ELITE PHARMACEUTICALS INC /DE/ - 10-K Annual Report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: March 31, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 333-45241

ELITE PHARMACEUTICALS, INC.
(Name of small business issuer in its charter)

Delaware		22-3542636
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
165 Ludlow Avenue, Northvale, New Jersey		07647
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number: (201) 750-2646

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class		Name of each exchange on which registered

	Common stock		American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

(Title of Class)

(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the closing sale price of that portion of the common equity that is publicly trated as of May 21, 2002 is $37,072,520.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

The number of shares outstanding of each of the issuers classes of common equity, as of May 21, 2002 is 9,725,736 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

List here the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; (3) any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for information purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). N/A

This Annual Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Annual Report which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as the attainment of pharmaceutical development milestones or the receipt of regulatory approval or the entering into of licensing or partnership arrangements and other similar matters, are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially from the Company's expectations, including the risk factors discussed below and elsewhere in this Annual Report and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this Annual Report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. The Company assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.

Elite Pharmaceuticals, Inc. (“EPI”), the registrant, is the sole owner of the Class A common voting stock of Elite Laboratories, Inc. (“ELI”). EPI and ELI may be referred to collectively in this report as “Elite” or “the Company”.

EPI was incorporated in the State of Delaware on October 1, 1997. EPI's predecessor, Prologica International, Inc. (“Prologica”), was incorporated in the State of Pennsylvania on April 20, 1984. From the time of its incorporation, and the completion of its initial public offering in August 1998, until the date of its merger with EPI, Prologica engaged in no business other than searching for suitable acquisitions. Except for ELI, it located no such acquisitions. EPI was incorporated for the purpose of merging with Prologica in order to change the name and state of incorporation

of Prologica. EPI survived the merger with Prologica; Prologica ceased to exist at the time of the merger on October 24, 1997. Contemporaneous with the merger of EPI and Prologica, ELI (the business of which is described below) merged with a wholly owned subsidiary of Prologica, HMF Enterprises, Inc. (“HMF”). HMF was incorporated on August 1, 1997 for the purpose of providing a vehicle into which ELI could merge. ELI and HMF merged on October 30, 1997. ELI survived the merger with HMF and HMF ceased to exist subsequent to the merger. The net result of the two mergers is that Prologica and HMF ceased to exist, and EPI at that time owned one hundred percent of the stock of ELI. Such stock ownership is EPI's sole business. At the present time, EPI has no plans to conduct any other business apart from the ownership of ELI.

ELI was incorporated in the State of Delaware on August 23, 1990. On October 30, 1997, one hundred percent of the stock of ELI was acquired by EPI via the merger between ELI and HMF. With that exception, no acquisition or disposition of any material assets, nor any material changes in the method of conducting business have incurred since its incorporation.

EPI, through its wholly-owned subsidiary ELI, primarily engages in researching, developing, licensing, manufacturing, and marketing proprietary drug delivery systems and products. ELI's drug delivery technology involves releasing a drug into the bloodstream or delivering it to a target site in the body over an extended period of time or at predetermined times. Such products are designed to allow drugs to be administered less frequently, with reduced side effects and, in certain circumstances, in reduced dosages. ELI has concentrated on developing orally administered controlled release products. ELI primarily develops controlled release versions of various drugs as depicted in the table below. The products include drugs which provide therapeutic benefits for angina and hypertension, a nonsteroidal analgesic drug, and one which appears to lower blood glucose by stimulating insulin from the pancreas. None of these products have yet been approved by the Food and Drug Administration (“FDA”), and Elite therefore does not yet market any products. ELI is currently developing and testing products which are at different stages of development, as depicted in the table below.

The following table provides information concerning a majority of the controlled release products under development by the Company.

Product

Brand

Brand Annual
Sales
(Millions)

Indication

NDA/
ANDA

Partner

Competition

(1)

Glucolite CR

Glucotrol XL

$300+

Diabetes

ANDA

Under negotiation

One filed for 10mg

(2)

ELI 2

Undisclosed

$120+

Infection

ANDA

Self

None

(3)

ELI 3

None

$200+
estimated

Chrono Delivery

NDA
For once
a day

Identified

Verelan PM,
Covera HS,
Cardizem XL
(awaiting approval)

(4)

ELI 4

Undisclosed

$1,500+

CNS

NDA
For once
a day

TBD

Brand twice
a day

(5)

ELR 5

Undisclosed

$900+

Pain

NDA
For once
a day

Elan

Brand twice
a day

(6)

ERL 6

Undisclosed

$700+

CNS

NDA or
ANDA
For once
a day

Elan

Brand

(7)

EC 7

None

N/A

Allergy

NDA
For once
a day

Yes

None

(8)

EC 8

None

N/A

Allergy/
Decongestant

NDA
For once
a day

Yes

None

(9)

Methylphenidate
(pulse dose)

Concerta
Ritalin LA

N/A

ADHD

NDA

Assigned to
Celgene/
Novartis

Concerta
Ritalin LA

(10)

Diclofelite CR
(diclofenac)

Voltaren XR

$100

Arthritis

NDA
For once
a day

TBD

Brand

(11)

ELI 11

Undisclosed

$50+

CNS

ANDA

TBD

No generics

(12)

ELI 12

Undisclosed

$500+

Infection

ANDA

TBD

No generics

(13)

ELI 13

Undisclosed

N/A

Hypertension
Angina

NDA
For once
a day

Identified -
Under
negotiation

One

(14)

ELI 14

Undisclosed

N/A

Hypertension
Angina

NDA
For once
a day

Identified -
Under
negotiation

None

(15)

Diltilite CD
(diltiazem)

Cardizem CD

$765

Hypertension
Angina

ANDA

Self

3 generics

(16)

Ketolite CR
(ketoprofen)

Oruvail

$60

Arthritis

ANDA

Self

One

(17)

Nifelite CR
(nifedipne)

Procardia XL
Adalat CC

$200+

Hypertension
Angina

NDA
For once a day

TBD

Two generics
Two brands

ELI (X) a indicates an internal product number for a product, the identity of which should not be described for competitive reasons; ERL (x) means product being developed by the joint venture and the identity of which is not described due to competitive reasons; and, EC (X) means products being developed for a partner, the

identity of which is not described due to contractual obligations and/or competitive reasons.

