amending its certificate of incorporation or
by-laws, by action of its stockholders, to exempt itself from coverage, provided
that the amendment to the certificate of incorporation or by-laws does not
become effective until 12 months after the date it is adopted.
PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND POLICY
Our Common Stock is quoted on the American Stock Exchange under the
symbol "ELI." The following table shows, for the periods indicated, the high and
low sales prices per share of our Common Stock as reported by the American Stock
Exchange.
COMMON STOCK
QUARTER ENDED HIGH LOW
FISCAL YEAR
ENDING MARCH 31, 2004:
March 31, 2004......................................................... $3.80 $2.40
December 31, 2003...................................................... $3.30 $2.70
September 30, 2003..................................................... $3.49 $2.05
June 30, 2003 ......................................................... $3.45 $1.34
14
FISCAL YEAR
ENDING MARCH 31, 2003:
March 31, 2003......................................................... $2.20 $1.45
December 31, 2002...................................................... $3.15 $1.80
September 30, 2002..................................................... $5.25 $2.41
June 30, 2002.......................................................... $7.75 $4.50
FISCAL YEAR
ENDING MARCH 31, 2002:
March 31, 2002......................................................... $8.30 $5.65
December 31, 2001...................................................... $7.75 $5.90
September 30, 2001..................................................... $11.50 $5.10
June 30, 2001.......................................................... $11.45 $4.85
On June 28, 2004, the last reported sale price of our Common Stock, as
reported by the American Stock Exchange, was $2.34 per share.
We have never paid cash dividends on our capital stock. We currently
anticipate that we will retain all available funds for use in the operation and
expansion of our business, and do not anticipate paying any cash dividends in
the foreseeable future.
MANAGEMENT
Board of Directors
The Board of Directors in May 2004 by Board resolution set the number
of Directors constituting the Board of Directors commencing with the Annual
Meeting of Stockholders held on June 22, 2004 at four, a reduction from seven.
The table below sets forth the names and ages, as of June 25, 2004, of
each of the Directors (Mr. Bernard Berk is Chairman of the Board and Chief
Executive Officer of the Company), and the period during which each such person
has served on the Board of Directors of the Company.
NAME AND BUSINESS ADDRESS AGE DIRECTOR SINCE
Bernard Berk (1) 55 2004
John A. Moore (1) 39 2002
Harmon Aronson 61 1999
26 Monterey Drive
Wayne, NJ 07470
Eric L. Sichel 44 2001
411 Highview Road
Engelwood, NJ 07631
15
(1) His address is c/o Elite Pharmaceuticals Inc., 165 Ludlow Avenue,
Northvale, NJ 07647
The principal occupations and employment of each such person during the
past five years is set forth below. In each instance in which dates are not
provided in connection with a nominee's business experience, such nominee has
held the position indicated for at least the past five years.
Bernard Berk was appointed the Chief Executive Officer of the Company
in June 2003, a Director in February 2004 and Chairman of the Board on May 12,
2004. Mr. Berk has been the President and Chief Executive Officer of Michael
Andrews Corporation, a pharmaceutical management consultant firm, since 1996.
Mr. Berk devotes and is to devote during his employment under his employment
agreement substantially all of his time to the operations of the Company. From
1994 until 1996, Mr. Berk was President and Chief Executive Officer of Nale
Pharmaceutical Corporation. From 1989 until 1994, Mr. Berk was Senior Vice
President of Sales, Marketing and Business Development of Par Pharmaceuticals,
Inc. Mr. Berk holds a B.S. from New York University.
John A. Moore served as Chairman of the Board from June 2003 to May 12,
2004. He has been Chief Executive Officer and President of Edson Moore
Healthcare Ventures Inc., an investment entity, since July 2002. Mr. Moore had
been from 1994 through June 2002 Chief Executive Officer and President and since
1994 a director of Optimer, Inc., a research based polymer development company.
He is also a director and Chairman of ImaRx Therapeutics, Inc., a privately-held
company engaged in medical technology development and a director of Medi-Hut
Co., Inc., a publicly traded medical products company. Mr. Moore holds a B.A. in
history from Rutgers University.
Harmon Aronson, Ph.D. has been employed since 1997 as the President of
Aronson Kaufman Associates, Inc., a New Jersey-based consulting firm that
provides manufacturing, FDA regulatory and compliance services to pharmaceutical
and biotechnology companies. Its clients include United States and international
firms manufacturing bulk drugs and finished pharmaceutical dosage products who
are seeking FDA approval for their products for the U.S. market. Prior to 1997,
Dr. Aronson was employed by Biocraft Laboratories, a leading generic drug
manufacturer, rising to the position of Vice President of Quality Management;
prior to that he held the position of Vice President of Non-Antibiotic
Operations, where he was responsible for the manufacturing of all the firm's
non-antibiotic products. Dr. Aronson holds a Ph.D. in Physics from the
University of Chicago. He is also a director of Elite Research, Ltd. Other than
Elite Research Ltd., no company with which Dr. Aronson was affiliated in the
past was a parent, subsidiary or other affiliate of the Company.
Eric L. Sichel, M.D. has been since 1997, owner and President of Sichel
Medical Ventures, Inc., a company that provides biotechnology company
assessments and investment banking services. From 1995 through 1996, Dr. Sichel
was a senior analyst in the biotechnology field for Alex Brown & Sons, Inc.
Prior to that, Dr. Sichel was affiliated with Sandoz Pharmaceuticals Corp. in
various capacities, including associate director of transplantation/immunology.
Dr. Sichel holds an M.B.A. from Columbia University and an M.D.
16
from UMDNJ--New Jersey Medical School, and is licensed to practice medicine by
the State of New York.
There is no family relationship between the persons nominated or chosen
by the Company to become directors.
Each director holds office (subject to our By-Laws) until the next
annual meeting of stockholders and until such director's successor has been
elected and qualified. All of our executive officers, except for Mr. Berk who
has a long term employment agreement, are serving until the next annual meeting
of directors and until their successors have been duly elected and qualified.
There are no family relationships between any of our directors and executive
officers.
COMMITTEES
The Board of Directors has an Audit Committee and, since March 2004, a
Nominating Committee. The Board has no other standing committees. The Audit
Committee members are John A. Moore, Harmon Aronson and Eric L. Sichel. The
Company's Board of Directors has adopted a written charter for the Audit
Committee, a copy of which was included as an appendix to the Company's proxy
statement sent to stockholders in connection with the annual meeting of
stockholders held October 11, 2001.
The Company deems the members of its Audit Committee, except for Mr.
Moore, to be independent, as independence is defined in Section 121(A) of the
American Stock Exchange Listing Standards, as amended effective December 1,
2003. The Board determined that Mr. Sichel, an independent director, qualifies
as the audit committee financial expert within the meaning of that term under
the applicable regulations under the Securities Exchange Act of 1934.
Audit Committee Report: The following is the Audit Committee Report
made by all its members with respect to our financial statements as of and for
the year ended March 31, 2004.
The Audit Committee reviewed and discussed the audited financial
statements with management. The Audit Committee discussed with the independent
auditors of the Company the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU 380), as modified or
supplemented. The Audit Committee received the written disclosures and the
letter from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as modified or supplemented. The Audit
Committee discussed with the independent accountant the independent accountant's
independence. Based upon the foregoing review and discussions, the Audit
Committee recommended to the Board of Directors of the Company that the audited
financial statements of the Company be included in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 2004 as filed with the
Commission.
17
The Nominating Committee is authorized to select the nominees of the
Board of Directors for election as directors. The current members are John A.
Moore, Harmon Aronson and Bernard Berk.
COMPENSATION OF DIRECTORS
Each non-affiliated director receives $2,000 as compensation for each
meeting of the Board of Directors attended.
Pursuant to an authorization by the Board of Directors, Mr. Moore
received $46,875 as compensation for the period from January 1, 2004 through May
12, 2004, the date of his resignation as Chairman of the Board, for his services
as Chairman in assisting the Chief Executive Officer in the management of the
Company's operations.
EXECUTIVE OFFICERS
Our executive officers of the Company are Bernard Berk and Mark I.
Gittelman.
Bernard Berk, age 55, was appointed Chief Executive Officer in June
2003, a director in February 2004 and Chairman of the Board on May 12, 2004. See
"Management - Board of Directors" for his business background.
Mark I. Gittelman, age 44, CPA, the Chief Financial Officer, Secretary
and Treasurer of the Company, is the President of Gittelman & Co., P.C., an
accounting firm in Clifton, NJ. Prior to forming Gittelman & Co., P.C. in 1984,
he worked as a certified public accountant with the international accounting
firm of KPMG Peat Marwick, LLP. Mr. Gittelman holds a B.S. in accounting from
New York University and a Masters of Science in Taxation from Farleigh Dickinson
University. He is a Certified Public Accountant licensed in New Jersey and New
York, and is a member of the American Institute of Certified Public Accountants
("AICPA"), and the New Jersey and New York States Societies of CPAs. Other than
Elite Labs, no company with which Mr. Gittelman was affiliated in the past was a
parent, subsidiary or other affiliate of the Company.
The Company entered into a three-year employment agreement effective
July 23, 2003 with Mr. Berk providing for (i) his full time employment as Chief
Executive Officer at an annual base salary of $200,000, (ii) the grant to him of
options which vest immediately to purchase 300,000 shares of Common Stock at a
price of $2.01 per share, the closing share price on the American Stock Exchange
on the date of grant and (iii) the grant of options to purchase an additional
300,000 shares at $2.01 per share to vest on consummation of a "strategic
transaction" while he is employed as Chief Executive Officer. The consummation
of such transaction will result in the increase of his base annual salary to
$310,140 effective with the consummation. A strategic transaction is defined as
any one of the following transactions provided that the net value of the
consideration to the Company or its stockholders determined in good faith by the
Board of Directors is at least $10,000,000: (i) the sale of all or substantially
all of the assets of the Company, (ii) a merger or consolidation or business
combination, or (iii) the sale by the Company of debt or equity securities.
18
Either party upon notice may terminate Mr. Berk's employment except
that a termination by the Company without cause or because of his permanent
disability or a termination by him for cause will result in severance pay in the
form of the continuation of his base salary for the balance of the term or two
years, whichever is longer, less in the event of termination for permanent
disability the amount of payments under a disability insurance policy maintained
by the Company. The Company is also to continue to pay during the foregoing
period the premiums for life and disability insurance policies. Furthermore, in
the event that Mr. Berk terminates his employment following a "change of
control" event he is to receive, payable in 24 monthly installments, an amount
which will depend on the fair value of the consideration determined in good
faith by the Board of Directors received by the Company or stockholders from the
"change of control" event less related expenses ("Net Fair Value") -- $500,000
if the Net Fair Value is $10 million or less; the greater of $500,000 or twice
his then base annual salary, if the Net Fair Value is greater than $10,000,000
but not more than $20 million, or $1,000,000 if the Net Fair Value is greater
than $20,000,000. A "change of control" event is (i) a merger or consolidation
in which securities possessing more than 50% of the voting power is issued to
persons other than the holders of voting securities of the Company immediately
prior to the event, (ii) the sale, transfer or disposition of all or
substantially all the assets of the Company, or (iii) the sale by the Company of
securities to a third party.
The agreement contains Mr. Berk's non-competition covenant for a period
of one year from termination.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the annual and long-term compensation
for services in all capacities to the Company for the three years ended March
31, 2004, awarded or paid to, or earned by Bernard Berk, the Company's President
and Chief Executive Officer since June 2003 and Dr. Atul M. Mehta, our former
President and Chief Executive Officer. No other executive officer of the Company
received compensation exceeding $100,000 during those periods. See "Certain
Relationships and Related Transactions" for fees paid to an affiliate of Mark I.
Gittelman, the Company's Chief Financial Officer, Treasurer and Secretary.
