What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-02-14 · 217 added, 263 removed, 296 unchanged (62% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion of our financial condition and results of operations for the Nine Months Ended December 31, 2023 and 2022 should

be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included

following discussion of our financial condition and results of operations for the Three Months Ended June 30, 2024 and 2023 should be

read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included

elsewhere in this report.

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State of Nevada.

are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, using

proprietary know-how and technology for the manufacture of generic pharmaceuticals.

Our strategy includes developing generic versions

of controlled-release drug products with high barriers to entry.

occupy manufacturing, warehouse, laboratory and office space at 165 Ludlow Avenue and 135 Ludlow Avenue in Northvale, NJ (the “Northvale

The Northvale Facility operates under Current Good Manufacturing Practice and is a United States Drug Enforcement Agency

registered facility for research, development and manufacturing.

We are also party to an operating lease for office space at Pompano

Beach, Florida (the “Pompano Office Lease”).

are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, and

the manufacture of generic pharmaceuticals.

Our strategy includes developing generic versions of controlled-release drug products with

high barriers to entry.

occupy manufacturing, warehouse, laboratory and office space at 135, 144 and 165 Ludlow Avenue in Northvale, NJ (the “Northvale

The Northvale Facility operates under Current Good Manufacturing Practice (“cGMP”) and is a United States

Drug Enforcement Agency (“DEA”) registered facility for research, development, and manufacturing.

We are also party to an

operating lease for office space at Pompano Beach, Florida (the “Pompano Office Lease”).

focus our efforts on the following areas:

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(iii) development of the other

product candidates in our pipeline including the products with our partners;

(iv) commercial exploitation of our products either by sales

under our own label, by license and the collection of royalties, or through the manufacture of our formulations;

and (v) development

of new products and the expansion of our licensing agreements with other pharmaceutical companies, including co-development projects,

joint ventures and other collaborations.

product candidates in our pipeline including products co-developed with partners;

(iv) commercial exploitation of our product candidates

either by sales under our own label, license and the collection of royalties, or through the manufacture of our formulations;

development of new products for sale under our own label, and the expansion of our licensing agreements with other pharmaceutical companies,

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

focus is on the development of various types of drug products, including generic drug products which require ANDAs as well as branded

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thereby allowing us to share costs of development and improve cash-flow.

May 20, 2024, the Company reported that it received approval from the FDA for a generic version of Methotrexate Sodium 2.5mg tablets.

Methotrexate Sodium belongs to a class of drugs known as antimetabolites and will be sold under the Elite Laboratories Inc.

of the date of filing of this Quarterly Report on Form 10-Q, this product had not yet been commercially launched.

June 17, 2024, the Company entered into an asset purchase agreement with Nostrum Laboratories Inc.

(the “Nostrum Asset Purchase

Agreement”), pursuant to which the Company acquired all rights in and to the approved ANDAs as well as royalty free, non-exclusive

perpetual licenses to use the manufacturing technology, proprietary information, processes, techniques, protocols, methods, know-how

and improvements necessary to manufacture the following products:

Bitartrate and Acetaminophen tablets

Hydrochloride and Acetaminophen tablets

Hydrochloride tablets

As of the date of filing of this Quarterly report on Form 10-Q, these products have not yet been commercially launched.

own, license, contract manufacture or have contractual rights to receive royalties from the following products currently approved for

commercial sale:

HCl 37.5mg tablets

Product Equivalent

HCl 37.5mg tablets (“Phentermine 37.5mg”)

Phendimetrazine

Tartrate 35mg tablets

HCl 15mg and 30mg capsules

HCl 50mg tablets

2.5mg and 5mg capsules

Tartrate 35mg tablets (“Phendimetrazine 35mg”)

HCl 15mg and 30mg capsules (“Phentermine 15mg” and “Phentermine 30mg”)

HCl 50mg tablets (“Naltrexone 50mg”)

2.5mg and 5mg capsules (“Isradipine 2.5mg” and “Isradipine 5mg”)

Cardiovascular

Maleate Immediate Release 25mg, 50mg and 100mg capsules

Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine

Antidepressant

1 unchanged sentence

Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg,

20mg and 30mg tablets

Nervous System Stimulant

Sodium Capsules 25mg, 50mg and 100mg

20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine

IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg” and “Amphetamine IR 30mg”)

Nervous System (“CNS”) Stimulant

Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”)

Dextroamphetamine

Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and

30mg capsules

Nervous System Stimulant

Succinate 5mg, 10mg, 25mg and 50gm capsules

30mg capsules (“Amphetamine ER 5mg”, “Amphetamine ER 10mg”, “Amphetamine ER 15mg”, “Amphetamine

ER 20mg”, “Amphetamine ER 25mg”, and “Amphetamine ER 30mg”)

Nervous System (“CNS”) Stimulant

Succinate 5mg, 10mg, 25mg and 50gm capsules (“Loxapine 5mg”, “Loxapine 10mg”, “Loxapine 25mg”,

and Loxapine 50mg”)

Antipsychotic

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Products Filed

the Company has filed a generic antimetabolite ANDA and a generic dopamine agonist ANDA and these products are under review by the FDA.

On August 17, 2023, the Company also submitted an ANDA for an opiate analgesic for pain management and it was accepted for review by

FDA on September 19, 2023.

On December 21, 2023, the FDA accepted for review an ANDA for an undisclosed generic drug product in a class

of medications known as central nervous stimulants.

the Company has filed the following ANDA’s which have been accepted for review by the FDA:

dopamine agonist accepted for review in December 2022

antimetabolite accepted for review in April 2023

opiate analgesic for pain management accepted for review in September 2023

central nervous system stimulant accepted for review in December 2023

Products Not Yet Commercialized

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are inadequate.

Acetaminophen with codeine products have annual U.S.

sales of approximately $45 million according to IQVIA (formerly

QuintilesIMS Health Data).

The Company is not pursuing licensing deals for any opioids at this time until the market changes.

will wait for the market to stabilize before pursuing these opportunities.

The Company is currently assessing commercialization options for this product.

Hyclate Tablets

Company received approval in April 2022 from the FDA of an ANDA for a generic version of an antibiotic product.

According to QVIA (formerly

QuintilesIMS Health) data, the branded product for this antibiotic and its equivalents had total annual U.S.

sales of approximately $85

million for the twelve months ending September 30, 2019.

The product is jointly owned by Elite and Praxgen Pharmaceuticals LLC, formerly

SunGen Pharma LLC, (“Praxgen”).

The product is jointly

owned by Elite and Praxgen Pharmaceuticals LLC, formerly SunGen Pharma LLC, (“Praxgen”).

Sodium Tablets

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.

Bitartrate and Acetaminophen Tablets

June 17, 2024, the Company entered into an asset purchase agreement with Nostrum Laboratories Inc.

(the “Nostrum Asset Purchase

Agreement”), pursuant to which the Company acquired all rights in and to the approved ANDA to this product and 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 this product.

Hydrochloride and Acetaminophen Tablets

Pursuant to the Nostrum Asset Purchase

Agreement, the Company acquired all rights in and to the approved ANDA to this product and 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 this product.

Hydrochloride Tablets

Pursuant to the Nostrum Asset Purchase

Agreement, the Company acquired all rights in and to the approved ANDA to this product and 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 this product.

can be no assurances in relation to any of the above approved products not yet commercialized, that there will be future revenues of

1 unchanged sentence

made to secure these marketing authorizations.

and Transferred Products

part of standard operating practices, the Company, from time to time, as relevant, conducts evaluations of all ANDAs owned, consisting,

without limitation, of ANDAs acquired or approved prior to the fiscal year ended March 31, 2024 (“Fiscal 2024”) and ANDAs

acquired or approved during the quarterly period ending June 30, 2024.

Such evaluations include, without limitation, costs and benefits relating to each ANDA owned,

with such costs including those fees required under the FDA’s Generic Drug User Fee Amendment which is significantly influenced

by the number of ANDAs owned, and other costs and benefits taking into consideration various specific market factors for each ANDA.

ANDAs with a cost/benefit profile not consistent with management criteria for continuation are identified for disposition and effort

is made to determine the optimal course of action to achieve disposition of the ANDA.

Company did not transfer or discontinue any ANDAs during the quarterly period ending June 30, 2024 or Fiscal 2024.

Accounting Policies and Estimates

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collaborations.

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.

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

The Company recognizes revenues following the five-step model prescribed under ASC 606:

(i) identify contract(s)

with a customer;

(i) identify contract(s) with a

(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

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

Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

(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.

value add, and other taxes collected on behalf of third parties are excluded from revenue.

of goods and services

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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.

credit losses stemming from unbilled receivables expected to be billed between June 30, 2024 and June 30, 2028 include additional risk

premiums estimated based on factors such as projected inflation, projected decreases in GDP, and projected unemployment.

Taxes - Income taxes are accounted for under the asset and liability method.

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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.

United States – Federal, 2020 and forward, and State, 2019 and forward.

The Company did not record unrecognized tax positions for the three months ended June 30, 2024.

Accounting Pronouncements

8 unchanged sentences

necessarily indicative of future results.

months ended December 31, 2023 compared to the three months ended December 31, 2022

months ended June 30, 2024 compared to the three months ended June 30, 2023

Cost of revenue and Gross profit:

5 unchanged sentences

Gross profit - percentage

revenues for the three months ended December 31, 2023 increased by $6.3 million or 68%, to $15.5 million, as compared to $9.3 million,

for the corresponding period of the prior year, primarily due to the launch of the Elite label during the current fiscal year which achieved

increased sales for the quarter ended December 31, 2023, as compared to the comparable quarter of the prior year, which did not include

any sales of Elite label products.

revenues for the three months ended June 30, 2024 increased by $9.8 million or 109%, to $18.8 million, as compared to $9.0 million, for

the corresponding period of the prior year, primarily due to the Elite label products achieving greater sales fifteen months

after their launch, as compared to the comparable period of the prior year being the period in which the Elite label was initially launched.

Manufacturing

fees revenue increased by $7.0 million, or 90%, primarily due to the launch of the Elite label during the current fiscal year which

achieved increased sales for the quarter ended December 31, 2023, as compared to the comparable quarter of the prior year, which did

not include any sales of Elite label products.

fees revenue increased by $10.5 million, or 133%, primarily due to the Elite label products achieving greater sales fifteen months

after their launch, as compared to the comparable period of the prior year being the period in which the Elite label was initially launched.

fees revenue decreased by $0.7 million, or 66%.

This decrease is primarily due to the expiration of the marketing alliance

agreements between the Company and Lannett Company, Inc.

dated March 6, 2019 and April 9, 2019 (the “Lannett

Agreements”) on March 31, 2023.

The revenue streams that were generated during periods ending on or prior to March 31, 2023

and attributed to the Lannett Agreements, included profit splits on the sale by Lannett of Amphetamine IR and Amphetamine ER.

April 1, 2023, these products are now sold by the Company under its own label, with revenues being recorded as manufacturing

revenues instead of licensing fees going forward.

This decrease is primarily due to the Company’s transitioning away from licensing

products to third parties to marketing of the Elite label, which does not result in license fee revenues.

of revenue consists of manufacturing and assembly costs.

Our cost of revenue increased by $4.2 million or 96%, to $8.5 million as compared

to $4.3 million for the corresponding period in the prior fiscal year.

This increase was due to an increased volume of products sold

during the three months ended December 31, 2023, as compared to the comparable period of the prior fiscal year, as noted above.

gross profit margin was 45% during the three months ended December 31, 2023 as compared to 53% during the comparable period of the prior

The decrease is due to total revenues consisting of a greater proportion of manufacturing revenues, as compared to the comparable

period of the prior year, with the associated increase in costs of manufacturing resulting in lower gross profit margins as compared

to the comparable period of the prior year which included a greater proportion of license fees that does not have a cost of manufacturing.

For the Three Months Ended

Operating expenses:

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

expenses consist of research and development costs, general and administrative costs, non-cash compensation and depreciation and amortization

Operating expenses for the three months ended December 31, 2023 increased by $0.5 million, or 19%, to $3.5 million as compared

to $3.0 million for the corresponding period in the prior fiscal year, largely due to an increase in general and administrative costs

of $0.5 million.

and development costs during the three months ended December 31, 2023 were $1.4 million, a decrease of less than $0.1 million, or 3%,

from approximately $1.4 million of such costs for the comparable period of the prior year.

and administrative expenses for the three months ended December 31, 2023 were $1.7 million, an increase of $0.5 million or approximately

44% from the comparable period of the prior fiscal year, largely due to an increased human resource headcount and costs as compared to

the comparable period of the prior year.

compensation expense for the three months ended December 31, 2023 and 2022 was less than $0.1 million.

and amortization expenses from the three months ended December 31, 2023 were $0.3 million, which was virtually unchanged from $0.3 million

in such costs for the comparable period of the prior fiscal year.

a result of the foregoing, our income from operations during the three months ended December 31, 2023 was $3.5 million, compared to income

from operations of $2.0 million for the comparable period of the prior fiscal year.

income (expense):

Our cost of revenue increased by $6.1 million or 144%, to $10.3 million as

compared to $4.2 million for the comparable period of the prior fiscal year.

This increase was due to an increased volume of

products sold during the three months ended June 30, 2024, as compared to the comparable period of the prior fiscal year, as noted

gross profit margin was 45% during the three months ended June 30, 2024 as compared to 53% for the corresponding period in the prior

The decrease is due to a combination of increased overheads resulting from facility expansion necessary to support volumes

in excess of current levels and lower product margins required to increase and maintain the level of sales.

For the Three Months Ended

Other income (expense):

Change in fair value of derivative financial instruments - warrants

$ (2,417,772 )

$ (2,790,666 )

Change in fair value of stock-based liabilities

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 )

$ (4,677,143 )

income (expense) for the three months ended December 31, 2023 was an other expense of $3.6 million, a decrease of $4.7 million from an

other income of $1.1 million for the comparable period of the prior fiscal year.

The decrease was primarily due to net increases of other

expenses of $2.9 million relating to the change in fair value of stock-based liabilities and $2.8 million relating to the change in fair

value of derivative financial instruments, a decrease in other income of $1.0 million from Gain on sale of ANDA that occurred in the

prior year only, offset by a decrease in other expenses of $0.2 million relating to the decrease in interest expense and amortization

of debt issuance costs in the current fiscal year as compared to the comparable period of the prior fiscal year.

The change in the fair

value of derivative instruments and stock-based liabilities is determined in large part by the change in the closing price of the Company’s

Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse relationship

between the fair value of our derivatives instruments and stock-based liabilities and decreases in the closing price of the Company’s

Common Stock.

The decrease in interest expense associated with the loans payable is due in large part to the Company paying off the principal

balance of the EWB loan during the fiscal year ended March 31, 2023, resulting in no interest on the EWB loan incurred for the three

months ended December 31, 2023.

a result of the foregoing, our net loss before income taxes for the three months ended December 31, 2023 was $0.1 million, compared

to net income before income taxes of $3.0 million for the comparable period of the prior fiscal year.

months ended December 31, 2023 compared to the nine months ended December 31, 2022

Cost of revenue and Gross profit:

For the Nine Months Ended

Manufacturing fees

Licensing fees

Total revenue

Cost of manufacturing

Gross profit - percentage

revenues for the nine months ended December 31, 2023 increased by $13.2 million or 52%, to $38.7 million, as compared to $25.5 million,

for the corresponding period of the prior year, primarily due to the launch of the Elite label during the current fiscal year which achieved

increased sales for the nine months ended December 31, 2023, as compared to the comparable quarter of the prior year, which did not include

any sales of Elite label products.

Manufacturing

fees revenue increased by $14.9 million, or 70%, primarily due to the launch of the Elite label during the current fiscal year which

achieved increased sales for the nine months ended December 31, 2023, as compared to the comparable quarter of the prior year, which

did not include any sales of Elite label products.

fees revenue decreased by $1.7 million, or 41%.

This decrease is primarily due to the expiration of the marketing alliance

agreements between the Company and Lannett Company, Inc.

dated March 6, 2019 and April 9, 2019 (the “Lannett

Agreements”) on March 31, 2023.

The revenue streams that were generated during periods ending on or prior to March 31, 2023

and attributed to the Lannett Agreements, included profit splits on the sale by Lannett of Amphetamine IR and Amphetamine ER.

April 1, 2023, these products are now sold by the Company under its own label, with revenues being recorded as manufacturing

revenues instead of licensing fees going forward.

of revenue consists of manufacturing and assembly costs.

Our cost of revenue increased by $8.1 million or 65%, to $20.4 million as compared

to $12.4 million for the corresponding period in the prior fiscal year.

This increase was due to an increased volume of products sold

during the nine months ended December 31, 2023, as compared to the comparable period of the prior fiscal year, as noted above.

gross profit margin was 47% during the nine months ended December 31, 2023 as compared to 52% during the comparable period of the prior

The decrease is due to total revenues consisting of a greater proportion of manufacturing revenues, as compared to the comparable

period of the prior year, with the associated increase in costs of manufacturing resulting in lower gross profit margins as compared

to the comparable period of the prior year which included a greater proportion of license fees that does not have a cost of manufacturing.

For the Nine Months Ended

Operating expenses:

5 unchanged sentences

expenses consist of research and development costs, general and administrative costs, non-cash compensation and depreciation and amortization

Operating expenses for the nine months ended December 31, 2023 increased by $2.1 million, or 23%, to $11.2 million as compared

Operating expenses for the three months ended June 30, 2024 increased by $1.5 million, or 46%, to $4.6 million as compared

to $3.1 million for the corresponding period in the prior fiscal year, largely due to an increase in research and development of $1.0

million and general and administrative expenses of $0.3 million.

and development costs during the nine months ended December 31, 2023 were $5.2 million, an increase of $1.4 million, or 37%, from approximately

$3.8 million of such costs for the comparable period of the prior year.

The increase was a result of the timing and nature of product

development activities during the nine months ended December 31, 2023 as compared to the comparable period of the prior fiscal year.

and administrative expenses for the nine months ended December 31, 2023 were $4.9 million as compared to $4.4 million for the corresponding

and development costs during the three months ended June 30, 2024 were $2.2 million, an increase of $1.0 million, or 89%, from

approximately $1.1 million of such costs for the prior year.

The increase was a result of the number, timing and nature of product

development activities during the three months ended June 30, 2024 as compared to the comparable period in the prior fiscal

and administrative expenses for the three months ended June 30, 2024 were $2.0 million as compared to $1.7 million for the comparable

period in the prior fiscal year, an increase of $0.3 million or approximately 19%, largely due to an increased human resource headcount

and costs as compared to the comparable period of the prior fiscal year.

compensation expense for the nine months ended December 31, 2023 was $0.1 million as compared to $0.02 million for the comparable period

of the prior fiscal year, an increase of $0.1 million or approximately 342%, with such increase being attributed to the issuance to employees

of options to purchase Common Stock during the current fiscal year.

and amortization expenses from the nine months ended December 31, 2023 were $1.0 million, which was virtually unchanged from $0.9 million

in such costs for the comparable period of the prior fiscal year.

a result of the foregoing, our income from operations during the nine months ended December 31, 2023 was $7.1 million, compared to income

from operations of $4.1 million for the comparable period of the prior fiscal year.

and costs as compared to the corresponding period in the prior fiscal year as well as infrastructure costs related to Elite label commercial

activities resulting from the commercial launch of the Elite label product line during the three months ended June 30, 2024.

and amortization expenses from the three months ended June 30, 2024 were $0.4 million as compared to $0.3 million for the comparable

period in the prior fiscal year, an increase of $0.1 million or approximately 30%.

This increase is due to depreciation expense being

recorded on an increased fixed asset base which resulted from additional investments in capital manufacturing facilities.

a result of the foregoing, our income from operations during the three months ended June 30, 2024 was $3.9 million, compared to income

from operations of $1.6 million for the comparable period in the prior fiscal year.

income (expense):

For the Nine Months Ended

Other income (expense):

Other expense

For the Three Months Ended

Other expense:

Change in fair value of derivative financial instruments - warrants

1 unchanged sentence

$ (2,593,546 )

Change in fair value of stock-based liabilities

Interest expense and amortization of debt issuance costs

Gain from settlement agreements

Gain on sale of ANDA

Interest income

Other (expense) income, net

Other expense, net

$ (3,016,304 )

$ (2,711,041 )

income (expense) for the nine months ended December 31, 2023 was an other expense of $8.6 million, a decrease of $9.4 million from an

other income of $0.8 million for the comparable period of the prior fiscal year.

The decrease was primarily due to a net increases in

other expenses of $5.6 million relating to the change in fair value of derivative instruments, and $4.9 million in change in fair value

of stock-based liabilities, net decrease in other income of $1.0 million relating to a gain on sale of ANDA in the comparable period

of the prior fiscal year that did not occur in the current fiscal year, offset by $1.8 million in gain from settlement agreements in

the current year that did not occur in the comparable period of the prior fiscal year, and an increase in other income resulting from

a net $0.4 million decrease in interest expense and amortization of debt issuance costs as compared to the comparable period of the prior

Please note that the change in the fair value of derivative instruments and stock-based liabilities is determined in large

part by the change in the closing price of the Company’s Common Stock as of the end of the period, as compared to the closing price

at the beginning of the period, with a strong inverse relationship between the fair value of our derivatives instruments and stock-based

liabilities and decreases in the closing price of the Company’s Common Stock.

The decrease in interest expense associated with

the loans payable is due in large part to the Company paying off the principal balance of the EWB loan during the fiscal year ended March

31, 2023, resulting in no interest on the EWB loan incurred for the nine months ended December 31, 2023.

a result of the foregoing, our net loss before income taxes for the nine months ended December 31, 2023 was $1.5 million, compared

to net income before income taxes of $4.8 million for the comparable period of the prior fiscal year.

expense, net for the three months ended June 30, 2024 was $3.0 million, an increase of $2.7 million for the corresponding

period in the prior fiscal year.

The increase was primarily due to a net increases in other expenses of $2.6 million relating to the

change in fair value of warrant derivative instruments, $0.1 million relating to increased interest expense and amortization of debt

issuance costs, less than $0.1 million relating to the loss on asset disposal, and less than $0.1 million relating to the increase in

interest income, offset by increases in other income totaling less than $0.1 million.

The change in the fair value of derivative instruments

and stock-based liabilities is determined in large part by the change in the closing price of the Company’s Common Stock as of

the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse relationship between the

fair value of the Company’s derivative instruments and stock-based liabilities and decreases in the closing price of the Company’s

Common Stock.

The increase in interest expense associated with the loans payable is due in large part to increased right of use financing

agreements related to ongoing facility expansion.

a result of the foregoing, our net income before income taxes for the three months ended June 30, 2024 was $0.8 million, compared to

net income before income taxes of $1.3 million for the comparable period in the prior fiscal year.

and Capital Resources

December 31, 2023

June 30, 2024

March 31, 2024

3 unchanged sentences

working capital (total current assets less total current liabilities) increased by $2.2 million from $27.0 million as of March 31, 2024

to $18.0 million as of December 31, 2023, with such increase being primarily related to the increase in finished goods inventory and

accounts receivable, associated with increased customer orders during the nine months ended December 31, 2023.

to $29.1 million as of June 30, 2024, with such increase being primarily related to the increase in finished goods inventory and accounts

receivable, associated with increased customer orders during the three months ended June 30, 2024 exceeding the increase in total current

liabilities over the same period.

of Cash Flows:

For the Nine Months Ended December 31,

Net cash (used in) provided by operating activities

For the Three Months Ended June 30,

Net cash provided by (used in) operating activities

$ (2,709,815 )

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$ (1,663,277 )

Net cash provided by financing activities

cash used in operating activities for the nine months ended December 31, 2023 was $5.3 million, which included, without limitation,

net income of $16.8 million, increased by depreciation and other non-cash expenses totaling $10.1 million and reduced by increases in

accounts receivable and inventory totaling $17.9 million.

cash used in investing activities for the nine months

ended December 31, 2023 was comprised of purchases of property and equipment of approximately $0.4 million.

cash provided by financing activities was $3.7 million for the nine months ended December 31, 2023 which consisted primarily of

proceeds from related party loans payable totaling $4.0 million offset by payments of bond and loan principal totaling $0.3

Net cash (used in) provided by financing activities

cash provided by operating activities for the three months ended June 30, 2024 was $3.1 million, which included net income of $0.6 million,

increased by depreciation and other non-cash expenses totaling $3.5 million and reduced by the change in operating assets and liabilities

totaling $0.9 million.

cash used in investing activities for the three months ended June 30, 2024 was comprised of purchases of property and equipment of approximately

$0.8 million and purchase of intangible assets of $0.9 million.

cash used in financing activities was $0.2 million for the three months ended June 30, 2024 payments of loan principal totaling

$0.2 million.

Promissory Note

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

fewer restrictive covenants.

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 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”).

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

The second year extension

of the Hakim Promissory Note was agreed to by both parties, with the maturity date being extended to June 2, 2025.

Promissory Note

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

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

will be used for working capital and other business purposes.

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

with an optional second year extension.

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

Promissory Note

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

fewer restrictive covenants (the “Hakim Promissory Note”).

These covenants include filing timely tax returns and financial

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

Hakim Promissory Note.

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

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

The Hakim Promissory Note has

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

business purposes.

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

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

were used for working capital and other business purposes.

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

with both parties agreeing to the optional second year extension, as provided in the Caskey Promissory Note.

The Caskey Promissory Note

has a current maturity date of June 30, 2025.

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

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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.

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

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

The EWB Mortgage Loan matures in 10 years and

bears interest at a rate of 4.75% fixed for 5 years then adjustable at WSJP plus 0.5% with floor rate of 4.5%.

The total transaction

costs associated with the EWB Mortgage Loan incurred as of December 31, 2023, were $13,251, which are being amortized on a monthly

basis over ten years, beginning in July 2022.

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

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

The EWB Mortgage Loan matures in 10 years and bears interest

at a rate of 4.75% fixed for 5 years then adjustable at WSJP plus 0.5% with floor rate of 4.5%.

The total transaction costs associated

with the EWB Mortgage Loan incurred as of June 30, 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 December 31, 2023, and through the date of filing of this quarterly report on Form 10-Q,

the Company was not aware of the existence of any violations of financial covenants included in the EWB Mortgage Loan.

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.

of June 30, 2024, and through the date of filing of this quarterly report on Form 10-Q, the Company is not aware of the existence of

any violations of financial covenants included in the EWB Mortgage Loan.

Park Capital – July 8, 2020 Purchase Agreement

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

the three and nine months ended December 31, 2023 and 2022, the Company did not issue any shares of Common Stock to Lincoln Park.

December 12, 2023, the Company announced the first shipment of generic Adderall XR® to its distribution and marketing partner Prasco,

LLC (“Prasco”).

The Company has a non-exclusive Manufacturing, Supply and Distribution Agreement with Prasco, and Burel Pharmaceuticals,

LLC to market Elite’s generic version of Adderall® XR in the United States.

Elite’s product is co-owned with Mikah Pharma.

the three months ended June 30, 2024 and 2023, the Company did not issue any shares of Common Stock to Lincoln Park.

August 31, 2005, the Company successfully completed a refinancing of a prior 1999 bond issue through the issuance of new tax-exempt bonds

(the “Bonds”).

The refinancing involved borrowing $4,155,000, evidenced by a 6.5% Series A Note in the principal amount of

$3,660,000 maturing on September 1, 2030 and a 9% Series B Note in the principal amount of $495,000 maturing on September 1, 2012.

net proceeds, after payment of issuance costs, were used (i) to redeem the outstanding tax-exempt Bonds originally issued by the Authority

on September 2, 1999, (ii) refinance other equipment financing and (iii) for the purchase of certain equipment to be used in the manufacture

of pharmaceutical products.

As of March 31, 2016, all of the proceeds were utilized by the Company for such stated purposes.

is payable semi-annually on March 1 and September 1 of each year.

The 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 related Indenture requires the maintenance

of a Debt Service Reserve Fund of $366,000 in relation to the Series A Notes.

issue costs of $354,454 were paid from the bond proceeds and are being amortized over the life of the bonds.

Amortization of bond issuance

costs amounted to $3,544 for the three months ended June 30, 2024.

NJEDA Bonds require the Company to make an annual principal payment on September 1st of varying amounts as specified in the loan documents

and semi-annual interest payments on March 1st and September 1st, equal to interest due on the outstanding principal at the applicable

rate for the semi-annual period just ended.

addition, the Company had previously received Notices of Default from the Trustee of the NJEDA Bonds as a result of the utilization of

the debt service reserve being used to pay interest payments as well as the company’s failure to make scheduled principal payments.

All monetary defaults were cured during Fiscal 2015 and the Company is current on all NJEDA Bond interest and principal payments.

of the date of filing of this Quarterly Report on Form 10-Q, there are no interest or principal amounts in arrears.

The Series B Notes

were retired, at par in July 2014.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis