ELITE PHARMACEUTICALS INC /NV/ 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control (“COSO”), as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2024 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As of March 31, 2024, we identified the following control deficiencies that we believe constituted individually, and in the aggregate, material weaknesses in the design and operation components of our internal controls within the COSO framework: ● We were unable to formalize and implement revised controls, policies and procedure documentation to evidence a system of internal controls, including testing of such revised controls, that was consistent with available personnel and resources; ● We failed to maintain effective control activities over our control environment, risk assessment, information technology and monitoring components; ● We had insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting functions due to limited personnel and resources. Management’s Annual Report on Internal Control Over Financial Reporting Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are achieved. Further, the design of a control system must be balanced against resource constraints, and therefore the benefits of controls must be considered relative to their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Accordingly, given the inherent limitations in a system of internal control, financial statement misstatements due to error or fraud may occur and may not be detected. Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives. We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies and procedures. 57 Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation, utilizing those criteria, management has determined that, as of March 31, 2024, because of the material weaknesses described above, our internal control over financial reporting was not effective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As of March 31, 2024, we identified the following control deficiencies that we believe constituted individually, and in the aggregate, material weaknesses in the design and operation components of our internal controls within the COSO framework: ● We were unable to formalize and implement revised controls, policies and procedure documentation to evidence a system of internal controls, including testing of such revised controls, that was consistent with available personnel and resources; ● We failed to maintain effective control activities over our control environment, risk assessment, information technology and monitoring components; ● We had insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting functions due to limited personnel and resources. The deficiencies in our internal controls over financial reporting and disclosure controls and procedures are described above and our efforts to remediate these deficiencies are described below. Please also see Item 1A-Risk Factors: “ We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition, cash flows and results of operations in a timely and fairly stated manner and/or increase the risk of future misstatements, which could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common shares and/or debt securities to decline.” Changes in Internal Controls Over Financial Reporting During the fiscal year ended March 31, 2024, as a result of reviews and assessments of internal controls over financial reporting conducted by the Company’s CFO appointed on September 5, 2023 over the last seven month period ended March 31, 2024, the Company identified material weaknesses in internal controls over financial reporting as further detailed above and began remediation efforts which are detailed below, with such activities expected to result in further changes in internal control over financial reporting as necessary to remediate the identified material weaknesses. Remediation efforts to address material weaknesses in internal controls over financial report ing We intend to revise the existing control environment documentation, designing and implementing controls, policies and procedure documentation that is consistent with our current personnel, resources and capabilities, with significant focus on controls relating to financial oversight, management, analysis and reporting of operations emanating from the Company’s manufacturing, marketing and distribution of its Elite Laboratory label product line. Please note that these material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time, allowing management, through testing, to reach a conclusion on such controls design and operational effectiveness. Item 9B. OTHER INFORMATION . During the fiscal year ended March 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended). ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. None. 58 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following sets forth biographical information about each of our directors and executive officers as of the date of this report: Name Age Position Director/Officer Since Director Class Nasrat Hakim 63 President, Chief Executive Officer and Director August 2013 III Barry Dash, Ph. D. 93 Director April 2005 II Jeffrey Whitnell 68 Director October 2009 III Davis Caskey 76 Director April 2016 I Kirko Kirkov 56 Chief Commercial Officer September 2022 Douglas Plassche 60 Executive Vice President of Operations August 2013 Carter Ward 60 Chief Financial Officer September 2023 The principal occupations and employment of each Director and executive officer during the past five years is set forth below. In each instance in which dates are not provided in connection with an individual’s business experience, such individual has held the position indicated for at least the past five years. Pursuant to our amended and restated bylaws, our Board of Directors is classified into three separate classes of directors. Each director currently holds office until the expiration of the term of his class (each for three years) and until his successor is duly elected and qualified, or until such director’s death, resignation, or removal. Nasrat Hakim Nasrat Hakim has served as a Director, President, and Chief Executive officer since August 2013. He has been a member of the Audit Committee, member and chairman of the nominating Committee and member of the Compensation Committee since September 2016. Mr. Hakim has more than 30 years of pharmaceutical and medical industry experience in Quality Assurance, Analytical Research and Development, Technical Services, and Regulatory Compliance. He brings with him proven management experience, in-depth knowledge of manufacturing systems, development knowledge in immediate and extended release formulations and extensive regulatory experience of GMP and FDA regulations. From 2004 to 2013, Mr. Hakim was employed by Actavis, Watson and Alpharma in various senior management positions. Most recently, Mr. Hakim served as International Vice President of Quality Assurance at Actavis, overseeing 25 sites with more than 3,000 employees under his leadership. Mr. Hakim also served as Corporate Vice President of Technical Services, Quality and Regulatory Compliance for Actavis U.S., Global Vice President, Quality, and Regulatory Compliance for Alpharma, as well as Executive Director of Quality Unit at TheraTech, overseeing manufacturing and research and development. In 2009, Mr. Hakim founded Mikah Pharma, LLC, a virtual, fully functional pharmaceutical company. Mr. Hakim holds a Bachelor in Chemistry/Bio-Chemistry and Masters of Science in Chemistry from California State University at Sacramento, Sacramento, CA; a Masters in Law with Graduate Certification in U.S. and International Taxation from St. Thomas University, School of Law, Miami, FL.; and a Graduate Certification in Regulatory Affairs (RAC) from California State University at San Diego, San Diego, CA. Mr. Hakim’s leadership experience (consisting of extensive experience in senior management positions, responsible for 25 global manufacturing/regulatory sites with more than 3,000 employees under his leadership), industry experience (comprising more than 30 years of pharmaceutical and medical industry experience served in various quality assurance, analytical research and development/technical services and compliance positions) and academic experience (including Bachelor degrees in Chemistry and Bio-Chemistry, Masters degrees in Chemistry and Law, with Graduate Certification in U.S. and International Taxation, and a Graduate Certification in Regulatory Affairs) led to the conclusion that he is qualified to serve as a director. Barry Dash, Ph.D. Dr. Barry Dash has served as a Director since April 2005, member of the Audit Committee since April 2005, member of the Nominating Committee since April 2005 and member and Chairman of the Compensation Committee since June 2007. Dr. Dash has been, since 1995, President and Managing Member of Dash Associates, L.L.C., an independent consultant to the pharmaceutical and health industries. From 1983 to 1996 he was employed by Whitehall-Robins Healthcare, a division of American Home Products Corporation (now known as Wyeth), initially as Vice President of Scientific Affairs, then as Senior Vice President of Scientific Affairs and then as Senior Vice President of Advanced Technologies, during which time he personally supervised six separate departments: Medical and Clinical Affairs, Regulatory Affairs, Technical Affairs, Research and Development, Analytical R&D and Quality Management/Q.C. Dr. Dash had been employed by the Whitehall Robins Healthcare from 1960 to 1976, during which time he served as Director of Product Development Research, Assistant Vice President of Product Development and Vice President of Scientific Affairs. Dr. Dash had been employed by J.B. Williams Company (Nabisco Brands, Inc.) from 1978 to 1982. From 1976 to 1978 he was Vice President and Director of Laboratories of the Consumer Products Division of American Can Company. Dr. Dash holds a Ph.D. from the University of Florida and M.S. and B.S. degrees from Columbia University where he was Assistant Professor at the College of Pharmaceutical Sciences from 1956 to 1960. He is a member of the American Pharmaceutical Association, the American Association for the Advancement of Science and the Society of Cosmetic Chemist, American Association of Pharmaceutical Scientists, Drug Information Association, American Foundation for Pharmaceutical Education, and Diplomate American Board of Forensic Examiners. He is the author of scientific publications and patents in the pharmaceutical field. Dr. Dash’s extensive education in pharmaceutical sciences and his experience in the development of scientific products, including his experience in regulatory affairs, led to the conclusion that he is qualified to serve as a director. 59 Jeffrey Whitnell Jeffrey Whitnell has served as a Director since October 23, 2009, Chairman of the Audit Committee, member of the Compensation Committee since October 2009 and designated by the Board as an “audit committee financial expert” as defined under applicable rules under the Exchange Act. Since April 2015, Mr. Whitnell has provided financial advisory services, primarily to the healthcare industry, including LifeWatch Services, where he served as the Vice President, Finance & Controller. From June 2010 to March 2015, Mr. Whitnell was the Chief Financial Officer for ReliefBand Medical Technologies, a medical device company. From June 2009 to June 2010, Mr. Whitnell provided financial advisory services to various healthcare companies, including ReliefBand Medical Technologies. From June 2004 to June 2009, Mr. Whitnell was Chief Financial Officer and Senior Vice President of Finance at Akorn, Inc. From June 2002 to June 2004, Mr. Whitnell was Vice President of Finance and Treasurer for Ovation Pharmaceuticals (acquired by Lundeck). From 1997 to 2001, Mr. Whitnell was Vice President of Finance and Treasurer for MediChem Research (acquired by deCODE genetics). Prior to 1997, Mr. Whitnell held various finance positions at Akzo Nobel and Motorola. Mr. Whitnell began his career as an auditor with Arthur Andersen & Co. He is a certified public accountant and holds an M.B.A. in Finance from the University of Chicago Booth School of Business and a B.S. in Accounting from the University of Illinois. Mr. Whitnell’s qualifications as an accounting and audit expert led to the conclusion that he is qualified to serve as a director. Davis Caskey Davis Caskey has served as a Director since April 2016, and a member of the Audit Committee, the nominating Committee and the Compensation Committee since September 2016. He brings more than 40 years of pharmaceutical industry experience to this position. Mr. Caskey is currently President & CEO of Caskey LLC, which he formed in 2013 to serve as an umbrella to manage his pharmaceutical consulting and other business interests. From 1990 to 2013, Davis served as the operating officer of ECR Pharmaceuticals, of which he was a founding member. HiTech Pharmacal acquired the privately held ECR in 2009 and Mr. Caskey continued in his role until retiring in 2013. At ECR, Mr. Caskey was credited with the establishment of the company’s sales and marketing structure, its product distribution format, and the development and management of the firm’s internal organization. His responsibilities included the oversight of drug development and regulatory filings, product acquisitions, and acquisition of other companies. A primary focus was to conceive and develop, with the assistance of key strategic partners, unique dosage forms and extended release formulations of products which enhance patient compliance and safety. Prior to ECR, Mr. Caskey was employed by A.H. Robins for 18 years in various field and home office management positions. His experience brings critical insight into the marketing and distribution of pharmaceutical products in a rapid and ever-changing competitive marketplace, and this experience led to the conclusion that he is qualified to serve as a director. Mr. Caskey attended the University of Texas (Austin) and Lamar University, and holds bachelor’s and master’s degrees. Kirko Kirkov Mr. Kirkov joined Elite in September 2022, as an accomplished and multi-faceted leader with more than twenty years of in-depth business development skills across international pharmaceutical organizations. Before joining Elite, Mr. Kirkov served as General Manager of Vertice Pharma, a specialty generics pharmaceutical company, from February 2020 to present. From April 2008 to February 2020, Mr. Kirkov was employed by Sandoz and served in positions of increasing responsibilities beginning with Country Head & Managing Director of Bulgaria from 2008 to 2011. From 2011 to 2013, Mr. Kirkov served as Sandoz’s Business Unit Head, Branded Prescription Generics in Russia, and most recently, from January 2013 to February 2020, served as Sandoz’s Executive Director, Commercial Operations. Mr. Kirkov brings with him a broad range of experience in the areas of business development, operationalization of commercial strategy, and implementation of retail and wholesale channel sales operations, having overseen sales portfolios consisting of 400+ product families, and 1,500+ SKUs covering both generic and branded products. Mr. Kirkov has a Bachelor of Science in Mechanical Engineering/Engineering Management from the University of Ottawa, two Masters of Science degrees respectively in Naval Architecture and Ocean Systems Management from the Massachusetts Institute of Technology, a Master of Science in Applied Positive Psychology and Coaching from the University of East London, and an MBA from the University of Durham. 60 Douglas Plassche Douglas Plassche has served as Executive Vice President of Operations since August 2013. Prior to joining the Company, from 2009 to 2013, Mr. Plassche served as the Managing Director of the New Jersey Solid Oral Dose Operations of Actavis, overseeing 450 employees and the production of more than 100 products. From 2007 to 2009, Mr. Plassche was the Senior Director of Manufacturing for PAR Pharmaceuticals, overseeing 200 employees and the production of more than 70 products. From 1990 – 2007, Mr. Plassche was employed by Schering-Plough, progressing steadily through multiple disciplines, locations, and technical operations sectors with increasing levels of responsibility. Mr. Plassche has a bachelor’s degree in Economics from Rochester University. Carter Ward Carter Ward has served as Chief Financial Officer, Secretary and Treasurer of the Company since September 5, 2023. This is Mr. Ward’s second tenure with the Company, previously serving in the same positions as currently from July 2009 through May 2021. In between Mr. Ward’s roles with the Company, he served as Chief Financial Officer of Mirror Biologics, a privately held biotech organization from September 2022 to July 2023 and as CFO of Enveric Biosciences, a NASDAQ listed biotech company, from May 2021 to September 2022. Prior to initially joining the Company, from July 2005 to April 2009, Mr. Ward filled multiple finance and supply chain leadership roles with the Actavis Group and its U.S. subsidiary, Amide Pharmaceuticals. From September 2004 to June 2005, Mr. Ward was a consultant, mainly engaged in improving internal controls and supporting Sarbanes Oxley compliance of Centennial Communications Inc, a NASDAQ listed wireless communications provider. Mr. Ward began his career as a certified public accountant in the audit department of KPMG. Mr. Ward holds a B.S. in Accounting from Long Island University from where he graduated summa cum laude. There are no family relationships between any of our directors and executive officers. Committees of the Board The Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating Committee. Audit Committee The members of the Audit Committee are Jeffrey Whitnell (Chairman of the Audit Committee), Dr. Barry Dash, Davis Caskey and Nasrat Hakim. The Board of Directors has determined that Messrs. Whitnell, Dash, and Caskey are independent and Mr. Whitnell is qualified as an audit committee financial expert. The Board of Directors has determined that Messrs. Whitnell, Dash and Caskey are independent directors as (i) defined in Rule 10A-3(b)(1)(ii) under the Exchange Act and (ii) under Sections 803A(2) and 803B(2)(a) of the NYSE American LLC Company Guide (although our securities are not listed on the NYSE American LLC or any other national exchange). Nominating Committee The members of the Nominating Committee are Nasrat Hakim (Chairman of the Nominating Committee), Dr. Barry Dash, and Davis Caskey. There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since the filing of our last Annual Report on Form 10-K. Compensation Committee The members of the Compensation Committee are Dr. Barry Dash (Chairman of the Compensation Committee), Jeffrey Whitnell, Davis Caskey and Nasrat Hakim. Delinquent Section 16 Reports Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who own more than ten percent of a registered class of the Company’s stock, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of copies of such reports and upon written representations from each of the Company’s officers and directors, the Company believes that, for the year ended March 31, 2024, all Section 16(a) filing requirements applicable to the Company’s officers, directors and greater than ten percent stockholders were complied with on a timely basis. Code of Conduct and Ethics At the first meeting of the Board of Directors following the annual meeting of stockholders held on June 22, 2004, and as further updated effective July 2009, the Board of Directors adopted a Code of Business Conduct and Ethics that is applicable to the Company’s directors, officers, and employees. A copy of the Code of Business Conduct and Ethics is available on our website at www.elitepharma.com, under Investor Relations. 61 ITEM 11. EXECUTIVE COMPENSATION Role of the Compensation Committee The Company formed the Compensation Committee in June 2007. Since the formation of the Compensation Committee all elements of the executives’ compensation are determined by the Compensation Committee, which currently is comprised of three independent non-employee directors, and one director who is also the Company’s Chief Executive Officer. However, the Compensation Committee’s decisions concerning the compensation of the Company’s Chief Executive Officer and equity awards are subject to ratification by the full Board of Directors. The members of the Compensation Committee are Dr. Barry Dash (Chairman of the Compensation Committee), Jeffrey Whitnell, Davis Caskey and Nasrat Hakim. The Compensation Committee operates pursuant to a charter. Under the Compensation Committee charter, the Compensation Committee has authority to retain compensation consultants, outside counsel, and other advisors that the committee deems appropriate, in its sole discretion, to assist it in discharging its duties, and to approve the terms of retention and fees to be paid to such consultants. During the fiscal year ended March 31, 2024, the Compensation Committee did not engage any advisors. Named Executive Officers The named executive officers for the fiscal year ended March 31, 2024 were: ● Nasrat Hakim, Chief Executive Officer and President for the full year; ● Douglas Plassche, Executive Vice President for the full year ● Carter Ward, Chief Financial Officer since September 5, 2023 These individuals are referred to collectively as the “Named Executive Officers”. Our Executive Compensation Program Overview Our approach to executive compensation is driven by our belief in rewarding people for consistently strong execution and performance. We believe that the ability to attract and retain qualified executive officers and other key employees is essential to our long-term success. Our plan to obtain and retain highly skilled employees is to provide significant incentive compensation opportunities and market competitive salaries. We strive to link individual employee objectives with overall company strategies and results, and to reward executive officers and significant employees for their individual contributions to those strategies and results. Furthermore, we believe that equity ownership serves to align the interests of our executives with those of our stockholders. As such, equity is a key component of our compensation program. The primary elements of our executive compensation program are base salary, incentive cash and stock bonus opportunities and equity incentives typically in the form of stock option grants or stock awards. Although we provide other types of compensation, these three elements are the principal means by which we provide the Named Executive Officers with compensation opportunities. Elements of our executive compensation program Base Salary We pay a base salary to each of the Named Executive Officers. In general, base salaries for the Named Executive Officers are determined by evaluating the responsibilities of the executive’s position, the executive’s experience, and the competitive marketplace. Base salary adjustments are considered and take into account changes in the executive’s responsibilities, the executive’s performance, and changes in the competitive marketplace. We believe that the base salaries of the Named Executive Officers are appropriate within the context of the compensation elements provided to the executives and because they are at a level which remains competitive in the marketplace. In the section below entitled “ Agreements with Named Executive Officers ”, we describe the breakdown between compensation paid in cash and in equity for each Named Executive Officer during the fiscal year ended March 31, 2024. Bonuses Named Executive Officers may earn discretionary bonuses, which are awarded by the Compensation Committee in its discretion after the end of a fiscal year based on its assessment of factors including Company and individual performance. In addition, as described in the section below entitled “ Agreements with Named Executive Officers ,” Mr. Plassche received a cash bonus of $165,032 during the fiscal year ended March 31, 2024, and a retention bonus of $150,000. Mr. Ward assumed his position as Chief Financial Officer on September 5, 2023 and was not paid a cash bonus during the fiscal year ended March 31, 2024. 62 Equity In addition to cash compensation, our Named Executive Officers from time to time are granted stock options. During the fiscal year ended March 31, 2024, in connection with his initial employment, Mr. Ward was granted options to purchase 3,000,000 shares of common stock at a price of $0.0898 per share. All options granted include vesting periods consisting of one-third of total options granted vesting on each of the first, second and third anniversaries of the grant date, with current employment being a requisite for all vesting. Options granted expire the earlier of ten years from the grant date or 90 days subsequent to the employee’s last date of employment. Retirement Benefits We maintain a tax-qualified retirement plan under Section 401(k) of the Code. The plan allows employees to defer compensation on a pre-tax basis subject to certain limits; however, Elite does not provide a matching contribution to its participants. Perquisites Mr. Hakim receives a monthly car allowance of up to $1,500 pursuant to the terms of his employment agreement. Mr. Plassche receives a monthly car allowance of up to $500. Mr. Hakim is also entitled to a monthly housing allowance up to $5,000. The value of the perquisites we provide are taxable to the Named Executive Officers and the incremental cost to us of providing these perquisites are reflected in the Summary Compensation Table. The Board of Directors believes that the perquisites provided are reasonable and appropriate. The Company generally covers life insurance premiums for its employee population, including its Named Executive Officers. For more information on perquisites provided to the Named Executive Officers, please see the “ All Other Compensation ” column of the Summary Compensation Table. Agreements with Named Executive Officers Nasrat Hakim Pursuant to his August 2013 employment agreement, as amended on January 12, 2016 and September 26, 2023 (the “Hakim Employment Agreement”), as of April 1, 2023, Mr. Hakim receives an annual salary of $1,000,000 per year payable in accordance with the Company’s payroll practices. The Board may also award discretionary bonuses in its sole discretion. Mr. Hakim is entitled to employee benefits (e.g., health, vacation, employee benefit plans and programs) consistent with other Company employees of his seniority, a car allowance of $1,500 and housing allowance of $5,000 per month, respectively. The Hakim Employment Agreement contains confidentiality, non-competition and other standard restrictive covenants. Mr. Hakim’s employment is terminable by the Company for cause (as defined in the Hakim Employment Agreement). The Hakim Employment Agreement also may be terminated by the Company upon at least 30 days written notice due to disability (as defined in the Hakim Employment Agreement) or without cause. Mr. Hakim can terminate the Hakim Employment Agreement by resigning, provided he gives notice at least 60 days prior to the effective resignation date. If Mr. Hakim is terminated for cause or he resigns, he only is entitled to accrued and unpaid annual salary, accrued vacation time and any reasonable and necessary business expenses, all through the date of termination (“Basic Termination Benefits”). If Mr. Hakim is terminated because of disability or death, in addition to Basic Termination Benefits, he is entitled to a pro rata discretionary bonus, if any, as awarded by the Board in its sole discretion, from the beginning of the calendar year of termination through the date of termination, payable in a lump sum. In addition, in the event of the termination of Mr. Hakim’s employment due to his disability, he will be entitled to a lump sum payment within 60 days of the termination date equal to one year of his base salary, subject to his execution of a release. If the Company terminates Mr. Hakim without cause, in addition to Basic Termination Benefits, Mr. Hakim is entitled to his pro rata discretionary bonus, if any, as awarded by the Board in its sole discretion, from the beginning of the calendar year of termination through the date of termination and an amount equal to two years’ annual base salary, all payable in a lump sum within 60 days of the termination date, and 12 months of continued health insurance continuation under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), at active employee rates, subject to his execution of a release and his continued compliance with applicable restrictive covenants. Upon a termination of employment in connection with a Change of Control (as defined below), in addition to Basic Termination Benefits, Mr. Hakim is entitled to a pro rata discretionary bonus and payment in an amount equal to two year’s base annual salary in effect upon the Date of Termination, less applicable deductions, and withholdings, in a lump sum within 60 days, and two years of health care continuation benefits. In addition, all outstanding unvested equity held by Mr. Hakim will then vest. 63 Under the Hakim Employment Agreement: “Cause” means (1) Mr. Hakim’s failure or refusal to perform the services required under the agreement, (2) the material breach by Mr. Hakim of any of the terms of the agreement, or (3) Mr. Hakim’s conviction of a crime that results in imprisonment or involves embezzlement, dishonest or activities injurious to the Company or its reputation. “Change of Control” means generally (1) an acquisition or merger resulting in the holders of the Company’s voting stock immediately prior to the transaction holding less than fifty (50%) percent of the combined voting power after the transaction; (2) the sale of all or substantially all of the assets or capital stock of the Company; or (3) the securities of the Company representing greater than fifty (50%) percent of the combined voting power of the Company’s then outstanding voting securities are acquired in a single transaction or series of related transactions. “Disability” means that Mr. Hakim is prevented by illness, accident or other disability (mental or physical) from performing the essential functions of his position for one or more periods cumulatively totaling 3 months during any consecutive 12 month period. Douglas Plassche On July 20, 2013, the Company entered into an employment agreement with Mr. Douglas Plassche (the “Plassche Employment Agreement”). Pursuant to the Plassche Employment Agreement, Mr. Plassche serves as an at-will employee, in the position of Vice President of Operations, commencing on August 12, 2013. The Plassche Employment Agreement includes an initial base salary of $205,000 being paid in accordance with the Company’s payroll practices and an annual stock award in an amount equal to $25,000. The Common Stock component of Mr. Plassche’s compensation is to be computed on an annual basis, with the number of shares issued being equal to the quotient of the annual amount due, divided by the average daily closing price of the Company’s Common Stock for the calendar year just ended. Mr. Plassche is also eligible for an annual bonus in cash and/or equity-based awards, with such annual bonus being awarded based upon the achievement of agreed milestones and at the discretion of the Company and its Chief Executive Officer. In addition, pursuant to the Plassche Employment Agreement, Mr. Plassche was initially granted options to purchase 3,000,000 shares of Common Stock, at a price of $ 0.07 per share, (the closing price of the Common Stock on the date of the Plassche Employment Agreement). The options were issued pursuant to the 2004 Employee Stock Option Plan and vested over a period of three years with the vesting period commencing one year from the date of issuance and expired, unexercised, ten years from the date of issuance in July of 2023. Mr. Plassche is entitled to a monthly automobile allowance of $500. Mr. Plassche’s employment is terminable by either party. If the Company terminates Mr. Plassche without cause, Mr. Plassche is entitled to an amount equal to six months of base annual salary in effect upon the date of termination. Throughout his tenure, Mr. Plassche’s compensation was increased from time to time by the Board and the annual stock award was removed. On March 1, 2024, Mr. Plassche’s compensation was adjusted to include an annual salary of $346,567 payable in accordance with the Company’s payroll practices. On February 18, 2022, Mr. Plassche entered into a second retention agreement with the Company (the “2022 Plassche Retention Agreement”), as an incentive for his continued employment and cooperation during a transitional period for the Company. Pursuant to the 2022 Plassche Retention Agreement, Mr. Plassche is entitled to a $150,000 retention payment on each of October 31, 2022 and June 30, 2023, subject in each case to his continued employment through such date. The retention payments have been made to Mr. Plassche in accordance with 2022 Plassche Retention Agreement. Carter Ward On September 5, 2023, the Company entered into an employment agreement with Mr. Carter Ward, effective as of September 5, 2023 to served as the Company’s Chief Financial Officer (the “Ward Employment Letter”). Pursuant to the Ward Employment Letter, Mr. Ward receives an annual base salary of $275,000, guaranteed annual bonus equal to 20% of annual base salary and is eligible to receive additional performance bonuses of up to 30% of annual base salary as determined from time to time by the Company’s Board of Directors. In addition and also pursuant to the Ward Employment Letter, the Company’s Board of Directors approved the grant of options to purchase 3,000,000 shares of Common Stock at a price equal to the closing price of the Company’s Common Stock on the first date of Mr. Ward’s employment pursuant to the Ward Employment Letter. The Ward Employment Agreement will remain in effect until terminated by either party with at least 60 days advance written notice. In addition, the Ward Employment Agreement is subject to early termination by Mr. Ward or the Company in accordance with the terms of the Ward Employment Agreement. 64 Pursuant to the Ward Agreement, if Mr. Ward’s employment is terminated by the Company without cause, then the Company must pay Mr. Ward, in addition to any then-accrued and unpaid obligations owed to him, severance payments equal to two months of his then-current base salary for each year of service, up to a maximum of 12 months, and 12 months of continued health insurance continuation under COBRA, at active employee rates, in each case, subject to his execution of a release and his compliance with applicable restrictive covenants. The Ward Employment Agreement also contains covenants restricting Mr. Ward from soliciting the Company’s employees or customers during his employment and for a period of 12 months after the termination of Mr. Ward’s employment with the Company and prohibiting him from disclosure of confidential information regarding the Company at any time. Potential Payments Upon Termination or Change of Control Messrs. Hakim, Plassche and Ward are entitled to certain benefits upon a termination event (and in the case of Mr. Hakim, in connection with a change of control), as described in the section entitled “Agreements with Named Executive Officers ” above. We do not presently provide the Named Executive Officers with any plan or arrangement, other than those that may be contained in the employment contracts disclosed above, in connection with any termination, including, without limitation, through retirement, resignation, severance, or constructive termination (including a change in responsibilities) of such Named Executive Officer’s employment with the Company. As part of the Company’s efforts to ensure the retention and continuity of key employees, officers, and directors in the event of a change of control of the ownership of the Company, unless otherwise stated in applicable employment contracts, key executives would receive an amount not to exceed twelve months of such executive’s salary, and certain Directors and managers would receive an amount equal to six months of such Director’s or manager’s fees or salaries, as applicable. In addition, any outstanding and unvested options would immediately vest, in the event of a change of control. Summary Compensation Table Name and Principal Position Fiscal Year Salary ($) Bonus ($) Option Awards ($) 11 All Other Compensation ($) Total ($) Nasrat Hakim, President, 2024 1,000,000 1 — 2 — 78,000 3 1,078,000 Chief Executive Officer and Chairman of the Board of Directors 2023 500,000 1 499,992 2 — 78,000 3 1,077,992 Douglas Plassche, 2024 331,440 4 315,032 5 — 6,000 7 652,472 Executive Vice President 2023 302,560 4 232,000 5 187,055 6 6,000 7 727,615 Carter Ward, 2024 158,477 9 — 255,018 10 — 383,495 Chief Financial Officer 8 2023 — — — — — 1 Represents salary earned by Mr. Hakim pursuant to the Hakim Employment Agreement for the fiscal years ended March 31, 2024 and 2023. Salaries earned during the fiscal year ended March 31, 2024 were paid in accordance with the Company’s payroll practices. Salaries earned during the fiscal year ended March 31, 2023 were to be paid via the issuance of Common Stock in lieu of cash. No shares were issued in payment of salaries earned during the fiscal year ended March 31, 2023. In aggregate a total of $3,125,000 was owed to Mr. Hakim for salaries earned but unpaid for all prior years through and including the fiscal year ended March 31, 2023. On March 29, 2024, a total of 49,534,368 shares of Common Stock were issued in full satisfaction pursuant to the Hakim Employment Agreement for this amount 2 Represents bonus earned by Mr. Hakim for the fiscal years ended March 31, 2024 and 2023, respectively, and paid in accordance with the Company’s payroll practices. 3 Represents annual auto and housing allowances of $18,000 and $60,000, respectively. 4 Represents salaries earned by Mr. Plassche pursuant to the Plassche Employment Agreement and paid in accordance with the Company’s payroll practices. 65 5 Represents cash bonuses earned pursuant to the Plassche Employment Agreement and retention bonuses earned pursuant to the 2022 Plassche Retention Agreement and paid in accordance with the Company’s payroll practices. 6 Represents options to purchase 7,500,000 shares of Common Stock at a price of $0.03 per share with the grant date fair value of such option awards being determined using the Black Scholes option-pricing model. 7 Represents annual auto allowances. 8 Mr. Ward has served as the Company’s Chief Financial Officer since September 5, 2023. 9 Represents salaries earned by Mr. Ward pursuant to the Ward Employment Agreement and paid in accordance with the Company’s payroll practices. 10 Represents options to purchase 3,000,000 shares of Common Stock at a price of $0.0898 per share with the grant date fair value of such option awards being determined using the Black Scholes option-pricing model. 11 The amounts in these columns reflect the grant date fair value of stock option awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. See Note 13 to the Consolidated Financial Statements contained in the Company’s report on Form 10-K for the fiscal year ended March 31, 2024 for the assumptions used in the valuations that appear in this column. Outstanding Equity Awards as of March 31, 2024 Name Number of securities underlying unexercised options Exercisable (#) Number of securities underlying unexercised options Unexercisable (#) Options Exercise Price ($) Option Expiration Date Douglas Plassche 2,500,000 5,000,000 1 $ 0.03 1/3/2033 Carter Ward — 3,000,000 2 $ 0.0898 9/5/2033 Nasrat Hakim — — 1 Options vest in equal annual increments of 2,500,000 shares on January 3, 2024, January 3, 2025 and January 3, 2026. 2 Options vest in equal annual increments of 1,000,000 shares on September 5, 2024, September 5, 2025 and September 5, 2026 Director Fee Compensation The Company’s policy regarding director fees is as follows: (i) Directors who are employees or consultants of the Company (and/or any of its subsidiaries), including Mr. Hakim, receive no additional remuneration for serving as directors or members of committees of the Board; (ii) all Directors are entitled to reimbursement for out-of-pocket expenses incurred by them in connection with their attendance at the Board or committee meetings; (iii) Directors who are not employees or consultants of the Company (and/or any of its subsidiaries) receive a $30,000 annual retainer fee, payable in cash (iv) Directors do not receive any additional compensation for attendance at or chairing of any meetings. 66 Director Compensation The following table sets forth information concerning director compensation for the year ended March 31, 2024: Name Fees Earned or Paid In Cash 1 ($) Stock Awards 1 ($) Total ($) Barry Dash 30,000 2 — 30,000 Jeffrey Whitnell 30,000 2 — 30,000 Davis Caskey 30,000 2 — 30,000 1 Please refer to the section below titled “Director Fee Compensation” for details on the Company’s director fee compensation policy. No directors held unexercised or unvested stock or option awards as of March 31, 2024. 2 Amounts represent Director fees earned during the fiscal year ended March 31, 2024 payable in cash. Other The Company’s Articles of Incorporation, as amended, provide for the indemnification of each of the Company’s directors to the fullest extent permitted under Nevada General Corporation Law. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information, as of June 26, 2024 (except as otherwise indicated), regarding beneficial ownership of our Common Stock by (i) each person who is known by us to own beneficially more than 5% of each such class, (ii) each of our directors, (iii) each of our executive officers and (iv) all our directors and executive officers as a group. As of June 26, 2024 we had 1,068,273,108 shares of Common Stock outstanding (exclusive of 0.1 million treasury shares). On any matter presented to the holders of our Common Stock for their action or consideration at any meeting of our Shareholders, each share of Common Stock entitles the holder to one vote. As used in the table below and elsewhere in this report, the term beneficial ownership with respect to a security consists of sole or shared voting power, including the power to vote or direct the vote, and/or sole or shared investment power, including the power to dispose or direct the disposition, with respect to the security through any contract, arrangement, understanding, relationship, or otherwise, including a right to acquire such power(s) during the 60 days immediately following June 23, 2023. Except as otherwise indicated, the Shareholders listed in the table have sole voting and investment powers with respect to the shares indicated. Name and Address of Beneficial Owner of Common Stock Common Stock Percent (%) of Voting Securities Beneficially Owned Nasrat Hakim, President, Chief Executive Officer and Chairman of the Board of Directors* 300,581,058 (1) 26.3 % Barry Dash, Director* 3,235,555 (2) ** % Jeffrey Whitnell, Director* 3,187,020 (3) ** % Davis Caskey, Director* 2,049,436 (4) ** % Douglas Plassche, Executive Vice President * 3,633,932 (5) ** % Carter Ward, Chief Financial Officer 4,990,445 (6) ** % All Directors and Officers as a group 317,677,446 (7) 27.8 % * The address is c/o Elite Pharmaceuticals Inc., 165 Ludlow Avenue, Northvale, NJ 07647. ** Less than 1% (1) Includes 219,349,250 shares of Common Stock held by Mr. Hakim and 2,223,147 shares of Common Stock held by Mr. Hakim’s spouse and 79,008,661 shares of Common Stock issuable upon cash exercise of the Series J Warrants with an exercise price of $0.1521 per share. (2) Includes 3,235,555 shares of Common Stock held by Dr. Dash (3) Includes 3,187,020 shares of Common Stock held by Mr. Whitnell (4) Includes 2,049,436 shares of Common Stock held by Mr. Caskey. (5) Includes 1,133,932 shares of Common Stock held by Mr. Plassche and shares of Common Stock issuable upon cash exercise of vested options to purchase 2,500,000 shares of Common Stock and excludes 5,000,000 shares issuable upon exercise of options not vested or not exercisable within the next 60 days. (6) Includes 4,990,445 shares of Common Stock held by Mr. Ward and excludes 3,000,000 shares issuable upon exercise of options not vested or not exercisable within the next 60 days. (7) Relates only to current directors and officers. Includes 236,168,785 shares of Common Stock held, 2,500,000 shares of Common Stock issuable upon cash exercise of vested options and 79,008,661 shares of Common Stock issuable upon cash exercise of warrants at an exercise price of $0.1521 per share of Common Stock, and excludes 8,000,000 shares issuable upon exercise of options not vested or not exercisable within the next 60 days. 67 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Certain Related Person Transactions In May 2020, Praxgen, under an asset purchase agreement, assigned its rights and obligations under the Praxgen Agreement for Amphetamine IR and Amphetamine ER to Mikah. The ANDAs for Amphetamine IR and Amphetamine ER are now registered under Elite’s name. Mikah is now Elite’s partner with respect to Amphetamine IR and ER and has assumed all the rights and obligations for these products from Praxgen. Mikah was founded in 2009 by Nasrat Hakim. Director Independence All related person transactions are reviewed and, as appropriate, may be approved or ratified by the Board of Directors. If a Director is involved in the transaction, he or she may not participate in any review, approval, or ratification of such transaction. Related person transactions are approved by the Board of Directors only if, based on all of the facts and circumstances, they are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the Board of Directors determines in good faith. The Board of Directors takes into account, among other factors it deems appropriate, whether the transaction is on terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The Board of Directors may also impose such conditions as it deems necessary and appropriate on us or the related person in connection with the transaction. In the case of a transaction presented to the Board of Directors for ratification, the Board of Directors may ratify the transaction or determine whether rescission of the transaction is appropriate. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The Company’s independent registered public accounting firm for the fiscal year ending March 31, 2024 is Forvis Mazars LLP (“ Forvis Mazars ”). The Company’s independent registered public accounting firm for the fiscal year ended March 31, 2023 was Buchbinder Tunick & Company LLP (“ Buchbinder ”). The following table presents fees, including reimbursements for expenses, for professional audit services rendered by Forvis Mazars (or its predecessor), for the fiscal year ended March 31, 2024, and Buchbinder, for the fiscal year ended March 31, 2023 for the audits of our financial statements and interim reviews of our quarterly financial statements. Fiscal 2024 Fiscal 2023 Audit Fees - Buchbinder Tunick & Company LLP $ — $ 120,000 Audit Fees - Mazars USA LLP $ 245,440 $ — Audit Fees - Forvis Mazars, LLP $ 60,000 $ — Audit-Related Fees $ — $ — Tax Fees $ — $ — Audit Fees Represents fees for professional services provided for the audit of our annual financial statements, services that are performed to comply with generally accepted auditing standards, and review of our financial statements included in our quarterly reports and services in connection with statutory and regulatory filings. Audit-Related Fees Represents the fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements. Pre-Approval Procedures The Audit Committee pre-approves all audit related and tax services and the terms thereof (which may include providing comfort letters in connection with securities underwriting) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by the independent auditor; provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the “de minimus” provisions of Section 10A (i)(1)(B) of the Exchange Act are satisfied. This authority to pre-approve non-audit services may be delegated to one or more members of the Audit Committee, who shall present all decisions to pre-approve an activity to the full Audit Committee at its first meeting following such decision. 68 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES (a) The following are filed as part of this Annual Report on Form 10-K (1) The financial statements and schedules required to be filed by Item 8 of this Annual Report on Form 10-K and listed in the Index to Consolidated Financial Statements. (2) The Exhibits required by Item 601 of Regulation S-K and listed below in the “Index to Exhibits required by Item 601 of Regulation S-K.” (b) The Exhibits are filed with or incorporated by reference in this Annual Report on Form 10-K (c) None Index to Exhibits required by Item 601 of Regulation S-K. Exhibit No. Description 3.1(a) Articles of Incorporation of Elite-Nevada, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on January 9, 2012. 3.1(b) Certificate of Designations of the Series G Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on April 18, 2013, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated April 18, 2013 and filed with the SEC on April 22, 2013. 3.1(c) Certificate of Designation of the Series H Junior Participating Preferred Stock, incorporated by reference to Exhibit 2 (contained in Exhibit 1) to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013. 3.1(d) Certificate of Designations of the Series I Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on February 6, 2014, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated February 6, 2014 and filed with the SEC on February 7, 2014. 3.1(e) Certificate of Designations of the Series J Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on May 3, 2017, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated April 28, 2017 and filed with the SEC on April 28, 2017. 3.1(f) Certificate of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, dated June 29, 2020 and filed with the SEC on June 29, 2020. 3.2(a) Amended and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K dated April 23, 2020 and filed with the SEC on April 23, 2020. 4.1 Form of specimen certificate for Series G Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, dated April 18, 2013 and filed with the SEC on April 22, 2013. 4.2 Form of specimen certificate for Series I Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, dated February 6, 2014 and filed with the SEC on February 7, 2014. 4.3 Rights Agreement, dated as of November 15, 2013, between the Company and American Stock Transfer & Trust Company, LLC., incorporated by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013. 4.4 Form of Series H Preferred Stock Certificate, incorporated by reference to Exhibit 1 to the Registration Statement on Form 8-A filed with the SEC on November 15, 2013. 4.5 Warrant to purchase shares of Common Stock issued to Nasrat Hakim dated April 28, 2017 incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated April 28, 2017, and filed with the SEC on April 28, 2017. 4.6 Description of Common Stock, incorporated by reference to Exhibit 4.6 to the Annual Report on Form 10-K, filed with the SEC on June 29, 2020 10.1* Elite Pharmaceuticals, Inc. Restated 2014 Equity Incentive Plan. 10.2 Form of Confidentiality Agreement (corporate), incorporated by reference to Exhibit 10.7 to the Form SB-2. 10.3 Form of Confidentiality Agreement (employee), incorporated by reference to Exhibit 10.8 to the Form SB-2. 10.4 Loan Agreement, dated as of August 15, 2005, between New Jersey Economic Development Authority (“NJEDA”) and the Company, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005. 69 10.5 Series A Note in the aggregate principal amount of $3,660,000.00 payable to the order of the NJEDA, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated August 31, 2005 and filed with the SEC on September 6, 2005. 10.19 August 1, 2013 Secured Convertible Note from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013. 10.20 August 1, 2013 Security Agreement from the Company to Mikah Pharma LLC., incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, dated August 1, 2013 and filed with the SEC on August 5, 2013. 10.21 October 15, 2013 Hakim Credit Line Agreement, incorporated by reference to Exhibit 10.16 to the Quarterly Report on Form 10-Q for the period ended September 30, 2013. 10.22 October 2, 2013 Manufacturing and Licensing Agreement with Epic Pharma LLC, incorporated by reference to Exhibit 10.17 to the Amended Quarterly Report on Form 10-Q/A for the period ended September 30, 2013 and filed with the SEC on April 25, 2014. Confidential Treatment granted with respect to portions of the Agreement. 10.23 February 7, 2014 Amendment to Secured Convertible Note from the Company to Mikah, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated February 7, 2014 and filed with the SEC on February 7, 2014. 10.24 Employment Agreement with Dr. G. Kenneth Smith, dated October 20, 2014, incorporated by reference to Exhibit 10.82 to the Quarterly Report on Form 10-Q for the period ended September 30, 2014 and filed with the SEC on November 14, 2014. 10.25 January 28, 2015 First Amendment to the Loan Agreement between Nasrat Hakim and Elite Pharmaceuticals dated October 15, 2013, incorporated by reference to Exhibit 10.83 to the Quarterly Report on Form 10-Q for the period ended December 31, 2014 and filed with the SEC on February 17, 2015. 10.26 January 28, 2015 Termination of Development and License Agreement for Mikah-001 between Elite Pharmaceuticals, Inc. and Mikah Pharma LLC and Transfer of Payment, incorporated by reference to Exhibit 10.84 to the Quarterly Report on Form 10-Q for the period ended December 31, 2014 and filed with the SEC on February 17, 2015. 10.27 June 4, 2015 License Agreement with Epic Pharma LLC, incorporated by reference to Exhibit 10.85 to Amendment No. 1 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2015 and filed with the SEC on July 11, 2016. (Confidential Treatment granted with respect to portions of the Agreement). 10.28 Amendment No. 1 to Hakim Employment Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 29, 2016. 10.29 August 24, 2016 Master Development and License Agreement between Elite and SunGen Pharma LLC. incorporated by reference to Exhibit 10.44 to the Quarterly Report on Form 10-Q for the period ended September 30, 2016 and filed with the SEC on November 9, 2016. (Confidential Treatment granted with respect to portions of the Agreement). 10.30 Purchase Agreement between the Company and Lincoln Park Capital LLC dated May 1, 2017, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated May 2, 2017 and filed with the SEC on May 2, 2017. 10.31 Registration Rights Agreement between the Company and Lincoln Park Capital LLC dated May 1, 2017, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated May 2, 2017 and filed with the SEC on May 2, 2017. 10.32 April 28, 2017 Exchange Agreement between the Company and Nasrat Hakim, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated April 28, 2017 and filed with the SEC on April 28. 2017. 10.33 May 2017 Trimipramine Acquisition Agreement from Mikah Pharma, incorporated by reference to Exhibit 10.50 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.34 May 2017 Secured Promissory Note from the Company to Mikah Pharma, incorporated by reference to Exhibit 10.51 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.35 May 2017 Security Agreement between the Company to Mikah Pharma, incorporated by reference to Exhibit 10.52 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.36 May 2017 Assignment of Supply and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference to Exhibit 10.53 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 10.37 May 2017 Assignment of Manufacturing and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.54 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. 70 10.38 Supply and Distribution Agreement between Dr. Reddy’s Laboratories and Mikah Pharma, incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.39 Manufacturing and Supply Agreement between Epic and Mikah Pharma, incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10-K, for the period ended March 31, 2017 and filed with the SEC on June 14, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.40 Master Development and License Agreement For Products Between Elite Pharmaceuticals, Inc. And SunGen dated July 6, 2017, incorporated by reference to Exhibit 10.57 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.41 First Amendment to Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated by reference to Exhibit 10.59 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.42 Second Amendment to Master Development And License Agreement For Products Between Elite Pharmaceuticals, Inc. and SunGen Pharma, LLC, incorporated by reference to Exhibit 10.58 to the Quarterly Report on Form 10-Q for the period ended June 30, 2017 and filed with the SEC on August 9, 2017. (Confidential Treatment granted with respect to portions of the Agreement). 10.43 May 22, 2018 License, Manufacturing and Supply Agreement with Glenmark Pharmaceuticals Inc. USA, incorporated by reference to Exhibit 10.60 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and filed with the SEC on June 14, 2018. (Confidential treatment granted with respect to portions of the Agreement). 10.44 August 1, 2018 Amendment to the Glenmark Pharmaceuticals Inc. USA License, Supply and Distribution Agreement, incorporated by reference to Exhibit 10.44 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.45 Development Agreement effective December 3, 2018 by and between Mikah Pharma LLC and Elite Laboratories, Inc., incorporated by reference to Exhibit 10.51 to the Annual Report on Form 10-K for the period ended March 31, 2019 and filed with the SEC on June 21, 2019 (portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.46 Asset Purchase Agreement dated November 13, 2019 by and between the Company and Nostrum Laboratories Inc., incorporated by reference to Exhibit 10.49 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. 10.47 January 2, 2020 Amendment to the Glenmark Pharmaceuticals Inc. USA License, Supply and Distribution Agreement, incorporated by reference to Exhibit 10.50 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)). 10.48 Asset Purchase Agreement executed January 16, 2020 by and between the Company and Nostrum Laboratories Inc., incorporated by reference to Exhibit 10.49 to the Quarterly Report on Form 10-Q, for the period ended December 31, 2019 and filed with the SEC on February 10, 2020. 10.49 Employment Agreement with Douglas Plassche, incorporated by reference to Exhibit 10.52 to the Annual Report on Form 10-K, filed with the SEC on June 14, 2021. 71 10.50 Master Development and License Agreement for Products Between Elite Pharmaceuticals, Inc. and Mikah Pharma LLC, effective as of June 10, 2021.(Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10), incorporated by reference to the 10-Q for the period ended June 30, 2021 and filed with the SEC on August 16, 2021. 10.51 License and Distribution Agreement by and between Elite Pharmaceuticals, Inc. and Dexcel Ltd. (Or Akiva, Israel), dated December 6, 2021, incorporated by reference to Exhibit 10.57 to the Annual Report on Form 10-K for the period ended March 31, 2022, filed with the SEC on June 29, 2022. 10.52 February 18, 2022 Retention Agreement with Douglas Plassche, incorporated by reference to Exhibit 10.58 to the Annual Report on Form 10-K for the period ended March 31, 2022, filed with the SEC on June 29, 2022. 10.53 Agreement for Sale and Purchase of Real Estate, dated April 8, 2022, by and between Clyde Wesp and Margaret Wesp as trustees of the Wesp Family Joint Living Trust UTD November 19, 2015 and the Company, incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, for the period ended June 30, 2022 and filed with the SEC on August 15, 2022. 10.54 Loan and Security Agreement, dated April 1, 2022, by and among East West Bank, Elite Pharmaceuticals, Inc. and Elite Laboratories, Inc., incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q, for the period ended June 30, 2022 and filed with the SEC on August 15, 2022. 10.55 Employment Agreement, dated September 5, 2022, between Elite Pharmaceuticals, Inc. and Kirko Kirkov, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 7, 2022. 10.56 Employment Agreement, dated April 27, 2023, between Elite Pharmaceuticals, Inc. and Mark Pellegrino, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 3, 2023 10.57 Employment Agreement, dated September 5, 2023, between Elite Pharmaceuticals, Inc. and Carter Ward, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 7, 2023. 10.58 Elite Pharmaceuticals, Inc. 2024 Equity Incentive Plan, incorporated by reference to Exhibit 99.1 to the Form S-8 filed with the SEC on March 28, 2024. 10.59* Asset Purchase Agreement, dated June 17, 2024, by and between the Company and Nostrum Laboratories Inc. 16 Buchbinder Letter Dated July 17, 2023, incorporated by reference to Exhibit 16 to the Current Report on Form 8-K filed with the SEC on July 17, 2023. 21 Subsidiaries of the Company, incorporated by reference to Exhibit 21 to the Annual Report on Form 10-K, for the period ended March 31, 2019 and filed with the SEC on June 21, 2019. 23.1* Consent of Forvis Mazars LLP, Independent Registered Public Accounting Firm* 23.2* Consent of Buchbinder Tunick & Company LLP, Independent Registered Accounting Firm 31.1* Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a)* 32.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (embedded within the Inline XBRL document). * Filed herewith. ** Furnished herewith. ITEM 16. FORM 10-K SUMMARY None. 72 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ELITE PHARMACEUTICALS, INC. 7/01/2024 By: /s/ Nasrat Hakim Nasrat Hakim Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer) 7/01/2024 By: /s/ Carter Ward Carter Ward Chief Financial Officer (Principal Accounting and Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Nasrat Hakim Chief Executive Officer, President and Chairman of the Board of Directors July 1, 2024 Nasrat Hakim (Principal Executive Officer) /s/ Carter Ward Chief Financial Officer July 1, 2024 Carter Ward (Principal Accounting and Financial Officer) /s/ Barry Dash Director July 1, 2024 Barry Dash /s/ Jeffrey Whitnell Director July 1, 2024 Jeffrey Whitnell /s/ Davis Caskey Director July 1, 2024 Davis Caskey 73 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2024 AND 2023 TABLE OF CONTENTS PAGE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ( Forvis Mazars, LLP , Iselin, NJ # 686 ) F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Buchbinder Tunick & Company #6189) F-2 CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-4 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 74 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Elite Pharmaceuticals, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Elite Pharmaceuticals, Inc. (the “Company”) as of March 31, 2024, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2024, and the results of its operations and its cash flows for the year ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Chargeback Liabilities As described in Note 1 to the financial statements, The 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 Abbreviated New Drug Applications (“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. The Company has revenue agreements with certain independent pharmaceutical wholesalers to sell and distribute their product. The Company provides for chargebacks to wholesalers for sales to various end-customers to include, but not limited to, hospitals, group purchasing organizations, and pharmacies. Chargebacks represent the difference between the price the wholesaler pays and the price that the end-customer pays for a product. The company’s estimate for chargebacks is developed based upon management’s assumption of anticipated product returns, other rebates, as well as historical information. We identified the chargeback liability as a critical audit matter. Our principal considerations for this determination is the level of subjectivity of certain assumptions required to estimate these amounts. In particular, the accrual for chargebacks includes estimates for outstanding claims that have occurred but for which the related claim has not yet been paid and for future claims that will be made when the wholesaler inventory is sold to the end-customer. This required a higher degree of auditor judgment when performing audit procedures and evaluating the results of those procedures. The primary procedures we performed to address this critical audit matter included: ● Obtaining an understanding of the management’s process for developing the chargeback liability, including management methods and assumptions used in the calculation; ● Tested a sample of chargeback liabilities by obtaining and inspecting source documents, including invoices and invoice credits related to the chargebacks, and customer arrangements or promotional practices, where applicable; ● Using company-generated and third-party reports, developed an independent expectation on claims that are outstanding and future claims as of the balance sheet date, and determined an expected period after the balance sheet date which such future claims would be realized; ● Assessed the relevance and reliability of the data from external sources utilized in determination of the independent expectation for chargeback liability estimate; ● Tested the completeness and accuracy of reports obtained from management; ● Performed a retrospective review of the chargeback liability and comparing the results to management’s reserves. /s/ Forvis Mazars, LLP We have served as the Company’s auditor since 2024. Iselin, NJ July 1, 2024 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Elite Pharmaceuticals, Inc., and Subsidiary Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Elite Pharmaceuticals, Inc. and Subsidiary (the “Company”) as of March 31, 2023 , and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended March 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2023 and the results of its operations and its cash flows for the year ended March 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. Intangible Assets — Refer to Note 1 to the consolidated financial statements Critical Audit Matter Description As described in Note 1 to the consolidated financial statements, the Company has capitalized costs of $6,052,189 for ANDAs and $289,039 for patents. The Company evaluates its intangible assets for impairment annually during the fourth quarter in accordance with ASC Topic 350, Intangibles, Goodwill and Other, and whenever events or circumstances change that indicate impairment may have occurred. Management performs a qualitative assessment of each intangible asset prior to performing a quantitative impairment test. Qualitative factors management considers include, the current revenue, cost factors of raw material and labor, current cash flows, legal and regulatory factors and industry and market considerations. If the qualitative assessment indicates the fair value is more likely than not less than the carrying value a quantitative test is performed. Management performed a quantitative test on certain intangible assets using a discounted cash flow methodology. The methods used to estimate the fair value of intangible assets involve significant assumptions. The significant assumptions applied by management in estimating the fair value of intangible assets included income projections and discount rates. Due to the significant estimates and assumptions management is required to make, we identified the fair value of intangible assets as a critical audit matter. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: We obtained an understanding and evaluated the design and implementation of controls over the intangible valuation process. This included management’s review over the assessment of the methodology, significant inputs and assumptions included in the fair value estimate, as well as management’s review around the completeness, accuracy and reasonableness of the data used in this estimate. Our audit procedures assessed whether the valuation methodology used was appropriate and tested the mathematical accuracy of the valuation model. We evaluated whether the assumptions used were reasonable by considering the historical revenue, current customer contracts, gross profit percentage and cost of debt discount rates, and whether such assumptions were consistent with evidence obtained in other areas of the audit. /s/ Buchbinder Tunick & Company LLP Buchbinder Tunick & Company LLP We have served as the Company’s auditor since 2010. Little Falls, New Jersey 07424 July 1, 2024 PCAOB ID: 6189 F- 2 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (AUDITED) March 31, 2024 March 31, 2023 ASSETS Current assets: Cash $ 7,106,262 $ 7,832,247 Accounts receivable, net of allowance for expected credit losses of $ 236,275 and $ 0 respectively 19,453,301 3,094,549 Inventory 12,930,464 9,550,716 Prepaid expenses and other current assets 524,162 1,032,785 Total current assets 40,014,189 21,510,297 Property and equipment, net of accumulated depreciation of $ 15,906,853 and $ 14,586,335 respectively 10,175,293 10,426,158 Intangible assets 6,341,228 6,341,228 Finance lease - right-of-use asset 2,079,658 — Operating lease - right-of-use asset 2,355,201 13,062 Deferred income tax asset 22,160,895 2,171,821 Other assets: Restricted cash - debt service for NJEDA bonds 432,832 412,434 Security deposits 94,240 21,018 Total other assets 527,072 433,452 Total assets $ 83,653,536 $ 40,896,018 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,714,306 $ 2,446,810 Accrued expenses 5,301,747 5,047,726 Deferred revenue, current portion 13,333 13,333 Bonds payable, current portion, net of bond issuance costs 115,822 110,822 Loans payable, current portion 180,399 200,032 Related party loans payable (Note 7) 4,000,000 — Lease obligation - finance lease, current portion 312,739 — Lease obligation - operating lease, current portion 411,418 14,914 Total current liabilities 13,049,764 7,833,637 Long-term liabilities: Deferred revenue, net of current portion 5,556 18,890 Bonds payable, net of current portion and bond issuance costs 913,203 1,029,018 Loans payable, net of current portion and loan costs 2,366,487 2,532,502 Lease obligation - finance lease, net of current portion 1,480,317 — Lease obligation - operating lease, net of current portion 1,957,383 — Derivative financial instruments - warrants 6,298,008 521,711 Total long-term liabilities 13,020,954 4,102,121 Total liabilities 26,070,718 11,935,758 Shareholders’ equity: Common Stock; par value $ 0.001 ; 1,445,000,000 shares authorized; 1,068,373,108 and 1,014,015,081 shares issued as of March 31, 2024 and March 31, 2023, respectively; 1,068,273,108 and 1,013,915,081 shares outstanding as of March 31, 2024 and March 31, 2023, respectively 1,068,377 1,014,019 Additional paid-in capital 173,210,549 164,750,980 Treasury stock; 100,000 shares as of March 31, 2024 and March 31, 2023, respectively, at cost ( 306,841 ) ( 306,841 ) Accumulated deficit ( 116,389,267 ) ( 136,497,898 ) Total shareholders’ equity 57,582,818 28,960,260 Total liabilities and shareholders’ equity $ 83,653,536 $ 40,896,018 The accompanying notes are an integral part of these consolidated financial statements. F- 3 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (AUDITED) 2024 2023 For the Years Ended March 31, 2024 2023 Revenue: Manufacturing fees $ 54,120,731 $ 29,187,573 Licensing fees 2,504,397 4,967,541 Total revenue 56,625,128 34,155,114 Cost of manufacturing 30,268,025 17,561,093 Gross profit 26,357,103 16,594,021 Operating expenses: Research and development 6,883,351 6,200,163 General and administrative 7,145,114 5,122,272 Impairment of intangible assets — 292,807 Non-cash compensation through issuance of stock options 159,921 39,325 Depreciation and amortization 1,379,948 1,263,452 Total operating expenses 15,568,334 12,918,019 Income from operations 10,788,769 3,676,002 Other (expense) income: Change in fair value of derivative financial instruments - warrants ( 5,776,297 ) 415,126 Change in fair value of stock-based liabilities ( 5,743,468 ) — Interest expense and amortization of debt issuance costs ( 588,622 ) ( 1,112,707 ) Gain from settlement agreements 1,761,792 — Gain on sale of ANDA — 1,000,000 Interest income 20,918 7,453 Other (expense) income, net ( 10,325,677 ) 309,872 Income before income taxes 463,092 3,985,874 Income tax benefit (expense) 19,645,539 ( 424,028 ) Net income $ 20,108,631 $ 3,561,846 Basic net income per share attributable to common shareholders $ 0.02 $ 0.00 Diluted net income per share attributable to common shareholders $ 0.02 $ 0.00 Basic weighted average Common Stock outstanding 1,015,443,363 1,012,911,346 Diluted weighted average Common Stock outstanding 1,023,225,623 1,012,911,346 The accompanying notes are an integral part of these consolidated financial statements. F- 4 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (AUDITED) Shares Amount Shares Amount Capital Shares Amount Deficit Equity Series J Preferred Stock Common Stock Additional Paid-In Treasury Stock Accumulated Total Shareholders’ Shares Amount Shares Amount Capital Shares Amount Deficit Equity Balance as of March 31, 2022 — $ — 1,011,381,988 $ 1,011,385 $ 164,577,227 100,000 $ ( 306,841 ) $ ( 140,059,744 ) $ 25,222,027 Net income — — — — — — — 3,561,846 3,561,846 Non-cash compensation through the issuance of employee stock options — — — — 39,325 — — — 39,325 Shares issued in payment of salaries — — 1,378,608 1,379 58,621 — — — 60,000 Shares issued in payment of consultants — — 1,254,485 1,255 75,807 — — — 77,062 Balance as of March 31, 2023 — $ — 1,014,015,081 $ 1,014,019 $ 164,750,980 100,000 $ ( 306,841 ) $ ( 136,497,898 ) $ 28,960,260 Balance — $ — 1,014,015,081 $ 1,014,019 $ 164,750,980 100,000 $ ( 306,841 ) $ ( 136,497,898 ) $ 28,960,260 Net income — — — — — — — 20,108,631 20,108,631 Non-cash compensation through the issuance of employee stock options — — — — 159,921 — — — 159,921 Shares issued in payment of salaries — — 51,177,339 51,177 7,843,843 — — — 7,895,020 Shares issued in payment of consultants — — 3,180,688 3,181 455,805 — — — 458,986 Balance as of March 31, 2024 — $ — 1,068,373,108 $ 1,068,377 $ 173,210,549 100,000 $ ( 306,841 ) $ ( 116,389,267 ) $ 57,582,818 Balance — $ — 1,068,373,108 $ 1,068,377 $ 173,210,549 100,000 $ ( 306,841 ) $ ( 116,389,267 ) $ 57,582,818 The accompanying notes are an integral part of these consolidated financial statements. F- 5 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (AUDITED) 2024 2023 For the Years Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 20,108,631 $ 3,561,846 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 1,320,518 1,277,622 Provision for losses on accounts receivable 236,276 — Amortization of operating leases - right-of-use assets 151,066 67,061 Impairment of intangible assets — 292,807 Non-cash compensation accrued 8,354,006 540,000 Change in fair value of derivative financial instruments - warrants 5,776,297 ( 415,126 ) Deferred income tax asset ( 19,989,074 ) — Change in fair value of stock-based liabilities ( 5,743,468 ) — Gain on settlement of Common Stock to consultant ( 1,761,792 ) — Non-cash compensation through the issuance of employee stock options 159,921 39,325 Non-cash rent expense and lease accretion — 803 Deferred revenue ( 13,334 ) ( 13,336 ) Change in operating assets and liabilities: Accounts receivable ( 16,595,028 ) ( 36,636 ) Inventory ( 3,379,748 ) ( 2,809,546 ) Prepaid expenses and other current assets 435,401 ( 435,116 ) Accounts payable, accrued expenses and other current liabilities 7,780,962 1,336,566 Interest expense of finance lease liability 17,126 — Lease obligations - operating leases ( 139,318 ) ( 67,566 ) Net cash (used in) provided by operating activities ( 3,281,558 ) 3,338,704 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 809,653 ) ( 5,736,618 ) Net cash used in investing activities ( 809,653 ) ( 5,736,618 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of bond principal ( 125,000 ) ( 115,000 ) Proceeds from related party loans payable 4,000,000 — Payments of loans and mortgage payable — ( 12,240,111 ) Proceeds from loans payable — 14,438,985 Payments on principal on finance lease obligations ( 350,171 ) — Amortization of finance leases - right-of-use assets 46,443 — Loan payments ( 185,648 ) ( 381,675 ) Net cash provided by financing activities 3,385,624 1,702,199 Net change in cash and restricted cash ( 705,587 ) ( 695,715 ) Cash and restricted cash, beginning of period 8,244,681 8,940,396 Cash and restricted cash, end of period $ 7,539,094 $ 8,244,681 Supplemental disclosure of cash and non-cash transactions: Cash paid for interest $ 119,412 $ 1,098,537 Cash paid for income taxes $ 292,000 $ 424,028 Stock issued in satisfaction of accrued directors salaries and consultant fees $ 8,354,006 $ 137,062 Recognition of right of use asset and lease liabilities entered into $ 2,592,233 $ — Reconciliation of cash and restricted cash Cash $ 7,106,262 $ 7,832,247 Restricted cash - debt service for NJEDA bonds 432,832 412,434 Total cash and restricted cash shown in statement of cash flows $ 7,539,094 $ 8,244,681 The accompanying notes are an integral part of these consolidated financial statements. F- 6 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview Elite Pharmaceuticals, Inc. (the “Company” or “Elite”) was incorporated on October 1, 1997 under the laws of the State of Delaware, and its wholly-owned subsidiary Elite Laboratories, Inc. (“Elite Labs”) was incorporated on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of Nevada. Elite Labs engages primarily in researching, developing, licensing, manufacturing, and sales of generic, oral dose pharmaceuticals. The Company is equipped to manufacture controlled-release products on a contract basis for third parties and itself, if and when the product candidates are approved. These products include drugs that cover therapeutic areas for allergy, bariatric, attention deficit and infection. Research and development activities are performed with an objective of developing product candidates that will secure marketing approvals from the United States Food and Drug Administration (“FDA”), and thereafter, commercially exploiting such products. Principles of Consolidation The accompanying audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The audited 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. Basis of Presentation The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make certain estimates and assumptions affecting amounts reported in our consolidated financial statements. We have identified investment valuation, revenue recognition and the recognition of capital gains incentive fee expense as our most critical accounting estimates. We continuously evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies and estimates follows. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Such management estimates and assumptions include, but are not limited to, standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, the period of benefit for deferred commissions, valuation of intangible assets, the useful life of property and equipment and identifiable intangible assets, stock-based compensation expense and income taxes. Actual results could differ from those estimates. Segment Information Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 280 (“ASC 280”), Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the Company. The Company has determined that its reportable segments are products whose marketing approvals were secured via an Abbreviated New Drug Application (“ANDA”) and products whose marketing approvals were secured via a New Drug Application (“NDA”). ANDA products are referred to as generic pharmaceuticals and NDA products are referred to as branded pharmaceuticals. During fiscal year ended March 31, 2024 and 2023, the Company has paused further development of NDAs and has not engaged in business activities. Accordingly during March 31, 2024 and 2023, results the Company has only engaged in business activities in a single operating segment. There are currently no intersegment revenues. Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements. Please see Note 15 for further details. F- 7 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Revenue Recognition The 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. Under ASC 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenues following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue. Nature of goods and services The following is a description of the Company’s goods and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each, as applicable: a) Manufacturing Fees The Company is equipped to manufacture controlled-release products on a contract basis for third parties, if, and when, the products are approved. These products include products using controlled-release drug technology. The Company also develops and markets (either on its own or by license to other companies) generic and proprietary controlled-release pharmaceutical products. The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms of 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 partner. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer. b) License Fees The Company enters into licensing and development agreements, which may include multiple revenue generating activities, including milestones payments, licensing fees, product sales and services. The Company analyzes each element of its licensing and development agreements in accordance with ASC 606 to determine appropriate revenue recognition. The terms of the license agreement may include payment to the Company of licensing fees, non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. The Company recognizes revenue from non-refundable upfront payments at a point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer. For those milestone payments which are contingent on the occurrence of particular future events (for example, payments due upon a product receiving FDA approval), the Company determined that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent uncertainty of the occurrence of future events, the Company will recognize revenue from the milestone when there is not a high probability of a reversal of revenue, which typically occurs near or upon achievement of the event. F- 8 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of March 31, 2024. In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the customer’s products occurs. c) Sale of product under the Elite label The Company began direct sales of products under the Company’s own label on April 1, 2023. License agreements will remain in place for select products. With this transition, however, a large portion of the manufacturing and license fees now reported will be replaced 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. The Company provides for chargebacks to wholesalers for sales to various end-customers to include, but not limited to, hospitals, group purchasing organizations, and pharmacies. Chargebacks represent the difference between the price the wholesaler pays and the price that the end-customer pays for a product. The company’s estimate for chargebacks is developed based upon management’s assumption of anticipated product returns, other rebates, as well as historical information. Disaggregation of revenue In the following table, revenue is disaggregated by type of revenue generated by the Company. The Company recognizes revenue at a point in time for all performance obligations. During fiscal year ended March 31, 2024 and 2023, the Company has paused further development of NDAs and has not engaged in business activities. Accordingly during March 31, 2024 and 2023, results the Company has only engaged in business activities in a single operating segment. The table also includes a reconciliation of the disaggregated revenue with the reportable segments: SCHEDULE OF DISAGGREGATION OF REVENUE For the Years Ended March 31, 2024 2023 NDA: Manufacturing fees $ — $ — Licensing fees $ — $ — Total NDA revenue — — ANDA: Manufacturing fees $ 54,120,731 $ 29,187,573 Licensing fees 2,504,397 4,967,541 Total ANDA revenue 56,625,128 34,155,114 Total revenue $ 56,625,128 $ 34,155,114 Selected information on reportable segments and reconciliation of operating income by segment to income from operations before income taxes are disclosed within Note 15. Cash Cash consists of cash on deposit with banks and money market instruments. The Company places its cash with high-quality, U.S. financial institutions and, to date has not experienced losses on any of its balances. Restricted Cash As of March 31, 2024, and March 31, 2023, the Company had $ 432,832 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). F- 9 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Accounts Receivable and Allowance for Expected Credit Losses (ASU 2016-13) Accounts 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. The 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 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. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to credit losses in the period incurred. Prior to April 1, 2023, trade receivables were presented net of allowance for expected credit losses based on the credit risk of specific clients, past collection history, and management’s evaluation of other risks. Expected credit losses stemming from unbilled receivables expected to be billed between March 31, 2024 and March 31, 2028 include additional risk premiums estimated based on factors such as projected inflation, projected decreases in GDP, and projected unemployment. The amendments were effective on April 1, 2023 for the Company, and must be applied using a modified retrospective approach with a cumulative-effect adjustment through retained earnings as of the beginning of the fiscal year upon adoption as required. While the standard modifies the measurement of the allowance for credit losses, it does not alter the credit risk of our trade or unbilled receivables. The impact of applying the CECL methodology upon adoption effective on April 1, 2023 was immaterial to the Company’s consolidated financial statements. The Company’s quantitative allowance for credit loss estimates under CECL was determined using the loss rate method, which is impacted by certain forecasted economic factors. In addition to the Company’s quantitative allowance for credit losses, the Company also incorporates qualitative adjustments that may relate to unique risks, changes in current economic conditions that may not be reflected in quantitatively derived results, or other relevant factors to further inform the Company’s estimate of the allowance for credit losses. Additionally, due to the expansion of the time horizon over which the Company is required to estimate future credit losses, the Company may experience increased volatility in its future provisions for credit losses. Factors that could contribute to such volatility include, but are not limited to, changes in the composition and credit quality of customer base, economic conditions and forecasts, the allowance for credit loss models that are used, the data that is included in the models, the associated qualitative allowance framework, and the Company’s estimation techniques. With the exception of an estimated allowance of $ 236,276 recorded in applying the CECL methodology for current estimated credit losses for the year ended March 31, 2024, the Company has had no recordable write offs for bad debts or uncollectible invoiced amounts during the for the year ended March 31, 2024 or the prior twelve months ended March 31, 2023. Inventory Inventory is recorded at the lower of cost or net realizable value on specific identification by lot number basis. Long-Lived Assets The Company periodically evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Property and equipment are stated at cost. Depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from three to forty years . Major repairs or improvements are capitalized. Minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently. Upon retirement or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is recognized in income. F- 10 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Intangible Assets The Company capitalizes certain costs to acquire intangible assets; if such assets are determined to have a finite useful life they are amortized on a straight-line basis over the estimated useful life. Costs to acquire indefinite lived intangible assets, such as costs related to ANDAs are capitalized accordingly. The Company tests its intangible assets for impairment at least annually (as of March 31st) and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others and without limitation: a significant decline in the Company’s expected future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change in legal factors or in the business climate of the Company’s segments; unanticipated competition; and slower growth rates. During 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 March 31, 2024. The Company notes that none of its patents relate to any of the Company’s revenue producing activities. The following table summarizes the Company’s intangible assets as of and for the periods ended March 31, 2024 and March 31, 2023: SCHEDULE OF INTANGIBLE ASSETS March 31, 2024 Estimated Useful Life Gross Carrying Amount Additions Impairment losses Accumulated Amortization Net Book Value Patent application costs - * $ 289,039 $ — $ — $ — $ 289,039 ANDA acquisition costs Indefinite 6,052,189 — — — 6,052,189 $ 6,341,228 $ — $ — $ — $ 6,341,228 March 31, 2023 Estimated Useful Life Gross Carrying Amount Additions Impairment losses Accumulated Amortization Net Book Value Patent application costs - * $ 465,684 $ — $ ( 176,645 ) $ — $ 289,039 ANDA acquisition costs Indefinite 6,168,351 — ( 116,162 ) — 6,052,189 $ 6,634,035 $ — $ ( 292,807 ) $ — $ 6,341,228 * Patent application costs were incurred in relation to the Company’s abuse deterrent opioid technology. Amortization of the patent costs will begin upon the issuance of marketing authorization by the FDA. Amortization will then be calculated on a straight-line basis through the expiry of the related patent(s). Research and Development Research and development expenditures are charged to expenses as incurred. Contingencies Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. On 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. On November 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 the date of filing of this Annual Report on Form 10-K, 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. F- 11 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not be realizable in the future. The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution . The Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all tax jurisdiction until the applicable statutes of limitation expire. As of March 31, 2024, a summary of the tax years that remain subject to examination in our major tax jurisdictions are: United States – Federal, 2020 and forward, and State, 2019 and forward. The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as a component of income tax expense. The Company did not have any unrecognized tax positions for the years ended March 31, 2024 and 2023. Warrants and Preferred Shares The accounting treatment of warrants and preferred share series issued is determined pursuant to the guidance provided by ASC 470, Debt , ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging , as applicable. Each feature of a freestanding financial instrument including, without limitation, any rights relating to subsequent dilutive issuances, dividend issuances, equity sales, rights offerings, forced conversions, optional redemptions, automatic monthly conversions, dividends and exercise is assessed with determinations made regarding the proper classification in the Company’s financial statements. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation . Under the fair value recognition provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, based on the terms of the awards. The cost of the stock-based 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 for forfeitures as they occur. In accordance with the Company’s Director compensation policy and certain employment contracts, director’s fees and a portion of employee’s salaries are to be paid via the issuance of shares of the Company’s Common Stock (“Common Stock”), in lieu of cash, with the valuation of such share being calculated on a quarterly basis and equal to the average closing price of the Company’s Common Stock. The Company records earned but unissued stock-based compensation in accrued expenses. Sale of ANDA During the year ended March 31, 2023, the Company entered into an agreement with Pyros Pharmaceuticals, Inc. (“Pyros”) pursuant 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 “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. In 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). Earnings Per Share Attributable to Common Shareholders ’ The Company follows ASC 260, Earnings Per Share , which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding during the period. 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 years ended March 31, 2024 and 2023 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. F- 12 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) The following is the computation of earnings per share applicable to common shareholders for the periods indicated: SCHEDULE OF EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS 2024 2023 For the Years Ended March 31, 2024 2023 Numerator Net income - basic $ 20,108,631 $ 3,561,846 Effect of dilutive instrument on net income — ( 415,126 ) Net income - diluted $ 20,108,631 $ 3,146,720 Denominator Weighted average shares of Common Stock outstanding - basic 1,015,443,363 1,012,911,346 Dilutive effect of stock options 7,782,260 — Weighted average shares of Common Stock outstanding - diluted 1,023,225,623 1,012,911,346 Net income per share Basic $ 0.02 $ 0.00 Diluted $ 0.02 $ 0.00 As the average market price of Common Stock for the year ended March 31, 2024 did not exceed the exercise price of the stock options, the potential dilution from the stock options converting into 647,946 shares of Common Stock for the year ended March 31, 2024 have been excluded from the number of shares used in calculating diluted net income per share as their inclusion would have been antidilutive. Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820 are described as follows: ● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. ● Level 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. ● Level 3 – Inputs that are unobservable for the asset or liability. F- 13 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Measured on a Recurring Basis The following table presents information about the Company’s liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell: SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS Derivative financial instruments - warrants, Fair value Derivative financial instruments - warrants, Fair value Derivative financial instruments - warrants, Fair value Derivative financial instruments - warrants, Fair value Amount at Fair Value Measurement Using Fair Value Level 1 Level 2 Level 3 March 31, 2024 Liabilities Derivative financial instruments - warrants $ 6,298,008 $ — $ — $ 6,298,008 March 31, 2023 Liabilities Derivative financial instruments - warrants $ 521,711 $ — $ — $ 521,711 See Note 11 for specific inputs used in determining fair value. The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments. Based upon current borrowing rates with similar maturities the carrying value of long-term debt, and related party loans payable approximates fair value. Non-Financial Assets that are Measured at Fair Value on a Non-Recurring Basis Non-financial assets such as intangible assets, and property and equipment are measured at fair value only when an impairment loss is recognized. The Company did not record an impairment charge during the year ended March 31, 2024. The Company recorded impairment of approximately $ 0.3 million on its ANDA and patent intangible assets during the year ended March 31, 2023. Treasury Stock The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of shareholders’ equity. Right-of-Use Asset and Lease Liability In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which modifies lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases and finance leases under previous accounting standards and disclosing key information about leasing arrangements. A lessee should recognize the lease liability to make lease payments and the right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases and finance leases, a right-of-use asset and a lease liability are initially measured at the present value of the lease payments by discount rates. The Company’s lease discount rates are generally based on its incremental borrowing rate, as the discount rates implicit in the Company’s leases is readily determinable. Operating leases are included in operating lease right-of-use assets and lease liabilities in the consolidated balance sheets. Finance leases are included in property and equipment and lease liability in our consolidated balance sheets. Lease expense for operating expense payments is recognized on a straight-line basis over the lease term. Interest and amortization expenses are recognized for finance leases on a straight-line basis over the lease term. For the leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. F- 14 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”). Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022 for public entities qualifying as smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact of this update on the consolidated financial statements and does not expect a material impact on the consolidated financial statements. In December 2023, the FASB issued ASU 2023-09 (Topic 740), Improvements to income tax disclosures, which enhances the disclosure requirements for the income tax rate reconciliation, domestic and foreign income taxes paid, requiring disclosure of disaggregated income taxes paid by jurisdiction, unrecognized tax benefits, and modifies other income tax-related disclosures. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted and should be applied prospectively. The Company is currently evaluating the effect of adopting this guidance on its consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segments,” which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. Topic 280 also requires other specified segment items and amounts to be disclosed under certain circumstances. The amendments in this ASU do not change or remove those disclosure requirements and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We do not expect that the requirements of ASU 2023 – 07 will have a material impact on our consolidated financial statements. Management has evaluated recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures. NOTE 2. INVENTORY Inventory consisted of the following: SCHEDULE OF INVENTORY March 31, 2024 March 31, 2023 Finished goods $ 4,465,970 $ 2,352,330 Work-in-progress 1,804,426 1,791,311 Raw materials 6,660,068 5,407,075 Inventory $ 12,930,464 $ 9,550,716 NOTE 3. PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following: SCHEDULE OF PROPERTY AND EQUIPMENT March 31, 2024 March 31, 2023 Land, building and improvements $ 11,061,149 $ 10,768,181 Laboratory, manufacturing, warehouse and transportation equipment 14,090,978 13,364,512 Office equipment and software 373,601 395,563 Furniture and fixtures 556,418 484,237 Property and equipment, gross 26,082,146 25,012,493 Less: Accumulated depreciation ( 15,906,853 ) ( 14,586,335 ) Property and equipment, net $ 10,175,293 $ 10,426,158 Depreciation expense was $ 1,320,518 and $ 1,237,770 for the years ended March 31, 2024 and 2023, respectively. NOTE 4. ACCRUED EXPENSES Accrued expenses consisted of the following: SUMMARY OF ACCRUED EXPENSES March 31, 2024 March 31, 2023 Co-development profit split $ 3,684,587 $ — Income tax 485,327 414,989 Employee bonuses 206,225 — Audit fees 125,000 125,000 Legal and professional expense 90,000 — Director dues 22,500 70,000 Consultant contract fees 20,000 193,333 Salaries and fees payable in Common Stock — 4,125,000 Other accrued expenses 668,108 119,404 Total accrued expenses $ 5,301,747 $ 5,047,726 F- 15 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) NOTE 5. NJEDA BONDS During August 2005, the Company refinanced a bond issue occurring in 1999 through the issuance of Series A and B Notes tax-exempt bonds (the “NJEDA Bonds” and/or “Bonds”). During July 2014, the Company retired all outstanding Series B Notes, at par, along with all accrued interest due and owed. In relation to the Series A Notes, the Company is required to maintain a debt service reserve. The debt service reserve is classified as restricted cash on the accompanying consolidated balance sheets. The NJEDA Bonds require the Company to make an annual principal payment on September 1st based on the amount specified in the loan documents and semi-annual interest payments on March 1st and September 1st, equal to interest due on the outstanding principal. The annual interest rate on the Series A Note is 6.5 %. The NJEDA Bonds are collateralized by a first lien on the Company’s facility and equipment acquired with the proceeds of the original and refinanced bonds. The following tables summarize the Company’s bonds payable liability: SCHEDULE OF BONDS PAYABLE LIABILITY March 31, 2024 March 31, 2023 Gross bonds payable NJEDA Bonds - Series A Notes $ 1,120,000 $ 1,245,000 Less: Current portion of bonds payable (prior to deduction of bond offering costs) ( 130,000 ) ( 125,000 ) Long-term portion of bonds payable (prior to deduction of bond offering costs) $ 990,000 $ 1,120,000 Bond offering costs $ 354,454 $ 354,454 Less: Accumulated amortization ( 263,479 ) ( 249,294 ) Bond offering costs, net $ 90,975 $ 105,160 Current portion of bonds payable - net of bond offering costs Current portions of bonds payable $ 130,000 $ 125,000 Less: Bonds offering costs to be amortized in the next 12 months ( 14,178 ) ( 14,178 ) Current portion of bonds payable, net of bond offering costs $ 115,822 $ 110,822 Long term portion of bonds payable - net of bond offering costs Long term portion of bonds payable $ 990,000 $ 1,120,000 Less: Bond offering costs to be amortized subsequent to the next 12 months ( 76,797 ) ( 90,982 ) Long term portion of bonds payable, net of bond offering costs $ 913,203 $ 1,029,018 Amortization expense was $ 14,185 and $ 14,178 for the years ended March 31, 2024 and 2023, respectively. Interest payable was $ 6,067 and $ 6,744 as of March 31, 2024, and 2023, respectively. Interest expense was $ 76,185 and $ 6,744 for the years ended March 31, 2024 and 2023, respectively. Maturities of bonds for the next five years are as follows: SCHEDULE OF MATURITIES OF BONDS Years ending March 31, Amount 2025 $ 130,000 2026 140,000 2027 150,000 2028 160,000 2029 170,000 Thereafter 370,000 Total $ 1,120,000 NOTE 6. LOANS PAYABLE On 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”). The EWB Term Loan bears interest at a rate of 9.73 % ( 1.73 % plus the prime rate (“Prime”)) and was 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. 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. F- 16 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) On July 1, 2022, the EWB provided a mortgage loan (“EWB Mortgage Loan”) in the amount of $ 2.55 million for the purchase of the property at 135-137 Ludlow Avenue, which was formerly a lease held by the Company. The EWB Mortgage Loan matures in 10 years and bears interest at a rate of 4.75% fixed for 5 years then adjustable at 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 March 31, 2024, 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 covenant. 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 . Refer to Note 7 for information regarding The Promissory Note. Loans payable consisted of the following: SCHEDULE OF LOANS PAYABLE March 31, 2024 March 31, 2023 Mortgage loan payable 4.75 % interest and maturing June 2032 $ 2,418,426 $ 2,472,923 Equipment and insurance financing loans payable, between 7.10 % and 12.02 % interest and maturing between July 2024 and October 2025 128,460 259,611 Less: Current portion of loans payable ( 180,399 ) ( 200,032 ) Long-term portion of loans payable $ 2,366,487 $ 2,532,502 The interest expense associated with the loans payable was $ 137,438 and $ 1,013,874 for the years ended March 31, 2024 and 2023, respectively. Loan principal payments for the next five years are as follows: SCHEDULE OF LOAN PRINCIPAL PAYMENTS Future principal balances Years ending March 31, Amount 2025 $ 180,399 2026 120,748 2027 92,773 2028 94,433 2029 1,960,089 2030 and thereafter 98,444 Total remaining principal balance $ 2,546,886 NOTE 7. 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 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 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 were 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 was exercised pursuant to the terms of the Hakim Promissory Note. For the year ended March 31, 2024, interest expense on the Hakim Promissory Note totaled and $ 270,000 , recorded on the Consolidated Balance Sheets in accrued expenses and on the Consolidated Statements of Operations in interest expense and amortization of debt issuance costs. F- 17 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) On 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 second year. The Caskey Promissory Note is subject to the same covenants as are contained in the Hakim Promissory Note. 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 was exercised pursuant to the terms of the Caskey Promissory Note. For the year ended March 31, 2024, interest expense on the Caskey Promissory Note totaled $ 90,000 , recorded on the Consolidated Balance Sheets in accrued expenses and on the Consolidated Statements of Operations in interest expense and amortization of debt issuance costs. NOTE 8. DEFERRED REVENUE Deferred revenues in the aggregate amount of $ 18,889 as of March 31, 2024, were comprised of a current component of $ 13,333 and a long-term component of $ 5,556 . 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. NOTE 9. COMMITMENTS AND CONTINGENCIES Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. On 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. On November 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 March 31, 2024, 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. Operating Leases The 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. 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. The Ludlow Ave. lease was terminated on July 1, 2022, when the Company purchased the underlying property. In 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 the Company taking occupancy on November 1, 2020. The Pompano Office Lease had a term of three years, ending on October 31, 2023. The Pompano Office Lease was extended for one additional year to October 31, 2024. The Company entered into a lease agreement for a portion of a one-story warehouse, located at 144 Ludlow Avenue, Northvale, New Jersey (the “144 Ludlow Ave. lease”). The lease agreement began on January 22, 2024, and has a term of five years. The 144 Ludlow Ave. lease will expire on December 31, 2028. The Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, the Company determines the classification and initial measurement of the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use. The Company has elected to account for non-lease components associated with its leases and lease components as a single lease component. The Company recognizes a right-of-use asset, which represents the Company’s right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments arising over the lease term. The present value of the lease payments is calculated using either the implicit interest rate in the lease or an incremental borrowing rate. F- 18 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) Finance Leases In November 2023, the Company entered into a 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 the Company 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. In February 2024, the Company entered into a finance lease for warehouse equipment (the “Warehouse Equipment Lease”). The Warehouse Equipment Lease is related to warehouse equipment with an acquisition cost of $ 37,500 , with the Company taking ownership of the asset during February 2024. The Warehouse Equipment Lease has a term of two years, ending in February 2026. 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. In February 2024, the Company entered into a finance lease for equipment ( the “February 2024 Equipment Lease”). The February 2024 Equipment Lease is related to manufacturing equipment with an acquisition cost of $ 455,000 , with the Company taking ownership of the asset during February 2024. The February 2024 Equipment Lease has a term of five years, ending in February 2029. The Company retains ownership of the equipment at lease termination. In March 2024, the Company entered into three separate finance leases for manufacturing assets (the “March 2024 Equipment Leases”). The March 2024 Equipment Leases are related to manufacturing equipment and vault installed at the Company’s facility located at 144 Ludlow Avenue, Northvale NJ with an aggregate acquisition cost of $ 1.1 million. Each of the separate leases included in the March 2024 Equipment Leases have a term of five years, ending in March 2029. The Company retains ownership of all related assets at lease termination. A 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. Lease assets and liabilities are classified as follows on the consolidated balance sheet: SCHEDULE OF LEASE ASSETS AND LIABILITIES For the Years Ended March 31, Lease Classification 2024 2023 Assets Finance Finance lease – right-of-use asset $ 2,079,658 $ — Operating Operating lease – right-of-use asset 2,355,201 13,062 Total leased assets $ 4,434,859 $ 13,062 Liabilities Current Finance Lease obligation – finance lease $ 312,739 $ — Operating Lease obligation – operating lease 411,418 14,914 Long-term Finance Lease obligation – finance lease, net of current portion 1,480,317 — Operating Lease obligation – operating lease, net of current portion 1,957,383 — Total lease liabilities $ 4,161,857 $ 14,914 Rent expense is recorded on the straight-line basis. Rent expense under the 135 Ludlow Ave. terminated lease was $ 0 and $ 58,248 for the years ended March 31, 2024 and 2023, respectively. Rent expense under the Pompano Office Lease was $ 28,690 and $ 25,635 for the years ended March 31, 2024 and 2023, respectively. Rent expense under the 144 Ludlow lease was $ 151,515 and $ 0 for the years ended March 31, 2024 and 2023. Rent expense is recorded in general and administrative expense in the consolidated statements of operations. F- 19 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) The table below shows the future minimum rental payments, exclusive of taxes, insurance and other costs, under the Pompano Office Lease and Waters Equipment Lease: SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS Years ending March 31, Operating Lease Amount Financing Lease Amount Total 2025 $ 629,280 $ 463,734 $ 1,093,014 2026 623,565 468,391 1,091,956 2027 637,050 449,745 1,086,795 2028 650,871 449,745 1,100,616 2029 440,159 408,453 848,612 Thereafter — 6,337 6,337 Less: interest ( 612,118 ) ( 453,355 ) ( 1,065,473 ) Present value of lease payments $ 2,368,807 $ 1,793,050 $ 4,161,857 The weighted-average remaining lease term and the weighted-average discount rate of our leases were as follows: SCHEDULE OF WEIGHTED -AVERAGE REMAINING TERM AND THE WEIGHTED-AVERAGE DISCOUNT RATE For the Years Ended March 31, Lease Term and Discount Rate 2024 2023 Remaining lease term (years) Operating leases 4.7 0.6 Finance leases 4.8 — Discount rate Operating leases 10.0 % 6.0 % Finance leases 9.5 % — NOTE 10. PREFERRED STOCK Series J convertible preferred stock On April 28, 2017, the Company created the Series J Convertible Preferred Stock (“Series J Preferred”) in conjunction with the 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 . NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS The Company evaluates and accounts for its freestanding instruments in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities . The Company issued warrants, with a term of ten years , to affiliates in connection with an exchange agreement dated April 28, 2017, as further described in this note below. The 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 March 31, 2024 and March 31, 2023. On April 28, 2017, the Company entered into an Exchange Agreement with Hakim, the Chairman of the Board, President, and Chief Executive Officer of the Company, pursuant to which the Company issued to Hakim 24.0344 shares of its Series J Preferred and warrants to purchase an aggregate of 79,008,661 shares of its Common Stock (the “Series J Warrants” and, along with the Series J Preferred issued to Hakim, the “Securities”) in exchange for 158,017,321 shares of Common Stock owned by Hakim. The fair value of the Series J Warrants was determined to be $ 6,474,674 upon issuance at April 28, 2017. The 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. F- 20 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) 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. The Series J Warrants also provide for other standard adjustments upon the happening of certain customary events. The fair value of the Series J Warrants was calculated using a Black-Scholes model. The following assumptions were used in the Black-Scholes model to calculate the fair value of the Series J Warrants: SCHEDULE OF FAIR VALUE OF WARRANTS ISSUED March 31, 2024 March 31, 2023 Fair value of the Company’s Common Stock $ 0.1543 $ 0.0290 Volatility 72.90 % 74.37 % Initial exercise price $ 0.1521 $ 0.1521 Warrant term (in years) 3.1 4.1 Risk free rate 4.40 % 3.55 % The changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis were as follows: SCHEDULE OF CHANGES IN WARRANTS MEASURED AT FAIR VALUE ON A RECURRING BASIS Balance at March 31, 2022 $ 936,837 Change in fair value of derivative financial instruments - warrants ( 415,126 ) Balance at March 31, 2023 $ 521,711 Change in fair value of derivative financial instruments - warrants 5,776,297 Balance at March 31, 2024 $ 6,298,008 NOTE 12. SHAREHOLDERS’ EQUITY Lincoln Park Capital Transaction - July 8, 2020 Purchase Agreement On 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. The Company did not issue any shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the years ended March 31, 2024 and 2023. 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. Summary of Common Stock Activity On 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. The price of the Company’s Common Stock on November 22, 2023, was $ 0.1533 per share. The aggregate value of the shares on the date of their issuance was $ 251,867 . On 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 share. The aggregate value of the shares on the date of their issuance was $ 311,238 . On March 29, 2024, the Company issued 957,541 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 $ 33,998 . The price of the Company’s Common Stock on March 29, 2024, was $ 0.1543 per share. The aggregate value of the shares on the date of their issuance was $ 147,749 . On March 29, 2024, the Company issued 49,534,368 shares of Common Stock in payment of salaries, with such shares having an aggregate value on the date of original accrual of $ 3,125,000 . The price of the Company’s Common Stock on March 29, 2024, was $ 0.1543 per share. The aggregate value of the shares on the date of their issuance was $ 7,643,153 . As of March 31, 2024, there were 1,068,373,108 shares of Common Stock issued and 1,068,273,108 shares of Common Stock outstanding. F- 21 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) As of March 31, 2023, there were 1,014,015,081 shares of Common Stock issued and 1,013,915,081 shares of Common Stock outstanding. During the years ended March 31, 2024 and 2023, the Company issued 54,358,027 and 2,633,093 shares of Common Stock, respectively, with such issuances of Common Stock being summarized as follows: SCHEDULE OF COMMON STOCK ACTIVITY 2024 2023 March 31, 2024 2023 Common Stock issued as of March 31, 2023 and 2022, respectively 1,014,015,081 1,011,381,988 Common Stock issued in payment of Directors fees, salaries and consulting fees 54,358,027 2,633,093 Common Stock issued during the fiscal year 54,358,027 2,633,093 Common Stock issued as of March 31, 2024 and 2023, respectively 1,068,373,108 1,014,015,081 NOTE 13. STOCK-BASED COMPENSATION Part of the compensation paid by the Company to its Directors and employees consists of the issuance of Common Stock or via the granting of options to purchase Common Stock. Stock-based Director Compensation The Company’s Director compensation policy, instituted in October 2009 and further revised in January 2016, includes provisions that prior to April 1, 2023, a portion of director’s fees are 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 quarterly basis and equal to the average closing price of the Company’s Common Stock. Beginning on April 1, 2023, all Directors fees are paid in cash. During the year ended March 31, 2024, the Company accrued director’s fees totaling $ 90,000 , which was paid in cash payments totaling $ 67,500 during the fiscal year ended March 31, 2024 and a cash payment in April 2024 for the balance of $ 22,500 . Prior to the fiscal year ended March 31, 2024, the Directors had earned and were owed Directors fees accrued during the prior fiscal year, with such accrued Directors fees totaling 1,642,971 shares of Common Stock and cash amounts totaling $ 30,000 . Both of these amounts were paid to the Directors during November 2023 via the issuance of a total of 1,642,971 shares of Common Stock to the Directors and cash payments totaling $ 30,000 being made to the Directors. SCHEDULE OF STOCK BASED COMPENSATION Balance of common stock owed at April 1, 2023 $ 60,000 Awarded shares — Change in fair value of stock-based liabilities 191,867 Issuance of common stock on November 22, 2023 ( 251,867 ) Balance of common stock owed at March 31, 2024 $ — Stock-based Employee/Consultant Compensation Employment contracts with the Company’s President and Chief Executive Officer and certain other employees and engagement contracts with certain consultants include provisions for a portion of each employee’s salaries or 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. SCHEDULE OF STOCK BASED COMPENSATION Balance of common stock owed at April 1, 2023 $ 4,278,333 Awarded shares — Change in fair value of stock-based liabilities 5,551,601 Common stock issued ( 8,068,142 ) Settlement of non-cash liability ( 1,761,792 ) Balance of common stock owed at March 31, 2024 $ — During the year ended March 31, 2024, 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. On March 29, 2024 the Company paid off its balance of accrued salaries to the president through the issuance of 49,534,368 shares of common stock. F- 22 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) On 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 Shares. 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 Consolidated Statements of Operations. On December 29, 2023, the Company issued 2,223,147 shares of Common Stock in satisfaction of accrued consultant fees. On March 29, 2024 the Company issued 957,541 shares of Common Stock in satisfaction of accrued consultant fees. Options Under its 2014 Equity Incentive Plan and its 2024 Equity Incentive Plan, the Company did grant and may grant stock options to officers, selected employees, as well as members of the Board of Directors and advisory board members. All options have generally been granted at a price equal to or greater than the fair market value of the Company’s Common Stock at the date of the grant. Generally, options are granted with a vesting period 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 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 year ended March 31, 2024 and year ended March 31, 2023: SCHEDULE OF GRANT DATE FAIR VALUE OF OPTION AWARDS March 31, 2024 March 31, 2023 Term (in years) 10 10 Exercise Price $ 0.08 -$ 0.16 $ 0.03 -$ 0.04 Dividend Yield — — Expected Volatility 80 %- 81 % 79 %- 80 % Risk Free Rate 4.27 %- 4.69 % 2.99 %- 4.01 % A summary of the activity of Company’s 2024 Equity Incentive plan and prior equity incentive plans for the year ended March 31, 2024 is as follows: SCHEDULE OF STOCK OPTION PLAN Shares Underlying Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at March 31, 2023 15,370,000 $ 0.07 7.4 $ — Granted 4,400,000 $ 0.09 — $ — Expired and Forfeited ( 4,040,000 ) $ 0.07 — $ — Outstanding at March 31, 2024 15,730,000 $ 0.05 8.8 $ 1,626,748 Exercisable at March 31, 2024 343,334 $ 0.18 4.3 $ 8,757 The 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 March 31, 2024 of $ 0.15 for those awards with strike prices lower than the quoted price of the Company’s Common Stock as of March 31, 2024. As of March 31, 2024, there was $ 437,921 in unrecognized stock based compensation expense that will be recognized over a weighted average 2.43 year period. 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. The 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. F- 23 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) 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. On October 2, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 100,000 shares of Common Stock. The options have an exercise price of $ 0.0938 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 November 11, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 300,000 shares of Common Stock. The options have an exercise price of $ 0.1578 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 year ended March 31, 2024 under the 2014 Plan was $ 0.0927 . NOTE 14. CONCENTRATIONS AND CREDIT RISK Revenues Three customers accounted for approximately 67 % of the Company’s revenues for the year ended March 31, 2024. These three customers accounted for approximately 32 %, 27 %, and 8 % of revenues each, respectively. Two customers accounted for approximately 96 % of the Company’s revenues for the year ended March 31, 2023. These two customers accounted for approximately 85 % and 11 % of revenue each, respectively. Accounts Receivable Two customers accounted for approximately 80 % of the Company’s accounts receivable as of March 31, 2024. These two customers accounted for approximately 49 % and 31 % of accounts receivable each, respectively. One customer accounted for approximately 96 % of the Company’s accounts receivable as of March 31, 2023. Purchasing Two suppliers accounted for approximately 62 % of the Company’s purchases of raw materials for the year ended March 31, 2024. These two customers accounted for approximately 49 %, and 13 %, of purchasing each, respectively. One supplier accounted for approximately 34 % of the Company’s purchases of raw materials for the year ended March 31, 2023. NOTE 15. SEGMENT RESULTS FASB ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based on the way a company’s management organized segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The Company has historically determined that its reportable segments are ANDAs for generic products and NDAs for branded products. The Company identified its reporting segments based on the marketing authorization relating to each and the financial information used by its chief operating decision maker to make decisions regarding the allocation of resources to and the financial performance of the reporting segments. During fiscal year ended March 31, 2024 and 2023, the Company has paused further development of NDAs and has not engaged in business activities. Accordingly during March 31, 2024 and 2023, results the Company has only engaged in business activities in a single operating segment. Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements. F- 24 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) The following represents selected information for the Company’s reportable segments: SCHEDULE OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS 2024 2023 For the Years Ended March 31, 2024 2023 Operating Income by Segment ANDA $ 19,473,752 $ 10,393,857 Operating income by Segment $ 19,473,752 $ 10,393,857 The Company notes that there was no revenue related to the NDA segment for the years ended March 31, 2024 and 2023. The table below reconciles the Company’s operating income by segment to income before income taxes as reported in the Company’s consolidated statements of operations: SCHEDULE OF OPERATING INCOME BY SEGMENT TO INCOME FROM OPERATIONS 2024 2023 For the Years Ended March 31, 2024 2023 Operating income by segment $ 19,473,752 $ 10,393,857 Corporate unallocated costs ( 7,145,114 ) ( 3,581,468 ) Interest income 20,918 7,453 Interest expense and amortization of debt issuance costs ( 588,622 ) ( 1,112,707 ) Impairment of intangible assets — ( 292,807 ) Depreciation and amortization expense ( 1,379,948 ) ( 1,263,452 ) Significant non-cash items 1,601,871 ( 580,128 ) Change in fair value of derivative instruments ( 5,776,297 ) 415,126 Change in fair value of stock-based liabilities ( 5,743,468 ) — Income before income taxes $ 463,092 $ 3,985,874 NOTE 16. RELATED PARTY AGREEMENTS Mikah Pharma, LLC Agreements In 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. In June 2021, the Company entered into a development and license agreement with Mikah, pursuant to which Mikah will engage in the research, development, sales and licensing of generic pharmaceutical products. In addition, Mikah will collaborate to develop and commercialize generic products including formulation development, analytical method development, manufacturing, sales and marketing of generic products. Initially two generic products were identified for the parties to develop. As of March 31, 2024, 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 consolidated balance sheets. Consultants Agreements Employment 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. F- 25 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) NOTE 17. INCOME TAXES The income before income taxes for the year ended March 31, 2024 and 2023 were $0.5 million and $4.0 million, respectively. Components of the provision for income taxes were (amounts in thousands): SCHEDULE OF PROVISION FOR INCOME TAXES For the Year Ended March 31 (in thousands) 2024 2023 Current provision (benefit): Federal $ — $ — State and local 343 424 Total current provision 343 424 Deferred provision (benefit): Federal ( 19,708 ) — State and local ( 281 ) — Total deferred provision (benefit) ( 19,989 ) — Provision for income taxes $ ( 19,646 ) $ 424 Reconciliation of the federal statutory rate to the Company’s effective tax rate were: SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION For the Year Ended March 31 (in thousands) 2024 2023 Federal income tax rate $ 99 $ 837 State and local taxes, net of federal benefit ( 10 ) 424 Non-deductible change in fair value of derivative financial instruments 1,213 — Non-deductible change in fair value of stock-based liabilities 949 — Other permanent items 11 — Prior year deferred true-up ( 1,659 ) Tax credits ( 240 ) — Change in valuation allowance ( 20,010 ) ( 837 ) Effective tax rate $ ( 19,646 ) $ 424 F- 26 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) The major components of deferred tax assets and liabilities as of March 31, 2024 and 2023 are as follows (amounts in thousands of dollars): SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES As of March 31 (in thousands) 2024 2023 Deferred tax assets: Lease Liability $ 1,034 $ — Fixed Assets 137 — Sec. 174 R&E Capitalization 2,298 — Allowance for Expected Credit Losses 59 — Net Operating Loss 15,533 17,613 R&D Credit 5,232 4,993 Deferred tax assets 24,293 22,606 Valuation Allowance — ( 20,434 ) Net deferred tax asset 24,293 2,172 Deferred tax liabilities: Right of Use Asset ( 1,102 ) — Intangible Assets ( 1,030 ) — Deferred tax liabilities ( 2,132 ) — Net deferred tax asset $ 22,161 $ 2,172 The Company’s income tax benefit was $ 19.6 million and $ 0.4 million for the year ended March 31, 2024 and March 31, 2023, respectively. During the year ended March 31, 2024, the Company recorded a tax benefit of $ 21.9 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. As of March 31, 2024, the Company has a federal net operating loss carry forward of $ 74.0 million, of which, $ 51.6 million are subject to expire at various dates between 2028 and 2037 and $22.4 million can be carried forward indefinitely with limitation of 80% of taxable income. The Company was able to release the entirety of its valuation allowance on its net deferred tax asset as it determined future taxable profits will offset all future tax attributes. During 2024, the Company recorded a tax benefit of $ 21.9 million as a result of this change in judgment. As of March 31, 2024, the Company’s federal and state income taxes due were zero and less than $ 0.5 million, respectively. The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as a component of income tax expense. There were no amounts accrued for interest or penalties for the year ended March 31, 2024. Management does not expect any material changes in its unrecognized tax benefits in the next year. F- 27 ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED) There are currently no federal or state income tax examinations underway. The Company’s federal tax returns are open to examination from 2020 and its state tax returns are open to examination from 2019. NOTE 18. SUBSEQUENT EVENTS Approval for generic Methotrexate On May 10, 2024, the Company received approval from the FDA for an ANDA for generic Methotrexate Sodium 2.5 mg tablets. Methotrexate belongs to a class of drugs known as antimetabolites and will be sold under the Elite Laboratories, Inc. label. Asset Purchase Agreement with Nostrum Laboratories On June 17, 2024, the Company and Nostrum Laboratories Inc. (“Nostrum”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), pursuant to which Nostrum was obligated to (i) sell to the Company all of its rights in and to the approved abbreviated new drug applications (ANDAs) for generic Norco® (Hydrocodone Bitartrate and Acetaminophen tablets, USP CII), generic Percocet® (Oxycodone Hydrochloride and Acetaminophen, USP CII), and generic Dolophine® (Methadone Hydrochloride tablets), each a “Product”, and (ii) grant to the Company a royalty-free, non-exclusive perpetual license to use the manufacturing technology, proprietary information, processes, techniques, protocols, methods, know-how, and improvements necessary or used to manufacture each Product in accordance with the applicable ANDA, in exchange for $ 900,000 in cash (the “Transaction”). The Asset Purchase Agreement includes customary representations and warranties and various customary covenants. The closing of the Transaction occurred on June 21, 2024. F- 28