What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-02-16 · 767 added, 1267 removed, 276 unchanged (88% of the section changed)

5 unchanged sentences

Property and equipment, net of accumulated depreciation of $ 12,462,783 and $ 12,153,626 , respectively

Intangible assets, net of

accumulated amortization of $-0-, respectively

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

Operating lease - right-of-use asset

3 unchanged sentences

Total other assets

LIABILITIES AND SHAREHOLDERS’

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

5 unchanged sentences

Lease obligation - operating lease, current portion

Senior secured promissory note - related party, current portion

Total current liabilities

8 unchanged sentences

Total liabilities

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

Shareholders’

Shareholders’ equity:

Series J convertible preferred stock;

1 unchanged sentence

50 shares authorized;

0 issued and outstanding as of December 31, 2020 and 24.0344 issued and outstanding as of March 31, 2020

0 issued and outstanding as of June 30, 2021 and March 31, 2021

Common Stock;

1 unchanged sentence

1,445,000,000 shares authorized;

1,009,276,752 shares issued and 1,009,176,752 shares outstanding as of December 31, 2020;

840,504,367 shares issued and

840,404,367 shares outstanding as of March 31, 2020

1,011,381,988 shares issued and 1,011,281,988 shares outstanding as of June 30, 2021;

1,009,276,752 shares issued and 1,009,176,752 shares outstanding as of March 31, 2021

Additional paid-in capital

Treasury stock;

100,000 shares as of December 31, 2020 and March 31, 2020;

100,000 shares as of June 30, 2021 and March 31, 2021;

Accumulated deficit

1 unchanged sentence

( 148,957,989 )

Total shareholders’

Total liabilities and shareholders’

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

Total shareholders’ equity

Total liabilities and shareholders’ equity

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF

For the Three Months Ended

For the Nine Months Ended

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30,

Manufacturing fees

1 unchanged sentence

Total revenue

Cost of revenue

Cost of manufacturing

Operating expenses:

4 unchanged sentences

Total operating expenses

Income (loss) from operations

Income from operations

Other income (expense):

3 unchanged sentences

Interest income

Proceeds from sale of ANDAs

Other income (expense), net

Income (loss) from operations before income taxes

Income tax benefit (expense)

Net income (loss) attributable to common shareholders

$ (1,860,680 )

$ (3,176,719 )

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

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

Income from operations before income taxes

Net benefit for sale of state net operating losses and credits

Net income attributable to common shareholders

Basic net income per share attributable to common shareholders

Diluted net income per share attributable to common shareholders

Basic weighted average Common Stock outstanding

2 unchanged sentences

1,009,199,886

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

1,001,130,122

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF

SHAREHOLDERS’

Series J Preferred Stock

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

J Preferred Stock

Additional Paid-In

Treasury Stock

Shareholders’

Total Shareholders’

Balance as of March 31, 2021

1 unchanged sentence

$ 164,407,480

Non-cash compensation through the issuance of employee stock options

Shares issued in payment of salaries

Balance at June 30, 2020

$ ( 306,841 )

Conversion of Preferred Stock to Common Stock

$ ( 148,957,989 )

Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase agreement

Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement

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

Costs associated with raising capital

Non-cash compensation through the issuance of employee stock options

Shares issued in payment of Director fees

Shares issued in payment of salaries

Shares issued in payment of consulting expenses

Balance at September 30, 2020

1,009,276,752

Balance at June 30, 2021

1,011,381,988

Non-cash compensation through the issuance of employee stock options

Balance at December 31, 2020

$ 164,565,685

1 unchanged sentence

$ ( 146,568,871 )

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF

SHAREHOLDERS’

Series J Preferred Stock

Additional Paid-In

Treasury Stock

Shareholders’

Total Shareholders’

Balance as of March 31, 2020

2 unchanged sentences

$ ( 154,046,410 )

Common Stock sold pursuant to the Lincoln Park purchase agreement

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

Costs associated with raising capital

Non-cash compensation through the issuance of employee stock options

Shares issued in payment of salaries

Balance at June 30, 2020

$ 150,319,552

Common Stock sold pursuant to the Lincoln Park purchase agreement

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

Costs associated with raising capital

Non-cash compensation through the issuance of employee stock options

Balance at September 30, 2019

$ ( 306,841 )

Common Stock sold pursuant to the Lincoln Park purchase agreement

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

Costs associated with raising capital

Non-cash compensation through the issuance of employee stock options

Reclassification of mezzanine equity to permanent equity

Balance at December 31, 2019

$ ( 152,969,061 )

$ (154,982,778 )

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF

For the Nine Months Ended December 31,

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ (3,176,719 )

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

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

Depreciation and amortization

7 unchanged sentences

Accounts receivable

( 1,690,615 )

( 1,423,931 )

Prepaid expenses and other current assets

2 unchanged sentences

Lease obligations - operating leases

Net cash provided by (used in) operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

1 unchanged sentence

Proceeds from disposal of property and equipment

Net cash used in investing activities

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the issuance of Common Stock

Proceeds from loans payable

Payment of bond principal

Other loan payments

7 unchanged sentences

Stock issued in payment of Directors fees, salaries and consulting expenses

Commitment shares issued to Lincoln Park Capital

Conversion of preferred stock to Common Stock

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

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Elite Pharmaceuticals,

(the “Company”

or “Elite”) was incorporated on October 1, 1997 under the laws of the State of Delaware,

and its wholly-owned subsidiary Elite Laboratories, Inc.

(“Elite Labs”) 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.

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

Elite Labs engages primarily in researching, developing, licensing and manufacture of generic, oral dose pharmaceuticals.

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

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 unaudited

condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the

United States (“GAAP”).

The unaudited condensed consolidated financial statements include the accounts of the Company

and its wholly-owned subsidiary, Elite Laboratories, Inc.

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

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

of Consolidation

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

principles in the United States (“GAAP”).

The unaudited condensed consolidated financial statements include the accounts

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

All significant intercompany accounts and transactions have been eliminated

in consolidation.

The unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring

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

The results of operations

for the three and nine months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the

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

The unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items,

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

The results of operations for the three

months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the entire year.

Accounting Standards Board (“FASB”) Accounting Standards Codification 280 (“ASC 280”), Segment Reporting ,

establishes standards for reporting information about operating segments.

Operating segments are defined as components of an enterprise

about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making

group, in deciding how to allocate resources and in assessing performance.

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 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.

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.

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.

are currently no intersegment revenues.

Asset information by operating segment is not presented below since the chief operating decision

maker does not review this information by segment.

The reporting segments follow the same accounting policies used in the preparation

of the Company’s condensed unaudited consolidated financial statements.

Please see Note 15 for further details.

Revenue Recognition

The Company generates

revenue primarily from manufacturing and licensing fees.

Manufacturing fees include the development of pain management products,

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

development of new products.

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

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

and other collaborations.

ELITE PHARMACEUTICALS, INC.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company generates revenue primarily from manufacturing and licensing fees.

Manufacturing fees include the development of pain management

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

the development of new products.

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

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

collaborations.

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

(i) identify contract(s)

with a customer;

(ii) identify the performance obligation(s) in the contract;

2 unchanged sentences

transaction price to the performance obligation(s) in the contract;

and (v) recognize revenues when (or as) the Company satisfies

a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect

the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception,

once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each

contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation

when (or as) the performance obligation is satisfied.

Sales, value add, and other taxes collected on behalf of third parties are

excluded from revenue.

Nature of goods and services

The following is a

description of the Company’s goods and services from which the Company generates revenue, as well as the nature, timing of

satisfaction of performance obligations, and significant payment terms for each, as applicable:

a) Manufacturing Fees

The Company is equipped

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

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

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.

and (v) recognize revenues when (or as) the Company satisfies a performance

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

Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

of goods and services

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:

Manufacturing Fees

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

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.

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

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a

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.

of licensing fees, non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on

product sales.

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.

ELITE PHARMACEUTICALS, INC.

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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

determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before

or significantly after performance, resulting in a significant financing component.

Applying the practical expedient in ASC 606-10-32-18,

the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations

under the contract and when the customer pays is one year or less.

None of the Company’s contracts contained a significant

financing component as of December 31, 2020.

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,

None of the Company’s contracts contained a significant financing

component as of June 30, 2021.

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

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”),

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:

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Disaggregation

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

The table also includes a reconciliation of

the disaggregated revenue with the reportable segments:

SCHEDULE OF DISAGGREGATION OF REVENUE

For the Three Months Ended

For the Nine Months Ended

Licensing fees

4 unchanged sentences

Total revenue

Selected information

on reportable segments and reconciliation of operating income by segment to income (loss) from operations before income taxes are

disclosed within Note 15.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

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,

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

Cash and cash

equivalents consist of cash on deposit with banks and money market instruments.

The Company places its cash and cash equivalents with

high-quality, U.S.

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

Restricted Cash

As of December 31,

2020, and March 31, 2020, the Company had $405,005 and $404,802, of restricted cash, respectively, related to debt service

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

Accounts Receivable

Accounts receivable

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

of June 30, 2021, and March 31, 2021, the Company had $ 405,013 and $ 405,013 , of restricted cash, respectively, related to debt service

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

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 is recorded

at the lower of cost or market on specific identification by lot number basis.

Long-Lived Assets

The Company periodically

evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever events or changes

in circumstances indicate that its carrying amounts may not be recoverable.

Property and equipment

are stated at cost.

is recorded at the lower of cost or market on specific identification by lot number basis.

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.

and equipment are stated at cost.

Depreciation is provided on the straight-line method based on the estimated useful lives of the respective

1 unchanged sentence

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.

Minor replacements and maintenance and repairs

which do not improve or extend asset lives are expensed currently.

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

Such indicators may include, among others and without limitation:

a significant decline in the Company’s expected future

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;

a significant decline in the Company’s expected future

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

As of December 31,

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

Please also see Note

4 for further details on intangible assets.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Research and Development

Research and development

expenditures are charged to expense as incurred.

and slower growth rates.

of June 30, 2021, the Company did not identify any indicators of impairment.

also see Note 4 for further details on intangible assets.

and Development

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.

Occasionally,

the Company may be involved in claims and legal proceedings arising from the ordinary course of its business.

The Company records a provision

for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably

If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s

condensed consolidated financial statements.

Contingencies are inherently unpredictable, and the assessments of the value can involve

a series of complex judgments about future events and can rely heavily on estimates and assumptions.

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

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

The Company operates

in multiple tax jurisdictions within the United States of America.

The Company remains subject to examination in all tax jurisdiction

until the applicable statutes of limitation expire.

As of December 31, 2020, a summary of the tax years that remain subject

for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated.

If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed

consolidated financial statements.

Contingencies are inherently unpredictable, and the assessments of the value can involve a series

of complex judgments about future events and can rely heavily on estimates and assumptions.

taxes are accounted for under the asset and liability method.

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.

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.

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 June 30, 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 three and nine months ended December 31, 2020 and 2019.

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

United States – Federal, 2016 and forward, and State, 2013 and forward.

Company did not record unrecognized tax positions for the three months ended June 30, 2021 and 2020.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and Preferred Shares

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.

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.

ELITE PHARMACEUTICALS, INC.

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.

accordance with the Company’s Director compensation policy and certain employment contracts, director’s fees and a portion

of employee’s salaries are to be paid via the issuance of shares of the Company’s Common Stock (“Common Stock”),

in lieu of cash, with the valuation of such share being calculated on a quarterly basis and equal to the average closing price of the

Company’s Common Stock.

Per Share Attributable to Common Shareholders’

Company follows ASC 260, Earnings Per Share , which requires presentation of basic and diluted earnings per share (“EPS”)

on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and

denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

In the accompanying financial

statements, basic earnings per share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding

during the period.

The computation of diluted net income per share does not include the conversion of securities that would have an antidilutive

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

In accordance with

the Company’s Director compensation policy and certain employment contracts, director’s fees and a portion of employee’s

salaries are to be paid via the issuance of shares of the Company’s Common Stock (“Common Stock”), in lieu of

cash, with the valuation of such share being calculated on a quarterly basis and equal to the simple average closing price of the

Company’s Common Stock for each trading day of the quarter then 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:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

SCHEDULE OF EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS

For the Three Months Ended

For the Nine Months Ended

Net income (loss) - basic

$ (1,860,680 )

$ (3,176,719 )

Net income - basic

Effect of dilutive instrument on net income

Net income (loss) - diluted

$ (1,860,680 )

$ (3,176,719 )

Net income - diluted

Weighted average shares of Common Stock outstanding - basic

3 unchanged sentences

1,009,199,886

Net income (loss) per share

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

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

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 –

1,001,130,122

Net income per share

Value of Financial Instruments

820, Fair Value Measurements and Disclosures (“ASC 820”) provides a framework for measuring fair value in accordance

with generally accepted accounting principles.

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

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:

1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

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.

3 – Inputs that are unobservable for the asset or liability.

Measured on a Recurring

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:

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Measured on a Recurring Basis

The following table presents information

about our liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those

measurements fell:

SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

Fair Value Measurement Using

December 31, 2020

June 30, 2021

Derivative financial instruments - warrants

3 unchanged sentences

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.

Company did not record an impairment charge related to these assets in the periods presented.

The carrying amounts of the Company’s

financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued

expenses, approximate their fair values because of the short maturity of these instruments.

Based upon current borrowing rates with similar

maturities the carrying value of long-term debt approximates fair value.

Non-Financial Assets that are

Measured at Fair Value on a Non-Recurring Basis

Non-financial assets such as intangible

assets, and property and equipment are measured at fair value only when an impairment loss is recognized.

The Company did not record an

impairment charge related to these assets in the periods presented.

Treasury Stock

The Company records

treasury stock at the cost to acquire it and includes treasury stock as a component of shareholders’

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Recently Issued Accounting

Pronouncements

In June 2016, the FASB

issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

The Company records treasury stock

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

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”).

Under the prior model, losses were recognized only as they were incurred.

The new model is applicable to all financial instruments

that are not accounted for at fair value through net income.

The standard is effective for fiscal years beginning after December

15, 2022 for public entities qualifying as smaller reporting companies.

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

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.

Inventory consisted

of the following:

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Inventory consisted of the following:

SCHEDULE OF INVENTORY

June 30, 2021

March 31, 2021

Finished goods

1 unchanged sentence

Raw materials

Inventory, net

PROPERTY AND EQUIPMENT, NET

Property and equipment

consisted of the following:

Property and equipment consisted

of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

June 30, 2021

March 31, 2021

Land, building and improvements

2 unchanged sentences

Furniture and fixtures

Property and equipment, gross

Accumulated depreciation

(11,834,185 )

(10,957,334 )

Depreciation expense

was $505,987 and $326,908 for the three months ended, and $980,227 and $982,456 for the nine months ended December 31, 2020 and

2019, respectively.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

INTANGIBLE ASSETS

The following table summarizes the Company’s

Property and equipment, net

Depreciation expense was $ 309,157

and $ 324,071 for the three months ended June 30, 2021 and 2020, respectively.

INTANGIBLE ASSETS

December 31, 2020

The following table summarizes

the Company’s intangible assets:

SCHEDULE OF INTANGIBLE ASSETS

June 30, 2021

Patent application costs

3 unchanged sentences

ANDA acquisition costs

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

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).

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

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 unaudited condensed consolidated balance sheets.

The NJEDA Bonds require the Company to make an annual

principal payment on September 1st based on the amount specified in the loan documents and semi-annual interest payments on March

1st and September 1st, equal to interest due on the outstanding principal.

The annual interest rate on the Series A Note is 6.5%.

The NJEDA Bonds are collateralized by a first lien on the Company’s facility and equipment acquired with the proceeds of

the original and refinanced bonds.

ELITE PHARMACEUTICALS, INC.

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).

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The following tables

summarize the Company’s bonds payable liability:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

unaudited condensed consolidated balance sheets.

The NJEDA Bonds require the Company to make an annual principal payment on September

1st based on the amount specified in the loan documents and semi-annual interest payments on March 1st and September 1st, equal to interest

due on the outstanding principal.

The annual interest rate on the Series A Note is 6.5 %.

The NJEDA Bonds are collateralized by a first

lien on the Company’s facility and equipment acquired with the proceeds of the original and refinanced bonds.

The following tables summarize

the Company’s bonds payable liability:

OF BONDS PAYABLE LIABILITY

June 30, 2021

March 31, 2021

Gross bonds payable

13 unchanged sentences

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

Amortization expense

was $3,544 and $3,545 for the three months ended, and $10,634 and $10,630 for the nine months ended December 31, 2020 and 2019,

respectively.

Amortization expense was $ 3,545

and $ 3,545 for the three months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and March 31, 2021, interest payable was

$ 31,850 and $ 7,963 , respectively.

LOANS PAYABLE

Loans payable consisted

of the following:

Equipment and insurance financing loans payable, between 3.5% and 12.73% interest and maturing between January 2021 and October 2025

Loan received pursuant to the Payroll Protection Program Term Note

Loans payable consisted of the

OF LOANS PAYABLE

June 30, 2021

March 31, 2021

Equipment and insurance financing loans payable, between 3.5 % and 12.73 % interest and maturing between June 2021 and October 2025

Current portion of loans payable

Long-term portion of loans payable

The interest expense

associated with the loans payable was $19,422 and $18,291 for the three months ended, and $58,062 and $63,170 for the nine months

ended December 31, 2020 and 2019, respectively.

2020 Paycheck Protection

Program Term Note

In April 2020, the

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

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

Act”) (P.L.

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.

In January 2021, the Company’s application for forgiveness

of amounts due under the PPP Note was approved, in full, in accordance with the CARES Act and the Program.

ELITE PHARMACEUTICALS, INC.

The interest expense associated

with the loans payable was $ 6,109 and $ 17,880 for the three months ended June 30, 2021 and 2020, respectively.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

RELATED PARTY SECURED PROMISSORY

NOTE WITH MIKAH PHARMA, LLC

For consideration of

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

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

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

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

The Note matures on December 31, 2020 at

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

Interest shall be computed on the unpaid principal

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

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

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

of fifteen percent (15%).

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

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

quarterly commencing August 1, 2017

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

No principal or interest payments have been made on

the Note since its issuance.

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

The interest expense associated with the Note was $30,000 for the three months ended and $90,000 for the nine months ended

December 31, 2020 and 2019, respectively.

Accrued interest due and owing on this note was $435,000 and $345,000 as of December 31,

2020 and March 31, 2020, respectively.

The Note matured on

December 31, 2020 without repayment.

Subsequent to December 31, 2020, amounts due pursuant to the note, consisting of unpaid principal

of $1,200,000 plus unpaid accrued interest through December 31, 2020 of $435,000 remain as a general, non-interest bearing liability

of the Company.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The principal amount of $ 1,200,000 was repaid by the Company at maturity.

Interest expense associated with

the Note was $ 30,000 for the three months ended June 30, 2020.

A total of $ 435,000 in accrued interest expense, representing interest

expense accrued during the life of the Mikah Note, was due and owing as of the maturity date of the Mikah Note.

Of the $ 435,000

accrued interest due at maturity, $ 343,379 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 $ 91,621 of accrued interest

expense owing in relation to the Mikah Note was recorded as a non-interest bearing, general liability of the Company.

DEFERRED REVENUE

Deferred revenues in

the aggregate amount of $68,891 as of December 31, 2020, were comprised of a current component of $13,333 and a long-term

component of $55,558.

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

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

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

payment received for a TAGI Pharma (“TAGI”) licensing agreement with a fifteen-year term beginning in September 2010

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

2015 and ending in May 2020.

These advance payments were recorded as deferred revenue when received and are earned, on a straight-line

basis over the life of the licenses.

The current component is equal to the amount of revenue to be earned during the 12-month period

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

Deferred revenues in the aggregate

amount of $ 55,558 as of June 30, 2021, were comprised of a current component of $ 13,333 and a long-term component of $ 42,225 .

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 .

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.

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 condensed

consolidated financial statements.

Contingencies are inherently unpredictable, and the assessments of the value can involve a series

of complex judgments about future events and can rely heavily on estimates and assumptions.

Operating Leases –

135 Ludlow Ave.

The Company entered

into an operating lease for a portion of a one-story warehouse, located at 135 Ludlow Avenue, Northvale, New Jersey (the “135

lease”).

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 condensed consolidated financial

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.

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”).

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.

ELITE PHARMACEUTICALS, INC.

modified lease

includes an initial term, which expired on December 31, 2016 with two tenant renewal options of five years each, at the sole discretion

of the Company.

On June 22, 2016, the Company exercised the first of these renewal options, with such option including a term that begins

on January 1, 2017 and expires on December 31, 2021 .

On June 30, 2021, the Company exercised the second of the renewal options, with such

option including a term that begins on January 1, 2022 and expires on December 31, 2026.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The 135 Ludlow Ave.

modified lease property required significant leasehold improvements and qualifications, as a prerequisite, for its intended future

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 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.

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.

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

Lease assets and liabilities

are classified as follows on the condensed consolidated balance sheet:

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.

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.

Lease assets and liabilities are

classified as follows on the condensed consolidated balance sheet:

SCHEDULE OF LEASE ASSETS AND LIABILITIES

Classification

Operating lease –

right-of-use asset

As of June 30, 2021

Operating lease – right-of-use asset

Total leased assets

Lease obligation –

operating lease

Lease obligation –

operating lease, net of current portion

Lease obligation – operating lease

Lease obligation – operating lease, net of current portion

Total lease liabilities

Rent expense is recorded

on the straight-line basis.

Rent expense is recorded on the

straight-line basis.

Rent expense under the 135 Ludlow Ave.

modified lease for the three months ended December 31, 2020

and 2019 was $55,986 and $18,296, respectively, and $167,958 and $128,072 for the nine months ended December 31, 2020 and 2019,

modified lease for the three months ended June 30, 2021 and 2020 was $ 57,105

and $ 55,986 , respectively.

Rent expense under the Pompano Office Lease for the three months ended June 30, 2021 and 2020 was $ 5,772 and

$ 0 , respectively.

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

of operations.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The table below shows

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

modified lease:

modified lease and the Pompano

Office Lease:

OF THE FUTURE MINIMUM RENTAL PAYMENTS

Years ending March 31,

1 unchanged sentence

Present value of lease payments

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The weighted-average

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

The weighted-average remaining

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

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

Lease Term and Discount Rate

June 30, 2021

Remaining lease term (years)

2 unchanged sentences

Operating leases

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

The Company records the fair value of the asset retirement obligation in the period in which it is incurred.

Company increases, annually, the liability related to this obligation.

The liability is accreted to its present value each period

and the capitalized cost is depreciated over the useful life of the related asset.

Upon settlement of the liability, the Company

records either a gain or loss.

As of December 31, 2020, and March 31, 2020, the Company had a liability of $37,069 and

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

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 .

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 June 30,

2021, and March 31, 2021, the Company had a liability of $ 38,195 and $ 37,628 , respectively, recorded as a component of other long-term

PREFERRED STOCK

Series J convertible preferred stock

On April 28, 2017,

the Company created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction with the Certificate

of Designations (“Series J COD”).

A total of 50 shares of Series J Preferred were authorized, zero shares are issued

and outstanding, with a stated value of $1,000,000 per share and a par value of $0.01 as of December 31, 2020.

On April 27, 2017,

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

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

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

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

The aggregate stated value of the Series J Preferred

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

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

In connection with the Exchange Agreement, the

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

as liabilities on the accompanying unaudited condensed consolidated balance sheet as of December 31, 2020 (See Note 11).

An amendment to the

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

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

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

the Series J Preferred Stock were converted.

On April 28, 2017, the Company

created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction with the Certificate of Designations

(“Series J COD”).

A total of 50 shares of Series J Preferred were authorized, zero shares are issued and outstanding, with

a stated value of $ 1,000,000 per share and a par value of $ 0.01 as of June 30, 2021.

On April 27, 2017, a total of

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

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

The Exchange Agreement

provided for Hakim to exchange 158,017,321 shares of Common Stock for 24.0344 shares of Series J Preferred and warrants to purchase 79,008,661

shares of Common Stock at $ 0.1521 per share.

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

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

Common Stock on April 27, 2017.

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

of Common Stock at $ 0.1521 per share, and such warrants are classified as liabilities on the accompanying unaudited condensed consolidated

balance sheet as of June 30, 2021 (See Note 11).

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

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.

DERIVATIVE FINANCIAL INSTRUMENTS –

The Company evaluates

and accounts for its freestanding instruments in accordance with ASC 815, Accounting for Derivative Instruments and Hedging

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:

December 31, 2020

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:

SCHEDULE OF WARRANT ACTIVITY

June 30, 2021

March 31, 2021

3 unchanged sentences

Weighted Average Exercise Price

Balance at beginning of period –

April 1, 2020 and 2019,

Balance at beginning of period

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

1 unchanged sentence

Balance at end of period

On April 28, 2017,

the Company entered into an Exchange Agreement with Hakim, the Chairman of the Board, President, and Chief Executive Officer of

the Company, pursuant to which the Company issued to Hakim 24.0344 shares of its Series J Preferred and warrants to purchase an

aggregate of 79,008,661 shares of its Common Stock (the “Series J Warrants”

and, along with the Series J Preferred

issued to Hakim, the “Securities”) in exchange for 158,017,321 shares of Common Stock owned by Hakim.

The fair value

of the Series J Warrants was determined to be $6,474,674 upon issuance at April 28, 2017.

The Series J Warrants

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

The initial exercise price is $0.1521

per share and the Series J Warrants can be exercised for cash or on a cashless basis.

The exercise price is subject to adjustment

for any issuances or deemed issuances of Common Stock or Common Stock equivalents at an effective price below the then exercise

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.

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

ELITE PHARMACEUTICALS, INC.

On April 28, 2017, the Company

entered into an Exchange Agreement with Hakim, the Chairman of the Board, President, and Chief Executive Officer of the Company, pursuant

to which the Company issued to Hakim 24.0344 shares of its Series J Preferred and warrants to purchase an aggregate of 79,008,661 shares

of its Common Stock (the “Series J Warrants” and, along with the Series J Preferred issued to Hakim, the “Securities”)

in exchange for 158,017,321 shares of Common Stock owned by Hakim.

The fair value of the Series J Warrants was determined to be $ 6,474,674

upon issuance at April 28, 2017.

The Series J Warrants are exercisable

for a period of 10 years from the date of issuance, commencing April 28, 2020.

The initial exercise price is $ 0.1521 per share and the

Series J Warrants can be exercised for cash or on a cashless basis.

The exercise price is subject to adjustment for any issuances or deemed

issuances of Common Stock or Common Stock equivalents at an effective price below the then exercise price.

Such exercise price adjustment

feature prohibits the Company from being able to conclude the warrants are indexed to its own stock and thus such warrants are classified

as liabilities and measured initially and subsequently at fair value.

The Series J Warrants also provide for other standard adjustments

upon the happening of certain customary events.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The fair value of the

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

shareholder approval provisions was no longer a factor.

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

the fair value of the Series J Warrants:

Fair value of the Company’s Common Stock

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the Series J

Warrants was calculated using a Black-Scholes model instead of a Monte Carlo Simulation because the probability with the shareholder approval

provisions was no longer a factor.

The following assumptions were used in the Black-Scholes model to calculate the fair value of the Series

OF THE FAIR VALUE OF THE WARRANTS ISSUED

June 30, 2021

March 31, 2021

Fair value of the Company’s Common Stock

Initial exercise price

1 unchanged sentence

Risk free rate

The changes in warrants

(Level 3 financial instruments) measured at fair value on a recurring basis for the nine months ended December 31, 2020 were as

The changes in warrants (Level

3 financial instruments) measured at fair value on a recurring basis for the three months ended June 30, 2021 were as follows:

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

Balance at March 31, 2021

Change in fair value of derivative financial instruments - warrants

Balance at December 31, 2020

SHAREHOLDERS’

Lincoln Park Capital –

Balance at June 30, 2021

SHAREHOLDERS’ EQUITY

Lincoln Park Capital – May 1, 2017 Purchase

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 Agreement expired

on July 1, 2020.

During the three months ended

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

In addition, there were no shares issued

to Lincoln Park as additional commitment shares, pursuant to the 2017 LPC Agreement.

Lincoln Park Capital Transaction - July 8, 2020

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 Agreement expired on July 1,

During the nine months

ended December 31, 2020, there were no shares sold to Lincoln Park pursuant to the 2017 LPC Agreement.

In addition, there were

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

During the nine months ended

December 31, 2019, a total of 8,895,233 shares were sold to Lincoln Park pursuant to the 2017 LPC Agreement for net proceeds totaling

In addition, 111,778 shares were issued to Lincoln Park as additional commitment shares, pursuant to the 2017 LPC Agreement.

Lincoln Park Capital Transaction

- July 8, 2020 Purchase Agreement

On July 8, 2020, the

Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights agreement

(the “2020 LPC Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant

to which Lincoln Park has committed to purchase up to $25.0 million of the Company’s Common Stock, $0.001 par value per share,

from time to time over the term of the 2020 LPC Purchase Agreement, at the Company’s direction.

During the nine months ended December 31, 2020 the Company issued

an aggregate of 5,975,857 shares of Common Stock in the amount of $469,105 to Lincoln Park as initial commitment shares.

sold 640,543 shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the nine months ended December 31, 2020

for net proceeds totaling $42,223.

In addition, 10,094 shares were issued to Lincoln Park as additional commitment shares, pursuant

to the 2020 LPC Agreement.

ELITE PHARMACEUTICALS, INC.

On July 8, 2020, the Company entered

into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights agreement (the “2020 LPC Registration

Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed

to purchase up to $ 25.0 million of the Company’s Common Stock, $ 0.001 par value per share, from time to time over the term of the

2020 LPC Purchase Agreement, at the Company’s direction.

During the three months ended

June 30, 2021, there were no shares sold to Lincoln Park pursuant to the 2020 LPC Purchase Agreement.

In addition, there were no shares

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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-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 a quarterly basis and equal to the simple average of the closing price of the Company’s

Common Stock for each trading day of the quarter then ended.

During the nine months

ended December 31, 2020, the Company issued 1,550,343 shares of Common Stock to its Directors in payment of director’s fees totaling

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

on January 1, 2018 and ending on March 31, 2020.

In addition, the Company made cash payments totaling an aggregate of $67,500 in

payment of director’s fees earned over the same twenty-seven month period.

During the nine months ended December 31,

2020, the Company accrued director’s fees totaling $67,500, which will be paid via cash payments totaling $22,500 and the

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

During the three months ended

June 30, 2021, the Company issued 886,710 shares of Common Stock to its Directors in payment of director’s fees totaling an aggregate

of $ 60,000 and with such aggregate director’s fees being earned and accrued over the twelve month period beginning on April 1, 2020

and ending on March 31, 2021.

In addition, the Company made cash payments totaling an aggregate of $ 30,000 in payment of director’s

fees earned over the same twelve month period.

During the three months ended

June 30, 2021, the Company accrued director’s fees totaling $ 22,500 , which will be paid via cash payments totaling $ 7,500 and the

issuance of 268,963 shares of Common Stock.

As of December 31,

2020, the Company owed its Directors a total of $22,500 in cash payments and 638,393 shares of Common Stock in payment of director

fees totaling $67,500 due and owing.

The Company anticipates that these shares of Common Stock will be issued prior to the end

of the current fiscal year.

As of June 30, 2021, the Company

owed its Directors a total of $ 7,500 in cash payments and 268,963 shares of Common Stock in payment of director fees totaling $ 22,500

due and owing.

The Company anticipates that these shares of Common Stock will be issued prior to the end of the current fiscal year.

Stock-based Employee/Consultant Compensation

Employment contracts

with the Company’s President and Chief Executive Officer, 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 simple average of the closing price of the Company’s Common Stock for the

quarter then ended.

During the nine months

ended December 31, 2020, the Company issued 646,336 shares of Common Stock in payment of salaries totaling $56,250 pursuant to

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

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

During the nine months

ended December 31, 2020, the Company accrued salaries totaling $597,500 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 8,492,964 shares of Common

As of December 31,

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

totaling $2,858,750 which will be paid via the issuance of 32,753,296 shares of Common Stock.

During the nine months

ended December 31, 2020, the Company issued 1,931,891 shares of Common Stock in payment of consulting fees totaling $161,033, pursuant

to engagement contracts with a certain consultant, and with such consulting expenses being earned and accrued over the twenty seven

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

ELITE PHARMACEUTICALS, INC.

Employment contracts with the

Company’s President and Chief Executive Officer and certain other employees and engagement contracts with

certain consultants include provisions for a portion of each employee’s salaries or consultant’s fees to be paid via the issuance

of shares of the Company’s Common Stock, in lieu of cash, with the valuation of such shares being calculated on a quarterly basis

and equal to the average closing price of the Company’s Common Stock.

During the three months ended

June 30, 2021, the Company issued 1,218,526 shares of Common Stock in payment of salaries totaling $ 97,500 pursuant to the employment

contract of the Company’s former Chief Financial Officer, with such salaries being earned and accrued over the thirty-month

period beginning on October 1, 2018 and ending on March 31, 2021.

During the three months ended

June 30, 2021, the Company accrued salaries totaling $ 193,750 owed to the Company’s President and Chief Executive Officer and certain

other employees which will be paid via the issuance of 3,506,847 shares of Common Stock.

As of June 30, 2021, the Company

owed its President and Chief Executive Officer and certain other employees’ salaries totaling $ 3,156,250 , which will be

paid via the issuance of 38,373,435 shares of Common Stock.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Under its 2014 Stock

Option Plan and prior options plans, the Company may grant stock options to officers, selected employees, as well as members of

the Board of Directors and advisory board members.

All options have generally been granted at a price equal to or greater than

the fair market value of the Company’s Common Stock at the date of the grant.

Generally, options are granted with a vesting

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

A summary of the activity of Company’s 2014 Stock

Option Plan for the nine months ended December 31, 2020 is as follows:

Exercise Price

Weighted Average

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 three months ended June 30, 2021 is

OF STOCK OPTION PLAN

Remaining Contractual

Aggregate Intrinsic

Outstanding at April 1, 2020

Forfeited and expired

Outstanding at December 31, 2020

Exercisable at December 31, 2020

The aggregate intrinsic

value for outstanding options is calculated as the difference between the exercise price of the underlying awards and the quoted

price of the Company’s Common Stock as of December 31, 2020 and March 31, 2020 of $0.09 and $0.07, respectively.

Term (in years)

Outstanding at March 31, 2021

Outstanding at June 30, 2021

Exercisable at June 30, 2021

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 June 30, 2021 and March 31, 2021 of $ 0.08 and $ 0.07 , respectively.

CONCENTRATIONS AND CREDIT RISK

Two customers accounted

for approximately 93% of the Company’s revenues for the nine months ended December 31, 2020.

These two customers accounted

for approximately 79% and 14% of revenues each, respectively.

The same two customers accounted for 82% and 12% of revenues each,

respectively, for the three months ended December 31, 2020.

Three customers accounted

for approximately 94% of the Company’s revenues for the nine months ended December 31, 2019.

These three customers accounted

for approximately 57%, 24%, and 13% of revenues each, respectively.

The same three customers accounted for approximately 69%, 12%

and 13% of revenues each for three months ended December 31, 2019.

Two customers accounted for approximately

92 % of the Company’s revenues for the three months ended June 30, 2021.

These two customers accounted for approximately 83 % and

9 % of revenues each, respectively.

Two customers accounted for approximately

92 % of the Company’s revenues for the three months ended June 30, 2020.

These two customers accounted for approximately 73 % and

19 % of revenues each, respectively.

Accounts Receivable

Two customers accounted

for approximately 94% of the Company’s accounts receivable as of December 31, 2020.

These two customers accounted for

approximately 88% and 6% 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

Two customers accounted for approximately

93 % of the Company’s accounts receivable as of June 30, 2021.

These two customers accounted for approximately 84 % and 9 % of accounts

receivable each, respectively.

Three customers accounted for

substantially all 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 suppliers accounted

for more than 81% of the Company’s purchases of raw materials for the nine months ended December 31, 2020.

These four suppliers

accounted for approximately 59%, 12%, 5% and 5% of purchases each, respectively.

Eight suppliers accounted

for more than 85% of the Company’s purchases of raw materials for the nine months ended December 31, 2019.

Included in these

seven suppliers were three suppliers accounting for approximately 34%, 25%, and 11% of purchases each, respectively.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Four suppliers accounted for more

than 64 % of the Company’s purchases of raw materials for the three months ended June 30, 2021.

These four suppliers accounted for

approximately 38 %, 14 %, 7 % and 5 % of purchases each, respectively.

Three suppliers accounted for

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

These three suppliers accounted

for approximately 63 %, 14 %, and 4 % of purchases each, respectively.

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.

segments are based on products and services, geography, legal structure, management structure, or any other manner in which management

disaggregates a company.

The Company has determined

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

The Company identified its reporting

segments based on the marketing authorization relating to each and the financial information used by its chief operating decision

maker to make decisions regarding the allocation of resources to and the financial performance of the reporting segments.

Asset information by

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

The reporting segments follow the same accounting policies used in the preparation of the Company’s unaudited condensed consolidated

financial statements.

Disaggregated revenue by reportable segments is included within Note 1.

The following represents

selected information for the Company’s reportable segments:

For the Three Months Ended

For the Nine Months Ended

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has determined that

its reportable segments are ANDAs for generic products and NDAs for branded products.

The Company identified its reporting segments based

on the marketing authorization relating to each and the financial information used by its chief operating decision maker to make decisions

regarding the allocation of resources to and the financial performance of the reporting segments.

Asset information by operating

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

The reporting segments

follow the same accounting policies used in the preparation of the Company’s unaudited condensed consolidated financial statements.

The following represents selected

information for the Company’s reportable segments:

OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

For the three Months Ended June 30,

Operating Income by Segment

The table below reconciles

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

The table below reconciles the

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

unaudited condensed consolidated statements of operations.

For the Three Months Ended

For the Nine Months Ended

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

For the Three Months Ended June 30,

Operating income by segment

5 unchanged sentences

Change in fair value of derivative instruments

Income (loss) from operations before income taxes

$ (1,860,680 )

$ (3,174,719 )

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 $229,451 in

excess of advanced payments received to date from Mikah.

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

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

ELITE PHARMACEUTICALS, INC.

Income from operations before income taxes

RELATED PARTY AGREEMENTS WITH MIKAH PHARMA,

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 March 31, 2021, the Company has incurred costs which are $ 238,451 in excess of advanced payments received

to date from Mikah.

This balance due from Mikah was offset, in full, against accrued interest due and owing to Mikah pursuant to the

Mikah Note (see Note 7).

In May 2020, SunGen Pharma LLC

(“SunGen”), pursuant to an asset purchase agreement, assigned its rights and obligations under the SunGen Agreement

for Amphetamine IR and Amphetamine ER to Mikah Pharmaceuticals.

The ANDAs for Amphetamine IR and Amphetamine ER are now registered under

Elite’s name.

Mikah will now be Elite’s partner with respect to Amphetamine IR and ER and will assume all the rights and

obligations for these products from SunGen.

Mikah Pharmaceuticals was founded in 2009 by Nasrat Hakim, a related party and the Company’s

President, Chief Executive Officer and Chairman of the Board.

In June 2021, the Company entered

into a development and license agreement with Mikah Pharma LLC, pursuant to which Mikah Pharma LLC will engage in the research,

development, sales and licensing of generic pharmaceutical products.

In addition, Mikah Pharma LLC will collaborate to develop

and commercialize generic products including formulation development, analytical method development, manufacturing, sales and marketing

of generic products.

Initially two generic products were identified for the parties to develop.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Sale of New Jersey Net Operating

Loss and R&D Tax Credits

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,

which is captured within the Income tax benefit (expense) line item on the Company’s Condensed Consolidated Statement of

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sale of New Jersey Net Operating Loss

In April 2020, Elite Labs

received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of $ 607,635 relating

to New Jersey net operating losses and net tax benefits of $ 338,772 , relating to R&D tax credits.

The Company sold the net tax benefits

approved for sale for total proceeds of $ 946,407 , during the three months ended June 30, 2020.

Sale of New Jersey Net Operating Loss and Research

and Development Tax Credit

In April 2021, Elite Labs

received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of $ 796,860 relating

to New Jersey net operating losses and net tax benefits of $ 58,490 , relating to research and development tax credits.

The Company sold

the net tax benefits approved for sale at a transfer price equal to ninety three and one half cents for every benefit dollar and incurred

transaction fees of $ 12,861 , resulting in net proceeds to the Company of $ 855,350 , during the three months ended June 30, 2021.

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.

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.

the Company increased its already thorough cleaning protocols throughout its facilities and has prohibited visits from non-essential

Certain of these measures have resulted in increased costs.

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.

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

The Company has implemented alternative working practices, which include, without limitation, modified schedules, shift rotation

and work at home abilities for appropriate employees to best ensure adequate social distancing.

In addition, the Company increased its

already thorough cleaning protocols throughout its facilities and has prohibited visits from non-essential visitors.

Certain of these

measures have resulted in increased costs.

Manufacturing and Supply Chain

During the three and

nine months ended December 31, 2020, and as of the date of this Quarterly Report on Form 10-Q, the Company has not experienced

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

activities, and has been able to operate without interruption.

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

practical measures to keep its facilities open.

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.

During the three months ended

June 30, 2021, and as of the date of this Quarterly Report on Form 10-Q, the Company has not experienced material, detrimental issues

related to COVID-19 in its manufacturing, supply chain, quality assurance and regulatory compliance activities, and has been able to operate

without interruption.

The Company has taken, and plans to continue to take, commercially practical measures to keep its facilities open.

The Company’s supply chains remain intact and operational, and the Company is in regular communications with its suppliers and third-party

A prolonging of the current situation relating to COVID-19 may result in an increased risk of interruption in the Company supply

chain in the future, with no assurances given as the materiality of such future interruption on the Company’s business, financial

condition, results of operations and cash flows.

SUBSEQUENT EVENTS

Forgiveness of Payroll Protection

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.

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion

of our financial condition and results of operations for the three and nine months ended December 31, 2020 and 2019 should be read

in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included

elsewhere in this report.

Our discussion includes forward-looking statements based upon current expectations that involve risks

and uncertainties, such as our plans, objectives, expectations, and intentions.

Actual results and the timing of events could differ

materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth

under Item 1A.

Risk Factors appearing in our Annual Report on Form 10-K for the year ended March 31, 2020.

We use words such

as “anticipate,”

“estimate,”

“plan,”

“project,”

“continuing,”

“ongoing,”

“expect,”

“believe,”

“intend,”

“may,”

“will,”

“should,”

“could,”

and similar expressions to identify forward-looking statements.

Unless expressly

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

and “our”

refer to Elite Pharmaceuticals, Inc., and subsidiary.

Elite Pharmaceuticals,

Inc., a Nevada corporation (the “Company”, “Elite”, “Elite Pharmaceuticals”, the “registrant”,

“we”, “us”

or “our”) was incorporated on October 1, 1997 under the laws of the State of Delaware,

and its wholly-owned subsidiary, Elite Laboratories, Inc.

(“Elite Labs”), was incorporated on August 23, 1990 under

the laws of the State of Delaware.

On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of

We are a specialty

pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, using proprietary

know-how and technology for the manufacture of generic pharmaceuticals.

Our strategy includes developing generic versions of controlled-release

drug products with high barriers to entry.

We occupy manufacturing,

warehouse, laboratory and office space at 165 Ludlow Avenue and 135 Ludlow Avenue in Northvale, NJ (the “Northvale Facility”).

The Northvale Facility operates under Current Good Manufacturing Practice (“cGMP”) and is a United States Drug Enforcement

Agency (“DEA”) registered facility for research, development, and manufacturing.

We focus our efforts

on the following areas:

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

(“ANDAs”);

(ii) development of additional generic pharmaceutical products;

(iii) development of the other products

in our pipeline including products co-developed with partners;

(iv) commercial exploitation of our products either by sales under

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

and (v) development of

new products for sale under our own label, and the expansion of our licensing agreements with other pharmaceutical companies, including

co-development projects, joint ventures and other collaborations.

Our focus is on the

development of various types of drug products, including branded drug products which require New Drug Applications (“NDAs”)

under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Drug Price

Competition Act”) as well as generic drug products which require ANDAs.

We believe that our

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

in various therapeutic categories and to build collaborations and establish licensing agreements with companies with greater resources

thereby allowing us to share costs of development and improve cash-flow.

Commercial Products

We own, license, contract

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

Phentermine HCl 37.5mg tablets

(“Phentermine 37.5mg”)

Adipex-P®

Phendimetrazine Tartrate 35mg tablets

(“Phendimetrazine 35mg”)

November 2012

Phentermine HCl 15mg and 30mg capsules

(“Phentermine 15mg”

and “Phentermine 30mg”)

Adipex-P®

Naltrexone HCl 50mg tablets

(“Naltrexone 50mg”)

Addiction Treatment

September 2013

Isradipine 2.5mg and 5mg capsules

(“Isradipine 2.5mg”

and “Isradipine 5mg”)

Cardiovascular

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

and “Oxy IR 30mg”)

Roxycodone®

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

Surmontil®

Antidepressant

Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg”

and “Amphetamine IR 30mg”)

Adderall®

Central Nervous System (“CNS”) Stimulant

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

Dantrium®

Muscle Relaxant

Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and 30mg capsules (“Amphetamine ER 5mg”, “Amphetamine ER 10mg”, “Amphetamine ER 15mg”, “Amphetamine ER 20mg”, “Amphetamine ER 25mg”, and “Amphetamine ER 30mg”)

Adderall XR®

Central Nervous System (“CNS”) Stimulant

Products Not Yet Commercialized

SequestOx™

our abuse-deterrent candidate for the management of moderate to severe pain where the use of an opioid analgesic is appropriate.

In January 2016, the

Company submitted an NDA for SequestOx ™

and on July 15, 2016, the US Food and Drug Administration (“FDA”)

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

The CRL stated that the review cycle for the SequestOx™

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

The Company developed

pilot data to address a key FDA concern in the CRL, but the Company has now paused development of this product and, in light of

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

Generic version

of an antibiotic product

On January 3, 2019,

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

The product is jointly owned by Elite and

SunGen Pharma LLC.

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

The ANDA is currently under review by the FDA.

Loxapine (“Loxapine

Capsules”)

The FDA approved a

transfer for manufacturing of Loxapine Capsules at the Northvale Facility.

The approved ANDAs for Loxapine Capsules were acquired

from Mikah Pharma.

The Company anticipates commercial launch of this product during the first quarter of the fiscal year ending

March 31, 2022.

Acetaminophen

and Codeine Phosphate

The Company received

approval from the FDA of an ANDA for a generic version of Tylenol®

with Codeine (acetaminophen and codeine phosphate).

Acetaminophen

with codeine is a combination medication indicated for the management of mild to moderate pain, where treatment with an opioid

is appropriate and for which alternative treatments are inadequate.

The Company is not pursuing licensing deals for any opioids

at this time and, in light of the current market and litigation around opioid products, the Company has no plans to commercialize

this product at this time.

Critical Accounting Policies and Estimates

The preparation of

the unaudited condensed consolidated financial statements and related disclosures in conformity with GAAP, and our discussion and

analysis of its financial condition and operating results require our management to make judgments, assumptions and estimates that

affect the amounts reported in its unaudited condensed consolidated financial statements and accompanying notes.

Management bases

its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the

results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results may differ

from these estimates and such differences may be material.

There were no significant

changes during the nine months ended December 31, 2020 to the items that we disclosed as our Critical Accounting Policies and Estimates

described in Item 7 of the Company’s financial statements as contained in the Company’s Annual Report on Form 10-K

for the fiscal year ended March 31, 2020.

Results of Operations

The following set forth

our results of operations for the periods presented.

The period-to-period comparison of financial results is not necessarily indicative

of future results.

ended December 31, 2020 compared to December 31, 2019

Revenue, Cost of

revenue and Gross profit:

For the Three Months Ended

Manufacturing fees

Licensing fees

Total revenue

Cost of revenue

Gross profit - percentage

Total revenues for

three months ended December 31, 2020 increased by $1.0 million or 20%, to $6.0 million, as compared to $5.0 million for the corresponding

period in 2019, primarily due to revenues earned from Amphetamine ER Capsules, which were launched during the current fiscal year,

offset by decreases in license fee revenues resulting from the full amortization of SequestOx™

milestone revenues occurring

in June 2020 and accordingly providing no contribution to revenues during the three months ended December 31, 2020, while contributing

to revenues in the comparable period of the prior year.

Manufacturing fees

increased by $1.1 million, or 29%, primarily due to revenues earned from Amphetamine ER Capsules, which were launched during the

current fiscal year, and increased sales of Amphetamine IR Tablets, Dantrolene capsules and Trimipramine capsules during the three

months ended December 31, 2020 as compared to the comparable period of the prior year.

Licensing fees decreased

by $0.1 million, or 8%.

This decrease is primarily due to the full amortization of SequestOx™

milestone license fees occurring

in June 2020.

Costs of revenue consists

of manufacturing and assembly costs.

Our costs of revenue increased by $0.4 million or 22%, to $2.6 million as compared to $2.2

million for the corresponding period in the prior fiscal year.

This increase was due in large part to the increased manufacturing

activities and related manufacturing revenues during the three months ended December 31, 2020, as compared to the comparable period

of the prior fiscal year, and also due to there being a strong positive correlation of costs of revenue to manufacturing revenues.

Our gross profit margin

was 56% during the three months ended December 31, 2020 as compared to 57% during the comparable period of the prior fiscal year.

Operating expenses:

For the Three Months Ended

Operating expenses:

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

Operating expenses

consist of research and development costs, general and administrative, non-cash compensation and depreciation and amortization

Operating expenses for the three months ended December 31, 2020 increased by $0.2 million or 9% to $2.4 million, as compared

to $2.2 million for the corresponding period in 2019.

Research and development

costs for the three months ended December 31, 2020 were $1.2 million, an increase of $0.2 million, or 26%, from $1.0 million of

such costs for the comparable period of the prior year.

The increase was a result of the timing and nature of product development

activities during the three months ended December 31, 2020 as compared to the comparable period of the prior year.

General and administrative

expenses for the three months ended December 31,2020 were $0.8 million, a decrease of $0.1 million or 6% from $0.9 million of such

costs for the comparable period of the prior year.

The decrease was due in large part to increased utilization rates of our manufacturing

facility as compared with the comparable period of the prior year, and ongoing cost reduction and cost control initiatives.

Non-cash compensation

expense for the three months ended December 31, 2020 and 2019 was less than $0.1 million.

Depreciation and amortization

expenses for the three months ended December 31,2020 were $0.3 million and remained relatively unchanged from $0.3 million of such

costs for the comparable period of the prior year.

As a result of the

foregoing, our income from operations for the three months ended December 31,2020 was $1.0 million, compared to $0.7 million for

the comparable period of the prior year.

Other income (expense):

For the Three Months Ended

Other income (expense):

Interest expense and amortization of debt issuance costs

Gain on sale of assets

Proceeds from sale of ANDA’s

Change in fair value of derivative instruments

Interest income

Other income (expense), net

$ (2,551,875 )

Other income, net for

the three months ended December 31, 2020 was $1.1 million, an increase in other income, net of $3.6 million from other expense,

net of $2.6 million for the comparable period of the prior year.

The increase in other income (expense), net was due to income

relating to changes in the fair value of our outstanding derivative warrants during the three months ended December 31, 2020.

note that the change in the fair value of derivative instruments is determined in large part by the change in the closing price

of the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning of the period,

with a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing price of

the Company’s Common Stock.

As a result of the

foregoing, our net income for the three months ended December 31, 2020 was $2.0 million, compared to a net loss of $1.9 million

for the comparable period of the prior year.

Nine months ended December 31, 2020

compared to December 31, 2019

Revenue, Cost of

revenue and Gross profit:

For the Nine Months Ended

Manufacturing fees

Licensing fees

Total revenue

Cost of revenue

Gross profit - percentage

Total revenues for

the nine-month period ended December 31, 2020 increased by $7.9 million or 61%, to $21.0 million, as compared to $13.1 million,

for the corresponding period of the prior year primarily due to revenues earned from Amphetamine ER Capsules, which were launched

during the current fiscal year, and increased sales of Amphetamine IR Tablets during the nine-month period ended December 31, 2020

as compared to the comparable period of the prior fiscal year.

Manufacturing fees

increased by $6.8 million, or 63%, primarily due to revenues earned from Amphetamine ER Capsules, which were launched during the

current fiscal year, and increased sales of Amphetamine IR Tablets during the nine month period ended December 31, 2020 as compared

to the comparable period of the prior fiscal year.

Licensing fees increased

by $1.1 million, or 51%.

This increase is primarily due to licensing fees earned from Amphetamine ER Capsules which were launched

during the current fiscal year, and increased licensing fees earned from the sale of Amphetamine IR Tablets, Naltrexone and Phentermine

during the nine months ended December 31, 2020 as compared to the comparable period of the prior fiscal year, offset by the full

amortization of license fee revenues recognized from SequestOx™

milestones occurring during June 2020.

The nine months ended

December 31, 2020 included less than three months of such license fee revenues as compared to the comparable period of the prior

year which included a full nine months of such license fee revenues.

Costs of revenue

consists of manufacturing and assembly costs.

Our costs of revenue increased by $3.5 million or 46%, to $11.0 million as compared

to $7.5 million for the corresponding period in the prior fiscal year.

This increase was due in large part to the increased manufacturing

activities and related manufacturing revenues during the nine months ended December 31, 2020, as compared to the comparable period

of the prior fiscal year, and also due to there being a strong positive correlation of costs of revenue to manufacturing revenues.

gross profit margin was 48% during the nine months ended December 31, 2020 as compared to 42% during the comparable period of the

prior fiscal year.

Operating expenses:

For the Nine Months Ended

Operating expenses:

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

Operating expenses

consist of research and development costs, general and administrative, non-cash compensation and depreciation and amortization

Operating expenses for the nine months ended December 31, 2020 increased by $0.4 million, or 6%, to $6.8 million as compared

to $6.4 million for the corresponding period in the prior fiscal year.

Research and development

costs for the nine months ended December 31, 2020 were $3.3 million, an increase of $0.3 million, or 10%, from approximately $3.0

million of such costs for the comparable period of the prior year.

The increase was a result of the timing and nature of product

development activities during the nine-month period ended December 31, 2020 as compared to the comparable period of the prior fiscal

General and administrative

expenses for the nine months ended December 31, 2020 were $2.5 million, an increase of $0.1 million, or 6% from $2.4 million of

such costs for the comparable period of the prior year with such increase being attributed in large part to increased costs and

headcounts relating to regulatory compliance and laboratory activities, offset by increased facility utilization rates and ongoing

cost reduction initiatives.

Non-cash compensation

expense for the nine months ended December 31, 2020 and 2019 was less than $0.1 million.

Depreciation and amortization

expenses for the nine months ended December 31, 2020 were $1.0 million, which was virtually unchanged from $1.0 million in such

costs for the comparable period of the prior fiscal year.

As a result of the

foregoing, our income from operations for the nine months ended December 31, 2020 was $3.2 million, compared to a loss from

operations of $0.9 million for the comparable period of the prior fiscal year.

Other income (expense):

For the Nine Months Ended

Other income (expense):

Interest expense and amortization of debt issuance costs

Gain on sale of assets

Proceeds from sale of ANDA’s

Change in fair value of derivative instruments

Interest income

Other income, net

$ (2,263,677 )

Other income,

net for the nine months ended December 31, 2020 was $1.5 million, an increase of $3.8 million from the other expense, net of $2.3

million for the comparable period of the prior fiscal year.

The increase in other income (expense) was due to income relating to

changes in the fair value of our outstanding derivative warrants during the nine months ended December 31, 2020.

Please note that

the change in the fair value of derivative instruments is determined in large part by the change in the closing price of the Company’s

Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse

relationship between the fair value of our derivatives instruments and decreases in the closing price of the Company’s Common

Please see Note 10 to the Unaudited Condensed Consolidated Financial Statements above.

As a result of the

foregoing, our net income before the net benefit from sale of net operating loss credits for the nine months ended December 31,

2020 was $4.6 million, compared to net loss $3.2 million for the comparable period of the prior fiscal year.

The Company received

a net benefit from sale of net operating loss credits of $0.9 million during the nine months ended December 31, 2020, resulting

in net income attributable to common shareholders of $5.5 million, compared to a net loss of $3.2 million for the comparable period

of the prior fiscal year.

Liquidity and Capital Resources

Capital Resources

Current assets

Current liabilities

$ (1,397,198 )

Working capital

Our working capital

(total current assets less total current liabilities) increased by $5.7 million from $1.6 million as of March 31, 2020 to

$7.3 million as of December 31, 2020, with such increase being primarily related to the net income of $5.6 million and a net

positive cash flow of $4.3 million achieved during the nine months ended December 31, 2020.

Summary of Cash

For the Nine Months Ended

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by

operating activities for the nine months ended December 31, 2020 was $3.9 million, which included net income of $5.6 million and

increases in non-cash expenses totaling $0.1 million, offset by net increases in assets and decreases in liabilities totaling $1.8

Net cash used in investing

activities for the nine months ended December 31, 2020 was comprised of purchases of purchases of property and equipment of $0.15

million offset by proceeds from the sale of property and equipment of $0.07 million.

Net cash provided by

financing activities was $0.4 million for the nine months ended December 31, 2020 which consisted primarily of proceeds from the

payroll protection program loan offset by loan payments.

Capital –

July 8, 2020 Purchase Agreement

On July 8, 2020, the

Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights agreement,

with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase up to

$25.0 million of the Company’s Common Stock, $0.001 par value per share, from time to time over the term of the 2020 LPC

Purchase Agreement, at the Company’s direction.

During the nine months

ended December 31, 2020 the Company issued an aggregate of 5,975,857 shares of Common Stock in the amount of $469,105 to Lincoln

Park as initial commitment shares.

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

during the nine months ended December 31, 2020 for net proceeds totaling $42,223.

In addition, 10,094 shares were issued to Lincoln

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

As a smaller reporting

company, we are not required to provide the information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements