ELITE PHARMACEUTICALS INC /NV/ 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2021 at the reasonable assurance level. 58 Management’s Report on Internal Control Over Financial Reporting Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are achieved. Further, the design of a control system must be balanced against resource constraints, and therefore the benefits of controls must be considered relative to their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Accordingly, given the inherent limitations in a cost-effective system of internal control, financial statement misstatements due to error or fraud may occur and may not be detected. Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives. We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies and procedures. Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation, management has concluded that our internal control over financial reporting was effective as of March 31, 2021 at the reasonable assurance level. Changes in internal control over financial reporting There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the fiscal quarter ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 59 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following sets forth biographical information about each of our directors and executive officers as of the date of this report: Name Age Position Director/Officer Since Director Tier Nasrat Hakim 60 President, Chief Executive Officer and Director August 2013 III Barry Dash, Ph. D. 90 Director April 2005 II Jeffrey Whitnell 65 Director October 2009 III Davis Caskey 73 Director April 2016 I Marc Bregman 50 Chief Financial Officer, Secretary and Treasurer May 2021 Douglas Plassche 58 Executive Vice President of Operations August 2013 The principal occupations and employment of each Director during the past five years is set forth below. In each instance in which dates are not provided in connection with a director’s business experience, such nominee has held the position indicated for at least the past five years. Each director currently holds office until the expiration of his Tier (each for three years) or until such director’s death, resignation, or removal. Pursuant to our recently amended and restated bylaws, our Board of Directors is now classified into three separate tiers of directors, with each respective tier to serve a three-year term and until their successors are duly elected and qualified. Nasrat Hakim Nasrat Hakim has served as a Director, President, and Chief Executive officer since August 2013. He has been a member of the Audit Committee, member and chairman of the nominating Committee and member of the Compensation Committee since September 2016. Mr. Hakim has more than 30 years of pharmaceutical and medical industry experience in Quality Assurance, Analytical Research and Development, Technical Services, and Regulatory Compliance. He brings with him proven management experience, in-depth knowledge of manufacturing systems, development knowledge in immediate and extended release formulations and extensive regulatory experience of GMP and FDA regulations. From 2004 to 2013, Mr. Hakim was employed by Actavis, Watson and Alpharma in various senior management positions. Most recently, Mr. Hakim served as International Vice President of Quality Assurance at Actavis, overseeing 25 sites with more than 3,000 employees under his leadership. Mr. Hakim also served as Corporate Vice President of Technical Services, Quality and Regulatory Compliance for Actavis U.S., Global Vice President, Quality, and Regulatory Compliance for Alpharma, as well as Executive Director of Quality Unit at TheraTech, overseeing manufacturing and research and development. In 2009, Mr. Hakim founded Mikah Pharma, LLC, a virtual, fully functional pharmaceutical company. Mr. Hakim holds a Bachelor in Chemistry/Bio-Chemistry and Masters of Science in Chemistry from California State University at Sacramento, Sacramento, CA; a Masters in Law with Graduate Certification in U.S. and International Taxation from St. Thomas University, School of Law, Miami, FL.; and a Graduate Certification in Regulatory Affairs (RAC) from California State University at San Diego, San Diego, CA. Mr. Hakim’s leadership experience (consisting of extensive experience in senior management positions, responsible for 25 global manufacturing/regulatory sites with more than 3,000 employees under his leadership), industry experience (comprising more than 30 years of pharmaceutical and medical industry experience served in various quality assurance, analytical research and development/technical services and compliance positions) and academic experience (including Bachelor degrees in Chemistry and Bio-Chemistry, Masters degrees in Chemistry and Law, with Graduate Certification in U.S. and International Taxation, and a Graduate Certification in Regulatory Affairs) led to the conclusion that he is qualified to serve as a director. Barry Dash, Ph.D. Dr. Barry Dash has served as a Director since April 2005, member of the Audit Committee since April 2005, member of the Nominating Committee since April 2005 and member and Chairman of the Compensation Committee since June 2007. Dr. Dash has been, since 1995, President and Managing Member of Dash Associates, L.L.C., an independent consultant to the pharmaceutical and health industries. From 1983 to 1996 he was employed by Whitehall-Robins Healthcare, a division of American Home Products Corporation (now known as Wyeth), initially as Vice President of Scientific Affairs, then as Senior Vice President of Scientific Affairs and then as Senior Vice President of Advanced Technologies, during which time he personally supervised six separate departments: Medical and Clinical Affairs, Regulatory Affairs, Technical Affairs, Research and Development, Analytical R&D and Quality Management/Q.C. Dr. Dash had been employed by the Whitehall Robins Healthcare from 1960 to 1976, during which time he served as Director of Product Development Research, Assistant Vice President of Product Development and Vice President of Scientific Affairs. Dr. Dash had been employed by J.B. Williams Company (Nabisco Brands, Inc.) from 1978 to 1982. From 1976 to 1978 he was Vice President and Director of Laboratories of the Consumer Products Division of American Can Company. Dr. Dash holds a Ph.D. from the University of Florida and M.S. and B.S. degrees from Columbia University where he was Assistant Professor at the College of Pharmaceutical Sciences from 1956 to 1960. He is a member of the American Pharmaceutical Association, the American Association for the Advancement of Science and the Society of Cosmetic Chemist, American Association of Pharmaceutical Scientists, Drug Information Association, American Foundation for Pharmaceutical Education, and Diplomate American Board of Forensic Examiners. He is the author of scientific publications and patents in the pharmaceutical field. Dr. Dash’s extensive education in pharmaceutical sciences and his experience in the development of scientific products, including his experience in regulatory affairs, led to the conclusion that he is qualified to serve as a director. 60 Jeffrey Whitnell Jeffrey Whitnell has served as a Director since October 23, 2009, Chairman of the Audit Committee, member of the Compensation Committee since October 2009 and designated by the Board as an “ audit committee financial expert ” as defined under applicable rules under the Exchange Act. Since April 2015, Mr. Whitnell has provided financial advisory services, primarily to the healthcare industry, including LifeWatch Services, where he served as the Vice President, Finance & Controller. From June2010 to March 2015, Mr. Whitnell was the Chief Financial Officer for ReliefBand Medical Technologies, a medical device company. From June 2009 to June 2010, Mr. Whitnell provided financial advisory services to various healthcare companies, including ReliefBand Medical Technologies. From June 2004 to June 2009, Mr. Whitnell was Chief Financial Officer and Senior Vice President of Finance at Akorn, Inc. From June 2002 to June 2004, Mr. Whitnell was Vice President of Finance and Treasurer for Ovation Pharmaceuticals. From 1997 to 2001, Mr. Whitnell was Vice President of Finance and Treasurer for MediChem Research. Prior to 1997, Mr. Whitnell held various finance positions at Akzo Nobel and Motorola. Mr. Whitnell began his career as an auditor with Arthur Andersen & Co. He is a certified public accountant and holds an M.B.A. in Finance from the University of Chicago Booth School of Business and a B.S. in Accounting from the University of Illinois. Mr. Whitnell’s qualifications as an accounting and audit expert provide specific experience to serve as a director for the Company. Davis Caskey Davis Caskey has served as a Director since April 2016, and a member of the Audit Committee, the nominating Committee and the Compensation Committee since September 2016. He brings more than 40 years of pharmaceutical industry experience to this position. Mr. Caskey is currently President & CEO of Caskey LLC, which he formed in 2013 to serve as an umbrella to manage his pharmaceutical consulting and other business interests. From 1990 to 2013, Davis served as the operating officer of ECR Pharmaceuticals, of which he was a founding member. HiTech Pharmacal acquired the privately held ECR in 2009 and Mr. Caskey continued in his role until retiring in 2013. At ECR, Mr. Caskey was credited with the establishment of the company’s sales and marketing structure, its product distribution format, and the development and management of the firm’s internal organization. His responsibilities included the oversight of drug development and regulatory filings, product acquisitions, and acquisition of other companies. A primary focus was to conceive and develop, with the assistance of key strategic partners, unique dosage forms and extended release formulations of products which enhance patient compliance and safety. Prior to ECR, Mr. Caskey was employed by A.H. Robins for 18 years in various field and home office management positions. His experience brings critical insight into the marketing and distribution of pharmaceutical products in a rapid and ever-changing competitive marketplace. Mr. Caskey attended the University of Texas (Austin) and Lamar University, and holds bachelor’s and master’s degrees. Marc Bregman Marc Bregman has served as Chief Financial Officer, Secretary and Treasurer of the Company since May 17, 2021. Prior to joining the Company, from February 2015 to May 2021, Mr. Bregman served as Controller of Langan Engineering. From 2013 to 2015, Mr. Bregman served as financial controller at Chemtrade Logistics. From 2009 to 2013, Mr. Bregman held corporate finance positions at Chemetall. From 1999 to 2009, Mr. Bregman held multiple corporate finance positions at National Starch and Chemical Company. Mr. Bregman began his career as a certified public accountant in the audit department of Ernst & Young, LLP. Mr. Bregman is a Certified Public Accountant (“CPA”), and holds a Master in Business degree from the New Jersey Institute of Technology, Newark, NJ and Bachelor of Science in Accounting from William Paterson College, Wayne, NJ. Mr. Bregman’s experience and expertise in the areas of finance, financial planning & analysis, Sarbanes Oxley compliance, financial auditing and manufacturing accounting, provides the qualifications, attributes, and skills to serve as an officer for the Company. Douglas Plassche Douglas Plassche has served as Executive Vice President of Operations since August 2013. Prior to joining the Company, from 2009 to 2013, Mr. Plassche served as the Managing Director of the New Jersey Solid Oral Dose Operations of Actavis, overseeing 450 employees and the production of more than 100 products. From 2007 to 2009, Mr. Plassche was the Senior Director of Manufacturing for PAR Pharmaceuticals, overseeing 200 employees and the production of more than 70 products. From 1990 – 2007, Mr. Plassche was employed by Schering-Plough, progressing steadily through multiple disciplines, locations, and technical operations sectors with increasing levels of responsibility. Mr. Plassche has a bachelor’s degree in Economics from Rochester University. There are no family relationships between any of our directors and executive officers. 61 Committees of the Board The Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating Committee. Audit Committee During Fiscal 2021, the members of the Audit Committee were Jeffrey Whitnell (Chairman of the Audit Committee), Dr. Barry Dash, Davis Caskey and Nasrat Hakim. We deem Messrs. Whitnell, Dash, and Caskey to be independent and Mr. Whitnell to be qualified as an audit committee financial expert. The Board of Directors has determined that Messrs. Whitnell, Dash and Caskey are independent directors as (i) defined in Rule 10A-3(b)(1)(ii) under the Exchange Act and (ii) under Sections 803A(2) and 803B(2)(a) of the NYSE American LLC Company Guide (although our securities are not listed on the NYSE American LLC or any other national exchange). Nominating Committee During Fiscal 2021, the members of the Nominating Committee were Nasrat Hakim (Chairman of the Nominating Committee), Dr. Barry Dash, and Davis Caskey. There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since the filing of our last Annual Report on Form 10-K. Compensation Committee During Fiscal 2021, the members of the Compensation Committee were Dr. Barry Dash (Chairman of the Compensation Committee), Jeffrey Whitnell, Davis Caskey and Nasrat Hakim. Code of Conduct and Ethics At the first meeting of the Board of Directors following the annual meeting of stockholders held on June 22, 2004, and as further updated effective July 2009, the Board of Directors adopted a Code of Business Conduct and Ethics that is applicable to the Company’s directors, officers, and employees. A copy of the Code of Business Conduct and Ethics is available on our website at www.elitepharma.com, under Investor Relations. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of our common stock to report their ownership of, and transactions in, our stock in filings with the SEC. Copies of these reports are also required to be supplied to VPG. VPG believes, based solely on a review of the copies of such reports received, that our directors and executive officers and persons who beneficially own more than ten percent of our common stock complied with all applicable Section 16(a) reporting requirements during the year ended March 31, 2021, except that Mr. Plassche filed one late Form 4 reporting the award of salary shares. 62 ITEM 11 EXECUTIVE COMPENSATION Role of the Compensation Committee The Company formed the Compensation Committee in June 2007. Since the formation of the Compensation Committee all elements of the executives’ compensation are determined by the Compensation Committee, which currently is comprised of three independent non-employee directors, and one director who is also the Company’s Chief Scientific Officer. However, the Compensation Committee’s decisions concerning the compensation of the Company’s Chief Executive Officer are subject to ratification by the independent directors of the Board of Directors. The members of the Compensation Committee are Dr. Barry Dash (Chairman of the Compensation Committee), Jeffrey Whitnell, Davis Caskey and Nasrat Hakim. The Committee operates pursuant to a charter. Under the Compensation Committee charter, the Compensation Committee has authority to retain compensation consultants, outside counsel, and other advisors that the committee deems appropriate, in its sole discretion, to assist it in discharging its duties, and to approve the terms of retention and fees to be paid to such consultants. During the fiscal year ended March 31, 2021, the Compensation Committee did not engage any advisors. Named Executive Officers The named executive officers for the fiscal year ended March 31, 2021 were: ● Nasrat Hakim, Chief Executive Officer, and President for the full year; ● Carter J. Ward, Chief Financial Officer, Secretary, and Treasurer for the full year; ● Douglas Plassche, Executive Vice President for the full year. These individuals are referred to collectively as the “ Named Executive Officers ”. Our executive compensation program Overview Our approach to executive compensation, one of the most important and complex aspects of corporate governance, is influenced by our belief in rewarding people for consistently strong execution and performance. We believe that the ability to attract and retain qualified executive officers and other key employees is essential to our long-term success. Our plan to obtain and retain highly skilled employees is to provide significant incentive compensation opportunities and market competitive salaries. We strive to link individual employee objectives with overall company strategies and results, and to reward executive officers and significant employees for their individual contributions to those strategies and results. Furthermore, we believe that equity ownership serves to align the interests of our executives with those of our stockholders. As such, equity is a key component of our compensation program. The primary elements of our executive compensation program are base salary, incentive cash and stock bonus opportunities and equity incentives typically in the form of stock option grants or stock awards. Although we provide other types of compensation, these three elements are the principal means by which we provide the Named Executive Officers with compensation opportunities. Elements of our executive compensation program Base Salary We pay a base salary to certain of the Named Executive Officers, with such payments being made in either cash, Common Stock or a combination of cash and Common Stock. In general, base salaries for the Named Executive Officers are determined by evaluating the responsibilities of the executive’s position, the executive’s experience, and the competitive marketplace. Base salary adjustments are considered and take into account changes in the executive’s responsibilities, the executive’s performance, and changes in the competitive marketplace. We believe that the base salaries of the Named Executive Officers are appropriate within the context of the compensation elements provided to the executives and because they are at a level which remains competitive in the marketplace. In the section below entitled “ Agreements with Named Executive Officers ”, we describe the breakdown between compensation paid in cash and in equity for each Named Executive Officer during the fiscal year ended March 31, 2021. Bonuses Named Executive Officers may earn discretionary bonuses, which are awarded by the Compensation Committee in its discretion after the end of a fiscal year based on its assessment of factors including Company and individual performance. Pursuant to his employment agreement, Mr. Hakim was eligible to earn a discretionary bonus for the fiscal year ended March 31, 2021 up to 100% of his base salary ($500,000 for fiscal 2021), which he earned in full. In addition, as described in the section below entitled “Agreements with Named Executive Officers,” Mr. Plassche was guaranteed a $75,000 annual bonus for the fiscal year ended March 31, 2021. Mr. Ward was awarded a $25,000 discretionary bonus for his service during fiscal 2021. 63 Equity As noted above, certain components of our Named Executive Officers’ fiscal year 2021 base salary and bonuses were payable in shares of Common Stock. In addition, Messrs. Ward and Plassche are each entitled to an annual grant of restricted shares of Common Stock, as described in the section entitled “ Agreements with Named Executive Officers ” below. During the fiscal year ended 2021, this amount was $25,000 worth of fully vested restricted shares for Mr. Ward and $30,000 worth of fully vested restricted shares for Mr. Plassche. From time to time, we also grant stock options to our Named Executive Officers which generally vest over time, obtainment of a corporate goal or a combination of the two. We did not grant any stock options to our named executive officers in fiscal year 2021. Retirement Benefits We maintain a tax-qualified retirement plan under Section 401(k) of the Code. The plan allows employees to defer compensation on a pre-tax basis subject to certain limits; however, Elite does not provide a matching contribution to its participants. Perquisites Mr. Hakim receives a monthly car allowance of up to $1,500 pursuant to the terms of his employment agreement. Mr. Plassche receives a monthly car allowance of up to $500. Mr. Hakim is also entitled to a monthly housing allowance up to $5,000. These perquisites represent a small fraction of the total compensation of each such Named Executive Officer. The value of the perquisites we provide are taxable to the Named Executive Officers and the incremental cost to us of providing these perquisites is reflected in the Summary Compensation Table. The Board of Directors believes that the perquisites provided are reasonable and appropriate. The Company generally covers life insurance premiums for its employee population, including its Named Executive Officers. For more information on perquisites provided to the Named Executive Officers, please see the “ All Other Compensation ” column of the Summary Compensation Table. Agreements with Named Executive Officers Nasrat Hakim Pursuant to his August 2013 employment agreement, as amended on January 12, 2016 (the “ Hakim Employment Agreement ”), Mr. Hakim receives an annual salary of $500,000 per year. The Salary is paid in shares of the Company’s Common Stock pursuant to the Company’s current procedures for paying Company executives in Stock. He also is entitled to an annual performance bonus equal to up to 100% of his annual salary, payable in shares of Common Stock as well. The Board may also award discretionary bonuses in its sole discretion. Mr. Hakim is entitled to employee benefits (e.g., health, vacation, employee benefit plans and programs) consistent with other Company employees of his seniority and a car allowance of up to $1,500 per month. The Hakim Employment Agreement contains restrictive covenants including a confidentiality provision and a one year post-termination non-solicit provision. Mr. Hakim’s employment is terminable by the Company for cause (as defined below). The Hakim Employment Agreement also may be terminated by the Company upon at least 30 days written notice due to disability (as defined below) or without cause. Mr. Hakim can terminate the Hakim Employment Agreement by resigning, provided he gives notice at least 60 days prior to the effective resignation date. If Mr. Hakim is terminated for cause or he resigns, he only is entitled to accrued and unpaid annual salary, accrued vacation time and any reasonable and necessary business expenses, all through the date of termination and payable in stock (“Basic Termination Benefits”). If Mr. Hakim is terminated because of disability or death, in addition to Basic Termination Benefits, he is entitled to a pro rata annual bonus through the date of termination (payable in Stock), payable in a lump sum. In addition, in the event of the termination of Mr. Hakim’s employment due to his disability, he will be entitled to a lump sum payment within 60 days of the termination date equal to one year of his base salary (payable in Stock), subject to his execution of a release. If the Company terminates Mr. Hakim without cause, in addition to Basic Termination Benefits, Mr. Hakim is entitled to his pro rata annual bonus through the date of termination and an amount equal to two years’ annual salary (all payable in Stock in a lump sum within 60 days of the termination date), and 12 months of continued health insurance continuation under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), at active employee rates, subject to his execution of a release and his continued compliance with applicable restrictive covenants. 64 Upon a termination of employment in connection with a Change of Control (as defined below), in addition to Basic Termination Benefits, Mr. Hakim is entitled to a pro rata annual bonus and payment in an amount equal to two year’s base annual salary in effect upon the Date of Termination, less applicable deductions, and withholdings, payable in Stock in a lump sum within 60 days, and two years of health care continuation benefits. In addition, all outstanding unvested equity held by Mr. Hakim will then vest. Under the Hakim Employment Agreement: “Cause” means (1) Mr. Hakim’s failure or refusal to perform the services required under the agreement, (2) the material breach by Mr. Hakim of any of the terms of the agreement, or (3) Mr. Hakim’s conviction of a crime that results in imprisonment or involves embezzlement, dishonest or activities injurious to the Company or its reputation. “Change of Control” means generally (1) an acquisition or merger resulting in the holders of the Company’s voting stock immediately prior to the transaction holding less than fifty (50%) percent of the combined voting power after the transaction; (2) the sale of all or substantially all of the assets or capital stock of the Company; or (3) the securities of the Company representing greater than fifty (50%) percent of the combined voting power of the Company’s then outstanding voting securities are acquired in a single transaction or series of related transactions. “Disability” means that Mr. Hakim is prevented by illness, accident or other disability (mental or physical) from performing the essential functions of his position for one or more periods cumulatively totaling 3 months during any consecutive 12 month period. Carter J. Ward On November 12, 2009, the Company entered into an employment agreement with Mr. Carter J. Ward (the “ Ward Employment Agreement ”) which superseded his prior agreement with the Company. Pursuant to the terms of the Ward Employment Agreement, Mr. Ward continues as an at-will employee of the Company as its Chief Financial Officer. Under the Ward Employment Agreement, Mr. Ward was entitled to an initial base salary of $125,000 in accordance with the Company’s payroll practices and an additional $25,000 per annum paid by the issuance of restricted shares of Common Stock. The Common Stock component of Mr. Ward’s compensation is to be computed on a quarterly basis, with the number of shares issued equal to the quotient of the quarterly amount due of $6,250 divided by the average daily closing price of the Company’s Common Stock for the quarter just ended. On April 1, 2020, Mr. Ward’s compensation was adjusted to include a total compensation of $200,529, consisting of $170,529 being paid in cash in accordance with the Company’s payroll practices and $30,000 being paid by the issuance of restricted shares of Common Stock. On March 1, 2021, Mr. Ward’s compensation was adjusted to include a total compensation of $208,543, consisting of $178,543 being paid in accordance with the Company’s payroll practices and $30,000 being paid by the issuance of restricted shares of Common Stock. Mr. Ward subsequently resigned as CFO of the Company, effective May 14, 2021. Douglas Plassche On July 20, 2013, the Company entered into an employment agreement with Mr. Douglas Plassche (the “ Plassche Employment Agreeme nt”). Pursuant to the Plassche Employment Agreement, Mr. Plassche serves as an at-will employee, in the position of Vice President of Operations, commencing on August 12, 2013. The Plassche Employment Agreement includes an initial base salary of $205,000 being paid in accordance with the Company’s payroll practices and an additional $25,000 being paid by the issuance of restricted shares of Common Stock. The Common Stock component of Mr. Plassche’s compensation is to be computed on an annual basis, with the number of shares issued being equal to the quotient of the annual amount due, divided by the average daily closing price of the Company’s Common Stock for the calendar year just ended. Mr. Plassche is also eligible for an annual bonus in cash and/or equity-based awards for up to an equivalent of 30% of base salary, with such annual bonus being granted based upon the achievement of agreed milestones and at the discretion of the Company and its Chief Executive Officer. In addition, pursuant to the Plassche Employment Agreement, he was initially granted options to purchase 3,000,000 shares of Common Stock, at a price of $ 0.07 per share, (the closing price of the Common Stock on the date of the Plassche Employment Agreement). The options were issued pursuant to the 2004 Employee Stock Option Plan and vested over a period of three years with the vesting period commencing one year from the date of issuance. Mr. Plassche’s employment is terminable by either party. If the Company terminates Mr. Plassche without cause, Mr. Plassche is entitled to an amount equal to six months of base annual salary in effect upon the date of termination. Throughout his tenure, Mr. Plassche’s compensation was increased from time to time by the Board. On June 21, 2019, Mr. Plassche entered into a retention agreement with the Company (the “Plassche Retention Agreement”), as an in