CNS means central nervous system disorder, and ADHD means Attention Deficit Hyperactive Disorder.

“TBD” means to be determined, and “Identified” means that the identity of the partner is not disclosed due to contractual restraints.

Patents have been issued on products number 9 and number 17. The Company has filed or anticipates filing patent applications on most of the remaining products.

NOTE: It is the general policy of the Company not to disclose products in its development pipeline or the status of such products until a product reaches an appropriate stage, for competitive reasons, and because the disclosure of such information may cause people to infer the occurrence of future matters or events that may not occur. In this instance, it was believed that disclosure of the information in the foregoing table would be helpful to persons in better understanding the general nature, orientation and activity of the Company, and the disclosures are made for such purpose. No inference should be made as to the occurrence of matters or events not specifically described. The Company may or may not disclose such information in the future based on competitive reasons and/or contractual obligations. Meanwhile, it is believed that the information is helpful on a one-time basis for the purpose described above.

The following table presents information with respect the development stage of the principal products under development by the Company. Completion of development of products by the Company depends on a number of factors, and there can be no assurance that specific time frames will be met during the development process or that the development of any particular products will be continued.

GMP means good manufacturing practices per Food and Drug Administration regulations.

Additionally, the NDA filings contemplated by the Company would be under Sections 505 (b)(1) or 505 (b)(2), which does not require certain studies that would otherwise be necessary; accordingly, the development timetable would be shorter.

Controlled 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. Its 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.

ELI spent approximately $1,475,487 in the fiscal year ended March 31, 2001, and $1,609,108 in the fiscal year ended March 31, 2002 on research and development activities.

The Company has acquired pharmaceutical manufacturing equipment with the intention of eventually manufacturing products developed by ELI as well as manufacturing products on a contract basis. The Company has registered its facilities with the FDA and the Drug Enforcement Agency (DEA).

In October 2000, the Company entered into a Joint Development and Operating Agreement with Elan Corporation, plc and Elan International Services, Ltd. (together “Elan”) to develop products using drug delivery technologies and expertise of both companies. This joint venture, Elite Research, Ltd. (“ERL”), a Bermuda corporation, is initially owned 80.1% by the Company and 19.9% by Elan. ERL will fund its research through capital contributions from its partners based on the partners' ownership percentage. ERL will subcontract research and development projects to the Company, Elan and others. The first product developed by ELI for the joint venture has successfully completed Phase I testing. The parties have commenced development activities with regard to two other products. As a part of the transaction, Elan was issued 12,015 shares of class A preferred stock of ELI and 454,000 shares of class B preferred stock of ELI. Both classes of ELI stock issued to Elan are non-voting except on the following issues: (a) amendment of certificate of incorporation in a manner that would adversely affect the rights of the shareholders holding the class of stock or (b) any change in the rights of the class of stock.

ELI competes in two related but distinct markets: It performs contract research and development work regarding controlled-release drug technology for other pharmaceutical companies, and it seeks to develop and market (either on its own or by licensure to other companies) proprietary controlled-release pharmaceutical products. In both arenas, Elite's competition consists of those companies which are perceived to be able to develop controlled-release drugs.

In recent years, an increasing number of pharmaceutical companies have become interested in the development and commercialization of products incorporating

advanced or novel drug delivery systems. The Company expects that competition in the field of drug delivery will significantly increase in the future since smaller specialized research and development companies are beginning 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 these companies have greater financial and other resources as well as more experience than the Company in commercializing pharmaceutical products. A comparatively small number of companies have a track record of success in developing controlled-release drugs. Significant among these are Alza Corporation, Andrx, Elan Corporation, Biovail Corporation, Ethypharm, Eurand, Faulding, Impax, KV Pharmaceutical, Penwest and Skyepharma. Each of these companies have developed expertise in certain types of drug delivery systems, although such expertise does not carry over to developing a controlled-release version of all drugs. Such companies may develop new drug formulations and products or may improve existing drug formulations and products more efficiently than the Company. While the Company's product development capabilities and patent protection may help the Company to maintain its market position in the field of advanced drug delivery, there can be no assurance that others will not be able to develop such capabilities or alternative technologies outside the scope of the Company's patents if any, or that even if patent protection is obtained, such patents will not be successfully challenged in the future. In addition, it must be noted that almost all of the Company's competitors have vastly greater resources than the Company.

ELI has received Notices of Allowance from the U.S. Patent and Trademark Office granting trademark protection for the following trademarks: Albulite CR, Nifelite CR, Diltilite CD, Ketolite CR, Verelite CR and Glucolite CR.

On February 16, 1999, Dr. Atul Mehta was awarded a patent on a controlled-release formulation of nifedipine (U.S. Patent No. 5,871,776). The United States market for controlled-release nifedipine is approximately one billion dollars. On May 11, 1999, Dr. Mehta was awarded a patent for method of preparation of controlled release nefedipine formulations (U.S. Patent No. 5,902,632). The Company is the beneficial owner of these patents, and these patents have been transferred by Dr. Mehta to the Company. On November 18, 1998, Dr. Mehta with two co-inventors was awarded a patent for the pulsed-release delivery system for methylphenidate (U.S. Patent No. 5,837,284). This latter patent was assigned to Celgene Corporation. This patent has subsequently been licensed by Celgene Corporation to Novartis. The Company owns certain manufacturing rights for methylphenidate. The Company licensed from Celgene Corporation rights for the pulsed-release technology with regard to all non-methylphenidate drugs.

The Company has filed applications for two U.S. patents relating to formulations designed for chrono delivery and formulations for delayed and sustained release of drugs.

The Company intends to apply for patents for other products in the future; however, there can be no assurance that these or any future patents will be granted. The Company believes that future patent protection of its technologies and processes and of its products may be important to its operations. The success of the Company's products may depend, in part, upon the Company's ability to obtain strong patent protection. There can be no assurance, however, that these patents, if issued, or any additional patents will prevent other companies from developing similar or functionally equivalent dosage forms of products. Furthermore, there can be no assurance that (i) any additional patents will be issued to the Company in any or all appropriate jurisdictions, (ii) the Company's patents will not be successfully challenged in the future, (iii) the Company's processes or products do not infringe upon the patents of third parties or (iv) the scope and validity of the Company's patents will prevent third parties from developing similar products. Although a patent has a statutory presumption of validity in the United States, there can be no assurance that patents issued covering the Company's technologies will not be infringed or successfully avoided through design innovation or by the challenge of that presumption of validity. Finally, there can be no assurance that products utilizing the Company's technologies, if and when issued, will not infringe patents or other rights of third parties. It is also possible that third parties will obtain patents or other proprietary rights that might be necessary or useful to the Company. In cases where third parties are first to invent a particular product or technology, it is possible that those parties will obtain patents that will be sufficiently broad so as to prevent the Company from using such technology or from marketing such products.

Patents and other proprietary rights are important to the Company's business. It is the Company's policy to seek patent protection for its inventions, and also to rely upon trade secrets, know-how, continuing technological innovations, and licensing opportunities to develop and maintain its competitive position. In addition, the Company consistently enters into confidentiality agreements with its employees and business partners.

Prior to the enactment in the United States of new laws adopting certain changes mandated by the General Agreement on Tariffs and Trade ("GATT"), the exclusive rights afforded by a U.S. Patent were for a period of 17 years measured from the date of grant. Under these new laws, the term of any U.S. Patent granted on an application filed subsequent to June 8, 1995, would terminate 20 years from the date on which the patent application was filed in the United States or the first priority date, whichever occurs first. Future patents granted on an application filed before June 8, 1995, will have a term that terminates 20 years from such date, or 17 years from the date of grant, whichever date is later.

Under the Drug Price Competition and Patent Term Restoration Act of 1984, a U.S. Product patent or use patent may be extended for up to five years under certain circumstances to compensate the patent holder for the time required for FDA regulatory review of the product. The benefits of this act are available only to the first approved use of the active ingredient in the drug product and may be applied only to one patent

per drug product. There can be no assurance that the Company will be able to take advantage of this law.

The Company's success will depend, in part, on its ability to obtain and enforce patents, protect trade secrets, obtain licenses to technology owned by third parties when necessary, and conduct its business without infringing the proprietary rights of others. The patent positions of pharmaceutical and biotechnology firms, including the Company, can be uncertain and involve complex legal and factual questions. In addition, the coverage sought in a patent application can be significantly reduced before the patent is issued.

Consequently, the Company does not know whether any of its pending applications will result in the issuance of patents or, if any patents are issued, whether they will provide significant proprietary protection or commercial advantage, or will be circumvented by others. Since patent applications in the United States are maintained in secrecy until patents issue, and since publication of discoveries in the scientific or patent literature often lag behind actual discoveries, the Company cannot be certain that it was the first to make the inventions covered by each of its pending patent applications, or that it was the first to file patent applications for such inventions. In the event a third party has also filed a patent for any of its inventions, the Company may have to participate in interference proceedings declared by the United States Patent and Trademark Office to determine priority of invention, which could result in the loss of any opportunity to secure patent protection for the invention and the loss of any right to use the invention, and even if the eventual outcome is favorable to the Company, such interference proceedings could result in substantial cost to the Company. Protection of patent applications and litigation to establish the validity and scope of patents, to assert patent infringement claims against others and to defend against patent infringement claims by others can be expensive and time-consuming. There can be no assurance that in the event that any claims with respect to any of the Company's patents, if issued, are challenged by one or more third parties, that any court or patent authority ruling on such challenge will determine that such patent claims are valid and enforceable. An adverse outcome in such litigation could cause the Company to lose exclusivity relating to such patent claims. If a third party is found to have rights covering products or processes used by the Company, then the Company could be forced to cease using the technologies covered by the disputed rights, could be subject to significant liabilities to such third party, and could be required to license technologies from such third party.

Also, different countries have different procedures for obtaining patents, and patents issued by different countries provide different degrees of protection against the use of a patented invention by others. There can be no assurance, therefore, that the issuance to the Company in one country of a patent covering an invention will be followed by the issuance in other countries of patents covering the same invention, or that any judicial interpretation of the validity, enforceability, or scope of the claims in a patent issued in one country will be similar to the judicial interpretation given to a corresponding patent issued in another country. Furthermore, even if the Company's patents are determined to be valid, enforceable, and broad in scope, there can be no

assurance that competitors will not be able to design around such patents and compete with the Company using the resulting alternative technology.

The Company also relies upon unpatented proprietary and trade secret technology that it seeks to protect, in part, by confidentiality agreements with its collaborative partners, employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors. There can be no assurance that these agreements provide meaningful protection or that they will not be breached, that the Company would have adequate remedies for any such breach, or that the Company's trade secrets, proprietary know-how, and technological advances will not otherwise become known to others. In addition, there can be no assurance that, despite precautions taken by the Company, others have not and will not obtain access to the Company's proprietary technology.

The design, development and marketing of pharmaceutical compounds, on which the Company's success depends, are intensely regulated by governmental regulatory agencies, including the Food and Drug Administration (the “FDA”). Non-compliance with applicable requirements can result in fines and other judicially imposed sanctions, including product seizures, injunction actions and criminal prosecution based on products or manufacturing practices that violate statutory requirements. In addition, administrative remedies can involve voluntary withdrawal of products, as well as the refusal of the Government to enter into supply contracts or to approve abbreviated new drug applications (“ANDAs”) and new drug applications (“NDAs”). The FDA also has the authority to withdraw approval of drugs in accordance with statutory due process procedures.

Before a drug may be marketed, it must be approved by the FDA. FDA approval procedure for an ANDA relies on bio-equivalency tests which compare the applicant's drug with an already approved reference drug, rather than with clinical studies. Because ELI has concentrated, during the first few years of its business operations, on developing products which are intended to be bio-equivalent to existing controlled-release formulations, the Company expects that such drug products will require ANDA filings.

The FDA approval procedure for an NDA is generally a two-step process. During the Initial Product Development stage, an investigational new drug (“IND”) for each product is filed with the FDA. A 30-day waiting period after the filing of each IND is required by the FDA prior to the commencement of initial (Phase I) clinical testing in healthy subjects. If the FDA does not comment on or question the IND within such 30-day period, initial clinical studies may begin. If, however, the FDA has comments or questions, the questions must be answered to the satisfaction of the FDA before initial clinical testing can begin. In some instances this process could result in substantial delay and expense. Phase I studies are intended to demonstrate the functional characteristics and safety of a product.

After Phase I testing, extensive efficacy and safety studies in patients must be conducted. After completion of the required clinical testing, an NDA is filed, and its approval, which is required for marketing in the United States, involves an extensive review process by the FDA. The NDA itself is a complicated and detailed document and must include the results of extensive clinical and other testing, the cost of which is substantial. However, the NDA filings contemplated by the Company would be made under Sections 505 (b)(1) or 505 (b)(2), which do not require certain studies that would otherwise be necessary; accordingly, the development timetable would be shorter. While the FDA is required to review applications within 180 days of their filing, in the process of reviewing applications, the FDA frequently requests that additional information be submitted and starts the 180-day regulatory review period anew when the requested additional information is submitted. The effect of such request and subsequent submission can significantly extend the time for the NDA review process. Until an NDA is actually approved, there can be no assurance that the information requested and submitted will be considered adequate by the FDA to justify approval. The packaging and labeling of all Company developed products are also subject to FDA regulation. It is impossible to anticipate the amount of time that will be needed to obtain FDA approval to market any product. The time to obtain FDA approval may range from approximately 12 to 24 months.

Whether or not FDA approval has been obtained, approval of the product by comparable regulatory authorities in any foreign country must be obtained prior to the commencement of marketing of the product in that country. All marketing in territories other than the United States shall be conducted through other pharmaceutical companies based in those countries. The approval procedure varies from country to country, can involve additional testing, and the time required may differ from that required for FDA approval. Although there are some procedures for unified filings for certain European countries, in general each country has its own procedures and requirements, many of which are time consuming and expensive. Thus, there can be substantial delays in obtaining required approvals from both the FDA and foreign regulatory authorities after the relevant applications are filed. After such approvals are obtained, further delays may be encountered before the products become commercially available.

All facilities and manufacturing techniques used for the manufacture of products for clinical use or for sale must be operated in conformity with Good Manufacturing Practice (“GMP”) regulations issued by the FDA. In the event the Company shall engage in manufacturing, it will be required to operate its facilities in accordance with GMP regulations. If the Company shall hire another company to perform contract manufacturing for it, it must take steps to ensure that its contractor's facilities conform to GMP regulations.

Under the Generic Drug Enforcement Act, ANDA applicants (including officers, directors and employees) who are convicted of a crime involving dishonest or fraudulent activity (even outside the FDA regulatory context) are subject to debarment. Debarment is disqualification from submitting or participating in the submission of future ANDAs for a period of years or permanently. The Generic Drug Enforcement Act also authorizes the FDA to refuse to accept ANDAs from any company which employs or

uses the services of a debarred individual. The Company does not believe that it receives any services from any debarred person.

The Company is governed by federal, state, and local laws of general applicability, such as laws relating to working conditions and environmental protection. The Company estimates that it spends approximately $3,000.00 per year in order to comply with applicable environmental laws. The Company is also licensed by, registered with, and subject to periodic inspection and regulation by the DEA and New Jersey state agencies, pursuant to federal and state legislation relating to drugs and narcotics. Certain drugs that the Company may develop in the future may be subject to regulation under the Controlled Substances Act and related Statutes. At such time as the Company begins manufacturing products, it may become subject to the Prescription Drug Marketing Act, which regulates wholesale distributors of prescription drugs.

The Company is not yet in the manufacturing phase of any product and therefore does not have a requirement for significant amounts of raw materials. It currently obtains what limited raw materials it needs from over twenty suppliers.

Each year, the Company has had some customers which have accounted for a large percentage of its sales. It is the intention of the Company to expand its business to service a greater number of customers at one time.

As of May 22, 2002, the Company had fourteen full-time employees and two part-time employees. Both full-time and part-time employees are engaged in administration, research and development. The Company believes its employee relations to be satisfactory. It is not a party to any labor agreements and none of its employees are represented by a labor union.

During each of the last two fiscal years, substantially all of the time of the Company has been spent on research and development activities. As previously stated, none of the products undergoing research and development have yet been approved by the FDA and, therefore, are not yet being marketed to customers.

The Company believes it is currently in substantial compliance with all federal, state and local environmental laws. The costs and effects of compliance with such laws is not material.

The Company owns real property and improvements, suitable for use as a laboratory and offices, located at 165 Ludlow Avenue, Northvale, New Jersey. It is intended that the property will be used for manufacturing in the future. The Company's operations are not dependent on any specific location. The real property and improvements of the Company are encumbered by a mortgage in favor of the New Jersey Economic Development Authority (NJEDA) as security for a loan through tax exempt bonds from the NJEDA to the Company. The mortgage document contains the customary provisions including, without limitation, the right of the mortgagee to foreclose upon default.

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 2002.

The common stock of the Company first began public trading on July 23, 1998. The stock was traded on the NASDAQ over-the-counter bulletin board under the symbol “ELIP.” On February 24, 2000, 13,912,856 shares of the Company's common stock (consisting of 8,560,355 shares issued and outstanding, 2,387,714 shares issuable upon exercise of options pursuant to the Company's 1997 Incentive Stock Option Plan, and 2,964,787 shares issuable upon exercise of warrants) were listed on

the American Stock Exchange. The Company's shares are now traded on that exchange under the symbol “ELI.”

The Company's Class A warrants are listed on the NASDAQ over-the-counter bulletin board under the symbol “ELIPZ.” The Company first began trading these warrants on September 11, 1998.

The common stock of EPI's predecessor, Prologica, was listed in the pink sheets, but no active trading occurred in those securities.

For each quarter within the two most recent fiscal years the high and low sales prices of the Company's common stock and the high and low bid for the Company's Class A warrants are as follows:

This information was obtained from Merrill Lynch & Co. The information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

As of May 22 , 2002, there were 82 holders of record of the Company's common stock, 23 holders of record of the Company's Class A warrants and 23 holders of record of the Company's Class B warrants. 6,471,033 (66.5%) of such shares and 1,188,430 (71.8%) of the Class A warrants are held by Cede & Company as nominee for the Depository Trust Company, and the Company believes such shares are held for the account of numerous other persons.

The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain any future earnings for funding growth and does not anticipate paying any cash dividends on its common stock in the foreseeable future.

The table below includes information as of the end of the most recently completed fiscal year of the Company for each category of equity compensation plan, as applicable.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	$363,100	$7.17	$886,900

Equity compensation plans not approved by security holders Total	None	None	None

Total	$363,100	$7.17	$886,900

The Company's Incentive Stock Option Plan (“Plan”), adopted in 1997, provides that 1,250,000 shares of the Company's common stock are subject to options to be granted under the Plan. If options granted under the Plan lapse without being exercised, other options may be granted covering the shares not purchased under such lapsed options. Options may be granted pursuant to the Plan to employees and officers of EPI or ELI. Members of the Board of Directors of the Company who are not officers of employees of the Company are not eligible to receive options under the Plan. The granting of options under the Plan shall be entirely discretionary. The exercise price of an option pursuant to the Plan shall not be less than 100% of the fair market value (to be determined by the board of directors of the Company in good faith) of the common stock at the time the option was granted; provided, an option granted to a person who, with his affiliates, directly or through other entities, owns more than 10% of the voting power of the Company's common voting stock (“a Substantial Shareholder”) shall have a exercise price not less than 110% of the fair market value of the Company's common stock at the time the option was granted. For any person, “Affiliates” shall mean that person's siblings, spouse, ancestors and lineal descendants. No person to whom options are granted pursuant to the Plan shall receive options first exercisable during any single calendar year for shares, the fair market value of which exceeds $100,000 (determined at the time the options are granted). Options issued pursuant to the Plan expire ten years from the date granted, except that options granted pursuant to the Plan to Substantial Shareholders expire five years from the date of grant (in either case, the “Expiration Date”). If, prior to the Expiration Date, (i) the employees employment with the Company ends for reasons other than death or retirement, any options shall terminate; (ii) the employees retire at normal retirement age or, with the consent of the Company, earlier on account of disability, the option shall expire at the end of three months after such retirement; (iii) the employee dies, his estate shall have six months to exercise the option, provided that the exercise period shall never extend beyond the Expiration Date.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

The Company has been developing over 15 oral controlled release pharmaceutical products which are at the varying stages of the development process and testing.

Elite Labs has also conducted several research and development projects on behalf of several large pharmaceuticals companies. These activities have generated only limited revenue for Elite Labs to date.

The Company has established a manufacturing facility in Northvale, NJ which is both FDA and DEA registered. This facility will allow the Company to make batches in sizes sufficient to file for FDA approval.

In October 2000, Elite entered into a joint development and operating agreement with Elan Corporation, plc, and Elan International Services, Ltd. (together “Elan”) to develop products using drug delivery technologies and expertise of both companies. This joint venture, Elite Research, Ltd. (“ERL”), a Bermuda corporation, is initially owned 80.1% by Elite and 19.9% by Elan. ERL will fund its research through capital contributions from its partners based on the partners' ownership percentage. ERL will subcontract research and development efforts to Elite, Elan and others. The in-vivo (pilot

bioavailability) has been completed on the first product formulated by Elite Labs. Elite has begun to develop formulations for the two additional products.

In June 2001, the Company entered into two separate and distinct development and license agreements with another U.S. pharmaceutical company to develop two products in exchange for development fees, certain payments, royalties and manufacturing rights. Elite has undertaken formulation development for these two products and has earned the development fees paid to date .

In September 2000, Elite received approval of its application to sell $4,872,267 in New Jersey Net Operating Tax Losses under the New Jersey Economic Development Agency's Technology Business Tax Certificate Program. The Company received $368,343 of proceeds from this sale.

In November 2001, Elite received approval of its application to sell an additional $1,822,929 in New Jersey Net Operating Tax Losses under the New Jersey Economic Development Agency's Technology Business Tax Certificate Program. The Company expects to receive $137,818. $71,741 was received during the quarter ending December 31, 2001.

In October 2001, the Company authorized the purchase of up to 100,000 shares of its common stock in the open market at the then prevailing market price on or before March 31, 2002. There has been no repurchases of any common stock during this period.

The Company plans to focus its efforts on the following areas: (i) to receive FDA approval for one or all of the oral controlled release pharmaceutical products already developed, either directly or through other companies; (ii) to commercially exploit these drugs either by licensure and the collection of royalties, or through the manufacturing of tablets and capsules using the formulations developed by the Company, and (iii) to continue the development of new products and the expansion of its licensing agreements with other pharmaceutical companies including contract research and development projects, joint ventures and other collaborations.

The Company has been issued three patents to date and has filed for two more patents. One of the patents has been assigned to Celgene who has now licensed it to Novartis.

Management's discussion addresses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the

reporting period. On an ongoing basis, management evaluates its estimates and judgment, including those related to bad debts, intangible assets, income taxes, workers compensation, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. The Company's most critical accounting policies include the recognition of revenue upon completion of certain phases of projects under research and development contracts. The Company also assesses a need for an allowance for doubtful accounts and determines a need for valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. The Company assesses the recoverability of long-lived assets and intangible assets whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company assesses its exposure to current commitments and contingencies. It should be noted that actual results may differ from these estimates under different assumptions or conditions.

Elite's revenues for the year ended March 31, 2002 were $1,197,507, an increase of $1,102,261, or approximately 1157%, over the comparable period of the prior year. Net revenues include research and development fees totaling $593,000 of which $550,000 was earned in conjunction with two separate and distinct development and licensing agreements with another pharmaceutical company, product formulation fees of $600,940 earned in conjunction with the Company's joint venture in ERL and $3,450 of consulting and testing fees. Comparable prior period revenues were $0, $80,931, and $14,314, respectively, for the above components that comprise total revenues.

General and administrative expenses for the year ended March 31, 2002 were $763,687, a decrease of $13,431, or approximately 1.7%, from the comparable period of the prior year. The decrease in general and administrative expenses was substantially due to a decrease in consulting fees. General and administrative expenses expressed as a percentage of revenues were approximately 64% for the year ended March 31, 2002 as compared to 816% for the comparable period of the prior year.

Research and development costs for the year ended March 31, 2002 were $1,609,108, an increase of $133,621, or approximately 9%, from the comparable period of the prior year. Research and development costs have increased as the Company has

undertaken certain biostudies that were not undertaken in the prior year. Research and development expenses expressed, as a percentage of revenues were 134% and 1549%, respectively, for the years ended March 31, 2002 and March 31, 2001. Elite's net loss for the year ended March 31, 2002 was $(1,774,527), as compared to $(13,964,981) for the comparable period of the prior year. The decrease in the net loss was primarily due to the decrease of $11,572,187 in equity loss of its 80.1% owned joint venture, which included a one time charge of $12,015,000 in the prior comparable period for the Company's share of the $15,000,000 payment to Elan for a technology license.

Elite's revenues for the year ended March 31, 2001 were $95,246, an increase of $84,931, or approximately 823%, over the comparable period of the prior year. Net revenues consisted of product formulation fees of $80,931 earned in conjunction with the Company's joint venture in ERL and $14,314 of consulting and test fees (compared with $10,312 of consulting and test fees for the comparable period of the prior year).

General and administrative expenses for the year ended March 31, 2001 were $777,118, a decrease of $207,618, or approximately 21% from the comparable period of the prior year. The decrease in general and administrative expenses was substantially due to a decrease in consulting fees. General and administrative expenses expressed as a percentage of revenues were approximately 816% for the year ended March 31, 2001 as compared to 9546% for the comparable period of the prior year.

Research and development costs for the year ended March 31, 2001, were $1,475,487, a decrease of $513,162, or approximately 26%, from the comparable period of the prior year. Research and development costs have declined, as the Company has not undertaken the kind of biostudies that were undertaken in the prior year.

Elite's net loss for year ended March 31, 2001 was $13,964,981, as compared to $2,976,392 for the comparable period of the prior year. The increase in the net loss was primarily due to $12,079,827 of equity in the loss of its 80.1% owned joint venture, ERL, partially offset by the $368,343 of income recognized in connection with the sale of New Jersey net operating tax losses. The $12,079,827 equity in the loss of ERL includes a one time charge of $12,015,000 for the Company's 80.1% share of the $15,000,000 payment to Elan for a technology license fee.

The Company's working capital (total current assets less total current liabilities), which was $7,373,673 as of March 31, 2001 decreased to $7,054,961 as of March 31, 2002. The Company's net loss from operations, increases in restricted cash, and purchases and deposits on property and equipment was offset by proceeds from the issuance of common stock and warrants and the bank note.

For the year ended March 31, 2002, the Company experienced negative cash flows from operations of $1,568,887 primarily due to the Company's net loss from operations of $1,442,207. For the year ended March 31, 2001, the Company experienced negative cash flows from operations of $1,905,984 primarily due to the Company's net loss from operations of $2,351,397.

Elite Research, Ltd. (ERL), a Bermuda corporation, was incorporated in October 2000. ERL, which is initially owned by Elite Pharmaceuticals, Inc. (80.1%) and by Elan Corporation, plc. and Elan International Services, Ltd. (19.9%), was organized to develop products using drug delivery technologies and expertise of both companies. ERL will fund its research through capital contributions based on the partners ownership percentages and will subcontract research development efforts to Elite, Elan, and others.

Research and development costs for the year ended March 31, 2002 of $600,940, were incurred on contracts with EPI. These costs increased by $520,009 or approximately 643% from the comparable period of the prior year. This is the result of ERL incurring costs associated with the later stages of formulation, development and testing of three products in the current period compared to one product in the previous comparable period.

General and administrative costs for the year ended March 31, 2002 were $13,997 compared to $0 for the comparable period of the prior year. This was the result of administrative expenses and the payment of a franchise tax imposed by Bermuda.

Licensing fees decreased in the current year. In the year ended March 31, 2001, ERL incurred a one time $15,000,000 payment to Elan for a technology license.

The working capital (total current assets less total current liabilities) of ERL, which was ($80,931) as of March 31, 2001 decreased to ($543,524) as of March 31, 2002. Capital contributions for research and development activities were more than offset by ERL's net loss from operations. In April 2002, additional contributions were funded by Elite and Elan in the amount of $254,000 and $78,791, respectively.

The Company does not invest in or own any market risk sensitive instruments entered into for trading purposes or for purposes other than trading purposes. All loans to the Company have been made at fixed interest rates; accordingly, the market risk to the Company prior to maturity is very minimal.

The information for this item is contained as an exhibit attached to this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There are no arrangements between any director or executive officer and any other person, pursuant to which the director or officer is to be selected as such. There is no family relationship between the directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.

Atul M. Mehta, Ph.D., the founder of ELI, has been a director of ELI since its inception in 1990 and a director of EPI since 1997. He has been employed as the President of ELI since 1990 and President of EPI since 1997. Prior to that, he was Vice President at Nortec Development Associates, a company specializing in the development of food, pharmaceutical and chemical specialty products, from 1984 to 1989. From 1981 to 1984, he was associated with Ayerst Laboratories, a division of American Home Products Corporation in the solids formulation section as Group Leader. His responsibilities included development of formulations of ethical drugs for conventional and controlled-release dosage forms for both USA and international

markets. He received his B.S. degree in Pharmacy with honors from Shivaji University, Kolhapur, India, and a BS, MS, and a Doctorate of Philosophy in Pharmaceutics from the University of Maryland in 1981. Other than ELI, no company with which Dr. Mehta was affiliated in the past was a parent, subsidiary or other affiliate of the Company.

Donald S. Pearson, a director since 1999, has been employed since 1997 as the President of Pearson & Associates, Inc., a company that provides consulting services to the pharmaceutical industry. Prior to starting Pearson & Associates, Mr. Pearson served for five years as the Director of Licensing at Elan Pharmaceuticals, and prior to that he was employed by Warner-Lambert for thirty years in various marketing, business development and licensing capacities. Mr. Pearson holds a B.S. in Chemistry from the University of Arkansas and studied steroid chemistry at St. John's University. He has served on the informal advisory board of ELI for several years; other than ELI, no company with which he was affiliated in the past was a parent, subsidiary or other affiliate of the Company.

Harmon Aronson, Ph.D., a director since 1999, 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 the 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 US Market. Prior to that, Dr. Aronson was employed by Biocraft Laboratories, a leading generic drug manufacturer, most recently in 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. Other than ELI, 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., a director since August 2, 2001, is President of Sichel Medical Ventures, Inc., Englewood, NJ, which company provides biotechnology company assessments and investment banking services. Dr. Sichel has been the owner and President of Sichel Medical Ventures, Inc. since 1997. From 1995 through 1996, Dr. Sichel was a senior analyst in the biotechnology field for Alex. Brown & Sons, Inc. of New York, NY. Prior to that, Dr. Sichel was affiliated with Sandoz Pharmaceuticals Corp. of East Hanover, NJ, in various capacities, including associate director of transplantation/immunology. Dr. Sichel is licensed to practice medicine in the State of New York.

Mark I. Gittelman 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"), the Securities and Exchange Practice Section of the AICPA, and the New Jersey State and New York States

Societies of CPAs. Other than ELI, no company with which Mr. Gittelman was affiliated in the past was a parent, subsidiary or other affiliate of the Company.

Each director holds office (subject to the By-Laws of EPI) until the next annual meeting of shareholders and until such director's successor has been elected and qualified. All executive officers of the Company 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 the directors and executive officers of the Company.

To the knowledge of the Company, there was no person who, at any time during the fiscal year ended March 31, 2002, was a director, officer, beneficial owner of more than 10% of any class of equity securities of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934, failed to file on a timely basis the reports required by Section 16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year. The Company became a reporting company, and reports to the Securities and Exchange Commission on Form 3, Form 4 and Form 5 became obligatory as of August 14, 1998. None of the officers, directors or holders of 10% or more of securities of the Company made a timely filing of Form 3. To the knowledge of the Company, all required reports on Form 3 have now been filed. To the knowledge of the Company, all required reports on Form 4 were filed late but have now been filed. To the knowledge of the Company, all filings for prior fiscal years required under Section 16(a) of said Act have been filed.

The following table provides information on the compensation of Dr. Atul M. Mehta, the chief executive officer of EPI for the last three fiscal years. No other executive officer of the Company received salary and bonus exceeding $100,000 during those periods.

(1) On December 15, 2000, Dr. Mehta surrendered options for 425,000 shares of the Company's common stock (exercisable at $7.00 per share) and in return received options for 425,000 shares of the Company's common stock exercisable on January 2, 2001 and expiring January 1, 2006. The exercise price is 110% of the opening price of the Company's common stock on January 2, 2001 adjusted upward to the nearest half dollar of $7.00. On January 2, 2001, the stock of the Company opened at $6.25 per share, therefore the exercise price for the stock subject to these options is $7.00 per share.

(2) By action on February 21, 2002, the Board corrected a clerical error in options for 425,000 shares of class A common stock of the Company previously 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.

The Company's fiscal year begins April 1 and ends March 31. The information is provided for each fiscal year beginning April 1.

Other Annual Compensation represents use of a company car and premiums paid by the Company for life insurance on Dr. Mehta's life for the benefit of his wife paid by the Company.

Reported below in this report is the purchase by the Company of options from Dr. Mehta. The purchase price for those options of $80,896 is included above in "Other Annual Compensation."

During the fiscal year, the Board of the Company authorized issuance to Dr. Mehta of options to acquire 50,000 shares of the common stock of the Company, vesting over a period of five years at the rate of 10,000 shares per year beginning February 21, 2003, exercisable at a price equal to 110% of the closing price of the stock on February 21, 2002 ($8.25 per share).

By action on January 25, 2001, the Board purchased options held by Dr. Mehta for 20,214 shares of the class A common stock of the Company at a price of $4.00 per share. The options carried an exercise price of $2.00 per share. The then current market price for the stock was in excess of $7.50. Dr. Mehta had intended to exercise the option for these shares and then sell the shares. The purchase price for the option

arrived at by the Board took into account the amount which would be necessary to purchase the options and cover taxes due Dr. Mehta on the transaction.

These options and the shares underlying them are unregistered, and their market value is unknown and incalculable. However, the registered common stock of the Company was trading for $6.15 per share as of the close of business on May 21, 2002. It is on this hypothetical value that the figures in column (e) are calculated. These figures may have no relation to the actual value of the unexercised options.

Options for 500,000 shares which were granted to Dr. Mehta during the fiscal year ended March 31, 2000 vest at the rate of 100,000 shares per year on each December 31 beginning December 31, 2001. The options expire on the earlier of (a) one year after Dr. Mehta ceases to be employed by EPI or to serve as an officer or director of EPI or (b) March 31, 2010. Notwithstanding, the options shall become fully vested and exercisable if Dr. Mehta's employment agreement or his position as an officer and director is terminated by the Company for any reason or if it expires as a result of the Company giving notice of nonrenewal. If the board of directors of the

Development Stage	Products	Comments	NDA/ANDA
Formulation Development	3	In progress
Phase I	4	Formulation developed Bioavailability studies	For NDA
Phase II	4	Phase I completed	For NDA
Pilot Biostudy	1	Bioequivalence Study	For ANDA
Pivotal Studies	2	Under evaluation	For ANDA
Scale Up	2	GMP	NDA and ANDA
NDA Filing	1	Through third party


	Common Stock					Warrants

		High		Low		High		Low

First Quarter		$	11.385	$	6.125	$	10.00	$	1.50

Second Quarter		$	12.188	$	6.875	$	6.50	$	2.25

Third Quarter		$	13.25	$	6.00	$	7.00	$	1.50

Fourth Quarter		$	8.625	$	6.063	$	4.00	$	1.375


	Common Stock					Warrants

		High		Low		High		Low

First Quarter		$	11.45	$	4.85	$	6.00	$	2.00

Second Quarter		$	11.50	$	5.10	$	6.21	$	1.40

Third Quarter		$	7.75	$	5.90	$	2.50	$	1.20

Fourth Quarter		$	8.30	$	5.60	$	2.25	$	0.86

		2002			2001			2000			1999			1998

Net Revenues	$	1,197,507		$	95,246		$	10,315		$	150,412		$	51,958

Net (loss)		(1,774,527	)		(13,964,981	)		(2,976,392	)		(1,661,881	)		(788,591	)

Net (loss) per common share		(0.19	)		(1.53	)		(0.35	)		(0.23	)		(0.13	)

Total Assets		12,724,498			12,350,301			9,162,383			3,076,582			5,179,119

Long-term obligations		3,788,148			2,765,000			2,885,000			---			---

Weighted average number of shares outstanding		9,561,299			9,135,369			8,287,648			7,237,613			5,858,238

		3-31-02			12-31-01			9-30-01			6-30-01

Net Revenues	$	260,949		$	473,597		$	387,163		$	75,798

Net (loss)	$	(715,162	)	$	(340,210	)	$	(272,173	)	$	(446,982	)

Net (loss) per common share	$	(0.08	)	$	(0.03	)	$	(0.03	)	$	(0.05	)

16


Weighted average shares Outstanding		9,662,001			9,631,601			9,543,526			9,408,593

		3-31-01			12-31-00			9-30-00			6-30-00

Net Revenues	$	86,465		$	8,781			---			---

Net (loss)	$	(616,034	)	$	(193,052	)	$	(12,566,324	)	$	(589,571	)

Net (loss) per common share	$	(0.06	)	$	(0.02	)	$	(1.41	)	$	(0.07	)

Weighted average shares outstanding		9,373,426			9,353,017			8,915,054			8,902,623

Name	Age	Position
Atul M. Mehta	53	President, Chief Executive Officer and Director
Donald S. Pearson	66	Director
Harmon Aronson	59	Director
Eric L. Sichel, M.D.	43	Director
Mark I. Gittelman	42	Secretary and Treasurer

		Individual Grants

(a)	(b)	(c)	(d)	(e)
Name	Number of Securities Underlying Options Granted	% Grant Represents of Options to Employees	Exercise or Base Price ($/sh)	Expiration Date

Atul M. Mehta	50,000	2.8%	$8.25	2-20-07

a	b	c	d	e
			No. of Securities Underlying Unexercised Options at FY-End	Value of Unexercised In-the-Money Options/ at FY-End

Name	Shares Acquired on Exercise	Value Realized	Exercisable/Unexcercisable	Exercisable/Unexercisable

Atul M. Mehta	None	$0	1,025,000/450,000	$2,120,000/0