Georgi Kamburov

Elite Pharmaceuticals Inc (OTCMKTS:ELTP) Corrects

by Georgi Kamburov July 14, 2016

With the start of July the stock of Elite Pharmaceuticals Inc (OTCMKTS:ELTP, ELTP message board) went on and formed a rather impressive uptrend of 7 sessions with just a single one of them ending in the red. At the end of Tuesday's trading the company had climbed to a close at 38 cents per share. Yesterday, however, ELTP lost its momentum and suffered a rather painful drop that erased a lot of its recent gains. The stock crashed by more than 10% and finished the day at $0.34, which was just above the intraday low for the session.

We have often stated that ELTP's financials set them apart from the majority of the other pennystocks and taking a look at the latest annual report makes that rather clear. As of March 31, 2016, the company had:

• $11.5 million cash
• $16.7 million total current assets
• $4.65 million total current liabilities
• $12.5 million total revenues
• $683 thousand net loss

Compared to what the company had at the end of its previous fiscal year the balance sheet shows a lot of improvement with the revenues growing by 150% while the cash position is up by $4 million.

However, there are some serious red flags that must not be overlooked when deciding whether to put any money into the stock or not. ELTP has been issuing sizable amounts of shares under its Purchase Agreement with Lincoln Park Capital Fund, LLC. During the twelve months covered by the report 24 million shares were sold to Lincoln Park at $0.26 each while between March 31 and June 7 this year ELTP sold another 5.5 million shares. Today the S-1 filing for the registration of 63 million shares for resale by Lincoln Park became effective.

Then there are the millions of shares that saw the light of day through the exercise of warrants. According to the subsequent events section of the annual report ELTP issued 9.3 million shares as exercise of cash warrants for total proceeds of $600 thousand, making the average price of each share just $0.065.

Today is the action date set by the U.S. Food and Drug Administration under the Prescription Drug User Fee Act (PDUFA) and the decision about ELTP's opioid abuse-deterrent candidate, SequestOx, will undoubtedly have a massive impact on the performance of the stock.

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