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Item 1. Financial Statements

2024-02-14 compared with 2023-11-14 · 508 added, 389 removed, 778 unchanged (54% of the section changed)

FINANCIAL STATEMENTS

September 30,

December 31, 2023

March 31, 2023

Current assets:

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

Accounts receivable, net of allowance for expected credit losses of $ 194,600 and $ 0 as of December 31, 2023 and March 31, 2023, respectively

Prepaid expenses and other current assets

2 unchanged sentences

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

Finance lease - right-of-use asset

Operating lease - right-of-use asset

12 unchanged sentences

Related party loans payable (Note 7)

Lease obligation - finance lease, current portion

Lease obligation - operating lease, current portion

4 unchanged sentences

Loans payable, net of current portion and loan costs

Lease obligation - finance lease, net of current portion

Derivative financial instruments - warrants

5 unchanged sentences

1,445,000,000 shares authorized;

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

1,017,881,199 and 1,014,015,081 shares issued as of December 31, 2023 and March 31, 2023, respectively;

1,017,781,199 and 1,013,915,081 shares outstanding as of December 31, 2023 and March 31, 2023, respectively

Additional paid-in capital

Treasury stock;

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

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

Accumulated deficit

3 unchanged sentences

Total liabilities and shareholders’ equity

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Manufacturing fees

17 unchanged sentences

Interest expense and amortization of debt issuance costs

Gain from settlement agreements

Gain on sale of ANDA

Interest income

Other expense, net

Other (expense) income, net

( 3,626,915 )

2 unchanged sentences

( 1,530,281 )

( 1,436,022 )

Income tax benefit (expense)

12 unchanged sentences

1,012,480,115

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'

J Preferred Stock

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Series J Preferred Stock

Treasury Stock

Shareholders’

Balance as of

April 1, 2023

Balance as of April 1, 2023

1,014,015,081

2 unchanged sentences

$ ( 136,497,898 )

Non-cash compensation through

the issuance of employee stock options

at June 30, 2023

Non-cash compensation through the issuance of employee stock options

Balance at June 30, 2023

1,014,015,081

2 unchanged sentences

$ ( 135,356,089 )

Non-cash compensation through

the issuance of employee stock options

at September 30, 2023

Non-cash compensation through the issuance of employee stock options

Balance at September 30, 2023

1,014,015,081

2 unchanged sentences

$ ( 120,421,488 )

J Preferred Stock

Shareholders’

Balance as of

April 1, 2022

Shares issued in satisfaction of accrued director salaries

Shares issued in satisfaction of accrued consultant fees

Non-cash compensation through the issuance of employee stock options

Balance at December 31, 2023

1,017,881,199

2 unchanged sentences

$ ( 119,715,134 )

Non-cash compensation through

the issuance of employee stock options

at June 30, 2022

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Series J Preferred Stock

Additional Paid-In

Treasury Stock

Total Shareholders’

Balance as of April 1, 2022

1,011,381,988

2 unchanged sentences

$ ( 140,059,744 )

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

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 )

The 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 director salaries

Shares issued in payment of consultant fees

Balance at September 30, 2022

1,014,015,081

$ 164,722,951

$ ( 306,841 )

$ ( 138,238,722 )

1,014,015,081

$ 164,722,951

$ ( 306,841 )

$ ( 138,238,722 )

Net income (Loss)

Non-cash compensation through the issuance of employee stock options

Balance at December 31, 2022

1,014,015,081

$ 164,735,980

$ ( 306,841 )

$ ( 135,268,644 )

1,014,015,081

$ 164,735,980

$ ( 306,841 )

$ ( 135,268,644 )

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

PHARMACEUTICALS, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended September 30,

For the Nine Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

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

Depreciation and amortization

1 unchanged sentence

Amortization of operating leases - right-of-use assets

Non-cash compensation accrued

Change in fair value of derivative financial instruments - warrants

Change in fair value of stock-based liabilities

Gain on settlement of Common Stock to consultant

( 1,761,792 )

Non-cash compensation through the issuance of employee stock options

Non-cash rent expense and lease accretion

Deferred income tax asset

( 17,261,347 )

Deferred revenue

Change in operating assets and liabilities:

3 unchanged sentences

( 4,774,325 )

( 1,860,688 )

Prepaid expenses and other current assets

Deferred income tax asset

( 18,061,782 )

Accounts payable, accrued expenses and other current liabilities

Deferred revenue

Interest expense of finance lease liability

Lease obligations - operating leases

10 unchanged sentences

Proceeds from loans payable

Amortization of finance leases - right-of-use assets

Loan payments

1 unchanged sentence

Net change in cash and restricted cash

( 2,000,471 )

Cash and restricted cash, beginning of period

3 unchanged sentences

Cash paid for income taxes

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.

Stock issued in satisfaction of accrued directors salaries and consultant fees

Recognition of right of use asset and lease liabilities entered into

Reconciliation of cash and restricted cash

Restricted cash - debt service for NJEDA bonds

Total cash and restricted cash shown in statement of cash flows

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

30 unchanged sentences

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

results for the nine months ended December 31, 2023 are not necessarily indicative of the results to be expected for the fiscal year

ending March 31, 2024 or for any future periods.

17 unchanged sentences

Please see Note 15 for further details.

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

of products either by license and the collection of royalties, or the expansion of licensing agreements with other pharmaceutical companies,

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

ELITE PHARMACEUTICALS, INC.

ELITE PHARMACEUTICALS,

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

fees include the commercialization of products either by license and the collection of royalties, or the expansion of licensing agreements

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

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

56 unchanged sentences

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

ELITE PHARMACEUTICALS, INC.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 September 30, 2023.

component as of December 31, 2023.

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

5 unchanged sentences

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.

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

4 unchanged sentences

OF DISAGGREGATION OF REVENUE

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Manufacturing fees

7 unchanged sentences

disclosed within Note 15.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2 unchanged sentences

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

of December 31, 2023, and March 31, 2023, the Company had $ 427,999 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, and other contractual deductions, including, without limitation, chargebacks, discounts and program rebates.

In determining collectability,

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

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, historical trends

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

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.

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.

of Credit Losses on Financial Assets, which was adopted by the Company on April 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.

31 unchanged sentences

and slower growth rates.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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:

There were no such impairments recorded during the period ended December 31, 2023.

The Company notes that none

of its patents relate to any of the Company’s revenue producing activities.

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

OF INTANGIBLE ASSETS

September 30, 2023

December 31, 2023

Estimated Useful Life

Gross Carrying Amount

Impairment losses

Accumulated Amortization

Net Book Value

Patent application costs

1 unchanged sentence

March 31, 2023

Estimated Useful Life

Gross Carrying Amount

Impairment losses

Accumulated Amortization

Net Book Value

Patent application costs

13 unchanged sentences

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

August 17, 2023, Elite filed a paragraph IV certification with its ANDA to generic Oxycontin and after Elite got acceptance of the ANDA

by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act.

14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma.

Elite obtained agreement with Purdue

to stay the litigation for six months.

Elite’s launch of a generic Oxycontin will depend on the approval by the FDA and the outcome

of various litigations involving Purdue or the expiry of the patents listed on the Orange Book.

As of December 31, 2023, the results

of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out

of any such matters will have a material adverse effect on its business, financial condition or results of operations.

taxes are accounted for under the asset and liability method.

12 unchanged sentences

tax jurisdiction until the applicable statutes of limitation expire.

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

As of December 31, 2023, a summary of the tax years that remain

subject to examination in our major tax jurisdictions are:

1 unchanged sentence

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

unrecognized tax positions for the nine months ended December 31, 2023.

and Preferred Shares

5 unchanged sentences

with determinations made regarding the proper classification in the Company’s financial statements.

exercise price is subject to adjustment for any issuances or deemed issuances of Common Stock or Common Stock equivalents at an effective

price below the then exercise price.

Such exercise price adjustment feature prohibits the Company from being able to conclude the warrants

are indexed to its own stock and thus such warrants are classified as liabilities and measured initially and subsequently at fair value.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation .

4 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.The Company accounts

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.

7 unchanged sentences

to which the Company sold to Pyros its rights in and to the Company’s approved abbreviated new drug applications (ANDAs) for its

generic Sabril drug.

The Company sold its rights to Pyros for $ 1,000,000 , which was recorded as gain on sale of ANDA during the year

ended March 31, 2023.

There is no further action required by the Company regarding the rights which would affect future periods.

conjunction with the sale of its Product to Pyros, the Company executed a Manufacturing and Supply Agreement (the “Pyros Agreement”)

Under the terms of the Pyros Agreement, the Company will receive an agreed-upon price per drug for the manufacturing and

packaging of Sabril over a term of three years.

Revenue per the Pyros Agreement will be recognized as control of the manufactured and

supplied drugs is transferred to Pyros (at the time of delivery).

generic Sabril drug (the “Sabril Product”).

The Company sold its rights to Pyros for $ 1,000,000 , which was recorded as gain

on sale of ANDA during the year ended March 31, 2023.

There is no further action required by the Company regarding the rights which would

affect future periods.

conjunction with the sale of its Sabril Product to Pyros, the Company executed a Manufacturing and Supply Agreement (the “Pyros

Agreement”) with Pyros.

Under the terms of the Pyros Agreement, the Company will receive an agreed-upon price per drug for the

manufacturing and packaging of Sabril over a term of three years.

Revenue per the Pyros Agreement will be recognized as control of the

manufactured and supplied drugs is transferred to Pyros (at the time of delivery).

Per Share Attributable to Common Shareholders’

7 unchanged sentences

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.

the average market price of Common Stock for the three

and nine months ended December 31, 2023 and 2022 did not exceed the exercise price of th e

warrants, t he potential dilutio n 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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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,

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Net income - basic

38 unchanged sentences

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

ELITE PHARMACEUTICALS, INC.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

on a Recurring Basis

5 unchanged sentences

Balance as of April 1, 2023

Change in fair value of derivative financial

instruments - warrants

Balance as of September 30, 2023

Change in fair value of derivative financial instruments - warrants

Balance as of December 31, 2023

Fair Value Measurement

1 unchanged sentence

Balance as of April 1, 2022

Change in fair value of derivative financial

instruments - warrants

Balance as of September 30, 2022

Change in fair value of derivative financial instruments - warrants

Balance as of December 31, 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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Additionally,

5 unchanged sentences

estimation techniques.

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 has had no recordable write offs for bad debts or uncollectible invoiced amounts during the for the nine months ended December

31, 2023 or the prior twelve months ended March 31, 2023.

In applying the CECL methodology, the Company recorded an estimated allowance

of $ 194,600 for current estimated credit losses.

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:

September 30,

December 31, 2023

March 31, 2023

Finished goods

4 unchanged sentences

OF PROPERTY AND EQUIPMENT

September 30,

December 31, 2023

March 31, 2023

Land, building and improvements

7 unchanged sentences

Property and equipment, net

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.

expense was $ 336,614 and $ 314,610 for the three months ended December 31, 2023 and 2022, respectively, and $ 992,136 and $ 923,365 for

the nine months ended December 31, 2023 and 2022, respectively.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACCRUED EXPENSES

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

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

OF ACCRUED EXPENSES

September 30,

Salaries and fees payable in common stock

Salaries and fees payable

December 31, 2023

March 31, 2023

Salaries and fees payable in Common Stock inclusive of the change in fair value of Common stock underlying such liabilities

Co-development profit split

16 unchanged sentences

OF BONDS PAYABLE LIABILITY

September 30,

December 31, 2023

March 31, 2023

Gross bonds payable

13 unchanged sentences

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

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

expense was $ 3,540 and $ 3,544 for the three months ended December 31, 2023 and 2022, $ 10,636 and $ 10,629 for the nine months ended December

31, 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.

Interest payable was $ 24,267 and $ 6,744 as of December 31, 2023 and March 31, 2023, respectively.

expense was $ 18,200 and $ 20,231 for the three months ended December 31, 2023 and 2022, respectively, and $ 57,985 and $ 63,808 for the

nine months ended December 31, 2023 and 2022, respectively.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of bonds for the next five years are as follows:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of bonds for the next five years, exclusive of the nine months ended December 31, 2023 are as follows:

OF MATURITIES OF BONDS

6 unchanged sentences

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

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 1, 2027 .

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 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

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.

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

6 unchanged sentences

OF LOANS PAYABLE

September 30,

December 31, 2023

March 31, 2023

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 December 2023 and October 2025

Equipment and insurance financing loans payable, between 7.10 % and 12.02 % interest and maturing between January 2024 and October 2025

Current portion of loans payable

Long-term portion of loans payable

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:

interest expense associated with the loans payable was $ 30,384 and $ 317,844 for the three months ended December 31, 2023 and 2022, and

$ 101,478 and $ 579,109 for the nine months ended December 31, 2023 and 2022, respectively.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

principal payments for the next five years are as follows:

OF LOAN PRINCIPAL PAYMENTS

Future principal balances

Years ending March 31,

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

2024 (excluding the nine months ended December 31, 2023)

2029 and thereafter

Total remaining principal balance

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

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 .

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

fewer 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

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

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.

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 nine months ended December 31, 2023, interest expense on the Hakim Promissory

Note totaled $ 67,500 and $ 202,500 respectively, 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

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floor rate of 4.5% .

The total transaction costs associated with the EWB Mortgage Loan incurred as of September 30, 2023, were $ 13,251 ,

The total transaction costs associated with the EWB Mortgage Loan incurred as of December 31, 2023, were $ 13,251 ,

which are being amortized on a monthly basis over ten years, beginning in July 2022.

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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

The Caskey Promissory Note has a principal balance of $ 1,000,000

and an interest rate of 9 %

for the first year and 10 %

for an optional second year.

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 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.

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

The Caskey Promissory Note has a principal balance of $ 1,000,000 and an interest rate of 9 % for the first year and 10 % for an optional

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

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

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

For the three and nine months

ended December 31, 2023, interest expense on the Caskey Promissory Note totaled $ 22,500 and $ 67,500 respectively, 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 $ 25,555 as

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

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

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.

revenues in the aggregate amount of $ 22,222 as of December 31, 2023, were comprised of a current component of $ 13,333 and a long-term

component of $ 8,889 .

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 2025 .

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

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

August 17, 2023, Elite filed a paragraph IV certification with its ANDA to generic Oxycontin and after Elite got acceptance of the ANDA

by the FDA on September 19, 2023, Elite sent the patentee and NDA holder a Notice Letter as required under the Hatch-Waxman Act.

14, 2023, a patent infringement suit was filed in the District Court of New Jersey by Purdue Pharma.

Elite obtained agreement with Purdue

to stay the litigation for six months.

Elite’s launch of a generic Oxycontin will depend on the approval by the FDA and the outcome

of various litigations involving Purdue or the expiry of the patents listed on the Orange Book.

As of December 31, 2023, the results

of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out

of any such matters will have a material adverse effect on its business, financial condition or results of operations.

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

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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.

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 Lease had 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.

year to October 31, 2024.

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

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

November 2023, the Company entered into an finance lease for equipment (the “Waters Equipment Lease”).

The Waters Equipment

Lease is related to lab equipment with an acquisition cost of $ 499,775 , with Elite taking ownership of the asset on December 1, 2023.

The Waters equipment lease has a term of five years,

ending on November 29, 2028.

The Company also has the option to purchase the asset at the end of the lease term for the amount of $ 1 ,

which is probable to be exercised.

lease is classified as a finance lease if any of the following criteria are met:

(i) ownership of the underlying asset transfers to the

Company by the end of the lease term;

(ii) the lease contains an option to purchase the underlying asset that the Company is reasonably

expected to exercise;

(iii) the lease term is for a major part of the remaining economic life of the underlying asset;

(iv) the present

value of the sum of lease payments and any residual value guaranteed by the Company equals or exceeds substantially all of the fair value

of the underlying asset;

or (v) the underlying asset is of a specialized nature that it is expected to have no alternative use to the

lessor at the end of the lease term.

A lease that does not meet any of the criteria to be classified as a finance lease is classified

as an operating lease.

As the Company expects to exercise the option to purchase the asset at the end of the lease term, the Waters equipment

lease was determined to be a finance lease.

The finance lease is included on the balance sheets as Finance lease - right-of-use asset

and Lease obligation - finance lease.

The finance lease costs are split between Depreciation and amortization expense related to the

asset and Interest expense and amortization of debt issuance costs on the lease liability, using the effective rate charged by the lessor.

The Company has elected to account for lease and non-lease components separately.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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Classification

September 30, 2023

December 31, 2023

Finance lease – right-of-use asset

Operating lease – right-of-use asset

Total leased assets

Lease obligation – finance lease

Lease obligation – operating lease

Lease obligation – finance lease, net of current portion

Lease obligation – operating lease, net of current portion

3 unchanged sentences

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.

December 31, 2023 and 2022, respectively, and $ 0 and $ 58,248 for the nine months ended December 31, 2023 and 2022, respectively.

expense under the Pompano Office Lease for the three months ended December 31, 2023 and 2022 was $ 7,565 and $ 6,456 , respectively, and

$ 20,603 and $ 19,116 for the nine months ended December 31, 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:

table below shows the future minimum rental payments, exclusive of taxes, insurance and other costs, under the Pompano Office Lease and

Waters Equipment Lease:

OF FUTURE MINIMUM RENTAL PAYMENTS

Years ending March 31,

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

Total future minimum lease payments

Operating Lease Amount

Financing Lease Amount

2024 (excluding the nine months ended December 31, 2023)

Present value of lease payments

ELITE PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Lease Term and Discount Rate

September 30, 2023

December 31, 2023

Remaining lease term (years)

Operating leases

Finance leases

Discount rate

Operating leases

Finance leases

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PREFERRED STOCK

10 unchanged sentences

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.

as of December 31, 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

4 unchanged sentences

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.

The initial exercise

price is $ 0.1521 per share and the Series J Warrants can be exercised for cash or on a cashless basis.

The exercise price is subject

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

exercise price.

Such exercise price adjustment feature prohibits the Company from being able to conclude the warrants are indexed to

its own stock and thus such warrants are classified as liabilities and measured initially and subsequently at fair value.

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

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

with the shareholder approval provisions was no longer a factor.

Series J Warrants are exercisable for a period of 10

years from the date of issuance, commencing April 28, 2020.

The initial exercise price is $ 0.1521

per share and the Series J Warrants can be exercised for cash or on a cashless basis, including a provision within that provides the

holder a choice of net cash settlement or settlement in shares upon a cashless exercise.

The net cash settlement amount is the cash

value obtained by subtracting the then exercise price from the closing price of the Company’s Common Stock (provided such

closing price is higher than the exercise price) and multiplying the difference by the number of shares exercised.

As this event is

at the holder’s option, it is considered outside of the Company’s control.

As a result of the net cash settlement at the option of the holder, such warrants are classified as

liabilities and measured initially and subsequently at fair value.

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

equivalents at an effective price below the then exercise price.

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

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

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

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OF FAIR VALUE OF WARRANTS ISSUED

September 30,

December 31, 2023

March 31, 2023

Fair value of the Company’s Common Stock

2 unchanged sentences

Risk free rate

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,

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

2023 were as follows:

2 unchanged sentences

Change in fair value of derivative financial instruments - warrants

Balance at September 30, 2023

Balance at December 31, 2023

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SHAREHOLDERS’ EQUITY

4 unchanged sentences

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.

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

December 31, 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 six months ended September 30, 2023 and 2022, the Company did not issue any shares of Common Stock.

November 22, 2023, the Company issued 1,642,971

shares of Common Stock in payment

of director fees to be paid via the issuance of common stock, with such shares having an aggregate value on the date of original accrual

of $ 60,000 and which were owed for periods prior to the current fiscal year and accrued as of the date of share issuance.

of the Company’s Common Stock on November 22, 2023, was $ 0.1533

The aggregate value

of the shares on the date of their issuance was $ 251,867 .

December 29, 2023, the Company issued 2,223,147 shares

of Common Stock in payment of consultant fees to be paid via the issuance of common stock, with such shares having an aggregate

value on the date of original accrual of $ 153,333

and which were owed for periods prior to the

current fiscal year and accrued as of the date of share issuance.

The price of the Company’s Common Stock on December 29,

2023, was $ 0.14 per

The aggregate value of the shares on the date of their issuance was $ 311,238 .

of December 31, 2023, there were 1,017,881,199 shares of Common Stock issued and 1,017,781,199 shares of Common Stock outstanding.

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 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.

the nine months ended December 31, 2023, the Company accrued director’s fees totaling $ 22,500 , which will be paid via cash payments

totaling $ 22,500 .

All of the accrued shares of common stock related to the Director’s compensation policy were paid out on December

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

Balance of common stock owed at April 1, 2023

Awarded shares

Change in fair value of stock-based liabilities

Issuance of common stock on November 22, 2023

Balance of common stock owed at December 31, 2023

Employee/Consultant Compensation

7 unchanged sentences

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.

Common stock issued

Settlement of non-cash liability

( 1,761,792 )

Balance of common stock owed at December 31, 2023

the nine months ended December 31, 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 December 31, 2023, the total

obligation of $ 6,934,812 is outstanding which is recorded at fair value and is included in Accrued Expenses on the Condensed Consolidated

Balance Sheets.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 6, 2023, the Company entered into a Settlement Agreement with a former executive who was terminated on February 7, 2022.

The employment agreement with the former executive included annual compensation of $ 250,000

which was to be paid via the issuance

of shares of Common Stock.

At the date of the former executive’s termination an aggregate of 14,892,580 shares

of Common Stock (the “Deferred Shares”) were due to the former executive, with such number of shares representing an

aggregate of $ 1,000,000

in compensation earned pursuant to the relevant employment agreement at an annual rate of $ 250,000 .

Pursuant to the Settlement Agreement, the former executive irrevocably elected to relinquish all rights and claims to the Deferred

The Company is released of any obligation to issue the Deferred Shares and further acknowledges that no Deferred Shares will

be issued to or received by the former employee.

The price of the Company’s Common Stock on November 6, 2023 was $ 0.1183

per share and the value of the Deferred Shares on this date was $ 1,761,792 .

The Company recorded other income from gain on settlement agreement for this amount on the unaudited Condensed Consolidated

Statements of Operations.

December 29, 2023, the Company issued 2,223,147

shares of Common Stock in satisfaction of accrued consultant fees.

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

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.

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 the U.S.

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:

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.

grant date fair value of option awards is determined using the Black Scholes option-pricing model.

The following assumptions were used

for the nine months ended December 31, 2023 and year ended March 31, 2023:

OF GRANT DATE FAIR VALUE OF OPTION AWARDS

September 30, 2023

December 31, 2023

March 31, 2023

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2.99 %- 4.01 %

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

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

summary of the activity of Company’s 2014 Stock Option Plan for the nine months ended December 31, 2023 is as follows:

OF STOCK OPTION PLAN

Weighted Average

Weighted Average Remaining

Remaining Contractual

Underlying Options

Exercise Price

Term (in years)

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( 3,840,000 )

Outstanding at September 30, 2023

Exercisable at September 30, 2023

Outstanding at December 31, 2023

Exercisable at December 31, 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 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 .

and the quoted price of the Company’s Common Stock as of December 31, 2023 of $ 0.14 for those awards with strike prices lower than the quoted price of the Company’s Common Stock as of December 31,

As of December 31, 2023, there was $ 450,470

in unrecognized stock based compensation

expense that will be recognized over a weighted average 2.37

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.

The options have an exercise price of $ 0.0898 per share, the fair market value of the Common Stock on the date

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The options have an exercise price of $ 0.0819 per share, the fair market value of the Common Stock on the date of grant.

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.

October 2, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 100,000 shares of Common

The options have an exercise price of $ 0.0938 per share, the fair market value of the Common Stock on the date of grant.

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.

weighted-average grant-date fair value of stock options granted during the nine months ended December 31, 2023 under the 2014 Plan was

CONCENTRATIONS AND CREDIT RISK

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.

customers accounted for approximately 57 % of the Company’s revenues for the nine months ended December 31, 2023.

These three customers

accounted for approximately 30 %, and 27 %, of revenues each, respectively.

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

customers accounted for approximately 77 % of the Company’s accounts receivable as of December 31, 2023.

These two customers accounted

for approximately 45 % and 32 % of accounts receivable 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.

customer accounted for approximately 89 % of the Company’s accounts receivable as of December 31, 2022.

suppliers accounted for approximately 43 % of the Company’s purchases of raw materials for the nine months ended December 31, 2023.

These two customers accounted for approximately 30 %, and 13 %, of purchasing each, respectively.

supplier accounted for approximately 62 % of the Company’s purchases of raw materials for the nine months ended December 31, 2022.

SEGMENT RESULTS

11 unchanged sentences

consolidated financial statements.

ELITE PHARMACEUTICALS, INC.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

SCHEDULE OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Operating Income by Segment

Operating income by Segment

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.

Company notes that there was no revenue related to the NDA segment for the three and nine months ended December 31, 2023 and 2022.

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

1 unchanged sentence

OF OPERATING INCOME BY SEGMENT TO INCOME FROM OPERATIONS

For the Three Months Ended

September 30,

For the Six Months Ended

September 30,

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Operating income by segment

13 unchanged sentences

( 4,921,376 )

Income before income taxes

$ ( 2,732,783 )

Income(Loss) before income taxes

$ ( 1,530,281 )

RELATED PARTY AGREEMENTS WITH MIKAH PHARMA, LLC

RELATED PARTY AGREEMENTS

Pharma, LLC Agreements

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

11 unchanged sentences

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

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,

of December 31, 2023, the Company owes an aggregate of $ 3,389,949 to

Mikah in accordance with the agreements, with such amount being recorded as an accrued expense on the unaudited condensed

consolidated balance sheets.

contracts with certain consultants include provisions for a portion of the consultant’s fees to be paid via the issuance of shares

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

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

On December 29, 2023, the Company issued 2,223,147

shares of Common Stock in satisfaction

of accrued consultant fees owed to one consultant.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company’s income tax benefit was $ 18.3 million and income tax expense was $ 0.05 million for the nine months ended December 31, 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 %.

Company’s income tax benefit was $ 0.8 million and income tax expense was $ 0.04 million for the three months ended December 31, 2023

and 2022, respectively.

the nine months ended December 31, 2023, the Company recorded a discrete tax benefit of $ 18.1 million

related to the Company’s release of the valuation allowance against deferred tax assets related to U.S.

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.

For the nine months ended December 31, 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

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

were identified.

Company has evaluated subsequent events from the balance sheet date through February 14, 2024, and note the following subsequent events:

140 Ludlow Office Lease

Company entered into a five-year office lease agreement for a portion of a one-story warehouse, located at 140 Ludlow Avenue, Northvale,

New Jersey (the 140 Ludlow Ave.

lease”) which began on January 22, 2024 and ends on December 31, 2028.

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