What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-14 · 289 added, 205 removed, 308 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 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

following discussion of our financial condition and results of operations for the Six Months Ended September 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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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”).

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”).

focus our efforts on the following areas:

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

(iv) commercial exploitation of our product candidates

(iv) commercial exploitation of our products

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

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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.

(“Generic Methotrexate”).

Methotrexate Sodium belongs to a class of drugs known as antimetabolites and will be sold under

the Elite Laboratories Inc.

Generic Methotrexate was launched commercially on August 27, 2024.

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

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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.

Hydrocodone Bitartrate and Acetaminophen tablets

Oxycodone Hydrochloride and Acetaminophen tablets

Methodone Hydrochloride tablets

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

October 7, 2024, the Company announced the commercial launch of Acetaminophen and Codeine Phosphate 300mg/15mg, 300mg/30mg and 300mg/60mg

tablets (“APAP Codeine Tablets”).

APAP Codeine Tablets are indicated for the management of mild to moderate pain, where treatment

with and opioid is appropriate and for which alternate treatments are inadequate.

APAP Codeine Tablets are marketed and sold under the

Elite Laboratories label.

October 10, 2024, the Company announced the Israeli Ministry of Health approval of Elite’s generic version of Adderall ®

, an immediate-release mixed salt of a single entity amphetamine product (Dextroamphetamine Saccharate, Amphetamine Asparate, Dextroamphetamine

Sulfate, Amphetamine Sulfate) with strengths of 10mg, 20mg and 30mg tablets.

The product is a central nervous system stimulant indicated

for the treatment of attention deficit hyper activity disorder (ADHD) and narcolepsy.

The Company will supply the product to Dexcel Pharma

(Akiva, Israel), the Company’s exclusive distributor for the Israel market.

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:

Product Equivalent

HCl 37.5mg tablets (“Phentermine 37.5mg”)

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Antipsychotic

Sodium 2.5mg tablets (“Methotrexate 2.5mg”)

Antimetabolite

Acetaminophen

and Codeine Phosphate 300mg/15mg, 300mg/30mg and 300mg/60mg tablets (“APAP Codeine Tablets”).

Under FDA Review

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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

Generic dopamine agonist accepted for review in December 2022

Generic opiate analgesic for pain management accepted for review

in September 2023

Generic central nervous system stimulant accepted for review

in December 2023

Products Not Yet Commercialized

Acetaminophen

and Codeine Phosphate

Company received approval on September 10, 2019 from the FDA of an ANDA for a generic version of Tylenol® with Codeine (acetaminophen

and codeine phosphate) 300mg/7.5mg, 300mg/15mg, 300mg/30mg and 300mg/60mg tablets.

Acetaminophen with codeine is a combination medication

indicated for the management of mild to moderate pain, where treatment with an opioid is appropriate and for which alternative treatments

are inadequate.

The Company is currently assessing commercialization options for this product.

Hyclate Tablets

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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

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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,

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,

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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,

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

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

profits, or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments

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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

acquired or approved during the quarterly period ending September 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.

Those 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 September 30, 2024 or Fiscal 2024.

Accounting Estimates

preparation of the unaudited condensed consolidated financial statements and related disclosures in conformity with GAAP, and our discussion

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regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.

of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United

States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses

during the reporting period.

Actual results could differ from those estimates.

Recognition - The Company generates revenue from manufacturing and licensing fees and sales of generic pharmaceuticals bearing the

Elite label to pharmaceutical distributors for pharmacies and institutions.

Manufacturing fees include the development of pain management

products, manufacturing of a line of generic pharmaceutical products with approved ANDA, through the manufacture of formulations and

the development of new products.

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

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

rebates, as applicable.

Licensing fees include the commercialization of products either by license and the collection of royalties, or

the expansion of licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other

Recognition - The Company generates revenue from manufacturing and sales of generic pharmaceuticals

bearing either the Elite label, which are sold to pharmaceutical distributors or the label of a licensing partner, which Elite sells directly

to such licensing partner, and licensing fees.

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

value which consists of gross amounts invoiced reduced by contractual reductions, including, without limitation, chargebacks, discounts

and program rebates, as applicable.

Licensing fees include the commercialization of products either by license and the collection of royalties,

or the expansion of licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other

collaborations.

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

(ii) identify the performance obligation(s) in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction

price to the performance obligation(s) in the contract;

and (v) recognize revenues when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled

to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within

the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance

obligations and assesses whether each promised good or service is distinct.

The Company then recognizes as revenue the amount of the

transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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

of goods and services

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Manufacturing Fees

Company is equipped to manufacture controlled-release products on a contract basis for third parties, if, and when, the products are

These products include products using controlled-release drug technology.

The Company also develops and markets (either on

its own or by license to other companies) generic and proprietary controlled-release pharmaceutical products.

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

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

The Company is primarily responsible for fulfilling

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

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

Revenue is measured as the amount of consideration

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

Company is equipped to manufacture immediate and controlled-release products marketed under the Elite label, or manufactured on a contract

basis for third parties.

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

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

The Company is primarily

responsible for fulfilling the promise to provide the product, is responsible to ensure that the product is produced in accordance with

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

Revenue is measured

as the amount of consideration the Company expects to receive in exchange for transferring products to a customer.

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

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Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.

determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before

or significantly after performance, resulting in a significant financing component.

Applying the practical expedient in ASC 606-10-32-18,

the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations

under the contract and when the customer pays is one year or less.

None of the Company’s contracts contained a significant financing

component as of December 31, 2023.

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

Sale of product under the Elite label

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

License agreements will remain in place

for select products.

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

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

Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms,

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

The Company is primarily responsible for fulfilling the promise to

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

Revenue is measured as the amount of consideration

earned from the sale of Elite labeled pharmaceutical products are recorded at their net realizable value which consists of gross amounts

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

Receivable and Allowance for Expected Credit Losses - Accounts receivable are comprised of balances due from customers, net of estimated

allowances for expected credit losses, and other contractual deductions, including, without limitation, chargebacks, discounts and program

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”)

Receivable and Allowance for Expected Credit Losses – Accounts receivable are comprised of balances due from customers, net

of estimated allowances for expected credit losses, and other contractual deductions, including, without limitation, chargebacks, discounts

and program rebates.

In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic

basis to arrive at appropriate allowances.

allowance for expected credit losses is based on the probability of future collection under the current expected credit 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.

of Credit Losses on Financial Assets, which was adopted by the Company on April 1, 2023.

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.

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

to be uncollectible.

Subsequent recoveries are credited to the allowance.

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

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.

Changes in the allowance are recorded as adjustments to credit

losses in the period incurred.

Expected credit losses stemming from unbilled receivables expected to billed between September 30, 2024

and September 30, 2028 included 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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and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for

the year in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using the enacted tax rates in effect

for the year in which those temporary differences are expected to be recovered or settled.

Where applicable, the Company records a valuation

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The Company remains subject to examination in all

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, 2020 and forward, and State, 2019 and forward.

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

tax jurisdictions until the applicable statutes of limitation expire.

As of September 30, 2024, a summary of the tax years that

remain subject to examination in our major tax jurisdictions are:

United States of America – Federal, 2020 and forward, and State,

2019 and forward.

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

Accounting Pronouncements

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necessarily indicative of future results.

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

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

Cost of revenue and Gross profit:

For the Three Months Ended

For the Three Months Ended September 30,

Manufacturing fees

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Gross profit - percentage

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.

revenues for the three months ended September 30, 2024 increased by $4.7 million or 33%, to $18.9 million, as compared to $14.2 million,

for the corresponding period of the prior year, , primarily due to increased sales of the Elite label products during the current quarter

in comparison to the comparable quarter of the prior fiscal year.

The Elite label products were launched during the prior fiscal year

and the current fiscal year represents their second year in the market.

The additional twelve months of marketing the Elite label products

has had a positive impact on sales, when compared to the sales achieved in the comparable period of the prior year.

Manufacturing

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 for the three months ended September 30, 2024 revenue increased by $4.7 million, or 35%, primarily due to increased sales of the

Elite label products during the current fiscal year in comparison to the comparable quarter of the prior fiscal year.

The Elite label

products were launched during the prior fiscal year and the current fiscal year represents their second year in the market.

The additional

twelve months of marketing the Elite label products has had a positive impact on sales, when compared to the sales achieved in the comparable

period of the prior year.

fees revenue for the three months ended September 30, 2024 was relatively unchanged, increasing by less than 1% as compared to licensing

fees earned during the comparable period of the prior fiscal year.

of manufacturing consists of manufacturing and assembly costs.

Our cost of revenue increased by $3.0 million or 39%, to $10.7 million

as compared to $7.7 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 September 30, 2024, as compared to the comparable period of the prior fiscal year, as noted above.

gross profit margin was 43% during the three months ended September 30, 2024 as compared to 46% during the comparable period of the

prior fiscal year.

The decrease is due to increased labor costs resulting from manufacturing personnel overtime hours incurred to

ensure production and supply of our products in response to increased demand.

In addition, during the three months ended September

30, 2024, manufacturing fees represented a higher proportion of total revenue, as compared to licensing fees.

Manufacturing fees

generate lower gross profit margins as compared to licensing fees, due to it having a related cost of manufacturing, which is not

associated with licensing fees.

The Company is in the process of expanding its manufacturing facilities and capacity to achieve

utilization rates that will yield higher volumes at standard labor rates.

For the Three Months Ended September 30,

Operating expenses:

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

expenses for the three months ended September 30, 2024 increased by $0.2 million, or 4%, to $4.7 million as compared to $4.5 million

for the corresponding period in the prior fiscal year, largely due to an increase in general and administrative costs of $0.7 million.

and development costs during the three months ended September 30, 2024 were $2.0 million, a decrease of $0.65 million, or 25%, from approximately

$2.6 million of such costs for the comparable period of the prior year.

The decrease was the result of laboratory resources being allocated

more to supporting commercial operations as well as the number, timing and nature of product development activities during the three

months ended September 30, 2024, as compared to the comparable period of the prior fiscal year.

and administrative expenses for the three months ended September 30, 2024 were $2.3 million, an increase of $0.7 million or approximately

48% from the comparable period of the prior fiscal year, largely due to increased human resource costs resulting from increased headcounts

as well as increased costs of financial and tax reporting compliance as compared to the comparable period of the prior year.

compensation expense for the three months ended September 30, 2024 and 2023 was less than $0.1 million.

and amortization expenses from the three months ended September 30, 2024 were $0.4 million, which increased slightly as a result of

additional capital expenditures and ASC 842 finance assets acquired, 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 September 30, 2024 was $3.5 million, compared to

income from operations of $1.9 million for the comparable period of the prior fiscal year.

income (expense):

For the Three Months Ended September 30,

Other income (expenses):

Change in fair value of derivative financial instruments - warrants

$ (12,754,735 )

$ (2,468,350 )

$ (10,286,385 )

Change in fair value of stock-based liabilities

Interest expense and amortization of debt issuance costs

Interest income

Other expenses, net

$ (13,003,969 )

$ (4,658,288 )

$ (8,345,681 )

Other income (expenses) for the three months ended September 30, 2024 was a net other (expense) $13.0 million, an increase of $8.3 million from a net

other (expense) of $4.7 million for the comparable period of the prior fiscal year.

The increase was primarily due to an increase of $10.3

million relating to the change in fair value of derivative financial instruments, offset by a decrease of other expenses of $2.1 million

relating to the change in fair value of stock-based liabilities and by a slight increase in other expenses of $0.1 million relating to

the interest expense and amortization of debt issuance costs in the current fiscal year as compared to the comparable period of the prior

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 other income expense recorded from changes in the fair value of our derivatives

instruments and stock-based liabilities and changes in the closing price of the Company’s Common Stock.

The increase in interest

expense associated with the loans payable is due to the Company servicing a larger principal amount of loans payable during the three

months ended September 30, 2024 as compared to the comparable period of the prior fiscal year

a result of the foregoing, our net loss before income taxes for the three months ended September 30, 2024 was $9.5 million, compared

to net loss before income taxes of $2.7 million for the comparable period of the prior fiscal year.

months ended September 30, 2024 compared to the six months ended September 30, 2023

Cost of revenue and Gross profit:

For the Six Months Ended September 30,

Manufacturing fees

Licensing fees

Total revenue

Cost of manufacturing

Gross profit - percentage

revenues for the six months ended September 30, 2024 increased by $14.5 million or 63%, to $37.7 million, as compared to $23.1 million,

for the corresponding period of the prior year due to increased sales of the Elite label products during the current fiscal year in comparison

to the comparable quarter of the prior fiscal year.

The Elite label products were launched during the prior fiscal year and the current

fiscal year represents their second year in the market.

The additional twelve months of marketing the Elite label products has had a

positive impact on sales, when compared to the sales achieved in the comparable period of the prior year.

Manufacturing

fees revenue increased by $15.3 million, or 71%, primarily due to increased sales of the Elite label products during the current fiscal

year in comparison to the comparable quarter of the prior fiscal year.

The Elite label products were launched during the prior fiscal

year and the current fiscal year represents their second year in the market.

The additional twelve months of marketing the Elite label

products has had a positive impact on sales, when compared to the sales achieved in the comparable period of the prior year.

fees revenue decreased by $0.7 million, or 41%.

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 $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

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,

License fees earned during the six months ended September 30, 2023 included residual amounts earned in relation to the expired

Lannett Agreements.

License fees earned during the six months ended September 30, 2024 did not include such residual amounts.

of manufacturing consists of manufacturing and assembly costs.

Our cost of revenue increased by $9.1 million or 76%, to $21.0 million

as compared to $11.9 million for the corresponding period in the prior fiscal year.

This increase was due to an increased volume of products

sold during the six months ended September 30, 2024, as compared to the comparable period of the prior fiscal year, as noted above.

gross profit margin was 44% during the six months ended September 30, 2024 as compared to 48% during the comparable period of the

prior fiscal year.

The decrease is due to increased labor costs resulting from manufacturing personnel overtime hours incurred to

ensure production and supply of our products in response to increased demand.

In addition, during the six months ended September 30,

2024, manufacturing fees represented a higher proportion of total revenue, as compared to licensing fees.

Manufacturing fees

generate lower gross profit margins as compared to licensing fees, due to it having a related cost of manufacturing, which is not

associated with licensing fees.

The Company is in the process of expanding its manufacturing facilities and capacity to achieve

utilization rates that will yield higher volumes at standard labor rates.

For the Six Months Ended September 30,

Operating expenses:

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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 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 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 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.

expenses for the six months ended September 30, 2024 increased by $1.7 million, or 22%, to $9.3 million as compared to $7.7 million for

the corresponding period in the prior fiscal year, largely due to an increase in research and development of $0.4 million and general

and administrative expenses of $1.0 million.

and development costs during the six months ended September 30, 2024 were $4.1 million, an increase of $0.4 million, or 10%, 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 six months ended September 30, 2024 as compared to the comparable period of the prior fiscal year.

and administrative expenses for the six months ended September 30, 2024 were $4.2 million as compared to $3.2 million for the corresponding

period in the prior fiscal year, an increase of $1.0 million or approximately 33%, largely due to increased human resource costs resulting

from increased headcounts as well as increased costs of financial and tax reporting compliance as compared to the comparable period of

the prior year.

compensation expense for the six months ended September 30, 2024 was $0.1 million as compared to $0.06 million for the comparable period

of the prior fiscal year, an increase of $0.05 million or approximately 81%, 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 six months ended September 30, 2024 were $0.8 million, which increased slightly as a result of

additional capital expenditures and ASC 842 finance assets acquired, from $0.7 million in such costs for the comparable period of

the prior fiscal year.

a result of the foregoing, our income from operations during the six months ended September 30, 2024 was $7.3 million, compared to income

from operations of $3.5 million for the comparable period of the prior fiscal year.

income (expense):

Other expense

For the Three Months Ended

Other expense:

For the Six Months Ended September 30,

Other expense (income):

Change in fair value of derivative financial instruments - warrants

1 unchanged sentence

$ (2,657,717 )

$ (12,879,931 )

Change in fair value of stock-based liabilities

Interest expense and amortization of debt issuance costs

Interest income

Other expense, net

Other (expense) income, net

$ (16,020,273 )

$ (4,963,551 )

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.

$ (11,056,722 )

(expense) income for the six months ended September 30, 2024 was a net other expense of $16.0 million, an increase of $11.1 million from

a net other expense of $5.0 million for the comparable period of the prior fiscal year.

The increase was primarily due to an increase

in other expenses of $12.9 million relating to the change in fair value of derivative instruments, offset by a decrease of $2.1 million

in change in fair value of stock-based liabilities, which were all settled during 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 other income expense recorded in relation to the changes in fair value of our derivatives instruments and stock-based liabilities

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

The increase in interest expense associated with the loans payable

is due to the Company servicing a larger principal amount of loans payable during the six months ended September 30, 2024 as compared

to the comparable period of the prior fiscal year.

a result of the foregoing, our net loss before income taxes for the six months ended September 30, 2024 was $8.7 million, compared to

net loss before income taxes of $1.4 million for the comparable period of the prior fiscal year.

and Capital Resources

June 30, 2024

September 30, 2024

March 31, 2024

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working capital (total current assets less total current liabilities) increased by $5.5 million from $27.0 million as of March 31, 2024

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.

to $32.4 million as of September 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 six months ended September 30, 2024.

of Cash Flows:

For the Three Months Ended June 30,

For the Six Months Ended September 30,

Net cash provided by (used in) operating activities

3 unchanged sentences

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.

cash provided by operating activities for the six months ended September 30, 2024 was $4.6 million, which included, without limitation,

net loss of $10.4 million, increased by the change in the change in fair value of derivative financial instruments - warrants of $15.5

million, deferred tax expenses of $1.3 million, and other non-cash expenses of $1.4 million, and reduced by increases in operating assets

and liabilities totaling $3.2 million.

cash used in investing activities for the six months ended September 30, 2024 was comprised of purchases of property and equipment of

approximately $0.9 million and purchases of intangible assets consisting of ANDA products of approximately $0.9 million.

cash used in financing activities was $0.5 million for the six months ended September 30, 2024 compared to net cash provided by financing

activities of $3.8 million for the corresponding period of the prior year.

Net cash used in financing activities consisted primarily

of payments of bond and loan principal totaling $0.3 million and payments on principal on finance lease obligations of $0.2 million.

Net cash provided by financing activities of $3.8 million during the prior fiscal year was due to $4.0 million in proceeds from related

party loan, offset by $0.2 million in other debt repayments.

Promissory Note

32 unchanged sentences

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.

with the EWB Mortgage Loan incurred as of September 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.

1 unchanged sentence

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.

of September 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

4 unchanged sentences

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

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

the three and six months ended September 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

13 unchanged sentences

Amortization of bond issuance

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

costs amounted to $7,089 for the six months ended September 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

10 unchanged sentences

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 2. Management’s Discussion and Analysis