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, ~~2022~~2023

☐ 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 ☒

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~~1,017,881,199 shares of Common Stock were issued, and ~~1,013,915,081~~1,017,781,199 shares of Common Stock were outstanding as of February 14, ~~2023.~~2024.

		PAGE
PART I	FINANCIAL INFORMATION	F-1

ITEM 1.	Financial Statements	F-1
	Condensed Consolidated Balance Sheets as of December 31, ~~2022 (Unaudited)~~2023 and March 31, ~~2022~~2023 (Unaudited)	F-1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	F-2
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended December 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	F-3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	F-5
	Notes to the Unaudited Condensed Consolidated Financial Statements	F-6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
ITEM 3.	Quantitative and Qualitative Disclosure About Market Risk	711
ITEM 4.	Controls and Procedures	711

PART II	OTHER INFORMATION	913

ITEM 1.	Legal Proceedings	913
ITEM 1A.	Risk Factors	913
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	913
ITEM 3.	Defaults Upon Senior Securities	913
ITEM 4.	Mine Safety Disclosures	913
ITEM 5.	Other Information	913
ITEM 6.	Exhibits	1014

SIGNATURES		1115

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

December 31, 2022 March 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash $ 17,909,077 $ 8,535,357
Accounts receivable 5,545,843 3,057,913
Inventory 8,601,858 6,741,170
Prepaid expenses and other current assets 1,108,062 526,949
Total current assets 33,164,840 18,861,389

Property and equipment, net of accumulated depreciation of $14,271,930 and $13,348,565, respectively 10,230,034 5,952,992

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

Operating lease - right-of-use asset 18,502 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 $ 52,716,134 $ 35,148,898

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ 1,472,198 $ 1,430,985
Accrued expenses 4,676,244 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 360,616 253,006
Lease obligation - operating lease, current portion 21,149 202,953
Total current liabilities 6,654,362 6,694,241

Long-term liabilities:
Deferred revenue, net of current portion 22,223 32,226
Bonds payable, net of current portion and bond issuance costs 1,025,479 1,139,848
Loans payable, net of current portion and loan costs 14,463,789 249,046
Lease obligation - operating lease, net of current portion — 835,893
Derivative financial instruments - warrants 375,767 936,837
Other long-term liabilities — 38,780
Total long-term liabilities 15,887,258 3,232,630
Total liabilities 22,541,620 9,926,871
Shareholders’ equity:
Series J convertible preferred stock; par value of $0.01; 50 shares authorized; 0 issued and outstanding as of December 31, 2022 and March 31, 2022 — —
Common stock; par value $0.001; 1,445,000,000 shares authorized; 1,014,015,081 and 1,011,381,988 shares issued as of December 31, 2022 and March 31, 2022, respectively; 1,013,915,081 and 1,011,281,988 shares outstanding as of December 31, 2022 and March 31, 2022, respectively 1,014,019 1,011,385
Additional paid-in capital 164,735,980 164,577,227
Treasury stock; 100,000 shares as of December 31, 2022 and March 31, 2022; at cost (306,841 ) (306,841 )
Accumulated deficit (135,268,644 ) (140,059,744 )
Total shareholders’ equity 30,174,514 25,222,027
Total liabilities and shareholders’ equity $ 52,716,134 $ 35,148,898

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

~~F-1~~

~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(UNAUDITED)~~

For the Three Months Ended December 31, For the Nine Months Ended December 31,
2022 2021 2022 2021
Revenue:
Manufacturing fees $ 7,798,159 $ 7,667,674 $ 21,312,663 $ 20,639,421
Licensing fees 1,451,907 1,307,140 4,200,888 3,950,623
Total revenue 9,250,066 8,974,814 25,513,551 24,590,044
Cost of manufacturing 4,330,841 4,957,150 12,360,935 13,209,430
Gross profit 4,919,225 4,017,664 13,152,616 11,380,614

Operating expenses:
Research and development 1,443,361 956,628 3,775,107 3,312,540
General and administrative 1,186,049 929,547 4,356,752 2,930,126
Non-cash compensation through issuance of stock options 13,030 3,630 24,325 10,617
Depreciation and amortization 317,685 296,559 933,531 908,297
Total operating expenses 2,960,125 2,186,364 9,089,715 7,161,580

Income from operations 1,959,100 1,831,300 4,062,901 4,219,034

Other income (expense):
Change in fair value of derivative instruments 372,894 489,500 561,070 1,523,394
Interest expense and amortization of debt issuance costs (322,681 ) (37,400 ) (782,221 ) (126,376 )
Gain on sale of ANDA 1,000,000 — 1,000,000 —
Interest income 15 13 187 77
Other income, net 1,050,228 452,113 779,036 1,397,095

Income before income taxes 3,009,328 2,283,413 4,841,937 5,616,129

Income tax expense (39,250 ) — (50,837 ) (4,000 )

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

Net income attributable to common shareholders $ 2,970,078 $ 2,283,413 $ 4,791,100 $ 6,469,508

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

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

Basic weighted average Common Stock outstanding 1,013,915,081 1,011,281,988 1,012,480,115 1,010,416,823

Diluted weighted average Common Stock outstanding 1,013,915,081 1,011,281,988 1,012,480,115 1,010,416,823

~~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

Shares issued in payment of salaries — — — — — — — — —

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

Net income — — — — — — — 2,970,078 2,970,078

Non-cash compensation through the issuance of employee stock options — — — $ — $ 13,029 — $ — $ — 13,029

Balance at December 31, 2022 — $ — 1,014,015,081 $ 1,014,019 $ 164,735,980 100,000 $ (306,841 ) $ (135,268,644 ) $ 30,174,514

~~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 SHAREHOLDERS’ EQUITY~~

~~(UNAUDITED)~~

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

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

	December 31, 2023			March 31, 2023
ASSETS
Current assets:
Cash	$	5,816,211		$	7,832,247
Accounts receivable, net of allowance for expected credit losses of $194,600 and $0 as of December 31, 2023 and March 31, 2023, respectively		16,009,614			3,094,549
Inventory		14,325,041			9,550,716
Prepaid expenses and other current assets		1,005,636			1,032,785
Total current assets		37,156,502			21,510,297

Property and equipment, net of accumulated depreciation of $15,578,471 and $14,586,335 respectively		10,095,029			10,426,158
Intangible assets, net of accumulated amortization of $-0-		6,341,228			6,341,228
Finance lease - right-of-use asset		408,428			—
Operating lease - right-of-use asset		26,231			13,062
Deferred income tax asset		20,233,603			2,171,821
Other assets:
Restricted cash - debt service for NJEDA bonds		427,999			412,434
Security deposits		7,259			21,018
Total other assets		435,258			433,452
Total assets	$	74,696,279		$	40,896,018

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,890,717		$	2,446,810
Accrued expenses		11,884,645			5,047,726
Deferred revenue, current portion		13,333			13,333
Bonds payable, current portion, net of bond issuance costs		115,822			110,822
Loans payable, current portion		190,607			200,032
Related party loans payable (Note 7)		4,000,000			—
Lease obligation - finance lease, current portion		37,444			—
Lease obligation - operating lease, current portion		26,231			14,914
Total current liabilities		19,158,799			7,833,637

Long-term liabilities:
Deferred revenue, net of current portion		8,889			18,890
Bonds payable, net of current portion and bond issuance costs		909,654			1,029,018
Loans payable, net of current portion and loan costs		2,407,077			2,532,502
Lease obligation - finance lease, net of current portion		200,939			—
Derivative financial instruments - warrants		5,597,200			521,711
Total long-term liabilities		9,123,759			4,102,121
Total liabilities		28,282,558			11,935,758
Shareholders’ equity:
Common Stock; par value $0.001; 1,445,000,000 shares authorized; 1,017,881,199 and 1,014,015,081 shares issued as of December 31, 2023 and March 31, 2023, respectively; 1,017,781,199 and 1,013,915,081 shares outstanding as of December 31, 2023 and March 31, 2023, respectively		1,017,885			1,014,019
Additional paid-in capital		165,417,811			164,750,980
Treasury stock; 100,000 shares as of December 31, 2023 and March 31, 2023, respectively, at cost		(306,841	)		(306,841	)
Accumulated deficit		(119,715,134	)		(136,497,898	)
Total shareholders’ equity		46,413,721			28,960,260
Total liabilities and shareholders’ equity	$	74,696,279		$	40,896,018

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

~~F-4~~F-1

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2023			2022			2023			2022
Revenue:
Manufacturing fees	$	14,791,110		$	7,798,159		$	36,208,217		$	21,312,663
Licensing fees		747,690			1,451,907			2,467,844			4,200,888
Total revenue		15,538,800			9,250,066			38,676,061			25,513,551
Cost of manufacturing		8,497,727			4,330,841			20,437,354			12,360,935
Gross profit		7,041,073			4,919,225			18,238,707			13,152,616

Operating expenses:
Research and development		1,403,790			1,443,361			5,165,684			3,775,107
General and administrative		1,711,275			1,186,049			4,906,187			4,356,752
Non-cash compensation through issuance of stock options		49,815			13,030			107,592			24,325
Depreciation and amortization		343,537			317,685			999,059			933,531
Total operating expenses		3,508,417			2,960,125			11,178,522			9,089,715

Income from operations		3,532,656			1,959,100			7,060,185			4,062,901

Other income (expense):
Change in fair value of derivative financial instruments - warrants		(2,417,772	)		372,894			(5,075,489	)		561,070
Change in fair value of stock-based liabilities		(2,854,556	)		—			(4,921,376	)		—
Interest expense and amortization of debt issuance costs		(121,628	)		(322,681	)		(371,478	)		(782,221	)
Gain from settlement agreements		1,761,792			—			1,761,792			—
Gain on sale of ANDA		—			1,000,000			—			1,000,000
Interest income		5,249			15			16,085			187
Other (expense) income, net		(3,626,915	)		1,050,228			(8,590,466	)		779,036

(Loss) income before income taxes		(94,259	)		3,009,328			(1,530,281	)		4,841,937

Income tax benefit (expense)		800,613			(39,250	)		18,313,045			(50,837	)

Net income attributable to common shareholders	$	706,354		$	2,970,078		$	16,782,764		$	4,791,100

Basic net income per share attributable to common shareholders	$	0.00		$	0.00		$	0.02		$	0.00

Diluted net income per share attributable to common shareholders	$	0.00		$	0.00		$	0.02		$	0.01

Basic weighted average Common Stock outstanding		1,014,768,071			1,013,915,081			1,014,265,162			1,012,480,115

Diluted weighted average Common Stock outstanding		1,024,448,445			1,013,915,081			1,019,511,813			1,012,480,115

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)


	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 April 1, 2023		—	$	—		1,014,015,081	$	1,014,019	$	164,750,980		100,000	$	(306,841	)	$	(136,497,898	)	$	28,960,260

Net income		—		—		—		—		—		—		—			1,141,809			1,141,809

Non-cash compensation through the issuance of employee stock options		—		—		—		—		15,000		—		—			—			15,000

Balance at June 30, 2023		—	$	—		1,014,015,081	$	1,014,019	$	164,765,980		100,000	$	(306,841	)	$	(135,356,089	)	$	30,117,069

Net income		—		—		—		—		—		—		—			14,934,601			14,934,601

Non-cash compensation through the issuance of employee stock options		—		—		—		—		42,777		—		—			—			42,777

Balance at September 30, 2023		—	$	—		1,014,015,081	$	1,014,019	$	164,808,757		100,000	$	(306,841	)	$	(120,421,488	)	$	45,094,447

Shares issued in satisfaction of accrued director salaries		—		—		1,642,971		1,643		250,224		—		—			—			251,867

Shares issued in satisfaction of accrued consultant fees		—		—		2,223,147		2,223		309,015		—		—			—			311,238

Net income		—		—		—		—		—		—		—			706,354			706,354

Non-cash compensation through the issuance of employee stock options		—		—		—		—		49,815		—		—			—			49,815

Balance at December 31, 2023		—	$	—		1,017,881,199	$	1,017,885	$	165,417,811		100,000	$	(306,841	)	$	(119,715,134	)	$	46,413,721

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~~SHAREHOLDERS' EQUITY

(UNAUDITED)

