UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED ~~DECEMBER 31, 2021~~SEPTEMBER 30, 2022

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

FOR THE TRANSITION PERIOD FROM _______________ TO _______________

COMMISSION FILE NUMBER: 001-15697

ELITE PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

nevada

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)

(~~(201)~~201) 750-2646

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.001 per share		ELTP		OTCQB

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

~~Title of each class~~		~~Trading Symbol~~		~~Name of each exchange on which registered~~
~~Common Stock, par value $0.001 per share~~		~~ELTP~~		~~OTCQB~~

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date: 1,014,015,081 shares of ~~1,011,381,988~~ Common Stock were issued, and ~~1,011,281,988~~ 1,013,915,081shares of Common Stock were outstanding as of ~~February11,~~November 14, 2022.

~~Table of Contents~~

		PAGE
PART I	FINANCIAL INFORMATION	F-1

ITEM 1.	Financial Statements	F-1
	Condensed Consolidated Balance Sheets as of ~~December31, 2021~~September 30, 2022 (Unaudited) and March 31, ~~2021 (Audited)~~2022	F-1
	Condensed Consolidated ~~Statement~~Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ (Unaudited)	F-2
	Condensed Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity for the Three and ~~Nine~~Six Months Ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ (Unaudited)	F-3
	Condensed Consolidated ~~Statement~~Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ (Unaudited)	~~F-5~~F-4
	Notes to the Unaudited Condensed Consolidated Financial Statements	~~F-6~~F-5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
ITEM 3.	Quantitative and Qualitative Disclosure About Market Risk	87
ITEM 4.	Controls and Procedures	87

PART II	OTHER INFORMATION	109

ITEM 1.	Legal Proceedings	109
ITEM 1A.	Risk Factors	109
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	109
ITEM 3.	Defaults Upon Senior Securities	109
ITEM 4.	Mine Safety Disclosures	109
ITEM 5.	Other Information	109
ITEM 6.	Exhibits	1110

SIGNATURES		1211

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

December 31, 2021 March 31, 2021
(Unaudited) (Audited)
ASSETS
Current assets:
Cash $ 7,288,456 $ 3,192,768
Accounts receivable, net of allowance for doubtful accounts of $-0-, respectively 2,661,413 3,496,376
Inventory 6,694,070 5,012,902
Prepaid expenses and other current assets 831,074 492,621
Total current assets 17,475,013 12,194,667

Property and equipment, net of accumulated depreciation of $13,051,288 and $12,153,626, respectively 5,986,090 6,649,365

Intangible assets, net of accumulated amortization of $-0-, respectively 6,634,035 6,634,035

Operating lease - right-of-use asset 1,082,168 214,674

Other assets:
Restricted cash - debt service for NJEDA bonds 405,027 405,013
Security deposits 364,563 91,738
Total other assets 769,590 496,751
Total assets $ 31,946,896 $ 26,189,492

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,284,334 $ 929,690
Accrued expenses 4,026,300 4,270,600
Deferred revenue, current portion 13,333 13,333
Bonds payable, current portion, net of bond issuance costs 100,822 95,822
Loans payable, current portion 299,601 314,996
Lease obligation - operating lease, current portion 153,813 188,090
Total current liabilities 5,878,203 5,812,531

Long-term liabilities:
Deferred revenue, net of current portion 35,559 45,558
Bonds payable, net of current portion and bond issuance costs 1,136,303 1,240,668
Loans payable, net of current portion 296,696 500,066
Lease obligation - operating lease, net of current portion 933,542 38,866
Derivative financial instruments - warrants 838,852 2,362,246
Other long-term liabilities 38,187 37,628
Total long-term liabilities 3,279,139 4,225,032
Total liabilities 9,157,342 10,037,563
Shareholders’ equity:
Series J convertible preferred stock; par value of $0.01; 50 shares authorized; 0 issued and outstanding as of December 31, 2021 and March 31, 2021 — —
Common Stock; par value $0.001; 1,445,000,000 shares authorized; 1,011,381,988 shares issued and 1,011,281,988 shares outstanding as of December 31, 2021; 1,009,276,752 shares issued and 1,009,176,752 shares outstanding as of March 31, 2021 1,011,385 1,009,279
Additional paid-in capital 164,573,491 164,407,480
Treasury stock; 100,000 shares as of December 31, 2021 and March 31, 2021; at cost (306,841 ) (306,841 )
Accumulated deficit (142,488,481 ) (148,957,989 )
Total shareholders’ equity 22,789,554 16,151,929
Total liabilities and shareholders’ equity $ 31,946,896 $ 26,189,492
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~F-1~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS~~
~~(UNAUDITED)~~
2021 2020 2021 2020
For the Three Months Ended December 31, For the Nine Months Ended December 31,
2021 2020 2021 2020
Revenue:
Manufacturing fees 7,667,674 $ 4,849,871 $ 20,639,421 $ 17,659,834
Licensing fees 1,307,140 1,196,711 3,950,623 3,325,384
Total revenue 8,974,814 6,046,582 24,590,044 20,985,218
Cost of manufacturing 4,957,150 2,643,175 13,209,430 10,984,021
Gross profit 4,017,664 3,403,407 11,380,614 10,001,197

Operating expenses:
Research and development 956,628 1,245,669 3,312,540 3,337,287
General and administrative 929,547 826,019 2,930,126 2,491,762
Non-cash compensation through issuance of stock options 3,630 1,651 10,617 9,261
Depreciation and amortization 296,559 328,899 908,297 990,861
Total operating expenses 2,186,364 2,402,238 7,161,580 6,829,171

Income from operations 1,831,300 1,001,169 4,219,034 3,172,026

Other income, net:
Change in fair value of derivative instruments 489,500 1,083,566 1,523,394 1,645,042
Interest expense and amortization of debt issuance costs (37,400 ) (79,673 ) (126,376 ) (238,857 )
Gain on sale of fixed assets — 6,973 — 48,463
Interest income 13 98 77 463
Other income, net 452,113 1,010,964 1,397,095 1,455,111

Income from operations before income taxes 2,283,413 2,012,133 5,616,129 4,627,137

Income tax expense — — (4,000 ) (2,500 )

Net benefit for sale of state net operating losses and credits — — 857,379 946,407

Net income attributable to common shareholders $ 2,283,413 $ 2,012,133 $ 6,469,508 $ 5,571,044

Basic net income per share attributable to common shareholders $ 0.00 $ 0.00 $ 0.01 $ 0.01

Diluted net income per share attributable to common shareholders $ 0.00 $ 0.00 $ 0.00 $ 0.01

Basic weighted average Common Stock outstanding 1,011,281,988 1,009,176,752 1,010,416,823 921,339,333

Diluted weighted average Common Stock outstanding 1,011,281,988 1,009,176,752 1,010,416,823 921,339,333
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~F-2~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY~~
~~(UNAUDITED)~~
Shares Amount Shares Amount Capital Shares Amount Deficit Equity
Series J Preferred Stock Common Stock
Additional
Paid-In
Treasury Stock Accumulated Total Shareholders’
Shares Amount Shares Amount Capital Shares Amount Deficit Equity
Balance as of March 31, 2021 — $ — 1,009,276,752 $ 1,009,279 $ 164,407,480 100,000 $ (306,841 ) $ (148,957,989 ) $ 16,151,929

Net income — — — — — — — 2,389,118 2,389,118
Conversion of Preferred Stock to Common Stock

Conversion of Preferred Stock to Common Stock, shares
Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement
Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement, shares
Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement
Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement, shares
Common Stock issued as additional commitment shares pursuant to the 2020 Lincoln Park purchase agreement
Common Stock issued as additional commitment shares pursuant to the 2020 Lincoln Park purchase agreement, shares
Costs associated with raising capital
Shares issued in payment of Director fees
Shares issued in payment of Director fees, shares
Shares issued in payment of consulting expenses
Shares issued in payment of consulting expenses, shares

Non-cash compensation through the issuance of employee stock options — — — — 2,811 — — — 2,811

Shares issued in payment of salaries — — 2,105,236 2,106 155,394 — — — 157,500

Balance at June 30, 2021 — $ — 1,011,381,988 $ 1,011,385 $ 164,565,685 100,000 $ (306,841 ) $ (146,568,871 ) $ 18,701,358

Net income — $ — — $ — $ — — $ — $ 1,796,977 1,796,977

Non-cash compensation through the issuance of employee stock options — — — — 4,176 — — — 4,176

Balance at September 30, 2021 — $ — 1,011,381,988 $ 1,011,385 $ 164,569,861 100,000 $ (306,841 ) $ (144,771,894 ) $ 20,502,511

Net income — $ — — $ — $ — — $ — $ 2,283,413 $ 2,283,413

Non-cash compensation through the issuance of employee stock options — $ — — $ — $ 3,630 — $ — $ — $ 3,630

Balance at December 31, 2021 — $ — 1,011,381,988 $ 1,011,385 $ 164,573,491 100,000 $ (306,841 ) $ (142,488,481 ) $ 22,789,554
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~F-3~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY~~
~~(UNAUDITED)~~
(continued)
Series J
Preferred Stock
Common Stock Additional Paid-In Treasury Stock Accumulated Total Shareholders’
Shares Amount Shares Amount Capital Shares Amount Deficit Equity
Balance as of March 31, 2020 24 $ 13,903,960 840,504,367 $ 840,507 $ 150,264,605 100,000 $ (306,841 ) $ (154,046,410 ) $ 10,655,821

Net income — — — — — — — 1,077,349 1,077,349

Non-cash compensation through the issuance of employee stock options — — — — 5,521 — — — 5,521

Shares issued in payment of salaries — $ — 574,597 $ 574 $ 49,426 — $ — $ — 50,000

Balance at June 30, 2020 24 $ 13,903,960 841,078,964 $ 841,081 $ 150,319,552 100,000 $ (306,841 ) $ (152,969,061 ) $ 11,788,691

Net income — — — — — — — 2,481,562 2,481,562

Conversion of Preferred Stock to Common Stock (24 ) (13,903,960 ) 158,017,321 158,017 13,745,943 — — — —

Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement — — 5,975,857 5,976 463,129 — — — 469,105

Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement — — 640,543 641 41,582 — — — 42,223

Common Stock issued as additional commitment shares pursuant to the 2020 Lincoln Park purchase agreement — — 10,094 10 722 — — — 732

Costs associated with raising capital — — — — (469,837 ) — — — (469,837 )

Non-cash compensation through the issuance of employee stock options — — — — 2,089 — — — 2,089

Shares issued in payment of Director fees — — 1,550,343 1,551 133,449 — — — 135,000

Shares issued in payment of salaries — — 71,739 71 6,179 — — — 6,250

Shares issued in payment of consulting expenses — — 1,931,891 1,932 159,101 — — — 161,033

Balance at September 30, 2020 — $ — 1,009,276,752 $ 1,009,279 $ 164,401,909 100,000 $ (306,841 ) $ (150,487,499 ) $ 14,616,848

Net income — $ — — $ — $ — — $ — $ 2,012,133 $ 2,012,133

Non-cash compensation through the issuance of employee stock options — $ — — $ — $ 1,651 — $ — $ — $ 1,651

Balance at December 31, 2020 — $ — 1,009,276,752 $ 1,009,279 $ 164,403,560 100,000 $ (306,841 ) $ (148,475,366 ) $ 16,630,632
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~F-4~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS~~
~~(UNAUDITED)~~
2021 2020
For the Nine Months Ended December 31,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,469,508 $ 5,571,044
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 908,297 990,861
Amortization of operating leases - right-of-use assets 175,306 150,897
Gain on the disposal of property and equipment — (48,463 )
Change in fair value of derivative financial instruments - warrants (1,523,394 ) (1,645,042 )
Non-cash compensation accrued 641,664 676,740
Non-cash compensation through the issuance of employee stock options 10,617 9,261
Non-cash rent expense and lease accretion 559 1,626
Change in operating assets and liabilities:
Accounts receivable 834,963 810,639
Inventory (1,681,168 ) (659,535 )
Prepaid expenses and other current assets (367,154 ) (173,142 )
Accounts payable, accrued expenses and other current liabilities (373,820 ) (1,417,530 )
Deferred revenue and customer deposits (9,999 ) (170,000 )
Lease obligations - operating leases (182,401 ) (154,127 )
Net cash provided by operating activities 4,902,978 3,943,229

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (234,387 ) (145,079 )
Proceeds from disposal of property and equipment — 67,200
Net cash used in investing activities (234,387 ) (77,879 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of bond principal (110,000 ) (105,000 )
Other loan payments (462,889 ) (534,793 )
Proceeds from the issuance of Common Stock — 42,223
Other loan proceeds — 1,013,480
Net cash (used in) provided by financing activities (572,889 ) 415,910

Net change in cash and restricted cash 4,095,702 4,281,260

Cash and restricted cash, beginning of period 3,597,781 1,536,530

Cash and restricted cash, end of period $ 7,693,483 $ 5,817,790

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest $ 126,376 $ 239,940
Financing of equipment purchases and insurance renewal $ 244,124 $ 410,141
Stock issued in payment of Directors fees, salaries and consulting expenses $ 157,500 $ 352,283
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets $ 1,042,800 $ —
Commitment shares issued to Lincoln Park Capital $ — $ 469,837
Conversion of preferred stock to Common Stock $ — $ 13,903,960
September 30, 2022 March 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash $ 18,555,034 $ 8,535,357
Accounts receivable 4,229,538 3,057,913
Inventory 7,468,286 6,741,170
Prepaid expenses and other current assets 219,851 526,949
Total current assets 30,472,709 18,861,389

Property and equipment, net of accumulated depreciation of $13,957,320 and $13,348,565, respectively 10,543,933 5,952,992

Intangible assets, net of accumulated amortization of $-0-, respectively 6,634,035 6,634,035

Operating lease - right-of-use asset 23,850 1,031,884

Deferred income tax asset 2,171,821 2,171,821

Other assets:
Restricted cash - debt service for NJEDA bonds 405,164 405,039
Security deposits 91,738 91,738
Total other assets 496,902 496,777
Total assets $ 50,343,250 $ 35,148,898

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ 1,723,592 $ 1,430,985
Accrued expenses 4,578,470 4,693,142
Deferred revenue, current portion 13,333 13,333
Bonds payable, current portion, net of bond issuance costs 110,822 100,822
Loans payable, current portion 391,779 253,006
Lease obligation - operating lease, current portion 25,065 202,953
Total current liabilities 6,843,061 6,694,241

Long-term liabilities:
Deferred revenue, net of current portion 25,556 32,226
Bonds payable, net of current portion and bond issuance costs 1,021,940 1,139,848
Loans payable, net of current portion and loan costs 14,510,462 249,046
Lease obligation - operating lease, net of current portion 2,163 835,893
Derivative financial instruments – warrants 748,661 936,837
Other long-term liabilities — 38,780
Total long-term liabilities 16,308,782 3,232,630
Total liabilities 23,151,843 9,926,871
Shareholders’ equity:
Series J convertible preferred stock; par value of $0.01; 50 shares authorized; 0 issued and outstanding as of September 30, 2022 and March 31, 2022 — —
Common stock; par value $0.001; 1,445,000,000 shares authorized; 1,014,015,081 shares issued as of September 30, 2022 and March 31, 2022; 1,013,915,081 shares outstanding as of September 30, 2022 and March 31, 2022. 1,014,019 1,011,385
Additional paid-in capital 164,722,951 164,577,227
Treasury stock; 100,000 shares as of September 30, 2022 and March 31, 2022; at cost (306,841 ) (306,841 )
Accumulated deficit (138,238,722 ) (140,059,744 )
Total shareholders’ equity 27,191,407 25,222,027
Total liabilities and shareholders’ equity $ 50,343,250 $ 35,148,898

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~F-5~~F-1

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
2022 2021 2022 2021

For the Three Months Ended
September 30,

For the Six Months Ended
September 30,

2022 2021 2022 2021
Revenue:
Manufacturing fees $ 7,187,363 $ 7,221,711 $ 13,514,504 $ 12,971,747
Licensing fees 1,398,400 1,336,730 2,744,167 2,643,483
Total revenue 8,585,763 8,558,441 16,258,671 15,615,230
Cost of manufacturing 4,761,329 4,790,292 8,436,390 8,253,369
Gross profit 3,824,434 3,768,149 7,822,281 7,361,861

Operating expenses:
Research and development 1,227,269 1,116,488 2,182,712 2,356,275
General and administrative 1,190,523 925,872 2,908,627 1,999,127
Non-cash compensation through issuance of stock options 5,973 4,176 11,295 6,987
Depreciation and amortization 319,552 299,036 615,846 611,738
Total operating expenses 2,743,317 2,345,572 5,718,480 4,974,127

Income from operations 1,081,117 1,422,577 2,103,801 2,387,734

Other income (expense):
Change in fair value of derivative instruments 688,319 419,433 188,176 1,033,894
Interest expense and amortization of debt issuance costs (242,753 ) (43,083 ) (459,540 ) (88,976 )
Interest income 43 21 172 64
Other (expense) income, net 445,609 376,371 (271,192 ) 944,982

Income from operations before income taxes 1,526,726 1,798,948 1,832,609 3,332,716

Income tax expense (11,587 ) (4,000 ) (11,587 ) (4,000 )

Net benefit for sale of state net operating losses and credits — 2,029 — 857,379

Net income attributable to common shareholders $ 1,515,139 $ 1,796,977 $ 1,821,022 $ 4,186,095

Basic net income per share attributable to common shareholders $ 0.00 $ 0.00 $ 0.00 $ 0.00

Diluted net income per share attributable to common shareholders $ 0.00 $ 0.00 $ 0.00 $ 0.00

Basic weighted average Common Stock outstanding 1,012,228,256 1,011,281,988 1,011,762,632 1,010,059,593

Diluted weighted average Common Stock outstanding 1,012,228,256 1,011,281,988 1,011,762,632 1,010,059,593
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
Shares Amount Shares Amount Capital Shares Amount Deficit
Equity

Series J Preferred Stock Common Stock Additional Paid-In Treasury Stock Accumulated Total
Shareholders’
Shares Amount Shares Amount Capital Shares Amount Deficit
Equity

Balance as of March 31, 2022 — $ — 1,011,381,988 $ 1,011,385 $ 164,577,227 100,000 $ (306,841 ) $ (140,059,744 ) $ 25,222,027

Net income — — — — — — — 305,883 305,883

Non-cash compensation through the issuance of employee stock options — — — — 5,322 — — — 5,322

Balance at June 30, 2022 — $ — 1,011,381,988 $ 1,011,385 $ 164,582,549 100,000 $ (306,841 ) $ (139,753,861 ) $ 25,533,232

Net Income — — — — — — — 1,515,139 1,515,139

Non-cash compensation through the issuance of employee stock options — — — — 5,974 — — — 5,974

Share issued in payment of director salaries — — 1,378,608 1,379 58,621 — — — 60,000

Shares issued in payment of consultants — — 1,254,485 1,255 75,807 — — — 77,062

Balance at September 30, 2022 — $ — 1,014,015,081 $ 1,014,019 $ 164,722,951 100,000 $ (306,841 ) $ (138,238,722 ) $ 27,191,407
Series J Preferred Stock Common Stock Additional Paid-In Treasury Stock Accumulated Total Shareholders’
Shares Amount Shares Amount Capital Shares Amount Deficit Equity
Balance as of March 31, 2021 — $ — 1,009,276,752 $ 1,009,279 $ 164,407,480 100,000 $ (306,841 ) $ (148,957,989 ) $ 16,151,929

Net income — — — — — — — 2,389,118 2,389,118

Non-cash compensation through the issuance of employee stock options — — — — 2,811 — — — 2,811

Shares issued in payment of salaries — — 2,105,236 2,106 155,394 — $ — $ — 157,500

Balance at June 30, 2021 — $ — 1,011,381,988 $ 1,011,385 $ 164,565,685 100,000 $ (306,841 ) $ (146,568,871 ) $ 18,701,358

Net income — — — — — — — 1,796,977 1,796,977

Non-cash compensation through the issuance of employee stock options — — — — 4,176 — — — 4,176

Balance at September 30, 2021 — $ — 1,011,381,988 $ 1,011,385 $ 164,569,861 100,000 $ (306,841 ) $ (144,771,894 ) $ 20,502,511
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
2022 2021
For the Six Months Ended September 30,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,821,022 $ 4,186,095
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 615,846 611,738
Amortization of operating leases - right-of-use assets 56,272 115,960
Change in fair value of derivative financial instruments - warrants (188,176 ) (1,033,894 )
Non-cash compensation accrued 288,415 428,999
Non-cash compensation through the issuance of employee stock options 11,296 6,987
Non-cash rent expense and lease accretion 602 1,143
Change in operating assets and liabilities:
Accounts receivable (1,171,625 ) (1,175,982 )
Inventory (727,116 ) (1,532,756 )
Prepaid expenses and other current assets 307,098 290,338
Accounts payable, accrued expenses and other current liabilities (13,962 ) 97,724
Deferred revenue (6,670 ) (6,666 )
Lease obligations - operating leases (55,104 ) (120,442 )
Net cash provided by operating activities 937,898 1,869,244

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,199,696 ) (152,311 )
Net cash used in investing activities (5,199,696 ) (152,311 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of bond principal (115,000 ) (110,000 )
Proceeds from loans payable 14,550,000 —
Other loan payments (153,400 ) (309,025 )
Net cash provided by (used in) financing activities 14,281,600 (419,025 )

Net change in cash and restricted cash 10,019,802 1,297,908

Cash and restricted cash, beginning of period 8,940,396 3,597,781

Cash and restricted cash, end of period $ 18,960,198 $ 4,895,689

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest $ 459,540 $ 88,976
Financing of equipment purchases and insurance renewal $ — $ 244,124
Stock issued in payment of Directors fees, salaries and consulting expenses $ 137,067 $ 157,500
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets $ — $ 1,042,800
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

Elite Pharmaceuticals, Inc. (the “Company” or “Elite”) was incorporated on October 1, 1997 under the laws of the State of Delaware, and its ~~wholly owned~~wholly-owned subsidiary Elite Laboratories, Inc. (“Elite Labs”) was incorporated on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of Nevada. Elite Labs engages primarily in researching, developing, licensing and manufacture of generic, oral dose pharmaceuticals. The Company is equipped to manufacture controlled-release products on a contract basis for third parties and itself, if and when the ~~products~~product candidates are approved. These products include drugs that cover therapeutic areas for allergy, bariatric, attention deficit and infection. Research and development activities are performed with an objective of developing ~~products~~product candidates that will secure marketing approvals from the United States Food and Drug Administration (“FDA”), and thereafter, commercially exploiting such products.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements include the accounts of the Company and its ~~wholly owned~~wholly-owned subsidiary, Elite Labs. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the ~~three and nine~~six months ended ~~December 31, 2021~~September 30, 2022 are not necessarily indicative of the results that may be expected for the entire year.

Segment Information

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 280 (“ASC 280”), Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the Company.

The Company has determined that its reportable segments are products whose marketing approvals were secured via an Abbreviated New Drug Applications (“ANDA”) and products whose marketing approvals were secured via a New Drug Application (“NDA”). ANDA products are referred to as generic pharmaceuticals and NDA products are referred to as branded pharmaceuticals.

There are currently no intersegment revenues. Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s condensed unaudited consolidated financial statements. Please see Note 15 for further details.

Revenue Recognition

The Company generates revenue primarily from manufacturing and licensing fees. Manufacturing fees include the development of pain management products, manufacturing of a line of generic pharmaceutical products with approved ANDA, through the manufacture of formulations and the development of new products. Licensing fees include the commercialization of products either by license and the collection of royalties, or the expansion of licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations.

~~F-6~~F-5

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Under ASC 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenues following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

Nature of goods and services

The following is a description of the Company’s goods and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each, as applicable:

a) Manufacturing Fees

The Company is equipped to manufacture controlled-release products on a contract basis for third parties, if, and when, the products are approved. These products include products using controlled-release drug technology. The Company also develops and markets (either on its own or by license to other companies) generic and proprietary controlled-release pharmaceutical products.

The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms of the contract. The Company is primarily responsible for fulfilling the promise to provide the product, is responsible to ensure that the product is produced in accordance with the related supply agreement and bears risk of loss while the inventory is in-transit to the commercial partner. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer.

b) License Fees

The Company enters into licensing and development agreements, which may include multiple revenue generating activities, including milestones payments, licensing fees, product sales and services. The Company analyzes each element of its licensing and development agreements in accordance with ASC 606 to determine appropriate revenue recognition. The terms of the license agreement may include payment to the Company of licensing fees, non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

The Company recognizes revenue from non-refundable upfront payments at a point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer. For those milestone payments which are contingent on the occurrence of particular future events (for example, payments due upon a product receiving FDA approval), the Company determined that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent uncertainty of the occurrence of future events, the Company will recognize revenue from the milestone when there is not a high probability of a reversal of revenue, which typically occurs near or upon achievement of the event.

~~F-7~~F-6

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of ~~December 31, 2021.~~September 30, 2022.

In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the customer’s products occurs.

The Company entered into a sales and distribution licensing agreement with Epic Pharma LLC, (“Epic”) dated June 4, 2015 (the “2015 Epic License Agreement”), which has been determined to satisfy the criteria for consideration as a collaborative agreement, and is accounted for accordingly. The 2015 Epic License Agreement expired on June 4, 2020 without renewal.

The Company entered into a Master Development and License Agreement with SunGen Pharma LLC dated August 24, 2016 (the “SunGen Agreement”), which has been determined to satisfy the criteria for consideration as a collaborative agreement, and is accounted for accordingly. On April 3, 2020, Elite and SunGen mutually agreed to discontinue any further joint product development activities.

Disaggregation of revenue

In the following table, revenue is disaggregated by type of revenue generated by the Company. The table also includes a reconciliation of the disaggregated revenue with the reportable segments:
SCHEDULE OF DISAGGREGATION OF REVENUE
For the Three Months Ended December 31, For the Nine Months Ended December 31,
2021 2020 2021 2020
NDA:
Manufacturing fees $ 7,667,674 $ 4,849,871 $ 20,639,421 $ 17,659,834
Licensing fees $ — $ — $ — $ 166,167
Total NDA revenue — — — 166,167
ANDA:
Manufacturing fees $ 7,667,674 $ 4,849,871 $ 20,639,421 $ 17,659,834
Licensing fees 1,307,140 1,196,711 3,950,623 3,159,217
Total ANDA revenue 8,974,814 6,046,582 24,590,044 20,819,051
Total revenue $ 8,974,814 $ 6,046,582 $ 24,590,044 $ 20,985,218
~~Selected information on reportable segments and reconciliation of operating income by segment to income (loss) from operations before income taxes are disclosed within Note 15.~~
For the Three Months Ended September 30, For the Six Months Ended September 30,
2022 2021 2022 2021
NDA:
Licensing fees $ — $ — $ — $ —
Total NDA revenue — — — —
ANDA:
Manufacturing fees $ 7,187,363 $ 7,221,711 $ 13,514,504 $ 12,971,747
Licensing fees 1,398,400 1,336,730 2,744,167 2,643,483
Total ANDA revenue 8,585,763 8,558,441 16,258,671 15,615,230
Total revenue $ 8,585,763 $ 8,558,441 $ 16,258,671 $ 15,615,230

~~F-8~~F-7

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Cash

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances.

Restricted Cash

As of ~~December 31, 2021,~~September 30, 2022, and March 31, ~~2021,~~2022, the Company had $~~405,027~~405,164 and $~~405,013~~405,039, of restricted cash, respectively, related to debt service reserve in regard to the New Jersey Economic Development Authority (“NJEDA”) bonds (see Note 5)6).

Accounts Receivable

Accounts receivable are comprised of balances due from customers, net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.

Inventory

Inventory is recorded at the lower of cost or ~~market~~net realizable value on specific identification by lot number basis.

Long-Lived Assets

The Company periodically evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable.

Property and equipment are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from three to forty years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently.

Upon retirement or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income.

Intangible Assets

The Company capitalizes certain costs to acquire intangible assets; if such assets are determined to have a finite useful life they are amortized on a straight-line basis over the estimated useful life. Costs to acquire indefinite lived intangible assets, such as costs related to ANDAs are capitalized accordingly.

The Company tests its intangible assets for impairment at least annually (as of March 31st) and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others and without limitation: a significant decline in the Company’s expected future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change in legal factors or in the business climate of the Company’s segments; unanticipated competition; and slower growth rates.

As of ~~December 31, 2021,~~September 30, 2022, the Company did not identify any indicators of impairment.

Please also see Note 4 for further details on intangible assets.
~~F-9~~F-8

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Research and Development

Research and development expenditures are charged to expense as incurred.
Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not be realizable in the future.

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate ~~resolution.~~resolution.

The Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all tax jurisdiction until the applicable statutes of limitation expire. As of ~~December 31, 2021,~~September 30, 2022, a summary of the tax years that remain subject to examination in our major tax jurisdictions are: United States – Federal, 2016 and forward, and State, 2013 and forward. The Company did not record unrecognized tax positions for the ~~three and nine~~six months ended ~~December 31, 2021 and 2020.~~September 30, 2022.

F-9
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Warrants and Preferred Shares

The accounting treatment of warrants and preferred share series issued is determined pursuant to the guidance provided by ASC 470, Debt, ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, as applicable. Each feature of a freestanding financial instrument including, without limitation, any rights relating to subsequent dilutive issuances, dividend issuances, equity sales, rights offerings, forced conversions, optional redemptions, automatic monthly conversions, dividends and exercise is assessed with determinations made regarding the proper classification in the Company’s financial statements.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. Under the fair value recognition provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, based on the terms of the awards. The cost of the stock-based payments to nonemployees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.

~~F-10~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
In accordance with the Company’s Director compensation policy and certain employment contracts, director’s fees and a portion of employee’s salaries are to be paid via the issuance of shares of the Company’s Common Stock (“Common Stock”), in lieu of cash, with the valuation of such share being calculated on a quarterly basis and equal to the average closing price of the Company’s Common Stock.

Earnings Per Share Attributable to Common Shareholders’

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding during the period. The computation of diluted net income per share does not include the conversion of securities that would have an antidilutive effect.

F-10
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following is the computation of earnings per share applicable to common shareholders for the periods indicated:
SCHEDULE OF EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS
2021 2020 2021 2020 2022 2021 2022 2021
For the Three Months Ended December 31, For the Nine Months Ended December 31, For the Three Months Ended September 30, For the Six Months Ended September 30,
2021 2020 2021 2020 2022 2021 2022 2021
Numerator
Net income - basic $ 2,283,413 $ 2,012,133 $ 6,469,508 $ 5,571,044 $ 1,515,139 $ 1,796,977 $ 1,821,022 $ 4,186,095
Effect of dilutive instrument on net income (489,500 ) — (1,523,394 ) — 688,319 (418,433 ) 188,176 (1,033,894 )
Net income - diluted $ 1,793,913 $ 2,012,133 $ 4,946,114 $ 5,571,044 $ 2,203,458 $ 1,378,544 $ 2,009,198 $ 3,152,201

Denominator
Weighted average shares of Common Stock outstanding - basic 1,011,281,988 1,009,176,752 1,010,416,823 921,339,333 1,012,228,256 1,011,281,988 1,011,762,632 1,010,059,593

Dilutive effect of stock options and convertible securities — — — — — — — —

Weighted average shares of Common Stock outstanding - diluted 1,011,281,988 1,009,176,752 1,010,416,823 921,339,333 1,012,228,256 1,011,281,988 1,011,762,632 1,010,059,593

Net income per share
Basic $ 0.00 $ 0.00 $ 0.01 $ 0.01 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Diluted $ 0.00 $ 0.00 $ 0.00 $ 0.01 $ 0.00 $ 0.00 $ 0.00 $ 0.00

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

~~F-11~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820 are described as follows:

● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
● Level 3 – Inputs that are unobservable for the asset or liability.
F-11
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Measured on a Recurring Basis

The following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell:
SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
Fair Value Measurement Using
Amount at Fair Value Level 1 Level 2 Level 3
December 31, 2021
Liabilities
Derivative financial instruments - warrants $ 838,852 $ — $ — $ 838,852

March 31, 2021
Liabilities
Derivative financial instruments - warrants $ 2,362,246 $ — $ — $ 2,362,246
Amount at Fair Fair Value Measurement Using
Value Level 1 Level 2 Level 3
Balance as of March 31, 2022 $ 936,837 $ — $ — $ 936,837
Change in fair value of derivative instruments (188,176 ) — — (188,176 )
Balance as of September 30, 2022 $ 748,661 $ — $ — $ 748,661

See Note 11 for specific inputs used in determining fair value.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments. Based upon current borrowing rates with similar maturities the carrying value of long-term debt approximates fair value.

Non-Financial Assets that are Measured at Fair Value on a Non-Recurring Basis

Non-financial assets such as intangible assets, and property and equipment are measured at fair value only when an impairment loss is recognized. The Company did not record an impairment charge related to these assets in the periods presented.

Treasury Stock

The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of shareholders’ equity.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”). Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022 for public entities qualifying as smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact of this update on the consolidated financial statements and does not expect a material impact on the consolidated financial statements.

~~F-12~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

NOTE 2. INVENTORY

Inventory consisted of the following:
SCHEDULE OF INVENTORY
December 31, 2021 March 31, 2021 September 30, 2022 March 31, 2022
Finished goods $ 579,336 $ 274,603 $ 425,072 $ 159,808
Work-in-progress 966 781,350 95,707 1,203,204
Raw materials 6,113,768 3,956,949 6,947,507 5,378,158
Inventory, net $ 6,694,070 $ 5,012,902 $ 7,468,286 $ 6,741,170
F-12
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
December 31, 2021 March 31, 2021 September 30, 2022 March 31, 2022
Land, building and improvements $ 5,456,523 $ 5,456,523 $ 10,556,524 $ 5,456,524
Laboratory, manufacturing, warehouse and transportation equipment 12,753,553 12,580,457 13,117,427 13,017,731
Office equipment and software 373,601 373,601 373,601 373,601
Furniture and fixtures 453,701 392,410 453,701 453,701
19,037,378 18,802,991
Property and equipment, gross 24,501,253 19,301,557
Less: Accumulated depreciation (13,051,288 ) (12,153,626 ) (13,957,320 ) (13,348,565 )
$ 5,986,090 $ 6,649,365
Property and equipment, net $ 10,543,933 $ 5,952,992

Depreciation expense was $~~293,014~~316,007 and $~~505,987~~295,491 for the three months ended September 30, 2022 and 2021, respectively. and $~~897,662~~608,755 and $~~980,227~~604,648 for the ~~nine~~six months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively.

NOTE 4. INTANGIBLE ASSETS

The following table summarizes the Company’s intangible assets:
SCHEDULE OF INTANGIBLE ASSETS
September 30, 2022
Estimated Gross
December 31, 2021 Useful Carrying Accumulated Net Book
Estimated Useful Life Gross Carrying Amount Additions Reductions Accumulated Amortization Net Book Value Life Amount Additions Reductions Amortization Value
Patent application costs * $ 465,684 $ — $ — $ 0 $ 465,684 * $ 465,684 $ — $       — $       — $ 465,684
ANDA acquisition costs Indefinite 6,168,351 — — 0 6,168,351 Indefinite 6,168,351 — — — 6,168,351
$ 6,634,035 $ — $ — $ 0 $ 6,634,035 $ 6,634,035 $ — $ — $ — $ 6,634,035

March 31, 2021
Estimated Useful Life Gross Carrying Amount Additions Reductions Accumulated Amortization Net Book Value
Patent application costs * $ 465,684 $ — $ — $ 0 $ 465,684
ANDA acquisition costs Indefinite 6,168,351 — — 0 6,168,351
$ 6,634,035 $ — $ — $ 0 $ 6,634,035
~~F-13~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
March 31, 2022
Estimated Gross
Useful Carrying Accumulated Net Book
Life Amount Additions Reductions Amortization Value
Patent application costs * * $ 465,684 $ — $       — $       — $ 465,684
ANDA acquisition costs Indefinite 6,168,351 — — — 6,168,351
$ 6,634,035 $ — $ — $ — $ 6,634,035

* Patent application costs were incurred in relation to the Company’s abuse deterrent opioid technology. Amortization of the patent costs will begin upon the issuance of marketing authorization by the FDA. Amortization will then be calculated on a straight-line basis through the expiry of the related patent(s).

F-13
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5.ACCRUED EXPENSES
As of September 30, 2022 and March 31, 2022, the Company’s accrued expenses consisted of the following:
SUMMARY OF ACCRUED EXPENSES
September 30, 2022 March 31, 2022
Salaries and fees payable in common stock 3,875,000 3,625,000
Income tax 50,000 414,989
Consultant contract fees 153,333 153,333
Audit fees 144,000 140,000
Director dues 45,000 90,000
EWB loan interest 85,143 —
Employee bonuses 131,250 143,000
Other accrued expenses 94,744 126,820
Total accrued expenses $ 4,578,470 $ 4,693,142
NOTE 6. NJEDA BONDS

~~During~~In August 2005, the Company refinanced a bond issue occurring in 1999 through the issuance of Series A and B Notes tax-exempt bonds (the “NJEDA Bonds” and/or “Bonds”). During July 2014, the Company retired all outstanding Series B Notes, at par, alongissued NJEDA tax exempt Bonds with ~~all accrued interest due and owed.~~
~~In relation to the~~ Series A Notes ~~the~~outstanding. The Company is required to maintain a debt service reserve. The debt service reserve is classified as restricted cash on the accompanying unaudited condensed consolidated balance sheets. The NJEDA Bonds require the Company to make an annual principal payment on September 1st based on the amount specified in the loan documents and semi-annual interest payments on March 1st and September 1st, equal to interest due on the outstanding principal. The annual interest rate on the Series A Note is ~~6.5~~6.5%%. The NJEDA Bonds are collateralized by a first lien on the Company’s facility and equipment acquired with the proceeds of the original and refinanced bonds.

The following tables summarize the Company’s bonds payable liability:
SCHEDULE OF BONDS PAYABLE LIABILITY
December 31, 2021 March 31, 2021 September 30, 2022 March 31, 2022
Gross bonds payable
NJEDA Bonds - Series A Notes $ 1,360,000 $ 1,470,000 $ 1,245,000 $ 1,360,000
Less: Current portion of bonds payable (prior to deduction of bond offering costs) (115,000 ) (110,000 ) (125,000 ) (115,000 )
Long-term portion of bonds payable (prior to deduction of bond offering costs) $ 1,245,000 $ 1,360,000 $ 1,120,000 $ 1,245,000

Bond offering costs $ 354,454 $ 354,454 $ 354,454 $ 354,454
Less: Accumulated amortization (231,579 ) (220,944 ) (242,209 ) (235,124 )
Bond offering costs, net $ 122,875 $ 133,510 $ 112,245 $ 119,330

Current portion of bonds payable - net of bond offering costs
Current portions of bonds payable $ 115,000 $ 110,000 $ 125,000 $ 115,000
Less: Bonds offering costs to be amortized in the next 12 months (14,178 ) (14,178 ) (14,178 ) (14,178 )
Current portion of bonds payable, net of bond offering costs $ 100,822 $ 95,822 $ 110,822 $ 100,822

Long term portion of bonds payable - net of bond offering costs
Long term portion of bonds payable 1,245,000 $ 1,360,000 1,245,000 $ 1,245,000
Less: Bond offering costs to be amortized subsequent to the next 12 months (108,697 ) (119,332 ) (223,060 ) (105,152 )
Long term portion of bonds payable, net of bond offering costs $ 1,136,303 $ 1,240,668 $ 1,021,940 $ 1,139,848

Amortization expense was $~~3,545~~3,539 and $~~3,544~~3,545 for the three months ended September 30, 2022 and 2021, $~~10,635~~7,085 and $~~10,634~~7,090 for the ~~nine~~six months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. As of ~~December 31, 2021~~September 30, 2022 and March 31, ~~2021,~~2022, interest payable was $~~29,467~~6,744 and $~~7,963~~7,367, respectively.

F-14

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Maturities of bonds for the next five years are as follows:
SCHEDULE OF MATURITIES OF BONDS FOR THE NEXT FIVE YEARS

Years ending March 31, Amount
2023 $ 115,000
2024 125,000
2025 130,000
2026 140,000
Thereafter 735,000
Total $ 1,245,000
NOTE 7. LOANS PAYABLE
On April 2, 2022, the Company and Elite Labs entered into a Loan and Security Agreement (the “EWB Loan Agreement”) with East West Bank (“EWB”). Pursuant to the EWB Loan Agreement, the Company and Elite Labs received one term loan for a principal amount of $12,000,000 (the “EWB Term Loan”) and a revolving line of credit up to $2,000,000 (the “EWB Revolver,” together with the “EWB Term Loan,” the EWB Loans”), each of which shall be used for working capital. The EWB Term Loan bears interest at a rate of 7.98% (1.73% plus the prime rate (“Prime”)) and is repayable over five years, maturing on May 1, 2027. The EWB Revolver bears interest at a rate of (7.12% (0.87% plus Prime)) and matures on May 1, 2027. The total transaction costs associated with the EWB Loans incurred as of September 30, 2022, were $40,120, which are being amortized on a monthly basis over five years, beginning in April 2022. The EWB Loans are secured by a security interest in the personal property of the Company and Elite Labs. The EWB Loan Agreement contains customary representations, warranties and covenants. These covenants include, but are not limited to, maintaining maximum leverage ratios of 3.50 to 1.00, minimum liquidity of $5,000,000, minimum cash of $1,000,000, a fixed charge coverage ratio of 1.25 to 1.00 and restrictions on mergers or sales of assets and debt borrowings. As of September 30, 2022, the Company is in compliance with each financial covenant and the Company has not used any of the Revolving line of credit.
On July 1, 2022, the EWB provided a mortgage loan (“EWB Mortgage Loan”) in the amount of $2.55 million for the purchase of the property at 135-137 Ludlow Avenue, which was formerly a lease held by the Company. The EWB Mortgage Loan matures in 10 years and bears interest at a rate of 4.75% fixed for 5 years then adjustable at WSJP plus 0.5% with floor rate of 4.5%. The total transaction costs associated with the EWB Mortgage Loan incurred as of September 30, 2022, were $34,952, which are being amortized on a monthly basis over ten years, beginning in July 2022. The EWB Mortgage Loan contains customary representations, warranties and covenants. These covenants include maintaining a minimum debt coverage ratio of 1.50 to 1.00 tested annually and a minimum trailing 12-month debt coverage ratio of 1.50 to 1.00. As of September 30, 2022, the Company was in compliance with each financial covenant.
Loans payable consisted of the following:
SCHEDULE OF LOANS PAYABLE
September 30, 2022 March 31, 2022
Equipment and insurance financing and mortgage loans payable, between 3.30% and 12.02% interest and maturing between October 2022 and June 2032 $ 14,902,241 $ 502,052
Less: Current portion of loans payable (391,779 ) (253,006 )
Long-term portion of loans payable $ 14,510,462 $ 249,046
The interest expense associated with the loans payable was $83,686 and $17,001 for the three months ended September 30, 2022 and 2021, respectively, and $261,265 and $35,598 for the six months ended September 30, 2022 and 2021, respectively.
F-15

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

~~NOTE 6.~~ ~~LOANS PAYABLE~~
~~Loans payable consisted of~~Loan principal payments for the ~~following:~~next five years are as follows:
SCHEDULE OF ~~LOANS PAYABLE~~LOAN PRINCIPAL PAYMENTS
December 31, 2021 March 31, 2021
Equipment and insurance financing loans payable, between 3.5% and 12.73% interest and maturing between December 2021 and October 2025 $ 596,297 $ 815,062
Less: Current portion of loans payable (299,601 ) (314,996 )
Long-term portion of loans payable $ 296,696 $ 500,066
~~The interest expense associated with the loans payable was $14,692~~ ~~and $19,422~~ ~~for the three months ended, and $50,290~~ ~~and $58,062~~ ~~for the nine months ended December 31, 2021 and 2020, respectively.~~
~~NOTE 7.~~ ~~RELATED PARTY SECURED PROMISSORY NOTE WITH MIKAH PHARMA, LLC~~
~~For consideration of the assets acquired on May 15, 2017, the Company issued a Secured Promissory Note (the “Mikah Note”) to Mikah Pharma, LLC (“Mikah”) for the principal sum of $1,200,000~~. Mikah was founded in 2009 by Nasrat Hakim (“Hakim”), a related party and the Company’s President, Chief Executive Officer and Chairman of the Board. The Mikah Note matured on December 31, 2020 and was retired at par in March 2021. The principal amount of $~~1,200,000~~ ~~was repaid by the Company at maturity.~~
~~Interest expense associated with the Note was $30,000~~ ~~for the three months ended and $90,000~~ ~~for the nine months ended December 31, 2020. A total of $435,000~~ ~~in accrued interest expense, representing interest expense accrued during the life of the Mikah Note, was due and owing as of the maturity date of the Mikah Note. Of the $435,000~~ ~~accrued interest due at maturity, $435,000~~ ~~of accrued interest was satisfied by offset against amounts due from Mikah pursuant to the development agreement between the Company and Mikah, dated December 3, 2018 (see Note 16).~~

Years ending March 31, Amount
2023 (excluding the six months ended September 30, 2022) $ 209,266
2024 327,317
2025 294,157
2026 227,306
2027 198,040
2028 and thereafter 13,646,155
Total remaining principal balance $ 14,902,241

NOTE 8. DEFERRED REVENUE

Deferred revenues in the aggregate amount of $~~48,892~~38,889 as of ~~December 31, 2021,~~September 30, 2022, were comprised of a current component of $13,333 and a long-term component of $~~35,559~~25,556. Deferred revenues in the aggregate amount of $~~58,891~~45,559 as of March 31, ~~2021,~~2022, were comprised of a current component of $13,333 and a long-term component of $~~45,558~~32,226. These line items represent the unamortized amounts of a $200,000 advance payment received for a TAGI Pharma (“TAGI”) licensing agreement with a fifteen-year term beginning in September 2010 and ending in August 2025 ~~and the $5,000,000~~ ~~advance payment Epic Collaborative Agreement with a~~ ~~five-year term beginning~~ in ~~June 2015~~ ~~and ending in~~ ~~May 2020~~. These advance payments were recorded as deferred revenue when received and are earned, on a straight-line basis over the life of the licenses. The current component is equal to the amount of revenue to be earned during the 12-month period immediately subsequent to the balance sheet date and the long-term component is equal to the amount of revenue to be earned thereafter.
NOTE 9. COMMITMENTS AND CONTINGENCIES

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
Operating Leases ~~– 135 Ludlow Ave.~~

The Company entered into an operating lease for a portion of a one-story warehouse, located at 135 Ludlow Avenue, Northvale, New Jersey (the ~~“135 Ludlow~~“Ludlow Ave. lease”)~~. The 135 Ludlow Ave. lease is for approximately~~ ~~15,000~~ ~~square feet of floor space and~~ which began ~~on July 1,~~in 2010. ~~During July 2014, the Company modified the 135 Ludlow Ave. lease in which the Company was permitted to occupy the entire~~ ~~35,000~~ ~~square feet of floor space in the building (“135 Ludlow Ave. modified lease”).~~
~~F-15~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
~~The 135 Ludlow Ave. modified lease includes an initial term, which expired on December 31, 2016 with two tenant renewal options of~~ ~~five years~~ each, at the sole discretion of the Company. On June 22, 2016, the Company exercised the first of these renewal options, with such option including a term that begins on January 1, 2017 and expires on December 31, 2021. On June 30, 2021, the Company exercised ~~the second of the~~a renewal ~~options,~~option, with such option including a term that begins on January 1, 2022 and expires on December 31, ~~2026~~.
2026. The ~~135~~ Ludlow Ave. ~~modified~~ lease property required significant leasehold improvements and qualifications, as a prerequisite, for its intended future use. Manufacturing, packaging, warehousing and regulatory activities are currently conducted at this location. Additional renovations and construction to further expandwas terminated on July 1, 2022, when the ~~Company’s manufacturing resources are in progress.~~Company purchased the underlying property.

In October 2020, the Company entered into an operating lease for office space in Pompano Beach, Florida (the “Pompano Office Lease”). The Pompano Office Lease is for approximately 1,275 square feet of office space, with Elite taking occupancy on November 1, 2020. The Pompano Office ~~includes a 3-month abatement from November 2020 through February 2021 and~~ has a term of three years, ending on October 31, 2023.
On April 8, 2022, the Company entered into an Agreement for Sale and Purchase of Real Estate to purchase the building located at 135-137 Ludlow Avenue in Northvale, NJ. The Company had leased the entire 35,000 square feet of floor space since 2014. This property is occupied by the Company’s Quality Assurance department, commercial manufacturing, packaging, and warehouse. The closing of the Agreement for Sale and Purchase of Real Estate occurred on July 1, 2022 (refer to Note 7).

The Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, the Company determines the classification and initial measurement of the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use. The Company has elected to account for non-lease components associated with its leases and lease components as a single lease component.

The Company recognizes a right-of-use asset, which represents the Company’s right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments arising over the lease term. The present value of the lease payments is calculated using either the implicit interest rate in the lease or an incremental borrowing rate.
~~Lease assets and liabilities are classified as follows on the condensed consolidated balance sheet:~~
~~SCHEDULE OF LEASE ASSETS AND LIABILITIES~~
Lease Classification As of December 31, 2021
Assets
Operating Operating lease – right-of-use asset $ 1,082,168
Total leased assets $ 1,082,168

Liabilities
Current
Operating Lease obligation – operating lease $ 153,813

Long-term
Operating Lease obligation – operating lease, net of current portion 933,542
Total lease liabilities $ 1,087,355
~~Rent expense is recorded on the straight-line basis. Rent expense under the 135 Ludlow Ave. modified lease for the three months ended December 31, 2021 and 2020 was $57,105~~ ~~and $55,986, respectively, and $171,315~~ ~~and $167,958~~ ~~for the nine months ended December 31, 2021 and 2020, respectively. Rent expense under the Pompano Office Lease for the three and nine months ended December 31, 2021 was $6,144~~ ~~and $17,688~~, respectively. There was no rent expense under the Pompano Office lease for the three and nine months ended December 31, 2020 as there was a rent abatement period from November 2020 through February 2021. Rent expense is recorded in general and administrative expense in the unaudited condensed consolidated statements of operations.

F-16

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Rent expense is recorded on the straight-line basis. Rent expense under the leases for the three months ended September 30, 2022 and 2021 was $6,330 and $62,877, respectively, and $70,908 and $125,754 for the six months ended September 30, 2022 and 2021, respectively. Rent expense is recorded in general and administrative expense in the unaudited condensed consolidated statements of operations.
The table below shows the future minimum rental payments, exclusive of taxes, insurance and other costs, under the ~~135~~ Ludlow Ave. modified lease and the Pompano Office Lease:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS
Years ending March 31, Amount
2022 64,578
2023 259,794
2024 254,050
2025 243,612
2026 248,484
Thereafter 189,144
Total future minimum lease payments 1,259,662
Less: interest (172,307 )
Present value of lease payments $ 1,087,355
~~The weighted-average remaining lease term and the weighted-average discount rate of our lease was as follows:~~
~~SCHEDULE OF WEIGHTED-AVERAGE REMAINING LEASE TERM AND THE WEIGHTED-AVERAGE DISCOUNT RATE~~
~~Lease Term and Discount Rate~~ ~~December 31, 2021~~
~~Remaining lease term (years)~~
~~Operating leases~~ 7
~~Discount rate~~
~~Operating leases~~ 6 %
Years ending March 31, Amount
2023 (excluding the six months ended September 30, 2022) $ 12,660
2024 14,770
2025 —
2026 —
Thereafter —
Total future minimum lease payments 27,430
Less: interest (202 )
Present value of lease payments $ 27,228

The Company has an obligation for the restoration of its leased facility and the removal or dismantlement of certain property and equipment as a result of its business operation in accordance with ASC 410, Asset Retirement and Environmental Obligations – Asset Retirement Obligations. The Company records the fair value of the asset retirement obligation in the period in which it is incurred. The Company increases, annually, the liability related to this obligation. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the Company records either a gain or loss. As of ~~December 31, 2021,~~September 30, 2022, and March 31, ~~2021,~~2022, the Company had a liability of $~~38,187~~0 and $~~37,628~~38,780, respectively, recorded as ~~a component of~~ other long-term liabilities.
NOTE 10.~~PREFERRED STOCK~~
~~Series J convertible preferred stock~~
~~On April 28, 2017, the Company created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction with the Certificate of Designations (“Series J COD”). A total of~~ 50 ~~shares of Series J Preferred were authorized, zero shares are issued and outstanding, with a stated value of $1,000,000~~ ~~per share and a par value of $0.01~~ ~~as of December 31, 2021.~~
~~On April 27, 2017, a total of~~ ~~24.0344~~ shares of Series J Preferred were issued pursuant to an exchange agreement (the “Exchange Agreement”) with Hakim, a related party and the Company’s President, Chief Executive Officer and Chairman of the Board of Directors. The Exchange Agreement provided for Hakim to exchange ~~158,017,321~~ ~~shares of Common Stock for~~ ~~24.0344~~ ~~shares of Series J Preferred and warrants to purchase~~ ~~79,008,661~~ ~~shares of Common Stock at $0.1521~~ per share. The aggregate stated value of the Series J Preferred issued was equal to the aggregate value of the shares of Common Stock exchanged, with such value of each share of Common Stock exchanged being equal to the closing price of the Common Stock on April 27, 2017. In connection with the Exchange Agreement, the Company also issued warrants to purchase ~~79,008,661~~ ~~shares of Common Stock at $0.1521~~ ~~per share, and such warrants are classified as liabilities on the accompanying unaudited condensed consolidated balance sheet as of December 31, 2021 (See Note 11).~~
~~F-17~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
~~An amendment to the Company’s Articles of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue from~~ ~~995,000,000~~ ~~shares to~~ ~~1,445,000,000~~ shares was approved at the Company’s Annual Meeting of Shareholders held on December 4, 2019. Prior to the approval of the increase in the number of authorized shares, there were insufficient authorized shares if the Series J Preferred Stock were converted. As a result, the shares were classified in mezzanine equity. After the approval of the increase in the number of authorized shares, there are now sufficient authorized shares in the event of a full conversion of Series J Preferred Stock. With the approval of the increase in the number of authorized shares, there is no longer the presumption that a cash settlement will be required. Therefore, the Series J Preferred was reclassified from mezzanine equity to permanent equity at its carrying amount of $~~13,903,960~~ ~~on the consolidated balance sheet as of March 31, 2020.~~
On June 23, 2020, the Company held a Special Meeting of Shareholders, with such including a proposal for shareholders to again vote on the above referenced amendment to the Company’s Articles of Incorporation. This proposal was also passed by shareholder vote.
~~On August 24, 2020, Hakim converted the~~ ~~24.0344~~ ~~shares of Series J Preferred into~~ ~~158,017,321~~ ~~shares of Common Stock at a conversion price of $0.1521~~ ~~per share.~~
~~NOTE 11.~~ DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS

The Company evaluates and accounts for its freestanding instruments in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities.

The Company issued warrants, with a term of ten years, to affiliates in connection with an exchange agreement dated April 28, 2017, as further described in this note below. The warrant share balance is 79,008,661 as of September 30, 2022, and March 31, 2022 with a weighted average exercise price of $0.1521 as of September 30, 2022, and March 31, 2022.
~~A summary of warrant activity is as follows:~~
~~SCHEDULE OF WARRANT ACTIVITY~~
December 31, 2021 March 31, 2021
Warrant Shares Weighted Average Exercise Price Warrant Shares Weighted Average Exercise Price
Balance at beginning of period 79,008,661 $ 0.1521 79,008,661 $ 0.1521

Warrants granted pursuant to the issuance of Series J convertible preferred shares 0 — — —

Warrants exercised, forfeited and/or expired, net — — — —

Balance at end of period 79,008,661 $ 0.1521 79,008,661 $ 0.1521

On April 28, 2017, the Company entered into an Exchange Agreement with Nasrat Hakim (“Hakim”), the Chairman of the Board, President, and Chief Executive Officer of the Company, pursuant to which the Company issued to Hakim 24.0344 shares of its Series J Preferred and warrants to purchase an aggregate of 79,008,661 shares of its Common Stock (the “Series J Warrants” and, along with the Series J Preferred issued to Hakim, the “Securities”) in exchange for 158,017,321 shares of Common Stock owned by Hakim. The fair value of the Series J Warrants was determined to be $6,474,674 upon issuance at April 28, 2017.
~~F-18~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~

The Series J Warrants are exercisable for a period of 10 years from the date of issuance, commencing April 28, 2020. The initial exercise price is $0.1521 per share and the Series J Warrants can be exercised for cash or on a cashless basis. The exercise price is subject to adjustment for any issuances or deemed issuances of Common Stock or Common Stock equivalents at an effective price below the then exercise price. Such exercise price adjustment feature prohibits the Company from being able to conclude the warrants are indexed to its own stock and thus such warrants are classified as liabilities and measured initially and subsequently at fair value. The Series J Warrants also provide for other standard adjustments upon the ~~happening~~occurrence of certain customary events.
F-17
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The fair value of the Series J Warrants was calculated using a Black-Scholes ~~model instead of a Monte Carlo Simulation because the probability with the shareholder approval provisions was no longer a factor.~~model. The following assumptions were used in the Black-Scholes model to calculate the fair value of the Series J Warrants:
SCHEDULE OF FAIR VALUE OF WARRANTS ISSUED
December 31, 2021 March 31, 2021 September 30, 2022 March 31, 2022
Fair value of the Company’s Common Stock $ 0.0331 $ 0.0610 $ 0.0350 $ 0.0350
Volatility 74.89 % 75.18 % 71.19 % 76.55 %
Initial exercise price $ 0.1521 $ 0.1521 $ 0.1521 $ 0.1521
Warrant term (in years) 5.3 6.1 4.6 5.1
Risk free rate 1.44 % 1.40 % 3.97 % 2.40 %

The changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 were as follows:
SCHEDULE OF CHANGES IN WARRANTS MEASURED AT FAIR VALUE ON A RECURRING BASIS
Balance at March 31, 2021 $ 2,362,246
Change in fair value of derivative financial instruments - warrants (1,523,394 )
Balance at December 31, 2021 $ 838,852
Balance at March 31, 2022 $ 936,837
Change in fair value of derivative financial instruments – warrants (188,176 )
Balance at September 30, 2022 $ 748,661

NOTE ~~12.~~11. SHAREHOLDERS’ EQUITY

Lincoln Park Capital Transaction - July 8, 2020 Purchase Agreement

On July 8, 2020, the Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights agreement (the “2020 LPC Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase up to $25.0 million of the Company’s Common Stock, $0.001 par value per share, from time to time over the term of the 2020 LPC Purchase Agreement, at the Company’s direction.

The Company did not issue any shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement.

~~During~~As of September 30, 2022, the ~~nine months ended December 31, 2020 the~~ Company has issued an aggregate of 5,975,857 shares of Common Stock ~~in the amount~~for net proceeds of $469,105 to Lincoln Park as initial commitment shares. ~~The Company sold~~ ~~640,543~~ ~~shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the nine months ended December 31, 2020 for net proceeds totaling $42,223. In addition,~~ ~~10,094~~ ~~shares were issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement.~~
F-18
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE ~~13.~~12. STOCK-BASED COMPENSATION

Part of the compensation paid by the Company to its Directors and employees consists of the issuance of Common Stock or via the granting of options to purchase Common Stock.•

Stock-based Director Compensation

The Company’s Director compensation policy, instituted in October 2009 and further revised in January 2016, includes provisions that a portion of director’s fees are to be paid via the issuance of shares of the Company’s Common Stock, in lieu of cash, with the valuation of such shares being calculated on quarterly basis and equal to the average closing price of the Company’s Common Stock.

~~F-19~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
~~During the nine months ended December 31, 2021, the Company issued~~ ~~886,710~~ ~~shares~~As of ~~Common Stock to its Directors in payment of director’s fees totaling an aggregate of $60,000~~ and with such aggregate director’s fees being earned and accrued over the twelve-month period beginning on April 1, 2020 and ending on March 31, 2021. In addition, the Company made cash payments totaling an aggregate of $~~30,000~~ ~~in payment of director’s fees earned over the same twelve-month period.~~
~~During the nine months ended December 31, 2021,~~September 30, 2022, the Company accrued director’s fees totaling $~~67,500~~45,000, which will be paid via cash payments totaling $~~22,500~~15,000 and the issuance of ~~969,319~~739,449 shares of Common Stock.
~~As of December 31, 2021, the Company owed its Directors a total of $22,500~~ ~~in cash payments and~~ ~~969,319~~ ~~shares of Common Stock in payment of director fees totaling $67,500~~ ~~due and owing.~~ The Company anticipates that these shares of Common Stock will be issued prior to the end of the current fiscal year.
Stock-based Employee/Consultant Compensation

Employment contracts with the Company’s President and Chief Executive Officer and certain other employees and engagement contracts with certain consultants include provisions for a portion of each employee’s salaries or consultant’s fees to be paid via the issuance of shares of the Company’s Common Stock, in lieu of cash, with the valuation of such shares being calculated on a quarterly basis and equal to the average closing price of the Company’s Common Stock.

During the ~~nine~~six months ended ~~December 31, 2021, the Company issued~~ ~~1,218,526~~ ~~shares of Common Stock in payment of salaries totaling $97,500~~ pursuant to the employment contract of the Company’s former Chief Financial Officer, with such salaries being earned and accrued over the thirty-month period beginning on October 1, 2018 and ending on March 31, 2021.
~~During the nine months ended December 31, 2021,~~September 30, 2022, the Company accrued salaries totaling $~~581,250~~250,000 owed to the Company’s President and Chief Executive Officer and certain other employees which will be paid via the issuance of ~~12,787,606~~6,109,277 shares of Common Stock.

As of ~~December 31, 2021,~~September 30, 2022, the Company owed its President and Chief Executive Officer and certain other employees’ salaries totaling $~~3,543,750~~3,875,000 which will be paid via the issuance of ~~47,654,194~~56,300,056 shares of Common Stock.
F-19
~~During the nine months ended December 31, 2021, the Company accrued~~ ~~2,228,004~~ ~~shares of Common Stock in payment of consulting fees totaling $153,333~~, pursuant to engagement contracts with consultants, and with such consulting expenses being earned and accrued over the forty-eight-month period beginning on January 1, 2018 and ending December 31, 2021.

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Options

Under its 2014 Stock Option Plan and prior options plans, the Company may grant stock options to officers, selected employees, as well as members of the Board of Directors and advisory board members. All options have generally been granted at a price equal to or greater than the fair market value of the Company’s Common Stock at the date of the grant. Generally, options are granted with a vesting period of up to three years and expire ten years from the date of grant. A summary of the activity of Company’s 2014 Stock Option Plan for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 is as follows:
~~F-20~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~
SCHEDULE OF STOCK OPTION PLAN

Shares
Underlying
Options

Weighted
Average
Exercise Price

Weighted Average
Remaining Contractual Term (in years)

Aggregate Intrinsic
Value

Outstanding at March 31, 2021 5,900,000 $ 0.13 3.7 $ 6,000
Forfeited and expired (750,000 ) $ — — —
Granted 300,000 $ 0.06 3.0 —
Outstanding at December 31, 2021 5,450,000 $ 0.14 2.7 $ 6,000
Exercisable at December 31, 2021 5,130,001 $ 0.14 2.7 $ 6,000

Shares
Underlying
Options

Weighted
Average
Exercise Price

Weighted Average
Remaining Contractual
Term
(in years)

Aggregate Intrinsic
Value

Outstanding at March 31, 2022 5,650,000 $ 0.14 2.8 $ —
Granted 1,100,000 $ 0.04 9.6 $ 13,970
Outstanding at September 30, 2022 6,750,000 $ 0.14 2.5 $ —
Exercisable at September 30, 2022 4,530,001 $ 0.16 2.1 $ —

The aggregate intrinsic value for outstanding options is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s Common Stock as of ~~December 31, 2021~~September 30, 2022 and March 31, ~~2021~~2022 of $~~0.11~~0.10 and $~~0.06~~0.10, respectively.
As of September 30, 2022, there was $38,357 in unrecognized stock based compensation expense that will be recognized over 2.5 years.

NOTE ~~14.~~13. CONCENTRATIONS AND CREDIT RISK

Revenues

~~NaN~~Two customers accounted for approximately 9696%% of the Company’s revenues for the ~~nine~~six months ended ~~December 31,~~September 30, 2022. These two customers accounted for approximately 85% and 11% of revenues each, respectively.
Two customers accounted for approximately 95% of the Company’s revenues for the six months ended September 30, 2021. These two customers accounted for approximately 8585%% and 1110%% of revenues each, respectively. The same two customers accounted for 8488%% and 99%% of revenues each, respectively, for the three months ended ~~December 31,~~September 30, 2021.
~~NaN~~ ~~customers accounted for approximately~~ 93~~% of the Company’s revenues for the nine months ended December 31, 2020. These two customers accounted for approximately~~ 79~~% and~~ 14~~% of revenues each, respectively. The same two customers accounted for~~ 82~~% and~~ 12~~% of revenues each, respectively, for the three months ended December 31, 2020.~~

Accounts Receivable

~~NaN~~Two customers accounted for approximately 9997%% of the Company’s accounts receivable as of ~~December 31, 2021.~~September 30, 2022. These two customers accounted for approximately 7379%% and 2518%% of accounts receivable each, respectively.

~~NaN~~Two customers accounted for ~~substantially all~~approximately 91% the Company’s accounts receivable as of March 31, ~~2021.~~2022. These ~~three~~two customers accounted for approximately 7378%%, 15% and 1113%% of accounts receivable each, respectively.

Purchasing

~~NaN~~One ~~suppliers~~supplier accounted for ~~more than~~approximately 7062%% of the Company’s purchases of raw materials for the ~~nine~~six months ended ~~December 31, 2021. These four suppliers accounted for approximately~~ 55%, 6%, 5~~% and~~ 4~~% of purchases each, respectively.~~September 30, 2022.

~~NaN~~One ~~suppliers~~supplier accounted for ~~more than~~approximately 8161%% of the Company’s purchases of raw materials for the ~~nine~~six months ended ~~December 31, 2020. These four suppliers accounted for approximately~~ 59%, 12%, 5~~%, and~~ 5~~% of purchases each, respectively.~~September 30, 2021.

F-20
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE ~~15.~~14. SEGMENT RESULTS

FASB ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based on the way a company’s management organized segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
~~F-21~~
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(UNAUDITED)~~

The Company has determined that its reportable segments are ANDAs for generic products and NDAs for branded products. The Company identified its reporting segments based on the marketing authorization relating to each and the financial information used by its chief operating decision maker to make decisions regarding the allocation of resources to and the financial performance of the reporting segments.

Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s unaudited condensed consolidated financial statements.

The following represents selected information for the Company’s reportable segments:
SCHEDULE OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS
2021 2020 2021 2020 2022 2021 2022 2021
For the Three Months Ended December 31, For the Nine Months Ended December 31, For the Three Months Ended September 30, For the Six Months Ended September 30,
2021 2020 2021 2020 2022 2021 2022 2021
Operating Income by Segment
ANDA $ 3,061,035 $ 2,395,955 8,068,073 6,446,116 $ 2,186,932 $ 2,651,661 $ 4,118,625 $ 5,005,586
NDA — $ (10,972 ) — 142,812 — $ — — $ —
Operating Income by Segment $ 3,061,035 $ 2,384,983 $ 8,068,073 $ 6,588,928
Operating income by Segment $ 2,186,932 $ 2,651,661 $ 4,118,625 $ 5,005,586

The table below reconciles the Company’s operating income by segment to income from operations before provision for income taxes as reported in the Company’s unaudited condensed consolidated ~~statement~~statements of ~~operations:~~operations.

SCHEDULE OF OPERATING LOSS BY SEGMENT TO (LOSS) INCOME FROM OPERATIONS
2021 2020 2021 2020 2022 2021 2022 2021
For the Three Months Ended December 31, For the Nine Months Ended December 31, For the Three Months Ended September 30, For the Six Months Ended September 30,
2021 2020 2021 2020 2022 2021 2022 2021
Operating income by segment $ 3,061,035 $ 2,384,983 $ 8,068,073 $ 6,588,928 $ 2,186,932 $ 2,651,661 $ 4,118,625 $ 5,005,586
Corporate unallocated costs (716,881 ) (830,042 ) (2,288,461 ) (1,691,578 ) (587,700 ) (715,680 ) (1,086,925 ) (1,570,128 )
Interest income 13 98 77 463 43 21 172 64
Interest expense and amortization of debt issuance costs (37,400 ) (79,673 ) (126,376 ) (238,857 ) (242,753 ) (43,083 ) (459,540 ) (88,976 )
Depreciation and amortization expense (296,559 ) (328,899 ) (908,297 ) (990,861 ) (319,552 ) (299,036 ) (615,846 ) (611,738 )
Significant non-cash items (216,295 ) (217,900 ) (652,281 ) (686,000 ) (198,563 ) (214,368 ) (312,053 ) (435,986 )
Change in fair value of derivative instruments 489,500 1,083,566 1,523,394 1,645,042 688,319 419,433 188,176 1,033,894
Income from operations before income taxes $ 2,283,413 $ 2,012,133 $ 5,616,129 $ 4,627,137 $ 1,526,726 $ 1,798,948 $ 1,832,609 $ 3,332,716
NOTE ~~16.~~15. RELATED PARTY AGREEMENTS WITH MIKAH PHARMA, LLC

On December 3, 2018, the Company executed a development agreement with Mikah Pharma LLC (“Mikah”), pursuant to which Mikah and the Company will collaborate to develop and commercialize generic products including formulation development, analytical method development, bioequivalence studies and manufacture of development batches of generic products. Mikah was founded in 2009 by Hakim, a related party and the Company’s President, Chief Executive Officer and Chairman of the Board. As of March 31, 2021, the Company has incurred costs which are $238,451 in excess of advanced payments received to date from Mikah. This balance due from Mikah was offset, in full, against accrued interest due and owing to Mikah pursuant to the ~~Mikah~~Secured Promissory Note, ~~(see Note 7).~~dated May 15, 2017, issued by the Company to Mikah..
F-21
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

In May 2020, SunGen Pharma LLC (“SunGen”), pursuant to an asset purchase agreement, assigned its rights and obligations under the SunGen Agreement for Amphetamine IR and Amphetamine ER to Mikah Pharmaceuticals. The ANDAs for Amphetamine IR and Amphetamine ER are now registered under Elite’s name. Mikah will now be Elite’s partner with respect to Amphetamine IR and ER and will assume all the rights and obligations for these products from SunGen. Mikah Pharmaceuticals was founded in 2009 by Nasrat Hakim, a related party and the Company’s President, Chief Executive Officer and Chairman of the Board.

In June 2021, the Company entered into a development and license agreement with Mikah Pharma LLC, pursuant to which Mikah Pharma LLC will engage in the research, development, sales and licensing of generic pharmaceutical products. In addition, Mikah Pharma LLC will collaborate to develop and commercialize generic products including formulation development, analytical method development, manufacturing, sales and marketing of generic products. Initially two generic products were identified for the parties to develop.

~~F-22~~
NOTE 16. INCOME TAXES
~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~The Company’s effective tax rate was 11.5%
and income tax expense for the six months ended September 30, 2022 was $~~(UNAUDITED)~~11,587. The Company’s effective tax rate was 10.75% and income tax expense was $4,000 for the six months ended September 30, 2021. The Company has evaluated its deferred tax assets, specifically its net operating loss carryovers, for realizability and has provided a valuation allowance on the majority of its deferred tax assets. The valuation allowance is the reason that the effective tax rate and income tax expense are different than the statutory rate of 21%.

NOTE 17.~~INCOME TAXES~~
~~Sale of New Jersey Net Operating Loss~~
~~In April 2020, Elite Labs received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of $607,635~~ ~~relating to New Jersey net operating losses and net tax benefits of $338,772, relating to R&D tax credits. The Company sold the net tax benefits approved for sale for total proceeds of $946,407~~ ~~during the nine months ended December 31, 2020.~~
~~Sale of New Jersey Net Operating Loss and Research and Development Tax Credit~~
~~In April 2021, Elite Labs received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of $796,860~~ ~~relating to New Jersey net operating losses and net tax benefits of $58,490~~, relating to research and development tax credits. The Company sold the net tax benefits approved for sale at a transfer price equal to ninety-three- and one-half cents for every benefit dollar and incurred transaction fees of $~~12,861, resulting in net proceeds to the Company of $857,379, during the nine months ended December 31, 2021.~~
~~NOTE 18.~~ COVID-19 UPDATE

In December 2019, the Novel Corona Virus, COVID-19 was reported to have emerged in Wuhan, China. In March 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a global pandemic. Governments at the national, state and local level in the United States, and globally, have implemented aggressive actions to reduce the spread of the virus, with such actions including, without limitation, lockdown and shelter in place orders, limitations on non-essential gatherings of people, suspension of all non-essential travel, and ordering certain businesses and governmental agencies to cease non-essential operations at physical locations. Under current and applicable laws and regulations, the Company’s business is deemed essential and it has continued to operate in all aspects of its pharmaceutical manufacturing, distribution, product development, regulatory compliance and other activities. The Company’s management has developed and implemented a range of measures to address the risks, uncertainties, and operational challenges associated with operating in a COVID-19 environment. The Company is closely monitoring the rapidly evolving and changing situation and are implementing plans intended to limit the impact of COVID-19 on our business so that the Company can continue to manufacture those medicines used by end user patients. Actions the Company has taken to date are, without limitation, further described below.

Workforce

The Company has taken and will continue to take, proactive measures to provide for the well-being of its workforce while continuing to safely produce pharmaceutical products. The Company has implemented alternative working practices, which include, without limitation, modified schedules, shift rotation and work at home abilities for appropriate employees to best ensure adequate social distancing. In addition, the Company increased its already thorough cleaning protocols throughout its facilities and has prohibited visits from non-essential visitors. Certain of these measures have resulted in increased costs.

Manufacturing and Supply Chain

During the ~~three and nine~~six months ended ~~December 31, 2021,~~September 30, 2022, and as of the date of this Quarterly Report on Form 10-Q, the Company has not experienced material, detrimental issues related to COVID-19 in its manufacturing, supply chain, quality assurance and regulatory compliance activities, and has been able to operate without interruption. The Company has taken, and plans to continue to take, commercially practical measures to keep its facilities open. The Company’s supply chains remain intact and operational, and the Company is in regular communications with its suppliers and third-party partners. A prolonging of the current situation relating to COVID-19 may result in an increased risk of interruption in the Company supply chain in the future, with no assurances given as the materiality of such future interruption on the Company’s business, financial condition, results of operations and cash flows.
NOTE ~~19.~~18. SUBSEQUENT EVENTS
On November 2, 2022, in a press release, the Company reported positive results from pivotal fed and fasted bioequivalence studies for an undisclosed extended-release generic drug product in a class of medications called dopamine agonists. The results indicate that the generic product is bioequivalent to the branded product.
The studies were single-dose crossover comparative bioavailability studies in healthy male and female volunteers in both the fed and fasting states. The results indicate that the generic product is bioequivalent to the branded product. The Company ~~has evaluated subsequent events from~~is compiling the ~~balance sheet date through February 11,~~data for this product to file an Abbreviated New Drug Application with the US Food and Drug Administration.
On November 10, 2022, in an 8-K, the Company reported the termination of the License, Supply, and ~~noted no material subsequent events.~~Distribution Agreement with Lannett Company, Inc for Vigabatrin, 500 mg. effective as of November 9, 2022. All marketing rights will return at that time to Elite.

~~F-23~~F-22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations for the ~~three and nine~~six months ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended March 31, ~~2021.~~2022. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms “Elite”, the “Company”, “we”, “us”, and “our” refer to Elite Pharmaceuticals, Inc. and subsidiary.

Background

Elite Pharmaceuticals, Inc., a Nevada corporation (the “Company”, “Elite”, “Elite Pharmaceuticals”, the “registrant”, “we”, “us” or “our”) was incorporated on October 1, 1997 under the laws of the State of Delaware, and its ~~wholly owned~~wholly-owned subsidiary, Elite Laboratories, Inc. (“Elite Labs”), was incorporated on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of Nevada.

We are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, using proprietary know-how and technology for the manufacture of generic pharmaceuticals. Our strategy includes developing generic versions of controlled-release drug products with high barriers to entry.

We occupy manufacturing, warehouse, laboratory and office space at 165 Ludlow Avenue and 135 Ludlow Avenue in Northvale, NJ (the “Northvale Facility”). The Northvale Facility operates under Current Good Manufacturing Practice (“cGMP”) and is a United States Drug Enforcement Agency (“DEA”) registered facility for research, development and manufacturing. We are also party to an operating lease for office space in Pompano Beach, Florida (the “Pompano Office Lease”).

Strategy

We focus our efforts on the following areas: (i) manufacturing of a line of generic pharmaceutical products with approved Abbreviated New Drug Applications (“ANDAs”); (ii) development of additional generic pharmaceutical products; (iii) development of the other products in our pipeline including the products with our partners; (iv) commercial exploitation of our products either by license and the collection of royalties, or through the manufacture of our formulations; and (v) development of new products and the expansion of our licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations.

Our focus is on the development of various types of drug products, including generic drug products which require ANDAs as well as branded drug products which require New Drug Applications (“NDAs”) under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Drug Price Competition Act”).

We believe that our business strategy enables us to reduce its risk by having a diverse product portfolio that includes generic products in various therapeutic categories and to build collaborations and establish licensing agreements with companies with greater resources thereby allowing us to share costs of development and improve cash-flow.
Recent Developments
Notice of Termination of License, Supply and Distribution Agreement
On September 14, 2022, the Company has provided written notice pursuant to Section 8.2 of the License, Supply and Distribution Agreement between the Company and Elite Laboratories, Inc. and Epic Pharma, Inc. dated November 21, 2020 (“the Epic Agreement”) that the Company and Elite Laboratories, Inc. are now providing notice of termination of the Epic Agreement, with such termination to be effective March 31, 2023.

1

Commercial Products

We own, license, contract manufacture or have contractual rights to receive royalties from the following products currently approved for commercial sale:

Product
Branded
Product
Equivalent

Therapeutic
Category

Launch
Date
Phentermine HCl 37.5mg tablets (“
(“Phentermine 37.5mg”)
Adipex-P® Bariatric April 2011
Phendimetrazine Tartrate 35mg tablets
(“Phendimetrazine 35mg”)
Bontril® Bariatric November 2012
Phentermine HCl 15mg and 30mg capsules
(“Phentermine 15mg” and “Phentermine 30mg”)
Adipex-P® Bariatric April 2013
Naltrexone HCl 50mg tablets
(“Naltrexone 50mg”)
Revia® Addiction Treatment September 2013
Isradipine 2.5mg and 5mg capsules (“
(“Isradipine 2.5mg” and “Isradipine 5mg”)
n/a Cardiovascular January 2015
Oxycodone HCl Immediate Release 5mg, 10mg, 15mg, 20mg and 30mg tablets (“OXY IR 5mg”, “Oxy IR 10mg”, “Oxy IR 15mg”, “OXY IR 20mg” and “Oxy IR 30mg”) Roxycodone® Pain March 2016
Trimipramine Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine 100mg”) Surmontil® Antidepressant May 2017
Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg” and “Amphetamine IR 30mg”) Adderall® Central Nervous System (“CNS”) Stimulant April 2019
Dantrolene Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”) Dantrium® Muscle Relaxant June 2019
Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and 30mg capsules (“Amphetamine ER 5mg”, “Amphetamine ER 10mg”, “Amphetamine ER 15mg”, “Amphetamine ER 20mg”, “Amphetamine ER 25mg”, and “Amphetamine ER 30mg”) Adderall XR® Central Nervous System (“CNS”) Stimulant March 2020
Loxapine Succinate 5mg, 10mg, 25mg and 50gm capsules (“Loxapine 5mg”, “Loxapine 10mg”, “Loxapine 25mg”, and Loxapine 50mg”) Loxapine® Antipsychotic May 2021

Approved Products Not Yet Commercialized

Acetaminophen and Codeine Phosphate

The Company received approval on September 10, 2019 from the FDA of an ANDA for a generic version of Tylenol® with Codeine (acetaminophen and codeine phosphate). Acetaminophen with codeine is a combination medication indicated for the management of mild to moderate pain, where treatment with an opioid is appropriate and for which alternative treatments are inadequate. The Company is not pursuing licensing deals for any opioids at this time and, in light of the current market and litigation around opioid products, the Company has no plans to commercialize this product at this time.
The Company received approval on June 27, 2022 from the FDA of an ANDA for a generic version of Sabril® (Vigabatrin USP) 500 mg powder for solution packet. Vigabatrin is an antiepileptic drug indicated for refractory complex partial seizures and used as an adjunctive therapy in patients who have inadequately responded to several alternative treatments. We are evaluating potential commercial opportunities.
The Company received approval on April 4, 2022 from the FDA of an ANDA for a generic version of Doxycycline (doxycycline hyclate) 100mg tablets. Doxycycline hyclate is an antibiotic that is used to treat a wide variety of bacterial infections. This product was co-developed and co-owned by Elite and Praxgen Pharmaceuticals LLC, formerly SunGen Pharma LLC. We are evaluating potential commercial opportunities.
2
Critical Accounting Policies and Estimates

The preparation of the unaudited condensed consolidated financial statements and related disclosures in conformity with GAAP, and our discussion and analysis of ~~its~~the Company’s financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in ~~its~~the Company’s unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.

2
There were no significant changes during the ~~three~~six months ended ~~December 31, 2021~~September 30, 2022 to the items that we disclosed as our significant accounting policies and estimates described in “Note 1, Summary of Significant Accounting Policies” to the Company’s financial statements as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021.~~2022.
Results of Operations

The following set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.
Three months ended ~~December 31, 2021~~September 30 2022 compared to ~~December 31, 2020~~September 30, 2021
Revenue, Cost of revenue and Gross profit:

For the Three Months Ended December 31, Change
For the Three Months Ended
September 30,
Change
2021 2020 Dollars Percentage 2022 2021 Dollars Percentage
Manufacturing fees $ 7,667,674 $ 4,849,871 $ 2,817,803 58 % $ 7,187,363 $ 7,221,711 $ (34,348 ) — %
Licensing fees 1,307,140 1,196,711 110,429 9 % 1,398,400 1,336,730 61,670 5 %
Total revenue 8,974,814 6,046,582 2,928,232 48 % 8,585,763 8,558,441 27,322 — %
Cost of manufacturing 4,957,150 2,643,175 2,313,975 88 % 4,761,329 4,790,292 (28,963 ) (1 )%
Gross profit $ 4,017,664 $ 3,403,407 $ 614,257 18 % $ 3,824,434 $ 3,768,149 $ 56,285 1 %

Gross profit - percentage 45 % 56 % 45 % 44 %

Total revenues for the three-month period ended ~~December 31, 2021~~September 30, 2022 increased by $3$0.03 million or ~~48%~~0.3%, to ~~$9.0~~$8.59 million, as compared to ~~$6.0~~$8.56 million, for the corresponding period of the prior year, primarily due to ~~strong~~the increased sales of Amphetamine IR Tablets and Amphetamine ER ~~tablets~~Capsules during the ~~three-month~~three month period ended ~~December 31, 2021~~September 30, 2022 as compared to the comparable period of the prior fiscal year.

Manufacturing fees ~~increased~~decreased by ~~$2.8~~$0.03 million, or ~~58%~~0.5%, primarily due to ~~strong~~decreased sales of Amphetamine IR Tablets and Amphetamine ER ~~tablets~~Capsules during the ~~three-month~~three month period ended ~~December 31, 2021~~September 30, 2022 as compared to the comparable period of the prior fiscal year.

Licensing fees increased by ~~$0.1~~$0.06 million, or 9%5%. This increase is primarily due to ~~strong sales~~licensing fees earned from the sale of Amphetamine ER Capsules and Amphetamine IR ~~and ER tablets~~Tablets during the three months ended ~~December 31, 2021~~September 30, 2022 as compared to the comparable period of the prior fiscal year.

Costs of revenue consists of manufacturing and assembly costs. Our costs of revenue ~~increased~~decreased by ~~$2.3~~$0.03 million or ~~88%~~0.6%, to ~~$4.9~~$4.76 million as compared to ~~$2.6~~$4.79 million for the corresponding period in the prior fiscal year. This ~~increase~~decrease was due in large part to ~~higher revenues~~an improved margin on products sold during the three months ended ~~December 31, 2021,~~September 30, 2022, as compared to the comparable period of the prior fiscal year.

Our gross profit margin was 45% during the three months ended ~~December 31, 2021~~September 30, 2022 as compared to ~~56%~~44% during the comparable period of the prior fiscal year.

3

Operating expenses:

For the Three Months Ended December 31, Change
For the Three Months Ended
September 30,
Change
2021 2020 Dollars Percentage 2022 2021 Dollars Percentage
Operating expenses:
Research and development $ 956,628 $ 1,245,669 $ (289,041 ) (23 )% $ 1,227,269 $ 1,116,488 $ 110,781 10 %
General and administrative 929,547 826,019 103,528 13 % 1,190,523 925,872 264,651 29 %
Non-cash compensation 3,630 1,651 1,979 120 % 5,973 4,176 1,797 43 %
Depreciation and amortization 296,559 328,899 (32,340 ) (10 )% 319,552 299,036 20,516 7 %
Total operating expenses $ 2,186,364 $ 2,402,238 $ (215,874 ) (9 )% $ 2,743,317 $ 2,345,572 $ 397,745 17 %

Operating expenses consist of research and development costs, general and administrative costs, non-cash compensation and depreciation and amortization expenses. Operating expenses ~~for~~from the three months ended ~~December 31, 2021 decreased~~September 30, 2022 increased by ~~$0.2~~$0.4 million, or 9%17%, to ~~$2.2~~$2.7 million as compared to ~~$2.4~~$2.3 million for the corresponding period in the prior fiscal year.

Research and development costs ~~for~~during the three months ended ~~December 31, 2021~~September 30, 2022 were ~~$0.9~~$1.2 million, ~~a decrease~~an increase of ~~$0.3~~$0.1 million, or ~~23%~~10%, from ~~$1.2~~approximately $1.1 million of such costs for the comparable period of the prior year. The increase was a result of the timing and nature of product development activities during the three months ended September 30, 2022 as compared to the comparable period of the prior fiscal year.

General and administrative expenses ~~for~~during the three months ended ~~December 31, 2021~~September 30, 2022 were ~~$0.9~~$1.2 million, an increase of ~~$0.1~~$0.3 million, or ~~13%~~29% from ~~$0.8~~$0.9 million of such costs for the comparable period of the prior ~~year.~~year due to increased spending in payroll and professional expense.

Non-cash compensation expense ~~for~~during the three months ended ~~December 31,~~September 30, 2022 and September 30, 2021 ~~and 2020~~ was less than $0.1 million.

Depreciation and amortization expenses ~~for~~during the three months ended ~~December 31, 2021~~September 30, 2022 were $0.3 million, which ~~remained consistent~~was virtually unchanged from $0.3 million ofin such costs for the comparable period of the prior fiscal year.

As a result of the foregoing, our income from operations ~~for~~during the three months ended ~~December 31, 2021~~September 30, 2022 was ~~$1.8~~$1.1 million, compared to income from operations of ~~$1.0~~$1.4 million for the comparable period of the prior fiscal year.

Other income ~~net:~~(expense):

For the Three Months Ended December 31, Change
For the Three Months Ended
September 30,
Change
2021 2020 Dollars Percentage 2022 2021 Dollars Percentage
Other income, net:
Other income (expense):
Change in fair value of derivative instruments $ 489,500 $ 1,083,566 $ (594,066 ) (55 )% $ 688,319 $ 419,433 $ 268,886 64 %
Interest expense and amortization of debt issuance costs (37,400 ) (79,673 ) 42,273 (53 )% (242,753 ) (43,083 ) (199,670 ) 463 %
Gain on sale of fixed assets — 6,973 (6,973 ) (100 )%
Interest income 13 98 (85 ) (87 )% 43 21 22 105 %
Other income, net $ 452,113 $ 1,010,964 $ (558,851 ) (55 )%
Other (expense) income, net $ 445,609 $ 376,371 $ 69,238 18 %

Other income ~~net~~(expense) for the three months ended ~~December 31, 2021~~September 30, 2022 was ~~$0.5~~$0.4 million, ~~a decrease~~an increase of ~~$0.6~~$0.1 million from the other income ~~net~~(expense) of ~~$1.0~~$0.4 million for the comparable period of the prior fiscal year. The ~~decrease in other income~~increase was due to ~~income~~expenses relating to changes in the fair value of our outstanding derivative warrants during the three months ended ~~December 31, 2021.~~September 30, 2022. Please note that the change in the fair value of derivative instruments is determined in large part by the change in the closing price of the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing price of the Company’s Common Stock. Please see Note 11 to the Unaudited Condensed Consolidated Financial Statements above.

4

The increase in interest expense was primarily attributable to the increased interest payments related to the loan and mortgage the Company obtained from East West Bank.
As a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the three months ended ~~December 31, 2021~~September 30, 2022 was ~~$2.3~~$1.5 million, compared to net income ~~of $2.0~~$1.8 million for the comparable period of the prior fiscal year.
~~Nine~~Six months ended ~~December 31, 2021~~September 30, 2022 compared to ~~December 31, 2020~~September 30, 2021

Revenue, Cost of revenue and Gross profit:
For the Nine Months Ended December 31, Change
For the Six Months Ended
September 30,
Change
2021 2020 Dollars Percentage 2022 2021 Dollars Percentage
Manufacturing fees $ 20,639,421 $ 17,659,834 $ 2,979,587 17 % $ 13,514,504 $ 12,971,747 $ 542,757       4 %
Licensing fees 3,950,623 3,325,384 625,239 19 % 2,744,167 2,643,483 100,684 4 %
Total revenue 24,590,044 20,985,218 3,604,826 17 % 16,258,671 15,615,230 643,441 4 %
Cost of manufacturing 13,209,430 10,984,021 2,225,409 20 % 8,436,390 8,253,369 183,021 2 %
Gross profit $ 11,380,614 $ 10,001,197 $ 1,379,417 14 % $ 7,822,281 $ 7,361,861 $ 460,420 6 %

Gross profit - percentage 46 % 48 %

Total revenues for the ~~nine-month~~six months period ended ~~December 31, 2021~~September 30, 2022 increased by ~~$3.6~~$0.6 million or ~~17%~~4%, to ~~$24.6~~$16.3 million, as compared to ~~$21.0~~$15.6 million, for the corresponding period of the prior year, primarily due ~~strong~~to the increased sales of Amphetamine IR Tablets and Amphetamine ER ~~tablets~~Capsules during the ~~nine-month period~~six months ended ~~December 31, 2021~~September 30, 2022 as compared to the comparable period of the prior fiscal year.

Manufacturing fees ~~for the nine-month period ended December 31, 2021 were $20.6 million, an increase of $2.9~~increased by $0.5 million, or ~~17%~~4%, ~~from $17.7 million~~ primarily due to ~~strong~~increased sales of Amphetamine IR Tablets and Amphetamine ER ~~tablets~~Capsules during the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 as compared to the comparable period of the prior fiscal year.

Licensing fees increased by ~~$0.6~~$0.1 million, or ~~19%~~4%. This increase is primarily due to ~~strong sales~~licensing fees earned from the sale of Amphetamine ER Capsules and Amphetamine IR ~~and ER tablets~~Tablets during the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 as compared to the comparable period of the prior fiscal year.

Costs of revenue consists of manufacturing and assembly costs. Our costs of revenue ~~for the nine-month period ended December 31, 2021 were $13.2 million, an increase of $2.2~~increased by $0.2 million or ~~20%~~2%, ~~from $11.0~~to $8.4 million ~~of such fees for the comparable period of the prior year.~~
~~Our gross profit margin was 46% during the nine months ended December 31, 2021~~ as compared to ~~48%~~$8.3 million for the corresponding period in the prior fiscal year. This increase was due in large part to an increase in manufacturing revenues, and also due to an improved margin on products sold during the six months ended September 30, 2022, as compared to the comparable period of the prior fiscal year.

Our gross profit margin was 48% during the six months ended September 30, 2022 as compared to 47% during the comparable period of the prior fiscal year.
5

Operating expenses:

For the Nine Months Ended December 31, Change
For the Six Months Ended
September 30,
Change
2021 2020 Dollars Percentage 2022 2021 Dollars Percentage
Operating expenses:
Research and development $ 3,312,540 $ 3,337,287 $ (24,747 ) (1 )% $ 2,182,712 $ 2,356,275 $ (173,563 )      (7 )%
General and administrative 2,930,126 2,491,762 438,364 18 % 2,908,627 1,999,127 909,500 45 %
Non-cash compensation 10,617 9,261 1,356 15 % 11,295 6,987 4,308 62 %
Depreciation and amortization 908,297 990,861 (82,564 ) (8 )% 615,846 611,738 4,108 1 %
Total operating expenses $ 7,161,580 $ 6,829,171 $ 332,409 5 % $ 5,718,480 $ 4,974,127 $ 744,353 15 %

Operating expenses consist of research and development costs, general and administrative costs, non-cash compensation and depreciation and amortization expenses. Operating expenses for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 increased by ~~$0.3~~$0.7 million, or 5%15%, to ~~$7.1~~$5.7 million as compared to ~~$6.8~~$5.0 million for the corresponding period in the prior fiscal year.

Research and development costs ~~for~~during the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 were ~~$3.3~~$2.2 million, ~~which was virtually unchanged~~a decrease of $0.2 million, or 7%, from approximately ~~$3.3~~$2.4 million of such costs for the comparable period of the prior year. The decrease was a result of the timing and nature of product development activities during the six months ended September 30, 2022 as compared to the comparable period of the prior fiscal year.

General and administrative expenses for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 were $2.9 million, an increase of ~~$0.4~~$0.9 million, or ~~18%~~45% from ~~$2.5~~$2.0 million of such costs for the comparable period of the prior year due to increased ~~costs~~spending in payroll and ~~headcounts relating to regulatory compliance and laboratory activities.~~professional expense.

Non-cash compensation expense for the ~~nine~~six months ended ~~December 31,~~September 30, 2022 and September 30, 2021 ~~and 2020~~ was less than $0.1 million.

Depreciation and amortization expenses ~~for~~from the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 were ~~$0.9~~$0.6 million, which was virtually unchanged from ~~$1.0~~$0.6 million in such costs for the comparable period of the prior fiscal year.

As a result of the foregoing, our income from operations ~~for~~during the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 was ~~$4.2~~$2.1 million, compared to income from operations of ~~$3.2~~$2.4 million for the comparable period of the prior fiscal year.

6
Other income (expense):

~~Other income, net:~~
For the Nine Months Ended December 31, Change
For the Six Months Ended
September 30,
Change
2021 2020 Dollars Percentage 2022 2021 Dollars Percentage
Other income, net:
Other income (expense):
Change in fair value of derivative instruments $ 1,523,394 $ 1,645,042 $ (121,648 ) (7 )% $ 188,176 $ 1,033,894 $ (845,718 ) (82 )%
Interest expense and amortization of debt issuance costs (126,376 ) (238,857 ) 112,481 47 % (459,540 ) (88,976 ) (370,564 ) 416 %
Gain on sale of fixed assets — 48,463 (48,463 ) (100 )%
Interest income 77 463 (386 ) (83 )% 172 64 108 169 %
Other income, net $ 1,397,095 $ 1,455,111 $ (58,016 ) (4 )%
Other (expense) income, net $ (271,192 ) $ 944,982 $ (1,216,174 ) (129 )%

Other income ~~net~~(expense) for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 was ~~$1.4~~$0.3 million, a decrease of ~~$0.1~~$1.2 million from ~~the other income, net of $1.5~~$0.9 million for the comparable period of the prior fiscal year. The decrease ~~in other income~~ was due to ~~income~~expenses relating to changes in the fair value of our outstanding derivative warrants during the ~~nine-month period~~six months ended ~~December 31, 2021.~~September 30, 2022. Please note that the change in the fair value of derivative instruments is determined in large part by the change in the closing price of the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing price of the Company’s Common Stock. Please see Note 11 to the Unaudited Condensed Consolidated Financial Statements above.

As a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 was ~~$5.6~~$1.8 million, compared to net income ~~$4.6~~$3.3 million for the comparable period of the prior fiscal year.

Liquidity and Capital Resources

Capital Resources

December 31, 2021 March 31, 2021 Change September 30, 2022 March 31, 2022 Change
Current assets $ 17,475,013 $ 12,194,667 $ 5,280,346 $ 30,472,709 $ 18,861,389 $ 11,611,320
Current liabilities $ 5,878,203 $ 5,812,531 $ 65,672 $ 6,843,061 $ 6,694,241 $ 148,820
Working capital $ 11,596,810 $ 6,382,136 $ 5,214,674 $ 23,629,648 $ 12,167,148 $ 11,462,500

Our working capital (total current assets less total current liabilities) increased by ~~$5.2~~$11.5 million from ~~$6.4~~$12.2 million as of March 31, ~~2021~~2022 to ~~$11.6~~$23.6 million as of ~~December 31, 2021,~~September 30, 2022, with such increase being primarily related to the ~~net income~~cash proceeds of ~~$6.5~~$14.6 million ~~and a net positive cash flow of $4.1 million achieved~~from the new loan during the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022.

6
Summary of Cash Flows:

For the Nine Months Ended December 31, For the Six Months Ended September 30,
2021 2020 2022 2021
Net cash provided by operating activities $ 4,902,978 $ 3,943,229 $ 937,898 $ 1,869,244
Net cash used in investing activities $ (234,387 ) $ (77,879 ) $ (5,199,696 ) $ (152,311 )
Net cash (used in) provided by financing activities $ (572,889 ) $ 415,910
Net cash provided by (used in) financing activities $ 14,281,600 $ (419,025 )

Net cash provided by operating activities for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 was ~~$4.9~~$0.9 million, which included net income of ~~$6.5~~$1.8 million and increases in non-cash expenses totaling ~~$0.2~~$0.8 million, offset by net ~~increases~~changes in assets and ~~decreases in~~ liabilities totaling ~~$(1.8)~~$1.7 million.

Net cash used in investing activities for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 was comprised of purchases of property and equipment of ~~$0.2~~approximately $5.2 million.
7

Net cash ~~used in~~provided by financing activities was ~~$0.6~~$14.3 million for the ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 which ~~consisted of~~proceeds from loan ~~and bond payments.~~issuances totaling $14.6 million, offset by loan payments totaling $0.2 million.

Lincoln Park Capital – July 8, 2020 Purchase Agreement

On July 8, 2020, the Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights agreement, with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase up to $25.0 million of the Company’s Common Stock, $0.001 par value per share, from time to time over the term of the 2020 LPC Purchase Agreement, at the Company’s direction.

During the six months ended September 30, 2022 and September 30, 2021, respectively, there were no shares sold to Lincoln Park pursuant to the 2020 LPC Purchase Agreement. In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Purchase Agreement.
The Company did not issue any shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the ~~nine~~six months ended ~~December 31,~~September 30, 2021. In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement.
During the nine months ended December 31, 2020 the Company issued an aggregate of 5,975,857 shares of Common Stock in the amount of $469,105 to Lincoln Park as initial commitment shares. The Company sold 640,543 shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the nine months ended December 31, 2020 for net proceeds totaling $42,223. In addition, 10,094 shares were issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement for net proceeds totaling $732.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, ~~2021~~2022 at the reasonable assurance level.

7
Management’s Report on Internal Control Over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
8

Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are achieved. Further, the design of a control system must be balanced against resource constraints, and therefore the benefits of controls must be considered relative to their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Accordingly, given the inherent limitations in a cost-effective system of internal control, financial statement misstatements due to error or fraud may occur and may not be detected. Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives. We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies and procedures.

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation, management has concluded that our internal control over financial reporting was effective as of ~~December 31, 2021~~September 30, 2022 at the reasonable assurance level.

Changes in Internal Controls Over Financial Reporting

There were no changes ~~subsequent to those identified in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 filed with the SEC on June 15, 2021,~~ in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the ~~end of the~~ period covered by this Quarterly Report.
98

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Pending Litigation

We may be subject from time to time to various claims and legal actions arising during the ordinary course of our business. We believe that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on our results of operations, financial condition or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021.~~2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.
109

ITEM 6. EXHIBITS

Exhibit
No.
Description

31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)*

31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)*

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.
** Furnished herewith.

1110

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ELITE PHARMACEUTICALS, INC.

~~February~~November 14, 2022 By: /s/ Nasrat Hakim

Nasrat Hakim
Chief Executive Officer, President and
Chairman of the Board of Directors
(Principal Executive Officer)

~~February~~November 14, 2022 By: /s/ ~~Marc Bregman~~Robert Chen

~~Marc Bregman~~Robert Chen
Chief Financial Officer ~~Treasurer and Secretary~~
(Principal ~~Financial~~Accounting and ~~Accounting~~Financial Officer)
1211

	December 31, 2021			March 31, 2021
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash	$	7,288,456		$	3,192,768
Accounts receivable, net of allowance for doubtful accounts of $-0-, respectively		2,661,413			3,496,376
Inventory		6,694,070			5,012,902
Prepaid expenses and other current assets		831,074			492,621
Total current assets		17,475,013			12,194,667

Property and equipment, net of accumulated depreciation of $13,051,288 and $12,153,626, respectively		5,986,090			6,649,365

Intangible assets, net of accumulated amortization of $-0-, respectively		6,634,035			6,634,035

Operating lease - right-of-use asset		1,082,168			214,674

Other assets:
Restricted cash - debt service for NJEDA bonds		405,027			405,013
Security deposits		364,563			91,738
Total other assets		769,590			496,751
Total assets	$	31,946,896		$	26,189,492

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,284,334		$	929,690
Accrued expenses		4,026,300			4,270,600
Deferred revenue, current portion		13,333			13,333
Bonds payable, current portion, net of bond issuance costs		100,822			95,822
Loans payable, current portion		299,601			314,996
Lease obligation - operating lease, current portion		153,813			188,090
Total current liabilities		5,878,203			5,812,531

Long-term liabilities:
Deferred revenue, net of current portion		35,559			45,558
Bonds payable, net of current portion and bond issuance costs		1,136,303			1,240,668
Loans payable, net of current portion		296,696			500,066
Lease obligation - operating lease, net of current portion		933,542			38,866
Derivative financial instruments - warrants		838,852			2,362,246
Other long-term liabilities		38,187			37,628
Total long-term liabilities		3,279,139			4,225,032
Total liabilities		9,157,342			10,037,563
Shareholders’ equity:
Series J convertible preferred stock; par value of $0.01; 50 shares authorized; 0 issued and outstanding as of December 31, 2021 and March 31, 2021		—			—
Common Stock; par value $0.001; 1,445,000,000 shares authorized; 1,011,381,988 shares issued and 1,011,281,988 shares outstanding as of December 31, 2021; 1,009,276,752 shares issued and 1,009,176,752 shares outstanding as of March 31, 2021		1,011,385			1,009,279
Additional paid-in capital		164,573,491			164,407,480
Treasury stock; 100,000 shares as of December 31, 2021 and March 31, 2021; at cost		(306,841	)		(306,841	)
Accumulated deficit		(142,488,481	)		(148,957,989	)
Total shareholders’ equity		22,789,554			16,151,929
Total liabilities and shareholders’ equity	$	31,946,896		$	26,189,492

	2021			2020			2021			2020
	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2021			2020			2021			2020
Revenue:
Manufacturing fees		7,667,674		$	4,849,871		$	20,639,421		$	17,659,834
Licensing fees		1,307,140			1,196,711			3,950,623			3,325,384
Total revenue		8,974,814			6,046,582			24,590,044			20,985,218
Cost of manufacturing		4,957,150			2,643,175			13,209,430			10,984,021
Gross profit		4,017,664			3,403,407			11,380,614			10,001,197

Operating expenses:
Research and development		956,628			1,245,669			3,312,540			3,337,287
General and administrative		929,547			826,019			2,930,126			2,491,762
Non-cash compensation through issuance of stock options		3,630			1,651			10,617			9,261
Depreciation and amortization		296,559			328,899			908,297			990,861
Total operating expenses		2,186,364			2,402,238			7,161,580			6,829,171

Income from operations		1,831,300			1,001,169			4,219,034			3,172,026

Other income, net:
Change in fair value of derivative instruments		489,500			1,083,566			1,523,394			1,645,042
Interest expense and amortization of debt issuance costs		(37,400	)		(79,673	)		(126,376	)		(238,857	)
Gain on sale of fixed assets		—			6,973			—			48,463
Interest income		13			98			77			463
Other income, net		452,113			1,010,964			1,397,095			1,455,111

Income from operations before income taxes		2,283,413			2,012,133			5,616,129			4,627,137

Income tax expense		—			—			(4,000	)		(2,500	)

Net benefit for sale of state net operating losses and credits		—			—			857,379			946,407

Net income attributable to common shareholders	$	2,283,413		$	2,012,133		$	6,469,508		$	5,571,044

Basic net income per share attributable to common shareholders	$	0.00		$	0.00		$	0.01		$	0.01

Diluted net income per share attributable to common shareholders	$	0.00		$	0.00		$	0.00		$	0.01

Basic weighted average Common Stock outstanding		1,011,281,988			1,009,176,752			1,010,416,823			921,339,333

Diluted weighted average Common Stock outstanding		1,011,281,988			1,009,176,752			1,010,416,823			921,339,333

	Shares		Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Equity
	Series J Preferred Stock				Common Stock				Additional Paid-In		Treasury Stock					Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Equity
Balance as of March 31, 2021		—	$	—		1,009,276,752	$	1,009,279	$	164,407,480		100,000	$	(306,841	)	$	(148,957,989	)	$	16,151,929

Net income		—		—		—		—		—		—		—			2,389,118			2,389,118
Conversion of Preferred Stock to Common Stock
Conversion of Preferred Stock to Common Stock, shares
Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement
Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement, shares
Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement
Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement, shares
Common Stock issued as additional commitment shares pursuant to the 2020 Lincoln Park purchase agreement
Common Stock issued as additional commitment shares pursuant to the 2020 Lincoln Park purchase agreement, shares
Costs associated with raising capital
Shares issued in payment of Director fees
Shares issued in payment of Director fees, shares
Shares issued in payment of consulting expenses
Shares issued in payment of consulting expenses, shares

Non-cash compensation through the issuance of employee stock options		—		—		—		—		2,811		—		—			—			2,811

Shares issued in payment of salaries		—		—		2,105,236		2,106		155,394		—		—			—			157,500

Balance at June 30, 2021		—	$	—		1,011,381,988	$	1,011,385	$	164,565,685		100,000	$	(306,841	)	$	(146,568,871	)	$	18,701,358

Net income		—	$	—		—	$	—	$	—		—	$	—		$	1,796,977			1,796,977

Non-cash compensation through the issuance of employee stock options		—		—		—		—		4,176		—		—			—			4,176

Balance at September 30, 2021		—	$	—		1,011,381,988	$	1,011,385	$	164,569,861		100,000	$	(306,841	)	$	(144,771,894	)	$	20,502,511

Net income		—	$	—		—	$	—	$	—		—	$	—		$	2,283,413		$	2,283,413

Non-cash compensation through the issuance of employee stock options		—	$	—		—	$	—	$	3,630		—	$	—		$	—		$	3,630

Balance at December 31, 2021		—	$	—		1,011,381,988	$	1,011,385	$	164,573,491		100,000	$	(306,841	)	$	(142,488,481	)	$	22,789,554

(continued)	Series J Preferred Stock						Common Stock				Additional Paid-In			Treasury Stock					Accumulated			Total Shareholders’
	Shares			Amount			Shares		Amount		Capital			Shares		Amount			Deficit			Equity
Balance as of March 31, 2020		24		$	13,903,960			840,504,367	$	840,507	$	150,264,605			100,000	$	(306,841	)	$	(154,046,410	)	$	10,655,821

Net income		—			—			—		—		—			—		—			1,077,349			1,077,349

Non-cash compensation through the issuance of employee stock options		—			—			—		—		5,521			—		—			—			5,521

Shares issued in payment of salaries		—		$	—			574,597	$	574	$	49,426			—	$	—		$	—			50,000

Balance at June 30, 2020		24		$	13,903,960			841,078,964	$	841,081	$	150,319,552			100,000	$	(306,841	)	$	(152,969,061	)	$	11,788,691

Net income		—			—			—		—		—			—		—			2,481,562			2,481,562

Conversion of Preferred Stock to Common Stock		(24	)		(13,903,960	)		158,017,321		158,017		13,745,943			—		—			—			—

Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement		—			—			5,975,857		5,976		463,129			—		—			—			469,105

Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement		—			—			640,543		641		41,582			—		—			—			42,223

Common Stock issued as additional commitment shares pursuant to the 2020 Lincoln Park purchase agreement		—			—			10,094		10		722			—		—			—			732

Costs associated with raising capital		—			—			—		—		(469,837	)		—		—			—			(469,837	)

Non-cash compensation through the issuance of employee stock options		—			—			—		—		2,089			—		—			—			2,089

Shares issued in payment of Director fees		—			—			1,550,343		1,551		133,449			—		—			—			135,000

Shares issued in payment of salaries		—			—			71,739		71		6,179			—		—			—			6,250

Shares issued in payment of consulting expenses		—			—			1,931,891		1,932		159,101			—		—			—			161,033

Balance at September 30, 2020		—		$	—			1,009,276,752	$	1,009,279	$	164,401,909			100,000	$	(306,841	)	$	(150,487,499	)	$	14,616,848

Net income		—		$	—			—	$	—	$	—			—	$	—		$	2,012,133		$	2,012,133

Non-cash compensation through the issuance of employee stock options		—		$	—			—	$	—	$	1,651			—	$	—		$	—		$	1,651

Balance at December 31, 2020		—		$	—			1,009,276,752	$	1,009,279	$	164,403,560			100,000	$	(306,841	)	$	(148,475,366	)	$	16,630,632

	September 30, 2022			March 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash	$	18,555,034		$	8,535,357
Accounts receivable		4,229,538			3,057,913
Inventory		7,468,286			6,741,170
Prepaid expenses and other current assets		219,851			526,949
Total current assets		30,472,709			18,861,389

Property and equipment, net of accumulated depreciation of $13,957,320 and $13,348,565, respectively		10,543,933			5,952,992

Intangible assets, net of accumulated amortization of $-0-, respectively		6,634,035			6,634,035

Operating lease - right-of-use asset		23,850			1,031,884

Deferred income tax asset		2,171,821			2,171,821

Other assets:
Restricted cash - debt service for NJEDA bonds		405,164			405,039
Security deposits		91,738			91,738
Total other assets		496,902			496,777
Total assets	$	50,343,250		$	35,148,898

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	1,723,592		$	1,430,985
Accrued expenses		4,578,470			4,693,142
Deferred revenue, current portion		13,333			13,333
Bonds payable, current portion, net of bond issuance costs		110,822			100,822
Loans payable, current portion		391,779			253,006
Lease obligation - operating lease, current portion		25,065			202,953
Total current liabilities		6,843,061			6,694,241

Long-term liabilities:
Deferred revenue, net of current portion		25,556			32,226
Bonds payable, net of current portion and bond issuance costs		1,021,940			1,139,848
Loans payable, net of current portion and loan costs		14,510,462			249,046
Lease obligation - operating lease, net of current portion		2,163			835,893
Derivative financial instruments – warrants		748,661			936,837
Other long-term liabilities		—			38,780
Total long-term liabilities		16,308,782			3,232,630
Total liabilities		23,151,843			9,926,871
Shareholders’ equity:
Series J convertible preferred stock; par value of $0.01; 50 shares authorized; 0 issued and outstanding as of September 30, 2022 and March 31, 2022		—			—
Common stock; par value $0.001; 1,445,000,000 shares authorized; 1,014,015,081 shares issued as of September 30, 2022 and March 31, 2022; 1,013,915,081 shares outstanding as of September 30, 2022 and March 31, 2022.		1,014,019			1,011,385
Additional paid-in capital		164,722,951			164,577,227
Treasury stock; 100,000 shares as of September 30, 2022 and March 31, 2022; at cost		(306,841	)		(306,841	)
Accumulated deficit		(138,238,722	)		(140,059,744	)
Total shareholders’ equity		27,191,407			25,222,027
Total liabilities and shareholders’ equity	$	50,343,250		$	35,148,898

	2022			2021			2022			2021
	For the Three Months Ended September 30,						For the Six Months Ended September 30,
	2022			2021			2022			2021
Revenue:
Manufacturing fees	$	7,187,363		$	7,221,711		$	13,514,504		$	12,971,747
Licensing fees		1,398,400			1,336,730			2,744,167			2,643,483
Total revenue		8,585,763			8,558,441			16,258,671			15,615,230
Cost of manufacturing		4,761,329			4,790,292			8,436,390			8,253,369
Gross profit		3,824,434			3,768,149			7,822,281			7,361,861

Operating expenses:
Research and development		1,227,269			1,116,488			2,182,712			2,356,275
General and administrative		1,190,523			925,872			2,908,627			1,999,127
Non-cash compensation through issuance of stock options		5,973			4,176			11,295			6,987
Depreciation and amortization		319,552			299,036			615,846			611,738
Total operating expenses		2,743,317			2,345,572			5,718,480			4,974,127

Income from operations		1,081,117			1,422,577			2,103,801			2,387,734

Other income (expense):
Change in fair value of derivative instruments		688,319			419,433			188,176			1,033,894
Interest expense and amortization of debt issuance costs		(242,753	)		(43,083	)		(459,540	)		(88,976	)
Interest income		43			21			172			64
Other (expense) income, net		445,609			376,371			(271,192	)		944,982

Income from operations before income taxes		1,526,726			1,798,948			1,832,609			3,332,716

Income tax expense		(11,587	)		(4,000	)		(11,587	)		(4,000	)

Net benefit for sale of state net operating losses and credits		—			2,029			—			857,379

Net income attributable to common shareholders	$	1,515,139		$	1,796,977		$	1,821,022		$	4,186,095

Basic net income per share attributable to common shareholders	$	0.00		$	0.00		$	0.00		$	0.00

Diluted net income per share attributable to common shareholders	$	0.00		$	0.00		$	0.00		$	0.00

Basic weighted average Common Stock outstanding		1,012,228,256			1,011,281,988			1,011,762,632			1,010,059,593

Diluted weighted average Common Stock outstanding		1,012,228,256			1,011,281,988			1,011,762,632			1,010,059,593

	Series J Preferred Stock				Common Stock				Additional Paid-In		Treasury Stock					Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Equity
Balance as of March 31, 2021		—	$	—		1,009,276,752	$	1,009,279	$	164,407,480		100,000	$	(306,841	)	$	(148,957,989	)	$	16,151,929

Net income		—		—		—		—		—		—		—			2,389,118			2,389,118

Non-cash compensation through the issuance of employee stock options		—		—		—		—		2,811		—		—			—			2,811

Shares issued in payment of salaries		—		—		2,105,236		2,106		155,394		—	$	—		$	—			157,500

Balance at June 30, 2021		—	$	—		1,011,381,988	$	1,011,385	$	164,565,685		100,000	$	(306,841	)	$	(146,568,871	)	$	18,701,358

Net income		—		—		—		—		—		—		—			1,796,977			1,796,977

Non-cash compensation through the issuance of employee stock options		—		—		—		—		4,176		—		—			—			4,176

Balance at September 30, 2021		—	$	—		1,011,381,988	$	1,011,385	$	164,569,861		100,000	$	(306,841	)	$	(144,771,894	)	$	20,502,511

	2022			2021
	For the Six Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,821,022		$	4,186,095
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		615,846			611,738
Amortization of operating leases - right-of-use assets		56,272			115,960
Change in fair value of derivative financial instruments - warrants		(188,176	)		(1,033,894	)
Non-cash compensation accrued		288,415			428,999
Non-cash compensation through the issuance of employee stock options		11,296			6,987
Non-cash rent expense and lease accretion		602			1,143
Change in operating assets and liabilities:
Accounts receivable		(1,171,625	)		(1,175,982	)
Inventory		(727,116	)		(1,532,756	)
Prepaid expenses and other current assets		307,098			290,338
Accounts payable, accrued expenses and other current liabilities		(13,962	)		97,724
Deferred revenue		(6,670	)		(6,666	)
Lease obligations - operating leases		(55,104	)		(120,442	)
Net cash provided by operating activities		937,898			1,869,244

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(5,199,696	)		(152,311	)
Net cash used in investing activities		(5,199,696	)		(152,311	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of bond principal		(115,000	)		(110,000	)
Proceeds from loans payable		14,550,000			—
Other loan payments		(153,400	)		(309,025	)
Net cash provided by (used in) financing activities		14,281,600			(419,025	)

Net change in cash and restricted cash		10,019,802			1,297,908

Cash and restricted cash, beginning of period		8,940,396			3,597,781

Cash and restricted cash, end of period	$	18,960,198		$	4,895,689

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	459,540		$	88,976
Financing of equipment purchases and insurance renewal	$	—		$	244,124
Stock issued in payment of Directors fees, salaries and consulting expenses	$	137,067		$	157,500
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets	$	—		$	1,042,800

	For the Three Months Ended September 30,				For the Six Months Ended September 30,
	2022		2021		2022		2021
NDA:
Licensing fees	$	—	$	—	$	—	$	—
Total NDA revenue		—		—		—		—
ANDA:
Manufacturing fees	$	7,187,363	$	7,221,711	$	13,514,504	$	12,971,747
Licensing fees		1,398,400		1,336,730		2,744,167		2,643,483
Total ANDA revenue		8,585,763		8,558,441		16,258,671		15,615,230
Total revenue	$	8,585,763	$	8,558,441	$	16,258,671	$	15,615,230

	●	Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
	●	Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	●	Level 3 – Inputs that are unobservable for the asset or liability.

			Fair Value Measurement Using
	Amount at Fair Value		Level 1		Level 2		Level 3
December 31, 2021
Liabilities
Derivative financial instruments - warrants	$	838,852	$	—	$	—	$	838,852

March 31, 2021
Liabilities
Derivative financial instruments - warrants	$	2,362,246	$	—	$	—	$	2,362,246

	Amount at Fair			Fair Value Measurement Using
	Value			Level 1		Level 2		Level 3
Balance as of March 31, 2022	$	936,837		$	—	$	—	$	936,837
Change in fair value of derivative instruments		(188,176	)		—		—		(188,176	)
Balance as of September 30, 2022	$	748,661		$	—	$	—	$	748,661

												September 30, 2022
												Estimated	Gross
	December 31, 2021											Useful	Carrying						Accumulated		Net Book
	Estimated Useful Life	Gross Carrying Amount		Additions		Reductions		Accumulated Amortization		Net Book Value		Life	Amount		Additions		Reductions		Amortization		Value
Patent application costs	*	$	465,684	$	—	$	—	$	0	$	465,684	*	$	465,684	$	—	$	—	$	—	$	465,684
ANDA acquisition costs	Indefinite		6,168,351		—		—		0		6,168,351	Indefinite		6,168,351		—		—		—		6,168,351
		$	6,634,035	$	—	$	—	$	0	$	6,634,035		$	6,634,035	$	—	$	—	$	—	$	6,634,035

	September 30, 2022		March 31, 2022
Salaries and fees payable in common stock		3,875,000		3,625,000
Income tax		50,000		414,989
Consultant contract fees		153,333		153,333
Audit fees		144,000		140,000
Director dues		45,000		90,000
EWB loan interest		85,143		—
Employee bonuses		131,250		143,000
Other accrued expenses		94,744		126,820
Total accrued expenses	$	4,578,470	$	4,693,142


Years ending March 31,	Amount
2023	$	115,000
2024		125,000
2025		130,000
2026		140,000
Thereafter		735,000
Total	$	1,245,000

	September 30, 2022			March 31, 2022
Equipment and insurance financing and mortgage loans payable, between 3.30% and 12.02% interest and maturing between October 2022 and June 2032	$	14,902,241		$	502,052
Less: Current portion of loans payable		(391,779	)		(253,006	)
Long-term portion of loans payable	$	14,510,462		$	249,046

	December 31, 2021			March 31, 2021
Equipment and insurance financing loans payable, between 3.5% and 12.73% interest and maturing between December 2021 and October 2025	$	596,297		$	815,062
Less: Current portion of loans payable		(299,601	)		(314,996	)
Long-term portion of loans payable	$	296,696		$	500,066


Years ending March 31,	Amount
2023 (excluding the six months ended September 30, 2022)	$	209,266
2024		327,317
2025		294,157
2026		227,306
2027		198,040
2028 and thereafter		13,646,155
Total remaining principal balance	$	14,902,241

Lease	Classification	As of December 31, 2021
Assets
Operating	Operating lease – right-of-use asset	$	1,082,168
Total leased assets		$	1,082,168

Liabilities
Current
Operating	Lease obligation – operating lease	$	153,813

Long-term
Operating	Lease obligation – operating lease, net of current portion		933,542
Total lease liabilities		$	1,087,355

~~Lease Term and Discount Rate~~	~~December 31, 2021~~
~~Remaining lease term (years)~~
~~Operating leases~~		7

~~Discount rate~~
~~Operating leases~~		6	%

	December 31, 2021				March 31, 2021
	Warrant Shares		Weighted Average Exercise Price		Warrant Shares		Weighted Average Exercise Price
Balance at beginning of period		79,008,661	$	0.1521		79,008,661	$	0.1521

Warrants granted pursuant to the issuance of Series J convertible preferred shares		0		—		—		—

Warrants exercised, forfeited and/or expired, net		—		—		—		—

Balance at end of period		79,008,661	$	0.1521		79,008,661	$	0.1521

Balance at March 31, 2021	$	2,362,246
Change in fair value of derivative financial instruments - warrants		(1,523,394	)
Balance at December 31, 2021	$	838,852

Balance at March 31, 2022	$	936,837
Change in fair value of derivative financial instruments – warrants		(188,176	)
Balance at September 30, 2022	$	748,661

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at March 31, 2021		5,900,000		$	0.13		3.7	$	6,000
Forfeited and expired		(750,000	)	$	—		—		—
Granted		300,000		$	0.06		3.0		—
Outstanding at December 31, 2021		5,450,000		$	0.14		2.7	$	6,000
Exercisable at December 31, 2021		5,130,001		$	0.14		2.7	$	6,000

Product	Branded Product Equivalent	Therapeutic Category	Launch Date
Phentermine HCl 37.5mg tablets (“ (“Phentermine 37.5mg”)	Adipex-P®	Bariatric	April 2011
Phendimetrazine Tartrate 35mg tablets (“Phendimetrazine 35mg”)	Bontril®	Bariatric	November 2012
Phentermine HCl 15mg and 30mg capsules (“Phentermine 15mg” and “Phentermine 30mg”)	Adipex-P®	Bariatric	April 2013
Naltrexone HCl 50mg tablets (“Naltrexone 50mg”)	Revia®	Addiction Treatment	September 2013
Isradipine 2.5mg and 5mg capsules (“ (“Isradipine 2.5mg” and “Isradipine 5mg”)	n/a	Cardiovascular	January 2015
Oxycodone HCl Immediate Release 5mg, 10mg, 15mg, 20mg and 30mg tablets (“OXY IR 5mg”, “Oxy IR 10mg”, “Oxy IR 15mg”, “OXY IR 20mg” and “Oxy IR 30mg”)	Roxycodone®	Pain	March 2016
Trimipramine Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine 100mg”)	Surmontil®	Antidepressant	May 2017
Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg” and “Amphetamine IR 30mg”)	Adderall®	Central Nervous System (“CNS”) Stimulant	April 2019
Dantrolene Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”)	Dantrium®	Muscle Relaxant	June 2019
Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and 30mg capsules (“Amphetamine ER 5mg”, “Amphetamine ER 10mg”, “Amphetamine ER 15mg”, “Amphetamine ER 20mg”, “Amphetamine ER 25mg”, and “Amphetamine ER 30mg”)	Adderall XR®	Central Nervous System (“CNS”) Stimulant	March 2020
Loxapine Succinate 5mg, 10mg, 25mg and 50gm capsules (“Loxapine 5mg”, “Loxapine 10mg”, “Loxapine 25mg”, and Loxapine 50mg”)	Loxapine®	Antipsychotic	May 2021

	For the Three Months Ended December 31,						Change					For the Three Months Ended September 30,						Change
	2021			2020			Dollars		Percentage			2022			2021			Dollars			Percentage
Manufacturing fees	$	7,667,674		$	4,849,871		$	2,817,803		58	%	$	7,187,363		$	7,221,711		$	(34,348	)		—	%
Licensing fees		1,307,140			1,196,711			110,429		9	%		1,398,400			1,336,730			61,670			5	%
Total revenue		8,974,814			6,046,582			2,928,232		48	%		8,585,763			8,558,441			27,322			—	%
Cost of manufacturing		4,957,150			2,643,175			2,313,975		88	%		4,761,329			4,790,292			(28,963	)		(1	)%
Gross profit	$	4,017,664		$	3,403,407		$	614,257		18	%	$	3,824,434		$	3,768,149		$	56,285			1	%

Gross profit - percentage		45	%		56	%							45	%		44	%

Exhibit No.		Description

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)*

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)*

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	ELITE PHARMACEUTICALS, INC.

~~February~~November 14, 2022	By:	/s/ Nasrat Hakim
		Nasrat Hakim Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer)

~~February~~November 14, 2022	By:	/s/ ~~Marc Bregman~~Robert Chen
		~~Marc Bregman~~Robert Chen Chief Financial Officer ~~Treasurer and Secretary~~ (Principal ~~Financial~~Accounting and ~~Accounting~~Financial Officer)