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------ -----------------------------------------------------------
Annual Compensation Long Term Compensation
------------------------------------------------------------------ -----------------------------------------------------------
(e)
(a) Other (g)
Name and (b) Annual (f) Securities (h) (i)
Principal Fiscal (c) (d) Compen- Restricted Underlying LTIP All Other
Position Year(1) Salary Bonus sation(3) Stock Awards Options Payouts Compensation
---------------- ------------ ------------ ---------- ------------ --------------- -------------- ------------ ---------------
Bernard Berk, 2003-04 $166,667 -- -- -- 300,000(4) -- --
President and
Chief
Executive
Officer
---------------- ------------ ------------ ---------- ------------ --------------- -------------- ------------ ---------------
19
---------------- ------------ ------------ ---------- ------------ --------------- -------------- ------------ ---------------
Atul M. Mehta, 2003-04 $ 53,684 -- $ 3,040 -- --(5) -- --
Ph.D. former
President and 2002-03 $330,140 -- $ 3,040 -- -- -- --
Chief
executive 2001-02 $272,855 -- $83,856 -- 50,000(6) -- --
Officer(2)
---------------- ------------ ------------ ---------- ------------ --------------- -------------- ------------ ---------------
(1) The Company's fiscal year begins on April 1 and ends on March 31.
The information is provided for each fiscal year beginning April 1.
(2) Dr. Mehta resigned as an employee and as a director of Elite as of
June 3, 2003.
(3) Other Annual Compensation represents use of a company car, premiums
paid by the Company for life insurance on Dr. Mehta's life for the benefit of
his wife and the purchase price of $80,856 for options acquired from Dr. Mehta
(4) Does not include 300,000 options which are exercisable only upon
occurrence of a "strategic transaction".
(5) As part of a settlement of a litigation between Dr. Mehta and the
Company the expiration dates of options granted to him prior to April 1, 2001 to
purchase 770,000 shares were extended in April 2004 to June 13, 2005.
(6) By action on February 21, 2002, our Board of Directors corrected a
clerical error in options for 425,000 shares of our Common Stock granted to Dr.
Mehta. This correction did not result in any additional shares being subject to
options held by Dr. Mehta, any change in the exercise price or a change in any
other material terms.
OPTION GRANTS TO AND EXERCISED BY EXECUTIVE OFFICERS IN LAST FISCAL YEAR
Options granted to executive officers of the Company named in the
Summary Compensation Table during the fiscal year ended March 31, 2004 were as
follows:
POTENTIAL REALIZED
NUMBER OF VALUE AT
SHARES % OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION FOR OPTION TERM
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
Bernard Berk 300,000(1) 41.4% $2.01 6/2/13 $982,223 $1,564,027
Atul M. Mehta(2) -- -- -- -- -- --
(1) Does not include grant of options to purchase 300,000 shares at $2.01 per
share which are exercisable only upon occurrence of a "strategic transaction".
See "Executive Officers".
20
(2) Pursuant to a settlement which closed in April 2004 of a litigation with the
Company the expiration dates of options to purchase 770,000 shares granted prior
to year ended March 31, 2002 while he was an executive officer were extended.
No options were exercised by executive officers during the fiscal year
ended March 31, 2004.
SHARES VALUE NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
NAME EXERCISED REALIZED UNEXERCISED OPTIONS AT YEAR-END* OPTIONS AT YEAR-END (1)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Atul M. Mehta -0- -0- 270,000 -0- $0 --
(2) -0- -0- 100,000 -0- $0 --
-0- -0- 100,000 -0- $48,000 --
-0- -0- 100,000 -0- $98,000 --
-0- -0- 100,000 -0- $148,000 --
-0- -0- 100,000 -0- $198,000 --
Bernard
Berk (3) -0- -0- 300,000 300,000 $291,000 $291,000
------
*Giving retroactive effect to a litigation settlement which became effective in
April 2004.
(1) The dollar values are calculated by determining the difference between $2.98
per share, the closing share price of the Common Stock on March 31, 2004 on the
American Stock Exchange and the exercise price of the respective options.
(2) Dr. Mehta resigned as an officer/employee and director as of June 3, 2003.
(3) Mr. Berk entered the employ of the Company in June 2003
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a party to an agreement dated February 26, 1998 whereby
fees are paid to Gittelman & Co., P.C., a firm wholly owned by Mark I.
Gittelman, the Company's Chief Financial Officer, Secretary and Treasurer, in
consideration for services rendered by the firm as internal accountant and
financial and management consultant. The firm's services include the services
rendered by Mr. Gittelman in his capacity as Chief Financial Officer, Treasurer
and Secretary. For the fiscal years ended March 31, 2004, 2003 and 2002, the
fees paid by the Company under the agreement were $168,750, $167,544 and
$91,260, respectively. The services rendered by the firm to the Company averaged
128, 127 and 69 hours per month, respectively, of which an average of 30 hours
per month were services rendered by him in his capacity as an officer of the
Company.
21
We also had a contractual relationship with Donald Pearson, a Director
until June 22, 2004, which expired on November 30, 2003, providing for Mr.
Pearson to: (i) refer potential customers who will license or collaborate in the
development or purchase of the technology of the Company and (ii) render
financial consulting services to the Company. Under the arrangement, Mr. Pearson
received consulting fees aggregating $28,800, $38,400 and $12,800 for fiscal
years ended March 31, 2004, 2003 and 2002, respectively. The referral fees were
to be a percentage ranging from 5% to 1% of the first $5,000,000 of revenues
generated by his referrals after deducting expenses and a credit for the
consulting fees. No revenues were generated under the arrangement. The Company
also has a similar customer referral arrangement with Mr. Harmon Aronson, a
Director, to pay him a percentage of net revenues generated by customers
referred by him. No fees have been earned under his arrangement.
See "Executive Officers" for information as to an employment agreement
with Bernard Berk.
22
SECURITY OWNERSHIP OF OUR DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of April 30, 2004 by (i) each director and
named executive officer, (ii) each beneficial holder of at least 5% of the
outstanding shares and (iii) all executive officers and directors as a group. On
such date, we had 12,104,423 shares of Common Stock outstanding. Shares not
outstanding but deemed beneficially owned by virtue of the right of any
individual to acquire shares within 60 days are treated as outstanding only when
determining the amount and percentage of Common Stock owned by such individual.
Each person has sole voting and investment power with respect to the shares
shown, except as noted. Unless otherwise indicated, the address of the person
named is c/o Elite Pharmaceuticals, Inc., 165 Ludlow Avenue, Northvale, New
Jersey 07647.
NAME AND ADDRESS Number of Shares Percentage of Class
---------------- -------------------
Harmon Aronson, Director* 70,000(1) **
Eric L. Sichel, Director* 60,000(2) **
John A. Moore, Director* 1,224,218(3) 9.9%
Bernard Berk, Chairman of the Board and Chief 300,000(4) 2.4%
Executive Officer*
Mark I. Gittelman, CFO, Treasurer and Secretary 10,000(5) **
300 Colfax Avenue
Clifton, New Jersey 07013
Dr. Atul Mehta 2,257,700(6) 17.5%
c/o Andrew Giles Freda, Esq.
Edwards & Caldwell LLC
1600 Route 208
North Hawthorne, NJ 07647
Edson Moore Healthcare Ventures, 914,218(7) 7.5%
Inc.
403 Marsh Lane
Wilmington, Delaware 19804
Jerome Belson 905,100(8) 7.5%
495 Broadway
New York, New York 10012
ALL DIRECTORS AND OFFICERS AS A GROUP 1,664,218(9) 13.0
* See "Management - Board of Directors" for his address
** Less than 1% of outstanding shares
23
(1) Comprised of options to purchase 70,000 shares.
(2) Represents options to purchase 40,000 shares and 20,000 shares owned as
co-tenant with Dana Cernea.
(3) Represents (i) options personally held by Mr. Moore to purchase 310,000
shares and (ii) 914,218 shares of Common Stock beneficially owned by Edson Moore
Healthcare Ventures, Inc. ("Edson Moore"), of which he is president and
principal stockholder. The 914,218 shares of Common Stock are comprised of: (i)
764,218 shares of Common Stock issued to Edson Moore upon the exchange of 12,915
shares of Series A Preferred Stock, per value $1.00 per share, of Elite
Laboratories, Inc., (ii) a warrant to purchase 100,000 shares of Common Stock
(exercisable through October 17, 2005) at an exercise price of $18.00 per share
and (iii) 50,000 shares acquired in a recent private placement.
(4) Comprised of options to purchase 300,000 shares.
(5) Comprised of options to purchase 10,000 shares.
(6) Based on his Schedule 13D filed on April 28, 2004 with the Securities and
Exchange Commission and includes options to purchase 770,000 shares , and
312,600 shares owned by his wife, members of his family or an affiliate.
(7) See clause (ii) of note 3 above.
(8) Based on information contained in a Schedule 13D, as amended, filed by
Jerome Belson on November 15, 2002. Includes (i) 535,200 shares held by Jerome
Belson, (ii) 53,900 shares held by Maxine Belson, wife of Jerome Belson, (iii)
7,000 shares held by Brianne Goldstein, daughter of Jerome Belson, (iv) 28,000
shares held by Majorie Belson, daughter-in-law of Jerome Belson, (v) 25,000
shares owned by the grandchildren of Jerome Belson and (vi) warrants to purchase
256,000 shares of common stock.
(9) Includes options and warrants to purchase an aggregate of 730,000 shares.
Except as otherwise set forth, information on the stock ownership of
each person was provided to the Company by such person.
Other than the Stock Option Plan, the Company does not have any
compensation plans or arrangements benefiting employees or non-employees under
which equity securities of the Company are authorized for issuance in exchange
for consideration in the form of goods or services.
The Company is informed and believes that as of April 20, 2004, Cede &
Co. held 7,069,228 shares of the Company's Common Stock as nominee for
Depository Trust Company, 55 Water Street, New York, New York 10004. It is our
understanding that both Cede & Co. and Depository Trust Company disclaim any
beneficial ownership therein and claim that such shares are held for the account
of numerous other persons, no one of whom is believed to beneficially own five
percent or more of the Common Stock of the Company.
24
SELLING STOCKHOLDERS
1,530,000 shares of Common Stock offered by the selling stockholders
were acquired by them at a price of $2.00 per share in a private placement by
the Company completed in December, 2003, including 70,000 shares acquired by
certain of our officers and directors or their affiliates. An additional 50,000
shares of Common Stock may be offered by Montauk Financial Group, Inc., the
Placement Agent in the private placement and its associates upon exercise of
warrants at $2.00 per share issued to them along with a cash commission to the
Placement Agent of $72,500 as consideration for the Agent's services. The
expiration date of the warrants is December 2, 2008.
The following table details the name of each selling stockholder, the
Placement Agent and each associate (collectively, the "selling stockholders"),
the number of shares of our Common Stock beneficially owned by each selling
stockholder and the number of shares of our Common Stock that may be offered for
resale under this prospectus. To the extent permitted by law, the selling
stockholders which are not natural persons may distribute shares from time to
time, to one or more of their respective affiliates, which may sell shares
pursuant to this prospectus. We have registered the shares to permit the selling
stockholders and their respective permitted transferees or other successors in
interest that receive their shares from selling stockholders after the date of
this prospectus to resell the shares. Because each selling stockholder may offer
all, some or none of the shares it holds, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the shares, no definitive estimate as to the number of shares that will be held
by each selling stockholder after the offering can be provided. The selling
stockholders may from time to time offer all or some of the shares pursuant to
this offering. Pursuant to Rule 416 under the Securities Act of 1933, the
Registration Statement of which this prospectus is a part also covers any
additional shares of our Common Stock which become issuable in connection with
such shares because of any stock dividend, stock split, recapitalization or
other similar transaction effected without the receipt of consideration which
results in an increase in the number of outstanding shares of our Common Stock.
The following table has been prepared on the assumption that all shares offered
under this prospectus will be sold to parties unaffiliated with the selling
stockholders. Except as indicated by footnote, none of the selling stockholders
has had a significant relationship with us within the past three years, other
than as a result of the ownership of our shares or other securities. Except as
indicated by footnote, the selling stockholders have sole voting and investment
power with their respective shares. Percentages in the table below are based on
12,104,423 shares of our Common Stock outstanding as of April 30, 2004 and
assumes that none of the outstanding warrants or options (including the options
held by Dr. Atul Mehta) will have been exercised after the offering.
Shares Owned After
Shares Owned Prior Number of Shares Offering
Name and Address to Offering Which May Be Sold Number Percent
--------------------------------------- --------------------- ------------------- ---------------------
Edson Moore Healthcare 914,218 50,000 864,218 7.2%
Ventures, Inc. (1)
403 Marsh Lane
Wilmington, DE 19804
--------------------------------------- --------------------- ------------------- ---------------------
25
Shares Owned After
Shares Owned Prior Number of Shares Offering
Name and Address to Offering Which May Be Sold Number Percent
--------------------------------------- --------------------- ------------------- ---------------------
Eric I. Sichel/Dana Cernea, as 60,000(2) 20,000 40,000 *
co-tenants (2)
411 Highview Road
Englewood, NJ 02631
--------------------------------------- --------------------- ------------------- ---------------------
Daniel Brandwein 12,500 12,500 0
916 Gulfstream Ct.
Weston, FL 33327
--------------------------------------- --------------------- ------------------- ---------------------
William J. Kurinsky 12,500 12,500 0
4 Cotswold Circle
Ocean Township, NJ 07712
--------------------------------------- --------------------- ------------------- ---------------------
Sharon Will 425,900(3) 25,000 400,900 3.3%
3014 SW 41st Lane
Ocala, FL 34474
--------------------------------------- --------------------- ------------------- ---------------------
Dianne Will 17,000 12,500 4,500 *
9 Prospect Hill Road, Ext.
Pine Plains, NY 12567
--------------------------------------- --------------------- ------------------- ---------------------
Dennis Levine 50,000 50,000 0
4101 N. Ocean Blvd.
1805D
Boca Raton, FL 33431
--------------------------------------- --------------------- ------------------- ---------------------
Steve T. Kelley 12,500 12,500 0
8982 Becker
Allen Park, MI 48101
--------------------------------------- --------------------- ------------------- ---------------------
Paul Becker 25,000 25,000 0
222 Wellington Road
Mineola, NY 11501
--------------------------------------- --------------------- ------------------- ---------------------
Robert Karsten 163,840 100,000 63,840 *
121 East 60th Street
New York, NY 10022
--------------------------------------- --------------------- ------------------- ---------------------
Lawrence Gorelick 12,500 12,500 0
DDS PC Retirement Trust
530 Route Six
Mahopac, NY 10541
--------------------------------------- --------------------- ------------------- ---------------------
Helen DeSantis 12,500 12,500 0
8 Rolling Drive
Brookville, NY 11545
--------------------------------------- --------------------- ------------------- ---------------------
E. Gerald Kay 57,500 50,000 7,500 *
201 Rte 22
Hillside, NJ 07205
--------------------------------------- --------------------- ------------------- ---------------------
Kenneth Wilk 25,000 25,000 0
678 Princeton Ave.
Brick, NJ 08724
--------------------------------------- --------------------- ------------------- ---------------------
Robert and Susan Moran 12,500 12,500 0
39 Soundview Drive
Fort Salonga, NY 11768
--------------------------------------- --------------------- ------------------- ---------------------
26
Shares Owned After
Shares Owned Prior Number of Shares Offering
Name and Address to Offering Which May Be Sold Number Percent
--------------------------------------- --------------------- ------------------- ---------------------
Ronald Robinson 12,500 12,500 0
134 Mineola Blvd.
Mineola, NY 11501
--------------------------------------- --------------------- ------------------- ---------------------
Stanley Ast 14,500 (4) 12,500 2,000(4) *
7 Clay Street
New City, NY 10956
--------------------------------------- --------------------- ------------------- ---------------------
Delores Bowman 50,000 50,000 0
21-07 Greenwood Drive
Fairlawn, NJ 07410
--------------------------------------- --------------------- ------------------- ---------------------
Michael Sokol 20,000 20,000 0
40 East 84th Street
New York, NY 10028
--------------------------------------- --------------------- ------------------- ---------------------
Murray Alon 25,000 25,000 0
64-40 Ellwell Crescent
Rego Park, NY 11374
--------------------------------------- --------------------- ------------------- ---------------------
Israel Cohen 45,000(5) 40,000 5,000(5) *
13852 Via DaVinci
Del Ray Beach, FL 33446
--------------------------------------- --------------------- ------------------- ---------------------
Frank B. Carr 313,400(6) 50,000 263,400(6) 2.5%
2005 Chestnut Hills Drive
Cleveland Heights, OH 44106-460
--------------------------------------- --------------------- ------------------- ---------------------
David Garceau 534,460(7) 75,000 459,460(7) 3.7%
14 Birdsall Farm Drive
Armonk, NY 10504
--------------------------------------- --------------------- ------------------- ---------------------
Lee Johnson Trust 25,000 25,000 0
14750 El Camino Real
Del Mar, CA 92014
--------------------------------------- --------------------- ------------------- ---------------------
Robert Rosenblum 15,000 15,000 0
74 Magnolia Lane
Jericho, NY 11753
--------------------------------------- --------------------- ------------------- ---------------------
Daniel Orenstein 26,500(8) 20,000 6,500(8) *
1385 York Avenue, Apt. 31B
New York, NY 10021
--------------------------------------- --------------------- ------------------- ---------------------
Ronald Schaffer 25,000 25,000
1016 Fifth Avenue 0
New York NY 10028
--------------------------------------- --------------------- ------------------- ---------------------
Ronald Menello 35,000 35,000 0
22 Calt Drive
Hazlet, NJ 07730
--------------------------------------- --------------------- ------------------- ---------------------
Joseph Giamanco 374,000(9) 100,000 274,000(9) 2.3%
4 White Rock Terrace
Holmdel, NJ 07733
--------------------------------------- --------------------- ------------------- ---------------------
27
Shares Owned After
Shares Owned Prior Number of Shares Offering
Name and Address to Offering Which May Be Sold Number Percent
--------------------------------------- --------------------- ------------------- ---------------------
Frank Lagano 100,000 100,000 0
147 Buckingham Rd.
Tenefly, NJ 07670
--------------------------------------- --------------------- ------------------- ---------------------
Ronald Brown 31,250(10) 25,000 6,250(10) *
4149 Old Manchester Ct.
Mason, OH 45040
--------------------------------------- --------------------- ------------------- ---------------------
Baji A. Palkhiwala 100,400 25,000 75,400 *
211 Trenor Drive
New Rochelle, NY 10804
--------------------------------------- --------------------- ------------------- ---------------------
Gerald Brauser 254,000 100,000 154,000 1.3%
820 Andrews Ave.
Pompano Beach, FL 33069
--------------------------------------- --------------------- ------------------- ---------------------
John N. Hatsopoulous 25,000 25,000 0
3 Woodcock Lane
Lincoln, MA 01773
--------------------------------------- --------------------- ------------------- ---------------------
Scott Waldman 12,500 12,500 0
105 The Intervale
Rosyln, NY 11576
--------------------------------------- --------------------- ------------------- ---------------------
Nora Sosnowski 12,500 12,500 0
PO Box 8944
Albany, NY 12208
--------------------------------------- --------------------- ------------------- ---------------------
Henderson Orthopedic Profit Sharing 25,000 25,000 0
Plan
451 Run Creek Road, #103
Henderson, NC 27536
--------------------------------------- --------------------- ------------------- ---------------------
Michael Stahl 12,500 12,500 0
23325 Ladrillo Street
Woodland Hills, CA 91367
--------------------------------------- --------------------- ------------------- ---------------------
Lindsey Dart 20,000 20,000 0
520 11th Street, Apt. 1
Washington, D.C. 2003
--------------------------------------- --------------------- ------------------- ---------------------
Bridge Ventures, Inc. 432,750(11) 25,000 407,750(11) 3.3%
1241 Gulf of Mexico Drive
Longboat Key, FL 34228
--------------------------------------- --------------------- ------------------- ---------------------
Seymour Orenstein 20,000 20,000 0
5 Shelly Lane
Great Neck, NY 11023
--------------------------------------- --------------------- ------------------- ---------------------
Marvin Sheeber 25,000 25,000 0
641 Fifth Avenue, Apt. 43B
New York, NY 10022
--------------------------------------- --------------------- ------------------- ---------------------
Kevin and Jeanne Hurley 15,000 15,000 0
3 Port Ct.
Manorville, NY 11949
--------------------------------------- --------------------- ------------------- ---------------------
28
Shares Owned After
Shares Owned Prior Number of Shares Offering
Name and Address to Offering Which May Be Sold Number Percent
--------------------------------------- --------------------- ------------------- ---------------------
Warren and Marianne Gilbert 25,000(12) 12,500 12,500(12) *
1200 N. Bayshore Drive, #210
North Miami, FL 33181
--------------------------------------- --------------------- ------------------- ---------------------
C. Ames Byrd 25,000 25,000 0
513 Market Street
Pacomke City, MD 21851
--------------------------------------- --------------------- ------------------- ---------------------
Robert J. Moore 25,000 25,000 0
21 Lighthouse Way
Darien, CT 06820
--------------------------------------- --------------------- ------------------- ---------------------
Martin and Beata Beck 42,500(12) 25,000 17,500(12) *
614 N. June Street
Los Angeles, CA 90004
--------------------------------------- --------------------- ------------------- ---------------------
Leonard Luttinger 12,500 12,500 0
830 Cordova Blvd. NE
St. Peterson, FL 33704
--------------------------------------- --------------------- ------------------- ---------------------
Robert Walker 12,500 12,500 0
467 Andrews Road
Mineola, NY 11501
--------------------------------------- --------------------- ------------------- ---------------------
Albert Saphier MD IRA 42,500(13) 12,500 30,000(13) *
4922 Bay Way Place
Tampa, FL 33629
--------------------------------------- --------------------- ------------------- ---------------------
Kevin J. Martin 44,386(14) 32,500 (14) 11,886 *
P.O. Box 270
Mineola, NY 11501
--------------------------------------- --------------------- ------------------- ---------------------
Daniel J. Walsh 49,886(14) 32,500 (14) 17,386 *
P.O. Box 270
Mineola, NY 11501
--------------------------------------- --------------------- ------------------- ---------------------
Christine Walker 2,500(15) 2,500(15) 0
467 Andrews Avenue
Mineola, NY 11501
--------------------------------------- --------------------- ------------------- ---------------------
Montauk Financial Group, Inc. 7,500(16) 7,500 (16) 0
328 Newman Springs Road
Red Bank, NJ 07701
--------------------------------------- --------------------- ------------------- ---------------------
(1) Mr. John A. Moore, a director and former Chairman of our Board of
Directors, is president and principal stockholder of Edson Moore
Healthcare Ventures, Inc.
(2) Represents (i) options personally held by Mr. Sichel, a former
director of the Company, to purchase 40,000 shares and (ii) 20,000
shares acquired Mr. Sichel and Dana Cernea as co-owners in our
private placement. The 20,000 shares are being offered by this
prospectus.
29
(3) Includes warrants to purchase 175,000 shares, (including warrants
to purchase 100,000 shares held by Saggi Capital Corp., a
consultant to the Company with which she is affiliated).
(4) Includes 2,000 shares issuable upon exercise of warrants.
(5) Includes 5,000 shares issuable upon exercise of warrants.
(6) Includes 171,200 shares issuable upon exercise of warrants
(7) Includes 201,585 shares issuable upon exercise of warrants.
(8) Includes 2,500 shares issuable upon exercise of warrants.
(9) Includes 65,000 shares issuable upon exercise of warrants.
(10) Includes 6,250 shares issuable upon exercise of warrants.
(11) Includes 103,750 shares issuable upon exercise of warrants.
Bridge Ventures Inc. is a consultant to the Company.
(12) Includes 12,500 shares issuable upon exercise of warrants.
(13) Includes 10,000 shares issuable upon exercise of warrants.
(14) Includes 24,386 shares issuable upon exercise of warrants of which
20,000 shares will be offered upon exercise of warrants received
as an associate of the Placement Agent.
(15) Represents the shares issuable upon exercise of the warrants
received as an associate of the Placement Agent.
(16) Represents the shares issuable upon exercise of the warrants
received as an associate of the Placement Agent.
An agreement between Dr. Atul Mehta, our former Chairman of the Board
and Chief Executive Officer, settling a litigation instituted against Elite
alleging a breach of his employment agreement provided, among other things, for
the extension to June 13, 2005 of the expiration dates of options to purchase
770,000 shares with exercise prices ranging from $1.00 to $10.00 per share, of
which options to purchase 70,000 shares had expired, and the grant of piggyback
registration rights to Dr. Mehta at our expense with respect to the shares
issuable upon exercise of the options. Pursuant to Dr. Mehta's request his
offering of 100,000 shares issuable upon exercise of options at a price of $1.00
per share is covered by this prospectus.
See "Security Ownership of Our Directors, Executive Officers and
Principal Stockholders" for Dr. Mehta's address and his beneficial holdings of
shares of our Common Stock as of April 30, 2004. Assuming the sale by Dr. Mehta
of all 100,000 shares subject to the options, the beneficial ownership of Dr.
Mehta based on his holdings as of April 30, 2004 would
30
be reduced to 2,154,700 shares, or 16.7% of the shares to be outstanding
assuming no other exercise of outstanding options or warrants.
PLAN OF DISTRIBUTION
Offer and Sale of Shares
A selling stockholder, including in such definition in this section,
Dr. Mehta and the Placement Agent and its associates, or a pledgee, donee,
transferee or other successor-in-interest who receives shares offered by the
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other non-sale related transfer, may offer and sell their shares
in the following manner:
o on the American Stock Exchange ("Amex") or otherwise at prices and at
terms then prevailing or at prices related to the then current market
price;
o at fixed prices, which may be changed; or
o in privately-negotiated transactions.
A selling stockholder or a pledgee, donee, transferee or other
successor-in-interest who receives shares offered by this prospectus from a
selling stockholder, may sell the shares in one or more of the following types
of transactions:
o a block trade in which a broker-dealer engaged to sell shares may sell
all of such shares in one or more blocks as agent;
o a broker-dealer may purchase as principal and resell shares for its own
account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of the Amex or a
quotation system;
o upon the exercise of options written relating to the shares;
o ordinary brokerage transactions or transactions in which the broker
solicits purchasers;
o a privately-negotiated transaction; and
o any combination of the foregoing or any other available means allowable
under law.
From time to time, a selling stockholder may transfer, pledge, donate
or assign its shares to lenders or others and each of those persons will be
deemed to be a "selling stockholder" for purposes of this prospectus. The number
of shares beneficially owned by a selling stockholder may decrease as, when and
if he takes such actions. The plan of distribution for the selling stockholder's
shares sold under this prospectus will otherwise remain unchanged, except that
the
31
transferees, pledgees, donees or other successors will be a selling stockholder
under this prospectus.
A selling stockholder may enter into hedging, derivative or short sale
transactions with broker-dealers in connection with sales or distributions of
the shares being offered by this prospectus or otherwise. In these transactions,
broker-dealers may engage in short sales of the shares in the course of hedging
the positions they assume with the selling stockholder. A selling stockholder
also may sell shares short and redeliver the shares to close out short positions
and engage in derivative or hedging transactions. A selling stockholder may
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the shares. The broker-dealer may then resell
or otherwise transfer the shares under this prospectus. A selling stockholder
also may loan or pledge the shares to a broker-dealer. The broker-dealer may
sell the loaned shares or upon a default the broker-dealer may sell the pledged
shares under this prospectus.
Selling through Broker-Dealers
A selling stockholder may select broker-dealers to sell its shares.
Broker-dealers so engaged may arrange for other broker-dealers, commissions or
discounts or concessions in amounts to be negotiated immediately before any
sale. In connection with such sales, these broker-dealers, any other
participating broker-dealers, and a selling stockholder and certain pledgees,
donees, transferees and other successors-in-interest, may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, as amended (the "Securities Act") in connection with the sale of the
shares. Accordingly, any such commission, discount or concession received by
them and any profit on the resale of the shares purchased by them may be deemed
to be underwriting discounts or commissions under the Securities Act. Because a
selling stockholder may be deemed to be an "underwriter" within the meaning of
Section 2(11) of the Securities Act, the selling stockholder will be subject to
the prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than under this
prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sales of the shares covered by this prospectus.
32
LEGAL MATTERS
Reitler Brown & Rosenblatt LLC, New York, New York, as counsel to the
Company will pass upon whether the shares of Common Stock which are being
registered under the Securities Act of 1933, as amended, by the Registration
Statement of which this prospectus is a part are fully paid, nonassessable and
legally issued.
EXPERTS
Our consolidated financial statements as of March 31, 2004 and March
31, 2003 and for the years ended March 31, 2004, 2003 and March 31, 2002,
incorporated by reference in this prospectus, have been audited by Miller, Ellin
& Company, LLP, New York, New York, independent certified public accountants, as
indicated in its report with respect thereto, and is incorporated by reference
in this prospectus in reliance upon its report given upon the authority of said
firm as experts in accounting and auditing.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows us to incorporate by
reference the information that we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference into this registration statement is
considered to be part of this registration statement, and information that we
file later with the Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the Commission under Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act:
a. our annual report on Form 10-K for the year ended March 31, 2004,
filed with the Commission on June 29, 2004;
b. our current reports on Form 8-K, dated April 2, 2004, April 16,
2004, May 5, 2004 and May 14, 2004; and
c. our definitive proxy statement, in Schedule 14A dated May 13,
2004, filed with the Commission on May 19, 2004 with respect to
our Annual Meeting of the Stockholders held on June 22, 2004.
33
You may request a copy of these filings, at no cost, by written or oral
request to us at the following address:
Mark I. Gittelman
Corporate Secretary
Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
(201) 750-2646
No person has been authorized to give any information or to make any
representation other than those contained in this prospectus in connection with
the offering of the shares of our Common Stock by the selling stockholders. If
information or representations other than those contained in this prospectus are
given or made you must not rely on it as if we authorized it. Neither the
delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that the information contained or
incorporated by reference herein is correct as of any time subsequent to its
date or that there has been no change in our affairs since such date. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities offered hereby in any jurisdiction in which such offer or
solicitation is not permitted, or to anyone whom it is unlawful to make such
offer or solicitation. The information in this prospectus is not complete and
may be changed.
