What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-02-14 · 107 added, 158 removed, 99 unchanged (73% of the section changed)

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

following discussion of our financial condition and results of operations the three and nine months ended December 31, 2021 and 2020

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

included elsewhere in this report.

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

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

Actual results and the timing of events could differ materially

from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A.

following discussion of our financial condition and results of operations for the three months ended June 30, 2022 and June 30, 2021

should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that

are included elsewhere in this report.

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

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

Actual results and the timing of events

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

those set forth under Item 1A.

Risk Factors appearing in our Annual Report on Form 10-K for the year ended March 31, 2022.

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.

words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”

“ongoing,” “expect,” “believe,” “intend,” “may,” “will,”

“should,” “could,” and similar expressions to identify forward-looking statements.

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

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commercial sale:

HCl 37.5mg tablets (“Phentermine 37.5mg”)

HCl 37.5mg tablets

(“Phentermine

Phendimetrazine

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HCl 50mg tablets

2.5mg and 5mg capsules (“Isradipine 2.5mg” and “Isradipine 5mg”)

2.5mg and 5mg capsules

2.5mg” and “Isradipine 5mg”)

Cardiovascular

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and Codeine Phosphate

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.

Company received approval on September 10, 2019 from the FDA of an ANDA for a generic version of Tylenol® with Codeine (acetaminophen

and codeine phosphate).

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.

Company received approval on June 27, 2022 from the FDA of an ANDA for a generic version of Sabril® (Vigabatrin USP) 500 mg powder

for solution packet.

Vigabatrin is an antiepileptic drug indicated for refractory complex

partial seizures and used as an adjunctive therapy in patients who have inadequately responded to several alternative treatments.

are evaluating potential commercial opportunities.

Company received approval on April 4, 2022 from the FDA of an ANDA for a generic version of Doxycycline (doxycycline hyclate) 100mg tablets.

Doxycycline hyclate is an antibiotic that is used to treat

a wide variety of bacterial infections .

This product was co-developed and co-owned by

Elite and Praxgen Pharmaceuticals LLC, formerly

SunGen Pharma LLC.

We are evaluating potential commercial opportunities.

Accounting Policies and Estimates

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.

and analysis of the Company’s financial condition and operating results require our management to make judgments, assumptions and estimates that

affect the amounts reported in the Company’s unaudited condensed consolidated financial statements and accompanying notes.

Management bases its

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estimates and such differences may be material.

were no significant changes during the three months ended December 31, 2021 to the items that we disclosed as our significant accounting

were no significant changes during the three months ended June 30, 2022 to the items that we disclosed as our significant accounting

policies and estimates described in “Note 1, Summary of Significant Accounting Policies” to the Company’s financial

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necessarily indicative of future results.

months ended December 31, 2021 compared to December 31, 2020

months ended June 30, 2022 compared to June 30, 2021

Cost of revenue and Gross profit:

For the Three Months Ended December 31,

Manufacturing fees

Licensing fees

Total revenue

Cost of manufacturing

Gross profit - percentage

revenues for the three-month period ended December 31, 2021 increased by $3 million or 48%, to $9.0 million, as compared to $6.0 million,

for the corresponding period of the prior year, primarily due to strong sales of Amphetamine IR and ER tablets during the three-month

period ended December 31, 2021 as compared to the comparable period of the prior fiscal year.

the Three Months Ended June 30,

Manufacturing

fees increased by $2.8 million, or 58%, primarily due to strong sales of Amphetamine IR and ER tablets during the three-month period

ended December 31, 2021 as compared to the comparable period of the prior fiscal year.

fees increased by $0.1 million, or 9%.

This increase is primarily due to strong sales of Amphetamine IR and ER tablets during the three

months ended December 31, 2021 as compared to the comparable period of the prior fiscal year.

of manufacturing

profit - percentage

revenues for the three-month period ended June 30, 2022 increased by $0.6 million or 9%, to $7.7 million, as compared to $7.1 million,

for the corresponding period of the prior year, primarily due to the increased sales of Amphetamine IR Tablets and Amphetamine ER Capsules

during the three month period ended June 30, 2022 as compared to the comparable period of the prior fiscal year.

Manufacturing

fees increased by $0.6 million, or 10%, primarily due to increased sales of Amphetamine IR Tablets and Amphetamine ER Capsules during

the three month period ended June 30, 2022 as compared to the comparable period of the prior fiscal year.

fees increased by less than $0.1 million, or 3%.

This increase is primarily due to licensing fees earned from the sale of Amphetamine

ER Capsules and Amphetamine IR Tablets during the three months ended June 30, 2022 as compared to the comparable period of the prior

of revenue consists of manufacturing and assembly costs.

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to $3.5 million for the corresponding period in the prior fiscal year.

This increase was due to higher revenues during the three months

ended December 31, 2021, as compared to the comparable period of the prior fiscal year.

gross profit margin was 45% during the three months ended December 31, 2021 as compared to 56% during the comparable period of the prior

For the Three Months Ended December 31,

Operating expenses:

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

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, 2021 decreased by $0.2 million, or 9%, to $2.2 million as compared

to $2.4 million for the corresponding period in the prior fiscal year.

and development costs for the three months ended December 31, 2021 were $0.9 million, a decrease of $0.3 million, or 23%, from $1.2 million

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

and administrative expenses for the three months ended December 31, 2021 were $0.9 million, an increase of $0.1 million or 13% from $0.8

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

compensation expense for the three months ended December 31, 2021 and 2020 was less than $0.1 million.

and amortization expenses for the three months ended December 31, 2021 were $0.3 million, which remained consistent from $0.3 million

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

a result of the foregoing, our income from operations for the three months ended December 31, 2021 was $1.8 million, compared to income

from operations of $1.0 million for the comparable period of the prior fiscal year.

For the Three Months Ended December 31,

Other income, net:

Change in fair value of derivative instruments

Interest expense and amortization of debt issuance costs

Gain on sale of fixed assets

Interest income

Other income, net

income, net for the three months ended December 31, 2021 was $0.5 million, a decrease of $0.6 million from the other income, net of $1.0

million for the comparable period of the prior fiscal year.

The decrease in other income was due to income relating to changes in the

fair value of our outstanding derivative warrants during the three months ended December 31, 2021.

Please note that the change in the

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

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

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

Please see Note

11 to the Unaudited Condensed Consolidated Financial Statements above.

a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the three months ended December

31, 2021 was $2.3 million, compared to net income of $2.0 million for the comparable period of the prior fiscal year.

months ended December 31, 2021 compared to December 31, 2020

Cost of revenue and Gross profit:

For the Nine Months Ended December 31,

Manufacturing fees

Licensing fees

Total revenue

Cost of manufacturing

Gross profit - percentage

revenues for the nine-month period ended December 31, 2021 increased by $3.6 million or 17%, to $24.6 million, as compared to $21.0 million,

for the corresponding period of the prior year, primarily due strong sales of Amphetamine IR and ER tablets during the nine-month period

ended December 31, 2021 as compared to the comparable period of the prior fiscal year.

Manufacturing

fees for the nine-month period ended December 31, 2021 were $20.6 million, an increase of $2.9 million, or 17%, from $17.7 million primarily

due to strong sales of Amphetamine IR and ER tablets during the nine months ended December 31, 2021 as compared to the comparable period

of the prior year.

fees increased by $0.6 million, or 19%.

This increase is primarily due to strong sales of Amphetamine IR and ER tablets during the nine

months ended December 31, 2021 as compared to the comparable period of the prior fiscal year.

of revenue consists of manufacturing and assembly costs.

Our costs of revenue for the nine-month period ended December 31, 2021 were

$13.2 million, an increase of $2.2 million, or 20%, from $11.0 million of such fees for the comparable period of the prior year.

gross profit margin was 46% during the nine months ended December 31, 2021 as compared to 48% during the comparable period of the prior

For the Nine Months Ended December 31,

This increase was due in large part to an increase in manufacturing

revenues, and also due to an improved margin on products sold during the three months ended June 30, 2022, as compared to the comparable

period of the prior fiscal year.

gross profit margin was 52% during the three months ended June 30, 2022 as compared to 50% during the comparable period of the prior

the Three Months Ended June 30,

and development

and administrative

and amortization

operating expenses

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

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, 2021 increased by $0.3 million, or 5%, to $7.1 million as compared

to $6.8 million for the corresponding period in the prior fiscal year.

and development costs for the nine months ended December 31, 2021 were $3.3 million, which was virtually unchanged from approximately

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

amortization expenses.

Operating expenses for the three months ended June 30, 2022 increased by $0.4 million, or 15%, to $3.0

million as compared to $2.6 million for the corresponding period in the prior fiscal year.

and development costs for the three months ended June 30, 2022 were $1.0 million, a decrease of $0.2 million, or 21%, from approximately

$1.2 million of such costs for the comparable period of the prior year.

and administrative expenses for the nine months ended December 31, 2021 were $2.9 million, an increase of $0.4 million, or 18% from $2.5

million of such costs for the comparable period of the prior year due to increased costs and headcounts relating to regulatory compliance

and laboratory activities.

compensation expense for the nine months ended December 31, 2021 and 2020 was less than $0.1 million.

and amortization expenses for the nine months ended December 31, 2021 were $0.9 million, which was virtually unchanged from $1.0 million

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

development activities during the three month period ended June 30, 2022 as compared to the comparable period of the prior fiscal year.

and administrative expenses for the three months ended June 30, 2022 were $1.7 million, an increase of $0.6 million, or 60% from $1.1

million of such costs for the comparable period of the prior year due to increased spending in professional expense.

compensation expense for the three months ended June 30, 2022 and June 30, 2021 was less than $0.1 million.

and amortization expenses for the three months ended June 30, 2022 were $0.3 million, which was virtually unchanged from $0.3 million

in such costs for the comparable period of the prior fiscal year.

a result of the foregoing, our income from operations for the nine months ended December 31, 2021 was $4.2 million, compared to income

from operations of $3.2 million for the comparable period of the prior fiscal year.

For the Nine Months Ended December 31,

Other income, net:

Change in fair value of derivative instruments

Interest expense and amortization of debt issuance costs

Gain on sale of fixed assets

Interest income

Other income, net

income, net for the nine months ended December 31, 2021 was $1.4 million, a decrease of $0.1 million from the other income, net of $1.5

a result of the foregoing, our income from operations for the three months ended June 30, 2022 was $1.0 million, compared to income from

operations of $1.0 million for the comparable period of the prior fiscal year.

income (expense):

the Three Months Ended June 30,

income (expense):

in fair value of derivative instruments

$ (1,114,604 )

expense and amortization of debt issuance costs

income (expense), net

$ (1,285,411 )

income (expense) for the three months ended June 30, 2022 was $0.7 million, a decrease of $1.3 million from the other income, net of

$0.6 million for the comparable period of the prior fiscal year.

The decrease in other income was due to income relating to changes in the

fair value of our outstanding derivative warrants during the nine-month period ended December 31, 2021.

Please note that the change in

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

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

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

see Note 11 to the Unaudited Condensed Consolidated Financial Statements above.

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

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

to changes in the fair value of our outstanding derivative warrants during the three months ended June 30, 2022.

Please note that

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

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

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

Company’s Common Stock.

Please see Note 11 to the Unaudited Condensed Consolidated Financial Statements above.

The increase in

interest expense was primarily attributable to the increased interest payments related to the loan the Company obtained from East

a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the three months ended June

30, 2022 was $0.3 million, compared to net income $1.5 million for the comparable period of the prior fiscal year.

and Capital Resources

December 31, 2021

March 31, 2021

Current assets

Current liabilities

Working capital

working capital (total current assets less total current liabilities) increased by $12.6 million from $12.2 million as of March 31, 2022

to $11.6 million as of December 31, 2021, with such increase being primarily related to the net income of $6.5 million and a net positive

cash flow of $4.1 million achieved during the nine months ended December 31, 2021.

to $24.8 million as of June 30, 2022, with such increase being primarily related to the cash proceeds of $12.0 million from the new loan

during the three months ended June 30, 2022.

of Cash Flows:

For the Nine Months Ended December 31,

Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

cash provided by operating activities for the nine months ended December 31, 2021 was $4.9 million, which included net income of $6.5

million and increases in non-cash expenses totaling $0.2 million, offset by net increases in assets and decreases in liabilities totaling

$(1.8) million.

cash used in investing activities for the nine months ended December 31, 2021 was comprised of purchases of property and equipment of

$0.2 million.

cash used in financing activities was $0.6 million for the nine months ended December 31, 2021 which consisted of loan and bond payments.

the Three Months Ended June 30,

cash (used in) provided by operating activities

cash used in investing activities

cash provided by (used in) financing activities

cash used in operating activities for the three months ended June 30, 2022 was $(0.6) million, which included net income of $0.3 million

and increases in non-cash expenses totaling $1.0 million, offset by net changes in assets and liabilities totaling $1.9 million.

cash used in investing activities for the three months ended June 30, 2022 was comprised of purchases of property and equipment of less

than $0.1 million.

cash provided by financing activities was $11.9 million for the three months ended June 30, 2022 which proceeds from loan issuances totaling

$12.0 million, offset by loan payments totaling $0.1 million.

Park Capital – July 8, 2020 Purchase Agreement

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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

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 for net proceeds totaling $732.

the three months ended June 30, 2022 and June 30, 2021, respectively, there were no shares sold to Lincoln Park pursuant to the 2020

LPC Purchase Agreement.

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

2020 LPC Purchase Agreement.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 2. Management’s Discussion and Analysis