What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-16 compared with 2020-08-14 · 854 added, 2096 removed, 525 unchanged (85% of the section changed)

FINANCIAL STATEMENTS

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

receivable, net of allowance for doubtful accounts of $-0-, respectively

expenses and other current assets

current assets

Accounts receivable, net of allowance for doubtful accounts of $-0-, respectively

Prepaid expenses and other current assets

Total current assets

Property and equipment, net of accumulated depreciation of $11,224,823 and $10,957,334, respectively

Intangible assets, net of accumulated depreciation of $-0-, respectively

Operating lease –

right-of-use asset

Other assets:

Restricted cash - debt service for NJEDA bonds

Security deposits

Total other assets

LIABILITIES AND SHAREHOLDERS’

and equipment, net of accumulated depreciation of $11,546,074 and $10,957,334, respectively

assets, net of accumulated depreciation of $-0-, respectively

lease - right-of-use asset

cash - debt service for NJEDA bonds

AND SHAREHOLDERS’

revenue, current portion

payable, current portion, net of bond issuance costs

payable, current portion

obligation - operating lease

secured promissory note - related party, current portion

current liabilities

Accounts payable

Accrued expenses

Deferred revenue, current portion

Bonds payable, current portion, net of bond issuance costs

Loans payable, current portion

Lease obligation - operating lease

Senior secured promissory note - related party, current portion

Total current liabilities

revenue, net of current portion

payable, net of current portion and bond issuance costs

payable, net of current portion

obligation - operating lease, net of current portion

financial instruments - warrants

long-term liabilities

Deferred revenue, net of current portion

Bonds payable, net of current portion and bond issuance costs

Loans payable, net current portion

Lease obligation - operating lease, net of current portion

Derivative financial instruments - warrants

Other long-term liabilities

Total long-term liabilities

Total liabilities

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

long-term liabilities

Shareholders’

Series J convertible preferred stock;

par value of $0.01 50 shares authorized;

24.0344 issued and outstanding as of June 30, 2020 and March 31, 2020

Common stock;

J convertible preferred stock;

par value of $0.01;

50 shares authorized;

0 issued and outstanding as of September 30, 2020

and 24.0344 issued and outstanding as of March 31, 2020

par value $0.001;

1,445,000,000 shares authorized;

841,078,964 shares issued and 840,978,964 outstanding as of June 30, 2019;

1,009,276,752 shares issued and 1,009,176,752 outstanding as of

September 30, 2020;

840,504,367 shares issued and 840,404,367 shares outstanding as of March 31, 2020

Additional paid-in capital

Treasury stock;

100,000 shares as of June 30, 2020 and March 31, 2019;

Accumulated deficit

paid-in capital

100,000 shares as of September 30, 2020 and March 31, 2020;

(150,487,499 )

(154,046,410 )

Total shareholders’

Total liabilities and shareholders’

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

shareholders’

liabilities and shareholders’

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF

For the Three Months Ended June 30,

Manufacturing fees

Licensing fees

Total revenue

Cost of revenue

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

the Three Months Ended

September 30,

the Six Months Ended

September 30,

Manufacturing

and development

and administrative

compensation through issuance of stock options

and amortization

operating expenses

Research and development

General and administrative

Non-cash compensation through issuance of stock options

Depreciation and amortization

Total operating expenses

Income (loss) from operations

Other income (expense):

Interest expense and amortization of debt issuance costs

Gain on sale of fixed assets

Change in fair value of derivative instruments

Interest income

Other (expense) income, net

Income from operations before net benefit from sale of state net operating loss credits

Net benefit from sale of state net operating loss credits

Net income attributable to common shareholders

Basic net income per share

attributable to common shareholders

Diluted net income (loss) per share attributable to common shareholders

Basic weighted average Common Stock outstanding

Diluted weighted average Common Stock outstanding

(loss) from operations

income (expense):

expense and amortization of debt issuance costs

on sale of fixed assets

in fair value of derivative instruments

income (expense), net

(loss) from operations before income taxes

Income tax expense

benefit from the sale of state net operating loss credits

income (loss)

$ (1,595,741 )

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

$ (1,316,039 )

net income (loss)

weighted average Common Stock outstanding

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF

SHAREHOLDERS’

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

J Preferred Stock

8 unchanged sentences

$ (152,969,061 )

of Preferred Stock to Common Stock

(13,903,960 )

commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement

Stock sold pursuant to the 2020 Lincoln Park purchase agreement

Stock issued as additional commitment shares pursuant to the 2020 Lincoln Park purchase agreement

associated with raising capital

compensation through the issuance of employee stock options

issued in payment of Director fees

issued in payment of salaries

issued in payment of consulting expenses

at September 30, 2020

1,009,276,752

$ 164,401,909

$ (150,487,499 )

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

J Preferred Stock

12 unchanged sentences

$ (1,861,668 )

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

Stock sold pursuant to the Lincoln Park purchase agreement

Stock issued as additional commitment shares pursuant to the LPC purchase agreement

associated with raising capital

compensation through the issuance of employee stock options

at September 30, 2019

$ 149,537,695

$ (153,122,098 )

$ (3,058,300 )

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF

For the Three Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of operating leases - right-of-use assets

Gain on the disposal of property and equipment

Change in fair value of derivative financial instruments - warrants

Non-cash compensation accrued

Non-cash compensation through the issuance of employee stock options

Non-cash rent expense and lease accretion

Change in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Accounts payable, accrued expenses and other current liabilities

Deferred revenue and customer deposits

Lease obligations - operating leases

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Proceeds from disposal of property and equipment

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the issuance of stock

Other loan proceeds

Other loan payments

Net cash provided by financing activities

Net change in cash and restricted cash

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Supplemental disclosure of cash and non-cash transactions:

Cash paid for interest

Financing of equipment purchases and insurance renewal

Stock issued in payment of salaries

Commitment shares issued to Lincoln Park Capital

Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets

The ac companying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

the Six Months Ended

September 30,

FLOWS FROM OPERATING ACTIVITIES:

income (loss)

$ (1,316,039 )

to reconcile net income (loss) to net cash provided by (used in) operating

and amortization

of operating leases - right-of-use assets

on the disposal of property and equipment

in fair value of derivative financial instruments - warrants

compensation accrued

compensation through the issuance of employee stock options

rent expense and lease accretion

in operating assets and liabilities:

expenses and other current assets

payable, accrued expenses and other current liabilities

revenue and customer deposits

obligations - operating leases

cash provided by (used in) operating activities

FLOWS FROM INVESTING ACTIVITIES:

of property and equipment

from disposal of property and equipment

cash used in investing activities

FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the issuance of Common Stock

loan proceeds

of bond principal

loan payments

cash provided by financing activities

change in cash and restricted cash

and restricted cash, beginning of period

and restricted cash, end of period

disclosure of cash and non-cash transactions:

paid for interest

of equipment purchases and insurance renewal

Stock issued in payment of Directors fees, salaries and consulting

shares issued to Lincoln Park Capital

Conversion of preferred stock to Common Stock

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Pharmaceuticals, Inc.

Elite Pharmaceuticals,

(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”) which 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 and licensing proprietary orally administered,

controlled-release drug delivery systems and products with abuse deterrent capabilities and the manufacture of generic, oral dose

pharmaceuticals.

The Company is equipped to manufacture controlled-release products on a contract basis for third parties and

itself, if and when the products are approved.

These products include drugs that cover therapeutic areas for pain, allergy, bariatric

and infection.

Research and development activities are done so with an objective of developing products that will secure marketing

approvals from the United States Food and Drug Administration (“FDA”), and thereafter, commercially exploiting such

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 and manufacture of generic, oral dose pharmaceuticals.

is equipped to manufacture controlled-release products on a contract basis for third parties and itself, if and when the products

are approved.

These products include drugs that cover therapeutic areas for allergy, bariatric, attention deficit and infection.

Research and development activities are performed with an objective of developing products that will secure marketing approvals

from the United States Food and Drug Administration (“FDA”), and thereafter, commercially exploiting such products.

of Consolidation

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting

principles in the United States (“GAAP”) and in conformity with the instructions on Form 10-Q and Rule 8-03 of Regulation

S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”).

The unaudited condensed

consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Elite Laboratories, Inc.

All significant intercompany accounts and transactions have been eliminated in consolidation.

The unaudited condensed consolidated

financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management,

necessary for a fair presentation of such statements.

The results of operations for the three months ended June 30, 2020 are not

necessarily indicative of the results that may be expected for the entire year.

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.

principles in the United States (“GAAP”).

The unaudited condensed consolidated financial statements include the accounts

of the Company and its wholly-owned subsidiary, Elite Laboratories, Inc.

All significant intercompany accounts and transactions

have been eliminated in consolidation.

The unaudited condensed consolidated financial statements reflect all adjustments, consisting

of normal recurring items, which are, in the opinion of management, necessary for a fair presentation of such statements.

results of operations for the three and six months ended September 30, 2020 are not necessarily indicative of the results that

may be expected for the entire year.

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.

Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results

10 unchanged sentences

Please see Note 15 for further details.

Company generates revenue from the development of pain management products, manufacturing of a line of generic pharmaceutical

products with approved ANDA, commercialization of products either by license and the collection of royalties, or through the manufacture

of formulations and the development of new products and the expansion of licensing agreements with other pharmaceutical companies,

including co-development projects, joint ventures and other collaborations.

The Company also generates revenue through its focus

on the development of various types of drug products, including branded drug products which require NDAs.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The Company generates

revenue primarily from manufacturing and licensing fees.

Manufacturing fees include the development of pain management products,

manufacturing of a line of generic pharmaceutical products with approved ANDA, through the manufacture of formulations and the

development of new products.

Licensing fees include the commercialization of products either by license and the collection of royalties,

or the expansion of licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures

and other collaborations.

ASC 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer

1 unchanged sentence

exchange for those goods or services.

The Company recognize revenues following the five-step model prescribed under ASC 606:

identify contract(s) with a customer;

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;

12 unchanged sentences

of third parties are excluded from revenue.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of goods and services

2 unchanged sentences

Manufacturing Fees

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 and products utilizing abuse deterrent

technologies.

The Company also develops and markets (either on its own or by license to other companies) generic and proprietary

controlled-release and abuse deterrent pharmaceutical products.

The Company is equipped

to manufacture controlled-release products on a contract basis for third parties, if, and when, the products are approved.

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.

Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping

terms of the contract.

Revenue on product are presented gross because 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.

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.

Company enters into licensing and development agreements, which may include multiple revenue generating activities, including

21 unchanged sentences

achieving each milestone.

Given the inherent uncertainty of the occurrence of future events, the Company will not recognize revenue

from the milestone until there is not a high probability of a reversal of revenue, which typically occurs near or upon achievement

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.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

management judgment is required to determine the level of effort required under an arrangement and the period over which the Company

10 unchanged sentences

None of the Company’s

contracts contained a significant financing component as of June 30, 2020.

contracts contained a significant financing component as of September 30, 2020.

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

1 unchanged sentence

(the “2015 Epic License Agreement”), which has been determined to satisfy the criteria for consideration as a collaborative

agreement, and is accounted for accordingly, in accordance with GAAP.

The 2015 Epic License Agreement expired on June 4, 2020

without renewal.

agreement, and is accounted for accordingly.

The 2015 Epic License Agreement expired on June 4, 2020 without renewal.

Company entered into a Master Development and License Agreement with SunGen Pharma LLC dated August 24, 2016 (the “SunGen

3 unchanged sentences

product development activities.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Disaggregation

the following table, revenue is disaggregated by type of revenue generated by the Company and timing of revenue recognition.

table also includes a reconciliation of the disaggregated revenue with the reportable segments:

For the Three Months Ended June 30,

Licensing fees

Total NDA revenue

Manufacturing fees

Licensing fees

Total ANDA revenue

Total revenue

the following table, revenue is disaggregated by type of revenue generated by the Company.

The table also includes a reconciliation

of the disaggregated revenue with the reportable segments:

the Three Months Ended

September 30,

the Six Months Ended

September 30,

Manufacturing

Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

3 unchanged sentences

financial institutions and, to date has not experienced losses on any of its balances.

of June 30, 2020, and March 31, 2020, the Company had $404,993 and $404,802, of restricted cash, respectively, related

to debt service reserve in regard to the New Jersey Economic Development Authority (“NJEDA”) bonds (see Note 5).

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

of September 30, 2020, and March 31, 2020, the Company had $404,994 and $404,802, of restricted cash, respectively,

related to debt service reserve in regard to the New Jersey Economic Development Authority (“NJEDA”) bonds (see Note

receivable are comprised of balances due from customers, net of estimated allowances for uncollectible accounts.

29 unchanged sentences

growth rates.

of June 30, 2020, the Company did not identify any indicators of impairment.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of September 30, 2020, the Company did not identify any indicators of impairment.

also see Note 4 for further details on intangible assets.

2 unchanged sentences

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

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.

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.

taxes are accounted for under the asset and liability method.

6 unchanged sentences

allowance to reduce any deferred tax assets that it determines will not be realizable in the future.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files

6 unchanged sentences

in all tax jurisdiction until the applicable statutes of limitation expire.

As of June 30, 2020, a summary of the tax years

that remain subject to examination in our major tax jurisdictions are:

As of September 30, 2020, a summary of the tax

years that remain subject to examination in our major tax jurisdictions are:

United States –

Federal, 2016 and forward, and State,

2012 and forward.

The Company did not record unrecognized tax positions for the three months ended June 30, 2020 and 2019.

Federal, 2016 and forward,

and State, 2012 and forward.

The Company did not record unrecognized tax positions for the three and six months ended September

30, 2020 and 2019.

and Preferred Shares

1 unchanged sentence

Debt , ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging , as applicable.

Each feature of a freestanding financial instruments including, without limitation, any rights relating to subsequent dilutive

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 are assessed with determinations made regarding the proper classification in the Company’s financial

dividends and exercise is assessed with determinations made regarding the proper classification in the Company’s financial

Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation .

6 unchanged sentences

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, 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.

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.

(Loss) Per Share Attributable to Common Shareholders’

The Company follows ASC 260, Earnings Per Share , which requires

presentation of basic and diluted earnings (loss) 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 (loss) per

share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the

The computation of diluted net income (loss) per shares does not include the conversion of securities that would have an

antidilutive effect.

ELITE PHARMACEUTICALS, INC.

Company follows ASC 260, Earnings Per Share , which requires presentation of basic and diluted earnings (loss) 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 (loss) per share is computed by dividing net income (loss) by the weighted

average number of shares of Common Stock outstanding during the period.

The computation of diluted net income (loss) per shares

does not include the conversion of securities that would have an antidilutive effect.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following is the computation of earnings (loss) per share applicable to common shareholders for the periods indicated:

For the Three Months Ended June 30,

Net income attributable to common shareholders –

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

Net income (loss) - basic

$ (1,595,741 )

$ (1,316,039 )

Effect of dilutive instrument on net income

Net income (loss) attributable to common shareholders - diluted

Net income (loss) - diluted

$ (1,595,741 )

$ (1,316,039 )

Weighted average shares of Common Stock outstanding - basic

1 unchanged sentence

Weighted average shares of Common Stock outstanding - diluted

1,001,130,122

Net income (loss) per share attributable to common shareholders

(1) Equivalent common shares

of 79,008,661 related to the conversion of warrants are excluded and 2,766,566 related to stock options from the calculation of

diluted net income per share for the three months ended June 30, 2020, since their effect is antidulitive.

Equivalent common shares

of 158,017,321 related to the conversion of Series J Preferred Stock, 79,008,661 related to the conversion of warrants and 6,098,000

related to stock options are excluded from the calculation of diluted net loss per share for the three months ended June 30, 2019,

since their effect is antidilutive.

Net income (loss) per share

Value of Financial Instruments

24 unchanged sentences

Inputs that are unobservable for the asset or liability.

ELITE PHARMACEUTICALS, INC.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

on a Recurring Basis

1 unchanged sentence

in the fair value hierarchy within which those measurements fell:

Fair Value Measurement Using

June 30, 2020

Derivative financial instruments –

March 31, 2020

Derivative financial instruments - warrants

Value Measurement Using

financial instruments - warrants

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

10 unchanged sentences

Adopted Accounting Pronouncements

November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (ASC 808), Clarifying the Interaction between ASC 808 and

ASC 606 (“ASU 2018-18”).

The ASU clarifies when transactions between collaborative participants are in the scope of

The ASU also provides some guidance on presentation of transactions not in the scope of ASC 606.

ASU 2018-18 is effective

for fiscal years, and interim periods within those years, beginning after December 15, 2019.

Early adoption is permitted for fiscal

years, and interim periods within those years.

The Company is not materially impacted by the implementation of this pronouncement.

November 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-18, Collaborative Arrangements (ASC 808),

Clarifying the Interaction between ASC 808 and ASC 606 (“ASU 2018-18”).

The ASU clarifies when transactions between

collaborative participants are in the scope of ASC 606.

The ASU also provides some guidance on presentation of transactions not

in the scope of ASC 606.

ASU 2018-18 is effective for fiscal years, and interim periods within those years, beginning after December

Early adoption is permitted for fiscal years, and interim periods within those years.

The Company is not materially

impacted by the implementation of this pronouncement.

Issued Accounting Pronouncements

June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses”.

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.

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.

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.

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.

ELITE PHARMACEUTICALS, INC.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

consisted of the following:

Finished goods

Work-in-progress

Raw materials

Inventory reserve

1 unchanged sentence

and equipment consisted of the following:

Land, building and improvements

Laboratory, manufacturing, warehouse and transportation equipment

Office equipment and software

Furniture and fixtures

building and improvements

manufacturing, warehouse and transportation equipment

equipment and software

Accumulated depreciation

1 unchanged sentence

(10,957,334 )

Depreciation expense was

$324,071 and $327,408 for the three months ended June 30, 2020 and 2019, respectively.

expense was $255,118 and $328,140 for the three months ended, and $654,871 and $655,548 for the six months ended September 30,

2020 and 2019, respectively.