34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the estimated expenses incurred by Elite
Pharmaceuticals, Inc. in connection with the distribution of the securities
registered under this registration statement:
AMOUNT
TO BE PAID *
----------
SEC Registration Fee.............................. $ 638.56
Legal Fees and Expenses........................... $20,000.00
Accounting Fees and Expenses...................... $ 1,000.00
Printing Expenses..................................$ 2,000.00
Miscellaneous......................................$ 2,000.00
----------
Total..............................................$25,638.56
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to authority conferred by Section 102 of the Delaware General
Corporation Law (the "DGCL"), Elite's Certificate of Incorporation, as amended,
contains a provision providing that the personal liability of a director is
eliminated to the fullest extent provided by the DGCL. The effect of this
provision is that no director of Elite is personally liable to Elite or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for (i) any breach of the director's duty of loyalty to
Elite or its stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) unlawful
payment of dividends as provided in Section 174 of the DGCL and (iv) any
transaction from which the director derived an improper personal benefit. This
provision is intended to eliminate the risk that a director might incur personal
liability to Elite or its stockholders for breach of duty of care. The
Certificate of Incorporation, as amended, also provides that if the Delaware Law
is amended to eliminate or limit further the liability of directors, then the
liability of a director of Elite shall be eliminated or limited, without further
stockholder action.
Section 145 of the DGCL contains provisions permitting and, in some
situations, requiring Delaware corporations, such as Elite, to provide
indemnification to their officers and directors for losses and litigation
expenses incurred in connection with their service to the
II-1
corporation in those capacities. The by-laws of Elite contain such a provision
requiring that we indemnify our directors and officers to the fullest extent
permitted by law, as the law may be amended from time to time.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, it has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ITEM 16. EXHIBITS
4.1 Certificate of Incorporation, together with all amendments thereto,
incorporated by reference to Exhibit 4.1 to the Registration Statement
on Form S-4, Registration No. 333-101686 filed with the Commission on
December 6, 2002
4.2 By-laws of Elite, as amended. Incorporated by reference to Exhibit 3.1
to Elite's Registration Statement on Form SB-2, Registration No.
333-90633, made effective on February 28, 2000.
4.3 Form of certificate representing shares of Elite's Common Stock.
Incorporated by reference to Exhibit 4.1 to Elite's Registration
Statement on Form SB-2, Registration No. 333-90633, made effective on
February 28, 2000.
4.4 Form of Common Stock Purchase Warrant issued to Montauk Financial Group
and its associates.**
5.1 Opinion of Reitler Brown & Rosenblatt LLC**
10.1 Settlement Agreement and Mutual Release in action of Atul M. Mehta,
Ph.D. v. Elite Pharmaceuticals, Inc., Elite Laboratories, Inc. and John
Moore, dated as of April 21, 2004.**
10.2 Employment Agreement dated July 23, 2003 between Company and Bernard
Berk incorporated by reference to Exhibit 10.9 to Elite's Report on
Form 10-Q for the three months ended June 30, 2003.**
23.1 Consent of Miller, Ellin & Company LLP*
23.2 Consent of KPMG*
23.3 Consent of Reitler Brown & Rosenblatt LLC (included in Exhibit 5.1
above)
24.1 Power of Attorney (included on Signature page).
---------------
* Filed with this Amendment No.1.
** Filed as an exhibit to the Form S-3 filed with the Commission on June 10,
2004.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective
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date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of the securities offered would not exceed that which was
registered) may be reflected in the form of prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424(b) if the change in volume
represents no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(B) INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE
SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING
PERSONS OF THE REGISTRANT PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE,
THE REGISTRANT HAS BEEN ADVISED THAT IN THE OPINION OF THE SECURITIES AND
EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED
IN THE SECURITIES ACT OF 1933 AND IS, THEREFORE, UNENFORCEABLE. IN THE EVENT
THAT A CLAIM FOR INDEMNIFICATION AGAINST SUCH LIABILITIES (OTHER THAN THE
PAYMENT BY THE REGISTRANT OF EXPENSES INCURRED OR PAID BY A DIRECTOR, OFFICER OR
CONTROLLING PERSON OF THE REGISTRANT IN THE SUCCESSFUL DEFENSE OF ANY ACTION,
SUIT OR PROCEEDING) IS ASSERTED AGAINST THE REGISTRANT BY SUCH DIRECTOR, OFFICER
OR CONTROLLING PERSON IN CONNECTION WITH THE SECURITIES BEING REGISTERED, THE
REGISTRANT WILL, UNLESS IN THE OPINION OF ITS COUNSEL THE MATTER HAS BEEN
SETTLED BY CONTROLLING PRECEDENT, SUBMIT TO A COURT OF APPROPRIATE
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JURISDICTION THE QUESTION WHETHER SUCH INDEMNIFICATION BY IT IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE SECURITIES ACT OF 1933 AND WILL BE GOVERNED BY THE
FINAL ADJUDICATION OF SUCH ISSUE.
(c)(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(b) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Borough of Northvale, State of
New Jersey, on June 30, 2004.
ELITE PHARMACEUTICALS, INC.
/s/ Bernard Berk
-------------------------------------
Bernard Berk
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Bernard Berk and Mark I. Gittelman as his
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
and file Registration Statement(s) and any and all pre- or post-effective
amendments to such Registration Statement(s), with all exhibits thereto and
hereto, and other documents with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Dated: June 30, 2004 /s/ Bernard Berk
---------------------------------
Bernard Berk
Chief Executive Officer and
Chairman of the Board of Directors
Dated: June 30, 2004 /s/ Mark I. Gittleman
---------------------------------
Mark I. Gittelman
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Dated: June 30, 2004 /s/ John A. Moore
---------------------------------
John A. Moore
Director
/s/ Eric L. Sichel
Dated: June 30, 2004 ----------------------------------
Eric L. Sichel
Director
Dated: June 30, 2004 /s/ Harmon Aronson
----------------------------------
Harmon Aronson
Director
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