What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-02-14 · 247 added, 399 removed, 594 unchanged (52% of the section changed)

FINANCIAL STATEMENTS

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

expenses and other current assets

3 unchanged sentences

lease - right-of-use asset

income tax asset

cash - debt service for NJEDA bonds

7 unchanged sentences

payable, net of current portion and bond issuance costs

payable, net of current portion

payable, net of current portion and loan costs

obligation - operating lease, net of current portion

3 unchanged sentences

Shareholders’

J convertible preferred stock;

Series J convertible

preferred stock;

par value of $ 0.01 ;

50 shares authorized;

0 issued and outstanding as of December 31, 2021 and March

0 issued and outstanding as of June 30, 2022 and March 31, 2022

par value $ 0.001 ;

1,445,000,000 shares authorized;

1,011,381,988 shares issued and 1,011,281,988 shares outstanding as of

December 31, 2021;

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

1,011,381,988 shares issued as of June 30, 2022 and March 31, 2022;

1,011,281,988

shares outstanding as of June 30, 2022 and March 31, 2022.

paid-in capital

100,000 shares as of December 31, 2021 and March 31, 2021;

Treasury stock;

shares as of June 30, 2022 and March 31, 2022;

( 139,753,861 )

5 unchanged sentences

AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

the Three Months Ended December 31,

the Nine Months Ended December 31,

CONSOLIDATED STATEMENTS OF OPERATIONS

the Three Months Ended June 30,

Manufacturing

6 unchanged sentences

from operations

income (expense):

in fair value of derivative instruments

expense and amortization of debt issuance costs

on sale of fixed assets

(expense) income, net

from operations before income taxes

6 unchanged sentences

1,009,199,886

1,010,416,823

weighted average Common Stock outstanding

1 unchanged sentence

1,009,199,886

1,010,416,823

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

J Preferred Stock

Total Shareholders’

Balance as of March 31, 2021

Shareholders’

as of March 31, 2022

1,011,381,988

$ 164,577,227

Conversion of Preferred Stock to Common Stock

Conversion of Preferred Stock to Common Stock, shares

Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase

agreement , shares

Common Stock sold pursuant to the 2020 Lincoln Park purchase agreement

Common Stock sold pursuant to the 2020 Lincoln Park purchase

agreement , shares

Common Stock issued as additional commitment shares pursuant to the 2020

Lincoln Park purchase agreement

Common Stock issued as additional commitment shares pursuant to the 2020

Lincoln Park purchase agreement , shares

Costs associated with raising capital

Shares issued in payment of Director fees

Shares issued in payment of Director fees , shares

Shares issued in payment of consulting expenses

Shares issued in payment of consulting expenses , shares

Non-cash compensation through the issuance of employee

stock options

Shares issued in payment of salaries

Balance at June 30, 2021

$ ( 306,841 )

$ ( 140,059,744 )

Non-cash compensation through the issuance of employee

stock options

Balance at September 30, 2021

compensation through the issuance of employee stock options

at June 30, 2022

1,011,381,988

$ 164,582,549

Non-cash compensation through the issuance of employee

stock options

Balance at December 31, 2021

$ ( 306,841 )

$ ( 139,753,861 )

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Preferred Stock

Additional Paid-In

Total Shareholders’

Balance as of March 31, 2020

J Preferred Stock

Shareholders’

as of March 31, 2021

1,009,276,752

Non-cash compensation through the issuance of employee stock options

Shares issued in payment of salaries

Balance at June 30, 2020

$ 164,407,480

Conversion of Preferred Stock to Common Stock

Initial commitment shares issued pursuant to the 2020 Lincoln Park purchase

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

$ ( 306,841 )

$ ( 148,957,989 )

Non-cash compensation through the issuance of employee stock options

Balance at December 31, 2020

compensation through the issuance of employee stock options

issued in payment of salaries

at June 30, 2021

1,011,381,988

$ 164,565,685

$ ( 306,841 )