INTANGIBLE ASSETS

following table summarizes the Company’s intangible assets:

June 30, 2020

Patent application costs

ANDA acquisition costs

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2020

Patent application costs

ANDA acquisition costs

application costs

acquisition costs

application costs

acquisition costs

application costs were incurred in relation to the Company’s abuse deterrent opioid

3 unchanged sentences

through the expiry of the related patent(s).

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 2005, the Company refinanced a bond issue occurring in 1999 through the issuance of Series A and B Notes tax-exempt bonds

14 unchanged sentences

following tables summarize the Company’s bonds payable liability:

Gross bonds payable

NJEDA Bonds - Series A Notes

bonds payable

Bonds - Series A Notes

Current portion of bonds payable (prior to deduction of bond offering costs)

Long-term portion of bonds payable (prior to deduction of bond offering costs)

Bond offering costs

portion of bonds payable (prior to deduction of bond offering costs)

offering costs

Accumulated amortization

Bond offering costs, net

Current portion of bonds payable - net of bond offering costs

Current portions of bonds payable

offering costs, net

portion of bonds payable - net of bond offering costs

portions of bonds payable

Bonds offering costs to be amortized in the next 12 months

Current portion of bonds payable, net of bond offering costs

Long term portion of bonds payable - net of bond offering costs

Long term portion of bonds payable

portion of bonds payable, net of bond offering costs

term portion of bonds payable - net of bond offering costs

term portion of bonds payable

Bond offering costs to be amortized subsequent to the next 12 months

Long term portion of bonds payable, net of bond offering costs

expense was $3,545 for the three months ended June 30, 2020 and 2019.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

term portion of bonds payable, net of bond offering costs

expense was $3,545 and $3,540 for the three months ended, and $7,090 and $7,085 for the six months ended September 30, 2020 and

2019, respectively.

LOANS PAYABLE

payable consisted of the following:

March 31, 2020

Equipment and insurance financing loans payable, between 3.5% and 12.73% interest and maturing between July 2020 and December 2023

Loans received

pursuant to the Payroll Protection Program Term Note

and insurance financing loans payable, between 3.5% and 12.73% interest and maturing between October 2020 and December 2023

received pursuant to the Payroll Protection Program Term Note

Current portion of loans payable

Long-term portion of loans payable

interest expense associated with the loans payable was $17,880 and $24,087 for the three months ended June 30, 2020 and 2019,

respectively.

2020 Paycheck Protection

Program Term Note

In April 2020, the Company

entered into a Paycheck Protection Program Term Note (the “PPP Note”) with TD Bank, NA in the amount of $1,013,480.

The PPP Note was issued to the Company pursuant to the Coronavirus, Aid, Relief, and Economic Security Act’s (the “CARES

Act”) (P.L.

portion of loans payable

interest expense associated with the loans payable was $20,760 and $20,792 for the three months ended, and $38,640 and $44,879

for the six months ended September 30, 2020 and 2019, respectively.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Paycheck Protection Program Term Note

April 2020, the Company entered into a Paycheck Protection Program Term Note (the “PPP Note”) with TD Bank, NA in

the amount of $1,013,480.

The PPP Note was issued to the Company pursuant to the Coronavirus, Aid, Relief, and Economic Security

Act’s (the “CARES Act”) (P.L.

116-136) Paycheck Protection Program (the “Program”).

Under the Program, all or a portion of the

PPP Note may be forgiven in accordance with the Program requirements.

The PPP Note carries a maturity date of April 2022, at a

1% interest rate.

Under the Program,

all or a portion of the PPP Note may be forgiven in accordance with the Program requirements.

The PPP Note carries a maturity

date of April 2022, at a 1% interest rate.

No payments are required for six months from the date of issuance.

The amount of the forgiveness shall be calculated

(and may be reduced) in accordance with the requirements of the Program, including the provisions of the CARES Act.

25% of the amount forgiven can be attributable to non-payroll costs, as defined in the Program.

The amount of the

forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the Program, including the provisions

of the CARES Act.

No more than 25% of the amount forgiven can be attributable to non-payroll costs, as defined in the Program.

RELATED PARTY SECURED PROMISSORY NOTE WITH MIKAH PHARMA, LLC

For consideration of the

assets acquired on May 15, 2017, the Company issued a Secured Promissory Note (the “Note”) to Mikah for the principal

sum of $1,200,000.

The Note matures on December 31, 2020 at which time the Company shall pay the outstanding principal balance

Interest shall be computed on the unpaid principal amount at the per annum rate of ten percent (10%);

provided, upon

the occurrence of an Event of Default as defined within the Note, the principal balance shall bear interest from the date of such

occurrence until the date of actual payment at the per annum rate of fifteen percent (15%).

All interest payable hereunder shall

be computed on the basis of actual days elapsed and a year of 360 days.

Installment payments of interest on the outstanding principal

shall be paid as follows:

quarterly commencing August 1, 2017 and on November 1, February 1, May 1 and August 1 of each year thereafter.

No principal or interest payments have been made on the Note since its issuance.

All unpaid principal and accrued but unpaid interest

shall be due and payable in full on the Maturity Date.

The interest expense associated with the Note was $30,000 for the three

months ended June 30, 2020 and 2019.

Accrued interest due and owing on this note was $375,000 and $345,000 as of June 30,

For consideration of

the assets acquired on May 15, 2017, the Company issued a Secured Promissory Note (the “Note”) to Mikah Pharma, LLC

(“Mikah”) for the principal sum of $1,200,000.

Mikah was founded in 2009 by Nasrat Hakim (“Hakim”), a related

party and the Company’s President, Chief Executive Officer and Chairman of the Board.

The Note matures on December 31, 2020

at which time the Company shall pay the outstanding principal balance of the Note.

Interest shall be computed on the unpaid principal

amount at the per annum rate of ten percent (10%);

provided, upon the occurrence of an Event of Default as defined within the Note,

the principal balance shall bear interest from the date of such occurrence until the date of actual payment at the per annum rate

of fifteen percent (15%).

All interest payable hereunder shall be computed on the basis of actual days elapsed and a year of 360

Installment payments of interest on the outstanding principal shall be paid as follows:

quarterly commencing August 1, 2017

and on November 1, February 1, May 1 and August 1 of each year thereafter.

No principal or interest payments have been made on

the Note since its issuance.

All unpaid principal and accrued but unpaid interest shall be due and payable in full on the Maturity

The interest expense associated with the Note was $30,000 for the three months ended and $60,000 for the six months ended

September 30, 2020 and 2019, respectively.

Accrued interest due and owing on this note was $405,000 and $345,000 as of September 30,

2020 and March 31, 2020, respectively.

DEFERRED REVENUE

revenues in the aggregate amount of $68,891 as of June 30, 2020, were comprised of a current component of $13,333 and a long-term

component of $55,558.

Deferred revenues in the aggregate amount of $238,891 as of March 31, 2020, were comprised of a current

component of $180,000 and a long-term component of $58,891.

These line items represent the unamortized amounts of a $200,000 advance

payment received for a TAGI licensing agreement with a fifteen-year term beginning in September 2010 and ending in August 2025

and the $5,000,000 advance payment Epic Collaborative Agreement with a five-year term beginning in June 2015 and ending in May

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 date and the long-term component is equal to the amount of revenue to be earned thereafter.

revenues in the aggregate amount of $68,891 as of September 30, 2020, were comprised of a current component of $13,333 and

a long-term component of $55,558.

Deferred revenues in the aggregate amount of $238,891 as of March 31, 2020, were comprised

of a current component of $180,000 and a long-term component of $58,891.

These line items represent the unamortized amounts of

a $200,000 advance payment received for a TAGI Pharma (“TAGI”) licensing agreement with a fifteen-year term beginning

in September 2010 and ending in August 2025 and the $5,000,000 advance payment Epic Collaborative Agreement with a five-year term

beginning in June 2015 and ending in May 2020.

These advance payments were recorded as deferred revenue when received and are

earned, on a straight-line basis over the life of the licenses.

The current component is equal to the amount of revenue to be

earned during the 12-month period immediately subsequent to the balance date and the long-term component is equal to the amount

of revenue to be earned thereafter.

COMMITMENTS AND CONTINGENCIES

19 unchanged sentences

modified lease”).

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

135 Ludlow Ave.

8 unchanged sentences

and construction to further expand the Company’s manufacturing resources are in progress.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company assesses whether an arrangement is a lease or contains a lease at inception.

3 unchanged sentences

The Company has elected to account for non-lease components associated with our leases and lease components as a single lease

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.

value of the lease payments is calculated using either the implicit interest rate in the lease or an incremental borrowing rate.

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.

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

Classification

Operating lease –

September 30,

lease –

right-of-use asset

Total leased assets

Lease obligation –

leased assets

obligation –

operating lease

Lease obligation –

obligation –

operating lease, net of current portion

Total lease liabilities

lease liabilities

expense is recorded on the straight-line basis.

1 unchanged sentence

modified lease for the three months ended

June 30, 2020 and 2019 was $55,986 and $54,888, respectively.

Rent expense is recorded in general and administrative expense in

the unaudited condensed consolidated statements of operations.

September 30, 2020 and 2019 was $55,986 and $54,888, respectively, and $111,972 and $109,776 for the six months ended September

30, 2020 and 2019, respectively.

Rent expense is recorded in general and administrative expense in the unaudited condensed consolidated

statements of operations.

table below show the future minimum rental payments, exclusive of taxes, insurance and other costs, under the 135 Ludlow Ave.

modified lease:

Years ending March 31,

Total future minimum lease payments

Present value of lease payments

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

ending March 31,

future minimum lease payments

value of lease payments

weighted-average remaining lease term and the weighted-average discount rate of our lease was as follows:

Lease Term and Discount Rate

Remaining lease term (years)

Operating leases

Discount rate

Operating leases

Term and Discount Rate

lease term (years)

Company has an obligation for the restoration of its leased facility and the removal or dismantlement of certain property and

8 unchanged sentences

of the liability, the Company records either a gain or loss.

As of June 30, 2020, and March 31, 2020, the Company had

a liability of $35,976 and $35,442, respectively and recorded as a component of other long-term liabilities.

As of September 30, 2020, and March 31, 2020, the Company

had a liability of $36,518 and $35,442, respectively, recorded as a component of other long-term liabilities.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PREFERRED STOCK

3 unchanged sentences

A total of 50 shares of Series J Preferred were authorized,

24.0344 shares are issued and outstanding, with a stated value of $1,000,000 per share and a par value of $0.01 as of June 30,

issued shares were pursuant to an Exchange Agreement with Nasrat Hakim, (“Hakim”) a related party and the Company’s

President, CEO and Chairman of the Board of Directors Pursuant to the Exchange Agreement the Company exchanged 158,017,321 shares

of Common Stock for 24.0344 shares of Series J Preferred and warrants to purchase 79,008,661 shares of common stock at $0.1521

The aggregate stated value of the Series J Preferred issued was equal to the aggregate value of the shares of common

stock exchanged, with such value of each share of Common Stock exchanged being equal to the closing price of the Common Stock

zero shares are issued and outstanding, with a stated value of $1,000,000 per share and a par value of $0.01 as of September 30,

On April 27, 2017,

In connection with the Exchange Agreement, the Company also issued warrants to purchase 79,008,661 shares of

common stock at $0.1521 per share, and such warrants are classified as liabilities on the accompanying unaudited condensed consolidated

balance sheet as of June 30, 2020 (See Note 11).

Series J Preferred is convertible at the option of the holder into shares of common stock.

The number of common shares is calculated

by dividing the Stated Value of such share of Series J Preferred by the Conversion Price.

The conversion price for the Series

J Preferred is $0.1521, subject to adjustment as discussed below.

on the current conversion price, the Series J Preferred is convertible into 158,017,321 shares of common stock.

The conversion

price is subject to the following adjustments:

(i) stock dividends and splits, (ii) sale or grant of shares below the conversion

price, (iii) pro rata distributions;

or (iv) fundamental changes (merger, consolidation, or sale of all or substantially all assets).

holders of the Series J Preferred shall have voting rights on any matter presented to the shareholders of the Company for their

action or consideration at any meeting of shareholders of the Company (or by written consent of shareholders in lieu of meeting).

Each holder shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares

of Series J Preferred held by the holder are convertible as of the record date for determining the shareholders entitled to vote

on such matter.

issuance the Company determined that the Series J Preferred host instrument was more akin to equity than debt and that the above

identified conversion feature, subject to adjustments, was clearly and closely related to the host instrument, and accordingly

bifurcation and classification of the conversion feature as a derivative liability was not required.

The Company has accounted

for the Series J Preferred as contingently redeemable preferred stock for which redemption is not probable.

The Series J Preferred

was initially measured at its fair value, $13,903,960 at April 28, 2017.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

in Authorized Shares

amendment to the Company’s Articles of Incorporation to increase the number of shares of common stock the Company is authorized

to issue from 995,000,000 shares to 1,445,000,000 shares was approved at the Company’s Annual Meeting of Shareholders held

on December 4, 2019.

Prior to the approval of the increase in the number of authorized shares, there were insufficient authorized

shares if the Series J Preferred Stock were converted.

a total of 24.0344 shares of Series J Preferred were issued pursuant to an exchange agreement (the “Exchange Agreement”)

with Hakim, a related party and the Company’s President, Chief Executive Officer and Chairman of the Board of Directors.

The Exchange Agreement provided for Hakim to exchange 158,017,321 shares of Common Stock for 24.0344 shares of Series J Preferred

and warrants to purchase 79,008,661 shares of Common Stock at $0.1521 per share.

The aggregate stated value of the Series J Preferred

issued was equal to the aggregate value of the shares of Common Stock exchanged, with such value of each share of Common Stock

exchanged being equal to the closing price of the Common Stock on April 27, 2017.

In connection with the Exchange Agreement, the

Company also issued warrants to purchase 79,008,661 shares of Common Stock at $0.1521 per share, and such warrants are classified

as liabilities on the accompanying unaudited condensed consolidated balance sheet as of September 30, 2020 (See Note 11).

An amendment to the

Company’s Articles of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue from

995,000,000 shares to 1,445,000,000 shares was approved at the Company’s Annual Meeting of Shareholders held on December

Prior to the approval of the increase in the number of authorized shares, there were insufficient authorized shares if

the Series J Preferred Stock were converted.

As a result, the shares were classified in mezzanine equity.

approval of the increase in the number of authorized shares, there are now sufficient authorized shares in the event of a full

conversion of Series J Preferred Stock.

With the approval of the increase in the number of authorized shares, there is no longer

the presumption that a cash settlement will be required.

Therefore, the Series J Preferred has been reclassified from mezzanine

equity to permanent equity at its current carrying amount of $13,903,960 on the accompanying consolidated balance sheet.

June 23, 2020, the Company held a Special Meeting of Shareholders, with such including a proposal for shareholders to again vote

on the above referenced amendment to the Company’s Articles of Incorporation.

This proposal was also passed by shareholder

After the approval of

the increase in the number of authorized shares, there are now sufficient authorized shares in the event of a full conversion of

Series J Preferred Stock.

With the approval of the increase in the number of authorized shares, there is no longer the presumption

that a cash settlement will be required.

Therefore, the Series J Preferred was reclassified from mezzanine equity to permanent

equity at its carrying amount of $13,903,960 on the consolidated balance sheet as of March 31, 2020.

On June 23, 2020, the

Company held a Special Meeting of Shareholders, with such including a proposal for shareholders to again vote on the above referenced

amendment to the Company’s Articles of Incorporation.

This proposal was also passed by shareholder vote.

August 24, 2020, Hakim converted the 24.0344 shares of Series J Preferred into 158,017,321 shares of Common Stock at a conversion

price of $0.1521 per share.

DERIVATIVE FINANCIAL INSTRUMENTS –

4 unchanged sentences

summary of warrant activity is as follows:

June 30, 2020

March 31, 2020

Warrant Shares

Weighted Average Exercise

Warrant Shares

Weighted Average Exercise

Balance at beginning of period

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

Warrants exercised, forfeited and/or expired, net

Balance at end of period

April 28, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”

) with Nasrat Hakim,

the Chairman of the Board, President, and Chief Executive Officer of the Company, pursuant to which the Company issued to Mr.

Hakim 23.0344 shares of its newly designated Series J Convertible Preferred Stock ( “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 Mr.

Hakim, the “

Securities”

) in exchange for 158,017,321 shares of Common

Stock owned by Mr.

Average Exercise Price

at beginning of period

granted pursuant to the issuance of Series J convertible preferred shares

exercised, forfeited and/or expired, net

at end of period

April 28, 2017, the Company entered into an Exchange Agreement with 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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Series J Warrants are exercisable for a period of 10 years from the date of issuance, commencing April 28, 2020.

7 unchanged sentences

The Series J Warrants also provide for other standard adjustments upon the happening of certain customary events.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

fair value of the warrants issued by the Company pursuant to the issuance of Series J convertible preferred shares (79,008,661

warrant shares) was calculated using a Black-Scholes model instead of a Monte Carlo Simulation because the probability with the

shareholder approval provisions was no longer a factor.

The following assumptions were used in the Black-Scholes model to calculate

the fair value of warrants issued by the Company pursuant to the issuance of Series J convertible preferred shares (79,008,661

warrant shares):

Fair value of the Company’s common stock

Initial exercise price

Warrant term (in years)

Risk free rate

changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the three months ended June

fair value of the Series J Warrants was calculated using a Black-Scholes model instead of a Monte Carlo Simulation because the

probability with the shareholder approval provisions was no longer a factor.

The following assumptions were used in the Black-Scholes

model to calculate the fair value of the Series J Warrants:

value of the Company’s Common Stock

exercise price

term (in years)

changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the six months ended September

30, 2020 were as follows:

Balance at March 30, 2020

Change in fair value of derivative financial instruments - warrants

Balance at June 30, 2020

at March 31, 2020

in fair value of derivative financial instruments - warrants

at September 30, 2020

SHAREHOLDERS’

1 unchanged sentence

May 1, 2017 Purchase Agreement

May 1, 2017, the Company entered into a purchase agreement (the “

2017 LPC Purchase Agreement ”), together with

a registration rights agreement (the “

2017 LPC Registration Rights Agreement ”), with Lincoln Park.

the terms and subject to the conditions of the 2017 LPC Purchase Agreement, the Company has the right to sell to and Lincoln Park

is obligated to purchase up to $40 million in shares of common stock, subject to certain limitations, from time to time, over

the 36-month period commencing on June 5, 2017.

The Company may direct Lincoln Park, at its sole discretion and subject to certain

conditions, to purchase up to 500,000 shares of common stock on any business day, provided that at least one business day has

passed since the most recent purchase, increasing to up to 1,000,000 shares, depending upon the closing sale price of the common

stock (such purchases, “

Regular Purchases ”).

However, in no event shall a Regular Purchase be more than $1,000,000.

The purchase price of shares of common stock related to the future funding will be based on the prevailing market prices of such

shares at the time of sales.

In addition, the Company may direct Lincoln Park to purchase additional amounts as accelerated purchases

under certain circumstances.

In the case of both Regular Purchases and accelerated purchases, the purchase price per share will

be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar

transaction occurring during the business days used to compute the purchase price.

Sales of shares of common stock to Lincoln

Park under the 2017 LPC Purchase Agreement are limited to no more than the number of shares that would result in the beneficial

ownership by Lincoln Park and its affiliates, at any single point in time, of more than 4.99% of the then outstanding shares of

common stock.

connection with the 2017 LPC Purchase Agreement, the Company issued to Lincoln Park 5,540,551 shares of common stock and is required

to issue up to 5,540,551 additional shares of Common Stock pro rata as the Company requires Lincoln Park to purchase shares under

the 2017 LPC Purchase Agreement over the term of the agreement.

Lincoln Park has represented to the Company, among other things,

that it is an “accredited investor”

(as such term is defined in Rule 501(a) of Regulation D under the Securities Act

of 1933, as amended (the “Securities Act”)).

The Company sold the securities in reliance upon an exemption from registration

contained in Section 4(a)(2) under the Securities Act.

The securities sold may not be offered or sold in the United States absent

registration or an applicable exemption from registration requirements.

2017 LPC Purchase Agreement and the 2017 LPC Registration Rights Agreement contain customary representations, warranties, agreements

and conditions to completing future sale transactions, indemnification rights and obligations of the parties.

The Company has

the right to terminate the 2017 LPC Purchase Agreement at any time, at no cost or penalty.

Actual sales of shares of common stock

to Lincoln Park under the 2017 LPC Purchase Agreement will depend on a variety of factors to be determined by us from time to

time, including, among others, market conditions, the trading price of the Common Stock and determinations by us as to the appropriate

sources of funding for us and our operations.

There are no trading volume requirements or, other than the limitation on beneficial

ownership discussed above, restrictions under the 2017 LPC Purchase Agreement.

Lincoln Park has no right to require any sales

by the Company but is obligated to make purchases from the Company as directed in accordance with the 2017 LPC Purchase Agreement.

Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of

the Company’s shares.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

net proceeds received by the Company under the 2017 LPC Purchase Agreement will depend on the frequency and prices at which the

Company sells shares of common stock to Lincoln Park.

A registration statement on form S-3 was filed with the SEC on

May 10, 2017 and was declared effective on June 5, 2017.

Company, from time to time and at the Company’s sole discretion but no more frequently than every other business day, could

direct Lincoln Park to purchase (a “Regular Purchase”) up to 500,000 shares of common stock on any such business day,

increasing up to 1,000,000 shares, depending upon the closing sale price of the common stock, provided that in no event shall

Lincoln Park purchase more than $760,000 worth of common stock on any single business day.

The purchase price of shares of common

stock related to the future Regular Purchase funding will be based on the prevailing market prices of such shares at the time

of sales (or over a period of up to ten business days leading up to such time), but in no event, will shares be sold to Lincoln

Park on a day the Common Stock closing price is less than the floor price of $0.10 per share, subject to adjustment.

addition to Regular Purchases, on any business day on which the Company has properly submitted a Regular Purchase notice and the

closing sale price is not below $0.15, the Company may purchase (an “Accelerated Purchase”) an additional “accelerated

amount”

under certain circumstances.

The amount of any Accelerated Purchase cannot exceed the lesser of three times the

number of purchase shares purchased pursuant to the corresponding Regular Purchase;

and 30% of the aggregate shares of the Company’s

common stock traded during normal trading hours on the purchase date.

The purchase price per share for each such Accelerated Purchase

will be equal to the lower of (i) 97% of the volume weighted average price during the purchase date;

or (ii) the closing sale

price of the Company’s common stock on the purchase date.

the case of both Regular Purchases and Accelerated Purchases, the purchase price per share will be equitably adjusted for any

reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during

the business days used to compute the purchase price.

than as set forth above, there are no trading volume requirements or restrictions under the Purchase Agreement, and the Company

will control the timing and amount of any sales of the Company’s common stock to Lincoln Park.

Company’s sales of shares of common stock to Lincoln Park under the Purchase Agreement are limited to no more than the number

of shares that would result in the beneficial ownership by Lincoln Park and its affiliates, at any single point in time, of more

than 9.99% of the then outstanding shares of common stock.

Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, agreements, and conditions

to completing future sale transactions, indemnification rights and obligations of the parties.

The Company has the right to terminate

the Purchase Agreement at any time, at no cost or penalty.

Actual sales of shares of common stock to Lincoln Park under the Purchase

Agreement will depend on a variety of factors to be determined by the Company from time to time, including, without limitation,

market conditions, the trading price of the Common Stock and determinations by the Company as to appropriate sources of funding

for the Company and its operations.

There are no trading volume requirements or restrictions under the Purchase Agreement.

Park has no right to require any sales by the Company but is obligated to make purchases from the Company as it directs in accordance

with the Purchase Agreement.

Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect

short selling or hedging of Company shares.

the three months ended June 30, 2020, there were no shares sold to Lincoln Park pursuant to the 2017 LPC Agreement.

May 1, 2017, the Company entered into a purchase agreement (the “2017 LPC Purchase Agreement”), together with a registration

rights agreement (the “2017 LPC Registration Rights Agreement”), with Lincoln Park.

Under the terms and

subject to the conditions of the 2017 LPC Purchase Agreement, the Company had the right to sell to and Lincoln Park was obligated

to purchase up to $40 million in shares of Common Stock, subject to certain limitations, from time to time, over the 36-month period

that commenced on June 5, 2017.

2017 LPC Agreement expired on July 1, 2020.

the six months ended September 30, 2020, there were no shares sold to Lincoln Park pursuant to the 2017 LPC Agreement.

there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2017 LPC Agreement.

During the three

months ended June 30, 2019, a total of 4,000,000 shares were sold to Lincoln Park pursuant to the 2017 LPC Agreement for net proceeds

totaling $340,300.

In addition, 47,136 shares were issued to Lincoln Park as additional commitment shares, pursuant to the 2017

LPC Agreement.

ELITE PHARMACEUTICALS, INC.

During the six

months ended September 30, 2019, a total of 7,895,233 shares were sold to Lincoln Park pursuant to the 2017 LPC Agreement for

net proceeds totaling $723,887.

In addition, 100,268 shares were issued to Lincoln Park as additional commitment shares, pursuant

to the 2017 LPC Agreement.

Park Capital Transaction - July 8, 2020 Purchase Agreement

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the six months

ended September 30, 2020 the Company issued an aggregate of 5,975,857 shares of Common Stock in the amount of $469,105 to Lincoln

Park as initial commitment shares.

The Company sold 640,543 shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement

during the six months ended September 30, 2020 for net proceeds totaling $42,223.

In addition, 10,094 shares were issued to Lincoln

Park as additional commitment shares, pursuant to the 2020 LPC Agreement.

The Company did not issue any shares of its Common Stock

pursuant to the 2020 LPC Purchase Agreement during the six months ended September 30, 2019.

In addition, there were no shares issued

to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement.

STOCK-BASED COMPENSATION

2 unchanged sentences

Director Compensation

Company’s Director compensation policy was instituted in October 2009 and further revised in January 2016, includes provisions

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

1 unchanged sentence

Common Stock.

the three months ended June 30, 2020, the Company did not issue any shares of common stock to its Directors in payment of director’s

the three months ended June 30, 2020, the Company accrued director’s fees totaling $22,500, which will be paid via cash

the six months ended September 30, 2020, the Company issued 1,550,343 shares of Common Stock to its Directors in payment of director’s

fees totaling an aggregate of $135,000 and with such aggregate director’s fees being earned and accrued over the twenty-seven

month period beginning on January 1, 2018 and ending on March 31, 2020.

In addition, the Company made cash payments totaling an

aggregate of $67,500 in payment of director’s fees earned over the same twenty-seven month period.

the six months ended September 30, 2020, the Company accrued director’s fees totaling $45,000, which will be paid via cash

payments totaling $15,000 and the issuance of 391,574 shares of Common Stock.

of June 30, 2020, the Company owed its Directors a total of $75,000 in cash payments and 1,729,860 shares of Common Stock

in payment of director fees totaling $150,000 due and owing.

The Company anticipates that these shares of Common Stock will be

issued prior to the end of the current fiscal year.

of September 30, 2020, the Company owed its Directors a total of $15,000 in cash payments and 391,574 shares of Common Stock in

payment of director fees totaling $45,000 due and owing.

The Company anticipates that these shares of Common Stock will be issued

prior to the end of the current fiscal year.

Employee/Consultant Compensation

3 unchanged sentences

being calculated on a quarterly basis and equal to the average closing price of the Company’s Common Stock.

the three months ended June 30, 2020, the Company issued 574,597 shares of Common Stock in payment of salaries totaling $50,000

pursuant to the employment contract of the Company’s Executive Vice President of Operations.

During the three months ended

June 30, 2020, the Company did not issue any shares pursuant to the engagement contracts with certain consultants.

the three months ended June 30, 2020, the Company accrued salaries totaling $201,250 owed to the Company’s President and

Chief Executive Officer, Chief Financial Officer and certain other employees which will be paid via the issuance of 2,407,767

the six months ended September 30, 2020, the Company issued 646,336 shares of Common Stock in payment of salaries totaling $56,250

pursuant to the employment contract of the Company’s Executive Vice President of Operations and with such salaries being

earned and accrued over the thirty month period beginning on January 1, 2018 and ending on June 30, 2020.

the six months ended September 30, 2020, the Company accrued salaries totaling $396,250 owed to the Company’s President

and Chief Executive Officer, Chief Financial Officer and certain other employees which will be paid via the issuance of 5,182,380

shares of Common Stock.

of June 30, 2020, the Company owed its President and Chief Executive Officer, Chief Financial Officer and certain other employees’

of September 30, 2020, the Company owed its President and Chief Executive Officer, Chief Financial Officer and certain other employees’

salaries totaling $2,657,500 which will be paid via the issuance of 29,442,712 shares of Common Stock.

ELITE PHARMACEUTICALS, INC.

the six months ended September 30, 2020, the Company issued 1,931,891 shares of Common Stock in payment of consulting fees totaling

$161,033, pursuant to engagement contracts with a certain consultant, and with such consulting expenses being earned and accrued

over the twenty seven month period beginning on January 1, 2018 and ending March 31, 2020.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

its 2014 Stock Option Plan and prior options plans, the Company may grant stock options to officers, selected employees, as well

4 unchanged sentences

with a vesting period of up to three years and expire ten years from the date of grant.

Weighted Average

A summary of the activity of Company’s

2014 Stock Option Plan for the six months ended September 30, 2020 is as follows:

Exercise Price

Remaining Contractual

Aggregate Intrinsic

Outstanding at March 31, 2020

Forfeited and expired

Outstanding at June 30, 2020

Exercisable at June 30, 2020

at April 1, 2020

at September 30, 2020

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 common stock as of June 30, 2020 and March 31, 2020 of $0.06 and $0.07, respectively.

awards and the quoted price of the Company’s Common Stock as of September 30, 2020 and March 31, 2020 of $0.06 and $0.07,

respectively.

CONCENTRATIONS AND CREDIT RISK

customers accounted for substantially all the Company’s revenues for the three months ended June 30, 2020.

customers accounted for approximately 93% of the Company’s revenues for the six months ended September 30, 2020.

customers accounted for approximately 78% and 15% of revenues each, respectively.

The same two customers accounted for 83% and

11% of revenues each, respectively, for the three months ended September 30, 2020.

customers accounted for approximately 87% of the Company’s revenues for the six months ended September 30, 2019.

customers accounted for approximately 44%, 30%, and 13% of revenues each, respectively.

The same three customers accounted for

approximately 55%, 23% and 11% of revenues each for three months ended September 30, 2019.

customers accounted for approximately 95% of the Company’s accounts receivable as of September 30, 2020.

These two customers

accounted for approximately 73% and 19% of revenues each, respectively.

Four customers accounted

for substantially all the Company’s revenues for the three months ended June 30, 2019.

These four customers accounted for

approximately 39%, 30%, 14% and 12% of revenues each, respectively.

Two customers accounted

for substantially all of the Company’s accounts receivable as of June 30, 2020.

These two customers accounted for approximately

70% and 14% of accounts receivable each, respectively.

accounted for approximately 84% and 11% of accounts receivable each, respectively.

customers accounted for substantially all the Company’s accounts receivable as of March 31, 2020.

1 unchanged sentence

for approximately 73%, 13%, 8%, and 5% of accounts receivable each, respectively.

suppliers accounted for more than 81% of the Company’s purchases of raw materials for the three months ended June 30, 2020.

These three suppliers accounted for approximately 63%, 14% and 4% of purchases each, respectively.

Three suppliers accounted

for more than 83% of the Company’s purchases of raw materials for the three months ended June 30, 2019.

These three suppliers

accounted for approximately 49%, 19%, and 15% of purchases each, respectively.

suppliers accounted for more than 83% of the Company’s purchases of raw materials for the six months ended September 30,

These four suppliers accounted for approximately 63%, 11%, 5% and 4% of purchases each, respectively.

suppliers accounted for more than 85% of the Company’s purchases of raw materials for the six months ended September 30,

Included in these seven suppliers were three suppliers accounting for approximately 35%, 18%, and 15% of purchases each,

respectively.

SEGMENT RESULTS

5 unchanged sentences

in which management disaggregates a company.

Company has determined that its reportable segments are Abbreviated New Drug Applications for generic products and NDAs for branded

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.

Company has determined that its reportable segments are ANDAs for generic products and NDAs for branded products.

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.

information by operating segment is not presented below since the chief operating decision maker does not review this information

1 unchanged sentence

condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Three Months Ended June 30,

Operating Income (Loss) by Segment

The table below reconciles

the Company’s operating income (loss) by segment to income from operations before provision for income taxes as reported

in the Company’s unaudited condensed consolidated statements of operations.

For the Three Months Ended June 30,

Operating income (loss) by segment

Corporate unallocated costs

Interest income

Interest expense and amortization of debt issuance costs

Depreciation and amortization expense

Significant non-cash items

Change in fair value of derivative instruments

Income from operations

COLLABORATIVE AGREEMENT WITH EPIC PHARMA LLC

June 4, 2015, the Company executed an exclusive License Agreement (the “2015 SequestOx™

License Agreement”)

with Epic Pharma LLC (“Epic”), to market and sell in the U.S., SequestOx™, an immediate release oxycodone with

sequestered naltrexone capsule, owned by us.

Epic will have the exclusive right to market ELI-200 and its various dosage forms

as listed in Schedule A of the Agreement.

Epic is responsible for all regulatory and pharmacovigilance matters related to the

Pursuant to the 2015 SequestOx™

License Agreement, Epic will pay us non-refundable milestone payments totaling

$15 million, with such amount representing the cost of an exclusive license to SequestOx™, the cost of developing the product,

the filing of an NDA with the FDA and the receipt of the approval letter for the NDA from the FDA.

The 2015 SequestOx™

Agreement expired on June 4, 2020.

During the term of this agreement, the Company received $7.5 million in non-refundable payments,

with such amount consisting of $5 million due and owing on the execution date of the 2015 SequestOx™

License Agreement and

$2.5 million being earned upon the Company’s filing of an NDA with the FDA for the relevant product in January 2016.

remaining $7.5 million in non-refundable payments required FDA approval of the relevant product, a milestone that was not achieved

prior to the expiration of the agreement.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

COLLABORATIVE AGREEMENT WITH SUNGEN PHARMA LLC

August 24, 2016, as amended we entered into an agreement with SunGen Pharma LLC (“SunGen”) (the “SunGen Agreement”)

to undertake and engage in the research, development, sales and marketing of eight generic pharmaceutical products.

products are classified as CNS stimulants (the “CNS Products”), two of the products are classified as beta blockers

and the remaining four products consist of antidepressants, antibiotics and antispasmodics.

The Company has received approval

from the FDA for Amphetamine IR Tablets, Amphetamine ER Capsules and has filed an ANDA for an antibiotic product.

the terms of the SunGen Agreement, Elite and SunGen will share in the responsibilities and costs in the development of these products

and will share in the profits from sales of the Products.

Upon approval, the know-how and intellectual property rights to the

products will be owned jointly by Elite and SunGen.

SunGen shall have the exclusive right to market and sell the Beta Blocker

Products using SunGen’s label and Elite shall have the exclusive right to market and sell the CNS Products using Elite’s

Elite will manufacture and package all four products on a cost-plus basis.

December 10, 2018, the Company received approval from the FDA for Amphetamine IR Tablets, a generic version of Adderall®,

an immediate-release mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine

Sulfate, Amphetamine Sulfate) with strengths of 5 mg, 7.5 mg, 10 mg, 12.5 mg, 15 mg, 20 mg, and 30 mg tablets.

The product is

a central nervous system stimulant and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD) and Narcolepsy.

The product is jointly owned by Elite and SunGen.

Elite manufactures and packages this product, at the Northvale Facility, on

a cost-plus basis, and it is currently sold pursuant to the Lannett Alliance, with the first commercial shipment of this product

occurring in April 2019.

Please see the section below titled “Strategic Marketing Alliance with Lannett Company Inc.”

for further details on the Lannett Alliance.

January 3, 2019, the Company filed an ANDA with the FDA for a generic version of an antibiotic 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

$94 million for the twelve months ending September 30, 2018.

The product is jointly owned by Elite and SunGen.

Upon approval by

the FDA of this ANDA, Elite will manufacture and package the product on a cost-plus basis.

The ANDA is currently under review

December 12, 2019, the Company received approval from the FDA for Amphetamine ER Capsules, a generic version of Adderall XR®,

an extended-release mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine

Sulfate, Amphetamine Sulfate) with strengths of 5mg, 10mg, 15mg, 20mg, 25mg and 30mg capsules.

The product is a central nervous

system stimulant and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD).

The product is jointly

owned by Elite and SunGen.

Elite manufactures and packages this product, at the Northvale Facility, on a cost-plus basis and it

is currently sold pursuant to the Lannett Alliance, with the first commercial shipment of this product occurring in March 2020.

Please see the section below titled “Strategic Marketing Alliance with Lannett Company Inc.”

for further details on

the Lannett Alliance.

April 3, 2020, the Company and SunGen mutually agreed to discontinue any further joint product development activities.

May 2020, SunGen, under an asset purchase agreement, assigned its rights and obligations under the Master Development and License

Agreement for Amphetamine IR and Amphetamine ER to Mikah Pharmaceuticals.

The ANDAs for Amphetamine IR and Amphetamine ER are

now registered under Elite’s name.

Mikah will now be Elite’s partner with respect to Amphetamine IR and ER and will

assume all the rights and obligations for these products from SunGen.

RELATED PARTY TRANSACTION AGREEMENTS WITH EPIC PHARMA LLC

Company has entered into two agreements with Epic which constitute agreements with a related party due to the management of Epic

including a member on our Board of Directors at the time such agreements were executed.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

June 4, 2015, the Company entered into the 2015 Epic License Agreement (please see Note 16 above).

The 2015 Epic License Agreement

includes milestone payments totaling $10 million upon the filing with and approval of an NDA with the FDA.

The Company has determined

these milestones to be substantive, with such assessment being made at the inception of the 2015 Epic License Agreement, and based

on the following:

Company’s performance is required to achieve each milestone;

milestones will relate to past performance, when achieved;

milestones are reasonable relative to all of the deliverables and payment terms within

the 2015 Epic License Agreement

2015 SequestOx™

License Agreement expired on June 4, 2020.

During the term of this agreement, the Company received $7.5

million in non-refundable payments, with such amount consisting of $5 million due and owing on the execution date of the 2015

SequestOx™

License Agreement and $2.5 million being earned upon the Company’s filing of an NDA with the FDA for the

relevant product in January 2016.

The remaining $7.5 million in non-refundable payments required FDA approval of the relevant

product, a milestone that was not achieved prior to the expiration of the agreement.

transaction is not to be considered as an arms-length transaction.

also note that, effective April 7, 2016, all Directors on the Company’s Board of Directors that were also owners/managers

of Epic had resigned as Directors of the Company and all current members of the Company’s Board of Directors have no relationship

Accordingly, Epic no longer qualifies as a party that is related to the Company.

MANUFACTURING, LICENSE AND DEVELOPMENT AGREEMENTS

Company has entered into the following active agreements:

agreement with Precision Dose, dated September 10, 2010 (the “Precision Dose License

Agreement”);

● Development

and License Agreement with SunGen (the “SunGen Agreement”);

Marketing Alliance with Glenmark Pharmaceuticals, Inc.

USA dated May 29, 2018 (the “Glenmark

Alliance”)

Marketing Alliance with Lannett Company.

dated March 11, 2019 (the “Lannett-SunGen

Product Alliance”);

Marketing Alliance with Lannett Company.

dated April 9, 2019 (the “Lannett-Elite

Product Alliance”).

Precision Dose Agreement provides for the marketing and distribution, by Precision Dose and its wholly owned subsidiary, TAGI

Pharma, of Phentermine 37.5mg tablets (launched in April 2011), Phentermine 15mg capsules (launched in April 2013), Phentermine

30mg capsules (launched in April 2013), Hydromorphone 8mg tablets (launched in March 2012), Naltrexone 50mg tablets (launched

in September 2013) and certain additional products that require approval from the FDA which has not been received.

Precision Dose

will have the exclusive right to market these products in the United States and Puerto Rico and a non-exclusive right to market

the products in Canada.

Pursuant to the Precision Dose License Agreement, Elite received $200k at signing, and is receiving milestone

payments and a license fee which is based on profits achieved from the commercial sale of the products included in the agreement.

from the $200k payment made upon signing of the Precision Dose Agreement is being recognized over the life of the Precision Dose

milestones, totaling $500k (with $405k already received), consist of amounts due upon the first shipment of each identified product,

Phentermine 37.5mg tablets ($145k), Phentermine 15 & 30mg capsules ($45k), Hydromorphone 8mg ($125k), Naltrexone

50mg ($95k) and the balance of $95k due in relation to the first shipment of generic products which still require marketing authorizations

from the FDA, and to which there can be no assurances of such marketing authorizations being granted and accordingly there can

be no assurances that the Company will earn and receive these milestone amounts.

These milestones have been determined to be substantive,

with such determination being made by the Company after assessments based on the following:

Company’s performance is required to achieve each milestone;

milestones will relate to past performance, when achieved;

milestones are reasonable relative to all of the deliverables and payment terms within

the Precision Dose License Agreement.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

license fees provided for in the Precision Dose Agreement are calculated as a percentage of net sales dollars realized from commercial

sales of the related products.

Net sales dollars consist of gross invoiced sales less those costs and deductions directly attributable

to each invoiced sale, including, without limitation, cost of goods sold, cash discounts, Medicaid rebates, state program rebates,

price adjustments, returns, short date adjustments, charge backs, promotions, and marketing costs.

The rate applied to the net

sales dollars to determine license fees due to the Company is equal to an amount negotiated and agreed to by the parties to the

Precision Dose License Agreement, with the following significant factors, inputs, assumptions, and methods, without limitation,

being considered by either or both parties:

of the opportunity for each generic product in the market, including consideration of

the following, without limitation:

market size, number of competitors, the current and

estimated future regulatory, legislative, and social environment for each generic product,

and the maturity of the market;

of various avenues for monetizing the generic products, including the various combinations

of sites of manufacture and marketing options;

● Capabilities

of each party with regards to various factors, including, one or more of the following:

manufacturing resources, marketing resources, financial resources, distribution capabilities,

ownership structure, personnel, assessment of operational efficiencies and stability,

company culture and image;

of development of each generic product, all of which did not have FDA approval at the

time of the discussions/negotiations and an assessment of the risks, probability, and

time frame for achieving marketing authorizations from the FDA for the products;

of consideration offered by Precision and other entities with whom discussions were conducted;

of the above factors among the various entities with whom the Company was engaged in

discussions relating to the commercialization of the generic products.

SunGen Agreement provides for the research, development, sales and marketing of eight generic pharmaceutical products.

the products are classified as CNS stimulants (the “CNS Products”), two of the products are classified as beta blockers

and the remaining four products consist of antidepressants, antibiotics and antispasmodics.

To date, the Company has filed ANDAs

with the FDA for the two CNS Products and one antibiotic identified in the SunGen Agreement.

The Company received FDA approval

of the ANDA filed for the first CNS Product in December 2018 and achieved commercial launch in April 2019, with such product being

marketed pursuant to the Lannett Alliance.

The Company received FDA approval of the ANDA filed for the second CNS Product in December

2019 and achieved commercial launch in March 2020, with such product being marketed pursuant to the Lannett Alliance.

the terms of the SunGen Agreement, Elite and SunGen will share in the responsibilities and costs in the development of these products

and will share substantially in the profits from sales.

Upon approval, the know-how and intellectual property rights to the products

will be owned jointly by Elite and SunGen.

Three of the eight products will be jointly owned, three products will be owned by

SunGen, with Elite having exclusive marketing rights and the remaining two products will be owned by Elite, with SunGen having

exclusive marketing rights.

Elite will manufacture and package all eight products on a cost-plus basis.

April 3, 2020, Elite and SunGen mutually agreed to discontinue any further joint product development activities under the SunGen

Agreement, with joint development of the remaining generic pharmaceutical products identified in the SunGen Agreement being discontinued.

May 2020, SunGen, under an asset purchase agreement, assigned its rights and obligations under the Master Development and License

Agreement for Amphetamine IR and Amphetamine ER to Mikah Pharmaceuticals.

The ANDAs for Amphetamine IR and Amphetamine ER are

now registered under Elite’s name.

Mikah will now be Elite’s partner with respect to Amphetamine IR and ER and will

assume all the rights and obligations for these products from SunGen.

Glenmark Alliance, provides for the manufacture by Elite and exclusive marketing by Glenmark of Isradipine capsules, Trimipramine

capsules and Methadone Tablets, and semi-exclusive marketing rights for Phendimetrazine tablets.

All marketing rights relating

to Methadone Tablets were terminated by mutual agreement in January 2020 and all marketing rights relating to Phendimetrazine

Tablets were terminated by mutual agreement in February 2020.

In addition to the purchase prices for the products, Elite will

receive license fees well in excess of 50% of gross profits.

Gross profit is defined as net sales less the price paid to Elite

for the products, distribution fees (less than 10%) and shipping costs.

The Agreement has an initial term of three years and automatically

renews for one-year periods absent prior written notice of non-renewal.

In addition to customary termination provisions, the Agreement

permits Glenmark to terminate with regard to a product on at least three months’

prior written notice if it determines to

stop marketing and selling such product, and it permits Elite to terminate with regard to a product if at any time after the first

twelvemonths from the first commercial sale, the average license fee paid by Glenmark for such product is less than $100,000 for

a six-month sales period.

ELITE PHARMACEUTICALS, INC.

the Three Months Ended

September 30,

the Six Months Ended

September 30,

Income by Segment

table below reconciles the Company’s operating income by segment to income (loss) from operations before provision for income

taxes as reported in the Company’s unaudited condensed consolidated statements of operations.

the Three Months Ended

September 30,

the Six Months Ended

September 30,

income by segment

unallocated costs

expense and amortization of debt issuance costs

and amortization expense

non-cash items

in fair value of derivative instruments

(loss) from operations

$ (1,595,741 )

$ (1,316,039 )

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

to Lannett-SunGen Product Alliance with Lannett Company Inc.

(“Lannett”), Lannett will be the exclusive U.S.

and distributor for Amphetamine IR Tablets and Amphetamine ER Capsules.

Elite will manufacture and Lannett will purchase the products

from Elite and then sell and distribute them.

In addition to the purchase prices for the products, Elite will receive license

fees in excess of 50% of net profits, which will be shared equally with SunGen, pursuant to the SunGen Agreement.

The Lannett-SunGen

Product Alliance has an initial term of three years and automatically renews for one-year periods absent prior written notice

of non-renewal.

In addition to customary termination provisions, the Agreement permits Lannett to terminate with regard to a product

on at least six months’

prior written notice, and it permits Elite or Lannett to terminate with regard to a product if at

any time after the first twelve months from the first commercial sale, the average license fee paid by Lannett for such product

is less than $300,000 for a six month sales period.

In addition to manufacturing fees and license fees, Lannett also paid a milestone,

of $750,000 upon the March 2020 commercial launch of Amphetamine ER Capsules.

This milestone payment was shared equally by Elite

and SunGen, pursuant to the SunGen Agreement.

first commercial shipment of Amphetamine IR Tablets, a generic version of Adderall®, with strengths of 5mg, 7.5mg, 10mg, 12.5mg,

15mg, 20mg and 30mg, pursuant to the Lannett-SunGen Product Alliance occurred in April 2019.

The first commercial shipment of

Amphetamine ER Capsules, a generic version of Adderall XR®, with strengths of 5mg, 10mg, 15mg, 20mg, 25mg and 30mg, pursuant

to the Lannett-SunGen Product Alliance occurred in March 2020.

to the Lannett-Elite Product Alliance, Lannett is the exclusive U.S.

marketer and distributor for Dantrolene Capsules.

Elite manufactures

and Lannett purchases, markets and distributes this product.

In addition to the purchase prices for the products, Elite receives

license fees in excess of 50% of net profits.

Net profits are defined as net sales less the price paid to Elite for the products,

distribution fees (less than 10%) and shipping costs.

The Lannett-Elite Product Alliance has an initial term of three years and

automatically renews for one-year periods absent prior written notice of non-renewal.

In addition to customary termination provisions,

the Agreement permits Lannett to terminate with regard to a product on at least six months’

prior written notice and it

permits Elite or Lannett to terminate with regard to a product if at any time after the first twelve months from the first commercial

sale, the average license fee paid by Lannett for such product is less than $300,000 for a six month sales period.

The first commercial

shipment of Dantrolene Capsules occurred in June 2019.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY AGREEMENTS WITH MIKAH PHARMA, LLC

On December 3, 2018,

the Company executed a development agreement with 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.

As of the date of this report, the Company has incurred costs which are $53,214 in

excess of advanced payments received to date from Mikah.

This balance due from Mikah is included in the financial statement line

of prepaid expenses and other current assets on the accompanying consolidated balance sheet.

December 3, 2018, the Company executed a development agreement with 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.

As of the date of this report, the Company has incurred costs

which are $229,451 in excess of advanced payments received to date from Mikah.

This balance due from Mikah is included in the

financial statement line of prepaid expenses and other current assets on the accompanying consolidated balance sheet.

of New Jersey Net Operating Loss

4 unchanged sentences

total proceeds of $946,407.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

COVID-19 UPDATE

15 unchanged sentences

Actions the Company has taken to date are, without limitation, further described below.

Company has taken and will continue to take, proactive measures to provide for the well-being of our workforce while continuing

Company has taken and will continue to take, proactive measures to provide for the well-being of its workforce while continuing

to safely produce pharmaceutical products.

1 unchanged sentence

modified schedules, shift rotation and work at home abilities for appropriate employees to best ensure adequate social distancing.

In addition, the Company increased our already thorough cleaning protocols throughout our facilities and have prohibited visits

In addition, the Company increased its already thorough cleaning protocols throughout its facilities and has prohibited visits

from non-essential visitors.

2 unchanged sentences

and Supply Chain

the three months ended June 30, 2020, and as of the date of this Quarterly Report on Form 10-Q, the Company has not experience

material, detrimental issues related to COVID-19 in our manufacturing, supply chain, quality assurance and regulatory compliance

activities, and have been able to operate without interruption.

The Company has taken, and plan to continue to take, commercially

practical measures to keep our facility open.

Our supply chains remain intact and operational, and the Company is in regular communications

with our suppliers and third-party partners.

Please note, however, that a prolonging of the current situation relating to COVID-19

may result in an increased risk of interruption in our supply chain in the future, with no assurances given as the materiality

of such future interruption on our business, financial condition, results of operations and cash flows.

the three and six months ended September 30, 2020, and as of the date of this Quarterly Report on Form 10-Q, the Company has not

experienced material, detrimental issues related to COVID-19 in its manufacturing, supply chain, quality assurance and regulatory

compliance activities, and has been able to operate without interruption.

The Company has taken, and plans to continue to take,

commercially practical measures to keep its facilities open.

Company supply chains remain intact and operational, and the Company

is in regular communications with its suppliers and third-party partners.

A prolonging of the current situation relating to COVID-19

may result in an increased risk of interruption in the Company supply chain in the future, with no assurances given as the materiality

of such future interruption on the Company’s business, financial condition, results of operations and cash flows.

SUBSEQUENT EVENTS

Company has evaluated subsequent events from the condensed consolidated balance sheet date through August 14, 2020 and identified

the following material subsequent events:

Park Capital Transaction - July 8, 2020 Purchase Agreement

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 terms and subject to the conditions of the 2020 LPC Purchase Agreement, the Company has the right, but not the obligation,

to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $25.0 million of the Company’s Common Stock.

of Common Stock by the Company, if any, will be subject to certain limitations set forth in the 2020 LPC Purchase Agreement, and

may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on July 27, 2020, the

date that the registration statement covering the resale of the shares of Common Stock that have been and may be issued under

the 2020 LPC Purchase Agreement was declared effective by the Securities and Exchange Commission (the “SEC”) and the

other conditions to Lincoln Park’s obligation to purchase such shares set forth in the Purchase Agreement, all of which

are outside of Lincoln Park’s control, were satisfied.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

the 2020 LPC Purchase Agreement, the Company may direct Lincoln Park to purchase up to 500,000 shares of Common Stock on such

business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased to up

to 600,000 shares, provided that the closing sale price of the Common Stock is not below $0.15 on the purchase date;

Regular Purchase may be increased to up to 700,000 shares, provided that the closing sale price of the Common Stock is not below

$0.20 on the purchase date;

(iii) the Regular Purchase may be increased to up to 800,000 shares, provided that the closing sale

price of the Common Stock is not below $0.25 on the purchase date;

and (iv) the Regular Purchase may be increased to up to 900,000

shares, provided that the closing sale price of the Common Stock is not below $0.30 on the purchase date.

In each case, Lincoln

Park’s maximum dollar commitment in any single Regular Purchase may not exceed $1,000,000.

The purchase price per share

for each such Regular Purchase will be based on an agreed upon fixed discount to the prevailing market prices of the Company’s

Common Stock immediately preceding the time of sale.

In addition to Regular Purchases, the Company may also direct Lincoln Park

to purchase other amounts as accelerated purchases and as additional accelerated purchases if the closing sale price of the Common

Stock is not less than $0.03 per share at such times as set forth in the 2020 LPC Purchase Agreement.

There are no upper limits

on the price per share that Lincoln Park must pay for shares of Common Stock.

The above-referenced share amount limitations and

closing sale price thresholds are subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split,

reverse stock split or other similar transaction as provided in the 2020 LPC Purchase Agreement.

Park has no right to require the Company to sell any shares of Common Stock to Lincoln Park, but Lincoln Park is obligated to

make purchases as the Company directs, subject to satisfaction of the conditions set forth in the 2020 LPC Purchase Agreement.

Actual sales of shares of Common Stock to Lincoln Park will depend on a variety of factors to be determined by the Company from

time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company

as to the appropriate sources of funding for the Company and its operations.

In all instances, the Company may not sell shares

of its Common Stock to Lincoln Park under the 2020 LPC Purchase Agreement if it would result in Lincoln Park beneficially owning

more than 4.99% of its Common Stock.

net proceeds under the 2020 LPC Purchase Agreement to the Company will depend on the frequency and prices at which the Company

sells shares of its stock to Lincoln Park.

The Company expects that any proceeds received by the Company from such sales to Lincoln

Park will be used for research and product development, general corporate purposes and working capital requirements.

consideration for Lincoln Park’s irrevocable commitment to purchase Common Stock upon the terms of and subject to satisfaction

of the conditions set forth in the 2020 LPC Purchase Agreement, upon execution of the 2020 LPC Purchase Agreement, the Company

issued to Lincoln Park 5,975,857 shares of Common Stock as commitment shares, and the Company has agreed to issue up to 5,975,857

additional shares of Common Stock as additional commitment shares, on a pro rata basis at such times during the term of the 2020

LPC Purchase Agreement as the Company may direct Lincoln Park to purchase shares of Common Stock under the 2020 LPC Purchase Agreement.

Company has agreed with Lincoln Park that it will not enter into any “variable rate”

transactions as defined in the

2020 LPC Purchase Agreement with any third party for a period set forth in the 2020 LPC Purchase Agreement.

Lincoln Park has covenanted

not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s Common

2020 LPC Purchase Agreement and the 2020 LPC Registration Rights Agreement contain customary representations, warranties, agreements

and conditions to completing future sale transactions, indemnification rights and obligations of the parties.

The Company has

the right to terminate the 2020 LPC Purchase Agreement at any time, at no cost or penalty.

During any “event of default”

under the 2020 LPC Purchase Agreement, all of which are outside of Lincoln Park’s control, Lincoln Park does not have the

right to terminate the 2020 LPC Purchase Agreement;

however, the Company may not deliver a notice directing Lincoln Park to make

purchases of Common Stock, until such event of default is cured.

In addition, in the event of bankruptcy proceedings by the Company,

the 2020 LPC Purchase Agreement will automatically terminate.

In addition, in the event of bankruptcy proceedings against the

Company, the 2020 LPC Purchase Agreement will terminate if the proceedings are not discharged within 90 days.

Company did not issue any shares of its common stock pursuant to the 2020 LPC Purchase Agreement during the three months ended

June 30, 2020.

As noted above subsequent to June 30, 2020, the Company issued an aggregate of 5,975,857 shares of Common Stock

to Lincoln Park as initial commitment shares.

Company has evaluated subsequent events from the condensed consolidated balance sheet date through November 16, 2020 and

determined that there were no material subsequent events.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2020 (UNAUDITED)

COMPARED TO THE

THREE MONTHS ENDED JUNE 30, 2019 (UNAUDITED)

The following discussion

of our financial condition and results of operations for the three months ended June 30, 2020 and 2019 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.

following discussion of our financial condition and results of operations for the three and six months ended September 30, 2020

and 2019 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,

We use words such as

“anticipate,”

We use words such as “anticipate,”

“estimate,”

11 unchanged sentences

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”

expressly indicated or the context requires otherwise, the terms “Elite”, the “Company”, “we”,

“us”, and “our”

refer to Elite Pharmaceuticals, Inc.

and subsidiary.

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

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, particularly as it relates to abuse resistant products and the manufacture of generic pharmaceuticals.

Our strategy includes improving off-patent drug products for life cycle management, developing generic versions of controlled-release

drug products with high barriers to entry and the development of branded and generic products that utilize our proprietary and

patented abuse resistance technologies.

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 focus our efforts

on the following areas:

(i) manufacturing of a line of generic pharmaceutical products with approved Abbreviated New Drug Applications

(“ANDAs”);

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.

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.

focus our efforts on the following areas:

(i) manufacturing of a line of generic pharmaceutical products with approved Abbreviated

New Drug Applications (“ANDAs”);

(ii) development of additional generic pharmaceutical products;

(iii) development of the other products

in our pipeline including the products with our partners;

(iv) commercial exploitation of our products either by license and the

collection of royalties, or through the manufacture of our formulations;

and (v) development of new products and the expansion

of our licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations.

Our focus is on the

development of various types of drug products, including 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”) as well as generic drug products which require ANDAs.

We believe that our

business strategy enables us to reduce its risk by having a diverse product portfolio that includes both branded and 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.

Commercial Products

We own, license, contract

manufacture or have contractual rights to receive royalties from the following products currently approved for commercial sale:

(iii) development

of the other products in our pipeline including the products with our partners;

(iv) commercial exploitation of our products either

by license and the collection of royalties, or through the manufacture of our formulations;

and (v) development of new products

and the expansion of our licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures

and other collaborations.

focus is on the development of various types of drug products, including 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”) as well as generic drug products which require ANDAs.

believe that our business strategy enables us to reduce its risk by having a diverse product portfolio that includes both branded

and 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.

own, license, contract manufacture or have contractual rights to receive royalties from the following products currently approved

for commercial sale:

Phentermine HCl 37.5mg tablets

3 unchanged sentences

(“Phendimetrazine 35mg”)

November 2012

Phentermine HCl 15mg and 30mg capsules

4 unchanged sentences

(“Naltrexone 50mg”)

September 2013

Addiction Treatment

Isradipine 2.5mg and 5mg capsules

2 unchanged sentences

Cardiovascular

Oxycodone HCl Immediate Release 5mg, 10mg, 15mg, 20mg and 30mg tablets (“OXY IR 5mg”, “Oxy IR 10mg”, “Oxy IR 15mg”, “OXY IR 20mg”

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®

Trimipramine Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine 100mg”)

Trimipramine Maleate Immediate Release 25mg,

50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine 100mg”)

Surmontil®

Antidepressant

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”

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

Dantrolene Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”)

Nervous System (“CNS”) Stimulant

Dantrolene Sodium Capsules 25mg, 50mg and 100mg

(“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”)

Dantrium®

Muscle Relaxant

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

Phentermine 37.5mg is also referred

to as “Phentermine Tablets”.

Phentermine 15mg and Phentermine 30mg are collectively and individually referred to as

“Phentermine Capsules”.

Phendimetrazine 35mg is also referred to as “Phendimetrazine Tablets”.

50mg is also referred to as “Naltrexone Tablets”.

Isradipine 2.5mg and Isradipine 5mg are collectively and individually

referred to as “Isradipine Capsules”.

Oxy IR 5mg, Oxy IR 10mg, Oxy IR 15mg Oxy IR 20mg and Oxy IR 30mg are collectively

and individually referred to as “Oxy IR”.

Trimipramine 25mg, Trimipramine 50mg, and Trimipramine 100mg are collectively

and individually referred to as “Trimipramine Capsules”.

Amphetamine IR 5mg, Amphetamine IR 7.5mg, Amphetamine IR 10mg,

Amphetamine IR 12.5mg, Amphetamine IR 15mg, Amphetamine IR 20mg and Amphetamine IR 30mg are collectively and individually referred

to as “Amphetamine IR Tablets”.

Dantrolene 25mg, Dantrolene 50mg and Dantrolene 100mg are collectively and individually

referred to as “Dantrolene Capsules”.

Amphetamine ER 5mg, Amphetamine ER 10mg, Amphetamine ER 15mg.

Amphetamine ER

20mg, Amphetamine ER 25mg and Amphetamine ER 30mg are collectively and individually referred to as “Amphetamine ER Capsules”.

Phentermine 37.5mg

The approved ANDA for

Phentermine 37.5mg was acquired pursuant to an asset purchase agreement with Epic Pharma LLC (“

Epic ”) dated

September 10, 2010 (the “

Phentermine Purchase Agreement ”).

Sales and marketing

rights for Phentermine 37.5mg are included in the licensing agreement between the Company and Precision Dose Inc.

Dose ”) dated September 10, 2010 (the “

Precision Dose License Agreement ”).

Please see the section below

titled “

Precision Dose License Agreement ”

for further details of this agreement.

Phentermine 37.5mg

is currently being manufactured by Elite and distributed by TAGI under the Precision Dose License Agreement.

Phendimetrazine

Tartrate 35mg

The ANDA for Phendimetrazine

was acquired by Elite in 2013.

Phendimetrazine 35mg

is currently a commercial product being manufactured at the Northvale Facility and distributed by Elite.

Phentermine 15mg

and Phentermine 30mg

Phentermine 15mg capsules

and Phentermine 30mg capsules were developed by the Company, with Elite receiving approval from the United States Food and Drug

Administration (“FDA”) of the related ANDA in September 2012.

Sales and marketing

rights for Phentermine 15mg and Phentermine 30mg are included in the Precision Dose License Agreement.

Please see the section below

titled “Precision Dose License Agreement”

for further details of this agreement.

Phentermine 15mg and

Phentermine 30mg are currently being manufactured by Elite and distributed by TAGI under the Precision Dose License Agreement..

Naltrexone 50mg

The ANDA for Naltrexone

50mg was acquired by Elite in 2010.

Sales and marketing

rights for Naltrexone 50mg are included in the Precision Dose License Agreement.

Please see the section below titled “Precision

Dose License Agreement”

for further details of this agreement.

Naltrexone 50mg is currently being manufactured by Elite and

distributed by TAGI under the Precision Dose License Agreement.

Isradipine 2.5mg

and Isradipine 5mg

The approved ANDAs

for Isradipine 2.5mg and Isradipine 5mg were acquired by Elite in 2013.

Isradipine 2.5mg and

Isradipine 5mg are currently a commercial product being manufactured by Elite at the Northvale Facility and distributed by Glenmark,

on an exclusive basis.

Oxycodone 5mg,

Oxycodone 10mg, Oxycodone 15mg, Oxycodone 20mg and Oxycodone 30mg (“Oxy IR”)

We received notification

from Epic in October 2015 of the approval by the FDA of Epic’s ANDA for Oxy IR which is owned by Epic.

This product was an

Identified IR Product in the Epic Strategic Alliance Agreement Dated March 18, 2009 (the “

Epic Strategic Alliance ”).

Oxy IR was developed at the Northvale Facility pursuant to the Epic Strategic Alliance, in which we are entitled to a Product Fee

of 15% of Profits through March 2026, as defined in the Epic Strategic Alliance.

The first commercial sale of Oxy IR occurred in

March 2016, and sales by Epic of this product are ongoing.

25mg, Trimipramine 50mg, and Trimipramine 100mg

The approved ANDA for

Trimipramine was acquired by Elite in 2017.

Trimipramine 25mg,

Trimipramine 50mg and Trimipramine 100mg are currently a commercial product being manufactured by Elite at the Northvale Facility

and distributed by Glenmark, on an exclusive basis.

Amphetamine IR

On December 10, 2018,

the Company received approval from the FDA for Amphetamine IR Tablets, a generic version of Adderall®, an immediate-release

mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate,

Amphetamine Sulfate) with strengths of 5 mg, 7.5 mg, 10 mg, 12.5 mg, 15 mg, 20 mg, and 30 mg tablets.

The product is a central

nervous system stimulant and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD) and Narcolepsy.

Amphetamine IR Tablets

are currently a commercial product being manufactured by Elite and distributed by Lannett Company Inc.

(“Lannett”),

on an exclusive basis.

Dantrolene Capsules

The approved ANDAs

for Dantrolene 25mg, Dantrolene 50mg and Dantrolene 100mg were acquired by Elite in 2013.

Dantrolene Capsules are currently a commercial

product being manufactured by Elite at the Northvale Facility and distributed by Lannett, on an exclusive basis.

Amphetamine ER

On December 12, 2019,

the Company received approval from the FDA for Amphetamine ER Capsules, a generic version of Adderall XR®, an extended-release

mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate,

Amphetamine Sulfate) with strengths of 5mg, 10mg, 15mg, 20mg, 25mg, and 30 mg tablets.

The product is a central nervous system

stimulant and is indicated for the treatment of ADHD and Narcolepsy.

Amphetamine ER Capsules

are currently a commercial product being manufactured by Elite and distributed by Lannett, on an exclusive basis .

Filed products under FDA review

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”)

Nervous System (“CNS”) Stimulant

Products Not Yet Commercialized

SequestOx™

Immediate Release Oxycodone with sequestered Naltrexone

SequestOx™

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 (“

PDUFA ”)

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.

In January 2016,

the Company submitted an NDA for SequestOx ™

and on July 15, 2016, the US Food and Drug Administration

(“FDA”) issued a Complete Response Letter, (“CRL”), regarding the NDA.

The CRL stated that the review

cycle for the SequestOx™

NDA is complete and the application was not ready for approval in its present form.

On July 7, 2017, the

5 unchanged sentences

with a range of 0.5 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

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,

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 2020.

Due to the prohibitive cost of such repeated bio-equivalence studies, the Company has paused

development of this product.

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.

Oxycodone Hydrochloride

extended release (generic version of OxyContin®)

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 2020.

Due to the prohibitive cost of such repeated bio-equivalence studies and further

development of SequestOx, the Company has paused development of this product and, in light of the current market and litigation

around opioid products, the Company is evaluating the feasibility of continuing development or the pursuit of any opioid containing

Hydrochloride extended release (generic version of OxyContin®)

On September 20, 2017,

4 unchanged sentences

alternative treatment options are inadequate.

IMS reported approximately $2.3 billion in revenue for OxyContin®

and its equivalents

The FDA requested additional information relating to this filing, compliance with which would require significant resources.

Development of this product is currently paused, with the Company evaluating the feasibility of the continued development of this

Generic version

of an antibiotic product

The FDA requested additional information relating to this filing.

Providing such

additional information would require significant resources.

Development of this product is currently paused and, in light of the

current market and litigation around opioid products,, the Company is evaluating the feasibility of continuing development or

the pursuit of any opioid containing products.

version of an antibiotic product

On January 3, 2019,

the Company filed an ANDA with the FDA for a generic version of an antibiotic product.

According to IQVIA (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 jointly owned by Elite and SunGen Pharma LLC.

Upon approval by

the FDA of this ANDA, Elite will manufacture and package the product on a cost-plus basis.

The ANDA is currently under review by

There can be no assurances

that any of these products will receive marketing authorization and achieve commercialization within this time period, or at all.

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 these marketing authorizations.

Approved Products Not Yet Commercialized

Loxapine 5mg,

10mg, 25mg and 50mg capsules (“Loxapine Capsules”)

The product is jointly owned by Elite and

SunGen Pharma LLC.

Upon approval by the FDA of this ANDA, Elite will manufacture and package the product on a cost-plus basis.

The ANDA is currently under review by the FDA.

(“Loxapine Capsules”)

The FDA approved a

transfer for manufacturing of Loxapine Capsules at the Northvale Facility.

The Company will provide an update upon launch of the

The approved ANDAs for Loxapine Capsules were acquired as part of the 2013 ANDA acquisition between the Company and Mikah

Please see the section below titled “Asset Acquisition Agreements”

for further details on the 2013 ANDA acquisition

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 these marketing authorizations.

The approved ANDAs for Loxapine Capsules were acquired

from Mikah Pharma.

The Company is currently evaluating the timeline for the launch of this product.

Acetaminophen

2 unchanged sentences

approval 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.

with Codeine (acetaminophen and codeine phosphate).

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 until the market changes.

The Company will wait for the

market to stabilize before pursuing these opportunities.

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.

Discontinued and Transferred Products

As part of standard

operating practices, the Company, from time to time, as relevant, conducts evaluations of all ANDAs owned, consisting, without

limitation, of ANDAs acquired or approved prior to June 30, 2020.

Such evaluations include, without limitation, costs and

benefits relating to each ANDA owned, with such costs including those fees required under the FDA’s Generic Drug User Fee

Amendment (“GDUFA”) which is significantly influenced by the number of ANDAs owned, and other costs and benefits taking

into consideration various specific market factors for each ANDA.

Those ANDAs with a cost/benefit profile not consistent with management

criteria for continuation are identified for disposition and effort is made to determine the optimal course of action to achieve

disposition of the ANDA.

There were no approved

ANDAs identified for such disposition.

Licensing, Manufacturing and Development Agreements

Sales and Distribution

Licensing Agreement with Epic Pharma LLC for SequestOx™

On June 4, 2015, we

executed an exclusive License Agreement (the “2015 SequestOx™

License Agreement”) with Epic, to market and sell

in the U.S., SequestOx™, an immediate release oxycodone with sequestered naltrexone capsule, owned by us.

Epic will have

the exclusive right to market ELI-200 and its various dosage forms as listed in Schedule A of the Agreement.

Epic is responsible

for all regulatory and pharmacovigilance matters related to the products.

Pursuant to the 2015 SequestOx™

License Agreement,

Epic will pay us non-refundable milestone payments totaling $15 million, with such amount representing the cost of an exclusive

license to SequestOx™, the cost of developing the product, the filing of an NDA with the FDA and the receipt of the approval

letter for the NDA from the FDA.

The 2015 SequestOx™

License Agreement expired on June 4, 2020.

During the term of this agreement,

the Company received $7.5 million in non-refundable payments, with such amount consisting of $5 million due and owing on the execution

date of the 2015 SequestOx™

License Agreement and $2.5 million being earned upon the Company’s filing of an NDA with

the FDA for the relevant product in January 2016.

The remaining $7.5 million in non-refundable payments required FDA approval of

the relevant product, a milestone that was not achieved prior to the expiration of the agreement.

Precision Dose

License Agreement

On September 10, 2010,

we executed a License Agreement with Precision Dose (the “Precision Dose License Agreement”) to market and distribute

Phentermine 37.5mg, Phentermine 15mg, Phentermine 30mg, Hydromorphone 8mg, Naltrexone 50mg, and certain additional products that

require approval from the FDA, through its wholly-owned subsidiary, TAGI, in the United States, Puerto Rico and Canada.

37.5mg was launched in April 2011.

Hydromorphone 8mg was launched in March 2012.

Phentermine 15mg and Phentermine 30mg were launched

in April 2013.

Naltrexone 50mg was launched in September 2013.

Precision Dose will have the exclusive right to market these products

in the United States and Puerto Rico and a non-exclusive right to market the products in Canada.

Pursuant to the Precision

Dose License Agreement, Elite will receive a license fee and milestone payments.

The license fee will be computed as a percentage

of the gross profit, as defined in the Precision Dose License Agreement, earned by Precision Dose as a result of sales of the products.

The license fee is payable monthly for the term of the Precision Dose License Agreement.

The milestone payments will be paid in

six installments.

The first installment was paid upon execution of the Precision Dose License Agreement.

The remaining installments

are to be paid upon FDA approval and initial shipment of the products to Precision Dose.

The term of the Precision Dose License

Agreement is 15 years and may be extended for 3 successive terms, each of 5 years.

Master Development

and License Agreement with SunGen Pharma LLC

On August 24, 2016,

as amended we entered into an agreement with SunGen Pharma LLC (“SunGen”) (the “SunGen Agreement”) to undertake

and engage in the research, development, sales and marketing of eight generic pharmaceutical products.

Two of the products are

classified as CNS stimulants (the “CNS Products”), two of the products are classified as beta blockers and the remaining

four products consist of antidepressants, antibiotics and antispasmodics.

The Company has received approval from the FDA for Amphetamine

IR Tablets, Amphetamine ER Capsules and has filed an ANDA for an antibiotic product.

Under the terms of

the SunGen Agreement, Elite and SunGen will share in the responsibilities and costs in the development of these products and will

share substantially in the profits from sales.

Upon approval, the know-how and intellectual property rights to the products will

be owned jointly by Elite and SunGen.

Three of the eight products will be jointly owned, three products will be owned by SunGen,

with Elite having exclusive marketing rights and the remaining two products will be owned by Elite, with SunGen having exclusive

marketing rights.

Elite will manufacture and package all eight products on a cost-plus basis.

On December 10, 2018,

the Company received approval from the FDA for Amphetamine IR Tablets, a generic version of Adderall®, an immediate-release

mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate,

Amphetamine Sulfate) with strengths of 5 mg, 7.5 mg, 10 mg, 12.5 mg, 15 mg, 20 mg, and 30 mg tablets.

The product is a central

nervous system stimulant and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD) and Narcolepsy.

The product is jointly owned by Elite and SunGen.

Elite manufactures and packages this product, at the Northvale Facility, on a

cost-plus basis, and it is currently sold pursuant to the Lannett Alliance, with the first commercial shipment of this product

occurring in April 2019.

Please see the section below titled “Strategic Marketing Alliance with Lannett Company Inc.”

for further details on the Lannett Alliance.

On January 3, 2019,

the Company filed an ANDA with the FDA for a generic version of an antibiotic 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 $94 million

for the twelve months ending September 30, 2018.

The product is jointly owned by Elite and SunGen.

Upon approval by the FDA of

this ANDA, Elite will manufacture and package the product on a cost-plus basis.

The ANDA is currently under review by the FDA.

On December 12, 2019,

the Company received approval from the FDA for Amphetamine ER Capsules, a generic version of Adderall XR®, an extended-release

mixed salt of a single entity Amphetamine product (Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate,

Amphetamine Sulfate) with strengths of 5mg, 10mg, 15mg, 20mg, 25mg and 30mg capsules.

The product is a central nervous system stimulant

and is indicated for the treatment of Attention Deficit Hyperactivity Disorder (ADHD).

The product is jointly owned by Elite and

Elite manufactures and packages this product, at the Northvale Facility, on a cost plus basis and it is currently sold

pursuant to the Lannett Alliance, with the first commercial shipment of this product occurring in March 2020.

Please see the section

below titled “Strategic Marketing Alliance with Lannett Company Inc.”

for further details on the Lannett Alliance.

On April 3, 2020, Elite

and SunGen mutually agreed to discontinue any further joint product development activities under the SunGen Agreement.

In May 2020, SunGen,

under an asset purchase agreement, assigned its rights and obligations under the SunGen Agreement for Amphetamine IR and Amphetamine

ER to Mikah Pharmaceuticals.

The ANDAs for Amphetamine IR and Amphetamine ER are now registered under Elite’s name.

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.

There can be no assurances

that there will be future revenues or profits, earned pursuant to the SunGen Agreement, or that any such future revenues or profits

would be in amounts that provide adequate return on the significant investments made to secure the marketing authorizations for

products included in the SunGen Agreement or provide sufficient financial contributions to support costs of operations and overheads.

Strategic Marketing

Alliance with Glenmark Pharmaceuticals, Inc.

On May 22, 2018, and as amended on August

1, 2018, we entered into a license, manufacturing and supply agreement with Glenmark Pharmaceuticals Inc.

USA (“Glenmark”)

to market the two Elite generic products described below in the United States with the option to add products in the future (the

“Glenmark Alliance”).

Pursuant to the Glenmark

Alliance, Glenmark will purchase the products from Elite and then sell and distribute them.

In addition to the purchase prices

for the products, Elite will receive license fees well in excess of 50% of gross profits.

Gross profits are defined as net sales

less the price paid to Elite for the products, distribution fees (less than 10%) and shipping costs.

Glenmark will have semi-exclusive

marketing rights to the ANDA approved generic product, phendimetrazine 35mg tablets, and exclusive marketing rights to the following

ANDA approved generic products:

Methadone 10mg, Methadone 5mg, Trimipramine 25mg, Trimipramine 50mg, Trimipramine 100mg, and, effective

October 2, 2018, upon expiration of the Epic Manufacturing and License Agreement, exclusive marketing rights to the following ANDA

approved generic products:

Isradipine 2.5mg and Isradipine 5mg.

The Glenmark Alliance has an initial term of three years and automatically

renews for one year periods absent prior written notice of non-renewal.

In addition to customary termination provisions, the Agreement

permits Glenmark to terminate with regard to a product on at least three months’

prior written notice if it determines to

stop marketing and selling such product, and it permits Elite to terminate with regard to a product if at any time after the first

twelvemonths from the first commercial sale, the average license fee paid by Glenmark for such product is less than $100,000 for

a six month sales period.

The first commercial

shipment of Methadone Tablets pursuant to the Glenmark Alliance occurred in November 2018.

The first commercial shipment of Isradipine

Capsules pursuant to the Glenmark Alliance occurred in March 2019.

The first commercial shipment of Trimipramine Capsules occurred

in April 2019.

The Methadone license was terminated in October 2019 and the Phendimetrazine license was terminated in February

Both products have subsequently been divested (see “Discontinued and Transferred Products”

There can be no assurances

that there will be future revenues or profits, earned pursuant to the Glenmark Alliance, or that any such future revenues or profits

would be in amounts that provide adequate return on the significant investments made to secure the marketing authorizations for

products included in the Glenmark Alliance or provide sufficient financial contributions to support costs of operations and overheads.

Strategic Marketing

Alliances with Lannett Company Inc.

The Company has entered

into two separate license, supply and distribution agreements with Lannett Company Inc.

(“Lannett”).

The first agreement,

dated March 6, 2019, relates to products that were co-developed with SunGen (the “Lannett-SunGen Product Alliance”).

The second agreement, dated April 9, 2019, relates to products that were solely developed by Elite (the “Lannett-Elite Product

Alliance”).

Both agreements are collectively and individually referred to as the “Lannett Alliance”)

Pursuant to Lannett-SunGen

Product Alliance with Lannett, Lannett will be the exclusive U.S.

distributor for Amphetamine IR Tablets and Amphetamine ER Capsules.

Elite manufactures these products, which are purchased, marketed and distributed by Lannett under the Lannett label.

to the purchase prices for the products, Elite will receive license fees well in excess of 50% of net profits, which will be shared

equally with SunGen, pursuant to the SunGen Agreement.

Net profits are defined as net sales less the price paid to Elite for the

products, distribution fees (less than 10%) and shipping costs.

The Lannett-SunGen Product Alliance has an initial term of three

years and automatically renews for one year periods absent prior written notice of non-renewal.

In addition to customary termination

provisions, the Agreement permits Lannett to terminate with regard to a product on at least three months’

prior written notice

if it determines to stop marketing and selling such product, and it permits Elite to terminate with regard to a product if at any

time after the first twelve months from the first commercial sale, the average license fee paid by Lannett for such product is

less than $100,000 for a six month sales period.

In addition to manufacturing fees and license fees, Lannett also paid a $750,000

milestone, upon the March 2020 commercial launch of Amphetamine ER Capsules.

This milestone payment was earned during March 2020

and was shared equally by Elite and SunGen, pursuant to the SunGen Agreement.

The first commercial

shipment of Amphetamine IR Tablets, a generic version of Adderall®, with strengths of 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg

and 30mg, pursuant to the Lannett-SunGen Product Alliance occurred in April 2019.

The first commercial

shipment of Amphetamine ER Capsules, a generic version of Adderall XR®, with strengths of 5mg, 10mg, 15mg, 20mg, 25mg and 30mg,

pursuant to the Lannett-SunGen Product Alliance occurred in March 2020.

Pursuant to the Lannett-Elite

Product Alliance, Lannett will be the exclusive U.S.

distributor for Dantrolene Capsules.

The first commercial shipment of Dantrolene

Capsules, with strengths of 25mg, 50mg and 100mg occurred in June 2019.

Pursuant to the Lannett-Elite

Product Alliance, Elite manufactures for Lannett’s purchase, marketing, and distribution of Dantrolene Capsules under the

Lannett label.

In addition to the purchase prices for the products, Elite will receive license fees well in excess of 50% of gross

Gross profits are defined as net sales less the price paid to Elite for the products, distribution fees (less than 10%)

and shipping costs.

Lannett will have exclusive marketing rights to Dantrolene Capsules.

The Lannett-Elite Product Alliance has

an initial term of three years and automatically renews for one year periods absent prior written notice of non-renewal.

to customary termination provisions, the Agreement permits Lannett to terminate with regard to a product on at least three months’

prior written notice if it determines to stop marketing and selling such product, and it permits Elite to terminate with regard

to a product if at any time after the first twelve months from the first commercial sale, the average license fee paid by Lannett

for such product is less than $100,000 for a six month sales period.

In addition to manufacturing fees and license fees.

Products Under Development

Elite’s research

and development activities include developing its proprietary abuse deterrent technology and the development of a range of abuse

deterrent opioid products that utilize this technology or other approaches to abuse deterrence.

Elite’s proprietary

abuse-deterrent technology utilizes the pharmacological approach to abuse deterrence and consists of a multi-particulate capsule

which contains an opioid agonist in addition to naltrexone, an opioid antagonist used primarily in the management of alcohol dependence

and opioid dependence.

When this product is taken as intended, the naltrexone is designed to pass through the body unreleased while

the opioid agonist releases over time providing therapeutic pain relief for which it is prescribed.

If the multi-particulate beads

are crushed or dissolved, the opioid antagonist, naltrexone, is designed to release.

The absorption of the naltrexone is intended

to block the euphoria by preferentially binding to same receptors in the brain as the opioid agonist and thereby reducing the incentive

for abuse or misuse by recreational drug abusers.

We filed an NDA for

the first product to utilize our abuse deterrent technology, Immediate Release Oxycodone 5mg, 10mg, 15mg, 20mg and 30mg with sequestered

Naltrexone (collectively and individually referred to as “

SequestOx™

”), on January 14, 2016.

Filed products under FDA review;

SequestOx™

- Immediate Release Oxycodone with sequestered Naltrexone ”

above and please note that continued development of this product is currently paused.

On September 20, 2017,

the Company filed an ANDA with the FDA for generic version of OxyContin®

(extended release Oxycodone Hydrochloride).

Filed products under FDA review;

Oxycodone Hydrochloride extended release (generic version of OxyContin ®”

Please note that there can be no assurances of this product receiving marketing authorization or achieving commercialization.

In addition, even if marketing authorization is received and the product is commercialized, there can be no assurances of future

revenues or profits in such amounts that would provide adequate return on the significant investments made to secure marketing

authorization for this product.

The Company is currently

not selling opioids nor are we pursuing licensing deals for opioids until the market conditions improve.

Further, we have divested

some opioid products.

The Company will wait for the market to stabilize before pursuing these opportunities.

On January 3, 2019,

the Company filed an Abbreviated New Drug Application with the US Food and Drug Administration for a generic version of an antibiotic

Please see “

Filed products under FDA review ”

Please note that there can be no assurances of

this product receiving marketing authorization or achieving commercialization.

In addition, even if marketing authorization is

received and the product is commercialized, there can be no assurances of future revenues or profits in such amounts that would

provide adequate return on the significant investments made to secure marketing authorization for this product.

Please also see

the section below titled “

Master Development and License Agreement with SunGen Pharma LLC ”.

Please note that, while

the FDA is required to review applications within certain timeframes, during the review process, the FDA frequently requests that

additional information be submitted.

The effect of such request and subsequent submission can significantly extend the time for

the NDA review process.

Until an NDA is actually approved, there can be no assurances that the information requested and submitted

will be considered adequate by the FDA to justify approval.

The packaging and labeling of our developed products are also subject

to FDA regulation.

Based on the foregoing, it is impossible to anticipate the amount of time that will be needed to obtain FDA

approval to market any product.

In addition, there can be no assurances of the Company filing the required application(s) with

the FDA or of the FDA approving such application(s) if filed, and the Company’s ability to successfully develop and commercialize

products incorporating its abuse deterrent technology is subject to a high level of risk as detailed in “

Factors-Risks Related to our Business ”

of the Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Abuse-Deterrent and Sustained Release

The abuse-deterrent

opioid products utilize our patented abuse-deterrent technology that is based on a pharmacological approach.

These products are

combinations of a narcotic agonist formulation intended for use in patients with pain, and an antagonist, formulated to deter abuse

Both, agonist, and antagonist, have been on the market for a number of years and sold separately in various dose strengths.

We have filed INDs for two abuse resistant products under development and have tested products in various pharmacokinetic and efficacy

The Company is currently

not selling opioids nor are we pursuing licensing deals for opioids until the market conditions improve.

Further, we have divested

some opioid products.

The Company will wait for the market to stabilize before pursuing these opportunities.

Since our incorporation,

we have secured the following patents, of which two have been assigned for a fee to another pharmaceutical company.

EXPIRATION DATE

patent 6,620,439

patent 6,926,909

patent 8,182,836

patent 8,425,933

patent 8,703,186

Canadian patent 2,521,655

Canadian patent 2,541,371

patent 9,056,054

patent 1615623

patent 10213388

We intend to apply

for patents for other products in the future;

however, there can be no assurance that any of the pending applications or other

applications which we may file will be granted.

We have also filed corresponding foreign applications for key patents.

Prior to the enactment

in the United States of new laws adopting certain changes mandated by the General Agreement on Tariffs and Trade (“GATT”),

the exclusive rights afforded by a U.S.

Patent were for a period of 17 years measured from the date of grant.

Under GATT, the term

Patent granted on an application filed subsequent to June 8, 1995 terminates 20 years from the date on which the patent

application was filed in the United States or the first priority date, whichever occurs first.

Future patents granted on an application

filed before June 8, 1995, will have a term that terminates 20 years from such date, or 17 years from the date of grant, whichever

date is later.

Under the Drug Price

Competition Act, a U.S.

product patent or use patent may be extended for up to five years under certain circumstances to compensate

the patent holder for the time required for FDA regulatory review of the product.

Such benefits under the Drug Price Competition

Act are available only to the first approved use of the active ingredient in the drug product and may be applied only to one patent

per drug product.

There can be no assurance that we will be able to take advantage of this law.

Also, different countries

have different procedures for obtaining patents, and patents issued by different countries provide different degrees of protection

against the use of a patented invention by others.

There can be no assurance, therefore, that the issuance to us in one country

of a patent covering an invention will be followed by the issuance in other countries of patents covering the same invention, or

that any judicial interpretation of the validity, enforceability, or scope of the claims in a patent issued in one country will

be similar to the judicial interpretation given to a corresponding patent issued in another country.

Furthermore, even if our patents

are determined to be valid, enforceable, and broad in scope, there can be no assurance that competitors will not be able to design

around such patents and compete with us using the resulting alternative technology.

SequestOx™

a trademark owned by Elite, for which United States trademark registration is being sought.

We currently plan to

license at least some of our products to other entities in the marketing of pharmaceuticals but may also sell products under our

own brand name in which case we may register trademarks for those products.

Terminated Agreements

Terminated Agreement

2015 SequestOx™

License Agreement

On June 4, 2020, the 2015 SequestOx™

License Agreement terminated in accordance with the terms of the agreement.

Other Business Factors and Details

Please see the risk

factor titled “Widespread health problems, including the recent global COVID-19 pandemic, natural disasters or other unexpected

events could materially and adversely affect our business”

included in the Annual Report on Form 10-K for the fiscal year

ended March 31, 2020 filed with the SEC on June 29, 2020 (the “2020 Form 10-K”).

Government Regulation

The design, development,

and marketing of pharmaceutical compounds, on which our success depends, are intensely regulated by governmental regulatory agencies,

in particular the FDA.

Non-compliance with applicable requirements can result in fines and other judicially imposed sanctions,

including product seizures, injunction actions and criminal prosecution based on products or manufacturing practices that violate

statutory requirements.

In addition, administrative remedies can involve voluntary withdrawal of products, as well as the refusal

of the FDA to approve ANDAs and NDAs.

The FDA also has the authority to withdraw approval of drugs in accordance with statutory

due process procedures.

Before a drug may be

marketed, it must be approved by the FDA either by an NDA or an ANDA, each of which is discussed below.

NDAs and ANDAs

under Section 505(b) of the Drug Price Competition Act

The FDA approval procedure

for an NDA is generally a two-step process.

During the Initial Product Development stage, an investigational new drug application

IND ”) for each product is filed with the FDA.

A 30-day waiting period after the filing of each IND is required

by the FDA prior to the commencement of initial clinical testing.

If the FDA does not comment on or question the IND within such

30-day period, initial clinical studies may begin.

If, however, the FDA has comments or questions, they must be answered to the

satisfaction of the FDA before initial clinical testing may begin.

In some instances, this process could result in substantial

delay and expense.

Initial clinical studies generally constitute Phase I of the NDA process and are conducted to demonstrate the

product tolerance/safety and pharmacokinetic in healthy subjects.

After Phase I testing,

extensive efficacy and safety studies in patients must be conducted.

After completion of the required clinical testing, an NDA

is filed, and its approval, which is required for marketing in the United States, involves an extensive review process by the FDA.

The NDA itself is a complicated and detailed application and must include the results of extensive clinical and other testing,

the cost of which is substantial.

However, the NDA filings contemplated by us, which are already marketed drugs, would be made

under Sections 505 (b)(1) or 505 (b)(2) of the Drug Price Competition Act, which do not require certain studies that would otherwise

be necessary;

accordingly, the development timetable should be shorter.

While the FDA is required to review applications within

a certain timeframe, during the review process, the FDA frequently requests that additional information be submitted.

of such request and subsequent submission can significantly extend the time for the NDA review process.

Until an NDA is approved,

there can be no assurance that the information requested and submitted will be considered adequate by the FDA to justify approval.

The packaging and labelling of our developed products are also subject to FDA regulation.

It is impossible to anticipate the amount

of time that will be needed to obtain FDA approval to market any product.

Whether or not FDA

approval has been obtained, approval of the product by comparable regulatory authorities in any foreign country must be obtained

prior to the commencement of marketing of the product in that country.

We intend to conduct all marketing in territories other

than the United States through other pharmaceutical companies based in those countries.

The approval procedure varies from country

to country, can involve additional testing, and the time required may differ from that required for FDA approval.

Although there

are some procedures for unified filings for certain European countries, in general each country has its own procedures and requirements,

many of which are time consuming and expensive.

Thus, there can be substantial delays in obtaining required approvals from both

the FDA and foreign regulatory authorities after the relevant applications are filed.

After such approvals are obtained, further

delays may be encountered before the products become commercially available.

The FDA approval procedure

for an ANDA differs from the procedure for an NDA in that the FDA waives the requirement of conducting complete clinical studies,

although it normally requires bioavailability and/or bioequivalence studies.

Bioavailability ”

indicates the

rate and extent of absorption and levels of concentration of a drug product in the blood stream needed to produce a therapeutic

Bioequivalence ”

compares the bioavailability of one drug product with another, and when established,

indicates that the rate of absorption and levels of concentration of the active drug substance in the body are equivalent for the

generic drug and the previously approved drug.

An ANDA may be submitted for a drug on the basis that it is the equivalent of a

previously approved drug or, in the case of a new dosage form, is suitable for use for the indications specified.

The timing of final

FDA approval of an ANDA depends on a variety of factors, including whether the applicant challenges any listed patents for the

drug and whether the brand-name manufacturer is entitled to one or more statutory exclusivity periods, during which the FDA may

be prohibited from accepting applications for, or approving, generic products.

In certain circumstances, a regulatory exclusivity

period can extend beyond the life of a patent, and thus block ANDAs from being approved on the patent expiration date.

In May 1992, Congress

enacted the Generic Drug Enforcement Act of 1992, which allows the FDA to impose debarment and other penalties on individuals and

companies that commit certain illegal acts relating to the generic drug approval process.

In some situations, the Generic Drug

Enforcement Act requires the FDA to not accept or review ANDAs for a period of time from a company or an individual that has committed

certain violations.

It also provides for temporary denial of approval of applications during the investigation of certain violations

that could lead to debarment and also, in more limited circumstances, provides for the suspension of the marketing of approved

drugs by the affected company.

Lastly, the Generic Drug Enforcement Act allows for civil penalties and withdrawal of previously

approved applications.

Neither we nor any of our employees have ever been subject to debarment.

We do not believe that we receive

any services from any debarred person.

Controlled Substances

We are also subject

to federal, state, and local laws of general applicability, such as laws relating to working conditions.

We are also licensed by,

registered with, and subject to periodic inspection and regulation by the Drug Enforcement Agency (“

DEA ”) and

New Jersey state agencies, pursuant to federal and state legislation relating to drugs and narcotics.

Certain drugs that we currently

develop or may develop in the future may be subject to regulations under the Controlled Substances Act and related statutes.

we manufacture such products, we may become subject to the Prescription Drug Marketing Act, which regulates wholesale distributors

of prescription drugs.

All facilities and

manufacturing techniques used for the manufacture of products for clinical use or for sale must be operated in conformity with

cGMP regulations issued by the FDA.

We engage in manufacturing on a commercial basis for distribution of products and operate our

facilities in accordance with cGMP regulations.

If we hire another company to perform contract manufacturing for us, we must ensure

that our contractor’s facilities conform to cGMP regulations.

Compliance with

Environmental Laws

We are subject to comprehensive

federal, state and local environmental laws and regulations that govern, among other things, air polluting emissions, waste water

discharges, solid and hazardous waste disposal, and the remediation of contamination associated with current or past generation

handling and disposal activities, including the past practices of corporations as to which we are the legal successor or in possession.

We do not expect that compliance with such environmental laws will have a material effect on our capital expenditures, earnings,

or competitive position in the foreseeable future.

There can be no assurance, however, that future changes in environmental laws

or regulations, administrative actions or enforcement actions, or remediation obligations arising under environmental laws will

not have a material adverse effect on our capital expenditures, earnings, or competitive position.

We have competition

with respect to our principal areas of operation.

We develop and manufacture generic products, products using controlled-release

drug technology, products utilizing abuse deterrent technologies, and we develop and market (either on our own or by license to

other companies) generic and proprietary controlled-release and abuse deterrent pharmaceutical products.

In both areas, our competition

consists of those companies which develop controlled-release, abuse deterrent drugs and alternative drug delivery systems.

not represent a significant presence in the pharmaceutical industry.

An increasing number

of pharmaceutical companies have become interested in the development and commercialization of products incorporating advanced

or novel drug delivery systems.

Some of the major pharmaceutical companies have invested and are continuing to invest significant

resources in the development of their own drug delivery systems and technologies and some have invested funds in such specialized

drug delivery companies.

Many of these companies have greater financial and other resources as well as more experience than we

do in commercializing pharmaceutical products.

Certain companies have a track record of success in developing controlled-release

Significant among these are, without limitation, Pfizer, Sandoz (a Novartis company), Mylan Laboratories, Inc., Endo Pharmaceuticals,

Inc., Teva Pharmaceuticals Industries Ltd., Amneal Laboratories, Inc., Mallinckrodt, and Aurobindo.

Each of these companies has

developed expertise in certain types of drug delivery systems, although such expertise does not carry over to developing a controlled-release

version of all drugs.

Such companies may develop new drug formulations and products or may improve existing drug formulations and

products more efficiently than we can.

In addition, almost all of our competitors have vastly greater resources than we do.

our product development capabilities and, if obtained, patent protection may help us to maintain our market position in the field

of advanced drug delivery, there can be no assurance that others will not be able to develop such capabilities or alternative technologies

outside the scope of our patents, if any, or that even if patent protection is obtained, such patents will not be successfully

challenged in the future.

In addition to competitors

that are developing products based on drug delivery technologies, there are also companies that have announced that they are developing

opioid abuse-deterrent products that might compete directly or indirectly with Elite’s products.

These include, but are not

limited to Pfizer Inc., Collegium Pharmaceuticals, Inc., and Purdue Pharma LP

We also face competition

in the generic pharmaceutical market.

The principal competitive factors in the generic pharmaceutical market include:

(i) introduction

of other generic drug manufacturers’

products in direct competition with our products under development, (ii) introduction

of authorized generic products in direct competition with any of our products under development, particularly if such products

are approved and sold during exclusivity periods, (iii) consolidation among distribution outlets through mergers and acquisitions

and the formation of buying groups, (iv) ability of generic competitors to quickly enter the market after the expiration of patents

or exclusivity periods, diminishing the amount and duration of significant profits, (v) the willingness of generic drug customers,

including wholesale and retail customers, to switch among pharmaceutical manufacturers, (vi) pricing pressures and product deletions

by competitors, (vii) a company’s reputation as a manufacturer and distributor of quality products, (viii) a company’s

level of service (including maintaining sufficient inventory levels for timely deliveries), (ix) product appearance and labeling

and (x) a company’s breadth of product offerings.

Sources and Availability of Raw Materials;

Manufacturing

A significant portion

of our raw materials may be available only from foreign sources.

Foreign sources can be subject to the special risks of doing business

abroad, including:

● greater possibility for disruption due to transportation

or communication problems;

● the relative instability of some foreign governments

and economies;

● interim price volatility based on labor unrest, materials

or equipment shortages, export duties, restrictions on the transfer of funds, or fluctuations in currency exchange rates;

● uncertainty regarding recourse to a dependable legal

system for the enforcement of contracts and other rights.

While we currently

obtain the raw materials that we need from over 20 suppliers, some materials used in our products are currently available from

only one supplier or a limited number of suppliers.

The FDA requires identification of raw material suppliers in applications for

approval of drug products.

If raw materials were unavailable from a specified supplier, FDA approval of a new supplier could delay

the manufacture of the drug involved.

We have acquired pharmaceutical

manufacturing equipment for manufacturing our products.

We have registered our facilities with the FDA and the DEA.

Please see the Risk

Factor in Part I, Item 1A to our 2020 Form 10-K entitled “

We are dependent on a small number of suppliers for our raw

materials and any delay or unavailability of raw materials can materially adversely affect our ability to produce products ”.

Dependence on One or a Few Major Customers

Each year we have had

one or a few customers that have accounted for a large percentage of our limited revenues, therefore the termination or restructuring

of a contract with a customer may result in the loss of material amount or substantially all of our revenues.

We are constantly

working to develop new relationships with existing or new customers, but despite these efforts we may not, at the time that any

of our current contracts expire, have other contracts in place generating similar or material revenue.

We have agreements with

Lannett, Glenmark and Precision Dose for the licensing, sales and distribution of products that we manufacture.

We receive revenues

to manufacture these products and also receive a profit split or royalties based on in-market sales of the products.

the Risk Factor in Part I, Item 1A to our 2020 Form 10-K entitled “

We depend on a limited number of customers and any

reduction, delay or cancellation of an order from these customers or the loss of any of these customers could cause our revenue

to decline .”

Critical Accounting Policies and Estimates

with codeine is a combination medication indicated for the management of mild to moderate pain, where treatment with an opioid

is appropriate and for which alternative treatments are inadequate.

The Company is not pursuing licensing deals for any opioids

at this time and, in light of the current market and litigation around opioid products, the Company is evaluation the feasibility

of continuing development or the pursuit of any opioid products.

Accounting Policies and Estimates

The preparation of

the unaudited condensed consolidated financial statements and related disclosures in conformity with GAAP, and our discussion and

analysis of its financial condition and operating results require our management to make judgments, assumptions and estimates that

affect the amounts reported in its condensed consolidated financial statements and accompanying notes.

Note 1 –

of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form

10-Q describes the significant accounting policies and methods used in the preparation of our unaudited condensed consolidated

financial statements.

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.

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.

ended June 30, 2020 compared to June 30, 2019

Revenue, Cost of

revenue and Gross profit:

For the Three Months

Ended June 30,

Manufacturing fees

Licensing fees

Total revenue

Cost of revenue

Gross profit - percentage

Total revenues for

the three-month period ended June 30, 2020 increased by $4.2 million or 124%, to $7.5 million, as compared to $3.4 million,

for the corresponding period in 2019 primarily due to revenues earned from Amphetamine ER Tablets which was launched during the

current fiscal year and increased sales of Amphetamine IR Tablets, Isradipine and Phentermine during the three month period ended

June 30, 2020 as compared to the comparable period of the prior fiscal year.

Manufacturing fees

increased by $3.7 million, or 127%, primarily due to revenues earned from the manufacture of Amphetamine ER Tablets which was launched

during the current fiscal year and increased sales of Amphetamine IR Tablets, Isradipine and Phentermine during the three month

period ended June 30, 2020 as compared to the comparable period of the prior fiscal year.

Licensing fees increased

by $0.5 million, or 109%.

This increase is primarily due to license fees earned from in-market sales of Amphetamine ER Tablets,

which were launched during the current fiscal year and increased fees earned from in-market sales of Amphetamine IR Tablets during

the three months ended June 30, 2020 as compared to the comparable period of the prior fiscal year.

Costs of revenue consists

of manufacturing and assembly costs.

Our costs of revenue increased by $2.5 million or 121%, to $4.6 million as compared to $2.1

million for the corresponding period in the prior fiscal year.

This increase was due in large part to the increase in manufacturing

revenues as compared to the comparable period of the prior fiscal year, which have a strong positive correlation to these costs

Our gross profit margin

was 39% during the three months ended June 30, 2020 as compared to 39% during the comparable period of the prior fiscal year.

Operating expenses:

For the Three Months

Ended June 30,

Operating expenses:

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

the unaudited condensed consolidated financial statements and related disclosures in conformity with GAAP, and our discussion

and analysis of its financial condition and operating results require our management to make judgments, assumptions and estimates

that affect the amounts reported in its unaudited condensed consolidated financial statements and accompanying notes.

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.

There were no significant changes during the six months ended

September 30, 2020 to the items that we disclosed as our significant accounting policies and estimates described in “Note

1, Summary of Significant Accounting Policies”

to the Company’s financial statements as contained in the Company’s

Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

of Operations

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.

months ended September 30, 2020 compared to September 30, 2019

Cost of revenue and Gross profit:

the Three Months Ended

September 30,

Manufacturing

profit - percentage

revenues for three months ended September 30, 2020 increased by $2.8 million or 60%, to $7.4 million, as compared to $4.6 million

for the corresponding period in 2019, primarily due to revenues earned from Amphetamine ER Capsules, which were launched during

the current fiscal year, and increased sales of Amphetamine IR Tablets during the three months ended September 30, 2020 as compared

to the three months ended September 30, 2019.

Manufacturing

fees increased by $2.0 million, or 48%, primarily due to revenues earned from Amphetamine ER Capsules, which were launched during

the current fiscal year, and increased sales of Amphetamine IR Tablets during the three months ended September 30, 2020 as compared

to the three months ended September 30, 2019.

fees increased by $0.8 million, or 164%.

This increase is primarily due to licensing fees earned from Amphetamine ER Capsules

which were launched during the current fiscal year, and increased licensing fees earned from the sale of Amphetamine IR Tablets,

Naltrexone and Phentermine during the three months ended September 30, 2020 as compared to the comparable period of the prior

of revenue consists of manufacturing and assembly costs.

Our costs of revenue increased by $0.5 million or 14%, to $3.8 million

as compared to $3.3 million for the corresponding period in 2019.

This increase was due in large part to the increased manufacturing

activities and related manufacturing revenues during the three months ended September 30, 2020, as compared to the comparable

period of the prior fiscal year, and also due to there being a strong positive correlation of costs of revenue to manufacturing

gross profit margin was 49% during the three months ended September 30, 2020 as compared to 29% during the three months ended

September 30, 2019.

The increase in gross margin is due to increased manufacturing efficiencies of scale being achieved in relation

to increased manufacturing volumes resulting in decreased unit overhead absorption rates, as compared to the comparable period

of the prior year, combined with timing of in market sales by our marketing partner of the Amphetamine IR and Dantrolene products

resulting in a higher level of related licensing fees during the three months ended September 30, 2020, as compared to the comparable

period of the prior fiscal year.

Please note that there is a strong positive correlation of licensing fees to in market sales

of our products by our marketing partners.

the Three Months Ended

September 30,

and development

and administrative

and amortization

operating expenses

consist of research and development costs, general and administrative, non-cash compensation and depreciation and amortization

Operating expenses for the three months ended June 30, 2020 decreased by $0.3 million, or 12%, to $2.1 million as compared

to $2.4 million for the corresponding period in the prior fiscal year.

Research and development

costs for the three months ended June 30, 2020 were $0.9 million, a decrease of $0.5 million, or 33%, from $1.4 million of such

costs for the comparable period of the prior year.

The decrease was a result of the timing and nature of product development activities

during the three month period ended June 30, 2020 as compared to the comparable period of the prior fiscal year.

General and administrative

expenses for the three months ended June 30, 2020 were $0.9 million, an increase of $0.2 million, or 27% from $0.7 million of such

costs for the comparable period of the prior year with such increase being attributed in large part to increased costs and headcounts

relating to regulatory compliance and laboratory activities being in excess of ongoing cost reduction initiatives.

Non-cash compensation

expense for the three months ended June 30, 2020 and 2019 was $0.01 million and $0.03 million, respectively.

Depreciation and amortization

expenses for the three months ended June 30, 2020 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 operating profit for the three months ended June 30, 2020 was $0.8 million, compared to an operating loss of

$1.1 million for the comparable period of the prior fiscal year.

Other income (expense):

For the Three Months

Ended June 30,

Other income (expense):

Interest expense and amortization of debt issuance costs

Gain on sale of fixed assets

Change in fair value of derivative instruments

Interest income

Other (expense) income, net

expenses consist of research and development costs, general and administrative, non-cash compensation and depreciation and amortization

Operating expenses for the three months ended September 30, 2020 increased by $0.5 million or 28% to $2.3 million, as

compared to $1.8 million for the corresponding period in 2019.

and development costs for the three months ended September 30, 2020 were $1.1 million, an increase of $0.5 million, or 80%, from

$0.6 million of such costs for the comparable period of the prior year.

The increase was a result of the timing and nature of

product development activities during the three months ended September 30, 2020 as compared to the comparable period of the prior

and administrative expenses for the three months ended September 30, 2020 were $0.80 million, and remained relatively unchanged

from $0.80 million of such costs for the comparable period of the prior year due in large part to increased utilization rates

of our manufacturing facility as compared with the comparable period of the prior year, and ongoing cost reduction and control

compensation expense for the three months ended September 30, 2020 and 2019 was less than $0.1 million.

and amortization expenses for the three months ended September 30, 2020 were $0.3 million, and remained relatively unchanged from

$0.3 million of such costs for the comparable period of the prior year.

a result of the foregoing, our income from operations for the three months ended September 30, 2020 was $1.3 million, compared

to a loss from operations of $0.1 million for the three months ended September 30, 2019

income (expense):

the Three Months Ended

September 30,

income (expense):

expense and amortization of debt issuance costs

on sale of fixed assets

in fair value of derivative instruments

income (expense), net

$ (1,139,209 )

Other (expense) income,

net for the three months ended June 30, 2020 was a net other expense of $0.7 million, a decrease of $2.1 million from the net other

income of $1.4 million for the comparable period of the prior fiscal year.

The decrease in other income (expense) was due to derivative

income relating to changes in the fair value of our outstanding warrants during the three months ended June 30, 2020.

that the change in the fair value of derivative instruments is determined in large part by the change in the closing price of the

Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with

a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing price of the Company’s

Common Stock.

income, net for the three months ended September 30, 2020 was $1.1 million, an increase in other income, net of $2.3 million from

other expense, net of $1.1 million for the comparable period of the prior year.

The increase in other income (expense), net was

due to income relating to changes in the fair value of our outstanding derivative warrants during the three months ended September

Please note that the change in the fair value of derivative instruments is determined in large part by the change in

the closing price of the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning

of the period, with a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing

price of the Company’s Common Stock.

a result of the foregoing, our net income for the three months ended September 30, 2020 was $2.5 million, compared to a net loss

of $1.6 million for the comparable period of the prior year.

months ended September 30, 2020 compared to September 30, 2019

Cost of revenue and Gross profit:

the Six Months Ended

September 30,

Manufacturing

profit - percentage

revenues for the six-month period ended September 30, 2020 increased by $6.9 million or 87%, to $14.9 million, as compared

to $8.0 million, for the corresponding period in 2019 primarily due to revenues earned from Amphetamine ER Capsules, which were

launched during the current fiscal year, and increased sales of Amphetamine IR Tablets during the six month period ended September

30, 2020 as compared to the comparable period of the prior fiscal year.

Manufacturing

fees increased by $5.7 million, or 81%, primarily due to revenues earned from Amphetamine ER Capsules, which were launched during

the current fiscal year, and increased sales of Amphetamine IR Tablets during the six month period ended September 30, 2020 as

compared to the comparable period of the prior fiscal year.

fees increased by $1.2 million, or 137%.

This increase is primarily due to licensing fees earned from Amphetamine ER Capsules

which were launched during the current fiscal year, and increased licensing fees earned from the sale of Amphetamine IR Tablets,

Naltrexone and Phentermine during the six months ended September 30, 2020 as compared to the comparable period of the prior fiscal

of revenue consists of manufacturing and assembly costs.

Our costs of revenue increased by $3.0 million or 55%, to $8.3 million

as compared to $5.4 million for the corresponding period in the prior fiscal year.

This increase was due in large part in large

part to the increased manufacturing activities and related manufacturing revenues during the six months ended September 30, 2020,

as compared to the comparable period of the prior fiscal year, and also due to there being a strong positive correlation of costs

of revenue to manufacturing revenues.

gross profit margin was 44% during the six months ended September 30, 2020 as compared to 33% during the comparable period of

the prior fiscal year.

the Six Months Ended

September 30,

and development

and administrative

and amortization

operating expenses

expenses consist of research and development costs, general and administrative, non-cash compensation and depreciation and amortization

Operating expenses for the six months ended September 30, 2020 increased by $0.2 million, or 5%, to $4.4 million as

compared to $4.2 million for the corresponding period in the prior fiscal year.

and development costs for the six months ended September 30, 2020 were $2.1 million, an increase of $0.1 million, or 2%, from

approximately $2.0 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 six month period ended September 30, 2020 as compared to the comparable

period of the prior fiscal year.

and administrative expenses for the six months ended September 30, 2020 were $1.7 million, an increase of $0.2 million, or 13%

from $1.5 million of such costs for the comparable period of the prior year with such increase being attributed in large part

to increased costs and headcounts relating to regulatory compliance and laboratory activities, offset by increased facility utilization

rates and ongoing cost reduction initiatives.

compensation expense for the six months ended September 30, 2020 and 2019 was less than $0.1 million.

and amortization expenses for the six months ended September 30, 2020 were $0.7 million, which was virtually unchanged from $0.7

million in such costs for the comparable period of the prior fiscal year.

a result of the foregoing, our income from operations for the six months ended September 30, 2020 was $2.2 million, compared

to a loss from operations of $1.6 million for the comparable period of the prior fiscal year.

income (expense):

the Six Months Ended

September 30,

income (expense):

expense and amortization of debt issuance costs

on sale of fixed assets

in fair value of derivative instruments

income, net for the six months ended September 30, 2020 was $0.4 million, an increase of $0.2 million from the other income, net

of $0.3 million for the comparable period of the prior fiscal year.

The increase in other income (expense) was due to income relating

to changes in the fair value of our outstanding derivative warrants during the six months ended September 30, 2020.

that the change in the fair value of derivative instruments is determined in large part by the change in the closing price of

the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning of the period,

with a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing price of

the Company’s Common Stock.

Please see Note 10 to the Unaudited Condensed Consolidated Financial Statements above.

As a result of the foregoing,

our net income before the net benefit from sale of net operating loss credits for the three months ended June 30, 2020 was $0.1

million, compared to $0.3 million for the comparable period of the prior fiscal year.

Change in value

of convertible preferred share mezzanine equity:

There were no changes

in the value of our convertible preferred stock, which is included in the calculation of net loss attributable to common shareholders

for the three months ended June 30, 2020, and June 30, 2019.

Liquidity and Capital Resources

Capital Resources

Current assets

Current liabilities

Working capital

Our working capital

(total current assets less total current liabilities) increased by $3.0 million from $1.6 million as of March 31, 2020 to

$4.6 million as of June 30, 2020, with such increase being primarily related to the net income of $1.1 million and

a net positive cash flow of .$1.7 million achieved during the three months ended June 30, 2020.

Summary of Cash

For the Three Months

Ended June 30,

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net cash provided by

operating activities for the three months ended June 30, 2020 was $0.8 million, which included net income of $1.1 million, offset

by increases in assets/decreases in liabilities totaling $1.5 million and increased by non-cash expenses totaling $1.2 million.

Net cash provided by investing

activities for the three months ended June 30, 2020 was $0.04 million.

Net cash provided by

financing activities was $0.8 million for the three months ended June 30, 2020 which consist primarily of proceeds from the payroll

protection program loan offset by loan payments.

Capital - May 1, 2017 Purchase Agreement

On May 1, 2017, we

entered into a purchase agreement (the “2017 LPC Purchase Agreement”), together with a registration rights agreement

(the “2017 LPC Registration Rights Agreement”), with Lincoln Park.

Under the terms and

subject to the conditions of the 2017 LPC Purchase Agreement, we have the right to sell to and Lincoln Park is obligated to purchase

up to $40 million in shares of our Common Stock, subject to certain limitations, from time to time, over the 36-month period commencing

on June 5, 2017.

We may direct Lincoln Park, at our sole discretion and subject to certain conditions, to purchase up to 500,000

shares of Common Stock on any business day, provided that at least one business day has passed since the most recent purchase,

increasing to up to 1,000,000 shares, depending upon the closing sale price of the Common Stock (such purchases, “Regular

Purchases”).

However, in no event shall a Regular Purchase be more than $1,000,000.

The purchase price of shares of Common

Stock related to the future funding will be based on the prevailing market prices of such shares at the time of sales.

we may direct Lincoln Park to purchase additional amounts as accelerated purchases under certain circumstances.

Our sales of shares

of Common Stock to Lincoln Park under the 2017 LPC Purchase Agreement are limited to no more than the number of shares that would

result in the beneficial ownership by Lincoln Park and its affiliates, at any single point in time, of more than 4.99% of the then

outstanding shares of Common Stock.

In connection with

the 2017 LPC Purchase Agreement, we issued to Lincoln Park 5,540,551 shares of Common Stock and we are required to issue up to

5,540,551 additional shares of Common Stock pro rata as we require Lincoln Park to purchase our shares under the Purchase Agreement

over the term of the agreement.

Lincoln Park has represented to us, among other things, that it is an “accredited investor”

(as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)).

We sold the securities in reliance upon an exemption from registration contained in Section 4(a)(2) under the Securities Act.

securities sold may not be offered or sold in the United States absent registration or an applicable exemption from registration

requirements.

The 2017 LPC Purchase

Agreement and the 2017 LPC Registration Rights Agreement contain customary representations, warranties, agreements and conditions

to completing future sale transactions, indemnification rights and obligations of the parties.

We have the right to terminate the

2017 LPC Purchase Agreement at any time, at no cost or penalty.

Actual sales of shares of Common Stock to Lincoln Park under the

Purchase Agreement will depend on a variety of factors to be determined by us from time to time, including, among others, market

conditions, the trading price of the Common Stock and determinations by us as to the appropriate sources of funding for us and

our operations.

There are no trading volume requirements or, other than the limitation on beneficial ownership discussed above,

restrictions under the Purchase Agreement.

Lincoln Park has no right to require any sales by us but is obligated to make purchases

from us as we direct in accordance with the Purchase Agreement.

Lincoln Park has covenanted not to cause or engage in any manner

whatsoever, any direct or indirect short selling or hedging of our shares.

The net proceeds received

by us under the 2017 LPC Purchase Agreement will depend on the frequency and prices at which we sell shares of our stock to Lincoln

We anticipate that any proceeds received by us from such sales to Lincoln Park under the 2017 LPC Purchase Agreement will

be used for research and product development, general corporate purposes and working capital requirements.

A registration statement

on form S-3 was filed with the SEC on May 10, 2017 and was declared effective on June 5, 2017.

The 2017 LPC Purchase

Agreement expired on July 1, 2020, in accordance with its terms and conditions.

The Company did not

issue any shares of its common stock pursuant to the 2017 LPC Purchase Agreement during the three months ended June 30, 2020.

Capital –

a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the six months ended

September 30, 2020 was $3.6 million, compared to net loss $1.3 million for the comparable period of the prior fiscal year.

and Capital Resources

$ (1,628,745 )

working capital (total current assets less total current liabilities) increased by $4.7 million from $1.6 million as of March 31,

2020 to $6.3 million as of September 30, 2020, with such increase being primarily related to the net income of $3.6 million

and a net positive cash flow of $3.2 million achieved during the six months ended September 30, 2020.

of Cash Flows:

the Six Months Ended

September 30,

cash provided by (used in) operating activities

cash used in investing activities

cash provided by financing activities

cash provided by operating activities for the six months ended September 30, 2020 was $2.7 million, which included net income

of $3.6 million and increases in non-cash expenses totaling $0.6 million, offset by net increases in assets and decreases in liabilities

totaling $1.5 million.

cash used in investing activities for the six months ended September 30, 2020 was comprised of purchases of purchases of property

and equipment of $0.1 million offset by proceeds from the sale of property and equipment of $0.1 million.

cash provided by financing activities was $0.6 million for the six months ended September 30, 2020 which consisted primarily of

proceeds from the payroll protection program loan offset by loan payments.

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

(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.

Under the terms and

subject to the conditions of the 2020 LPC Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln

Park, and Lincoln Park is obligated to purchase, up to $25.0 million of the Company’s Common Stock.

Sales of Common Stock

by the Company, if any, will be subject to certain limitations set forth in the 2020 LPC Purchase Agreement, and may occur from

time to time, at the Company’s sole discretion, over the 36-month period commencing on July 27, 2020, the date that the registration

statement covering the resale of the shares of Common Stock that have been and may be issued under the 2020 LPC Purchase Agreement

was declared effective by the Securities and Exchange Commission (the “SEC”) and the other conditions to Lincoln Park’s

obligation to purchase such shares set forth in the Purchase Agreement, all of which are outside of Lincoln Park’s control,

were satisfied.

Under the 2020 LPC

Purchase Agreement, the Company may direct Lincoln Park to purchase up to 500,000 shares of Common Stock on such business day (each,

a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased to up to 600,000 shares, provided

that the closing sale price of the Common Stock is not below $0.15 on the purchase date;

(ii) the Regular Purchase may be increased

to up to 700,000 shares, provided that the closing sale price of the Common Stock is not below $0.20 on the purchase date;

the Regular Purchase may be increased to up to 800,000 shares, provided that the closing sale price of the Common Stock is not

below $0.25 on the purchase date;

and (iv) the Regular Purchase may be increased to up to 900,000 shares, provided that the closing

sale price of the Common Stock is not below $0.30 on the purchase date.

In each case, Lincoln Park’s maximum dollar commitment

in any single Regular Purchase may not exceed $1,000,000.

The purchase price per share for each such Regular Purchase will be based

on an agreed upon fixed discount to the prevailing market prices of the Company’s Common Stock immediately preceding the

time of sale.

In addition to Regular Purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated

purchases and as additional accelerated purchases if the closing sale price of the Common Stock is not less than $0.03 per share

at such times as set forth in the 2020 LPC Purchase Agreement.

There are no upper limits on the price per share that Lincoln Park

must pay for shares of Common Stock.

The above-referenced share amount limitations and closing sale price thresholds are subject

to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction

as provided in the 2020 LPC Purchase Agreement.

Lincoln Park has no

right to require the Company to sell any shares of Common Stock to Lincoln Park, but Lincoln Park is obligated to make purchases

as the Company directs, subject to satisfaction of the conditions set forth in the 2020 LPC Purchase Agreement.

Actual sales of

shares of Common Stock to Lincoln Park will depend on a variety of factors to be determined by the Company from time to time, including,

among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate

sources of funding for the Company and its operations.

In all instances, the Company may not sell shares of its Common Stock to

Lincoln Park under the 2020 LPC Purchase Agreement if it would result in Lincoln Park beneficially owning more than 4.99% of its

Common Stock.

The net proceeds under

the 2020 LPC Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its

stock to Lincoln Park.

The Company expects that any proceeds received by the Company from such sales to Lincoln Park will be used

for research and product development, general corporate purposes and working capital requirements.

As consideration for

Lincoln Park’s irrevocable commitment to purchase Common Stock upon the terms of and subject to satisfaction of the conditions

set forth in the 2020 LPC Purchase Agreement, upon execution of the 2020 LPC Purchase Agreement, the Company issued to Lincoln

Park 5,975,857 shares of Common Stock as commitment shares, and the Company has agreed to issue up to 5,975,857 additional shares

of Common Stock as additional commitment shares, on a pro rata basis at such times during the term of the 2020 LPC Purchase Agreement

as the Company may direct Lincoln Park to purchase shares of Common Stock under the 2020 LPC Purchase Agreement.

The Company has agreed

with Lincoln Park that it will not enter into any “variable rate”

transactions as defined in the 2020 LPC Purchase

Agreement with any third party for a period set forth in the 2020 LPC Purchase Agreement.

Lincoln Park has covenanted not to cause

or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s Common Stock.

The 2020 LPC Purchase

Agreement and the 2020 LPC Registration Rights Agreement contain customary representations, warranties, agreements and conditions

to completing future sale transactions, indemnification rights and obligations of the parties.

The Company has the right to terminate

the 2020 LPC Purchase Agreement at any time, at no cost or penalty.

During any “event of default”

under the 2020 LPC

Purchase Agreement, all of which are outside of Lincoln Park’s control, Lincoln Park does not have the right to terminate

the 2020 LPC Purchase Agreement;

however, the Company may not deliver a notice directing Lincoln Park to make purchases of Common

Stock, until such event of default is cured.

In addition, in the event of bankruptcy proceedings by the Company, the 2020 LPC Purchase

Agreement will automatically terminate.

In addition, in the event of bankruptcy proceedings against the Company, the 2020 LPC Purchase

Agreement will terminate if the proceedings are not discharged within 90 days.

The Company did not issue any shares of

its common stock pursuant to the 2020 LPC Purchase Agreement during the three months ended June 30, 2020.

As noted above, subsequent

to June 30, 2020, the Company issued an aggregate of 5,975,857 shares of Common Stock to Lincoln Park as initial commitment shares.

July 8, 2020, the Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration

rights agreement, with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed

to purchase up to $25.0 million of the Company’s Common Stock, $0.001 par value per share, from time to time over the term

of the 2020 LPC Purchase Agreement, at the Company’s direction.

During the six months

ended September 30, 2020 the Company issued an aggregate of 5,975,857 shares of Common Stock in the amount of $469,105 to Lincoln

Park as initial commitment shares.

The Company sold 640,543 shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement

during the six months ended September 30, 2020 for net proceeds totaling $42,223.

In addition, 10,094 shares were issued to Lincoln

Park as additional commitment shares, pursuant to the 2020 LPC Agreement.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting

company, we are not required to provide the information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements