What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 430 added, 321 removed, 520 unchanged (59% of the section changed)

FINANCIAL STATEMENTS

expenses and other current assets

September 30, 2022

March 31, 2022

Current assets:

and equipment, net of accumulated depreciation of $ 13,641,313 and $ 13,348,565 , respectively

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

lease - right-of-use asset

income tax asset

cash - debt service for NJEDA bonds

AND SHAREHOLDERS’ EQUITY

revenue, current portion

payable, current portion, net of bond issuance costs

payable, current portion

obligation - operating lease, current portion

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Property and equipment, net of accumulated depreciation of $ 13,957,320 and $ 13,348,565 , respectively

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

Operating lease - right-of-use asset

Deferred income tax asset

Other assets:

Restricted cash - debt service for NJEDA bonds

Security deposits

Total other assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

revenue, net of current portion

payable, net of current portion and bond issuance costs

payable, net of current portion and loan costs

obligation - operating lease, net of current portion

financial instruments - warrants

long-term liabilities

Accounts payable

Accrued expenses

Deferred revenue, current portion

Bonds payable, current portion, net of bond issuance costs

Loans payable, current portion

Lease obligation - operating lease, current portion

Total current liabilities

Long-term liabilities:

Shareholders’

Series J convertible

preferred stock;

Deferred revenue, net of current portion

Bonds payable, net of current portion and bond issuance costs

Loans payable, net of current portion and loan costs

Lease obligation - operating lease, net of current portion

Derivative financial instruments – warrants

Other long-term liabilities

Total long-term liabilities

Total liabilities

Shareholders’ equity:

Series J convertible preferred stock;

par value of $ 0.01 ;

50 shares authorized;

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

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

Common stock;

par value $ 0.001 ;

1,445,000,000 shares authorized;

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

1,014,015,081 shares issued as of September 30, 2022 and March 31, 2022;

1,013,915,081 shares outstanding as of September 30, 2022 and March 31, 2022.

Additional paid-in capital

Treasury stock;

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

100,000 shares as of September 30, 2022 and March 31, 2022;

Accumulated deficit

( 138,238,722 )

( 140,059,744 )

shareholders’ equity

liabilities and shareholders’ equity

Total shareholders’ equity

Total liabilities and shareholders’ equity

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

the Three Months Ended June 30,

Manufacturing

of manufacturing

and development

and administrative

compensation through issuance of stock options

and amortization

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

Manufacturing fees

Licensing fees

Total revenue

Cost of manufacturing

Operating expenses:

from operations

income (expense):

in fair value of derivative instruments

expense and amortization of debt issuance costs

(expense) income, net

from operations before income taxes

benefit for sale of state net operating losses and credits

income attributable to common shareholders

net income per share attributable to common shareholders

weighted average Common Stock outstanding

Research and development

General and administrative

Non-cash compensation through issuance of stock options

Depreciation and amortization

Total operating expenses

Income from operations

Other income (expense):

Change in fair value of derivative instruments

Interest expense and amortization of debt issuance costs

Interest income

Other (expense) income, net

Income from operations before income taxes

Income tax expense

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

1,012,228,256

1,011,281,988

weighted average Common Stock outstanding

1,011,762,632

1,010,059,593

Diluted weighted average Common Stock outstanding

1,012,228,256

1,011,281,988

1,011,762,632

1,010,059,593

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

J Preferred Stock

Series J Preferred Stock

Additional Paid-In

Treasury Stock

Shareholders’

as of March 31, 2022

Balance as of March 31, 2022

1,011,381,988

2 unchanged sentences

$ ( 140,059,744 )

compensation through the issuance of employee stock options

at June 30, 2022

Non-cash compensation through the issuance of employee stock options

Balance at June 30, 2022

1,011,381,988

2 unchanged sentences

$ ( 139,753,861 )

J Preferred Stock

Shareholders’

as of March 31, 2021

Non-cash compensation through the issuance of employee stock options

Share issued in payment of director salaries

Shares issued in payment of consultants

Balance at September 30, 2022

1,014,015,081

2 unchanged sentences

$ ( 138,238,722 )

compensation through the issuance of employee stock options

issued in payment of salaries

at June 30, 2021

Series J Preferred Stock

Additional Paid-In

Treasury Stock

Total Shareholders’

Balance as of March 31, 2021

1,009,276,752

2 unchanged sentences

$ ( 148,957,989 )

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

Non-cash compensation through the issuance of employee stock options

Shares issued in payment of salaries

Balance at June 30, 2021

1,011,381,988

$ 164,565,685

$ ( 306,841 )

$ ( 146,568,871 )

Non-cash compensation through the issuance of employee stock options

Balance at September 30, 2021

1,011,381,988

$ 164,569,861

$ ( 306,841 )

$ ( 144,771,894 )

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

PHARMACEUTICALS, INC.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Three Months Ended June 30,

FLOWS FROM OPERATING ACTIVITIES:

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

and amortization

of operating leases - right-of-use assets

in fair value of derivative financial instruments - warrants

compensation accrued

compensation through the issuance of employee stock options

rent expense and lease accretion

in operating assets and liabilities:

For the Six Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Depreciation and amortization

Amortization of operating leases - right-of-use assets

Change in fair value of derivative financial instruments - warrants

( 1,033,894 )

expenses and other current assets

payable, accrued expenses and other current liabilities

obligations - operating leases

cash (used in) provided by operating activities

FLOWS FROM INVESTING ACTIVITIES:

of property and equipment

cash used in investing activities

FLOWS FROM FINANCING ACTIVITIES:

from loans payable

loan payments

cash provided by (used in) financing activities

change in cash and restricted cash

and restricted cash, beginning of period

and restricted cash, end of period

disclosure of cash and non-cash transactions:

paid for interest

of equipment purchases and insurance renewal

issued in payment of Directors fees, salaries and consulting expenses

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

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

Non-cash compensation accrued

Non-cash compensation through the issuance of employee stock options

Non-cash rent expense and lease accretion

Change in operating assets and liabilities:

Accounts receivable

( 1,171,625 )

( 1,175,982 )

( 1,532,756 )

Prepaid expenses and other current assets

Accounts payable, accrued expenses and other current liabilities

Deferred revenue

Lease obligations - operating leases

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

( 5,199,696 )

Net cash used in investing activities

( 5,199,696 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of bond principal

Proceeds from loans payable

Other loan payments

Net cash provided by (used in) financing activities

Net change in cash and restricted cash

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Supplemental disclosure of cash and non-cash transactions:

Cash paid for interest

Financing of equipment purchases and insurance renewal

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

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.

PHARMACEUTICALS, INC.

3 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 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.

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 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

7 unchanged sentences

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, 2022 are not necessarily indicative of the results that may be expected for the entire year.

The results of operations for the six

months ended September 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 June 30, 2022.

component as of September 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 June 30,

Manufacturing

For the Three Months Ended September 30,

For the Six Months Ended September 30,

Licensing fees

Total NDA revenue

Manufacturing fees

Licensing fees

Total ANDA revenue

Total revenue

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.

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

of September 30, 2022, and March 31, 2022, the Company had $ 405,164 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 6).

28 unchanged sentences

and slower growth rates.

of June 30, 2022, the Company did not identify any indicators of impairment.

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

to examination in our major tax jurisdictions are:

As of September 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.

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

The Company did not record unrecognized tax positions for the six months ended September 30, 2022.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and Preferred Shares

29 unchanged sentences

OF EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS

the Three Months Ended June 30,

income - basic

of dilutive instrument on net income

income - diluted

Weighted average

shares of Common Stock outstanding - basic

For the Three Months Ended September 30,

For the Six Months Ended September 30,

Net income - basic

Effect of dilutive instrument on net income

( 1,033,894 )

Net income - diluted

Weighted average shares of Common Stock outstanding - basic

1,012,228,256

effect of stock options and convertible securities

average shares of Common Stock outstanding - diluted

1,011,281,988

1,011,762,632

1,010,059,593

Dilutive effect of stock options and convertible securities

Weighted average shares of Common Stock outstanding - diluted

1,012,228,256

1,011,281,988

1,011,762,632

1,010,059,593

Net income per share

28 unchanged sentences

OF LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

Value Measurement Using

at Fair Value

as of March 31, 2022

in fair value of derivative instruments

as of June 30, 2022

Amount at Fair

Fair Value Measurement Using

Balance as of March 31, 2022

Change in fair value of derivative instruments

Balance as of September 30, 2022

Note 11 for specific inputs used in determining fair value.

24 unchanged sentences

consisted of the following:

September 30, 2022

March 31, 2022

Finished goods

Work-in-progress

Raw materials

Inventory, net

PHARMACEUTICALS, INC.

4 unchanged sentences

OF PROPERTY AND EQUIPMENT

building and improvements

manufacturing, warehouse and transportation equipment

equipment and software

plant and equipment, gross

September 30, 2022

March 31, 2022

Land, building and improvements

Laboratory, manufacturing, warehouse and transportation equipment

Office equipment and software

Furniture and fixtures

Property and equipment, gross

Accumulated depreciation

1 unchanged sentence

( 13,348,565 )

plant and equipment, net

expense was $ 292,748

and $ 309,157

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

Property and equipment, net

expense was $ 316,007 and $ 295,491 for the three months ended September 30, 2022 and 2021, respectively.

and $ 608,755 and $ 604,648 for

the six months ended September 30, 2022 and 2021, respectively.

INTANGIBLE ASSETS

1 unchanged sentence

OF INTANGIBLE ASSETS

application costs

acquisition costs

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).

September 30, 2022

Patent application costs

ANDA acquisition costs

March 31, 2022

Patent application costs *

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

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

of the related patent(s).

PHARMACEUTICALS, INC.

2 unchanged sentences

ACCRUED EXPENSES

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

of September 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

September 30, 2022

March 31, 2022

Salaries and fees payable in common stock

Consultant contract fees

Director dues

EWB loan interest

Employee bonuses

Other accrued expenses

Total 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 %.

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 Company is required to maintain a debt service

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.

following tables summarize the Company’s bonds payable liability:

OF BONDS PAYABLE LIABILITY

bonds payable

Bonds - Series A Notes

September 30, 2022

March 31, 2022

Gross bonds payable

NJEDA Bonds - Series A Notes

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

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

offering costs

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

Bond offering costs

Accumulated amortization

offering costs, net

portion of bonds payable - net of bond offering costs

portions of bonds payable

Bond offering costs, net

Current portion of bonds payable - net of bond offering costs

Current portions of bonds payable

Bonds offering costs to be amortized in the next 12 months

portion of bonds payable, net of bond offering costs

term portion of bonds payable - net of bond offering costs

term portion of bonds payable

Current portion of bonds payable, net of bond offering costs

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

Long term portion of bonds payable

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

term portion of bonds payable, net of bond offering costs

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.

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

expense was $ 3,539 and $ 3,545 for the three months ended September 30, 2022 and 2021, $ 7,085 and $ 7,090 for the six months ended September

30, 2022 and 2021, respectively.

As of September 30, 2022 and March 31, 2022, interest payable was $ 6,744 and $ 7,367 , respectively.

PHARMACEUTICALS, INC.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of bonds for the next five years are as follows:

SCHEDULE OF MATURITIES OF BONDS FOR THE NEXT FIVE YEARS

Years ending March 31,

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,”

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 Term Loan

bears interest at a rate of 7.98 % ( 1.73 % plus the prime rate (“Prime”)) and is repayable over five years , maturing on May

The EWB Revolver bears interest at a rate of ( 7.12 % ( 0.87 % plus Prime)) and matures on May 1, 2027 .

The total transaction costs

associated with the EWB Loans incurred as of September 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.

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 September 30, 2022, the Company is in

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

July 1, 2022, the EWB provided a mortgage loan (“EWB Mortgage Loan”) in the amount of $ 2.55 million for the purchase of the

property at 135-137 Ludlow Avenue, which was formerly a lease held by the Company.

The EWB 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% .

The total transaction costs

associated with the EWB Mortgage Loan incurred as of September 30, 2022, were $ 34,952 , which are being amortized on a monthly basis over

ten years, beginning in July 2022.

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

These covenants

include maintaining a minimum debt coverage ratio of 1.50 to 1.00 tested annually and a minimum trailing 12-month debt coverage ratio

of 1.50 to 1.00.

As of September 30, 2022, the Company was in compliance with each financial covenant .

payable consisted of the following:

OF LOANS PAYABLE

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

September 30, 2022

March 31, 2022

Equipment and insurance financing and mortgage loans payable, between 3.30 % and 12.02 % interest and maturing between October 2022 and June 2032

Current portion of loans payable

portion of loans payable

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

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

Long-term portion of loans payable

interest expense associated with the loans payable was $ 83,686 and $ 17,001 for the three months ended September 30, 2022 and 2021, respectively,

and $ 261,265 and $ 35,598 for the six months ended September 30, 2022 and 2021, respectively.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

principal payments for the next five years are as follows:

SCHEDULE OF LOAN PRINCIPAL PAYMENTS

Years ending March 31,

2023 (excluding the six months ended September 30, 2022)

2028 and thereafter

Total remaining principal balance

DEFERRED REVENUE

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

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.

revenues in the aggregate amount of $ 38,889 as of September 30, 2022, were comprised of a current component of $ 13,333 and a long-term

component of $ 25,556 .

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

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

Leases – 135 Ludlow Ave.

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

“135 Ludlow Ave.

lease”) which began in 2010.

1 unchanged sentence

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

135 Ludlow Ave.

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

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 Ludlow Ave.

lease was terminated on July 1,

2022, when the Company purchased the underlying property.

October 2020, the Company entered into an operating lease for office space in Pompano Beach, Florida (the “Pompano Office Lease”).

1 unchanged sentence

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

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 (refer to Note 7).

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

expense is recorded on the straight-line basis.

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

2021 was $ 64,578 and

$ 62,877 , respectively.

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

Rent expense under the leases for the three months ended September 30, 2022 and 2021

was $ 6,330 and $ 62,877 , respectively, and $ 70,908 and $ 125,754 for the six months ended September 30, 2022 and 2021, respectively.

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

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

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OF FUTURE MINIMUM RENTAL PAYMENTS

ending March 31,

(excluding the three months ended June 30, 2022)

future minimum lease payments

value of lease payments

Years ending March 31,

2023 (excluding the six months ended September 30, 2022)

Total future minimum lease payments

Present value of lease payments

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

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

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

As of September 30, 2022, and March 31, 2022, the Company had a liability of $ 0 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:

OF WARRANT ACTIVITY

Average Exercise Price

at beginning of period

granted pursuant to the issuance of Series J convertible preferred shares

exercised, forfeited and/or expired, net

at end of period

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

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 warrant share balance is 79,008,661 as of September 30, 2022, and March 31, 2022 with a weighted average

exercise price of $ 0.1521 as of September 30, 2022, and March 31, 2022.

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 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.

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

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

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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OF FAIR VALUE OF WARRANTS ISSUED

value of the Company’s Common Stock

Initial exercise

term (in years)

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

September 30, 2022

March 31, 2022

Fair value of the Company’s Common Stock

Initial exercise price

Warrant term (in years)

Risk free rate

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

2022 were as follows:

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

at March 31, 2022

in fair value of derivative financial instruments - warrants

at June 30, 2022

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Balance at March 31, 2022

Change in fair value of derivative financial instruments – warrants

Balance at September 30, 2022

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 three months ended June 30,

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

In addition, there were no shares 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.

of September 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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

of September 30, 2022, the Company accrued director’s fees totaling $ 45,000 , which will be paid via cash payments totaling $ 15,000

and the issuance of 739,449 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.

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 three months ended June 30, 2022, the Company accrued salaries totaling $ 193,750 owed to the Company’s President and Chief

the six months ended September 30, 2022, the Company accrued salaries totaling $ 250,000 owed to the Company’s President and Chief

Executive Officer and certain other employees which will be paid via the issuance of 6,109,277 shares of Common Stock.

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

of September 30, 2022, the Company owed its President and Chief Executive Officer and certain other employees’ salaries totaling

$ 3,875,000 which will be paid via the issuance of 56,300,056 shares of Common Stock.

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

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

for the six months ended September 30, 2022 is as follows:

OF STOCK OPTION PLAN

Exercise Price

Average Remaining Contractual

Intrinsic Value

at March 31, 2022

at June 30, 2022

Weighted Average

Remaining Contractual

Aggregate Intrinsic

Outstanding at March 31, 2022

Outstanding at September 30, 2022

Exercisable at September 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 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.

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

of September 30, 2022, there was $ 38,357 in unrecognized stock based compensation expense that will be recognized over 2.5 years.

CONCENTRATIONS AND CREDIT RISK

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.

customers accounted for approximately 96 %

of the Company’s revenues for the six months ended September 30, 2022.

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

customers accounted for approximately 95 % of the Company’s revenues for the six months ended September 30, 2021.

These two customers

accounted for approximately 85 % and 10 % of revenues each, respectively.

The same two customers accounted for 88 % and 9 % of revenues each,

respectively, for the three months ended September 30, 2021.

customers accounted for approximately 97 % of the Company’s accounts receivable as of September 30, 2022.

These two customers accounted

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for approximately 78 % and 13 % of accounts receivable 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.

supplier accounted for approximately 62 % of the Company’s purchases of raw materials for the six months ended September 30, 2022.

supplier accounted for approximately 61 % of the Company’s purchases of raw materials for the six months ended September 30, 2021.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT RESULTS

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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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OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

the Three Months Ended June 30,

Income by Segment

For the Three Months Ended September 30,

For the Six Months Ended September 30,

Operating Income by Segment

Operating income by Segment

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

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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

For the Three Months Ended September 30,

For the Six Months Ended September 30,

Operating income by segment

Corporate unallocated costs

( 1,086,925 )

( 1,570,128 )

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

RELATED PARTY AGREEMENTS WITH MIKAH PHARMA, LLC

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.

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 $ 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 Secured Promissory Note, dated May 15, 2017, issued by the Company to

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 %.

Company’s effective tax rate was 11.5 % and income tax expense for the six months ended September 30, 2022 was $ 11,587 .

The Company’s

effective tax rate was 10.75 % and income tax expense was $ 4,000 for the six months ended September 30, 2021.

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

the six months ended September 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

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SUBSEQUENT EVENTS

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% .

November 2, 2022, in a press release, the Company reported positive results from pivotal fed and fasted bioequivalence studies for an

undisclosed extended-release generic drug product in a class of medications called dopamine agonists.

The results indicate that the generic

product is bioequivalent to the branded product.

studies were single-dose crossover comparative bioavailability studies in healthy male and female volunteers in both the fed and fasting

The results indicate that the generic product is bioequivalent to the branded

The Company is compiling the data for this product to file an Abbreviated New

Drug Application with the US Food and Drug Administration.

November 10, 2022, in an 8-K, the Company reported the termination of the License, Supply, and Distribution Agreement with Lannett Company,

Inc for Vigabatrin, 500 mg.

effective as of November 9, 2022.

marketing rights will return at that time to Elite.

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