incentive for his continued employment and cooperating during a transitional period for the Company. Pursuant to the Plassche Retention Agreement, Mr. Plassche is entitled to a lump sum retention payment of $253,552 as of June 30, 2021, provided Mr. Plassche remains continuously employed by the Company through such date. In addition, Mr. Plassche was paid a one-time $30,000 relocation payment during fiscal year 2020. Under the Plassche Retention Agreement, the Company also guaranteed Mr. Plassche a salary of $253,552 and an annual bonus of $75,000 during the two year period following the agreement date. 65 On April 1, 2020, Mr. Plassche’s compensation was adjusted to include a total base compensation package of $272,530, consisting of $247,530 being paid in accordance with the Company’s payroll practices and $25,000 being paid by the issuance of restricted shares of Common Stock. On March 1, 2021, Mr. Plassche’s compensation was adjusted to include a total base compensation package of $278,606, consisting of $253,606 being paid in accordance with the Company’s payroll practices and $25,000 being paid by the issuance of restricted shares of Common Stock. Potential Payments Upon Termination or Change of Control Messrs. Hakim and Plassche are entitled to certain benefits upon a termination event (and in the case of Mr. Hakim, in connection with a change of control), as described in the section entitled “ Agreements with Named Executive Officers ” above. We do not presently provide the Named Executive Officers with any plan or arrangement, other than those that may be contained in the employment contracts disclosed above, in connection with any termination, including, without limitation, through retirement, resignation, severance, or constructive termination (including a change in responsibilities) of such Named Executive Officer’s employment with the Company. As part of the Company’s efforts to ensure the retention and continuity of key employees, officers, and directors in the event of a change of control of the ownership of the Company, unless otherwise stated in applicable employment contracts, key executives would receive an amount not to exceed twelve months of such executive’s salary, and certain Directors and managers would receive an amount equal to six months of such Director’s or manager’s fees or salaries, as applicable. In addition, any outstanding and unvested options would immediately vest, in the event of a change of control. Hedging Policy We do not permit the Named Executive Officers to “hedge” ownership by engaging in short sales or trading in any options contracts involving securities. Summary Compensation Table Name and Principal Position Fiscal Year Salary ($) Bonus ($) Stock Awards ($) All Other Compensation ($) Total ($) Nasrat Hakim, President, Chief Executive Officer and Chairman of the Board of Directors 2021 500,000 (1) 500,000 (2) — 78,000 (3) 1,078,000 2020 500,000 500,000 — 78,000 1,078,000 Carter J. Ward, Chief Financial Officer 2021 201,197 (4) 25,000 (5) — — 226,197 2020 192,816 30,000 — — 222,816 Douglas Plassche, Executive Vice President 2021 267,536 (6) 75,000 (7) — 6,000 (8) 348,536 2020 253,552 75,000 — 36,000 364,552 (1) Represents salary earned by Mr. Hakim pursuant to the Hakim Employment Agreement for Fiscal 2021, with such amounts to be paid via the issuance of Common Stock in lieu of cash. No shares of Common Stock have been issued to Mr. Hakim in payment of salaries due for Fiscal 2021. A total of 7,388,707 shares of Common Stock are due and owing to Mr. Hakim in payment of salaries earned during Fiscal 2021. A total of 6,305,856 shares of Common Stock are due and owing to Mr. Hakim in payment of salaries earned during Fiscal 2020. In aggregate, a total of $2,125,000 is accrued, due and owing to Mr. Hakim for salaries earned during Fiscal 2021, Fiscal 2020, and the thirty-six months ended March 31, 2019, but not paid. This amount is to be paid via the issuance of 24,342,733 shares of Common Stock, with the date of such issuance of shares of Common Stock being undetermined. (2) The bonus earned by Mr. Hakim for fiscal 2021. Bonuses earned by Mr. Hakim during Fiscal 2021 were paid in accordance with the Company’s payroll practices during Fiscal 2021. Mr. Hakim was also paid $437,500 during Fiscal 2021 for bonuses earned and accrued during the twelve months ended March 31, 2018, and not paid previously. Mr. Hakim was also paid $312,500 during Fiscal 2021 for bonuses earned and accrued during the twelve months ended March 31, 2019, and not previously paid. Mr. Hakim accordingly was paid a total of $1,250,000 during Fiscal 2021, with such amount representing bonuses earned during Fiscal 2021 and the twenty-four month period ending March 31, 2019, and not previously paid. A total of $125,000 of bonus earned by Mr. Hakim during Fiscal 2020 was paid in accordance with the Company’s payroll practices. A total of $375,000 of bonus earned by Mr. Hakim during Fiscal 2020 was accrued and is owing to Mr. Hakim. As of March 31, 2021, Mr. Hakim is owed $562,500 in bonuses earned during the twenty-four-month period ending March 31, 2020. Pursuant to the Hakim Employment Agreement, these bonuses are to be paid in accordance with the Company’s payroll practices. 66 (3) Represents $18,000 amounts paid for auto allowance and $60,000 for housing allowances. (4) Represents salaries earned by Mr. Ward pursuant to the Ward Employment Agreement. Fiscal 2021 salaries consist of $171,197 being paid in accordance with the Company’s payroll practices and $30,000 being accrued, due, owing and to be paid via the issuance of 443,355 shares of Common Stock. In aggregate, salaries totaling $97,500 are accrued, due and owing to Mr. Ward for salaries earned and not paid during Fiscal 2021, Fiscal 2020 and the twenty-four month period ended March 31, 2019, with such accrued amount being paid via the issuance of 1,218,536 shares of Common Stock during May 2021. (5) Represents the bonus earned by Mr. Ward for fiscal 2021. (6) Represents salaries earned by Mr. Plassche pursuant to the Plassche Employment Agreement. Fiscal 2021 salaries consist of $242,536 being paid in accordance with the Company’s payroll practices and $25,000 being accrued, due, owing and to be paid via the issuance of 369,462 shares of Common Stock. In aggregate, salaries totaling $25,000 are accrued, due and owing to Mr. Plassche for salaries earned and not paid during Fiscal 2021, with such accrued amount to be paid via the issuance of 369,462 shares of Common Stock, with the date of such issuance of shares of Common Stock being undetermined. (7) Represents the bonus earned by Mr. Plassche for fiscal 2021 pursuant to the Plassche Employment Agreement. (8) Represents amounts paid for auto allowances. Outstanding Equity Awards at March 31, 2021 Option Awards Name Number of securities underlying unexercised options Exercisable (#) Number of securities underlying unexercised options Unexercisable (#) Equity Incentive Plan Awards: Number of securities underlying unexercised unearned options (#) Options Exercise Price ($) Option Expiration Date Nasrat Hakim Carter Ward 150,000 - - 0.12 6/19/2022 Douglas Plassche 3,000,000 - - 0.07 7/23/2023 67 Director Compensation The following table sets forth information concerning director compensation for the year ended March 31, 2021: Name Fees Earned or Paid In Cash (1) ($) Stock Awards (1) ($) Option Awards ($) All Other Compensation ($) Total ($) Barry Dash 10,000 (2) 20,000 (3) - - - - 30,000 Jeffrey Whitnell 10,000 (2) 20,000 (3) - - - - 30,000 Davis Caskey 10,000 (2) 20,000 (3) - - - - 30,000 (1) Please refer to the section below titled “ Director Fee Compensation ” for details on the Company’s director fee compensation policy. No directors held unexercised or unvested stock awards as of March 31, 2021. (2) Amounts represent Director fees earned during the fiscal year ended March 31, 2021 which are to be paid in cash. These fees were accrued and unpaid as of March 31, 2021, with a payment date being undetermined. In aggregate, Directors fees totaling $30,000 ($10,000 for each of the Company’s three non-employee Directors) is accrued, due and owing for Director fees earned during Fiscal 2021. This amount is to be paid in cash, with the date of such payment being undetermined. (3) Director equity compensation for the fiscal year ended March 31, 2021 consists of an entitlement to 295,570 shares of Common Stock for each of Dr. Dash, Mr. Whitnell and Mr. Caskey each receiving 295,570 shares of Common Stock. Payment of this amount due via share issuance will be made at an as yet undetermined date. Director Fee Compensation The Company’s policy regarding director fees is as follows: (i) Directors who are employees or consultants of the Company (and/or any of its subsidiaries) receive no additional remuneration for serving as directors or members of committees of the Board; (ii) all Directors are entitled to reimbursement for out-of-pocket expenses incurred by them in connection with their attendance at the Board or committee meetings; (iii) Directors who are not employees or consultants of the Company (and/or any of its subsidiaries) receive a $30,000 annual retainer fee, with $20,000 of this amount being paid via the issuance of restricted Common Stock, and the remaining $10,000 being paid in cash; (iv) Directors and the Chairman do not receive any additional compensation for attendance at or chairing of any meetings. Director Equity Compensation As described above, members of the Board of Directors and the Chairman are paid a portion of their annual retainer fees via the issuance of restricted shares of Common Stock of the Company. The number of shares to be issued to each Director and the Chairman is equal to the quotient of the quarterly amount due to each Director and the Chairman, respectively, divided by the average daily closing price of the Company’s stock for the quarter just ended. Members of the Board of Directors during the fiscal year ended March 31, 2021 did not receive any options or equity compensation for serving as directors other than shares of Common Stock earned in lieu of cash in relation to Director fees due. Other The Company’s Articles of Incorporation provide for the indemnification of each of the Company’s directors to the fullest extent permitted under Nevada General Corporation Law. 68 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information, as of June 7, 2021 (except as otherwise indicated), regarding beneficial ownership of our Common Stock by (i) each person who is known by us to own beneficially more than 5% of each such class, (ii) each of our directors, (iii) each of our executive officers and (iv) all our directors and executive officers as a group. As of June 7, 2021, we had 1,009,176,752 shares of Common Stock outstanding (exclusive of 0.1 million treasury shares). On any matter presented to the holders of our Common Stock for their action or consideration at any meeting of our Shareholders, each share of Common Stock entitles the holder to one vote. As used in the table below and elsewhere in this report, the term beneficial ownership with respect to a security consists of sole or shared voting power, including the power to vote or direct the vote, and/or sole or shared investment power, including the power to dispose or direct the disposition, with respect to the security through any contract, arrangement, understanding, relationship, or otherwise, including a right to acquire such power(s) during the 60 days immediately following June 7, 2021. Except as otherwise indicated, the Shareholders listed in the table have sole voting and investment powers with respect to the shares indicated. Name and Address of Beneficial Owner of Common Stock Common Stock Percent (%) of Voting Securities Beneficially Owned Nasrat Hakim, President, Chief Executive Officer and Chairman of the Board of Directors* 273,166,287 (1) 24.4 % Barry Dash, Director* 2,228,362 (2) ** % Jeffrey Whitnell, Director* 2,179,827 (3) ** % Davis Caskey, Director* 1,042,243 (4) ** % Carter J. Ward, Former Chief Financial Officer 5,185,023 (5) ** % Douglas Plassche, Executive Vice President * 4,503,394 (6) ** % All Directors and Officers as a group 283,120,113 (7) 25.3 % * The address is c/o Elite Pharmaceuticals Inc., 165 Ludlow Avenue, Northvale, NJ 07647. ** Less than 1% (1) Includes 169,814,882 shares of Common Stock held and 24,342,744 shares of Common Stock due and owing to Mr. Hakim as of March 31, 2021 (the latest practicable date) for compensation earned pursuant to Mr. Hakim’s employment agreement with the Company and 79,008,661 shares of Common Stock issuable upon cash exercise of the Series J Warrants with an exercise price of $0.1521 per share. (2) Includes 1,932,792 shares of Common Stock held and 295,570 shares of Common Stock due and owing to Dr. Dash as of March 31, 2021 (the latest practicable date) for Directors fees accrued as of such date. (3) Includes 1,884,257 shares of Common Stock held and 295,570 shares of Common Stock due and owing to Mr. Whitnell as of March 31, 2021 (the latest practicable date) for Directors fees accrued as of such date. (4) Includes 746,673 shares of Common Stock held and 295,570 shares of Common Stock due and owing to Mr. Caskey as of March 31, 2021 (the latest practicable date) Date for Directors fees accrued as of such date. (5) Mr. Ward resigned on May 14, 2021. Address is c/o Enveric Biosciences Inc., 4851 Tamiami Trail N, Naples FL 34103. Includes 3,771,919 shares of Common Stock held and 1,263,104 shares of Common Stock due and owing to Mr. Ward as of May 14, 2021. for salaries earned pursuant to Mr. Ward’s employment agreement with the Company, with such shares being issued to Mr. Ward during May 2021, and vested options to purchase 150,000 shares of Common Stock. (6) Includes 1,133,932 shares of Common Stock held 369,462 shares of Common Stock due and owing to Mr. Plassche as of March 31, 2021 (the latest practicable date) for salaries earned pursuant to Mr. Plassche’s employment agreement with the Company, and shares of Common Stock issuable upon cash exercise of vested options to purchase 3,000,000 shares of Common Stock. (7) Relates only to current directors and officers. Includes 175,512,536 shares of Common Stock held, 25,598,916 shares of Common Stock due and owing as of March 31, 2021 (the latest practicable date) for director’s fees and salaries accrued as of such date, 3,000,000 shares of Common Stock issuable upon cash exercise of vested options and 79,008,661 shares of Common Stock issuable upon cash exercise of warrants at an exercise price of $0.1521 per share of Common Stock. 69 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Certain Related Person Transactions 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. Mikah will now be Elite’s partner with respect to Amphetamine IR and ER and will assume all the rights and obligations for these products from SunGen. Mikah Pharmaceuticals was founded in 2009 by Nasrat Hakim. Director Independence All related person transactions are reviewed and, as appropriate, may be approved or ratified by the Board of Directors. If a Director is involved in the transaction, he or she may not participate in any review, approval, or ratification of such transaction. Related person transactions are approved by the Board of Directors only if, based on all of the facts and circumstances, they are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the Board of Directors determines in good faith. The Board of Directors takes into account, among other factors it deems appropriate, whether the transaction is on terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The Board of Directors may also impose such conditions as it deems necessary and appropriate on us or the related person in connection with the transaction. In the case of a transaction presented to the Board of Directors for ratification, the Board of Directors may ratify the transaction or determine whether rescission of the transaction is appropriate. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The Company’s independent registered public accounting firm for the fiscal year ending March 31, 2022 is Buchbinder Tunick & Company LLP (“ Buchbinder ”). The following table presents fees, including reimbursements for expenses, for professional audit services rendered by Buchbinder, for the audits of our financial statements and interim reviews of our quarterly financial statements. Fiscal 2021 Fiscal 2020 Audit Fees $ 120,000 $ 120,000 Audit-Related Fees — — Tax Fees 8,000 8,000 Audit Fees Represents fees for professional services provided for the audit of our annual financial statements, services that are performed to comply with generally accepted auditing standards, and review of our financial statements included in our quarterly reports and services in connection with statutory and regulatory filings. Audit-Related Fees Represents the fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements. Tax Fees Represents preparation of Federal, State and Local income tax returns. The Audit Committee has determined that Buchbinder’s rendering of these audit-related services was compatible with maintaining auditor’s independence. The Board of Directors considered Buchbinder to be well qualified to serve as our independent public accountants. The Committee also pre-approved the charges for services performed in Fiscal 2021. Pre-Approval Procedures The Audit Committee pre-approves all audit and tax services and the terms thereof (which may include providing comfort letters in connection with securities underwriting) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by the independent auditor; provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the “de minimus” provisions of Section 10A (i)(1)(B) of the Exchange Act are satisfied. This authority to pre-approve non-audit services may be delegated to one or more members of the Audit Committee, who shall present all decisions to pre-approve an activity to the full Audit Committee at its first meeting following such decision. 70 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES (a) The following are filed as part of this Annual Report on Form 10-K (1) The financial statements and schedules required to be filed by Item 8 of this Annual Report on Form 10-K and listed in the Index to Consolidated Financial Statements. (2) The Exhibits required by Item 601 of Regulation S-K and listed below in the “ Index to Exhibits required by Item 601 of Regulation S- K.” (b) The Exhibits are filed with or incorporated by reference in this Annual Report on Form 10-K (c) None 71 Index to Exhibits required by Item 601 of Regulation S-K. Exhibit No. Description 3.1(a) Articles of Incorporation of Elite-Nevada, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on January 9, 2012. 3.1(b) Certificate of Designations of the Series G Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on April 18, 2013, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated April 18, 2013 and filed with the SEC on April 22, 2013. 3.1(c) Certificate of Designation of the Series H Junior Participating Preferred Stock, incorporated by reference to Exhibit 2 (contained in Exhibit 1) to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013. 3.1(d) Certificate of Designations of the Series I Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on February 6, 2014, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated February 6, 2014 and filed with the SEC on February 7, 2014. 3.1(e) Certificate of Designations of the Series J Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on May 3, 2017, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated April 28, 2017 and filed with the SEC on April 28, 2017. 3.1(f) Certificate of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated June 24, 2020 and filed with the SEC on June 24, 2020. 3.2(a) Amended and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K dated April 23, 2020 and filed with the SEC on April 23, 2020. 4.1 Form of specimen certificate for Series G Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, dated April 18, 2013 and filed with the SEC on April 22, 2013. 4.2 Form of specimen certificate for Series I Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, dated February 6, 2014 and filed with the SEC on February 7, 2014. 4.3 Rights Agreement, dated as of November 15, 2013, between the Company and American Stock Transfer & Trust Company, LLC., incorporated by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013. 4.4 Form of Series H Preferred Stock Certificate, incorporated by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013. 4.5 Warrant to purchase shares of Common Stock issued to Nasrat Hakim dated April 28, 2017 incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated April 28, 2017, and filed with the SEC on April 28, 2017. 72 4.6 Description of Common Stock, incorporated by reference to Exhibit 4.6 to the Report 10-K filed in June 2020. 10.1 Elite Pharmaceuticals, Inc. 2014 Equity Incentive Plan, incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement for its Annual Meeting of Shareholders, filed with the SEC on April 3, 2014. 10.2 Form of Confidentiality Agreement (corporate), incorporated by reference to Exhibit 10.7 to the Form SB-2. 10.3 Form of Confidentiality Agreement (employee), incorporated by reference to Exhibit 10.8 to the Form SB-2. 10.4 Loan Agreement, dated as of August 15, 2005, between New Jersey Economic Development Authority (“NJEDA”) and the Company, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005. 10.5 Series A Note in the aggregate principal amount of $3,660,000.00 payable to the order of the NJEDA, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005. 10.6 Series B Note in the aggregate principal amount of $495,000.00 payable to the order of the NJEDA, incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005. 10.7 Mortgage from the Company to the NJEDA, incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005. 10.8 Indenture between NJEDA and the Bank of New York as Trustee, dated as of August 15, 2005, incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005. 10.13 Employment Agreement, dated as of November 13, 2009, by and between the Company and Carter J. Ward, incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, for the period ending September 30, 2009 and filed with the SEC on November 16, 2009.+ 10.15 License Agreement, dated as of September 10, 2010, by and among Precision Dose Inc. and the Company, incorporated by reference to Exhibit 10.8 to the Quarterly Report on Form 10-Q, for the period ended September 30, 2010 and filed with the SEC on November 15, 2010 (Confidential Treatment granted with respect to portions of the Agreement). 10.16 Manufacturing and Supply Agreement, dated as of September 10, 2010, by and among Precision Dose Inc. and the Company, incorporated by reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q, for the period ended September 30, 2010 and filed with the SEC on November 15, 2010 (Confidential Treatment granted with respect to portions of the Agreement). 10.17 August 1, 2013 Employment Agreement with Nasrat Hakim, incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013.+ 10.18 August 1, 2013 Mikah LLC Asset Purchase Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K/A, dated August 1, 2013 and filed with the SEC on August 30, 2018. (Confidential Treatment granted with respect to portions of the Agreement). 10.19 August 1, 2013 Secured Convertible Note from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013. 10.20 August 1, 2013 Security Agreement from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013. 10.21 October 15, 2013 Hakim Credit Line Agreement, incorporated by reference to Exhibit 10.16 to the Quarterly Report on Form 10-Q for the period ended September 30, 2013. 10.22 October 2, 2013 Manufacturing and Licensing Agreement with Epic Pharma LLC, incorporated by reference to Exhibit 10.17 to the Amended Quarterly Report on Form 10-Q/A for the period ended September 30, 2013 and filed with the SEC on April 25, 2014. Confidential Treatment granted with respect to portions of the Agreement. 10.23 February 7, 2014 Amendment to Secured Convertible Note from the Company to Mikah, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated February 7, 2014 and filed with the SEC on February 7, 2014. 73 10.24 Employment Agreement with Dr. G. Kenneth Smith, dated October 20, 2014, incorporated by reference to Exhibit 10.82 to the Quarterly Report on Form 10-Q for the period ended September 30, 2014 and filed with the SEC on November 14, 2014.+ 10.25 January 28, 2015 First Amendment to the Loan Agreement between Nasrat Hakim and Elite Pharmaceuticals dated October 15, 2013, incorporated by reference to Exhibit 10.83 to the Quarterly Report on Form 10-Q for the period ended December 31, 2014 and filed with the SEC on February 17, 2015. 10.26 January 28, 2015 Termination of Development and License Agreement for Mikah-001 between Elite Pharmaceuticals, Inc. and Mikah Pharma LLC and Transfer of Payment, incorporated by reference to Exhibit 10.84 to the Quarterly Report on Form 10-Q for the period ended December 31, 2014 and filed with the SEC on February 17, 2015. 10.28 Amendment No. 1 to Hakim Employment Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 29, 2016. 10.29 August 24, 2016 Master Development and License Agreement between Elite and SunGen Pharma LLC. incorporated by reference to Exhibit 10.44 to the Quarterly Report on Form 10-Q for the period ended September 30, 2016 and filed with the SEC on November 9, 2016. (Confidential Treatment granted with respect to portions of the Agreement). 10.30 Purchase Agreement between the Company and Lincoln Park Capital LLC dated July 8, 2020, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated July 9, 2020 and filed with the SEC on July 9, 2020. 10.31 Registration Rights Agreement between the Company and Lincoln Park Capital LLC dated July 8, 2020, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated July 9, 2020 and filed with the SEC on July 9, 2020. 10.33 May 2017 Trimipramine Acquisition Agreement from Mikah Pharma, incorporated by reference to Exhibit 10.50 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.34 May 2017 Secured Promissory Note from the Company to Mikah Pharma, incorporated by reference to Exhibit 10.51 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.35 May 2017 Security Agreement between the Company to Mikah Pharma, incorporated by reference to Exhibit 10.52 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.36 May 2017 Assignment of Supply and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference to Exhibit 10.53 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.37 May 2017 Assignment of Manufacturing and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.54 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.38 Supply and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.39 Manufacturing and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.40 Master Development and License Agreement For Products Between Elite Pharmaceuticals, Inc. And SunGen dated July 6, 2017, incorporated by reference to Exhibit 10.57 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.41 First Amendment to Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated by reference to Exhibit 10.59 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.42 Second Amendment to Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated by reference to Exhibit 10.58 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 74 10.45 License, Supply And Distribution Agreement effective March 6, 2019 by and between Elite Pharmaceuticals, Inc., and Elite Laboratories, Inc. and Lannett Company, Inc., USA, incorporated by reference to Exhibit 10.45 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.46 License, Supply and Distribution Agreement effective April 9, 2019 by and between Elite Pharmaceuticals, Inc., and Elite Laboratories, Inc. and Lannett Company, Inc., USA, incorporated by reference to Exhibit 10.49 to the Annual Report on Form 10-K for the period ended March 31, 2019 and filed with the SEC on June 21, 2019 (portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.47 License, Supply and Distribution Agreement effective March 6, 2019 by and between Elite Pharmaceuticals, Inc., and Elite Laboratories, Inc. and Lannett Company, Inc., USA, incorporated by reference to Exhibit 10.50 to the Annual Report on Form 10-K for the period ended March 31, 2019 and filed with the SEC on June 21, 2019 (portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.48 Development Agreement effective December 3, 2018 by and between Mikah Pharma LLC and Elite Laboratories, Inc., incorporated by reference to Exhibit 10.51 to the Annual Report on Form 10-K for the period ended March 31, 2019 and filed with the SEC on June 21, 2019 (portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.49 Asset Purchase Agreement dated November 13, 2019 by and between the Company and Nostrum Laboratories Inc. , incorporated by reference to Exhibit 10.49 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. 10.50 January 2, 2020 Amendment to the Glenmark Pharmaceuticals Inc. USA License, Supply and Distribution Agreement, incorporated by reference to Exhibit 10.50 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.51 Asset Purchase Agreement executed January 16, 2020 by and between the Company and Nostrum Laboratories Inc., incorporated by reference to Exhibit 10.49 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. 10.52 Employment Agreement with Douglas Plassche *+ 10.53 June 21, 2019 Retention Agreement with Douglas Plassche.* + 10.54 July 29, 2019 Amendment To The License, Supply And Distribution Agreement Between Elite Pharmaceuticals, Inc./Elite Laboratories, Inc. And Lannett Company, Inc. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).* 21 Subsidiaries of the Company, incorporated by reference to Exhibit 21 to the Annual Report on Form 10-K, for the period ended March 31, 2019 and filed with the SEC on June 21, 2019. 75 23.1 Consent of Buchbinder Tunick & Company LLP, Independent Registered Public Accounting Firm* 31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)* 31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)* 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File * Filed herewith. ** Furnished herewith. + Indicates management contract or compensatory plan or arrangement. ITEM 16. FORM 10-K SUMMARY None. 76 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ELITE PHARMACEUTICALS, INC. By: /s/ Nasrat Hakim Nasrat Hakim Chief Executive Officer Dated: June 14, 2021 By: /s/ Marc Bregman Marc Bregman Chief Financial Officer Dated: June 14, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Nasrat Hakim Chief Executive Officer, President and Chairman of the June 14, 2021 Board of Directors (Principal Executive Officer) /s/ Marc Bregman Chief Financial Officer, Treasurer, Secretary (Principal June 14, 2021 Financial Officer and Principal Accounting Officer) /s/ Barry Dash Director June 14, 2021 /s/ Jeffrey Whitnell Director June 14, 2021 /s/ Davis Caskey Director June 14, 2021 78 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2021 AND 2020 TABLE OF CONTENTS PAGE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2 CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Elite Pharmaceuticals, Inc., and Subsidiary Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Elite Pharmaceuticals, Inc. and Subsidiary (the Company) as of March 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2021 and 2020 and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. Indefinite-Lived Intangible Assets Impairment Assessments of ANDAs and Patents — Refer to Notes 1, 4 and 15 to the financial statements Critical Audit Matter Description As of March 31, 2021, the Company has capitalized costs of $6,168,351 for ANDAs and $465,684 for patents. The Company evaluates its intangible assets for impairment annually during the fourth quarter in accordance with ASC Topic 350, Intangibles Goodwill and Other, and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the assets carrying amount. Management evaluates qualitative factors to determine whether it is more likely than not that the fair value of the intangible assets is less than its carrying amount. The qualitative factors management considers include, but are not limited to, the current project status, expected future cash flows, decline in the Company’s stock price, legal and regulatory factors and industry and market considerations. We identified the impairment evaluation of the intangibles as a critical audit matter because of the significant judgements made by management to estimate the fair value of the intangible assets. Our audit procedures related to impairment of indefinite lived intangible assets included review of management’s analysis and testing the significant assumptions used by management. /s/ Buchbinder Tunick & Company LLP Buchbinder Tunick & Company LLP We have served as the Company’s auditor since 2010. Little Falls, New Jersey 07424 June 14, 2021, F- 2 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (AUDITED) March 31, 2021 March 31, 2020 ASSETS Current assets: Cash $ 3,192,768 $ 1,131,728 Accounts receivable, net of allowance for doubtful accounts of $-0-, respectively 3,496,376 4,106,846 Inventory 5,012,902 4,142,472 Prepaid expenses and other current assets 492,621 870,233 Total current assets 12,194,667 10,251,279 Property and equipment, net of accumulated depreciation of $12,153,626 and $10,957,334, respectively 6,649,365 7,227,648 Intangible assets, net of accumulated amortization of $-0-, respectively 6,634,035 6,634,035 Operating lease - right-of-use asset 214,674 363,282 Other assets: Restricted cash - debt service for NJEDA bonds 405,013 404,802 Security deposits 91,738 75,534 Total other assets 496,751 480,336 Total assets $ 26,189,492 $ 24,956,580 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 929,690 $ 1,577,860 Accrued expenses 4,270,600 4,821,132 Deferred revenue, current portion 13,333 180,000 Bonds payable, current portion, net of bond issuance costs 95,822 90,822 Loans payable, current portion 314,996 561,550 Lease obligation - operating lease, current portion 188,090 208,184 Senior secured promissory note - related party, current portion — 1,200,000 Total current liabilities 5,812,531 8,639,548 Long-term liabilities: Deferred revenue, net of current portion 45,558 58,891 Bonds payable, net of current portion and bond issuance costs 1,240,668 1,336,489 Loans payable, net of current portion 500,066 463,902 Lease obligation - operating lease, net of current portion 38,866 167,109 Derivative financial instruments - warrants 2,362,246 3,599,378 Other long-term liabilities 37,628 35,442 Total long-term liabilities 4,225,032 5,661,211 Total liabilities 10,037,563 14,300,759 The accompanying notes are an integral part of these audited consolidated financial statements. F- 3 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (continued) March 31, 2021 March 31, 2020 Shareholders’ equity: Series J convertible preferred stock; par value of $0.01; 50 shares authorized; 0 issued and outstanding as of March 31, 2021 and 24.0344 issued and outstanding as of March 31, 2020 — 13,903,960 Common Stock; par value $0.001; 1,445,000,000 shares authorized; 1,009,276,752 shares issued and 1,009,176,752 shares outstanding as of March 31, 2021; 840,504,367 shares issued and 840,404,367 shares outstanding as of March 31, 2020 1,009,279 840,507 Additional paid-in capital 164,407,480 150,264,605 Treasury stock; 100,000 shares as of March 31, 2021 and March 31, 2020; at cost (306,841 ) (306,841 ) Accumulated deficit (148,957,989 ) (154,046,410 ) Total shareholders’ equity 16,151,929 10,655,821 Total liabilities and shareholders’ equity $ 26,189,492 $ 24,956,580 The accompanying notes are an integral part of these audited consolidated financial statements. F- 4 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (AUDITED) For the Years Ended March 31, 2021 2020 Revenue: Manufacturing fees $ 20,997,310 $ 14,526,048 Licensing fees 4,383,439 3,468,591 Total revenue 25,380,749 17,994,639 Cost of manufacturing 13,513,611 10,015,855 Gross profit 11,867,138 7,978,784 Operating expenses: Research and development 5,112,542 5,532,462 General and administrative 3,323,045 3,349,837 Non-cash compensation through issuance of stock options 13,181 62,098 Depreciation and amortization 1,313,847 1,319,795 Total operating expenses 9,762,615 10,264,192 Income (loss) from operations 2,104,523 (2,285,408 ) Other income (expense): Change in fair value of derivative instruments 1,237,132 (1,111,548 ) Interest expense and amortization of debt issuance costs (259,598 ) (355,874 ) Gain on sale of fixed assets 48,463 — Gain on transfer/discontinuance of intangible assets — 1,502,500 Interest income 514 11,979 PPP loan forgiveness 1,013,480 — Other income, net 2,039,991 47,057 Income (loss) from operations before income taxes 4,144,514 (2,238,351 ) Income tax benefit (expense) 943,907 (2,000 ) Net income (loss) attributable to common shareholders $ 5,088,421 $ (2,240,351 ) Basic net income (loss) per share attributable to common shareholders $ 0.01 $ (0.00 ) Diluted net income (loss) per share attributable to common shareholders $ 0.01 $ (0.00 ) Basic weighted average Common Stock outstanding 942,997,875 832,326,965 Diluted weighted average Common Stock outstanding 942,997,875 993,260,953 The accompanying notes are an integral part of these audited consolidated financial statements. F- 5 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (AUDITED) Series J Preferred Stock Common Stock Additional Paid-In Treasury Stock Accumulated Total Shareholders’ Equity Shares Amount Shares Amount Capital Shares Amount Deficit (Deficit ) Balance as of March 31, 2019 — $ — 824,946,559 $ 824,949 $ 148,780,087 100,000 $ (306,841 ) $ (151,806,059 ) $ (2,507,864 ) Net loss — — — — — — — (2,240,351 ) (2,240,351 ) Common Stock sold pursuant to the Lincoln Park purchase agreement — — 15,358,627 15,359 1,422,620 — — — 1,437,979 Common Stock issued as additional commitment shares pursuant to the LPC purchase agreement — — 199,181 199 20,111 — — — 20,310 Costs associated with raising capital — — — — (20,311 ) — — — (20,311 ) Non-cash compensation through the issuance of employee stock options — — — — 62,098 — — — 62,098 Reclassification of mezzanine equity to permanent equity 24 13,903,960 — — — — — — 13,903,960 Balance at March 31, 2020 24 $ 13,903,960 840,504,367 $ 840,507 $ 150,264,605 100,000 $ (306,841 ) $ (154,046,410 ) $ 10,655,821 Net income — — — — — — — 5,088,421 5,088,421 Conversion of Preferred Stock to Common Stock (24 ) (13,903,960 ) 158,017,321 158,017 13,745,943 — — — — Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement — — 5,975,857 5,976 463,129 — — — 469,105 Common Stock sold pursuant to the Lincoln Park purchase agreement — — 640,543 641 41,582 — — — 42,223 Common Stock issued as additional commitment shares pursuant to the LPC purchase agreement — — 10,094 10 722 — — — 732 Costs associated with raising capital — — — — (469,837 ) — — — (469,837 ) Non-cash compensation through the issuance of employee stock options — — — — 13,181 — — — 13,181 Shares issued in payment of Director fees — — 1,550,343 1,551 133,449 — — — 135,000 Shares issued in payment of salaries — — 646,336 645 55,605 — — — 56,250 Shares issued in payment of consulting fees — — 1,931,891 1,932 159,101 — — — 161,033 Balance at March 31, 2021 — $ — 1,009,276,752 $ 1,009,279 $ 164,407,480 100,000 $ (306,841 ) $ (148,957,989 ) $ 16,151,929 The accompanying notes are an integral part of these audited consolidated financial statements. F- 6 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) For the Years Ended March 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 5,088,421 $ (2,240,351 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,313,847 1,319,795 Amortization of operating leases - right-of-use assets 210,744 190,806 Gain on the disposal of property and equipment (48,463 ) — Change in fair value of derivative financial instruments - warrants (1,237,132 ) 1,111,548 PPP loan forgiveness (1,013,480 ) — Non-cash compensation accrued 922,443 966,655 Non-cash compensation from issuances of options 13,181 62,098 Non-cash rent expense and lease accretion 2,186 2,081 Change in operating assets and liabilities: Accounts receivable 610,470 (2,785,041 ) Inventory (870,430 ) 373,251 Prepaid expenses and other current assets 361,408 216,091 Accounts payable, accrued expenses and other current liabilities (1,768,862 ) 344,395 Deferred revenue and customer deposits (180,000 ) (1,163,332 ) Lease obligations - operating leases (210,472 ) (191,817 ) Net cash provided by (used in) operating activities 3,193,861 (1,793,821 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (329,981 ) (34,953 ) Proceeds from disposal of property and equipment 67,200 — Net cash used in investing activities (262,781 ) (34,953 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of Common Stock 42,223 1,437,978 Proceeds from PPP loan 1,013,480 — Payment of related party note payable (1,200,000 ) — Payment of bond principal (105,000 ) (95,000 ) Other loan payments (620,532 ) (653,442 ) Net cash (used in) provided by financing activities (869,829 ) 689,536 Net change in cash and restricted cash 2,061,251 (1,139,238 ) Cash and restricted cash, beginning of year 1,536,530 2,675,768 Cash and restricted cash, end of year $ 3,597,781 $ 1,536,530 Supplemental disclosure of cash and non-cash transactions: Cash paid for interest $ 176,179 $ 240,785 Financing of equipment purchases and insurance renewal $ 410,141 $ 54,462 Stock issued in payment of Directors fees, salaries and consulting expenses $ 352,283 $ — Commitment shares issued to Lincoln Park Capital $ 722 $ 20,311 Conversion of preferred stock to Common Stock $ 13,903,960 $ — Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets $ — $ 554,088 F- 7 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview Elite Pharmaceuticals, Inc. (the “Company” or “Elite”) was incorporated on October 1, 1997 under the laws of the State of Delaware, and its wholly-owned subsidiary Elite Laboratories, Inc. (“Elite Labs”) was incorporated on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of Nevada. Elite Labs engages primarily in researching, developing, licensing and manufacture of generic, oral dose pharmaceuticals. The Company is equipped to manufacture controlled-release products on a contract basis for third parties and itself, if and when the products 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. Principles of Consolidation The accompanying audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The audited 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 audited 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. Segment Information Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 280 (“ASC 280”), Segment Reporting , establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the Company. The Company has determined that its reportable segments are products whose marketing approvals were secured via an Abbreviated New Drug Applications (“ANDA”) and products whose marketing approvals were secured via a New Drug Application (“NDA”). ANDA products are referred to as generic pharmaceuticals and NDA products are referred to as branded pharmaceuticals. There are currently no intersegment revenues. Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s audited consolidated financial statements. Please see Note 15 for further details. Revenue Recognition The Company generates revenue primarily from manufacturing and licensing fees. Manufacturing fees include the development of pain management products, manufacturing of a line of generic pharmaceutical products with approved ANDA, through the manufacture of formulations and the development of new products. Licensing fees include the commercialization of products either by license and the collection of royalties, or the expansion of licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations. Under ASC 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenues following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue. F- 8 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Nature of goods and services The following is a description of the Company’s goods and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each, as applicable: a) Manufacturing Fees The Company is equipped to manufacture controlled-release products on a contract basis for third parties, if, and when, the products are approved. These products include products using controlled-release drug technology. The Company also develops and markets (either on its own or by license to other companies) generic and proprietary controlled-release pharmaceutical products. The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms of the contract. The Company is primarily responsible for fulfilling the promise to provide the product, is responsible to ensure that the product is produced in accordance with the related supply agreement and bears risk of loss while the inventory is in-transit to the commercial partner. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer. b) License Fees The Company enters into licensing and development agreements, which may include multiple revenue generating activities, including milestones payments, licensing fees, product sales and services. The Company analyzes each element of its licensing and development agreements in accordance with ASC 606 to determine appropriate revenue recognition. The terms of the license agreement may include payment to the Company of licensing fees, non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. The Company recognizes revenue from non-refundable upfront payments at a point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer. For those milestone payments which are contingent on the occurrence of particular future events (for example, payments due upon a product receiving FDA approval), the Company determined that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent uncertainty of the occurrence of future events, the Company will recognize revenue from the milestone when there is not a high probability of a reversal of revenue, which typically occurs near or upon achievement of the event. Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of March 31, 2021. F- 9 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the customer’s products occurs. The Company entered into a sales and distribution licensing agreement with Epic Pharma LLC, (“Epic”) dated June 4, 2015 (the “2015 Epic License Agreement”), which has been determined to satisfy the criteria for consideration as a collaborative agreement, and is accounted for accordingly. The 2015 Epic License Agreement expired on June 4, 2020 without renewal. The Company entered into a Master Development and License Agreement with SunGen Pharma LLC dated August 24, 2016 (the “SunGen Agreement”), which has been determined to satisfy the criteria for consideration as a collaborative agreement, and is accounted for accordingly. On April 3, 2020, Elite and SunGen mutually agreed to discontinue any further joint product development activities. Disaggregation of revenue In the following table, revenue is disaggregated by type of revenue generated by the Company. The table also includes a reconciliation of the disaggregated revenue with the reportable segments: For the Years Ended March 31, 2021 2020 NDA: Licensing fees $ 166,167 $ 1,000,000 Total NDA revenue 166,167 1,000,000 ANDA: Manufacturing fees $ 20,997,310 $ 14,526,048 Licensing fees 4,217,272 2,468,591 Total ANDA revenue 25,214,582 16,994,639 Total revenue $ 25,380,749 $ 17,994,639 Cash The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market instruments. The Company places its cash and cash equivalents with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances. Restricted Cash As of March 31, 2021 and March 31, 2020, the Company had restricted cash of $405,013 and $404,802, respectively, related to debt service reserve in regard to the New Jersey Economic Development Authority (“NJEDA”) bonds (see Note 5). Accounts Receivable Accounts receivable are comprised of balances due from customers, net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. Inventory Inventory is recorded at the lower of cost or market on specific identification by lot number basis. F- 10 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Long-Lived Assets The Company periodically evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Property and equipment are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from three to forty years. Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently. Upon retirement or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income. Intangible Assets The Company capitalizes certain costs to acquire intangible assets; if such assets are determined to have a finite useful life they are amortized on a straight-line basis over the estimated useful life. Costs to acquire indefinite lived intangible assets, such as costs related to ANDAs are capitalized accordingly. The Company tests its intangible assets for impairment at least annually (as of March 31st) and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others and without limitation: a significant decline in the Company’s expected future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change in legal factors or in the business climate of the Company’s segments; unanticipated competition; and slower growth rates. As of March 31, 2021, the Company did not identify any indicators of impairment. Please also see Note 4 for further details on intangible assets. Research and Development Research and development expenditures are charged to expense as incurred. Contingencies Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not be realizable in the future. The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all tax jurisdiction until the applicable statutes of limitation expire. As of March 31, 2021, 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 years ended March 31, 2021 and 2020. F- 11 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Warrants and Preferred Shares The accounting treatment of warrants and preferred share series issued is determined pursuant to the guidance provided by ASC 470, Debt , ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging , as applicable. Each feature of a freestanding financial instrument including, without limitation, any rights relating to subsequent dilutive issuances, dividend issuances, equity sales, rights offerings, forced conversions, optional redemptions, automatic monthly conversions, dividends and exercise is assessed with determinations made regarding the proper classification in the Company’s financial statements. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation . Under the fair value recognition provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, based on the terms of the awards. The cost of the stock-based payments to nonemployees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term. In accordance with the Company’s Director compensation policy and certain employment contracts, director’s fees and a portion of employee’s salaries are to be paid via the issuance of shares of the Company’s Common Stock (“Common Stock”), in lieu of cash, with the valuation of such shares being calculated on a quarterly basis and equal to the simple average closing price of the Company’s Common Stock for each trading day of the quarter just ended. Earnings (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 period. The computation of diluted net income (loss) per share does not include the conversion of securities that would have an antidilutive effect. The following is the computation of earnings (loss) per share applicable to common shareholders for the periods indicated: For the Years Ended March 31, 2021 2020 Numerator Net income (loss) - basic $ 5,088,421 $ (2,240,351 ) Effect of dilutive instrument on net income — 1,111,548 Net income (loss) - diluted $ 5,088,421 $ (1,128,803 ) Denominator Weighted average shares of Common Stock outstanding - basic 942,997,875 832,326,965 Dilutive effect of stock options and convertible securities — 160,933,988 Weighted average shares of Common Stock outstanding - diluted 942,997,875 993,260,953 Net income (loss) per share Basic $ 0.01 $ (0.00 ) Diluted $ 0.01 $ (0.00 ) F- 12 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820 are described as follows: ● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 – Inputs that are unobservable for the asset or liability. Measured on a Recurring Basis The following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell: Amount at Fair Value Measurement Using Fair Value Level 1 Level 2 Level 3 March 31, 2021 Liabilities Derivative financial instruments - warrants $ 2,362,246 $ — $ — $ 2,362,246 March 31, 2020 Liabilities Derivative financial instruments - warrants $ 3,599,378 $ — $ — $ 3,599,378 See Note 11, for specific inputs used in determining fair value. The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments. Based upon current borrowing rates with similar maturities the carrying value of long-term debt approximates fair value. Non-Financial Assets that are Measured at Fair Value on a Non-Recurring Basis Non-financial assets such as intangible assets, and property and equipment are measured at fair value only when an impairment loss is recognized. The Company did not record an impairment charge related to these assets in the periods presented. F- 13 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Treasury Stock The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of shareholders’ equity. Recently Adopted Accounting Standards In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement . ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company adopted the guidance as of April 1, 2020. The Company is not materially impacted by the implementation of this pronouncement. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808) , Clarifying the Interaction between Topic 808 and Topic 606. 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 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years. The Company adopted the guidance as of April 1, 2020. The Company is not materially impacted by the implementation of this pronouncement. In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments . The ASU clarifies disclosure guidance for fair value options, adds clarifications to the subsequent measurement of fair value, clarifies disclosure for depository and lending institutions, clarifies the line-of-credit or revolving-debt arrangements guidance, and the interaction of Financial Instruments - Credit Losses (Topic 326) with Leases (Topic 842) and Transfers and Servicing-Sales of Financial Assets (Subtopic 860-20). In accordance with ASU 2020-03, the Company adopted the guidance as of April 1, 2020. The Company is not materially impacted by the implementation of this pronouncement. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”). Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022 for public entities qualifying as smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact of this update on the consolidated financial statements and does not expect a material impact on the consolidated financial statements. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures. NOTE 2. INVENTORY Inventory consisted of the following: March 31, 2021 March 31, 2020 Finished goods $ 274,603 $ 138,981 Work-in-progress 781,350 677,824 Raw materials 3,956,949 3,325,667 $ 5,012,902 $ 4,142,472 F- 14 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3. PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following: March 31, 2021 March 31, 2020 Land, building and improvements $ 5,456,523 $ 5,260,524 Laboratory, manufacturing, warehouse and transportation equipment 12,580,457 12,167,754 Office equipment and software 373,601 373,601 Furniture and fixtures 392,410 383,103 18,802,991 18,184,982 Less: Accumulated depreciation (12,153,626 ) (10,957,334 ) $ 6,649,365 $ 7,227,648 Depreciation expense was $1,299,668 and $1,305,616 for the years ended March 31, 2021 and 2020, respectively. NOTE 4. INTANGIBLE ASSETS The following table summarizes the Company’s intangible assets: March 31, 2021 Estimated Gross Useful Carrying Accumulated Net Book Life Amount Additions Reductions Amortization Value Patent application costs * $ 465,684 $ — $ — $ — $ 465,684 ANDA acquisition costs Indefinite 6,168,351 — — — 6,168,351 $ 6,634,035 $ — $ — $ — $ 6,634,035 March 31, 2020 Estimated Gross Useful Carrying Accumulated Net Book Life Amount Additions Reductions Amortization Value Patent application costs * $ 465,684 $ — $ — $ — $ 465,684 ANDA acquisition costs Indefinite 6,168,351 — — — 6,168,351 $ 6,634,035 $ — $ — $ — $ 6,634,035 * Patent application costs were incurred in relation to the Company’s abuse deterrent opioid technology. Amortization of the patent costs will begin upon the issuance of marketing authorization by the FDA. Amortization will then be calculated on a straight-line basis through the expiry of the related patent(s). F- 15 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. NJEDA BONDS During August 2005, the Company refinanced a bond issue occurring in 1999 through the issuance of Series A and B Notes tax-exempt bonds (the “NJEDA Bonds” and/or “Bonds”). During July 2014, the Company retired all outstanding Series B Notes, at par, along with all accrued interest due and owed. In relation to the Series A Notes, the Company is required to maintain a debt service reserve. The debt service reserve is classified as restricted cash on the accompanying consolidated balance sheets. The NJEDA Bonds require the Company to make an annual principal payment on September 1st based on the amount specified in the loan documents and semi-annual interest payments on March 1st and September 1st, equal to interest due on the outstanding principal. The annual interest rate on the Series A Note is 6.5%. The NJEDA Bonds are collateralized by a first lien on the Company’s facility and equipment acquired with the proceeds of the original and refinanced bonds. The following tables summarize the Company’s bonds payable liability: March 31, 2021 March 31, 2020 Gross bonds payable NJEDA Bonds - Series A Notes $ 1,470,000 $ 1,575,000 Less: Current portion of bonds payable (prior to deduction of bond offering costs) (110,000 ) (105,000 ) Long-term portion of bonds payable (prior to deduction of bond offering costs) $ 1,360,000 $ 1,470,000 Bond offering costs $ 354,454 $ 354,454 Less: Accumulated amortization (220,944 ) (206,765 ) Bond offering costs, net $ 133,510 $ 147,689 Current portion of bonds payable - net of bond offering costs Current portions of bonds payable $ 110,000 $ 105,000 Less: Bonds offering costs to be amortized in the next 12 months (14,178 ) (14,178 ) Current portion of bonds payable, net of bond offering costs $ 95,822 $ 90,822 Long term portion of bonds payable - net of bond offering costs Long term portion of bonds payable 1,360,000 $ 1,470,000 Less: Bond offering costs to be amortized subsequent to the next 12 months (119,332 ) (133,511 ) Long term portion of bonds payable, net of bond offering costs $ 1,240,668 $ 1,336,489 Amortization expense was $14,179 and $14,174 for the year ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and 2020, interest payable was $7,963 and $8,531, respectively. Maturities of bonds for the next five years are as follows: Years ending March 31, Amount 2022 110,000 2023 115,000 2024 125,000 2025 130,000 Thereafter 990,000 $ 1,470,000 F- 16 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6. LOANS PAYABLE Loans payable consisted of the following: March 31, 2021 March 31, 2020 Equipment and insurance financing loans payable, between 3.5% and 12.73% interest and maturing between January 2021 and October 2026 $ 815,062 $ 1,025,452 Less: Current portion of loans payable (314,996 ) (561,550 ) Long-term portion of loans payable $ 500,066 $ 463,902 The interest expense associated with the loans payable was $77,218 and $79,870 for the years ended March 31, 2021 and 2020, respectively. Loan principal payments for the next five years are as follows: Years ending March 31, Amount 2022 $ 314,996 2023 245,405 2024 129,275 2025 96,117 Thereafter 29,269 $ 815,062 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. 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. On January 12, 2021, the Company received notification that the United States Small Business Administration (“SBA”), had approved, in full, the Company’s application for forgiveness of amounts received pursuant to the CARES Act and the Program. NOTE 7. RELATED PARTY SECURED PROMISSORY NOTE WITH MIKAH PHARMA, LLC For consideration of the assets acquired on May 15, 2017, the Company issued a Secured Promissory Note (the “Mikah Note”) to Mikah Pharma, LLC (“Mikah”) for the principal sum of $1,200,000. Mikah was founded in 2009 by Nasrat Hakim (“Hakim”), a related party and, the Company’s President, Chief Executive Officer and Chairman of the Board. The Mikah Note matured on December 31, 2020 and was retired at par in March 2021. The principal amount of $1,200,000 was repaid by the Company at maturity. Interest expense associated with the Note was $90,000 and $120,000 for the years ended March 31, 2021 and 2020, respectively. A total of $435,000 in accrued interest expense, representing interest expense accrued during the life of the Mikah Note was due and owing as of the maturity date of the Note. Of the $435,000 accrued interest due at maturity, $238,451 of accrued interest was satisfied by offset against amounts due from Mikah pursuant to the development agreement between the Company and Mikah, dated December 3, 2018 (see Note 16). The balance of $196,549 of accrued interest expense owing in relation to the Mikah Note is recorded as a non-interest bearing, general liability of the Company. F- 17 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. DEFERRED REVENUE Deferred revenues in the aggregate amount of $58,891 as of March 31, 2021, were comprised of a current component of $13,333 and a long-term component of $45,558. 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 sheet date and the long-term component is equal to the amount of revenue to be earned thereafter. NOTE 9. COMMITMENTS AND CONTINGENCIES Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that 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 consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Operating Leases The Company entered into an operating lease for a portion of a one-story warehouse, located at 135 Ludlow Avenue, Northvale, New Jersey (the “135 Ludlow Ave. lease”). The 135 Ludlow Ave. lease is for approximately 15,000 square feet of floor space and began on July 1, 2010. During July 2014, the Company modified the 135 Ludlow Ave. lease in which the Company was permitted to occupy the entire 35,000 square feet of floor space in the building (“135 Ludlow Ave. Modified Lease”). The 135 Ludlow Ave. Modified Lease includes an initial term, which expired on December 31, 2016 with two tenant renewal options of five years each, at the sole discretion of the Company. On June 22, 2016, the Company exercised the first of these renewal options, with such option including a term that begins on January 1, 2017 and expires on December 31, 2021. The 135 Ludlow Ave. modified lease property required significant leasehold improvements and qualifications, as a prerequisite, for its intended future use. Manufacturing, packaging, warehousing and regulatory activities are currently conducted at this location. Additional renovations and construction to further expand the Company’s manufacturing resources are in progress. The Company plans to exercise the second option pursuant to the 135 Ludlow Ave. Modified Lease in June 2021. This option includes a term that begins on January 1, 2022 and expires on December 31, 2026. Minimum lease payments required during the five year term of this option total $1,212,480. In October 2020, the Company entered into an operating lease for office space in Pompano Beach, Florida (the “Pompano Office Lease”). The Pompano Office Lease is for approximately 1,275 square feet of office space, with Elite taking occupancy on November 1, 2020. The Pompano Office includes a 3 month abatement from November 2020 through February 2021 and has a term of three years, ending on October 31, 2023. The Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, the Company determines the classification and initial measurement of the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use. The Company has elected to account for non-lease components associated with its leases and lease components as a single lease component. The Company recognizes a right-of-use asset, which represents the Company’s right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments arising over the lease term. The present value of the lease payments is calculated using either the implicit interest rate in the lease or an incremental borrowing rate. F- 18 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lease assets and liabilities are classified as follows on the consolidated balance sheet: Lease Classification As of March 31, 2021 Assets Operating Operating lease – right-of-use asset $ 214,674 Total leased assets $ 214,674 Liabilities Current Operating Lease obligation – operating lease $ 188,090 Long-term Operating Lease obligation – operating lease, net of current portion 38,866 Total lease liabilities $ 226,956 Rent expense is recorded on the straight-line basis. Rent expense under the 135 Ludlow Ave. Modified lease for the years ended March 31, 2021 and 2020, is $219,638 and $220,650, respectively. Rent expense under the Pompano Office Lease for the years ended March 31, 2021 and 2020, is $9,544 and $0, respectively. Rent expense is recorded in general and administrative expense in the audited consolidated statements of operations. The table below show the future minimum rental payments, exclusive of taxes, insurance and other costs, in aggregate, under the 135 Ludlow Ave. modified lease and the Pompano Office Lease: Years ending March 31, Amount 2022 $ 195,331 2023 25,638 2024 15,214 2025 --- 2026 --- Subsequent to March 31, 2026 --- Total future minimum lease payments 236,183 Less: interest (9,227 ) Present value of lease payments $ 226,956 The weighted-average remaining lease term and the weighted-average discount rate of our lease was as follows: Lease Term and Discount Rate March 31, 2021 Remaining lease term (years) Operating leases 2.6 Discount rate Operating leases 6 % The Company has an obligation for the restoration of its leased facility and the removal or dismantlement of certain property and equipment as a result of its business operation in accordance with ASC 410, Asset Retirement and Environmental Obligations – Asset Retirement Obligations . The Company records the fair value of the asset retirement obligation in the period in which it is incurred. The Company increases, annually, the liability related to this obligation. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the Company records either a gain or loss. As of March 31, 2021, and March 31, 2020, the Company had a liability of $37,628 and $35,442, respectively, recorded as a component of other long-term liabilities. F- 19 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. PREFERRED STOCK Series J convertible preferred stock On April 28, 2017, the Company created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction with the Certificate of Designations (“Series J COD”). A total of 50 shares of Series J Preferred were authorized, zero shares are outstanding, with a stated value of $1,000,000 per share and a par value of $0.01 as of March 31, 2021. On April 27, 2017, a total of 24.0344 shares of Series J Preferred were issued pursuant to an exchange agreement (the “Exchange Agreement”) with Nasrat Hakim (“Mr. 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 consolidated balance sheet as of March 31, 2021 (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 4, 2019. Prior to the approval of the increase in the number of authorized shares, there were insufficient authorized shares if the Series J Preferred Stock were converted. As a result, the shares were classified in mezzanine equity. After the approval of the increase in the number of authorized shares, there are now sufficient authorized shares in the event of a full conversion of Series J Preferred Stock. With the approval of the increase in the number of authorized shares, there is no longer the presumption that a cash settlement will be required. Therefore, the Series J Preferred was reclassified from mezzanine equity to permanent equity at its carrying amount of $13,903,960 on the consolidated balance sheet as of March 31, 2020. On June 23, 2020, the Company held a Special Meeting of Shareholders, with such including a proposal for shareholders to again vote on the above referenced amendment to the Company’s Articles of Incorporation. This proposal was also passed by shareholder vote. On August 24, 2020, Hakim converted the 24.0344 shares of Series J Preferred into 158,017,321 shares of Common Stock at a conversion price of $0.1521 per share. F- 20 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS The Company evaluates and accounts for its freestanding instruments in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities . The Company issued warrants, with a term of ten years, to affiliates in connection with an exchange agreement dated April 28, 2017, as further described in this note below. A summary of warrant activity is as follows: March 31, 2021 March 31, 2020 Warrant Shares Weighted Average Exercise Price Warrant Shares Weighted Average Exercise Price Balance at beginning of period 79,008,661 $ 0.1521 79,008,661 $ 0.1521 Warrants granted pursuant to the issuance of Series J convertible preferred shares — — $ — Warrants exercised, forfeited and/or expired, net — — $ — Balance at end of period 79,008,661 $ 0.1521 79,008,661 $ 0.1521 On April 28, 2017, the Company entered into an Exchange Agreement with Mr. 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 Mr. Hakim, the “Securities”) in exchange for 158,017,321 shares of Common Stock owned by Mr. Hakim. The fair value of the Series J Warrants was determined to be $6,474,674 upon issuance at April 28, 2017. The Series J Warrants are exercisable for a period of 10 years from the date of issuance, commencing April 28, 2020. The initial exercise price is $0.1521 per share and the Series J Warrants can be exercised for cash or on a cashless basis. The exercise price is subject to adjustment for any issuances or deemed issuances of Common Stock or Common Stock equivalents, other than shares issued pursuant to the 2020LPC Purchase Agreement (as defined below), at an effective price below the then exercise price. Such exercise price adjustment feature prohibits the Company from being able to conclude the warrants are indexed to its own stock and thus such warrants are classified as liabilities and measured initially and subsequently at fair value. The Series J Warrants also provide for other standard adjustments upon the happening of certain customary events. The fair value of the Series J Warrants was calculated using a Black-Scholes model. The following assumptions were used in the Black-Scholes model to calculate the fair value of the Series J Warrants: March 31, 2021 March 31, 2020 Fair value of the Company’s Common Stock $ 0.0610 $ 0.0720 Volatility 75.18 % 83.81 % Initial exercise price $ 0.1521 $ 0.1521 Warrant term (in years) 6.1 7.1 Risk free rate 1.40 % 0.55 % F- 21 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the years ended March 31, 2021 were as follows: Balance at March 31, 2019 $ 2,487,830 Change in fair value of derivative financial instruments - warrants 1,111,548 Balance at March 31, 2020 3,599,378 Change in fair value of derivative financial instruments - warrants (1,237,132 ) Balance at March 31, 2021 $ 2,362,246 NOTE 12. SHAREHOLDERS’ EQUITY Lincoln Park Capital – May 1, 2017 Purchase Agreement On 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. The 2017 LPC Purchase Agreement expired on July 1, 2020. During the year ended March 31, 2021, there were no shares sold to Lincoln Park pursuant to the 2017 LPC Purchase Agreement. In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2017 LPC Purchase Agreement. During the year ended March 31, 2020, a total of 15,358,627 shares were sold to Lincoln Park pursuant to the 2017 LPC Purchase Agreement for net proceeds totaling $15,359. In addition, 199,181 shares were issued to Lincoln Park as additional commitment shares, pursuant to the 2017 LPC Purchase Agreement. Lincoln Park Capital Transaction - July 8, 2020 Purchase Agreement On July 8, 2020, Elite Pharmaceuticals, Inc., a Nevada corporation (the “Company”), entered into a purchase agreement (the “Purchase Agreement”), and a registration rights agreement (the “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 (the “Common Stock”), from time to time over the term of the Purchase Agreement, at the Company’s direction. During the year ended March 31, 2021 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 year ended March 31, 2021 for net proceeds totaling $42,223. In addition, 10,094 shares were issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement. F- 22 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summary of Common Stock Activity During the years ended March 31, 2021 and 2020, the Company issued 168,772,385 and 15,557,808 shares of Common Stock, respectively, with such issuances of Common Stock being summarized as follows: March 31, 2021 2020 Common Stock issued as of March 31, 2021 and 2020, respectively 840,504,367 824,946,559 Common stock converted from Preferred Stock 158,017,321 — Common Stock sold pursuant to the Lincoln Park Capital Purchase Agreements, with net proceeds of such shares totaling $42,223 and $1,437,978 for the years ended March 31, 2021 and 2020, respectively. 640,543 15,358,627 Common Stock issued as initial and additional commitment shares pursuant to the Lincoln Park Capital Purchase Agreements 5,985,951 199,181 Common Stock issued in payment of Directors fees, salaries and consulting fees 4,128,570 — Common Stock issued during the fiscal year 168,772,385 15,557,808 Common Stock issued as of March 31, 2021 and 2020, respectively 1,009,276,752 840,504,367 NOTE 13. STOCK-BASED COMPENSATION Part of the compensation paid by the Company to its Directors and employees consists of the issuance of Common Stock or via the granting of options to purchase Common Stock. Stock-based Director Compensation The Company’s Director compensation policy, instituted in October 2009 and further revised in January 2016, includes provisions that a portion of director’s fees are to be paid via the issuance of shares of the Company’s Common Stock, in lieu of cash, with the valuation of such shares being calculated on quarterly basis and equal to the average closing price of the Company’s Common Stock. During the year ended March 31, 2021, 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. During the year ended March 31, 2021, the Company accrued director’s fees totaling $60,000, which will be paid via cash payments totaling $30,000 and the issuance of 886,710 shares of Common Stock. As of March 31, 2021, the Company owed its Directors a total of $30,000 in cash payments and 886,710 shares of Common Stock in payment of director fees totaling $60,000 due and owing. The Company anticipates that these shares of Common Stock will be issued prior to the end of the subsequent fiscal year. Stock-based Employee/Consultant Compensation Employment contracts with the Company’s President and Chief Executive Officer, Chief Financial Officer and certain other employees and engagement contracts with certain consultants include provisions for a portion of each employee’s salaries or consultant’s fees to be paid via the issuance of shares of the Company’s Common Stock, in lieu of cash, with the valuation of such shares being calculated on a quarterly basis and equal to the average closing price of the Company’s Common Stock. During the year ended March 31, 2021, 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. F- 23 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the year ended March 31, 2021, the Company accrued salaries totaling $748,750 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 11,250,185 shares of Common Stock. As of March 31, 2021, the Company owed its President and Chief Executive Officer, Chief Financial Officer and certain other employees’ salaries totaling $3,060,000 which will be paid via the issuance of 36,085,114 shares of Common Stock. During the year ended March 31, 2021, 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. Options Under its 2014 Stock Option Plan and prior options plans, the Company may grant stock options to officers, selected employees, as well as members of the Board of Directors and advisory board members. All options have generally been granted at a price equal to or greater than the fair market value of the Company’s Common Stock at the date of the grant. Generally, options are granted with a vesting period of up to three years and expire ten years from the date of grant. A summary of the activity of Company’s 2014 Stock Option Plan for the years ended March 31, 2021and 2020 is as follows: Weighted Average Shares Weighted Average Remaining Contractual Aggregate Underlying Options Exercise Price Term (in years) Intrinsic Value Outstanding at March 31, 2019 6,158,000 $ 0.15 5.0 $ 87,330 Granted 115,000 0.10 9.5 Forfeited and expired (898,000 ) Outstanding at March 31, 2020 5,375,000 0.14 4.1 6,000 Granted 600,000 0.06 9.7 Forfeited and expired (75,000 ) Outstanding at March 31, 2021 5,900,000 $ 0.13 3.7 $ 6,000 Exercisable at March 31, 2021 5,246,667 $ 0.13 3.7 $ 6,000 The aggregate intrinsic value for outstanding options is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s Common Stock as of March 31, 2021 and March 31, 2020 of $0.06 and $0.07, respectively. NOTE 14. CONCENTRATIONS AND CREDIT RISK Revenues Two customers accounted for approximately 92% of the Company’s revenues for the year ended March 31, 2021. These two customers accounted for approximately 77% and 15% of revenues each, respectively. Three customers accounted for approximately 92% of the Company’s revenues for the year ended March 31, 2020. These three customers accounted for approximately 55%, 24%, and 13% of revenues each, respectively. Accounts Receivable Three customers accounted for approximately 99% of the Company’s accounts receivable as of March 31, 2021. These three customers accounted for approximately 73%, 15% and 11% of accounts receivable each, respectively. Four customers accounted for substantially all the Company’s accounts receivable as of March 31, 2020. These four customers accounted for approximately 73%, 13%, 8%, and 5% of accounts receivable each, respectively. F- 24 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Purchasing Four suppliers accounted for approximately 78% of the Company’s purchases of raw materials for the year ended March 31, 2021. These four suppliers accounted for approximately 54%, 13%, 6% and 5% of purchases each, respectively. Three suppliers accounted for more than 71% of the Company’s purchases of raw materials for the year ended March 31, 2020. These three suppliers accounted for approximately 41%, 23%, and 7% of purchases each, respectively. NOTE 15. SEGMENT RESULTS FASB ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based on the way a company’s management organized segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The Company has determined that its reportable segments are ANDAs for generic products and NDAs for branded products. The Company identified its reporting segments based on the marketing authorization relating to each and the financial information used by its chief operating decision maker to make decisions regarding the allocation of resources to and the financial performance of the reporting segments. Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements. Disaggregated revenue by reportable segments is disclosed in Note 1. The following represents selected information for the Company’s reportable segments: For the Years Ended March 31, 2021 2020 Operating Income by Segment ANDA $ 6,512,632 $ 3,579,047 NDA 142,812 580,414 $ 6,655,444 $ 4,159,461 The 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 consolidated statements of operations. For the Years Ended March 31, 2021 2020 Operating income by segment $ 6,655,444 $ 4,159,461 Corporate unallocated costs (2,252,983 ) (2,721,103 ) Interest income 514 11,980 Interest expense and amortization of debt issuance costs (259,598 ) (355,874 ) Depreciation and amortization expense (1,313,847 ) (1,319,795 ) Significant non-cash items (935,628 ) (901,472 ) PPP loan forgiveness 1,013,480 --- Change in fair value of derivative instruments 1,237,132 (1,111,548 ) Income (loss) from operations before income taxes $ 4,144,514 $ (2,238,351 ) NOTE 16. 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 $238,451 in excess of advanced payments received to date from Mikah. This balance due from Mikah was offset, in full, against accrued interest due and owing to Mikah pursuant to the Mikah Note (see Note 7). F- 25 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In May 2020, SunGen Pharma LLC (“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. Mikah will now be Elite’s partner with respect to Amphetamine IR and ER and will assume all the rights and obligations for these products from SunGen. Mikah Pharmaceuticals was founded in 2009 by Nasrat Hakim. NOTE 17. INCOME TAXES The components of the income taxes benefit (expense) are as follows: Year Ended March 31, 2021 2020 Federal Current — — Deferred — — State Current — — Deferred — — Benefit from sale of state net operating loss credits 904,528 — Net benefit from sale of state net operating loss credits $ 904,528 $ — The major components of deferred tax assets and liabilities as of March 31, 2021 and 2020 are as follows (amounts in thousands of dollars): Year Ended March 31, 2021 2020 Federal Net operating loss carry forward 20,890 21,360 Valuation allowance (20,890 ) (21,360 ) $ — $ — State Net operating loss carry forward 841 2,258 Valuation Allowance (841 ) (2,258 ) $ — $ — At March 31, 2021 and 2020 a 100% valuation allowance is provided, as it is uncertain if the deferred tax assets will provide any future benefits because of the uncertainty about the Company’s ability to generate the future taxable income necessary to use the net operating loss carry forwards. Absent the above mentioned allowance, at March 31, 2021, the Company’s federal and state income taxes due were $0.4 million and $0.2 million, respectively. Absent the above mentioned allowance, at March 31, 2020, the Company’s federal and state income taxes due were $0.2 million and $0.1 million, respectively. The company believes that temporary timing differences between accrual and payment of income taxes are not material to the financial position of the Company. As of March 31, 2021, Elite has a federal net operating loss carry forward of $99.5 million, which do not expire and net operating loss carry forward in state tax jurisdictions of $9.3 million some of which will began to expire in 2021. F- 26 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sale of New Jersey Net Operating Loss In April 2020, Elite Laboratories Inc., a wholly owned subsidiary of Elite Pharmaceuticals Inc., received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of $607,635 relating to New Jersey net operating losses and net tax benefits of $338,772, relating to R&D tax credits. The Company sold the net tax benefits approved for sale for total proceeds of $946,407. NOTE 18. COVID-19 UPDATE In December 2019, the Novel Corona Virus, COVID-19 was reported to have emerged in Wuhan, China. In March 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a global pandemic. Governments at the national, state and local level in the United States, and globally, have implemented aggressive actions to reduce the spread of the virus, with such actions including, without limitation, lockdown and shelter in place orders, limitations on non-essential gatherings of people, suspension of all non-essential travel, and ordering certain businesses and governmental agencies to cease non-essential operations at physical locations. Under current and applicable laws and regulations, the Company’s business is deemed essential and it has continued to operate in all aspects of its pharmaceutical manufacturing, distribution, product development, regulatory compliance and other activities. The Company’s management has developed and implemented a range of measures to address the risks, uncertainties, and operational challenges associated with operating in a COVID-19 environment. The Company is closely monitoring the rapidly evolving and changing situation and are implementing plans intended to limit the impact of COVID-19 on our business so that the Company can continue to manufacture those medicines used by end user patients. Actions the Company has taken to date are, without limitation, further described below. Workforce The Company has taken and will continue to take, proactive measures to provide for the well-being of its workforce while continuing to safely produce pharmaceutical products. The Company has implemented alternative working practices, which include, without limitation, modified schedules, shift rotation and work at home abilities for appropriate employees to best ensure adequate social distancing. In addition, the Company increased its already thorough cleaning protocols throughout its facilities and has prohibited visits from non-essential visitors. Certain of these measures have resulted in increased costs. Manufacturing and Supply Chain During the year ended March 31, 2021, the Company has not experienced material, detrimental issues related to COVID-19 in its manufacturing, supply chain, quality assurance and regulatory compliance activities, and has been able to operate without interruption. The Company has taken, and plans to continue to take, commercially practical measures to keep its facilities open. The Company’s supply chains remain intact and operational, and the Company is in regular communications with its suppliers and third-party partners. A prolonging of the current situation relating to COVID-19 may result in an increased risk of interruption in the Company supply chain in the future, with no assurances given as the materiality of such future interruption on the Company’s business, financial condition, results of operations and cash flows. NOTE 19. SUBSEQUENT EVENTS Sale of New Jersey Net Operating Loss and Research and Development Tax Credit In April 2021, Elite Laboratories Inc., a wholly owned subsidiary of Elite Pharmaceuticals Inc. received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of $798,889 relating to New Jersey net operating losses and net tax benefits of $58,490, relating to research and development tax credits. The Company sold the net tax benefits approved for sale at a transfer price equal to ninety three and one half cents for every benefit dollar and incurred transaction fees of $12,861, resulting in net proceeds to the Company of $788,789. F-27