Elite Pharmaceuticals Inc (ELTP)

[WeeZuhl]

Couch, don't forget about the bond issue.

Management used proceeds from generic drug sales to retire some of the NJ bonds and get current on all the rest. This led to removal of the "Going Concern" language from the auditors. This move did not buy an ounce of API, pay for any equipment, or fund any study. But it was a critical step in proving the health of the company and will allow for a stronger negotiating position with any potential suppliers and partners. It will attract more investors, and eventually allow for uplisting to NASDAQ.



http://www.elitepharma.com/press-releases/elite-pharmaceuticals-inc-reports-financial-results-for-the-second-quarter-of-fiscal-year-2015/

ELITE PHARMACEUTICALS, INC. REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL YEAR 2015
Posted on November 14, 2014
Revenues increase by 8%

...

During the quarter, Elite also retired the NJEDA Series B 9% bonds and became current with all NJEDA Series A bonds monetary obligations.

...

http://seekingalpha.com/article/2696615-elite-pharmaceuticals-eltp-ceo-nasrat-hakim-on-q2-2015-results-earnings-call-transcript

Carter Ward:

During this quarter we finally cured the long standing bond default. We retired the Series B which we had a 9% interest rate and we caught up on all payments that were due on the Series A 6.5% bonds. That was a total of $1.1 million paid to the bonds to bring us current during the quarter. Now these payments have resulted in a number of positive effects for the company. First, we’ve cured the monetary default which had been hanging over us for almost six years. This removes a major threat to the company’s ability to operate as a growing concern.

Second, the removal of the monetary default has been positive with respect to the management of our supply chain function. We now qualify for credit terms from vendors which had previously required advanced payments. Now may not sound like much, but these are the things that facilitate greater efficiencies and help support our growth. As we are growing it’s important that we continue to improve our operations and this is something that definitely helps in that regard.

Third, we now have a clean opinion from our auditors. In the past the bond situation resulted in a going concern qualification. Getting a clean opinion has had a positive effect with regards to our access to infrastructure financing at competitive rates, which we now able to get. And lastly we retired $0.25 million that was costing us 8% and $900,000 that was at 6.5% interest. That’s money which we can now invest in Elite as opposed to paying it out in interest.

In addition to these benefits curing the default means we can now allocate the remaining bond liability between current and long-term portions on our balance sheet. So an accounting entry that results in almost $3.2 million being moved from current liabilities to long-term liabilities. Better said, this results in $3.2 million increase in working capital. While it’s just a balance sheet re-class it’s an important one when it’s viewed by our vendors and our banks. So this is a re-class that has had quite a positive effect with regards to supporting continued growth in the company.