$ ( 146,568,871 )

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

1 unchanged sentence

AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

the Nine Months Ended December 31,

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Three Months Ended June 30,

FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

of operating leases - right-of-use assets

on the disposal of property and equipment

in fair value of derivative financial instruments - warrants

( 1,523,394 )

( 1,645,042 )

compensation accrued

5 unchanged sentences

payable, accrued expenses and other current liabilities

( 1,417,530 )

revenue and customer deposits

obligations - operating leases

cash provided by operating activities

cash (used in) provided by operating activities

FLOWS FROM INVESTING ACTIVITIES:

of property and equipment

from disposal of property and equipment

cash used in investing activities

FLOWS FROM FINANCING ACTIVITIES:

of bond principal

from loans payable

loan payments

from the issuance of Common Stock

loan proceeds

cash (used in) provided by financing activities

cash provided by (used in) financing activities

change in cash and restricted cash

6 unchanged sentences

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

shares issued to Lincoln Park Capital

of preferred stock to Common Stock

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

4 unchanged sentences

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.

(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.

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.

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.

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

State of Nevada.

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

pharmaceuticals.

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

itself, if and when the product candidates are approved.

These products include drugs that cover therapeutic areas for allergy,

bariatric, attention deficit and infection.

Research and development activities are performed with an objective of developing

product candidates that will secure marketing approvals from the United States Food and Drug Administration (“FDA”), and

thereafter, commercially exploiting such products.

of Consolidation

8 unchanged sentences

The results of operations for the three

and nine months ended December 31, 2021 are not necessarily indicative of the results that may be expected for the entire year.

months ended June 30, 2022 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 ,

97 unchanged sentences

None of the Company’s contracts contained a significant financing

component as of December 31, 2021.

component as of June 30, 2022.

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

11 unchanged sentences

OF DISAGGREGATION OF REVENUE

the Three Months Ended December 31,

the Nine Months Ended December 31,

the Three Months Ended June 30,

Manufacturing

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

are disclosed within Note 15.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

4 unchanged sentences

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

of December 31, 2021, and March 31, 2021, the Company had $ 405,027 and $ 405,013 of restricted cash, respectively, related to debt service

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2022, and March 31, 2022, the Company had $ 405,163 and $ 405,039 , of restricted cash, respectively, related to debt service

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

2 unchanged sentences

historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.

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

is recorded at the lower of cost or net realizable value 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

23 unchanged sentences

and slower growth rates.

of December 31, 2021, the Company did not identify any indicators of impairment.

of June 30, 2022, 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.

PHARMACEUTICALS, INC.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and Development

and development expenditures are charged to expense as incurred.

Contingencies

21 unchanged sentences

tax jurisdiction until the applicable statutes of limitation expire.

As of December 31, 2021, a summary of the tax years that remain

subject to examination in our major tax jurisdictions are:

As of June 30, 2022, a summary of the tax years that remain subject

to examination in our major tax jurisdictions are:

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

The Company did not record unrecognized tax positions for the three and nine months ended December 31, 2021 and 2020.

Company did not record unrecognized tax positions for the three months ended June 30, 2022 and June 30, 2021.

and Preferred Shares

12 unchanged sentences

there is a contractual term for services in which case such compensation would be amortized over the contractual term.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

10 unchanged sentences

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

OF EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS

the Three Months Ended December 31,

the Nine Months Ended December 31,

the Three Months Ended June 30,

income - basic

of dilutive instrument on net income

( 1,523,394 )

income - diluted

3 unchanged sentences

1,009,199,886

1,010,416,823

effect of stock options and convertible securities

2 unchanged sentences

1,009,199,886

1,010,416,823

Net income per share

7 unchanged sentences

own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for

2 unchanged sentences

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.

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

on a Recurring Basis

4 unchanged sentences

at Fair Value

financial instruments - warrants

as of March 31, 2022

in fair value of derivative instruments

as of June 30, 2022

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

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of this update on the consolidated financial statements and does not expect a material impact on the consolidated financial statements.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant

2 unchanged sentences

Work-in-progress

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY AND EQUIPMENT, NET

4 unchanged sentences

equipment and software

plant and equipment, gross

Accumulated depreciation

1 unchanged sentence

( 13,348,565 )

expense was $ 293,014 and $ 505,987 for the three months ended, and $ 897,662 and $ 980,227 for the nine months ended December 31, 2021 and

2020, respectively.

plant and equipment, net

expense was $ 292,748

and $ 309,157

for the three months ended June 30, 2022 and June 30, 2021, respectively.

INTANGIBLE ASSETS

following table summarizes the Company’s intangible assets:

SCHEDULE OF INTANGIBLE ASSETS

Carrying Amount

OF INTANGIBLE ASSETS

application costs

acquisition costs

Carrying Amount

application costs *

acquisition costs

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.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Amortization will then be calculated on a straight-line basis through the expiry

of the related patent(s).

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.

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.

ACCRUED EXPENSES

of June 30, 2022 and March 31, 2022, the Company’s accrued expenses consisted of the following:

OF ACCRUED EXPENSES

and fees payable in common stock

contract fees

loan interest

accrued expenses

August, 2005, the Company issued NJEDA tax exempt Bonds with Series A Notes outstanding.

The Company is required to maintain a debt

service reserve.

The debt service reserve is classified as restricted cash on the accompanying unaudited condensed consolidated

balance sheets.

The NJEDA Bonds require the Company to make an annual principal payment on September 1st based on the amount

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

outstanding principal.

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

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 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.

following tables summarize the Company’s bonds payable liability:

15 unchanged sentences

term portion of bonds payable, net of bond offering costs

expense was $ 3,545 and $ 3,544 for the three months ended, and $ 10,635 and $ 10,634 for the nine months ended December 31, 2021 and 2020,

expense was $ 3,546

for the three months ended June 30, 2022 and June 30, 2021, respectively.

As of June 30, 2022 and March 31, 2022, interest payable

and $ 7,367 ,

respectively.

As of December 31, 2021 and March 31, 2021, interest payable was $ 29,467 and $ 7,963 , respectively.

PHARMACEUTICALS, INC.

2 unchanged sentences

LOANS PAYABLE

April 2, 2022, the Company and Elite Labs entered into a Loan and Security Agreement (the “EWB Loan Agreement”) with East West Bank (“EWB”).

Pursuant to the EWB Loan Agreement, the Company and Elite Labs

received one term loan for a principal amount of $ 12,000,000 (the “EWB Term Loan”) and a revolving line of credit up to $ 2,000,000 (the “EWB Revolver,”

together with the “EWB Term Loan,” the EWB Loans” ), each of which shall be used for working capital.

The EWB Term Loan bears interest at a rate of 6.48 % ( 1.73 % plus

the prime rate (“Prime”)) and is repayable over five years , maturing on May 1, 2027 .

The EWB Revolver bears interest at a rate of [ 5.65 % ( 0.87 % plus Prime)]

and matures on May 1, 2027 .

The total transaction costs associated with the EWB Loans incurred as of June 30, 2022, were $ 40,120 ,

which are being amortized on a monthly basis over five years, beginning in April 2022.

The EWB Loans are secured by a security interest

in the personal property of the Company and Elite Labs.

The EWB Loan Agreement contains customary representations, warranties and covenants.

These covenants include, but are not limited to,

maintaining maximum leverage ratios of 3.50 to 1.00,

minimum liquidity of $5,000,000, minimum cash of $1,000,000, a fixed charge coverage ratio of 1.25 to 1.00 and restrictions on mergers or sales of assets and debt borrowings .

As of June 30,

2022, the Company is in compliance with each financial covenant and the Company has not used any of the Revolving line of credit.

payable consisted of the following:

SCHEDULE OF LOANS PAYABLE

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

OF LOANS PAYABLE

and insurance financing loans payable, between 3.30 % and 12.02 % interest and maturing between October 2022 and April 2027

Current portion of loans payable

portion of loans payable

interest expense associated with the loans payable was $ 14,692 and $ 19,422 for the three months ended, and $ 50,290 and $ 58,062 for the

nine months ended December 31, 2021 and 2020, respectively.

RELATED PARTY SECURED PROMISSORY NOTE WITH MIKAH PHARMA, LLC

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

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

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

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

The Mikah Note matured on December

31, 2020 and was retired at par in March 2021.

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

expense associated with the Note was $ 30,000 for the three months ended and $ 90,000 for the nine months ended December 31, 2020.

of $ 435,000 in accrued interest expense, representing interest expense accrued during the life of the Mikah Note, was due and owing as

of the maturity date of the Mikah Note.

Of the $ 435,000 accrued interest due at maturity, $ 435,000 of accrued interest was satisfied

by offset against amounts due from Mikah pursuant to the development agreement between the Company and Mikah, dated December 3, 2018

(see Note 16).

interest expense associated with the loans payable was $ 177,579

for the three months ended June 30, 2022 and June 30, 2021, respectively.

DEFERRED REVENUE

revenues in the aggregate amount of $ 48,892 as of December 31, 2021, were comprised of a current component of $ 13,333 and a long-term

component of $ 35,559 .

Deferred revenues in the aggregate amount of $ 58,891 as of March 31, 2021, were comprised of a current component

of $ 13,333 and a long-term component of $ 45,558 .

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 .

revenues in the aggregate amount of $ 42,222 as of June 30, 2022, were comprised of a current component of $ 13,333 and a long-term component

of $ 28,889 .

Deferred revenues in the aggregate amount of $ 45,559 as of March 31, 2022, were comprised of a current component of $ 13,333

and a long-term component of $ 32,226 .

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

TAGI Pharma (“TAGI”) licensing agreement with a fifteen-year term beginning in September 2010 and ending in August 2025 .

These advance payments were recorded as deferred revenue when received and are earned, on a straight-line basis over the life of the

2 unchanged sentences

COMMITMENTS AND CONTINGENCIES

Occasionally,

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

The Company records a provision

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

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

consolidated financial statements.

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

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

Leases – 135 Ludlow Ave.

1 unchanged sentence

“135 Ludlow Ave.

The 135 Ludlow Ave.

lease is for approximately 15,000 square feet of floor space and began on July

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”).

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

lease”) which began in 2010.

On June 30, 2021, the Company exercised a renewal option, with such option

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

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 .

135 Ludlow Ave.

5 unchanged sentences

The Pompano Office Lease is for approximately 1,275 square feet of office space, with Elite taking occupancy on November 1, 2020.

Pompano Office includes a 3-month abatement from November 2020 through February 2021 and has a term of three years, ending on October

Pompano Office has a term of three years, ending on October 31, 2023 .

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

3 unchanged sentences

has elected to account for non-lease components associated with its leases and lease components as a single lease component.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company recognizes a right-of-use asset, which represents the Company’s right to use the underlying asset for the lease term, and

1 unchanged sentence

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

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

SCHEDULE OF LEASE ASSETS AND LIABILITIES

Classification

of December 31, 2021

lease – right-of-use asset

leased assets

obligation – operating lease

obligation – operating lease, net of current portion

lease liabilities

expense is recorded on the straight-line basis.

Rent expense under the 135 Ludlow Ave.

modified lease for the three months ended December

31, 2021 and 2020 was $ 57,105 and $ 55,986 , respectively, and $ 171,315 and $ 167,958 for the nine months ended December 31, 2021 and 2020,

respectively.

Rent expense under the Pompano Office Lease for the three and nine months ended December 31, 2021 was $ 6,144 and $ 17,688 ,

Rent expense under the leases for the three months ended June 30, 2022 and June 30,

2021 was $ 64,578 and

$ 62,877 , respectively.

There was no rent expense under the Pompano Office lease for the three and nine months ended December 31, 2020 as there

was a rent abatement period from November 2020 through February 2021.

Rent expense is recorded in general and administrative expense

in the unaudited condensed consolidated statements of operations.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

2 unchanged sentences

ending March 31,

(excluding the three months ended June 30, 2022)

future minimum lease payments

value of lease payments

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

SCHEDULE OF WEIGHTED-AVERAGE

REMAINING LEASE TERM AND THE WEIGHTED-AVERAGE DISCOUNT RATE

Term and Discount Rate

lease term (years)

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

6 unchanged sentences

Upon settlement of the liability, the Company records either a gain or

As of December 31, 2021, and March 31, 2021, the Company had a liability of $ 38,187 and $ 37,628 , respectively, recorded as a component

of other long-term liabilities.

PREFERRED STOCK

J convertible preferred stock

April 28, 2017, the Company created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction with the

Certificate of Designations (“Series J COD”).

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

issued and outstanding, with a stated value of $ 1,000,000 per share and a par value of $ 0.01 as of December 31, 2021.

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.

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

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

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

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

the closing price of the Common Stock on April 27, 2017.

In connection with the Exchange Agreement, the Company also issued warrants

to purchase 79,008,661 shares of Common Stock at $ 0.1521 per share, and such warrants are classified as liabilities on the accompanying

unaudited condensed consolidated balance sheet as of December 31, 2021 (See Note 11).

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

J Preferred Stock were converted.

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

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

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.

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

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

This proposal was also passed by shareholder vote.

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

of $ 0.1521 per share.

As of June 30, 2022, and March 31, 2022, the Company had a liability of $ 40,551 and $ 38,780 , respectively, recorded as other long-term

DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS

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described in this note below.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

summary of warrant activity is as follows:

SCHEDULE OF WARRANT ACTIVITY

OF WARRANT ACTIVITY

Average Exercise Price

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exercised, forfeited and/or expired, net

Balance at end of

April 28, 2017, the Company entered into an Exchange Agreement with Hakim, the Chairman of the Board, President, and Chief Executive

at end of period

April 28, 2017, the Company entered into an Exchange Agreement with Nasrat Hakim (“Hakim”), the Chairman of the Board, President, and Chief Executive

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

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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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.

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:

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

fair value of the Series J Warrants was calculated using a Black-Scholes model.

The following assumptions were used in the Black-Scholes

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

OF FAIR VALUE OF WARRANTS ISSUED

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term (in years)

changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the nine months ended December 31,

changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the three months ended June 30, 2022

were as follows:

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

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

at March 31, 2022

in fair value of derivative financial instruments - warrants

( 1,523,394 )

at December 31, 2021

at June 30, 2022

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SHAREHOLDERS’ EQUITY

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

Company did not issue any shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the nine months ended December

Company did not issue any shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the three months ended June 30,

In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement.

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.

of June 30, 2022, the Company has issued an aggregate of 5,975,857 shares of Common Stock for net proceeds of $ 469,105 to Lincoln Park

as initial commitment shares.

STOCK-BASED COMPENSATION

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the valuation of such shares being calculated on quarterly basis and equal to the average closing price of the Company’s Common

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the nine months ended December 31, 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.

the nine months ended December 31, 2021, the Company accrued director’s fees totaling $ 67,500 , which will be paid via cash payments

totaling $ 22,500 and the issuance of 969,319 shares of Common Stock.

of December 31, 2021, the Company owed its Directors a total of $ 22,500 in cash payments and 969,319 shares of Common Stock in payment

of director fees totaling $ 67,500 due and owing.

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

end of the current fiscal year.

of June 30, 2022, the Company accrued director’s fees totaling $ 112,500 , which will be paid via cash payments totaling $ 37,500

and the issuance of 1,744,608 shares of Common Stock.

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

to the end of the current fiscal year.

Employee/Consultant Compensation

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

the nine months ended December 31, 2021, the Company issued 1,218,526

shares of Common Stock in payment of salaries

totaling $ 97,500

pursuant to the employment contract of the

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

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

the nine months ended December 31, 2021, the Company accrued salaries totaling $ 581,250 owed to the Company’s President and Chief

the three months ended June 30, 2022, 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 2,274,102 shares of Common Stock.

of December 31, 2021, the Company owed its President and Chief Executive Officer and certain other employees’ salaries totaling

of June 30, 2022, the Company owed its President and Chief Executive Officer and certain other employees’ salaries totaling $ 3,750,000

which will be paid via the issuance of 53,107,446 shares of Common Stock.

the nine months ended December 31, 2021, the Company accrued 2,228,004

shares of Common Stock in payment of consulting

fees totaling $ 153,333 ,

pursuant to engagement contracts with consultants, and with such consulting expenses being earned and accrued over the forty-eight-month

period beginning on January 1, 2018 and ending December 31, 2021.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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A summary of the activity of Company’s 2014 Stock Option Plan

for the nine months ended December 31, 2021 is as follows:

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SCHEDULE OF STOCK OPTION PLAN

for the three months ended June 30, 2022 is as follows:

OF STOCK OPTION PLAN

Exercise Price

Weighted Average

Remaining Contractual Term (in years)

Aggregate Intrinsic

Outstanding at March 31, 2021

Forfeited and expired

Outstanding at December 31, 2021

Exercisable at December 31, 2021

Average Remaining Contractual

Intrinsic Value

at March 31, 2022

at June 30, 2022

aggregate intrinsic value for outstanding options is calculated as the difference between the exercise price of the underlying awards

and the quoted price of the Company’s Common Stock as of December 31, 2021 and March 31, 2021 of $ 0.11 and $ 0.06 , respectively.

and the quoted price of the Company’s Common Stock as of June 30, 2022 and March 31, 2022 of $ 0.09 and $ 0.10 , respectively.

of June 30, 2022, there was $ 44,330 in unrecognized stock based compensation expense that will be recognized over 2.8 years.

CONCENTRATIONS AND CREDIT RISK

customers accounted for approximately 96 % of the Company’s revenues for the nine months ended December 31, 2021.

These two customers

accounted for approximately 85 % and 11 % of revenues each, respectively.

The same two customers accounted for 84 % and 9 % of revenues each,

respectively, for the three months ended December 31, 2021.

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.

customers accounted for approximately 99 % of the Company’s accounts receivable as of December 31, 2021.

customer accounted for approximately 85 % of the Company’s revenues for the three months ended June 30, 2022.

customer accounted for approximately 83 % of the Company’s revenues for the three months ended June 30, 2021.

customers accounted for approximately 90 % of the Company’s accounts receivable as of June 30, 2022.

These two customers accounted

for approximately 80 % and 10 % of accounts receivable each, respectively.

customers accounted for substantially all the Company’s accounts receivable as of March 31, 2021.

These three customers accounted

customers accounted for approximately 91 % the Company’s accounts receivable as of March 31, 2022.

These two customers accounted

for approximately 78 % and 13 % of accounts receivable each, respectively.

suppliers accounted for more than 70 %

of the Company’s purchases of raw materials for the nine months ended December 31, 2021.

These four suppliers accounted for

approximately 55 %, 6 %, 5 %

of purchases each, respectively.

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.

suppliers accounted for approximately 66 % of the Company’s purchases of raw materials for the three months ended June 30, 2022.

These two suppliers accounted for approximately 56 % and 10 % of purchases each, respectively.

suppliers accounted for approximately 52 % of the Company’s purchases of raw materials for the three months ended June 30, 2021.

These two suppliers accounted for approximately 38 % and 14 % of purchases each, respectively.

SEGMENT RESULTS

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management disaggregates a company.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

SCHEDULE OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Operating Income by Segment

OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

the Three Months Ended June 30,

Income by Segment

table below reconciles the Company’s operating income by segment to income from operations before provision for income taxes as

reported in the Company’s unaudited condensed consolidated statement of operations:

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

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Operating income by segment

Corporate unallocated costs

( 2,288,461 )

( 1,691,578 )

Interest income

Interest expense and amortization of debt issuance costs

Depreciation and amortization expense

Significant non-cash items

Change in fair value of derivative instruments

Income from operations before income taxes

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

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

the Three Months Ended June 30,

income by segment

unallocated costs

expense and amortization of debt issuance costs

and amortization expense

non-cash items

in fair value of derivative instruments

from operations before income taxes

RELATED PARTY AGREEMENTS WITH MIKAH PHARMA, LLC

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).

December 3, 2018, the Company executed a development agreement with Mikah Pharma, LLC (“Mikah”), pursuant to which Mikah and the Company will collaborate

to develop and commercialize generic products including formulation development, analytical method development, bioequivalence

studies and manufacture of development batches of generic products.

Mikah was founded in 2009 by Hakim, a related party and the Company’s President, Chief Executive Officer and

Chairman of the Board.

As of March 31, 2021, the Company has incurred costs which are

in excess of advanced payments received to date from Mikah.

This balance due from Mikah was offset, in full, against accrued

interest due and owing to Mikah pursuant to the Secured Promissory Note, dated May 15, 2017, issued by the Company to Mikah.

May 2020, SunGen Pharma LLC (“SunGen”), pursuant to an asset purchase agreement, assigned its rights and obligations under

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TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of New Jersey Net Operating Loss

April 2020, Elite Labs received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of

$ 607,635 relating to New Jersey net operating losses and net tax benefits of $ 338,772 , relating to R&D tax credits.

The Company sold

the net tax benefits approved for sale for total proceeds of $ 946,407 during the nine months ended December 31, 2020.

of New Jersey Net Operating Loss and Research and Development Tax Credit

April 2021, Elite Labs received final approval from the New Jersey Economic Development Authority for the sale of net tax benefits of

$ 796,860 relating to New Jersey net operating losses and net tax benefits of $ 58,490 , relating to research and development tax credits.

The Company sold the net tax benefits approved for sale at a transfer price equal to ninety-three- and one-half cents for every benefit

dollar and incurred transaction fees of $ 12,861 , resulting in net proceeds to the Company of $ 857,379 , during the nine months ended December

Company’s effective tax rate and income tax expense for the three months ended June 30, 2022 was $ 0 .

The Company has evaluated its deferred tax assets, specifically its net operating loss carryovers, for realizability and has

provided a valuation allowance on the majority of its deferred tax assets.

The valuation allowance is the reason that the effective

tax rate and income tax expense are different than the statutory rate of 21 %.

COVID-19 UPDATE

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and Supply Chain

the three and nine months ended December 31, 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 three months ended June 30, 2022, and as of the date of this Quarterly Report on Form 10-Q, the Company has not experienced material,

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

has been able to operate without interruption.

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

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SUBSEQUENT EVENTS

Company has evaluated subsequent events from the balance sheet date through February 11, 2022 and noted no material subsequent

April 8, 2022, the Company entered into an Agreement for Sale and Purchase of Real Estate to purchase the building located at 135-137

Ludlow Avenue in Northvale, NJ.

The Company had leased the entire 35,000

square feet of floor space since 2014.

This property

is occupied by the Company’s Quality Assurance department, commercial manufacturing, packaging, and warehouse.

The closing of the

Agreement for Sale and Purchase of Real Estate occurred on July 1, 2022.

July 1, 2022, the EWB provided a mortgage loan in the amount of $ 2.55

million for the purchase of the above property.

The mortgage loan matures in 10

years and bears

interest at a rate of 4.75% fixed for 5 years then adjustable at WSJP plus 0.5% with floor rate of 4.5% .

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