2022 2021

For the Nine Months Ended
December 31,

2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,791,100 $ 6,469,508
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 933,531 908,297
Amortization of operating leases - right-of-use assets 61,621 175,306
Change in fair value of derivative financial instruments - warrants (561,070 ) (1,523,394 )
Non-cash compensation accrued 430,778 641,664
Non-cash compensation through the issuance of employee stock options 24,325 10,617
Non-cash rent expense and lease accretion 602 559
Change in operating assets and liabilities:
Accounts receivable (2,487,930 ) 834,963
Inventory (1,860,688 ) (1,681,168 )
Prepaid expenses and other current assets (581,113 ) (367,154 )
Accounts payable, accrued expenses and other current liabilities (309,950 ) (373,820 )
Deferred revenue (10,003 ) (9,999 )
Lease obligations - operating leases (61,182 ) (182,401 )
Net cash provided by operating activities 370,021 4,902,978

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,200,407 ) (234,387 )
Net cash used in investing activities (5,200,407 ) (234,387 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of bond principal (115,000 ) (110,000 )
Proceeds from loans payable 14,550,001 —
Other loan payments (230,770 ) (462,889 )
Net cash provided by (used in) financing activities 14,204,231 (572,889 )

Net change in cash and restricted cash 9,373,845 4,095,702

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

Cash and restricted cash, end of period $ 18,314,241 $ 7,693,483

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest $ 782,221 $ 126,376
Cash paid for income taxes
$
127,522
$ —
Financing of equipment purchases and insurance renewal $ — $ 244,124
Stock issued in payment of Directors fees, salaries and consulting expenses $ 137,063 $ 157,500
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets $ — $ 1,042,800

	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 April 1, 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

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

Shares issued in payment of consultant fees		—		—		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
Balance		—	$	—		1,014,015,081	$	1,014,019	$	164,722,951		100,000	$	(306,841	)	$	(138,238,722	)	$	27,191,407

Net income		—		—		—		—		—		—		—			2,970,078			2,970,078
Net income (Loss)		—		—		—		—		—		—		—			2,970,078			2,970,078

Non-cash compensation through the issuance of employee stock options		—		—		—		—		13,029		—		—			—			13,029

Balance at December 31, 2022		—	$	—		1,014,015,081	$	1,014,019	$	164,735,980		100,000	$	(306,841	)	$	(135,268,644	)	$	30,174,514
Balance		—	$	—		1,014,015,081	$	1,014,019	$	164,735,980		100,000	$	(306,841	)	$	(135,268,644	)	$	30,174,514

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

F-4

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Nine Months Ended December 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,782,764		$	4,791,100
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		992,136			933,531
Bad debt expense		194,600			—
Amortization of operating leases - right-of-use assets		18,153			61,621
Non-cash compensation accrued		563,105			430,778
Change in fair value of derivative financial instruments - warrants		5,075,489			(561,070	)
Change in fair value of stock-based liabilities		4,921,376			—
Gain on settlement of Common Stock to consultant		(1,761,792	)		—
Non-cash compensation through the issuance of employee stock options		107,592			24,325
Non-cash rent expense and lease accretion		—			602
Deferred revenue		(10,001	)		(10,003	)
Change in operating assets and liabilities:
Accounts receivable		(13,109,665	)		(2,487,930	)
Inventory		(4,774,325	)		(1,860,688	)
Prepaid expenses and other current assets		40,908			(581,113	)
Deferred income tax asset		(18,061,782	)		—
Accounts payable, accrued expenses and other current liabilities		3,702,825			(309,950	)
Interest expense of finance lease liability		(2,915	)		—
Lease obligations - operating leases		(20,005	)		(61,182	)
Net cash (used in) provided by operating activities		(5,341,537	)		370,021

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(406,007	)		(5,200,407	)
Net cash used in investing activities		(406,007	)		(5,200,407	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of bond principal		(125,000	)		(115,000	)
Proceeds from related party loans payable		4,000,000			—
Proceeds from loans payable		—			14,550,001
Amortization of finance leases - right-of-use assets		6,923			—
Loan payments		(134,850	)		(230,770	)
Net cash provided by financing activities		3,747,073			14,204,231

Net change in cash and restricted cash		(2,000,471	)		9,373,845

Cash and restricted cash, beginning of period		8,244,681			8,940,396

Cash and restricted cash, end of period	$	6,244,210		$	18,314,241

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	119,412		$	782,221
Cash paid for income taxes	$	292,000		$	127,522
Stock issued in satisfaction of accrued directors salaries and consultant fees	$	563,105		$	137,067
Recognition of right of use asset and lease liabilities entered into	$	272,620		$	—

Reconciliation of cash and restricted cash
Cash	$	5,816,211		$	17,909,077
Restricted cash - debt service for NJEDA bonds		427,999			405,164
Total cash and restricted cash shown in statement of cash flows	$	6,244,210		$	18,314,241

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

F-5

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 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, manufacturing, and ~~manufacture~~sales 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 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 product candidates that will secure marketing approvals from the United States Food and Drug Administration (“FDA”), and thereafter, commercially exploiting such products.

~~Principles~~Basis of ~~Consolidation~~Presentation

The accompanying unaudited condensed consolidated financial statements ~~have been prepared~~of the Company are presented in ~~accordance~~conformity with accounting principles generally accepted ~~accounting principles~~ in the United States of America (“GAAP”). and pursuant to the rules and regulations of the SEC. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Elite Labs. All significant intercompany accounts and transactions have been eliminated in consolidation. ~~The~~Certain information or footnote disclosures normally included in condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements ~~reflect~~include all adjustments, consisting of a normal recurring ~~items,~~nature, which are ~~in the opinion of management,~~ necessary for a fair presentation of ~~such statements.~~the financial position, operating results and cash flows for the periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Form 10-K as filed with the SEC on June 29, 2023. The interim results ~~of operations~~ for the nine months ended December 31, ~~2022~~2023 are not necessarily indicative of the results ~~that may~~to be expected for the ~~entire year.~~fiscal year ending March 31, 2024 or for any future periods.

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~~Application (“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.

F-6

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Revenue Recognition

The Company generates revenue ~~primarily~~ from manufacturing and licensing ~~fees.~~fees and sales of generic pharmaceuticals bearing the Elite label to pharmaceutical distributors for pharmacies and institutions. 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. Revenues earned from the sale of Elite label products are recorded at their net realizable value which consists of gross amounts invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable. 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~~

~~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.~~contract, at which time the performance obligation is deemed to be completed. 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

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, ~~2022.~~2023.

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 satisfyc) Sale of product under 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.~~Elite label

The Company ~~entered into~~began direct sales of products under the Company’s own label on April 1, 2023. License agreements will remain in place for select products. With this transition, however, a ~~Master Development~~large portion of the manufacturing and ~~License Agreement~~license fees now reported will be replaced with ~~SunGen Pharma LLC dated August 24, 2016 (the “SunGen Agreement”),~~revenues from sales of Elite labeled pharmaceutical products to distributors for pharmacies and institutions.

The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms, at which ~~has been determined~~time the performance obligation is deemed to ~~satisfy~~be completed. The Company is primarily responsible for fulfilling the ~~criteria for~~promise to deliver the product and bears risk of loss while the inventory is in-transit to the purchaser. Revenue is measured as the amount of consideration earned from the sale of Elite labeled pharmaceutical products are recorded at their net realizable value which consists of gross amounts invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, 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.~~applicable.

Disaggregation of revenue

In the following table, revenue is disaggregated by type of revenue generated by the Company. The Company recognizes revenue at a point in time for all performance obligations. 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,				For the Three Months Ended December 31,				For the Nine Months Ended December 31,
	2022		2021		2022		2021		2023		2022		2023		2022
NDA:
Manufacturing fees									$	-	$	-	$	-	$	-
Licensing fees	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total NDA revenue		—		—		—		—		—		—		—		—
ANDA:
Manufacturing fees	$	7,798,159	$	7,667,674	$	21,312,663	$	20,639,421	$	14,791,110	$	7,798,159	$	36,208,217	$	21,312,663
Licensing fees		1,451,907		1,307,140		4,200,888		3,950,623		747,690		1,451,907		2,467,844		4,200,888
Total ANDA revenue		9,250,066		8,974,814		25,513,551		24,590,044		15,538,800		9,250,066		38,676,061		25,513,551
Total revenue	$	9,250,066	$	8,974,814	$	25,513,551	$	24,590,044	$	15,538,800	$	9,250,066	$	38,676,061	$	25,513,551

~~Cash~~

~~The Company considers all highly liquid investments with an original maturity~~Selected information on reportable segments and reconciliation of ~~three months or less~~operating income by segment 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.income from operations before income taxes are disclosed within Note 15.

F-8

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Cash

Cash consists of cash on deposit with banks and money market instruments. The Company places its cash 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, ~~2022,~~2023, and March 31, ~~2022,~~2023, the Company had $~~405,164~~427,999 and $~~405,039~~412,434, of restricted cash, respectively, related to debt service reserve in regard to the New Jersey Economic Development Authority (“NJEDA”) bonds (see Note 6)5).

Accounts Receivable and Allowance for Expected Credit Losses

Accounts receivable are comprised of balances due from customers, net of estimated allowances for ~~uncollectible accounts.~~expected credit losses, and other contractual deductions, including, without limitation, chargebacks, discounts and program rebates. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.

The allowance for expected credit losses is based on the probability of future collection under the current expected credited loss (“CECL”) impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Assets, which was adopted by the Company on April 1, 2023, as discussed below within Recently Adopted Accounting Pronouncements. Under the CECL impairment model, the Company determines its allowance by applying a loss-rate method based on an aging schedule using the Company’s historical loss rate. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience. The adequacy of the allowance is evaluated on a regular basis. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to credit losses in the period incurred.

Prior to April 1, 2023, trade receivables were presented net of allowance for expected credit losses based on the credit risk of specific clients, past collection history, and management’s evaluation of other risks. Expected credit losses stemming from unbilled receivables expected to be billed between March 31, 2024 and March 31, 2028 include additional risk premiums estimated based on factors such as projected inflation, projected decreases in GDP, and projected unemployment.

Inventory

Inventory is recorded at the lower of cost or 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~~.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.

F-9

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

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~Please also see Note 4~~During the year ended March 31, 2023, the Company determined indicators of impairment occurred and recorded impairment expense of $292,807 on its ANDAs and patents. There were no such impairments recorded during the period ended December 31, 2023. The Company notes that none of its patents relate to any of the Company’s revenue producing activities.

The following table summarizes the Company’s intangible assets as of and for ~~further details on intangible assets.~~the periods ended December 31, 2023 and March 31, 2023:

SCHEDULE OF INTANGIBLE ASSETS

	December 31, 2023
	Estimated Useful Life	Gross Carrying Amount		Impairment losses		Accumulated Amortization		Net Book Value
Patent application costs	*	$	289,039	$	—	$	—	$	289,039
ANDA acquisition costs	Indefinite		6,052,189		—		—		6,052,189
		$	6,341,228	$	—	$	—	$	6,341,228

	March 31, 2023
	Estimated Useful Life	Gross Carrying Amount		Impairment losses			Accumulated Amortization		Net Book Value
Patent application costs	*	$	465,684	$	(176,645	)	$	—	$	289,039
ANDA acquisition costs	Indefinite		6,168,351		(116,162	)		—		6,052,189
		$	6,634,035	$	(292,807	)	$	—	$	6,341,228

Research and Development

Research and development expenditures are charged to ~~expense~~expenses 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.

~~F-9~~

~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~On August 17, 2023, Elite filed a paragraph IV certification with its ANDA to generic Oxycontin and after Elite got acceptance of the ANDA by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act. On November 14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma. Elite obtained agreement with Purdue to stay the litigation for six months. Elite’s launch of a generic Oxycontin will depend on the approval by the FDA and the outcome of various litigations involving Purdue or the expiry of the patents listed on the Orange Book. As of December 31, 2023, the results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matters will have a material adverse effect on its business, financial condition or results of operations.

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.

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, ~~2022,~~2023, a summary of the tax years that remain subject to examination in our major tax jurisdictions are: United States – Federal, 2016 and forward. The Company did not record unrecognized tax positions for the nine months ended December 31, ~~2022.~~2023.

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.

F-10

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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. The Company accounts for forfeitures as they occur.

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. The Company records earned but unissued stock-based compensation in accrued expenses.

Sale of ANDA

During the ~~nine months~~quarter ended December 31, 2022, the Company entered into an agreement with Pyros Pharmaceuticals, Inc. (“Pyros”) pursuant to which the Company sold to Pyros its rights in and to the Company’s approved abbreviated new drug applications (ANDAs) for its generic Sabril ~~drug.~~drug (the “Sabril Product”). The Company sold its rights to Pyros for $1,000,000, which was recorded as gain on sale of ANDA during the ~~nine months~~year ended ~~December~~March 31, ~~2022.~~2023. There is no further action required by the Company regarding the rights which would affect future periods.

In conjunction with the sale of its Sabril Product to Pyros, the Company executed a Manufacturing and Supply ~~agreement~~Agreement (the “Pyros Agreement”) with Pyros. Under the terms of the Pyros Agreement, the Company will receive an agreed-upon price per drug for the manufacturing and packaging of Sabril over a term of three years. Revenue per the Pyros Agreement will be recognized as control of the manufactured and supplied drugs is transferred to Pyros (at the time of delivery).

Earnings Per Share Attributable to Common ~~Shareholders~~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 change in fair value of derivative instruments or the conversion of securities that would have an antidilutive effect.

As the average market price of Common Stock for the three and nine months ended December 31, 2023 and 2022 did not exceed the exercise price of the warrants, the potential dilution from the warrants converting into 79,008,661 shares of Common Stock for all periods have been excluded from the number of shares used in calculating diluted net income per share as their inclusion would have been antidilutive.

~~F-10~~F-11

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

	2022		2021			2022		2021
	For the Three Months Ended December 31,					For the Nine Months Ended December 31,					For the Three Months Ended December 31,				For the Nine Months Ended December 31,
	2022		2021			2022		2021			2023		2022		2023		2022
Numerator
Net income - basic	$	2,970,078	$	2,283,413		$	4,791,100	$	6,469,508		$	706,354	$	2,970,078	$	16,782,764	$	4,791,100
Effect of dilutive instrument on net income		372,894		(489,500	)		561,070		(1,523,394	)		—		372,894		—		561,070
Net income - diluted	$	3,342,972	$	1,793,913		$	5,352,170	$	4,946,114		$	706,354	$	3,342,972	$	16,782,764	$	5,352,170

Denominator
Weighted average shares of Common Stock outstanding - basic		1,013,915,081		1,011,281,988			1,012,480,115		1,010,416,823			1,014,768,071		1,013,915,081		1,014,265,162		1,012,480,115

Dilutive effect of stock options and convertible securities		—		—			—		—			9,680,374		—		5,246,651		—

Weighted average shares of Common Stock outstanding - diluted		1,013,915,081		1,011,281,988			1,012,480,115		1,010,416,823			1,024,448,445		1,013,915,081		1,019,511,813		1,012,480,115

Net income per share
Basic	$	0.00	$	0.00		$	0.00	$	0.01		$	0.00	$	0.00	$	0.02	$	0.00
Diluted	$	0.00	$	0.00		$	0.01	$	0.00		$	0.00	$	0.00	$	0.02	$	0.01

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).

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~~F-12

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
Balance as of March 31, 2022 $ 936,837 $ — $ — $ 936,837
Change in fair value of derivative instruments (561,070 ) — — (561,070 )
Balance as of December 31, 2022 $ 375,767 $ — $ — $ 375,767

			Fair Value Measurement
	Amount at Fair Value		Level 1		Level 2		Level 3
Balance as of April 1, 2023	$	521,711	$	—	$	—	$	521,711
Change in fair value of derivative financial instruments - warrants		5,075,489		—		—		5,075,489
Balance as of December 31, 2023	$	5,597,200	$	—	$	—	$	5,597,200

				Fair Value Measurement
	Amount at Fair Value			Level 1		Level 2		Level 3
Balance as of April 1, 2022	$	936,837		$	—	$	—	$	936,837
Change in fair value of derivative financial instruments - warrants		(561,070	)		—		—		(561,070	)
Balance as of December 31, 2022	$	375,767		$	—	$	—	$	375,767

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.

Financial Instruments — Credit Losses (ASU 2016-13)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“CECL”). The amendments in this update introduce a new accounting model to measure credit losses for financial assets measured at amortized cost. The FASB has also issued additional ASUs to clarify the scope and provide additional guidance for ASU 2016-13. Credit losses for financial assets measured at amortized cost should be determined based on the total current expected credit losses over the life of the financial asset or group of financial assets. In effect, the financial asset or group of financial assets should be presented at the net amount expected to be collected. Credit losses will no longer be recorded under the current incurred loss model for financial assets measured at amortized cost. The amendments also modify the accounting for available-for-sale debt securities whereby credit losses will be recorded through an allowance for credit losses rather than a write-down to the security’s cost basis, which allows for reversals of credit losses when estimated credit losses decline. Credit losses for available-for-sale debt securities should be measured in a manner similar to current GAAP.

The amendments were effective on April 1, 2023 for the Company, and must be applied using a modified retrospective approach with a cumulative-effect adjustment through retained earnings as of the beginning of the fiscal year upon adoption as required. While the standard modifies the measurement of the allowance for credit losses, it does not alter the credit risk of our trade or unbilled receivables.

The impact of applying the CECL methodology upon adoption effective on April 1, 2023 was immaterial to the Company’s consolidated financial statements.

The Company’s quantitative allowance for credit loss estimates under CECL was determined using the loss rate method, which is impacted by certain forecasted economic factors. In addition to the Company’s quantitative allowance for credit losses, the Company also incorporates qualitative adjustments that may relate to unique risks, changes in current economic conditions that may not be reflected in quantitatively derived results, or other relevant factors to further inform the Company’s estimate of the allowance for credit losses.

F-13

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Additionally, due to the expansion of the time horizon over which the Company is required to estimate future credit losses, the Company may experience increased volatility in its future provisions for credit losses. Factors that could contribute to such volatility include, but are not limited to, changes in the composition and credit quality of customer base, economic conditions and forecasts, the allowance for credit loss models that are used, the data that is included in the models, the associated qualitative allowance framework, and the Company’s estimation techniques.

The Company has had no recordable write offs for bad debts or uncollectible invoiced amounts during the for the nine months ended December 31, 2023 or the prior twelve months ended March 31, 2023. In applying the CECL methodology, the Company recorded an estimated allowance of $194,600 for current estimated credit losses.

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.

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, 2022 March 31, 2022
Finished goods $ 327,827 $ 159,808
Work-in-progress 99,283 1,203,204
Raw materials 8,174,748 5,378,158
Inventory, net $ 8,601,858 $ 6,741,170

~~F-12~~

~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

	December 31, 2023		March 31, 2023
Finished goods	$	5,544,848	$	2,352,330
Work-in-progress		1,247,307		1,791,311
Raw materials		7,532,886		5,407,075
Inventory	$	14,325,041	$	9,550,716

NOTE 3. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	December 31, 2022			March 31, 2022			December 31, 2023			March 31, 2023
Land, building and improvements	$	10,556,523		$	5,456,524		$	10,269,297		$	10,768,181
Laboratory, manufacturing, warehouse and transportation equipment		13,118,139			13,017,731			14,518,570			13,364,512
Office equipment and software		373,601			373,601			373,601			395,563
Furniture and fixtures		453,701			453,701			512,032			484,237
Property and equipment, gross		24,501,964			19,301,557			25,673,500			25,012,493
Less: Accumulated depreciation		(14,271,930	)		(13,348,565	)		(15,578,471	)		(14,586,335	)
Property and equipment, net	$	10,230,034		$	5,952,992		$	10,095,029		$	10,426,158

Depreciation expense was $~~314,610~~336,614 and $~~293,014~~314,610 for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and $~~923,365~~992,136 and $~~897,662~~923,365 for the nine months ended December 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~NOTE 4.~~ ~~INTANGIBLE ASSETS~~

~~The following table summarizes the Company’s intangible assets:~~

~~SCHEDULE OF INTANGIBLE ASSETS~~

December 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

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~~F-14

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5.4. ACCRUED EXPENSES

As of December 31, ~~2022~~2023 and March 31, ~~2022,~~2023, the Company’s accrued expenses consisted of the following:

SUMMARY OF ACCRUED EXPENSES

	December 31, 2022		March 31, 2022		December 31, 2023		March 31, 2023
Salaries and fees payable in common stock		4,000,000		3,625,000
Salaries and fees payable in Common Stock inclusive of the change in fair value of Common stock underlying such liabilities					$	6,934,812	$	4,125,000
Income tax		54,550		414,989		—		414,989
Co-development profit split						3,389,949		—
Consultant contract fees		153,333		153,333		10,000		193,333
Audit fees		144,000		140,000		125,000		125,000
Director dues		67,500		90,000		22,500		70,000
EWB loan interest		104,386		—
Legal and professional expense						75,000		—
Employee bonuses		37,500		143,000		712,384		—
Other accrued expenses		114,975		126,820		615,000		119,404
Total accrued expenses	$	4,676,244	$	4,693,142	$	11,884,645	$	5,047,726

NOTE 6.5. NJEDA BONDS

In ~~August 2005,~~relation to the ~~Company issued NJEDA tax exempt Bonds with~~ Series A Notes, ~~outstanding. The~~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%. 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, 2022			March 31, 2022			December 31, 2023			March 31, 2023
Gross bonds payable
NJEDA Bonds - Series A Notes	$	1,245,000		$	1,360,000		$	1,120,000		$	1,245,000
Less: Current portion of bonds payable (prior to deduction of bond offering costs)		(125,000	)		(115,000	)		(130,000	)		(125,000	)
Long-term portion of bonds payable (prior to deduction of bond offering costs)	$	1,120,000		$	1,245,000		$	990,000		$	1,120,000

Bond offering costs	$	354,454		$	354,454		$	354,454		$	354,454
Less: Accumulated amortization		(245,753	)		(235,124	)		(259,930	)		(249,294	)
Bond offering costs, net	$	108,701		$	119,330		$	94,524		$	105,160

Current portion of bonds payable - net of bond offering costs
Current portions of bonds payable	$	125,000		$	115,000		$	130,000		$	125,000
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	$	110,822		$	100,822		$	115,822		$	110,822

Long term portion of bonds payable - net of bond offering costs
Long term portion of bonds payable		1,120,000		$	1,245,000		$	990,000		$	1,120,000
Less: Bond offering costs to be amortized subsequent to the next 12 months		(94,521	)		(105,152	)		(80,346	)		(90,982	)
Long term portion of bonds payable, net of bond offering costs	$	1,025,479		$	1,139,848		$	909,654		$	1,029,018

Amortization expense was $~~3,544~~3,540 and $~~3,545~~3,544 for the three months ended December 31, 2023 and 2022, ~~and 2021,~~$10,636 and $10,629 ~~and $10,635~~ for the nine months ended December 31, 2023 and 2022, respectively. Interest payable was $24,267and ~~2021, respectively. As~~$6,744 as of December 31, ~~2022~~2023 and March 31, ~~2022, interest payable~~2023, respectively. Interest expense was $~~6,744~~18,200 and $~~7,367~~20,231, for the three months ended December 31, 2023 and 2022, respectively, and $57,985 and $63,808 for the nine months ended December 31, 2023 and 2022, respectively.

~~F-14~~F-15

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Maturities of bonds for the next five years, exclusive of the nine months ended December 31, 2023 are as follows:

SCHEDULE OF MATURITIES OF BONDS ~~FOR THE NEXT FIVE YEARS~~

Years ending March 31,	Amount		Amount
2023	$	—
2024		125,000	$	—
2025		130,000		130,000
2026		140,000		140,000
2027		150,000		150,000
2028				160,000
Thereafter		700,000		540,000
Total	$	1,245,000	$	1,120,000

NOTE 7.6. 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~~“EWB Loans”), each of which shall be used for working capital. The EWB Term Loan bears interest at a rate of ~~9.23~~9.73% (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 (~~8.37~~8.87% (0.87% plus Prime)) and matures on May 1, 2027. The total transaction costs associated with the EWB ~~Loans~~Term Loan incurred as of ~~December~~March 31, ~~2022,~~2023, 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.~~borrowings. As of ~~December~~March 31, ~~2022,~~2023, the principal and interest on the EWB Term Loan has been paid in full by the Company and the EWB Loan Agreement is ~~in compliance with each financial covenant and~~terminated.

In place of the EWB Term Loan, the Company has ~~not used any~~entered into a collateralized promissory note with individual lenders with rates comparable to the EWB Term Loan but with less restrictive covenants (a “Promissory Note”). As of June 2, 2023, a Promissory Note was placed with Nasrat Hakim, CEO and Chairman of the ~~Revolving line~~Board of ~~credit.~~Directors, for $3,000,000. The Promissory Note has an interest rate of 9% for the first year and 10% for an optional second year and the proceeds will be used for working capital and other business purposes.

Loans payable consisted of the following:

SCHEDULE OF LOANS PAYABLE

	December 31, 2023			March 31, 2023
Mortgage loan payable 4.75% interest and maturing June 2032	$	2,438,958		$	2,472,923
Equipment and insurance financing loans payable, between 7.10% and 12.02% interest and maturing between January 2024 and October 2025		158,726			259,611
Less: Current portion of loans payable		(190,607	)		(200,032	)
Long-term portion of loans payable	$	2,407,077		$	2,532,502

The interest expense associated with the loans payable was $30,384 and $317,844 for the three months ended December 31, 2023 and 2022, and $101,478 and $579,109 for the nine months ended December 31, 2023 and 2022, respectively.

F-16

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Loan principal payments for the next five years are as follows:

SCHEDULE OF LOAN PRINCIPAL PAYMENTS


Future principal balances
Years ending March 31,		Amount
2024 (excluding the nine months ended December 31, 2023)	$	44,535
2025		186,657
2026		120,748
2027		92,773
2028		94,433
2029 and thereafter		2,058,538
Total remaining principal balance	$	2,597,684

NOTE 7. RELATED PARTY LOANS

The Company has entered into a collateralized promissory note with individual lenders with rates comparable to the EWB Term Loan but with fewer covenants (the “Hakim Promissory Note”). These covenants include filing timely tax returns and financial statements, and an agreement not to sell, lease, or transfer a substantial portion of the Company’s assets during the term of the Hakim Promissory Note. On June 2, 2023, the Company entered into a Promissory Note with Nasrat Hakim, CEO and Chairman of the Board of Directors, pursuant to which the Company borrowed funds in the aggregate principal amount of $3,000,000. The Hakim Promissory Note has an interest rate of 9% for the first year and 10% for an optional second year and the proceeds will be used for working capital and other business purposes. The original maturity date of the Hakim Promissory Note is June 2, 2024, with an optional second year extension. The second year extension must be exercised by both parties 60 days prior to the original maturity date. As of the date of this filing, the Company does not expect to exercise the second year extension. For the three and nine months ended December 31, 2023, interest expense on the Hakim Promissory Note totaled $67,500 and $202,500 respectively, recorded on the Condensed Consolidated Balance Sheets in accrued expenses and on the Condensed Consolidated Statements of Operations in interest expense and amortization of debt issuance costs.

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~~the Wall Street Journal Prime Rate (“WSJP”) plus 0.5% with floor rate of 4.5%. The total transaction costs associated with the EWB Mortgage Loan incurred as of December 31, ~~2022,~~2023, were $~~34,952~~13,251, 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 ~~December 31, 2022,~~the date of this filing, the Company was in compliance with each financial ~~covenant.~~covenant.

~~Loans payable consisted~~On June 30, 2023, the Company entered into a collateralized promissory note with Davis Caskey (the “Caskey Promissory Note”). The Caskey Promissory Note has a principal balance of $1,000,000 and an interest rate of 9% for the first year and 10% for an optional second year. The Caskey Promissory Note is subject to the same covenants as are contained in the Hakim Promissory Note. The proceeds will be used for working capital and other business purposes. The original maturity date of the ~~following:~~

~~SCHEDULE OF LOANS PAYABLE~~

December 31, 2022 March 31, 2022
Equipment and insurance financing and mortgage loans payable, between 4.75% and 12.02% interest and maturing between March 2023 and June 2032 $ 14,824,405 $ 502,052
Less: Current portion of loans payable (360,616 ) (253,006 )
Long-term portion of loans payable $ 14,463,789 $ 249,046

Caskey Promissory Note is June 30, 2024, with an optional second year extension. The ~~interest expense associated with~~second year extension must be exercised by both parties 60 days prior to the ~~loans payable was $317,844~~ ~~and $14,692~~ ~~for~~original maturity date. As of the date of this filing, the Company does not expect to exercise the second year extension. For the three ~~months ended December 31, 2022~~ and ~~2021, respectively, and $579,109~~ ~~and $50,290~~ ~~for the~~ nine months ended December 31, ~~2022~~2023, interest expense on the Caskey Promissory Note totaled $22,500 and ~~2021, respectively.~~$67,500 respectively, recorded on the Condensed Consolidated Balance Sheets in accrued expenses and on the Condensed Consolidated Statements of Operations in interest expense and amortization of debt issuance costs.

~~F-15~~

~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Loan principal payments for the next five years are as follows:~~

~~SCHEDULE OF LOAN PRINCIPAL PAYMENTS~~

Years ending March 31, Amount
2023 (excluding the nine months ended December 31, 2022) $ 149,322
2023 $ 149,322
2024 327,317
2025 294,157
2026 227,306
2027 198,040
2028 and thereafter 13,628,263
Total remaining principal balance $ 14,824,405

NOTE 8. DEFERRED REVENUE

Deferred revenues in the aggregate amount of $~~35,556~~22,222 as of December 31, ~~2022,~~2023, were comprised of a current component of $13,333 and a long-term component of $~~22,223~~8,889. Deferred revenues in the aggregate amount of $~~45,559~~32,223 as of March 31, ~~2022,~~2023, were comprised of a current component of $13,333 and a long-term component of $~~32,226~~18,890. These ~~line items~~amounts represent the unamortized ~~amounts~~balance 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. 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.

F-17

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9. COMMITMENTS AND CONTINGENCIES

On August 17, 2023, Elite filed a paragraph IV certification with its ANDA to generic Oxycontin and after Elite got acceptance of the ANDA by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act. On November 14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma. Elite obtained agreement with Purdue to stay the litigation for six months. Elite’s launch of a generic Oxycontin will depend on the approval by the FDA and the outcome of various litigations involving Purdue or the expiry of the patents listed on the Orange Book. As of December 31, 2023, the results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matters will have a material adverse effect on its business, financial condition or results of operations.

Operating Leases

The Company entered into an operating lease for a portion of a one-story warehouse, located at 135 Ludlow Avenue, Northvale, New Jersey (the “Ludlow Ave. lease”) which began in 2010. On June 30, 2021, the Company exercised a renewal option, with such option including a term that begins on January 1, 2022 and expires on December 31, 2026. The Ludlow Ave. lease was terminated on July 1, 2022, when the 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 ~~has~~Lease had a term of three years, ending on October 31, 2023. The Pompano Office Lease was extended for one additional year to October 31, 2024.

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.

Finance Leases

In November 2023, the Company entered into an finance lease for equipment (the “Waters Equipment Lease”). The Waters Equipment Lease is related to lab equipment with an acquisition cost of $499,775, with Elite taking ownership of the asset on December 1, 2023. The Waters equipment lease has a term of five years, ending on November 29, 2028. The Company also has the option to purchase the asset at the end of the lease term for the amount of $1, which is probable to be exercised.

A lease is classified as a finance lease if any of the following criteria are met: (i) ownership of the underlying asset transfers to the Company by the end of the lease term; (ii) the lease contains an option to purchase the underlying asset that the Company is reasonably expected to exercise; (iii) the lease term is for a major part of the remaining economic life of the underlying asset; (iv) the present value of the sum of lease payments and any residual value guaranteed by the Company equals or exceeds substantially all of the fair value of the underlying asset; or (v) the underlying asset is of a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease that does not meet any of the criteria to be classified as a finance lease is classified as an operating lease. As the Company expects to exercise the option to purchase the asset at the end of the lease term, the Waters equipment lease was determined to be a finance lease. The finance lease is included on the balance sheets as Finance lease - right-of-use asset and Lease obligation - finance lease. The finance lease costs are split between Depreciation and amortization expense related to the asset and Interest expense and amortization of debt issuance costs on the lease liability, using the effective rate charged by the lessor. The Company has elected to account for lease and non-lease components separately.

~~F-16~~F-18

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Lease assets and liabilities are classified as follows on the condensed consolidated balance sheet:

SCHEDULE OF LEASE ASSETS AND LIABILITIES

Lease	Classification	December 31, 2023
Assets
Finance	Finance lease – right-of-use asset	$	408,428
Operating	Operating lease – right-of-use asset		26,231
Total leased assets		$	434,659

Liabilities
Current
Finance	Lease obligation – finance lease	$	37,444
Operating	Lease obligation – operating lease		26,231

Long-term
Finance	Lease obligation – finance lease, net of current portion		200,939
Operating	Lease obligation – operating lease, net of current portion		—
Total lease liabilities		$	264,614

Rent expense is recorded on the straight-line basis. Rent expense under the ~~leases~~135 Ludlow Ave. modified lease was $0 for the three months ended December 31, 2023 and 2022, respectively, and ~~2021 was~~ $~~6,330~~0 and $~~63,249, respectively, and $77,238~~ ~~and $189,003~~58,248 for the nine months ended December 31, 2023 and 2022, respectively. Rent expense under the Pompano Office Lease for the three months ended December 31, 2023 and ~~2021,~~2022 was $7,565 and $6,456, respectively, and $20,603 and $19,116 for the nine months ended December 31, 2023 and 2022, 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 ~~Ludlow Ave. modified lease and the~~ Pompano Office Lease and Waters Equipment Lease:

SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS

Years ending March 31,	Amount			Operating Lease Amount			Financing Lease Amount			Total
2023 (excluding the nine months ended December 31, 2022)	$	6,330
2024		14,840
2024 (excluding the nine months ended December 31, 2023)				$	8,087		$	16,286		$	24,373
2025		—			18,870			65,145			84,015
2026		—			—			65,145			65,145
2027					—			65,145			65,145
2028					—			65,145			65,145
Thereafter		—			—			43,429			43,429
Total future minimum lease payments		21,170
Less: interest		(21	)		(727	)		(81,911	)		(82,638	)
Present value of lease payments	$	21,149		$	26,230		$	238,384		$	264,614

The ~~Company has an obligation for the restoration of its leased facility~~weighted-average remaining lease term and the ~~removal or dismantlement~~weighted-average discount rate of ~~certain property and equipment~~our leases were as ~~a result of its business operation in accordance with ASC 410,~~ follows:

SCHEDULE OF WEIGHTED -AVERAGE REMAINING TERM AND THE WEIGHTED-AVERAGE DISCOUNT RATE

Lease Term and Discount Rate	December 31, 2023
Remaining lease term (years)
Operating leases		0.8
Finance leases		4.9
Discount rate
Operating leases		6.0	%
Finance leases		12.5	%

~~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, 2022, and March 31, 2022, the Company had a liability of $

F-19

0 ~~and $38,780, respectively, recorded as other long-term liabilities.~~

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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. 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.

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~~Company has 79,008,661 astotal warrants to purchase shares of ~~December 31, 2022, and March 31, 2022~~Common Stock outstanding with a weighted average exercise price of $0.1521 as of December 31, ~~2022,~~2023 and March 31, ~~2022.~~2023.

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.

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.~~ basis, including a provision within that provides the holder a choice of net cash settlement or settlement in shares upon a cashless exercise. The net cash settlement amount is the cash value obtained by subtracting the then exercise price from the closing price of the Company’s Common Stock (provided such closing price is higher than the exercise price) and multiplying the difference by the number of shares exercised. As this event is at the holder’s option, it is considered outside of the Company’s control. As a result of the net cash settlement at the option of the holder, such warrants are classified as liabilities and measured initially and subsequently at fair value.

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 ~~occurrence~~happening 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. 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, 2022			March 31, 2022			December 31, 2023			March 31, 2023
Fair value of the Company’s Common Stock	$	0.0295		$	0.0350		$	0.1393		$	0.0290
Volatility		63.63	%		76.55	%		73.50	%		74.37	%
Initial exercise price	$	0.1521		$	0.1521		$	0.1521		$	0.1521
Warrant term (in years)		4.3			5.1			3.3			4.1
Risk free rate		3.96	%		2.40	%		4.01	%		3.55	%

The changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the nine months ended December 31, ~~2022~~2023 were as follows:

SCHEDULE OF CHANGES IN WARRANTS MEASURED AT FAIR VALUE ON A RECURRING BASIS

Balance at March 31, 2022 $ 936,837
Change in fair value of derivative financial instruments - warrants (561,070 )
Balance at December 31, 2022 $ 375,767

Balance at March 31, 2023	$	521,711
Change in fair value of derivative financial instruments - warrants		5,075,489
Balance at December 31, 2023	$	5,597,200

F-20

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE ~~11.~~12. 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 three and nine months ended December 31, 2023 and 2022. In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Purchase Agreement. The 2020 LPC Purchase Agreement expired on August 1, 2023.

Summary of Common Stock Activity

On November 22, 2023, the Company issued 1,642,971 shares of Common Stock in payment of director fees to be paid via the issuance of common stock, with such shares having an aggregate value on the date of original accrual of $60,000 and which were owed for periods prior to the current fiscal year and accrued as of the date of share issuance. The price of the Company’s Common Stock on November 22, 2023, was $0.1533 per share. The aggregate value of the shares on the date of their issuance was $251,867.

On December 29, 2023, the Company issued 2,223,147 shares of Common Stock in payment of consultant fees to be paid via the issuance of common stock, with such shares having an aggregate value on the date of original accrual of $153,333 and which were owed for periods prior to the current fiscal year and accrued as of the date of share issuance. The price of the Company’s Common Stock on December 29, 2023, was $0.14per share. The aggregate value of the shares on the date of their issuance was $311,238.

As of December 31, ~~2022, the Company has issued an aggregate of~~2023, there were ~~5,975,857~~1,017,881,199 shares of Common Stock ~~for net proceeds~~issued and 1,017,781,199 shares of $~~469,105~~ ~~to Lincoln Park as initial commitment shares.~~Common Stock outstanding.

NOTE ~~12.~~13. 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.

~~As of~~During the nine months ended December 31, ~~2022,~~2023, the Company accrued director’s fees totaling $~~67,500~~22,500, which will be paid via cash payments totaling $22,500 ~~and~~. All of the ~~issuance of~~ ~~1,193,253~~accrued shares of ~~Common Stock. The Company anticipates that these shares of Common Stock will be issued prior~~common stock related to the ~~end of the current fiscal year.~~Director’s compensation policy were paid out on December 29, 2023.

SCHEDULE OF STOCK BASED COMPENSATION

Balance of common stock owed at April 1, 2023	$	60,000
Awarded shares		—
Change in fair value of stock-based liabilities		191,867
Issuance of common stock on November 22, 2023		(251,867	)
Balance of common stock owed at December 31, 2023	$	—

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.

SCHEDULE OF STOCK BASED COMPENSATION

Balance of common stock owed at April 1, 2023	$	4,278,333
Awarded shares		—
Change in fair value of stock-based liabilities		4,729,509
Common stock issued		(311,238	)
Settlement of non-cash liability		(1,761,792	)
Balance of common stock owed at December 31, 2023	$	6,934,812

During the nine months ended December 31, ~~2022,~~2023, the Company accrued no additional salaries ~~totaling $375,000~~ owed to the Company’s President, ~~and~~ Chief Executive Officer and certain other employees which will be paid via the issuance of ~~10,000,176~~shares of Common Stock.

As of December 31, ~~2022,~~2023, the ~~Company owed its President~~total obligation of $6,934,812 is outstanding which is recorded at fair value and ~~Chief Executive Officer and certain other employees’ salaries totaling $4,000,000~~ ~~which will be paid via~~is included in Accrued Expenses on the ~~issuance of~~ ~~60,190,955~~ ~~shares of Common Stock.~~Condensed Consolidated Balance Sheets.

~~F-18~~F-21

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On November 6, 2023, the Company entered into a Settlement Agreement with a former executive who was terminated on February 7, 2022. The employment agreement with the former executive included annual compensation of $250,000 which was to be paid via the issuance of shares of Common Stock. At the date of the former executive’s termination an aggregate of 14,892,580 shares of Common Stock (the “Deferred Shares”) were due to the former executive, with such number of shares representing an aggregate of $1,000,000 in compensation earned pursuant to the relevant employment agreement at an annual rate of $250,000. Pursuant to the Settlement Agreement, the former executive irrevocably elected to relinquish all rights and claims to the Deferred Shares. The Company is released of any obligation to issue the Deferred Shares and further acknowledges that no Deferred Shares will be issued to or received by the former employee. The price of the Company’s Common Stock on November 6, 2023 was $0.1183 per share and the value of the Deferred Shares on this date was $1,761,792. The Company recorded other income from gain on settlement agreement for this amount on the unaudited Condensed Consolidated Statements of Operations.

On December 29, 2023, the Company issued 2,223,147 shares of Common Stock in satisfaction of accrued consultant fees.

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.

The fair value of option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The exercise price of each award is generally not less than the per share fair value in effect as of that award date. The determination of fair value using the Black-Scholes model is affected by the Company’s share fair value as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, risk-free interest rate and projected employee share option exercise behaviors. The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards, since the Company does not have sufficient exercise history to estimate term of its historical option awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The grant date fair value of option awards is determined using the Black Scholes option-pricing model. The following assumptions were used for the nine months ended December 31, 2023 and year ended March 31, 2023:

SCHEDULE OF GRANT DATE FAIR VALUE OF OPTION AWARDS

	December 31, 2023			March 31, 2023
Term (in years)		10			10
Exercise Price		$0.08-$0.09			$0.03-$0.04
Dividend Yield		—			—
Expected Volatility		80%-81	%		79%-80	%
Risk Free Rate		4.27%-4.69	%		2.99%-4.01	%

A summary of the activity of Company’s 2014 Stock Option Plan for the nine months ended December 31, ~~2022~~2023 is as follows:

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, 2022 5,650,000 $ 0.14 2.8 $ —
Granted 4,100,000 $ 0.04 4.5 $ —
Outstanding at December 31, 2022 9,750,000 $ 0.17 2.3 $ —
Exercisable at December 31, 2022 4,530,001 $ 0.16 1.8 $ —

~~Options granted during the nine months ended December 31, 2022 were valued using the Black Scholes model with the following assumptions:~~

~~SCHEDULE OF OPTIONS GRANTED~~

December 31, 2022
Term 3.0 - 10.0
Stock Price $ 0.03
Exercise Price $ 0.04
Dividend Yield $ —
Expected Volatility 63.6 %
Risk Free Rate 4.0 %

	Shares			Weighted		Weighted Average Remaining Contractual		Aggregate
	Underlying Options			Average Exercise Price		Term (in years)		Intrinsic Value
Outstanding at March 31, 2023		15,370,000		$	0.07		7.4	$	—
Granted		4,100,000		$	0.09		10.0	$	—
Expired and Forfeited		(3,840,000	)	$	0.07		1.8	$	—
Outstanding at December 31, 2023		15,630,000		$	0.05		9.0	$	1,429,822
Exercisable at December 31, 2023		343,334		$	0.19		4.6	$	6,850

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, ~~2022 and March 31, 2022~~2023 of $~~0.03~~0.14 ~~and $0.03, respectively.~~

for those awards with strike prices lower than the quoted price of the Company’s Common Stock as of December 31, 2023. As of December 31, ~~2022,~~2023, there was $~~95,888~~450,470 in unrecognized stock based compensation expense that will be recognized over a weighted average ~~2.3~~2.37 year period.

On September 5, 2023, options were granted to the Chief Financial Officer pursuant to the 2014 Plan to purchase an aggregate of 3,000,000 ~~years.~~shares of Common Stock. The options have an exercise price of $0.0898 per share, the fair market value of the Common Stock on the date of grant. The options granted will vest one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.

F-22

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On September 19, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 1,000,000 shares of Common Stock. The options have an exercise price of $0.0819 per share, the fair market value of the Common Stock on the date of grant. The options granted will vest one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.

On October 2, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 100,000 shares of Common Stock. The options have an exercise price of $0.0938 per share, the fair market value of the Common Stock on the date of grant. The options granted will vest one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.

The weighted-average grant-date fair value of stock options granted during the nine months ended December 31, 2023 under the 2014 Plan was $0.0754.

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

Revenues

Two customers accounted for approximately 57% of the Company’s revenues for the nine months ended December 31, 2023. These three customers accounted for approximately 30%, and 27%, of revenues each, respectively.

Two customers accounted for approximately 96% of the Company’s revenues for the nine months ended December 31, 2022. These two customers accounted for approximately 85% and 11% of ~~revenues~~revenue each, respectively. ~~The same two customers accounted for~~ 85~~% and~~ 12~~% of revenues each, respectively, for the three months ended December 31, 2022.~~

~~Two customers accounted for approximately~~ 96~~% of the Company’s revenues for the nine months ended December 31, 2021. These two customers accounted for approximately~~ 85~~% and~~ 11~~% of revenues each, respectively. The same two customers accounted for~~ 84~~% and~~ 9~~% of revenues each, respectively, for the three months ended December 31, 2021.~~

Accounts Receivable

Two customers accounted for approximately 77% of the Company’s accounts receivable as of December 31, 2023. These two customers accounted for approximately 45% and 32% of accounts receivable each, respectively.

One customer accounted for approximately 89% of the Company’s accounts receivable as of December 31, 2022.

~~F-19~~

~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Two~~ ~~customers accounted for approximately~~ 91~~% the Company’s accounts receivable as of March 31, 2022. These two customers accounted for approximately~~ 78~~% and~~ 13~~% of accounts receivable each, respectively.~~

Purchasing

Two suppliers accounted for approximately 43% of the Company’s purchases of raw materials for the nine months ended December 31, 2023. These two customers accounted for approximately 30%, and 13%, of purchasing each, respectively.

One supplier accounted for approximately 62% of the Company’s purchases of raw materials for the nine months ended December 31, 2022.

~~One~~ ~~supplier accounted for approximately~~ 55~~% of the Company’s purchases of raw materials for the nine months ended December 31, 2021.~~

NOTE ~~14.~~15. 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.

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.

F-23

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following represents selected information for the Company’s reportable segments:

SCHEDULE OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

	2022		2021		2022		2021		2023		2022		2023		2022
	For the Three Months Ended December 31,				For the Nine Months Ended December 31,				For the Three Months Ended December 31,				For the Nine Months Ended December 31,
	2022		2021		2022		2021		2023		2022		2023		2022
Operating Income by Segment
ANDA	$	3,828,493	$	3,061,035	$	7,947,118	$	8,068,073	$	5,637,283	$	3,828,493	$	13,073,023	$	7,947,118
NDA		—	$	—		—	$	—
Operating income by Segment	$	3,828,493	$	3,061,035	$	7,947,118	$	8,068,073	$	5,637,283	$	3,828,493	$	13,073,023	$	7,947,118

The Company notes that there was no revenue related to the NDA segment for the three and nine months ended December 31, 2023 and 2022.

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

SCHEDULE OF OPERATING ~~LOSS~~INCOME BY SEGMENT TO ~~(LOSS)~~ INCOME FROM OPERATIONS

2022 2021 2022 2021
For the Three Months Ended December 31, For the Nine Months Ended December 31,
2022 2021 2022 2021
Operating income by segment $ 3,828,493 $ 3,061,035 $ 7,947,118 $ 8,068,073
Corporate unallocated costs (378,867 ) (716,881 ) (1,465,792 ) (2,288,461 )
Interest income 15 13 187 77
Interest expense and amortization of debt issuance costs (322,681 ) (37,400 ) (782,221 ) (126,376 )
Depreciation and amortization expense (317,685 ) (296,559 ) (933,531 ) (908,297 )
Significant non-cash items (172,841 ) (216,295 ) (484,894 ) (652,281 )
Change in fair value of derivative instruments 372,894 489,500 561,070 1,523,394
Income before income taxes $ 3,009,328 $ 2,283,413 $ 4,841,937 $ 5,616,129

~~F-20~~

	2023			2022			2023			2022
	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2023			2022			2023			2022
Operating income by segment	$	5,637,283		$	3,828,493		$	13,073,023		$	7,947,118
Corporate unallocated costs		(1,711,275	)		(378,867	)		(4,906,187	)		(1,465,792	)
Interest income		5,249			15			16,085			187
Interest expense and amortization of debt issuance costs		(121,628	)		(322,681	)		(371,478	)		(782,221	)
Depreciation and amortization expense		(343,537	)		(317,685	)		(999,059	)		(933,531	)
Significant non-cash items		1,711,977			(172,841	)		1,654,200			(484,894	)
Change in fair value of derivative instruments		(2,417,772	)		372,894			(5,075,489	)		561,070
Change in fair value of stock-based liabilities		(2,854,556	)		—			(4,921,376	)		—
Income(Loss) before income taxes	$	(94,259	)	$	3,009,328		$	(1,530,281	)	$	4,841,937

~~ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY~~NOTE 16. RELATED PARTY AGREEMENTS

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~NOTE 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 Secured Promissory Note, dated May 15, 2017, issued by the Company to Mikah..Agreements

In May 2020, Praxgen (formerly known as SunGen Pharma ~~LLC (“SunGen”)~~LLC), pursuant to an asset purchase agreement, assigned its rights and obligations under the ~~SunGen~~Praxgen Agreement for Amphetamine IR and Amphetamine ER to Mikah ~~Pharmaceuticals.~~Pharma LLC (“Mikah”). 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.~~Praxgen. 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.

~~NOTE 16.~~ As of December 31, 2023, the Company owes an aggregate of $~~INCOME TAXES~~3,389,949 to Mikah in accordance with the agreements, with such amount being recorded as an accrued expense on the unaudited condensed consolidated balance sheets.

~~The Company’s effective tax rate was~~ ~~11.5% and income tax expense for the nine months ended December 31, 2022 was $50,837. The Company’s effective tax rate was~~ ~~10.75% and income tax expense was $4,000~~ for the nine months ended December 31, 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%.

Consultants Agreements

~~NOTE 17.~~ ~~COVID-19 UPDATE~~

Employment contracts with certain consultants include provisions for a portion of the 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. On December 29, 2023, the Company issued 2,223,147 shares of Common Stock in satisfaction of accrued consultant fees owed to one consultant.

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.

~~F-21~~F-24

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 17. ~~Workforce~~INCOME TAXES

The ~~Company has taken~~Company’s income tax benefit was $18.3 million and ~~will continue to take, proactive measures to provide~~income tax expense was $0.05 million 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 rotationnine months ended December 31, 2023 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.2022, respectively.

The Company’s income tax benefit was $~~Manufacturing~~0.8 million and ~~Supply Chain~~income tax expense was $0.04 million for the three months ended December 31, 2023 and 2022, respectively.

During the nine months ended December 31, ~~2022, and as~~2023, the Company recorded a discrete tax benefit of $18.1 million related to the Company’s release of the ~~date of this Quarterly Report on Form 10-Q, the Company has not experienced material, detrimental issues~~valuation allowance against deferred tax assets related to ~~COVID-19 in~~U.S. federal net operating losses carryforwards and research and development tax credits, which are expected to be realized based on demonstrated current profitability and 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, andexpectations of forecasted income. For the ~~Company is in regular communications with its suppliers and third-party partners. A prolonging of~~nine months ended December 31, 2023, the ~~current situation relating to COVID-19 may result in an increased risk of interruption~~release in the ~~Company supply chain in~~valuation allowance is the ~~future, with no assurances given as~~primary reason that the ~~materiality~~effective tax rate is different than the United States federal statutory rate of ~~such future interruption on the Company’s business, financial condition, results of operations and cash flows.~~21%.

NOTE 18. SUBSEQUENT EVENTS

~~[update~~The Company has evaluated subsequent events from the balance sheet date through ~~filing]~~February 14, 2024, and note the following subsequent events:

140 Ludlow Office Lease

The Company entered into a five-year office lease agreement for a portion of a one-story warehouse, located at 140 Ludlow Avenue, Northvale, New Jersey (the 140 Ludlow Ave. lease”) which began on January 22, 2024 and ends on December 31, 2028.

~~F-22~~F-25

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 ~~nine months ended~~Nine Months Ended December 31, 2023 and 2022 ~~and 2021~~ 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, ~~2022.~~2023. 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 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 at 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~~product candidates in our pipeline including the products with our partners; (iv) commercial exploitation of our products either by sales under our own label, 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”).~~1984.

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~~

~~Pyros Agreement~~

During the nine months ended December 31, 2022, the Company entered into an agreement with Pyros Pharmaceuticals, Inc. (“Pyros”) pursuant to which the Company sold to Pyros its rights in and to the Company’s approved abbreviated new drug applications (ANDAs) for its generic Sabril drug. The Company sold its rights to Pyros for $1,000,000, which was recorded as gain on sale of ANDA during the nine months ended December 31, 2022. There is no further action required by the Company regarding the rights which would affect future periods.

In conjunction with the sale of its Product to Pyros, the Company executed a Manufacturing and Supply agreement (the “Pyros Agreement”) with Pyros. Under the terms of the Pyros Agreement, the Company will receive an agreed-upon price per drug for the manufacturing and packaging of Sabril over a term of three years. Revenue per the Pyros Agreement will be recognized as control of the manufactured and supplied drugs is transferred to Pyros (at the time of delivery).

~~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.

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	~~Branded Product Equivalent~~	Therapeutic Category	~~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~~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

Products Under FDA Review

SequestOx™ - Immediate Release Oxycodone with sequestered Naltrexone

SequestOx™ is our abuse-deterrent candidate for the management of moderate to severe pain where the use of an opioid analgesic is appropriate. SequestOx™ is an immediate-release Oxycodone Hydrochloride containing sequestered Naltrexone which incorporates 5mg, 10mg, 15mg, 20mg and 30mg doses of oxycodone into capsules.

In January 2016, the Company submitted a 505(b)(2) New Drug Application for SequestOx™, after receiving a waiver of the $2.3 million filing fee from the FDA. In March 2016, the Company received notification of the FDA’s acceptance of this filing and that such filing has been granted priority review by the FDA with a target action under the Prescription Drug User Fee Act of July 14, 2016.

On July 15, 2016, the FDA issued a Complete Response Letter, or CRL, regarding the NDA. The CRL stated that the review cycle for the SequestOx™ NDA is complete and the application is not ready for approval in its present form.

On July 7, 2017, the Company reported topline results from a pivotal bioequivalence fed study for or SequestOx™. The mean Tmax (the amount of time that a drug is present at the maximum concentration in serum) of SequestOx™ was 4.6 hr. with a range of 0.5 hr. to 12 hr. and the mean Tmax of the comparator, Roxicodone®, was 3.4 hr. with a range of 0.5 hr. to 12 hr. A key objective for the study was to determine if the reformulated SequestOx™ had a similar Tmax to the comparator when taken with a high fat meal. Based on these results, the Company paused clinical trials for this formulation of SequestOx™. On January 30, 2018, the Company reported positive topline results from a pilot study conducted for a modified SequestOx™ wherein, based on the results of this pilot study, the modified SequestOx™ formulation is expected to achieve bioequivalence with a Tmax range equivalent to the reference product when conducted in a pivotal trial under fed conditions. The Company has provided the pilot data to the FDA, requesting clarification as to the requirements for resubmission of the NDA. The FDA has provided guidance for repeated bio-equivalence studies in order to bridge the new formulation to the original SequestOx™ studies and also extended our filing fee waiver until July 2023. Due to the prohibitive cost of such repeated bio-equivalence studies and the uncertain commercial viability given the regulatory and competitive landscape, the Company has paused development of this product candidate.

There can be no assurances of the Company conducting future clinical trials, or if such trials are conducted, there can be no assurances of the success of any future clinical trials, or if such trials are successful, there can be no assurances that an intended future resubmission of the NDA product filing, if made, will be accepted by or receive marketing approval from the FDA. In addition, even if marketing authorization is received, there can be no assurances that there will be future revenues or profits, or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments made to secure this marketing authorization.

Generic Products Filed

Currently the Company has filed a generic antimetabolite ANDA and a generic dopamine agonist ANDA and these products are under review by the FDA. On August 17, 2023, the Company also submitted an ANDA for an opiate analgesic for pain management and it was accepted for review by FDA on September 19, 2023. On December 21, 2023, the FDA accepted for review an ANDA for an undisclosed generic drug product in a class of medications known as central nervous stimulants.

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). 300mg/7.5mg, 300mg/15mg, 300mg/30mg and 300mg/60mg tablets. 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. Acetaminophen with codeine products have annual U.S. sales of approximately $45 million according to IQVIA (formerly QuintilesIMS Health Data). The Company is not pursuing licensing deals for any opioids at this time ~~and, in light of~~until the ~~current~~ market ~~and litigation around opioid products,~~changes. The Company will wait for the ~~Company has no plans~~market to ~~commercialize this product at this time.~~stabilize before pursuing these opportunities.

Doxycycline Hyclate Tablets

The Company received approval ~~on June 27,~~in April 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~~product. According to QVIA (formerly QuintilesIMS Health) data, the branded product for this antibiotic and its equivalents had total annual U.S. sales of approximately $85 million for the twelve months ending September 30, 2019. The product is ~~used to treat a wide variety of bacterial infections. This product was co-developed and co-owned~~jointly owned by Elite and Praxgen Pharmaceuticals LLC, formerly SunGen Pharma ~~LLC. We are evaluating potential commercial opportunities.~~LLC, (“Praxgen”).

There can be no assurances in relation to any of the above approved products not yet commercialized, that there will be future revenues of profits, or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments made to secure these marketing authorizations.

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 the Company’s financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in 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. We have identified below the critical accounting policies, which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.

~~There~~Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition - The Company generates revenue from manufacturing and licensing fees and sales of generic pharmaceuticals bearing the Elite label to pharmaceutical distributors for pharmacies and institutions. 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. Revenues earned from the sale of Elite label products are recorded at their net realizable value which consists of gross amounts invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable. 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.

Nature of goods and services

a) Manufacturing Fees

The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms of the contract, at which time the performance obligation is deemed to be completed. 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

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

c) Sale of product under the Elite label

The Company began direct sales of products under the Company’s own label on April 1, 2023. License agreements will remain in place for select products. With this transition, however, a large portion of the manufacturing and license fees now reported will be replaced with revenues from sales of Elite labeled pharmaceutical products to distributors for pharmacies and institutions.

The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms, at which time the performance obligation is deemed to be completed. The Company is primarily responsible for fulfilling the promise to deliver the product and bears risk of loss while the inventory is in-transit to the purchaser. Revenue is measured as the amount of consideration earned from the sale of Elite labeled pharmaceutical products are recorded at their net realizable value which consists of gross amounts invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable.

Accounts Receivable and Allowance for Expected Credit Losses - Accounts receivable are comprised of balances due from customers, net of estimated allowances for expected credit losses, and other contractual deductions, including, without limitation, chargebacks, discounts and program rebates. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.

Prior to April 1, 2023, trade receivables were ~~no significant changes during~~presented net of allowance for expected credit losses based on the credit risk of specific clients, past collection history, and management’s evaluation of other risks. Expected credit losses stemming from unbilled receivables expected to be billed between March 31, 2024 and March 31, 2028 include additional risk premiums estimated based on factors such as projected inflation, projected decreases in GDP, and projected unemployment.

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 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, 2023, a summary of the tax years that remain subject to examination in our major tax jurisdictions are: United States – Federal, 2016 and forward. The Company did not record unrecognized tax positions for the nine months ended December 31, ~~2022 to~~2023.

New Accounting Pronouncements

For a description of recent accounting standards, including the ~~items that we disclosed as~~expected dates of adoption and estimated effects, if any, on our ~~significant accounting policies and estimates described in~~financial statements, see “Note 1,1. Summary of Significant Accounting ~~Policies” to the Company’s financial statements as contained~~Polices: Recently Issued Accounting Pronouncements” in ~~the Company’s Annual Report on~~Part II, Item 1 of this Form ~~10-K for the fiscal year ended March 31, 2022.~~10-Q.

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, ~~2022~~2023 compared to the three months ended December 31, ~~2021~~2022

Revenue, Cost of revenue and Gross profit:

	For the Three Months Ended December 31,						Change						For the Three Months Ended December 31,						Change
	2022			2021			Dollars			Percentage			2023			2022			Dollars			Percentage
Manufacturing fees	$	7,798,159		$	7,667,674		$	130,485			2	%	$	14,791,110		$	7,798,159		$	6,992,951			90	%
Licensing fees		1,451,907			1,307,140			144,767			11	%		747,690			1,451,907			(704,217	)		(49	)%
Total revenue		9,250,066			8,974,814			275,252			3	%		15,538,800			9,250,066			6,288,734			68	%
Cost of manufacturing		4,330,841			4,957,150			(626,309	)		(13	)%		8,497,727			4,330,841			4,166,886			96	%
Gross profit	$	4,919,225		$	4,017,664		$	901,561			22	%	$	7,041,073		$	4,919,225		$	2,121,848			43	%

Gross profit - percentage		53	%		45	%								45	%		53	%

Total revenues for the ~~three-month period~~three months ended December 31, ~~2022~~2023 increased by ~~$0.28~~$6.3 million or 3%68%, to ~~$9.25~~$15.5 million, as compared to ~~$8.97~~$9.3 million, for the corresponding period of the prior year, primarily due to the launch of the Elite label during the current fiscal year which achieved increased sales ~~of Amphetamine IR Tablets and Amphetamine ER Capsules during~~for the ~~three month period~~quarter ended December 31, ~~2022~~2023, as compared to the comparable ~~period~~quarter of the prior ~~fiscal year.~~year, which did not include any sales of Elite label products.

Manufacturing fees revenue increased by ~~$0.13~~$7.0 million, or 2%90%, primarily due to the launch of the Elite label during the current fiscal year which achieved increased sales ~~of Amphetamine IR Tablets and Amphetamine ER Capsules during~~for the ~~three month period~~quarter ended December 31, ~~2022~~2023, as compared to the comparable ~~period~~quarter of the prior ~~fiscal year.~~year, which did not include any sales of Elite label products.

Licensing fees ~~increased~~revenue decreased by ~~$0.14~~$0.7 million, or ~~11%~~49%. This ~~increase~~decrease is primarily due to the expiration of the marketing alliance agreements between the Company and Lannett Company, Inc. dated March 6, 2019 and April 9, 2019 (the “Lannett Agreements”) on March 31, 2023. The revenue streams that were generated during periods ending on or prior to March 31, 2023 and attributed to the Lannett Agreements, included profit splits on the sale by Lannett of Amphetamine IR and Amphetamine ER. Since April 1, 2023, these products are now sold by the Company under its own label, with revenues being recorded as manufacturing revenues instead of licensing fees ~~earned from the sale of Amphetamine ER Capsules and Amphetamine IR Tablets during the three months ended December 31, 2022 as compared to the comparable period of the prior fiscal year.~~going forward.

~~Costs~~Cost of revenue consists of manufacturing and assembly costs. Our ~~costs~~cost of revenue ~~decreased~~increased by ~~$0.63~~$4.2 million or ~~13%~~96%, to ~~$4.33~~$8.5 million as compared to ~~$4.96~~$4.3 million for the corresponding period in the prior fiscal year. This ~~decrease~~increase was due ~~in large part~~ to an ~~improved margin on~~increased volume of products sold during the three months ended December 31, ~~2022,~~2023, as compared to the comparable period of the prior fiscal ~~year.~~

year, as noted above.

Our gross profit margin was ~~53%~~45% during the three months ended December 31, ~~2022~~2023 as compared to ~~45%~~53% during the comparable period of the prior fiscal year. The decrease is due to total revenues consisting of a greater proportion of manufacturing revenues, as compared to the comparable period of the prior year, with the associated increase in costs of manufacturing resulting in lower gross profit margins as compared to the comparable period of the prior year which included a greater proportion of license fees that does not have a cost of manufacturing.

Operating expenses:

	For the Three Months Ended December 31,				Change					For the Three Months Ended December 31,				Change
	2022		2021		Dollars		Percentage			2023		2022		Dollars			Percentage
Operating expenses:
Research and development	$	1,443,361	$	956,628	$	486,733		51	%	$	1,403,790	$	1,443,361	$	(39,571	)		(3	)%
General and administrative		1,186,049		929,547		256,502		28	%		1,711,275		1,186,049		525,226			44	%
Non-cash compensation		13,030		3,630		9,400		259	%		49,815		13,030		36,785			282	%
Depreciation and amortization		317,685		296,559		21,126		7	%		343,537		317,685		25,852			8	%
Total operating expenses	$	2,960,125	$	2,186,364	$	773,761		35	%	$	3,508,417	$	2,960,125	$	548,292			19	%

Operating expenses consist of research and development costs, general and administrative costs, non-cash compensation and depreciation and amortization expenses. Operating expenses ~~from~~for the three months ended December 31, ~~2022~~2023 increased by ~~$0.8~~$0.5 million, or ~~35%~~19%, to ~~$3.0~~$3.5 million as compared to ~~$2.2~~$3.0 million for the corresponding period in the prior fiscal ~~year.~~year, largely due to an increase in general and administrative costs of $0.5 million.

Research and development costs during the three months ended December 31, ~~2022~~2023 were $1.4 million, ~~an increase~~a decrease of ~~$0.5~~less than $0.1 million, or ~~51%~~3%, from approximately ~~$1.0~~$1.4 million of such costs for the comparable period of the prior year. ~~The increase was a result of the timing~~

General and ~~nature of product development activities during~~administrative expenses for the three ~~month period~~months ended December 31, ~~2022~~2023 were $1.7 million, an increase of $0.5 million or approximately 44% from the comparable period of the prior fiscal year, largely due to an increased human resource headcount and costs as compared to the comparable period of the prior ~~fiscal~~ year.

General and administrative expenses during the three months ended December 31, 2022 were $1.2 million, an increase of $0.3 million, or 28% from $0.9 million of such costs for the comparable period of the prior year due to increased spending in payroll and professional expense.

Non-cash compensation expense ~~during~~for the three months ended December 31, ~~2022~~2023 and ~~December 31, 2021~~2022 was less than $0.1 million.

Depreciation and amortization expenses ~~during~~from the three months ended December 31, ~~2022~~2023 were $0.3 million, which was virtually unchanged from $0.3 million in such costs for the comparable period of the prior fiscal year.

As a result of the foregoing, our income from operations during the three months ended December 31, ~~2022~~2023 was ~~$2.0~~$3.5 million, compared to income from operations of ~~$1.8~~$2.0 million for the comparable period of the prior fiscal year.

Other income (expense):

	For the Three Months Ended December 31,						Change
	2023			2022			Dollars			Percentage
Other income (expense):
Change in fair value of derivative financial instruments - warrants	$	(2,417,772	)	$	372,894		$	(2,790,666	)		(748	)%
Change in fair value of stock-based liabilities		(2,854,556	)		—			(2,854,556	)		—	%
Interest expense and amortization of debt issuance costs		(121,628	)		(322,681	)		201,053			(62	)%
Gain from settlement agreements		1,761,792			—			1,761,792			—	%
Gain on sale of ANDA		—			1,000,000			(1,000,000	)		(100	)%
Interest income		5,249			15			5,234			34,893	%
Other (expense) income, net	$	(3,626,915	)	$	1,050,228		$	(4,677,143	)		(445	)%

For the Three Months Ended December 31, Change
2022 2021 Dollars Percentage
Other income (expense):
Change in fair value of derivative instruments $ 372,894 $ 489,500 $ (116,606 ) (24 )%
Interest expense and amortization of debt issuance costs (322,681 ) (37,400 ) (285,281 ) 763 %
Gain on sale of ANDA 1,000,000 — 1,000,000 100 %
Interest income 15 13 2 15 %
Other (expense) income, net $ 1,050,228 $ 452,113 $ 598,115 132 %

Other income (expense) for the three months ended December 31, ~~2022~~2023 was ~~$1.1~~an other expense of $3.6 million, ~~an increase~~a decrease of ~~$0.6~~$4.7 million from ~~the~~an other income ~~(expense)~~ of ~~$0.5~~$1.1 million for the comparable period of the prior fiscal year. The ~~increase~~decrease was primarily due to net increases of other expenses of $2.9 million relating to the ~~gain~~change in fair value of stock-based liabilities and $2.8 million relating to the change in fair value of derivative financial instruments, a decrease in other income of $1.0 million from Gain on sale of ANDA that occurred in the prior year only, offset by ~~an increase~~a decrease in other expenses of $0.2 million relating to the decrease in interest expense and amortization of debt issuance costs ~~during~~in the ~~three months ended December 31, 2022. Please note that~~current fiscal year as compared to the comparable period of the prior fiscal year. The change in the fair value of derivative instruments and stock-based liabilities 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 stock-based liabilities and decreases in the closing price of the Company’s Common Stock. ~~Please see Note 11 to the Unaudited Condensed Consolidated Financial Statements above.~~

The ~~increase~~decrease in interest expense ~~was primarily attributable~~associated with the loans payable is due in large part to the ~~increased~~Company paying off the principal balance of the EWB loan during the fiscal year ended March 31, 2023, resulting in no interest ~~payments related to~~on the EWB loan ~~and mortgage~~incurred for the ~~Company obtained from East West Bank.~~three months ended December 31, 2023.

As a result of the foregoing, our net loss before income ~~before the net benefit from sale of net operating loss credits~~taxes for the three months ended December 31, ~~2022~~2023 was ~~$3.0~~$0.1 million, compared to net income ~~$2.3~~before income taxes of $3.0 million for the comparable period of the prior fiscal year.

Nine months ended December 31, ~~2022~~2023 compared to the nine months ended December 31, ~~2021~~2022

Revenue, Cost of revenue and Gross profit:

	For the Nine Months Ended December 31,						Change						For the Nine Months Ended December 31,						Change
	2022			2021			Dollars			Percentage			2023			2022			Dollars			Percentage
Manufacturing fees	$	21,312,663		$	20,639,421		$	673,242			3	%	$	36,208,217		$	21,312,663		$	14,895,554			70	%
Licensing fees		4,200,888			3,950,623			250,265			6	%		2,467,844			4,200,888			(1,733,044	)		(41	)%
Total revenue		25,513,551			24,590,044			923,507			4	%		38,676,061			25,513,551			13,162,510			52	%
Cost of manufacturing		12,360,935			13,209,430			(848,495	)		(6	)%		20,437,354			12,360,935			8,076,419			65	%
Gross profit	$	13,152,616		$	11,380,614		$	1,772,002			16	%	$	18,238,707		$	13,152,616		$	5,086,091			39	%

Gross profit - percentage		52	%		46	%								47	%		52	%

Total revenues for the nine months ~~period~~ ended December 31, ~~2022~~2023 increased by ~~$0.9~~$13.2 million or 4%52%, to ~~$25.5~~$38.7 million, as compared to ~~$24.6~~$25.5 million, for the corresponding period of the prior year, primarily due to the launch of the Elite label during the current fiscal year which achieved increased sales ~~of Amphetamine IR Tablets and Amphetamine ER Capsules during~~for the nine months ended December 31, ~~2022~~2023, as compared to the comparable ~~period~~quarter of the prior ~~fiscal year.~~year, which did not include any sales of Elite label products.

Manufacturing fees revenue increased by ~~$0.7~~$14.9 million, or 3%70%, primarily due to the launch of the Elite label during the current fiscal year which achieved increased sales ~~of Amphetamine IR Tablets and Amphetamine ER Capsules during~~for the nine months ended December 31, ~~2022~~2023, as compared to the comparable ~~period~~quarter of the prior ~~fiscal year.~~year, which did not include any sales of Elite label products.

Licensing fees ~~increased~~revenue decreased by ~~$0.3~~$1.7 million, or 6%41%. This ~~increase~~decrease is primarily due to the expiration of the marketing alliance agreements between the Company and Lannett Company, Inc. dated March 6, 2019 and April 9, 2019 (the “Lannett Agreements”) on March 31, 2023. The revenue streams that were generated during periods ending on or prior to March 31, 2023 and attributed to the Lannett Agreements, included profit splits on the sale by Lannett of Amphetamine IR and Amphetamine ER. Since April 1, 2023, these products are now sold by the Company under its own label, with revenues being recorded as manufacturing revenues instead of licensing fees ~~earned from the sale of Amphetamine ER Capsules and Amphetamine IR Tablets during the nine months ended December 31, 2022 as compared to the comparable period of the prior fiscal year.~~going forward.

~~Costs~~Cost of revenue consists of manufacturing and assembly costs. Our ~~costs~~cost of revenue ~~decreased~~increased by ~~$0.8~~$8.1 million or 6%65%, to ~~$12.4~~$20.4 million as compared to ~~$13.2~~$12.4 million for the corresponding period in the prior fiscal year. This ~~decrease~~increase was due to an ~~improved margin on~~increased volume of products sold during the nine months ended December 31, ~~2022,~~2023, as compared to the comparable period of the prior fiscal ~~year.~~year, as noted above.

Our gross profit margin was ~~52%~~47% during the nine months ended December 31, ~~2022~~2023 as compared to ~~46%~~52% during the comparable period of the prior fiscal year. The decrease is due to total revenues consisting of a greater proportion of manufacturing revenues, as compared to the comparable period of the prior year, with the associated increase in costs of manufacturing resulting in lower gross profit margins as compared to the comparable period of the prior year which included a greater proportion of license fees that does not have a cost of manufacturing.

Operating expenses:

	For the Nine Months Ended December 31,				Change					For the Nine Months Ended December 31,				Change
	2022		2021		Dollars		Percentage			2023		2022		Dollars		Percentage
Operating expenses:
Research and development	$	3,775,107	$	3,312,540	$	462,567		14	%	$	5,165,684	$	3,775,107	$	1,390,577		37	%
General and administrative		4,356,752		2,930,126		1,426,626		49	%		4,906,187		4,356,752		549,435		13	%
Non-cash compensation		24,325		10,617		13,708		129	%		107,592		24,325		83,267		342	%
Depreciation and amortization		933,531		908,297		25,234		3	%		999,059		933,531		65,528		7	%
Total operating expenses	$	9,089,715	$	7,161,580	$	1,928,135		27	%	$	11,178,522	$	9,089,715	$	2,088,807		23	%

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 months ended December 31, ~~2022~~2023 increased by ~~$1.9~~$2.1 million, or ~~27%~~23%, to ~~$9.1~~$11.2 million as compared to ~~$7.2~~$9.1 million for the corresponding period in the prior fiscal ~~year.~~year, largely due to an increase in research and development of $1.4 million and general and administrative expenses of $0.5 million.

Research and development costs during the nine months ended December 31, ~~2022~~2023 were ~~$3.8~~$5.2 million, an increase of ~~$0.5~~$1.4 million, or ~~14%~~37%, from approximately ~~$3.3~~$3.8 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 nine months ended December 31, ~~2022~~2023 as compared to the comparable period of the prior fiscal year.

General and administrative expenses for the nine months ended December 31, ~~2022~~2023 were $4.9 million as compared to $4.4 million for the corresponding period in the prior fiscal year, an increase of ~~$1.4~~$0.5 million or ~~49% from $2.9 million of such~~approximately 13%, largely due to an increased human resource headcount and costs ~~for~~as compared to the comparable period of the prior ~~year due to increased spending in payroll and professional expense.~~fiscal year.

Non-cash compensation expense for the nine months ended December 31, ~~2022 and December 31, 2021~~2023 was ~~less than~~ $0.1 ~~million.~~million as compared to $0.02 million for the comparable period of the prior fiscal year, an increase of $0.1 million or approximately 342%, with such increase being attributed to the issuance to employees of options to purchase Common Stock during the current fiscal year.

Depreciation and amortization expenses from the nine months ended December 31, ~~2022~~2023 were ~~$0.9~~$1.0 million, which was virtually unchanged from $0.9 million in such costs for the comparable period of the prior fiscal year.

As a result of the foregoing, our income from operations during the nine months ended December 31, ~~2022~~2023 was ~~$4.1~~$7.1 million, compared to income from operations of ~~$4.2~~$4.1 million for the comparable period of the prior fiscal year.

Other income (expense):

	For the Nine Months Ended December 31,						Change						For the Nine Months Ended December 31,						Change
	2022			2021			Dollars			Percentage			2023			2022			Dollars			Percentage
Other income (expense):
Change in fair value of derivative instruments	$	561,070		$	1,523,394		$	(962,324	)		(63	)%
Change in fair value of derivative financial instruments - warrants													$	(5,075,489	)	$	561,070		$	(5,636,559	)		(1,005	)%
Change in fair value of stock-based liabilities														(4,921,376	)		—			(4,921,376	)		100	%
Interest expense and amortization of debt issuance costs		(782,221	)		(126,376	)		(655,845	)		519	%		(371,478	)		(782,221	)		410,743			(53	)%
Gain from settlement agreements														1,761,792			—			1,761,792			—	%
Gain on sale of ANDA		1,000,000			—			1,000,000			100	%		—			1,000,000			(1,000,000	)		(100	)%
Interest income		187			77			110			143	%		16,085			187			15,898			8,502	%
Other (expense) income, net	$	779,036		$	1,397,095		$	(618,059	)		(44	)%	$	(8,590,466	)	$	779,036		$	(9,369,502	)		(1,203	)%

Other income (expense) for the nine months ended December 31, ~~2022~~2023 was ~~$0.8~~an other expense of $8.6 million, a decrease of ~~$0.6~~$9.4 million from ~~$1.4~~an other income of $0.8 million for the comparable period of the prior fiscal year. The decrease was primarily due to ~~decreased income~~a net increases in other expenses of $5.6 million relating to ~~changes~~the change in ~~the~~ fair value of ~~our outstanding~~ derivative ~~warrants~~instruments, and ~~increased~~$4.9 million in change in fair value of stock-based liabilities, net decrease in other income of $1.0 million relating to a gain on sale of ANDA in the comparable period of the prior fiscal year that did not occur in the current fiscal year, offset by $1.8 million in gain from settlement agreements in the current year that did not occur in the comparable period of the prior fiscal year, and an increase in other income resulting from a net $0.4 million decrease in interest expense and amortization of debt issuance costs ~~offset by~~as compared to the ~~gain on sale~~comparable period of ~~ANDA during~~ the ~~nine months ended December 31, 2022.~~prior fiscal year. Please note that the change in the fair value of derivative instruments and stock-based liabilities 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 stock-based liabilities and decreases in the closing price of the Company’s Common Stock. ~~Please see Note 11~~The decrease in interest expense associated with the loans payable is due in large part to the ~~Unaudited Condensed Consolidated Financial Statements above.~~Company paying off the principal balance of the EWB loan during the fiscal year ended March 31, 2023, resulting in no interest on the EWB loan incurred for the nine months ended December 31, 2023.

As a result of the foregoing, our net loss before income ~~before the net benefit from sale of net operating loss credits~~taxes for the nine months ended December 31, ~~2022~~2023 was ~~$4.8~~$1.5 million, compared to net income ~~$5.6~~before income taxes of $4.8 million for the comparable period of the prior fiscal year.

Liquidity and Capital Resources

Capital Resources

	December 31, 2022		March 31, 2022		Change			December 31, 2023		March 31, 2023		Change
Current assets	$	33,164,840	$	18,861,389	$	14,303,451		$	37,156,502	$	21,510,297	$	15,646,205
Current liabilities	$	6,654,362	$	6,694,241	$	(39,879	)	$	19,158,799	$	7,833,637	$	11,325,162
Working capital	$	26,510,478	$	12,167,148	$	14,343,330		$	17,997,703	$	13,676,660	$	4,321,043

Our working capital (total current assets less total current liabilities) increased by ~~$14.3~~$4.3 million from ~~$12.2~~$13.7 million as of March 31, ~~2022~~2023 to ~~$26.5~~$18.0 million as of December 31, ~~2022,~~2023, with such increase being primarily related to the ~~cash proceeds of $14.6 million from the new loan~~increase in finished goods inventory and accounts receivable, associated with increased customer orders during the nine months ended December 31, ~~2022.~~2023.

Summary of Cash Flows:

For the Nine Months Ended December 31,
2022 2021
Net cash provided by operating activities $ 370,021 $ 4,902,978
Net cash used in investing activities $ (5,200,407 ) $ (234,387 )
Net cash provided by (used in) financing activities $ 14,204,231 $ (572,889 )

	For the Nine Months Ended December 31,
	2023			2022
Net cash (used in) provided by operating activities	$	(5,341,537	)	$	370,021
Net cash used in investing activities	$	(406,007	)	$	(5,200,407	)
Net cash provided by financing activities	$	3,747,073		$	14,204,231

Net cash ~~provided by~~used in operating activities for the nine months ended December 31, ~~2022~~2023 was ~~$0.4~~$5.3 million, which included, without limitation, net income of ~~$4.8~~$16.8 million, increased by depreciation and ~~increases in~~other non-cash expenses totaling ~~$0.9~~$10.1 million ~~offset~~and reduced by ~~net changes~~increases in ~~assets~~accounts receivable and ~~liabilities~~inventory totaling ~~$5.3~~$17.9 million.

Net cash used in investing activities for the nine months ended December 31, ~~2022~~2023 was comprised of purchases of property and equipment of approximately ~~$5.2~~$0.4 million.

Net cash provided by financing activities was ~~$14.2~~$3.7 million for the nine months ended December 31, ~~2022~~2023 which consisted primarily of proceeds from ~~loan issuances~~related party loans payable totaling ~~$14.6~~$4.0 million offset by payments of bond and loan ~~payments~~principal totaling ~~$0.2~~$0.3 million.

Caskey Promissory Note

On June 30, 2023, the Company entered into a collateralized promissory note with Davis Caskey (the “Caskey Promissory Note”). The Caskey Promissory Note has a principal balance of $1,000,000 and an interest rate of 9% for the first year and 10% for an optional second year. The Caskey Promissory Note is subject to the same covenants as are contained in the Hakim Promissory Note. The proceeds will be used for working capital and other business purposes. The original maturity date of the Caskey Promissory Note is June 30, 2024, with an optional second year extension. The second year extension must be exercised by both parties 60 days prior to the original maturity date.

Hakim Promissory Note

The Company has entered into a collateralized promissory note with individual lenders with rates comparable to the EWB Term Loan but with fewer restrictive covenants (the “Hakim Promissory Note”). These covenants include filing timely tax returns and financial statements, and an agreement not to sell, lease, or transfer a substantial portion of the Company’s assets during the term of the Hakim Promissory Note. On June 2, 2023, the Company entered into a Promissory Note with Nasrat Hakim, CEO and Chairman of the Board of Directors, pursuant to which the Company borrowed funds in the aggregate principal amount of $3,000,000. The Hakim Promissory Note has an interest rate of 9% for the first year and 10% for an optional second year and the proceeds will be used for working capital and other business purposes. The original maturity date of the Hakim Promissory Note is June 2, 2024, with an optional second year extension. The second year extension must be exercised by both parties 60 days prior to the original maturity date.

East West Bank

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 December 31, 2023, were $13,251, 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 December 31, 2023, and through the date of filing of this quarterly report on Form 10-Q, the Company was not aware of the existence of any violations of financial covenants included in the EWB Mortgage Loan.

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. The 2020 LPC Purchase Agreement expired on August 1, 2023.

During the three and nine months ended December 31, 2023 and 2022, ~~and December 31, 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 months ended December 31, 2021. In addition, there were no shares issued~~ to Lincoln ~~Park as additional commitment shares, pursuant~~Park.

Recent Developments

On December 12, 2023, the Company announced the first shipment of generic Adderall XR® to its distribution and marketing partner Prasco, LLC (“Prasco”). The Company has a non-exclusive Manufacturing, Supply and Distribution Agreement with Prasco, and Burel Pharmaceuticals, LLC to market Elite’s generic version of Adderall® XR in the ~~2020 LPC Agreement.~~United States. Elite’s product is co-owned with Mikah Pharma.

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 December 31, ~~2022~~2023 at the reasonable assurance level.

711

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.

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, ~~2022~~2023 at the reasonable assurance level.

Changes in Internal Controls Over Financial Reporting

There were no changes 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 period covered by this Quarterly Report.

812

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Pending Litigation

~~We may be subject from time~~On August 17, 2023, Elite filed a paragraph IV certification with its ANDA to ~~time~~generic Oxycontin and after Elite got acceptance of the ANDA by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act. On November 14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma. Elite obtained agreement with Purdue to stay the litigation for six months. Elite’s launch of a generic Oxycontin will depend on the approval by the FDA and the outcome of various ~~claims and legal actions arising during~~litigations involving Purdue or the ~~ordinary course~~expiry 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~~the patents listed on ~~our results of operations, financial condition or cash flows.~~the Orange Book.

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, ~~2022.~~2023, except as set forth in our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2023.

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.~~During the fiscal quarter ended December 31, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

913

ITEM 6. EXHIBITS

Exhibit No.		Description

~~10.1~~		Employment Agreement, dated September 5, 2022, between Elite Pharmaceuticals, Inc. and Kirko Kirkov, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 7, 2022.

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.~~

* Filed herewith.

** Furnished herewith.

1014

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 14, ~~2023~~2024	By:	/s/ Nasrat Hakim
		Nasrat Hakim
		Chief Executive Officer, President and
		Chairman of the Board of Directors
		(Principal Executive Officer)

February 14, ~~2023~~2024	By:	/s/ ~~Robert Chen~~Carter Ward
		~~Robert Chen~~Carter Ward
		Chief Financial Officer
		(Principal Accounting and Financial Officer)

1115

				Fair Value Measurement Using
	Amount at Fair Value			Level 1		Level 2		Level 3
Balance as of March 31, 2022	$	936,837		$	—	$	—	$	936,837
Change in fair value of derivative instruments		(561,070	)		—		—		(561,070	)
Balance as of December 31, 2022	$	375,767		$	—	$	—	$	375,767

	December 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

	December 31, 2022			March 31, 2022
Equipment and insurance financing and mortgage loans payable, between 4.75% and 12.02% interest and maturing between March 2023 and June 2032	$	14,824,405		$	502,052
Less: Current portion of loans payable		(360,616	)		(253,006	)
Long-term portion of loans payable	$	14,463,789		$	249,046

Balance at March 31, 2022	$	936,837
Change in fair value of derivative financial instruments - warrants		(561,070	)
Balance at December 31, 2022	$	375,767

	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		4,100,000	$	0.04		4.5	$	—
Outstanding at December 31, 2022		9,750,000	$	0.17		2.3	$	—
Exercisable at December 31, 2022		4,530,001	$	0.16		1.8	$	—

	December 31, 2022
Term		3.0 - 10.0
Stock Price	$	0.03
Exercise Price	$	0.04
Dividend Yield	$	—
Expected Volatility		63.6	%
Risk Free Rate		4.0	%