What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-14 compared with 2024-02-14 · 354 added, 647 removed, 639 unchanged (61% of the section changed)

FINANCIAL STATEMENTS

December 31, 2023

June 30, 2024

March 31, 2024

Current assets:

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

Accounts receivable, net of allowance for expected credit losses of approximately $ 233,000 and $ 236,000 respectively

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net of accumulated depreciation of $ 16,197,891 and $ 15,906,853 respectively

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

Intangible assets

Finance lease - right-of-use asset

21 unchanged sentences

Lease obligation - finance lease, net of current portion

Lease obligation - operating lease, net of current portion

Derivative financial instruments - warrants

5 unchanged sentences

1,445,000,000 shares authorized;

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

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

1,068,373,108 and 1,068,373,108 shares issued as of June 30, 2024 and March 31, 2024, respectively;

1,068,273,108 and 1,068,273,108 shares outstanding as of June 30, 2024 and March 31, 2024, respectively

Additional paid-in capital

Treasury stock;

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

100,000 shares as of June 30, 2024 and March 31, 2024, respectively, at cost

Accumulated deficit

6 unchanged sentences

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30,

Manufacturing fees

9 unchanged sentences

Income from operations

Other income (expense):

Other (expense) income:

Change in fair value of derivative financial instruments - warrants

( 2,782,913 )

( 5,075,489 )

Change in fair value of stock-based liabilities

( 2,854,556 )

( 4,921,376 )

Interest expense and amortization of debt issuance costs

Gain from settlement agreements

Gain on sale of ANDA

Interest income

Other (expense) income, net

( 3,626,915 )

( 8,590,466 )

(Loss) income before income taxes

Other expense, net

( 3,016,304 )

Income tax benefit (expense)

Net income attributable to common shareholders

Income before income taxes

Income tax expense

Basic net income per share attributable to common shareholders

3 unchanged sentences

1,013,915,081

1,014,265,162

1,012,480,115

Diluted weighted average Common Stock outstanding

1 unchanged sentence

1,014,572,821

1,019,511,813

1,012,480,115

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

1 unchanged sentence

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Series J Preferred Stock

1 unchanged sentence

Shareholders’

Balance as of April 1, 2023

Balance as of March 31, 2024

1,068,373,108

8 unchanged sentences

$ ( 115,773,494 )

Non-cash compensation through the issuance of employee stock options

Balance at September 30, 2023

1,014,015,081

$ 164,808,757

$ ( 306,841 )

$ ( 120,421,488 )

Shares issued in satisfaction of accrued director salaries

Shares issued in satisfaction of accrued consultant fees

Non-cash compensation through the issuance of employee stock options

Balance at December 31, 2023

1,017,881,199

$ 165,417,811

$ ( 306,841 )

$ ( 119,715,134 )

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Series J Preferred Stock

1 unchanged sentence

Treasury Stock

Total Shareholders’

Balance as of April 1, 2022

1,011,381,988

$ 164,577,227

$ ( 306,841 )

$ ( 140,059,744 )

Non-cash compensation through the issuance of employee stock options

Balance at June 30, 2022

1,011,381,988

$ 164,582,549

$ ( 306,841 )

$ ( 139,753,861 )

Non-cash compensation through the issuance of employee stock options

Shares issued in payment of director salaries

Shares issued in payment of consultant fees

Balance at September 30, 2022

Shareholders’

Balance as of March 31, 2023

1,014,015,081

6 unchanged sentences

$ ( 136,497,898 )

Net income (Loss)

Non-cash compensation through the issuance of employee stock options

Balance at December 31, 2022

Balance at June 30, 2023

1,014,015,081

9 unchanged sentences

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31,

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

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

Depreciation and amortization

Bad debt expense

Provision for losses on accounts receivable

Amortization of operating leases - right-of-use assets

Non-cash compensation accrued

Amortization of finance leases - right-of-use assets

Amortization of debt discount - bonds offering costs

Change in fair value of derivative financial instruments - warrants

Change in fair value of stock-based liabilities

Gain on settlement of Common Stock to consultant

( 1,761,792 )

Deferred tax expense

Non-cash compensation through the issuance of employee stock options

Non-cash rent expense and lease accretion

Deferred revenue

Non-cash loss on asset disposal

Change in operating assets and liabilities:

3 unchanged sentences

( 1,617,715 )

( 1,860,688 )

Prepaid expenses and other current assets

Deferred income tax asset

( 18,061,782 )

Accounts payable, accrued expenses and other current liabilities

Interest expense of finance lease liability

Accounts payable

Accrued expenses

Deferred revenue

Lease obligations - operating leases

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

( 2,709,815 )

1 unchanged sentence

Purchase of property and equipment

( 5,200,407 )

Purchase of intangible assets

Proceeds from disposition of property and equipment

Net cash used in investing activities

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of bond principal

Proceeds from related party loans payable

Proceeds from loans payable

Amortization of finance leases - right-of-use assets

Payments on principal on finance lease obligations

Loan payments

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Net change in cash and restricted cash

( 2,000,471 )

Cash and restricted cash, beginning of period

3 unchanged sentences

Cash paid for income taxes

Stock issued in satisfaction of accrued directors salaries and consultant fees

Recognition of right of use asset and lease liabilities entered into

Finance directors and officers insurance premium

Reconciliation of cash and restricted cash

36 unchanged sentences

The accompanying unaudited condensed consolidated

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

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

ending March 31, 2024 or for any future periods.

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.

financial statements should be read in conjunction with the Company’s Form 10-K as filed with the SEC on July 1, 2024.

results for the three months ended June 30, 2024 are not necessarily indicative of the results to be expected for the fiscal year ending

March 31, 2025 or for any future periods.

preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and

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.

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.

Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results

5 unchanged sentences

are referred to as generic pharmaceuticals and NDA products are referred to as branded pharmaceuticals.

The Company paused further development

of NDAs and has not engaged in business activities.

Accordingly, during the three months ended June 30, 2024 and 2023, the Company has

only engaged in business activities in a single operating segment.

are currently no intersegment revenues.

2 unchanged sentences

The reporting segments follow the same accounting policies used in the preparation

of the Company’s condensed unaudited consolidated financial statements.

of the Company’s condensed consolidated financial statements.

Please see Note 13 for further details.

ELITE PHARMACEUTICALS,

PHARMACEUTICALS, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company generates revenue from manufacturing and licensing fees and sales of generic pharmaceuticals bearing the Elite label to pharmaceutical

distributors for pharmacies and institutions.

Manufacturing fees include the development of pain management products, manufacturing of

a line of generic pharmaceutical products with approved ANDA, through the manufacture of formulations and the development of new products.

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

reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable.

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

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company generates revenue from manufacturing and licensing fees and direct sales 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.

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.

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

71 unchanged sentences

None of the Company’s contracts contained a significant financing

component as of December 31, 2023.

component as of June 30, 2024.

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

12 unchanged sentences

invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts and program rebates, as applicable.

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

2 unchanged sentences

in time for all performance obligations.

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

During the three months ended June 30, 2024 and 2023, the Company had paused further

development of NDAs and has not engaged in business activities in that segment.

Accordingly, during the three months ended June 30,

2024 and 2023, 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:

OF DISAGGREGATION OF REVENUE

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Manufacturing fees

Licensing fees

Total NDA revenue

For the Three Months Ended June 30,

Manufacturing fees

1 unchanged sentence

Total ANDA revenue

Total revenue

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

disclosed within Note 13.

of June 30, 2024, and March 31, 2024, the Company had $ 438,222 and $ 432,832 , of restricted cash, respectively, related to debt service

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

PHARMACEUTICALS, INC.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

of December 31, 2023, and March 31, 2023, the Company had $ 427,999 and $ 412,434 , of restricted cash, respectively, related to debt service

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

Receivable and Allowance for Expected Credit Losses

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

deductions, including, without limitation, chargebacks, discounts and program rebates.

In determining collectability, historical trends

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

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.

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.

is recorded at the lower of cost or net realizable value on specific identification by lot number basis.

Company periodically evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever events

23 unchanged sentences

and slower growth rates.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

its ANDAs and patents.

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

The Company notes that none

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

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

were no such impairments recorded during the three months ended June 30, 2024 and three months ended June 30, 2023.

The Company notes

that none of its patents relate to any of the Company’s revenue producing activities.

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.

following table summarizes the Company’s intangible assets as of and for the periods ended June 30, 2024 and March 31, 2024:

OF INTANGIBLE ASSETS

December 31, 2023

June 30, 2024

Estimated Useful Life

12 unchanged sentences

Patent application costs

$ ( 176,645 )

ANDA acquisition costs

$ ( 292,807 )

and Development

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 condensed

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.

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

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

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

Elite obtained agreement with Purdue

to stay the litigation for six months.

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

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

As of December 31, 2023, the results

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

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

* 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).

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

taxes are accounted for under the asset and liability method.

12 unchanged sentences

tax jurisdiction until the applicable statutes of limitation expire.

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

subject to examination in our major tax jurisdictions are:

United States – Federal, 2016 and forward.

The Company did not record

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

and Preferred Shares

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

the quarter ended December 31, 2022, 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.

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).

As of June 30, 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.

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 as of June 30, 2024 and March

Per Share Attributable to Common Shareholders’

7 unchanged sentences

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

the average market price of Common Stock for the three

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

warrants, t he potential dilutio n from the warrants converting into

79,008,661 shares of Common Stock for all periods have been excluded from the number of shares used in calculating diluted net income

per share as their inclusion would have been antidilutive.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the average market price of Common Stock for the three months ended June 30, 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.

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

OF EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

For the Three Months Ended June 30,

Net income - basic

4 unchanged sentences

1,013,915,081

1,014,265,162

1,012,480,115

Dilutive effect of stock options and convertible securities

Dilutive effect of stock options

Weighted average shares of Common Stock outstanding - diluted

1 unchanged sentence

1,014,572,821

1,019,511,813

1,012,480,115

Net income per share

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Value of Financial Instruments

10 unchanged sentences

hierarchy under ASC 820 are described as follows:

1 – Unadjusted quoted prices in active markets for identical assets or liabilities

that are accessible at the measurement date.

2 – Inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly or indirectly.

Level 2 inputs include quoted prices

for similar assets or liabilities in active markets;

quoted prices for identical or similar

assets or liabilities in markets that are not active;

inputs other than quoted prices that

are observable for the asset or liability;

and inputs that are derived principally from or

corroborated by observable market data by correlation or other means.

1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

or indirectly.

Level 2 inputs include quoted prices for similar assets or liabilities in active markets;

quoted prices for identical

or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset

or liability;

and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

on a Recurring Basis

following table presents information about our liabilities measured at fair value on a recurring basis, aggregated by the level in the

fair value hierarchy within which those measurements fell:

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:

OF LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

1 unchanged sentence

Amount at Fair Value

Balance as of April 1, 2023

Balance as of March 31, 2024

Change in fair value of derivative financial instruments - warrants

Balance as of December 31, 2023

Balance as of June 30, 2024

Fair Value Measurement

Amount at Fair Value

Balance as of April 1, 2022

Balance as of March 31, 2023

Change in fair value of derivative financial instruments - warrants

Balance as of December 31, 2022

Balance as of June 30, 2023

Note 10 for specific inputs used in determining fair value.

1 unchanged sentence

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 approximates fair value.

Based upon current borrowing rates with similar maturities the carrying value of long-term debt, and related party loans payable approximates

Non-Financial

3 unchanged sentences

Company did not record an impairment charge related to these assets in the periods presented.

Instruments — Credit Losses (ASU 2016-13)

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“CECL”).

The amendments in this update introduce

a new accounting model to measure credit losses for financial assets measured at amortized cost.

The FASB has also issued additional

ASUs to clarify the scope and provide additional guidance for ASU 2016-13.

Credit losses for financial assets measured at amortized cost

should be determined based on the total current expected credit losses over the life of the financial asset or group of financial assets.

In effect, the financial asset or group of financial assets should be presented at the net amount expected to be collected.

Credit losses

will no longer be recorded under the current incurred loss model for financial assets measured at amortized cost.

The amendments also

modify the accounting for available-for-sale debt securities whereby credit losses will be recorded through an allowance for credit losses

rather than a write-down to the security’s cost basis, which allows for reversals of credit losses when estimated credit losses

Credit losses for available-for-sale debt securities should be measured in a manner similar to current GAAP.

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.

impact of applying the CECL methodology upon adoption effective on April 1, 2023 was immaterial to the Company’s consolidated financial

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

Issued Accounting Pronouncements

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 condensed consolidated financial statements.

PHARMACEUTICALS, INC.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

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

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

of $ 194,600 for current estimated credit losses.

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

Issued Accounting Pronouncements

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.

The Company does not expect that the requirements of ASU 2023 – 07 will

have a material impact on its condensed consolidated financial statements.

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.

impact on the Company’s condensed consolidated financial statements and related disclosures.

consisted of the following:

December 31, 2023

June 30, 2024

March 31, 2024

5 unchanged sentences

OF PROPERTY AND EQUIPMENT

December 31, 2023

June 30, 2024

March 31, 2024

8 unchanged sentences

Property and equipment, net

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

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and amortization expense was $ 322,103 and $ 328,282 for the three months ended June 30, 2024 and 2023, respectively.

ACCRUED EXPENSES

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

of June 30, 2024 and March 31, 2024, the Company’s accrued expenses consisted of the following:

OF ACCRUED EXPENSES

December 31, 2023

June 30, 2024

March 31, 2024

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

Co-development profit split

Consultant contract fees

Director dues

Legal and professional expense

Employee bonuses

Other accrued expenses

Legal and professional expense

Salaries and fees payable

Director dues

Consultant contract fees

Total accrued expenses

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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 unaudited consolidated balance sheets.

restricted cash on the accompanying condensed consolidated balance sheets.

The NJEDA Bonds require the Company to make an annual principal

5 unchanged sentences

following tables summarize the Company’s bonds payable liability:

OF BONDS PAYABLE LIABILITY

December 31, 2023

SCHEDULE OF BONDS PAYABLE LIABILITY

June 30, 2024

March 31, 2024

14 unchanged sentences

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

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

expense was $ 3,544 and $ 3,548 for the three months ended June 30, 2024 and 2023, respectively.

Interest payable was $ 24,267 and $ 6,067

as of June 30, 2024 and March 31, 2024, respectively.

Interest expense was $ 18,200 and $ 20,232 for the three months ended June 30, 2024

and 2023, respectively.

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

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

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

of bonds for the next five years and thereafter are as follows:

SCHEDULE OF MATURITIES OF BONDS

Years ending March 31,

Remainder of 2025

PHARMACEUTICALS, INC.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

OF MATURITIES OF BONDS

Years ending March 31,

LOANS PAYABLE

April 2, 2022, the Company and Elite Labs entered into a Loan and Security Agreement (the “EWB Loan Agreement”) with East

West Bank (“EWB”).

Pursuant to the EWB Loan Agreement, the Company and Elite Labs received one term loan for a principal

amount of $ 12,000,000 (the “EWB Term Loan”) and a revolving line of credit up to $ 2,000,000 (the “EWB Revolver,”

together with the “EWB Term Loan,” the “EWB Loans”), each of which shall be used for working capital.

Term Loan bears interest at a rate of 9.73 % ( 1.73 % plus the prime rate (“Prime”)) and is repayable over five years , maturing

on May 1, 2027 .

The EWB Revolver bears interest at a rate of ( 8.87 % ( 0.87 % plus Prime)) and matures on May 1, 2027 .

The total transaction

costs associated with the EWB Term Loan incurred as of March 31, 2023, were $ 40,120 , which are being amortized on a monthly basis over

five years, beginning in April 2022.

The EWB Loans are secured by a security interest in the personal property of the Company and Elite

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

These covenants include, but are not limited

to, maintaining maximum leverage ratios of 3.50 to 1.00, minimum liquidity of $5,000,000, minimum cash of $1,000,000, a fixed charge

coverage ratio of 1.25 to 1.00 and restrictions on mergers or sales of assets and debt borrowings .

As of March 31, 2023, the principal

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

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

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

As of June 2, 2023, a Promissory Note was

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

The Promissory Note has an interest rate of 9 %

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

payable consisted of the following:

OF LOANS PAYABLE

December 31, 2023

SCHEDULE OF LOANS PAYABLE

June 30, 2024

March 31, 2024

Mortgage loan payable 4.75 % interest and maturing June 2032

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

Equipment and insurance financing loans payable, between 5.99 % and 12.02 % interest and maturing between July 2024 and October 2025

Current portion of loans payable

Long-term portion of loans payable

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

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

principal payments for the next five years are as follows:

OF LOAN PRINCIPAL PAYMENTS

interest expense associated with the loans payable was $ 34,883 and $ 77,238 for the three months ended June 30, 2024 and 2023, respectively.

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

SCHEDULE OF LOAN PRINCIPAL PAYMENTS

Future principal balances

Years ending March 31,

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

2029 and thereafter

Remainder of 2025

Total remaining principal balance

7 unchanged sentences

The Hakim Promissory Note has an interest rate of

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

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

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 was June 2, 2024, with an optional second year extension.

The second year extension

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

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

to exercise the second year extension.

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

Note totaled $ 67,500 and $ 202,500 respectively, recorded on the Condensed Consolidated Balance Sheets in accrued expenses and on the

Condensed Consolidated Statements of Operations in interest expense and amortization of debt issuance costs.

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

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 December 31, 2023, were $ 13,251 ,

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

The EWB Mortgage Loan contains customary representations,

warranties and covenants.

These covenants include maintaining a minimum debt coverage ratio of 1.50 to 1.00 tested annually and a minimum

trailing 12-month debt coverage ratio of 1.50 to 1.00.

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

was exercised pursuant to the terms of the Hakim Promissory Note.

For the three months ended June 30, 2024, interest expense on the Hakim

Promissory Note totaled $ 67,500 , recorded on the Condensed Consolidated Balance Sheets in accrued expenses and on the Condensed Consolidated

Statements of Operations in interest expense and amortization of debt issuance costs.

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

2 unchanged sentences

will be used for working capital and other business purposes.

The original maturity date of the Caskey Promissory Note is June 30, 2024,

The original maturity date of the Caskey Promissory Note was June 30, 2024,

with an optional second year extension.

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

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

For the three and nine months

ended December 31, 2023, interest expense on the Caskey Promissory Note totaled $ 22,500 and $ 67,500 respectively, recorded on the Condensed

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

of debt issuance costs.

DEFERRED REVENUE

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

component of $ 8,889 .

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

of $ 13,333 and a long-term component of $ 18,890 .

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

for a TAGI Pharma licensing agreement with a fifteen-year term beginning in September 2010 and ending in August 2025 .

These advance payments

were recorded as deferred revenue when received and are earned, on a straight-line basis over the life of the licenses.

The current component

is equal to the amount of revenue to be earned during the 12-month period immediately subsequent to the balance sheet date and the long-term

component is equal to the amount of revenue to be earned thereafter.

The second year extension was exercised pursuant to the terms of the Caskey Promissory Note.

For the three months ended June 30, 2024, interest expense on the Caskey Promissory Note totaled $ 22,500 , recorded on the Condensed Consolidated

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

debt issuance costs.

PHARMACEUTICALS, INC.

17 unchanged sentences

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

As of December 31, 2023, the results

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

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

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

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.

As of June 30, 2024, the results of such

proceedings cannot be predicted with certainty and are neither probable nor estimable.

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

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

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

The Pompano Office Lease 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.

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.

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.

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

6 unchanged sentences

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

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

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 Elite taking ownership of the asset on December 1, 2023.

The Waters equipment lease has a term of five years,

ending on November 29, 2028.

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

which is probable to be exercised.

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

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.

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.

February 2024, the Company entered into a finance lease for equipment ( the “February 2024 Equipment Lease”).

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 will retain

ownership of the equipment at lease termination .

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 will retain ownership of all related assets at lease termination.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

13 unchanged sentences

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 finance lease is included on the condensed consolidated balance sheets as Finance lease

- right-of-use asset and Lease obligation - finance lease.

The finance lease costs are split between Depreciation and amortization expense

related to the asset and Interest expense and amortization of debt issuance costs on the lease liability, using the effective rate charged

by the lessor.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

OF LEASE ASSETS AND LIABILITIES

SCHEDULE OF LEASE ASSETS AND LIABILITIES

Classification

December 31, 2023

June 30, 2024

March 31, 2024

Finance lease – right-of-use asset

7 unchanged sentences

expense is recorded on the straight-line basis.

Rent expense under the 135 Ludlow Ave.

modified lease was $ 0 for the three months ended

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

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

$ 20,603 and $ 19,116 for the nine months ended December 31, 2023 and 2022, respectively.

Rent expense is recorded in general and administrative

expense in the unaudited condensed consolidated statements of operations.

Rent expense under the Pompano Office Lease was $ 8,087 and $ 6,519 for the three months

ended June 30, 2024 and 2023, respectively.

Rent expense under the 144 Ludlow lease was $ 151,515 and $ 0 for the three months ended June

30, 2024 and 2023, respectively.

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

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Waters Equipment Lease:

OF FUTURE MINIMUM RENTAL PAYMENTS

SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS

Years ending March 31,

1 unchanged sentence

Financing Lease Amount

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

Remainder of 2025

Present value of lease payments

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

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

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

For the Three Months Ended June 30,

Lease Term and Discount Rate

December 31, 2023

Remaining lease term (years)

4 unchanged sentences

Finance leases

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PREFERRED STOCK

10 unchanged sentences

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

as of December 31, 2023 and March 31, 2023.

as of June 30, 2024 and March 31, 2024.

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

4 unchanged sentences

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

Series J Warrants are exercisable for a period of 10

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

The initial exercise price is $ 0.1521

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

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

The net cash settlement amount is the cash

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

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

As this event is

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

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

liabilities and measured initially and subsequently at fair value.

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

equivalents at an effective price below the then exercise price.

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

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.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

price below the then exercise price.

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

customary events.

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

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

the fair value of the Series J Warrants:

OF FAIR VALUE OF WARRANTS ISSUED

December 31, 2023

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

June 30, 2024

March 31, 2024

3 unchanged sentences

Risk free rate

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

2023 were as follows:

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

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, 2023

Change in fair value of derivative financial instruments - warrants

Balance at December 31, 2023

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SHAREHOLDERS’ EQUITY

Park Capital Transaction - July 8, 2020 Purchase Agreement

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.

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

December 31, 2023 and 2022.

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

2020 LPC Purchase Agreement.

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

of Common Stock Activity

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

shares of Common Stock in payment

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

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

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

The aggregate value

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

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

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

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

and which were owed for periods prior to the

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

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

2023, was $ 0.14 per

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

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

Balance at March 31, 2024

Change in fair value of derivative financial instruments - warrants

Balance at June 30, 2024

STOCK-BASED COMPENSATION

of the compensation paid by the Company to its Directors and employees consists of the issuance of Common Stock or via the granting of

of the compensation paid by the Company to employees consists of the granting of

options to purchase Common Stock.

Director Compensation

Company’s Director compensation policy, instituted in October 2009 and further revised in January 2016, includes provisions that

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

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

totaling $ 22,500 .

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

OF STOCK BASED COMPENSATION

Balance of common stock owed at April 1, 2023

Awarded shares

Change in fair value of stock-based liabilities

Issuance of common stock on November 22, 2023

Balance of common stock owed at December 31, 2023

Employee/Consultant Compensation

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.

OF STOCK BASED COMPENSATION

Balance of common stock owed at April 1, 2023

Awarded shares

Change in fair value of stock-based liabilities

Common stock issued

Settlement of non-cash liability

( 1,761,792 )

Balance of common stock owed at December 31, 2023

the nine months ended December 31, 2023, the Company accrued no additional salaries owed to the Company’s President, Chief Executive

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

As of December 31, 2023, the total

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

Balance Sheets.

PHARMACEUTICALS, INC.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

which was to be paid via the issuance

of shares of Common Stock.

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

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

aggregate of $ 1,000,000

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

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

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

be issued to or received by the former employee.

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

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

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

Statements of Operations.

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

shares of Common Stock in satisfaction of accrued consultant fees.

its 2014 Stock Option Plan and prior options plans, the Company may grant stock options to officers, selected employees, as well as members

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.

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.

On July 1, 2024 the Company restated the 2014 Equity

Incentive Plan to increase the shares reserved under the option plan by 12,730,000 .

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.

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

13 unchanged sentences

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

The following assumptions were used

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

OF GRANT DATE FAIR VALUE OF OPTION AWARDS

December 31, 2023

March 31, 2023

Term (in years)

Exercise Price

$ 0.08 -$ 0.09

$ 0.03 -$ 0.04

Dividend Yield

Expected Volatility

Risk Free Rate

4.27 %- 4.69 %

2.99 %- 4.01 %

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

OF STOCK OPTION PLAN

Weighted Average

Remaining Contractual

Underlying Options

No options were issued for the three

months ended June 30, 2024 and 2023.

summary of the activity of Company’s 2024 Equity Incentive plan and prior equity incentive plans for the three months ended June

30, 2024 is as follows:

SCHEDULE OF STOCK OPTION PLAN

Exercise Price

2 unchanged sentences

Expired and Forfeited

( 3,840,000 )

Outstanding at December 31, 2023

Exercisable at December 31, 2023

Outstanding at June 30, 2024

Exercisable at June 30, 2024

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

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

in unrecognized stock based compensation

expense that will be recognized over a weighted average 2.37

September 5, 2023, options were granted to the Chief Financial Officer pursuant to the 2014 Plan to purchase an aggregate of 3,000,000

shares of Common Stock.

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

The options granted will vest one third for each of the next three years upon the anniversary date of the grant and have a

ten-year expiration date.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 19, 2023, options were granted to one employee pursuant to the 2014 Plan to purchase an aggregate of 1,000,000 shares of Common

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

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

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

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

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

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

and the quoted price of the Company’s Common Stock as of June 30, 2024 of $ 0.20 for those awards with strike prices lower than

the quoted price of the Company’s Common Stock as of June 30, 2024.

As of June 30, 2024, there was $ 385,592 in unrecognized stock

based compensation expense that will be recognized over a weighted average 1.94 year period.

CONCENTRATIONS AND CREDIT RISK

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

These three customers

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

customers accounted for approximately 96 % of the Company’s revenues for the nine months ended December 31, 2022.

customers accounted for approximately 68 % of the Company’s revenues for the three months ended June 30, 2024.

These two customers

accounted for approximately 44 % and 24 % of revenues each, respectively.

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

These five customers

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

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

customers accounted for approximately 74 % of the Company’s accounts receivable as of June 30, 2024.

These two customers accounted

for approximately 50 % and 24 %of accounts receivable each, respectively.

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

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

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

These three customers accounted

for approximately 22 %, 21 %, and 13 % of accounts receivable each, respectively.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

suppliers accounted for approximately 61 % of the Company’s purchases of raw materials for the three months ended June 30, 2024.

These two customers accounted for approximately 39 % and 22 % of purchasing each, respectively.

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

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

SEGMENT RESULTS

4 unchanged sentences

management disaggregates a company.

Company has 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.

Company has historically determined that its reportable segments are ANDAs for generic products and NDAs for branded products.

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 years ended March 31, 2024 and 2023, the Company had paused further development of NDAs and

has not engaged in business activities in that segment.

Accordingly, during the three months ended June 30, 2024 and 2023, the Company has only engaged in business activities in a single operating segment.

information by operating segment is not presented below since the chief operating decision maker does not review this information by

The reporting segments follow the same accounting policies used in the preparation of the Company’s unaudited condensed

consolidated financial statements.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The reporting segments follow the same accounting policies used in the preparation of the Company’s condensed consolidated

financial statements.

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

SCHEDULE OF SELECTED INFORMATION FOR REPORTABLE SEGMENTS

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

For the Three Months Ended June 30,

Operating Income by Segment

Operating income by Segment

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

Company notes that there was no revenue related to the NDA segment for the three months ended June 30, 2024 and 2023.

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

unaudited condensed consolidated statements of operations:

OF OPERATING INCOME BY SEGMENT TO INCOME FROM OPERATIONS

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

condensed consolidated statements of operations:

SCHEDULE OF OPERATING INCOME BY SEGMENT TO INCOME FROM OPERATIONS

For the Three Months Ended June 30,

Operating income by segment

2 unchanged sentences

( 1,519,736 )

( 1,465,792 )

Interest income

4 unchanged sentences

( 2,782,913 )

( 5,075,489 )

Change in fair value of stock-based liabilities

( 2,854,556 )

( 4,921,376 )

Income(Loss) before income taxes

$ ( 1,530,281 )

Income before income taxes

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY AGREEMENTS

13 unchanged sentences

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

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

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

consolidated balance sheets.

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

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

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

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

shares of Common Stock in satisfaction

of accrued consultant fees owed to one consultant.

PHARMACEUTICALS, INC.

AND SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company’s income tax benefit was $ 18.3 million and income tax expense was $ 0.05 million for the nine months ended December 31, 2023

and 2022, respectively.

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

and 2022, respectively.

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

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

federal net operating

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

profitability and its expectations of forecasted income.

For the nine months ended December 31, 2023, the release in the

valuation allowance is the primary reason that the effective tax rate is different than the United States federal statutory rate of 21 %.

SUBSEQUENT EVENTS

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

140 Ludlow Office Lease

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

New Jersey (the 140 Ludlow Ave.

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

of June 30, 2024, the Company owes an aggregate of $ 4,435,536 to Mikah in accordance with the agreements, with such amount being recorded

as an accrued expense on the condensed consolidated balance sheets.

determination of income tax expense in the accompanying unaudited condensed consolidated statements of income is based on the effective

tax rate for the year, adjusted for the impact of any discrete items which are accounted for in the period in which they occur.

The Company’s

income tax expense was $ 231,979 and

$ 154,975 for the three months ended June 30, 2024 and June 30, 2023, respectively.

The Company recorded tax expense of approximately

27.4 % and 11.9 % of income before income tax expense, for each of the three-month period ended June 30, 2024 and 2023, respectively.

increase of the effective tax rate for the current period as compared to the prior period is primarily due to the release of the valuation

allowance on the Company’s deferred tax assets as of March 31, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements