What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 513 added, 326 removed, 654 unchanged (56% of the section changed)

FINANCIAL STATEMENTS

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

June 30, 2023

March 31, 2023

September 30,

Current assets:

Accounts receivable, net of allowance for expected credit losses of $ 100,000 and $ 0 as of June 30, 2023 and March 31, 2023, respectively

Accounts receivable, net of allowance for expected credit losses of $ 125,000 and $ 0 as of September 30, 2023 and March 31, 2023, respectively

Prepaid expenses and other current assets

29 unchanged sentences

1,445,000,000 shares authorized;

1,014,015,081 shares issued and 1,013,915,081 shares outstanding as of June 30, 2023;

1,014,015,081 shares issued and 1,013,915,081 shares outstanding as of March 31, 2023

1,014,015,081 shares issued and 1,013,915,081 shares outstanding as of September 30, 2023 and March 31, 2023

Additional paid-in capital

Treasury stock;

100,000 shares as of June 30, 2023 and March 31, 2023, respectively, at cost

100,000 shares as of September 30, 2023 and March 31, 2023, respectively, at cost

Accumulated deficit

3 unchanged sentences

Total liabilities and shareholders’ equity

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

PHARMACEUTICALS, INC.

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

Manufacturing fees

10 unchanged sentences

Other income (expense):

Change in fair value of derivative instruments

Change in fair value of derivative financial instruments - warrants

( 2,468,350 )

( 2,657,717 )

Change in fair value of stock-based liabilities

( 2,066,820 )

Interest expense and amortization of debt issuance costs

1 unchanged sentence

Other expense, net

Income before income taxes

Income tax expense

( 4,658,288 )

( 4,963,551 )

(Loss) income before income taxes

( 2,732,783 )

( 1,436,022 )

Income tax benefit (expense)

Net income attributable to common shareholders

4 unchanged sentences

1,012,228,256

1,013,915,081

1,011,762,632

Diluted weighted average Common Stock outstanding

1 unchanged sentence

1,012,228,256

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

PHARMACEUTICALS, INC.

1,016,944,870

1,011,762,632

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Series J Preferred Stock

Additional Paid-In

Treasury Stock

Total Shareholders’

Balance as of April 1, 2023

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'

J Preferred Stock

Shareholders’

Balance as of

April 1, 2023

1,013,915,081

2 unchanged sentences

$ ( 136,497,898 )

Non-cash compensation through the issuance of employee stock options

Balance at June 30, 2023

Non-cash compensation through

the issuance of employee stock options

at June 30, 2023

1,013,915,081

2 unchanged sentences

$ ( 135,356,089 )

Series J Preferred Stock

Additional Paid-In

Treasury Stock

Total Shareholders’

Balance as of April 1, 2022

Non-cash compensation through

the issuance of employee stock options

at September 30, 2023

1,013,915,081

2 unchanged sentences

$ ( 120,421,488 )

Non-cash compensation through the issuance of employee stock options

Balance at June 30, 2022

J Preferred Stock

Shareholders’

Balance as of

April 1, 2022

1,011,381,988

2 unchanged sentences

$ ( 140,059,744 )

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

Non-cash compensation through

the issuance of employee stock options

at June 30, 2022

1,011,381,988

$ 164,582,549

$ ( 306,841 )

$ ( 139,753,861 )

Non-cash compensation through

the issuance of employee stock options

Share issued in payment of

director salaries

Shares issued in payment of

at September 30, 2022

1,014,015,081

$ 164,722,951

$ ( 306,841 )

$ ( 138,238,722 )

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash used in operating activities:

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

Depreciation and amortization

2 unchanged sentences

Change in fair value of derivative financial instruments - warrants

Change in fair value of stock-based liabilities

Non-cash compensation through the issuance of employee stock options

Non-cash rent expense and lease accretion

Deferred income tax asset

( 17,261,347 )

Change in operating assets and liabilities:

2 unchanged sentences

( 1,171,625 )

( 5,673,668 )

Prepaid expenses and other current assets

2 unchanged sentences

Lease obligations - operating leases

Net cash used in operating activities

Net cash (used in) provided by operating activities

( 2,945,753 )

1 unchanged sentence

Purchase of property and equipment

( 5,199,696 )

Net cash used in investing activities

( 5,199,696 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from loans payable

Payment of bond principal

Proceeds from related party loans payable

Proceeds from loans payable

Loan payments

6 unchanged sentences

Cash paid for income taxes

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

PHARMACEUTICALS, INC.

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

The accompanying notes

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

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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of Presentation

accompanying unaudited condensed consolidated financial statements of the Company are presented in conformity with accounting

principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary,

All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain information or

footnote disclosures normally included in condensed financial statements prepared in accordance with GAAP have been condensed or

omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.

Accordingly, they do not include all the

information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.

the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments,

consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results

and cash flows for the periods presented.

The accompanying unaudited condensed consolidated financial statements should be read in

conjunction with the Company’s Form 10-K as filed with the SEC on June 29, 2023.

The interim results for the three months

ended June 30, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending March 31, 2024 or for

any future periods.

accompanying unaudited condensed consolidated financial statements of the Company are presented in conformity with accounting principles

generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.

The unaudited

condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Elite Labs.

All significant

intercompany accounts and transactions have been eliminated in consolidation.

Certain information or footnote disclosures normally included

in condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations

of the SEC for interim financial reporting.

Accordingly, they do not include all the information and footnotes necessary for a comprehensive

presentation of financial position, results of operations, or cash flows.

In the opinion of management, the accompanying unaudited condensed

consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation

of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed consolidated

financial statements should be read in conjunction with the Company’s Form 10-K as filed with the SEC on June 29, 2023.

results for the six months ended September 30, 2023 are not necessarily indicative of the results to be expected for the fiscal year

ending March 31, 2024 or for any future periods.

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

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Please see Note 15 for further details.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company generates revenue from manufacturing and licensing fees and direct sales to pharmaceutical distributors for pharmacies and institutions.

Company generates revenue from manufacturing and licensing fees and sales of generic pharmaceuticals bearing the Elite label to pharmaceutical distributors for pharmacies and institutions.

Manufacturing fees include the development of pain management products, manufacturing of a line of generic pharmaceutical products with

approved ANDA, through the manufacture of formulations and the development of new products.

Revenues earned from the sale of Elite label products are recorded at their net realizable value which consists of

gross amounts invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts

and program rebates, as applicable.

Licensing fees include the commercialization

1 unchanged sentence

including co-development projects, joint ventures and other collaborations.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

27 unchanged sentences

the contract, at which time the performance obligation is deemed to be completed.

The Company is primarily responsible for fulfilling the promise to provide the product, is responsible to ensure that the

product is produced in accordance with the related supply agreement and bears risk of loss while the inventory is in-transit to the commercial

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

The Company is primarily responsible for fulfilling

the promise to provide the product, is responsible to ensure that the product is produced in accordance with the related supply agreement

and bears risk of loss while the inventory is in-transit to the commercial partner.

Revenue is measured as the amount of consideration

the Company expects to receive in exchange for transferring products to a customer.

Company enters into licensing and development agreements, which may include multiple revenue generating activities, including milestones

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conditions and internally approved pricing guidelines related to the performance obligations.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company recognizes revenue from non-refundable upfront payments at a point in time, typically upon fulfilling the delivery of the associated

7 unchanged sentences

of a reversal of revenue, which typically occurs near or upon achievement of the event.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

management judgment is required to determine the level of effort required under an arrangement and the period over which the Company

10 unchanged sentences

None of the Company’s contracts contained a significant financing

component as of June 30, 2023.

component as of September 30, 2023.

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

Sale of product under the Elite label

Company began direct sales of products under the Company’s own label on April 1, 2023.

2 unchanged sentences

With this transition, however, a large portion of the manufacturing and license fees now reported will be replaced

with revenues from direct sales of pharmaceutical products to distributors for pharmacies and institutions.

with revenues from sales of Elite labeled pharmaceutical products to distributors for pharmacies and institutions.

The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual

shipping terms, at which time the performance obligation is deemed to be completed.

The Company is primarily responsible for fulfilling

the promise to deliver the product and bears risk of loss while the inventory is in-transit to the purchaser.

Revenue is measured as the

amount of consideration earned from the sale of Elite labeled pharmaceutical products are recorded at their net realizable value which

consists of gross amounts invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts and program

rebates, as applicable.

Disaggregation

2 unchanged sentences

in time for all performance obligations.

The table also includes a reconciliation of the disaggregated revenue with the reportable

The table also includes a reconciliation of the disaggregated revenue with the reportable segments:

OF DISAGGREGATION OF REVENUE

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

Manufacturing fees

Licensing fees

Total NDA revenue

Manufacturing fees

Licensing fees

Total ANDA revenue

Total revenue

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

are disclosed within Note 15.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash consists of cash on deposit with banks and money market instruments.

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

disclosed within Note 15.

consists of cash on deposit with banks and money market instruments.

The Company places its cash with high-quality, U.S.

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

of June 30, 2023, and March 31, 2023, the Company had $ 415,430 and $ 412,434 , of restricted cash, respectively, related to debt service

financial institutions

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

of September 30, 2023, and March 31, 2023, the Company had $ 422,750 and $ 412,434 , of restricted cash, respectively, related to debt service

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

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Receivable and Allowance for Expected Credit Losses

receivable are comprised of balances due from customers, net of estimated allowances for expected credit losses.

receivable are comprised of balances due from customers, net of estimated allowances for expected credit losses, and other contractual deductions, including, without limitation, chargebacks, discounts and program rebates.

In determining collectability,

1 unchanged sentence

allowance for expected credit losses is based on the probability of future collection under the current expected credited loss (“CECL”)

impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Assets,

which was adopted by the Company on February 1, 2023, as discussed below within Recently Adopted Accounting Pronouncements.

CECL impairment model, the Company determines its allowance by applying a loss-rate method based on an aging schedule using the Company’s

historical loss rate.

The Company also considers reasonable and supportable current information in determining its estimated loss rates,

such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience.

impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement

of Credit Losses on Financial Assets, which was adopted by the Company on February 1, 2023, as discussed below within Recently Adopted

Accounting Pronouncements.

Under the CECL impairment model, the Company determines its allowance by applying a loss-rate method based

on an aging schedule using the Company’s historical loss rate.

The Company also considers reasonable and supportable current information

in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’

credit risk and historical loss experience.

The adequacy of the allowance is evaluated on a regular basis.

Account balances are written off after all means of collection are exhausted

and the balance is deemed uncollectible.

Account balances are written

off after all means of collection are exhausted and the balance is deemed uncollectible.

Subsequent recoveries are credited to the allowance.

Changes in the allowance are recorded as

adjustments to credit losses in the period incurred.

Changes in the allowance are recorded as adjustments to credit losses in the period incurred.

to April 1, 2023, trade receivables were presented net of allowance for expected credit losses based on the credit risk of specific clients,

19 unchanged sentences

ANDAs are capitalized accordingly.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company tests its intangible assets for impairment at least annually (as of March 31st) and whenever events or circumstances change that

8 unchanged sentences

and slower growth rates.

the year ended March 31, 2023, the Company determined indicators of impairment occurred and recorded impairment expense of $ 292,807

on its ANDAs and patents.

There were no such impairment recorded during the period ended June 30, 2023.

following table summarizes the Company’s intangible assets as of and for the periods ended June 30, 2023 and March 31,

the year ended March 31, 2023, the Company determined indicators of impairment occurred and recorded impairment expense of $ 292,807 on

its ANDAs and patents.

There were no such impairments recorded during the period ended September 30, 2023.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following table summarizes the Company’s intangible assets as of and for the periods ended September 30, 2023 and March 31, 2023:

OF INTANGIBLE ASSETS

June 30, 2023

September 30, 2023

Patent application costs

27 unchanged sentences

These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution .

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company operates in multiple tax jurisdictions within the United States of America.

1 unchanged sentence

tax jurisdiction until the applicable statutes of limitation expire.

As of June 30, 2023, a summary of the tax years that remain subject

to examination in our major tax jurisdictions are:

As of September 30, 2023, a summary of the tax years that remain

subject to examination in our major tax jurisdictions are:

United States – Federal, 2016 and forward.

The Company did not record unrecognized

tax positions for the three months ended June 30, 2023.

The Company did not record

unrecognized tax positions for the six months ended September 30, 2023.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and Preferred Shares

16 unchanged sentences

payments to nonemployees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless

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

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

for forfeitures as they occur.

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

2 unchanged sentences

Company’s Common Stock.

Company records earned but unissued stock-based compensation in accrued expenses.

The Company records earned but unissued stock-based compensation in accrued expenses.

the quarter ended December 31, 2022, the Company entered into an agreement with Pyros Pharmaceuticals, Inc.

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during the period.

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

PHARMACEUTICALS, INC.

The computation of diluted net income per share does not include the change in fair value of derivative instruments

or the conversion of securities that would have an antidilutive effect.

As the average market price

of common stock for the three and six months ended September 30, 2023 and 2022 did not exceed the exercise price of the warrants, the

potential dilution from the warrants converting into 79,008,661 shares of common stock for all periods have been excluded from the number

of shares used in calculating diluted net income per share as their inclusion would have been antidilutive.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following is the computation

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

NOTES 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

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

Net income - basic

Effect of dilutive instrument on net income

Net income - basic and diluted

Net income - diluted

Weighted average shares of Common Stock outstanding - basic

1 unchanged sentence

1,012,228,256

1,013,915,081

1,011,762,632

Dilutive effect of stock options and convertible securities

2 unchanged sentences

1,012,228,256

1,016,944,870

1,011,762,632

Net income per share

11 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.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

on a Recurring Basis

5 unchanged sentences

Balance as of April 1, 2023

Change in fair value of derivative instruments

Balance as of June 30, 2023

Change in fair value of derivative financial

instruments - warrants

Balance as of September 30, 2023

Fair Value Measurement

1 unchanged sentence

Balance as of April 1, 2022

Change in fair value of derivative instruments

Balance as of June 30, 2022

No amounts are included in the calculation because their effects are anti-dilutive

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Change in fair value of derivative financial

instruments - warrants

Balance as of September 30, 2022

Note 11 for specific inputs used in determining fair value.

32 unchanged sentences

in quantitatively derived results, or other relevant factors to further inform the Company’s estimate of the allowance for credit

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Additionally,

5 unchanged sentences

estimation techniques.

Company has historical collections of customer payments averaging approximately 99.96 % as of June 30, 2023.

The Company recorded revenue

during the three months ended June 30, 2023 of approximately $ 9.0 million and recorded an estimated allowance of $ 100,000 , which is approximately

1.2 % of total revenues during the three months ended June 30, 2023.

The Company estimated the allowance using considerations such as

customer collections, and estimated credit losses.

The Company believes the 1.2 % credit allowance is appropriate given its historical

customer collections.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company has historical collections of customer payments averaging approximately 99.96 % as of September 30, 2023.

The Company recorded

revenue for the six months ended September 30, 2023 of approximately $ 23.1 million and recorded an estimated allowance of $ 125,000 ,

which is approximately 0.54 % of total revenues during for the six months ended September 30, 2023.

The Company estimated the allowance

using considerations such as customer collections, and estimated credit losses.

The Company believes the 0.54 % credit allowance is appropriate

given its historical customer collections.

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

3 unchanged sentences

consisted of the following:

June 30, 2023

March 31, 2023

September 30,

Finished goods

4 unchanged sentences

OF PROPERTY AND EQUIPMENT

June 30, 2023

March 31, 2023

September 30,

Land, building and improvements

7 unchanged sentences

Property and equipment, net

expense was $ 328,282 and $ 292,748 for the three months ended June 30, 2023 and 2022, respectively.

PHARMACEUTICALS, INC.

expense was $ 327,240 and $ 316,007 for the three months ended September 30, 2023 and 2022, respectively, and $ 655,522 and $ 608,755 for

the six months ended September 30, 2023 and 2022, respectively.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACCRUED EXPENSES

of June 30, 2023 and March 31, 2023, the Company’s accrued expenses consisted of the following:

of September 30, 2023 and March 31, 2023, the Company’s accrued expenses consisted of the following:

OF ACCRUED EXPENSES

June 30, 2023

March 31, 2023

September 30,

Salaries and fees payable in common stock

Salaries and fees payable

Co-development profit split

Consultant contract fees

15 unchanged sentences

OF BONDS PAYABLE LIABILITY

June 30, 2023

March 31, 2023

September 30,

Gross bonds payable

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

expense was $ 3,548 and $ 3,546 for the three months ended June 30, 2023 and 2022, respectively.

Interest payable was $ 6,744 as of June

30, 2023 and March 31, 2023.

Interest expense was $ 20,232 and $ 22,101 for the three months ended June 30, 2023 and 2022, respectively.

PHARMACEUTICALS, INC.

expense was $ 3,548 and $ 3,539 for the three months ended September 30, 2023 and 2022, $ 7,096 and $ 7,085 for the six months ended September

30, 2023 and 2022, respectively.

Interest payable was $ 6,067 and $ 6,744 as of September 30, 2023 and March 31, 2023, respectively.

expense was $ 19,553 and $ 21,476 for the three months ended September 30, 2023 and 2022, respectively, and $ 39,785 and $ 43,577 for the six months ended September 30, 2023 and 2022, respectively.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of bonds for the next five years are as follows:

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 9.73 %

plus the prime rate (“Prime”)) and is repayable over five

years , maturing on May

The EWB Revolver bears interest at a rate of ( 8.87 %

plus Prime)) and matures on May

The total transaction costs associated with the EWB Term Loan incurred as of March 31, 2023, were $ 40,120 ,

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

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 March 31, 2023, the principal and interest on the

EWB Term Loan has been paid in full by the Company and the EWB Loan Agreement is terminated.

In place of the EWB Term Loan, the Company has entered into a collateralized promissory note with individual lenders

with rates comparable to the EWB Term Loan but with less restrictive covenants (a "Promissory Note”).

As of June 2, 2023, a

Promissory Note was placed with Nasrat Hakim, CEO and Chairman of the Board of Directors, for $ 3,000,000 .

The Promissory Note has an interest

rate of 9 % for the first year and 10 % for an optional second year and the proceeds will be used for working capital and other business

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 9.73 % ( 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 ( 8.87 % ( 0.87 % plus Prime)) and matures on May 1, 2027 .

The total transaction costs

associated with the EWB Term Loan incurred as of March 31, 2023, 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 March 31, 2023, the principal and interest

on the EWB Term Loan has been paid in full by the Company and the EWB Loan Agreement is terminated.

place of the EWB Term Loan, the Company has entered into a collateralized promissory note with individual lenders with rates comparable

to the EWB Term Loan but with less restrictive covenants (a “Promissory Note”).

As of June 2, 2023, a Promissory Note was

placed with Nasrat Hakim, CEO and Chairman of the Board of Directors, for $ 3,000,000 .

The Promissory Note has an interest rate of 9 %

for the first year and 10 % for an optional second year and the proceeds will be used for working capital and other business purposes.

payable consisted of the following:

OF LOANS PAYABLE

June 30, 2023

March 31, 2023

September 30,

Mortgage loan payable 4.75 % interest and maturing June 2032

Equipment and insurance financing loans payable, between 7.10 % and 12.02 % interest and maturing between September 2023 and October 2025

Equipment and insurance financing loans payable, between 7.10 % and 12.02 % interest and maturing between December 2023 and October 2025

Current portion of loans payable

Long-term portion of loans payable

interest expense associated with the loans and mortgage payable was $ 77,238 and $ 177,579 for the three months ended June 30, 2023 and

2022, respectively.

and mortgage principal payments for the next five years are as follows:

interest expense associated with the loans payable was $ 93,832

for the three months ended September 30, 2023

and 2022, and $ 171,070

and $ 261,265 for

the six months ended September 30, 2023 and 2022, respectively.

Loan principal payments for the next five years are as follows:

OF LOAN PRINCIPAL PAYMENTS

Years ending March 31,

2024 (excluding the three months ended June 30, 2023)

2024 (excluding the six months ended September 30, 2023)

2029 and thereafter

Total remaining principal balance

RELATED PARTY LOANS

The Company has entered into a collateralized promissory note with individual lenders with rates

comparable to the EWB Term Loan but with less covenants (the “Hakim Promissory Note”).

These covenants include

filing timely tax returns and financial statements, and an agreement not to sell, lease, or transfer a substantial portion of the Company’s

assets during the term of the Hakim Promissory Note.

On June 2, 2023, the Company entered into a Promissory Note with Nasrat Hakim, CEO and Chairman

of the Board of Directors, pursuant to which the Company borrowed funds in the aggregate principal amount of $ 3,000,000 .

The Hakim Promissory Note has an interest rate of 9 % for the first year and 10 % for an optional

second year and the proceeds will be used for working capital and other business purposes.

The original maturity date of the Hakim Promissory

Note is June 2, 2024, with an optional second year extension.

The second year extension must be exercised by both parties 60 days prior

to the original maturity date.

As of the date of this filing, the Company does not expect to exercise the second year extension.

PHARMACEUTICALS, INC.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY LOANS

Company has entered into a collateralized promissory note with individual lenders with rates comparable to the EWB Term Loan but

with less covenants (the “Hakim Promissory Note”).

These covenants include filing timely tax returns and financial

statements, and an agreement not to sell, lease, or transfer a substantial portion of the Company’s assets during the term of

the Hakim Promissory Note.

On June 2, 2023, the Company entered into a Promissory Note with Nasrat Hakim, CEO and Chairman of the

Board of Directors, pursuant to which the Company borrowed funds in the aggregate principal amount of $ 3,000,000 .

The Hakim Promissory Note has an interest rate of 9 %

for the first year and 10 %

for an optional second year and the proceeds will be used for working capital and other business purposes.

The original maturity

date of the Hakim Promissory Note is June 2, 2024, with an optional second year extension.

The second year extension must be

exercised by both parties 60 days prior to the original maturity date.

As of the date of this filing, the Company does not expect to

exercise the second year extension.

For the three and six months ended September 30, 2023, interest expense on the Hakim Promissory

Note totaled $ 67,500

recorded on the Condensed Consolidated Balance Sheets in accrued expenses and on the Condensed Consolidated Statements of Operations

in interest expense and amortization of debt issuance costs.

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

1 unchanged sentence

The EWB Mortgage Loan matures in 10 years and bears

interest at a rate of 4.75% fixed for 5 years then adjustable at the Wall Street Journal Prime Rate (“WSJP”) plus 0.5% with floor rate of 4.5%.

The total transaction costs

associated with the EWB Mortgage Loan incurred as of June 30, 2023, were $ 13,251 , 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

As of the date of this filing, the Company was in compliance with each financial covenant.

interest at a rate of 4.75% fixed for 5 years then adjustable at the Wall Street Journal Prime Rate (“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, 2023, were $ 13,251 ,

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 the date of this filing, the Company was in compliance with each financial

June 30, 2023, the Company entered into a collateralized promissory note with Davis Caskey (the “Caskey Promissory

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The Caskey Promissory Note is subject to the same covenants as are contained in the Hakim Promissory

The proceeds will be used for working capital and other

business purposes.

The original maturity date of the Caskey Promissory Note is June 30, 2024, with an optional second year

The second year extension must be exercised by both parties 60 days prior to the original maturity date.

As of the date of this filing, the Company does not expect to exercise the second year extension.

The proceeds will be used for working capital and other business purposes.

The original maturity date of the Caskey Promissory

Note is June 30, 2024, with an optional second year extension.

The second year extension must be exercised by both parties 60 days

prior to the original maturity date.

As of the date of this filing, the Company does not expect to exercise the second year

For the three and six months ended September 30, 2023, interest expense on the Caskey Promissory Note totaled $ 22,500 recorded

on the Condensed Consolidated Balance Sheets in accrued expenses and on the Condensed Consolidated Statements of Operations in

interest expense and amortization of debt issuance costs.

DEFERRED REVENUE

revenues in the aggregate amount of $ 28,889 as of June 30, 2023, were comprised of a current component of $ 13,333 and a long-term component

of $ 15,556 .

Deferred revenues in the aggregate amount of $ 32,223 as of March 31, 2023, were comprised of a current component of $ 13,333

revenues in the aggregate amount of $ 25,555 as

of September 30, 2023, were comprised of a current component of $ 13,333

and a long-term component of $ 12,222 .

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

TAGI Pharma 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.

Deferred revenues in the aggregate amount of $ 32,223

as of March 31, 2023, were comprised of a current component

of $ 13,333 and

a long-term component of $ 18,890 .

These amounts represent the unamortized balance of a $ 200,000

advance payment received for a TAGI Pharma 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

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

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

(the “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

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 a renewal option, with such option including

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

The Ludlow Ave.

was terminated on July 1, 2022, when the Company purchased the underlying property.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

The Pompano Office Lease is for approximately 1,275

square feet of office space, with Elite taking occupancy on November 1, 2020.

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

The Pompano Office Lease was extended for one additional

year on November 1, 2023 ending on October 31, 2024.

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.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES 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

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Classification

June 30, 2022

September 30, 2023

Operating lease – right-of-use asset

5 unchanged sentences

Rent expense under the 135 Ludlow Ave.

modified lease for the three months ended June

30, 2023 and 2022 was $0 and $ 58,248 , respectively.

Rent expense under the Pompano Office Lease for the three months ended June

30, 2023 and 2022 was $ 6,519 and $ 6,330 , respectively.

Rent expense is recorded in general and administrative expense in the unaudited

condensed consolidated statements of operations.

modified lease was $ 0 for the three months ended

September 30, 2023 and 2022, respectively, and $ 0 and $ 58,248 for the six months ended September 30, 2023 and 2022, respectively.

expense under the Pompano Office Lease for the three months ended September 30, 2023 and 2022 was $ 6,519 and $ 6,330 , respectively, and

$ 13,038 and $ 12,660 for the six months ended September 30, 2023 and 2022, respectively.

Rent 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 Pompano Office Lease:

1 unchanged sentence

Years ending March 31,

2024 (excluding the three months ended June 30, 2023)

2024 (excluding the six months ended September 30, 2023)

Total future minimum lease payments

Present value of lease payments

PHARMACEUTICALS, INC.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Lease Term and Discount Rate

June 30, 2023

September 30, 2023

Remaining lease term (years)

6 unchanged sentences

Certificate of Designations.

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 .

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 .

DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS

3 unchanged sentences

described in this note below.

Company has 79,008,661 total warrants to purchase shares of common stock outstanding with a weighted average exercise price of $ 0.1521 as of June 30, 2023 and March

Company has 79,008,661 total warrants to purchase shares of common stock outstanding with a weighted average exercise price of $ 0.1521

as of September 30, 2023 and March 31, 2023.

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

18 unchanged sentences

OF FAIR VALUE OF WARRANTS ISSUED

June 30, 2023

March 31, 2023

September 30,

Fair value of the Company’s Common Stock

2 unchanged sentences

Risk free rate

changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis for the three months ended June 30, 2023

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2023 were as follows:

2 unchanged sentences

Change in fair value of derivative financial instruments - warrants

Balance at June 30, 2023

Balance at September 30, 2023

SHAREHOLDERS’ EQUITY

1 unchanged sentence

July 8, 2020, the Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights

agreement, with Lincoln Park Capital Fund, LLC (“Lincoln Park”),

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

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2023 and 2022.

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

The 2020 LPC Purchase Agreement will expire on August 1, 2023.

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

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

Purchase Agreement, at the Company’s direction.

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

ended September 30, 2023 and 2022.

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

pursuant to the 2020 LPC Purchase Agreement.

The 2020 LPC Purchase Agreement expired on August 1, 2023.

of Common Stock Activity

the three months ended June 30, 2023 and 2022, the Company did not issue any shares of Common Stock.

the six months ended September 30, 2023 and 2022, the Company did not issue any shares of Common Stock.

STOCK-BASED COMPENSATION

5 unchanged sentences

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

the three months ended June 30, 2023, the Company accrued director’s fees totaling $ 37,500 ,

which will be paid via cash payments totaling $ 7,500

and the issuance of shares of Common Stock.

the six months ended September 30, 2023, the Company accrued director’s fees totaling $ 227,915 , which will be paid via cash payments

totaling $ 75,000 and the issuance of shares of Common Stock, with the valuation of such shares being calculated on a quarterly basis and equal to the average closing price of the Company’s

Common Stock.

As of September 30, 2023, the total obligation of $ 152,915 is outstanding which is recorded at fair value and is included

in Accrued Expenses on the Condensed Consolidated Balance Sheets.

OF STOCK BASED COMPENSATION

of common stock owed at April 1, 2023

in fair value of stock-based liabilities

of common stock owed at September 30, 2023

Employee/Consultant Compensation

3 unchanged sentences

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

the three months ended June 30, 2023, the Company accrued salaries totaling $ 170,000

owed to the Company’s President, Chief

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

As of June 30, 2023, the

total obligation of $ 4,725,000

is outstanding.

OF STOCK BASED COMPENSATION

Balance of common stock owed at April 1, 2023

Awarded shares

Change in fair value of stock-based liabilities

Balance of common stock owed at September 30, 2023

the six months ended September 30, 2023, the Company accrued no

additional salaries owed to the Company’s President, Chief Executive Officer and certain other employees which will be paid

via the issuance of shares of Common Stock.

As of September 30, 2023, the total obligation of $ 6,252,238

is outstanding which is recorded at fair value and is included in Accrued Expenses on the Condensed Consolidated Balance Sheets.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES 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

4 unchanged sentences

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

The fair value of option awards

is estimated on the date of grant using the Black-Scholes option-pricing model.

The exercise price of each award is generally not less

than the per share fair value in effect as of that award date.

The determination of fair value using the Black-Scholes model is affected

by the Company’s share fair value as well as assumptions regarding a number of complex and subjective variables, including expected

price volatility, risk-free interest rate and projected employee share option exercise behaviors.

The Company estimates its expected volatility

by using a combination of historical share price volatilities of similar companies within our industry.

The expected term of the Company’s

stock options for employees has been determined utilizing the “simplified” method for awards, since the Company does not have

sufficient exercise history to estimate term of its historical option awards.

The risk-free interest rate is determined by reference to

Treasury yield curve.

Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does

not expect to pay any cash dividends in the foreseeable future.

The grant date fair value of option

awards is determined using the Black Scholes option-pricing model.

The following assumptions were used for the three and six months ended

September 30, 2023 and year ended March 31, 2023:

OF GRANT DATE FAIR VALUE OF OPTION AWARDS

September 30, 2023

March 31, 2023

Term (in years)

Exercise Price

$ 0.08 -$ 0.09

$ 0.03 -$ 0.04

Dividend Yield

Expected Volatility

Risk Free Rate

4.27 %- 4.32 %

2.99 %- 4.01 %

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

for the three months ended June 30, 2023 is as follows:

for the six months ended September 30, 2023 is as follows:

OF STOCK OPTION PLAN

Exercise Price

Weighted Average

Remaining Contractual

Aggregate Intrinsic

Weighted Average Remaining

Term (in years)

Outstanding at March 31, 2023

Outstanding at June 30, 2023

Exercisable at June 30, 2023

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Expired and Forfeited

( 3,840,000 )

Outstanding at September 30, 2023

Exercisable at September 30, 2023

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, 2023 and March 31, 2023 of $ 0.04 and $ 0.03 , respectively.

of June 30, 2023, there was $ 184,722 in unrecognized stock based compensation expense that will be recognized over a 1.3 year period.

and the quoted price of the Company’s Common Stock as of September 30, 2023 and March 31, 2023 of $ 0.04 and $ 0.03 , respectively.

As of September 30, 2023, there was $ 164,105 in unrecognized stock based compensation expense that will be recognized over a 1.2 year

On September 5, 2023, options

were granted to the Chief Financial Officer pursuant to the 2014 Plan to purchase an aggregate of 3,000,000 shares of common stock.

options have an exercise price of $ 0.0898 per share, the fair market value of the common stock on the date of grant.

The options granted

will vest one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.

On September 19, 2023, options

were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 1,000,000 shares of common stock.

The options have

an exercise price of $ 0.0819 per share, the fair market value of the common stock on the date of grant.

The options granted will vest

one third for each of the next three years upon the anniversary date of the grant and have a ten-year expiration date.

The weighted-average grant-date fair value of

stock options granted during the six months ended September 30, 2023 under the 2014 Plan was $ 0.0734 .

CONCENTRATIONS AND CREDIT RISK

customers accounted for approximately 76 % of the Company’s revenues for the three months ended June 30, 2023.

These five customers

accounted for approximately 21 %, 16 %, 15 %, 14 %, and 10 % of revenues each, respectively.

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

customers accounted for approximately 56 % of the Company’s accounts receivable as of June 30, 2023.

These three customers accounted

customers accounted for approximately 67 %

of the Company’s revenues for the six months ended September 30, 2023.

These three customers accounted for approximately 35 %,

of revenues each, respectively.

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 revenue each, respectively.

customers accounted for approximately 78 %

of the Company’s accounts receivable as of September 30, 2023.

These two customers accounted for approximately 41 %

of accounts receivable each, respectively.

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

These two customers accounted

for approximately 79 % and 18 % of accounts receivable each, respectively.

customer accounted for approximately 96 % the Company’s accounts receivable as of March 31, 2023.

supplier accounted for approximately 39 % of the Company’s purchases of raw materials for the three months ended June 30, 2023.

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.

supplier accounted for approximately 37 % of the Company’s purchases of raw materials for the six months ended September 30, 2023.

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

SEGMENT RESULTS

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consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

Operating Income by Segment

Operating income by Segment

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company notes that there was no revenue related to the NDA segment for the three and six months ended September

30, 2023 and 2022.

table below reconciles the Company’s operating income by segment to income before income taxes as reported in the Company’s

2 unchanged sentences

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

Operating income by segment

2 unchanged sentences

( 3,194,912 )

( 1,086,925 )

Interest income

3 unchanged sentences

Change in fair value of derivative instruments

( 2,468,350 )

( 2,657,717 )

Change in fair value of stock-based liabilities

( 2,066,820 )

Income before income taxes

$ ( 2,732,783 )

$ ( 1,436,022 )

RELATED PARTY AGREEMENTS WITH MIKAH PHARMA, LLC

May 2020, Praxgen (formerly known as SunGen Pharma LLC), pursuant to an asset purchase agreement, assigned its rights and obligations under the Praxgen Agreement for Amphetamine

IR and Amphetamine ER to Mikah Pharma LLC (“Mikah”).

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

Elite’s name.

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

obligations for these products from Praxgen.

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

Chief Executive Officer and Chairman of the Board.

May 2020, Praxgen (formerly known as SunGen Pharma LLC), pursuant to an asset purchase agreement, assigned its rights and obligations

under the Praxgen Agreement for Amphetamine IR and Amphetamine ER to Mikah Pharma LLC (“Mikah”).

The ANDAs for Amphetamine

IR and Amphetamine ER are now registered under Elite’s name.

Mikah will now be Elite’s partner with respect to Amphetamine

IR and ER and will assume all the rights and obligations for these products from Praxgen.

Mikah was founded in 2009 by Nasrat Hakim,

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

June 2021, the Company entered into a development and license agreement with Mikah, pursuant to which Mikah will engage in the research,

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

Company’s effective tax rate was 11.5 % and income tax expense for the three months ended June 30, 2023 was $ 154,952 .

The Company’s

effective tax rate was 0.00 % and income tax expense was $— for the three months ended June 30, 2022.

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 change in valuation allowance is the reason that the effective tax rate and income tax expense are

different than the statutory rate of 21 %.

of September 30, 2023, the Company has accrued $ 3,373,800 in accordance with the agreements entered into with Mikah, which is

recorded in accrued expenses on the unaudited condensed consolidated balance sheets.

Company’s income tax benefit was $ 17.5 million and income tax expense was $ 0.0 million for the six months ended September 30,

2023 and 2022, respectively.

Company’s income tax benefit was $ 17.7 million and income tax expense was $ 0.0

million for the three months ended September 30, 2023 and 2022 ,

respectively.

the six months ended September 30, 2023 , the Company recorded a discrete tax

benefit of $ 17.3 million related to the Company’s release of the valuation allowance against deferred tax assets related to

federal net operating losses carryforwards and research and development tax credits, which are expected to be realized based on demonstrated

current profitability and its expectations of forecasted income .

Prior to September

2023, the Company’s net deferred tax assets were largely offset by a valuation allowance.

The Company prepares a quarterly

analysis of its deferred tax assets which consists of positive and negative evidence, including its cumulative income (loss)

position, revenue growth, continuing and improved profitability, and expectations regarding future profitability.

For the three

months ended September 30, 2023, the Company recorded a net valuation allowance release of $ 2,044,144 on the basis of our reassessment of the

amount of deferred tax assets that are more likely than not to be realized.

The positive evidence assessed included recent increases

in actual and forecasted operating results due to manufacturing efficiencies in relation to increased production volumes.

three months ended September 30, 2023, the release in the valuation allowance is the primary reason that the effective tax rate is

different than the United States federal statutory rate of 21 %.

SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date through August 14, 2023 and note no material subsequent events were identified.

Company has evaluated subsequent events from the balance sheet date through November 14, 2023 and note no material subsequent events

were identified.

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