UNITED STATES



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

(Mark One)



| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30,
2012



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



For the transition period from _______________________
to ___________________________



Commission File No.: 000-54421










CADISTA HOLDINGS INC.

(Exact name of registrant as specified
in its charter)



|Delaware                                                               |  | 31-1259887                          
|---------------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
        incorporation or organization) |  | (I.R.S. Employer Identification No.)



|207 Kiley Drive
        Salisbury, Maryland |  | 21801     
|------------------------------------------- |  | ----------
|(Address of principal executive offices)    |  | (Zip Code)



Registrant’s telephone number,
including area code: (410) 860-8500



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.



YesxNo ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to file such files).



YesxNo ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.



|Large accelerated filer |  ̈ | Accelerated filer ̈        
|----------------------- | - | --------------------------
|                        |   |                           
|Non-accelerated filer   | x | Smaller reporting company ̈



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).



Yes ̈Nox

As of August 17, 2012 the registrant had 117,797,180 shares of
common stock issued and outstanding.


















CADISTA HOLDINGS INC.



INDEX



|                               |                                                                                       | Page No.
|------------------------------ | ------------------------------------------------------------------------------------- | --------
|PART I.  FINANCIAL INFORMATION |                                                                                      
|                               |                                                                                       |         
|Item 1.                        | Financial Statements (Unaudited)                                                      | 1       
|                               |                                                                                       |         
|Item 2.                        | Management's Discussion and Analysis of Financial Condition and Results of Operations | 13      
|                               |                                                                                       |         
|Item 3.                        | Quantitative And Qualitative Disclosure About Market Risk                             | 25      
|                               |                                                                                       |         
|Item 4.                        | Controls and Procedures                                                               | 25      
|                               |                                                                                       |         
|PART II.  OTHER INFORMATION    |                                                                                      
|                               |                                                                                       |         
|Item 6.                        | Exhibits                                                                              | 26      
|                               |                                                                                       |         
|Signatures                     | 27                                                                                   



i







PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



CADISTA HOLDINGS INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



(UNAUDITED)

(All amounts in thousands United States
Dollars, unless otherwise stated)



|                                                                                                                     |  | June 30, |        |  | March 31, |  
|-------------------------------------------------------------------------------------------------------------------- |  | -------- | ------ |  | --------- | -
|                                                                                                                     |  | 2012     |        |  | 2012      |  
|ASSETS                                                                                                               |  |          |        |  |           |  
|Current assets:                                                                                                      |  |          |        |  |           |  
|Cash and cash equivalents                                                                                            |  |          | 8,441  |  |           |  
|Accounts receivable                                                                                                  |  |          | 22,163 |  |           |  
|Due from related parties                                                                                             |  |          | 10,245 |  |           |  
|Inventories                                                                                                          |  |          | 14,573 |  |           |  
|Prepaid expenses and other current assets                                                                            |  |          | 530    |  |           |  
|Deferred tax assets (current)                                                                                        |  |          | 4,892  |  |           |  
|Total current assets                                                                                                 |  | $        | 60,844 |  |           | $
|                                                                                                                     |  |          |        |  |           |  
|Restricted cash                                                                                                      |  |          | 35     |  |           |  
|Property, plant and equipment, net                                                                                   |  |          | 17,196 |  |           |  
|Intangible assets, net                                                                                               |  |          | 317    |  |           |  
|Total assets                                                                                                         |  | $        | 78,392 |  |           | $
|                                                                                                                     |  |          |        |  |           |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                 |  |          |        |  |           |  
|Current liabilities:                                                                                                 |  |          |        |  |           |  
|Short-term borrowings                                                                                                |  |          | 1      |  |           |  
|Accounts payable                                                                                                     |  |          | 2,022  |  |           |  
|Due to related parties                                                                                               |  |          | 1,342  |  |           |  
|Deferred revenue                                                                                                     |  |          | 249    |  |           |  
|Other current liabilities                                                                                            |  |          | 6,845  |  |           |  
|Dividend payable                                                                                                     |  |          | 66     |  |           |  
|Total current liabilities                                                                                            |  | $        | 10,525 |  |           | $
|Deferred tax liabilities(non-current)                                                                                |  |          | 623    |  |           |  
|Total  liabilities                                                                                                   |  | $        | 11,148 |  |           | $
|Stockholders’ equity                                                                                                 |  |          |        |  |           |  
|Equity shares at $ 0.001 par value                                                                                   |  |          | 118    |  |           |  
|120,000,000 shares authorized; issued and outstanding –   117,797,180 shares as of June 30,  2012 and March 31, 2012 |  |          |        |  |           |  
|Additional paid-in capital                                                                                           |  |          | 38,755 |  |           |  
|Accumulated surplus                                                                                                  |  |          | 28,371 |  |           |  
|Total stockholders’ equity                                                                                           |  | $        | 67,244 |  |           | $
|Total liabilities and stockholders’ equity                                                                           |  | $        | 78,392 |  |           | $



(See accompanying notes to the consolidated financial statements.)



1







CADISTA HOLDINGS INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME



(UNAUDITED)

(All amounts in thousands United States
Dollars, except per share data, unless otherwise stated)



|                                    |  | Three months ended June 30, |       
|----------------------------------- |  | --------------------------- | ------
|                                    |  | 2012                        |       
|                                    |  |                             |       
|Net revenues                        |  | $                           | 29,874
|Cost of revenues                    |  |                             | 10,521
|Gross profit                        |  |                             | 19,353
|                                    |  |                             |       
|Operating costs and expenses:       |  |                             |       
|Selling, general and administration |  |                             | 1,090 
|Depreciation and amortization       |  |                             | 414   
|                                    |  |                             |       
|Total operating costs and expenses  |  |                             | 1,504 
|                                    |  |                             |       
|Operating income                    |  |                             | 17,849
|Other income (expense), net         |  |                             | 104   
|Income before income taxes          |  |                             | 17,953
|Income taxes                        |  |                             | 6,847 
|Net income                          |  | $                           | 11,106
|                                    |  |                             |       
|Net income per common share         |  |                             |       
|Basic                               |  | $                           | 0.09  
|Diluted                             |  | $                           | 0.09  



(See accompanying notes to the consolidated financial statements.)



2







CADISTA HOLDINGS INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



(UNAUDITED)

(All amounts in thousands United States
Dollars, unless otherwise stated)



|                                                                                     |  | Three months ended June 30, |       
|------------------------------------------------------------------------------------ |  | --------------------------- | ------
|                                                                                     |  | 2012                        |       
|Cash flows from operating activities:                                                |  |                             |       
|Net income                                                                           |  | $                           | 11,106
|Adjustments to reconcile net income to net cash provided by operating
    activities |  |                             |       
|Depreciation and amortization                                                        |  |                             | 414   
|Amortization of debt initiation cost                                                 |  |                             | -     
|Income taxes                                                                         |  |                             | 6,847 
|Provision for bad debts                                                              |  |                             | 2     
|Changes in operating assets and liabilities, net                                     |  |                             |       
|Increase in accounts receivable                                                      |  |                             | (1,991
|Decrease/(Increase) in inventories                                                   |  |                             | 161   
|Decrease/(Increase) in dues from  related parties                                    |  |                             | 142   
|(Decrease)/Increase in dues to related parties                                       |  |                             | (1,804
|Decrease in accounts payable and other current liabilities                           |  |                             | (6,250
|Increase in prepaid expenses and other current assets                                |  |                             | (93   
|Net cash provided by  operating activities                                           |  | $                           | 8,534 
|                                                                                     |  |                             |       
|Cash flows from investing activities:                                                |  |                             |       
|Purchase of property, plant and equipment                                            |  | $                           | (2,228
|                                                                                     |  |                             |       
|Net cash (used in) investing activities                                              |  | $                           | (2,228
|                                                                                     |  |                             |       
|Cash flows from financing activities:                                                |  |                             |       
|                                                                                     |  |                             |       
|Proceeds from short term borrowings, net                                             |  | $                           | 1     
|(Repayment) of long term debt                                                        |  |                             | -     
|                                                                                     |  |                             |       
|Net cash provided by/(used in)  financing
    activities                             |  | $                           | 1     
|                                                                                     |  |                             |       
|Net change in cash and cash equivalents                                              |  | $                           | 6,307 
|                                                                                     |  |                             |       
|Cash and cash equivalents (including restricted cash)                                |  |                             |       
|Beginning of the period                                                              |  | $                           | 2,169 
|End of the period                                                                    |  | $                           | 8,476 
|                                                                                     |  |                             |       
|Supplementary cash flow information                                                  |  |                             |       
|Cash paid during the period for interest                                             |  | $                           | 22    
|Cash paid during the period for tax                                                  |  | $                           | 6,524 



(See accompanying notes to the consolidated financial statements)



3







CADISTA HOLDINGS INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(UNAUDITED)

(All amounts in thousands United States
Dollars, unless otherwise stated)



| | 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| | - | ------------------------------------------



| | a) | Basis of Preparation
| | -- | --------------------



The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not
include all of the information and footnotes required by accounting principles generally accepted in the United States of America
("GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring
items) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results
for the full fiscal year.



These unaudited consolidated
financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto for
the year ended March 31, 2012 included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission
on July 13, 2012. The balance sheet as at March 31, 2012 presented in this report has been derived from audited financial statements
at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. Amounts
presented in the financial statements and footnotes are rounded to the nearest thousands, except per share data and par values.
Unless the context requires otherwise, references in these notes to the “Company,” “we,” “us”
or “our” refers to Cadista Holdings Inc. and its subsidiaries including Jubilant Cadista Pharmaceuticals Inc.



| | b) | Recent Accounting Pronouncements
| | -- | --------------------------------



In
June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard
Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive
Income.  This amendment of the codification allows an entity the option to present the total of comprehensive
income, the components of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two, separate but consecutive statements. In both choices, an entity is required to
present each component of net income along with total net income, each component of other comprehensive income along with a
total for other comprehensive income, and a total amount for comprehensive income.  This ASU eliminates the option to
present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.
 The amendments to the codification in this ASU do not change the items that must be reported in other comprehensive
income or when an item of other comprehensive income must be reclassified to net income.  This ASU must be
applied retrospectively.  The amendments to the Codification in this ASU are effective for fiscal years
and interim periods within those years, beginning after December 15, 2011. The guidance in this topic does not apply to
the Company as the Company has no items of Other Comprehensive Income in any period presented and in such cases the Company
is excluded from reporting Other comprehensive income or comprehensive income.



| | c) | Revenue Recognition
| | -- | -------------------



Revenue from sale of goods is
recognized when significant risks and rewards in respect of ownership of the products are transferred to the customer and when
the following criteria are met:



| | · | Persuasive evidence of an arrangement
exists;
| | - | ---------------------------------------------

| | · | The price to the buyer is fixed and determinable;
and
| | - | -----------------------------------------------------

| | · | Collectability of the sales price is reasonably
assured.
| | - | --------------------------------------------------------



4







Revenue from sale of goods is
shown net of provisions for estimated chargeback, rebates, returns, cash discounts, price protection reserve and other deductions.



The Company participates in
prime vendor programs with a government entity whereby pricing on products is extended below the wholesale list price. This government
entity purchases products through wholesalers at the lower prime vendor price, and the wholesalers charge the difference between
their acquisition cost and the lower prime vendor price back to the Company. The Company determines its estimates of the prime
vendor chargeback primarily based on historical experience regarding prime vendor chargebacks and current contract prices under
the prime vendor programs. Accruals for chargebacks are reflected as a direct reduction to revenues and accounts receivable.



The Company enters into revenue
arrangements to sell multiple products and/or services (multiple deliverables). Revenue arrangements with multiple deliverables
are evaluated to determine if the deliverables (items) can be divided into more than one unit of accounting. An item can generally
be considered a separate unit of accounting if all of the following criteria are met:



| | · | The
delivered item(s) has value to the customer on a standalone basis;
| | - | ----------------------------------------------------------------------

| | · | There is objective and reliable evidence
of the fair value of the undelivered item(s); and
| | - | ------------------------------------------------------------------------------------------

| | · | If the arrangement includes a general
right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and
substantially in the control of the Company.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If an arrangement contains more
than one element, the arrangement consideration is allocated among separately identified elements based on relative fair values
of each element.



Revenues related to
contract manufacturing arrangement are recognized when performance obligations are substantially fulfilled. Revenues related
to development contracts are recognized on proportionate performance basis. Customarily for contract manufacturing and
development services, the Company receives upfront non-refundable payments which are recorded as deferred revenue. These
amounts are recognized as revenues as obligations are fulfilled under contract manufacturing arrangement and as milestones
are achieved for development arrangements.



When the Company receives advance
payments from customers for sale of products, such payments are reported as advances from customers until all conditions for revenue
recognition are met.



Allowances for sales returns
are estimated and provided for in the year of sales. Such allowances are made based on the historical trends. The Company has the
ability to make a reasonable estimate of the amount of future returns due to large volumes of homogeneous transactions and historical
experience with similar types of sales of products. In respect of new products launched or expected to be launched, the sales returns
are not expected to be different from the existing products as such products relate to categories where established products exist
and are sold in the market. Further, the Company evaluates the sales returns of all the products at the end of each reporting period
and necessary adjustments, if any, are made.



The Company estimates the decline
in prices for some of its products based on the expected additional competition in the foreseeable future. The Company has the
ability to make a reasonable estimate of the expected decline in prices and the claims in respect of such price decline to be made
applicable to the inventory with the customers as on the date of reduction in price. A reserve is established for price decline
claims on the inventory.



5







| | d) | Income taxes
| | -- | ------------



Income taxes are accounted for
using the asset and liability method. The current charge for income taxes is calculated in accordance with the relevant tax regulations
applicable to the Company. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The measurement
of deferred tax assets is reduced, if necessary, by a valuation allowance of any tax benefits of which future realization is uncertain.



The Company applies a two-step
approach for recognizing and measuring uncertain tax positions.  The first step is to evaluate the tax position for recognition
by determining, based on the technical merits, that the position will be more likely than not sustained upon examination. The second
step is to measure the tax benefit as the largest amount of the tax benefit that is greater than 50% likely of being realized upon
settlement. The Company includes interest and penalties related to unrecognized tax benefits within its provision for income
tax expense.



| | e) | Net income per share
| | -- | --------------------



Basic net income per share is
computed by dividing net income by the weighted average number of shares outstanding during each period. Diluted net income per
share is computed by dividing net income by the weighted average shares outstanding, as adjusted for the dilutive effect of common
stock equivalents, which consist of stock options.



The table below reflects basic
and diluted net income per share for the:



|                                                                  |  | Three months ended June 30, |        
|----------------------------------------------------------------- |  | --------------------------- | -------
|                                                                  |  | 2012                        |        
|Net income available for common shareholders (basic and dilutive) |  | $                           | 11,106 
|                                                                  |  |                             |        
|Weighted average shares outstanding:                              |  |                             |        
|Basic                                                             |  |                             | 117,797
|Effect of dilutive stock                                          |  |                             | 750    
|Diluted                                                           |  |                             | 118,547
|                                                                  |  |                             |        
|Earnings per share (in US Dollars)                                |  |                             |        
|Basic                                                             |  | $                           | 0.09   
|Diluted                                                           |  | $                           | 0.09   



6







| | 2 | FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISK
| | - | -----------------------------------------------



Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, trade receivables, advances
and investments. The cash resources of the Company are invested with money market funds and banks after an evaluation of the credit
risk. By their nature, all such financial instruments involve risk including the credit risk of non-performance by counter parties.
In management’s opinion, as of June 30, 2012 and 2011 there was no significant risk of loss in the event of non-performance
of the counter parties to these financial instruments.



As of June 30, 2012, we had
a loan outstanding in the principal amount of $10,000, that we extended to HSL Holdings Inc.(“HSL Holdings”), a wholly-owned
subsidiary of Jubilant Life Sciences Holdings Inc. (“Jubilant Holdings”), the holder, through its wholly-owned subsidiary,
of approximately 82% of our common stock. The loan was funded pursuant to a loan agreement that we entered into on November 23,
2011 (the “HSL Loan Agreement”). Jubilant Holdings has guaranteed the prompt payment and performance, when due, of
all obligations of HSL Holdings under the HSL Loan Agreement. By its nature, such loan involves risk including credit risk of non-performance
by HSL Holdings and Jubilant Holdings. If HSL Holdings and Jubilant Holdings were to not perform their obligations under the HSL
Loan Agreement, the Company could lose some or all of its investment. In management’s opinion, as of June 30, 2012, there
was no significant risk of loss as a result of such non-performance.



The customers of the Company
are primarily enterprises based in the United States and accordingly, trade receivables are concentrated in the United States.
To reduce credit risk, the Company performs ongoing credit evaluation of customers. For the three months ended June 30, 2012, three
customers had a 28%, 17% and 12% share in net product sales, respectively, and for the three months ended June 30, 2011 two customers
had 32% and 12%, shares, respectively, in net product sales; no other customer, individually accounted for more than 10% of net
product sales during these periods.. As of June 30, 2012, three customers had 34%, 15% and 13% shares, respectively, and as of
June 30, 2011 two customers had 32%, and 24% shares, respectively, in total trade receivables; no other customer individually accounted
for more than 10% of the Company’s total trade receivables during these periods. For the three months ended June 30, 2012,
three products collectively accounted for approximately 86% of net product sales and for the three months ended June 30, 2011,
four products collectively accounted for approximately 80% of net product sales. A relatively small group of products, the raw
materials for which are supplied by a limited number of vendors, represent a significant portion of net revenues. The maximum amount
of loss due to credit risk that the Company would incur should the customer fail to perform is the amount of the outstanding receivable.
The Company does not believe other significant concentrations of credit risk exist.



| | 3 | CASH AND CASH EQUIVALENTS
| | - | -------------------------



Cash and cash equivalents comprises
the following:



|                                           |  | As of June 30, 2012 |       |  | As of March 31, 2012 |  
|------------------------------------------ |  | ------------------- | ----- |  | -------------------- | -
|Cash in hand                               |  | $                   | 1     |  |                      | $
|Balances with banks in current accounts    |  |                     | 744   |  |                      |  
|Balances with banks in money market funds* |  |                     | 7,731 |  |                      |  
|                                           |  | $                   | 8,476 |  |                      | $



Cash balances on checking accounts
and payroll accounts with the bank are insured by the Federal Deposit Insurance Corporation up to an aggregate of $250.



*As of June 30, 2012 and March
31 2012, cash equivalents include restricted cash of $35 and $35, respectively, which represents amount of bond given by the Company
to a City Administration for construction of building and parking lot.



| | 4 | ACCOUNTS RECEIVABLE
| | - | -------------------



Accounts receivable as of June
30, 2012 and 2011 are stated net of allowance for doubtful receivables and provision for chargebacks, returns, rebates, discounts,
and shelf stock (i.e. price protection) adjustments..



7







The activity in the allowance for doubtful accounts
receivable is given below:



|                                       |  | Three months ended June 30, |    
|-------------------------------------- |  | --------------------------- | ---
|                                       |  | 2012                        |    
|Balance at the beginning of the period |  | $                           | 181
|Charges to revenues and costs          |  |                             | 2  
|Balance at the end of the period       |  | $                           | 183



| | 5 | INVENTORIES
| | - | -----------



Inventories consist of the following
amounts:



|                                               |  | June 30, |        |   | March 31, |  
|---------------------------------------------- |  | -------- | ------ | - | --------- | -
|                                               |  | 2012     |        |   | 2012      |  
|Raw materials                                  |  | $        | 6,982  |   |           | $
|Work in progress                               |  |          | 2,375  |   |           |  
|Finished goods                                 |  |          | 5,354  |   |           |  
|Stores and spares                              |  |          | 70     |   |           |  
|                                               |  | $        | 14,781 |   |           | $
|Provision for slow moving / obsolete inventory |  |          | (208   | ) |           |  
|                                               |  | $        | 14,573 |   |           | $



The activity in the allowance
for slow moving/obsolete inventory is given below.



|                                       |  | Three months ended June 30, |    
|-------------------------------------- |  | --------------------------- | ---
|                                       |  | 2012                        |    
|Balance at the beginning of the period |  | $                           | 161
|Charges to revenues and costs          |  |                             | 47 
|Balance at the end of the period       |  | $                           | 208



| | 6 | SHORT TERM BORROWINGS
| | - | ---------------------



Jubilant Cadista Pharmaceuticals
Inc. (“Cadista Pharmaceuticals”) has a Revolving Credit Facility (the“SBNY Revolver”) from State Bank
of India, New York (“SBNY”) for an amount up to $6,500 to meet its working capital requirements (the
“SBNY Credit Agreement”). The original maturities of these loans are less than one year and the loans bear
interest at the rate of 6 months LIBOR plus 275 basis points. By amendment in February 2010, the amount of the SBNY Revolver
was increased from $3,000 to $6,500 and the interest rate on the SBNY Revolver increased from 6 months LIBOR plus 175 basis
points to its current rate of 6 months LIBOR plus 275 basis points. As of June 30, 2012 and March 2012 the outstanding short
term loans aggregate to $1 and Nil, respectively. The SBNY Revolver is secured by all of Cadista Pharmaceuticals goods and
inventory, accounts receivable, contract rights and current assets, which ranks pari passu with the security interest in the
same collateral that secures the ICICI Bank NY(“ICICI”) credit facility described below. The SBNY Revolver
is guaranteed by Cadista Holdings Inc., and Generic Pharmaceuticals Holdings Inc., which is the current holder of 82.38 %
shares of the Company, and has pledged 62,560,815 shares of common stock of the Company to secure Cadista Pharmaceuticals
obligations under the SBNY Credit Agreement. The guaranty of Cadista Holdings Inc. is secured by a pledge of stock of Cadista
Pharmaceuticals held by Cadista Holdings Inc. In connection with the amendment of the Credit Agreement in February 2010;
State Bank of India, Corporate Accounts Group, New Delhi, India Branch (“SBI CAG”), with whom Jubilant Life
Sciences Limited (“Jubilant”) has a credit facility, issued a letter of comfort (the “Original Letter
of Comfort”) in favor of SBNY providing for the following: (i) that the security for Jubilant’s credit facility
with SBI CAG would not be released so long as any liabilities of Cadista Pharmaceuticals to SBNY; including amounts under the
SBNY Revolver, remain outstanding: and (ii) SBI CAG’s obligation to indemnify and hold SBNY harmless, and pay any
claim submitted by SBNY arising from a default by Cadista Pharmaceuticals, for up to $3,500 principal amount of loans funded
by SBNY under the SBNY Revolver, together with accrued interest thereon and other fees and commissions arising under the
Credit Agreement. The Original Letter of Comfort expired on March 31, 2011, and was replaced by a similar letter of comfort
(the “Replacement Letter of Comfort”) issued by SBI CAG in favor of SBI NY on April 21, 2011. Upon the expiration
of the Original Letter of Comfort, the SBNY Revolver was reduced by $1,500 from $6,500 to $5,000 and Jubilant pledged $2,000
of collateral to SBNY to secure the SBNY Revolver. The Replacement Letter of Comfort was issued pursuant to
Jubilant’s credit facility with SBI CAG. The Replacement Letter of Comfort was effective until the earlier of (a) March
31, 2012 or (b) the date that all liabilities of Cadista Pharmaceuticals to SBNY have been extinguished. The Replacement
Letter of Comfort has been extended to have an expiration date of March 31, 2013.



8







The SBNY Credit Agreement requires Cadista
Pharmaceuticals to maintain a ratio (“Leverage Ratio”) of (i) unconsolidated long and short term indebtedness for borrowed
money not subordinated to the bank (including capitalized leases, guarantees, mandatory redeemable stock and letters of credit)
to (ii) EBITDA of no more than 3:1 as measured on the last day of Cadista Pharmaceuticals’ fiscal year. “EBITDA”
is determined at the end of each fiscal year on an unconsolidated basis and consists of net income plus the following: interest
expense; depreciation expense; amortization expense; income tax expense; and research and development expense. The Credit Agreement
also requires Cadista Pharmaceuticals to maintain a ratio (“Interest Coverage Ratio”) of EBITDA to interest expense
(the sum of all interest charges for a period, on an unconsolidated basis) of no less than 2.0:1 as measured on the last day of
each fiscal year. As of the end of its 2009 fiscal year, Cadista Pharmaceuticals was out of compliance with the foregoing covenants
which was applicable to determining the imposition of default interest (as a result of financial non-compliance) for the immediate
subsequent fiscal year 2010. As a result of being out of compliance, Cadista Pharmaceuticals paid a default interest rate of interest
(2% increase over the otherwise applicable interest rate) on the SBNY Revolver and the term loans under the SBNY Credit Agreement
during fiscal year 2010. Cadista Pharmaceuticals regained compliance at the end of fiscal year 2010 (which was applicable for determining
the imposition of a default interest rate for fiscal year 2011 as a result of financial covenant non-compliance), and has been
in compliance with these ratios at the end of each of its fiscal years 2011 and 2012. The SBNY Credit Agreement also defines certain
other covenants restricting the ability of Cadista Pharmaceuticals to incur additional indebtedness to banks and other financial
institutions, create liens, make certain investments, sell assets, or enter into a merger or acquisition. Cadista Pharmaceuticals
is permitted to pay dividends so long as there is no breach of the financial covenants. The unused facility as of June 30, 2012
aggregated to $6,499.



In February 2012 Cadista Pharmaceuticals
entered into an amendment to its credit agreement with SBNY effectuating the following changes: (i) modifications to reflect that
SBNY’s security interest will rank pari passu to the security interest of ICICI Bank NY in those items of collateral in
which both ICICI Bank NY and SBNY will have a security interest; (ii) extension of the expiration date of the SBNY Revolver from
March 21, 2012 to November 18, 2012 (which is the current expiration date of the SBNY Revolver); (iii) establishing a $1,000 sub-limit
for the issuance of letters of credit under the SBNY Revolver; and (iv) requiring Cadista Pharmaceuticals to obtain a rating by
a reputable credit agency no later than September 30, 2012, failing which Cadista Pharmaceuticals, will be required to pay additional
interest of 0.5% on the total commitment until it obtains such a rating.



In February 2012, Cadista Pharmaceuticals
entered into an agreement (the “ICICI Credit Facility Agreement”) with the ICICI Bank NY for its working capital requirements
for an amount of $8,500 (the “Maximum Amount”). The agreement contemplates that ICICI Bank NY may extend the following
loans and credit accommodations to Cadista to be used, depending upon the facility, for purchasing raw materials or capital equipment
for its manufacturing process or working capital purposes: revolving loans (“ICICI Revolving Loans;” and the credit
facility pursuant to which such loans are issued, the “ICICI Revolving Credit Facility”); the issuance of letters of
credit for Cadista Pharmaceutical’s account (the “ICICI Letters of Credit Facility”); and a facility enabling
Cadista Pharmaceuticals to discount and receive payment for certain customer invoices (the “ICICI Bill Discounting Facility”).
The ICICI Credit Facility Agreement has a term that expires on the first anniversary of the agreement.



9







ICICI Revolving Loans are extended and
required to be repaid so that the ICICI Revolving Loans, together with the amounts drawn under or due and owing under the ICICI
Letters of Credit Facility and the ICICI Bill Discounting Facility, do not exceed a specified percentage of the sum of (i) accounts
receivable satisfying certain criteria and subject to certain adjustments and (ii) inventory created and used in Cadista Pharmaceutical’s
ordinary course of business. The ICICI Letters of Credit Facility provides for the issuance of letters of credit, with durations
ending prior to the first anniversary of the ICICI Credit Facility Agreement. The ICICI Bill Discounting Facility provides for
advances, based upon invoices issued to specified customers, subject to a sublimit per customer of $4,000 in the aggregate. The
aggregate amount of loans and credit accommodations that are provided under the three facilities is capped at the Maximum Amount.



If not otherwise payable before, all amounts
under all three facilities are due on the expiration date of the ICICI Credit Facility Agreement. The ICICI Revolving Loans may
be payable earlier on demand. Cadista Pharmaceuticals is required to promptly reimburse ICICI Bank NY for all amounts drawn under
the letters of credit, which reimbursement may be in the form of an ICICI Revolving Loan to the extent Cadista Pharmaceuticals
is able to borrow such amount under the ICICI Revolving Loan Credit Facility at that time. Advances under the ICICI’s Bill
Discounting Facility are payable 120 days after the advance (or if earlier, upon the demand for repayment of the ICICI Revolving
Loans).



Interest on outstanding amounts of ICICI
Revolving Loans accrues at a rate equal to the three month LIBOR rate plus three and three-fourths percent (3.75%) per annum. Interest
on the outstanding amount of advances under the ICICI Bill Discounting Facility accrues at a rate equal to the three month LIBOR
rate plus three percent (3%) per annum. Interest on both facilities is payable monthly.



The ICICI Credit Facility Agreement requires
Cadista Pharmaceuticals to maintain as of March 31 and September 30 of each fiscal year: (i) an asset coverage ratio equal to the
“Bank’s Pro Rata Share of Borrower’s Assets” (as defined in the ICICI Credit Facility Agreement) divided
by the amounts then outstanding under the ICICI Credit Facility Agreement (and the other credit documents executed in connection
therewith) of not less than 1.40; and (ii) a ratio of its outstanding long-term debt, plus outstanding amounts of working capital
or short term debt of Cadista Pharmaceuticals, divided by “EBITDA” (i.e. earnings before interest, taxes, depreciation,
and amortization) of no more than 3.00. For purposes of the ICICI Credit Facility Agreement: the “Bank’s Pro Rata Share
of Borrower’s Assets” is equal to the product of: (x) 8.5 divided by 15 (which is the proportion that the Maximum Amount
bears to the combined maximum amounts that may be borrowed or credit accommodations provided under the SBNY Revolver and the ICICI
Credit Facility Agreements), and (y) Cadista Pharmaceuticals current assets. If Cadista Pharmaceuticals’ financial statements
reflect negative EBITDA for any six (6) month period, it may be required to fund a reserve account with ICICI in an amount equal
to six (6) months of interest payable on the principal amount outstanding under the ICICI Credit Facility Agreement for the prior
six (6) month period.



The ICICI Credit Facility Agreement contains
various covenants, including: covenants restricting changes in control (including that Jubilant Life Sciences Limited maintain
at least a 51% equity interest in the Company); upon ICICI NY’s request, requiring Cadista Pharmaceuticals to obtain a credit
rating with respect to itself or the loan transactions; covenants restricting the repayment of affiliate indebtedness; and other
restrictions similar to those contained in Cadista Pharmaceuticals’ credit agreement with SBNY.



The ICICI Credit Facility is secured by
Cadista Pharmaceuticals’ goods, inventory, accounts receivable, contract rights and current assets. ICICI Bank NY’s
security interest ranks pari passu with the security interest of SBNY in the same assets.



10







The details of average loan outstanding,
average interest expense and weighted average rate of interest and interest rate on balance sheet date for loans and advances under
both of the ICICI Credit Facility Agreement and the SBNY Credit Agreement are as follows:



|Three months period ended |  | Average loan outstanding during the period (000’s) |       |  | Average interest expense during the period (000’s) |   |    | Average interest rate during the period | 
|------------------------- |  | -------------------------------------------------- | ----- |  | -------------------------------------------------- | - | -- | --------------------------------------- | 
|June 30, 2012             |  |                                                    | -     |  |                                                    | $ | 25 | *                                       | 
|June 30, 2011             |  | $                                                  | 4,956 |  |                                                    | $ | 39 |                                         | 



The interest rate as of June
30, 2012 was 3.90% as compared to 3.21% as of June 30, 2011.



* Commitment charges on the unutilized
credit line.



| | 7 | DEPRECIATION AND AMORTIZATION
| | - | -----------------------------



The Company’s underlying
accounting records do not contain an allocation of depreciation and amortization between “cost of revenues,” “research
and development charges,” “selling general and administration expenses.” As such, the charge for depreciation
and amortization has been presented as a separate line item on the face of the consolidated statements of income.



| | 8 | INCOME TAXES
| | - | ------------



The Company estimates its
effective tax rate (Federal and State) to be approximately 38.14% for the year ending March 31, 2013, as compared to 33.59%
for the year ended March 31, 2012. The increase in effective tax rate is on account of the increase in current federal and
state taxes due to projected taxable income for the year. The Company regularly assesses the future realization of
deferred taxes and whether a valuation allowance against certain deferred tax assets is warranted. For
the three months ended June 30, 2012, the Company has recognized a tax expense of $6,847, comprised of $6,867 of current tax
and ($20) of deferred tax benefit; compared to a tax expense of $1,156, comprised of $1,049 of current tax and $107 of
deferred tax expense for the comparable period of 2011. We are a party to a tax sharing agreement (the “Tax Sharing
Agreement”), with an effective date of October 1, 2011, with Jubilant Holdings. The Tax Sharing Agreement sets forth,
among other things, each of the Company’s and Jubilant Holding’s obligations in connection with filing
consolidated Federal, state and foreign tax returns. The agreement provides that current income tax (benefit) is computed on
a separate return basis and members of the tax group shall make payments (or receive reimbursement) to or from Jubilant
Holdings to the extent their income (loses and other credits) contribute to (reduce) the consolidated income tax expense. The
consolidating companies are reimbursed for the net operating losses or other tax attributes they have generated when utilized
in the consolidated returns. As of June 30, 2012 the Company owes $2,955 towards federal taxes and $118 (including carryover
from previous year) towards state taxes to Jubilant Holdings under the tax sharing agreement. The Company makes
tax-sharing payments to Jubilant Holdings equal to the taxes that the Company would pay (or receive) if it filed return on a
stand-alone basis. During the quarter ended June 30, 2012 the Company paid $3,000 to Jubilant Holdings under the Tax Sharing
Agreement.



| | 9 | CHANGES IN STOCKHOLDERS’ EQUITY
| | - | -------------------------------



There have been no changes in
the statement of stockholders’ equity during the three months ended June 30, 2012, other than the change in the balance of
accumulated surplus due to the net income earned during the period.



11







| | 10 | SUBSEQUENT EVENTS
| | -- | -----------------



The Company evaluated all subsequent
events that have occurred after the date of the accompanying financial statements and determined that there were no events or transactions
occurring during this subsequent event reporting period which require recognition or disclosure in the Company’s consolidated
financial statements.



12







Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations



The following
discussion and analysis provides information that management believes is relevant to an understanding of our results of operations
and financial condition. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements
and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. Unless the context
requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,”
or “our” refer to Cadista Holdings, Inc. and its subsidiaries including Jubilant Cadista Pharmaceuticals Inc., and
all amounts are in thousands United States Dollars.



Cautionary Note Regarding Forward-looking Statements



Certain
statements in this Quarterly Report constitute “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, including those concerning management’s expectations with respect to future financial performance,
trends and future events. To the extent that any statements made in this Quarterly Report contain information that is not historical,
such statements are essential forward-looking estimates and projections about us, our industry, our beliefs, and our assumptions.
Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” “would,” “should,” “scheduled,” “projects,”
and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are
not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control
and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking
statements. Risk factors that might affect such forward-looking statements include those set forth in Item 1A (“Risk Factors”)
of our Annual Report on Form 10-K for the year ended March 31, 2012, and from time to time in our other filings with the SEC, including
current reports on Form 8-K, and general industry and economic conditions. The forward-looking statements in this Quarterly Report
statement speak only as of the date hereof and caution should be taken not to place undue reliance on any such forward-looking
statements. We disclaim any obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.



Overview



We are
engaged in the development, manufacture, sale and distribution of prescription generic pharmaceutical products in the United States
through our wholly-owned subsidiary, Jubilant Cadista Pharmaceuticals Inc. (“Cadista Pharmaceuticals”). Pharmaceutical
products commonly referred to as “generics” are the pharmaceutical and therapeutic equivalents of brand-name drug products
and are usually marketed under their established non-proprietary drug names, rather than under a brand name. Generic pharmaceuticals
are generally sold at prices significantly less than the brand product. Generic pharmaceuticals contain the same active ingredient
and are of the same route of administration, dosage form, strength and indication(s) as brand–name pharmaceuticals already
approved for use in the United States by the Food and Drug Administration (“FDA”).



We sell
our products in the United States primarily through pharmaceutical wholesalers and to national and regional pharmacy chains, mass
merchandisers, government agencies and mail order pharmacies. Our sales are generated primarily by our own sales force, with the
support of our senior management team, customer services, and distribution employees. For the three months ended June 30, 2012
and June 30, 2011 approximately 93% and 100% of our product sales revenue, respectively, were derived from products sold under
our own product label. The balance of our product sales revenue was comprised of private label product sales (which products are
sold by a customer under its name). In addition to our product sales revenue, from time to time we provide drug development and
manufacturing services to Jubilant Life Sciences Ltd. (“Jubilant”), the parent company of our principal stockholders,
and third parties. There were no drug development services during either the three month period ended June 30, 2012 or the three
month period ended June 30, 2011.



We filed
our first ANDA with the FDA in May, 1996, and through June 30, 2012 we have filed a total of 19 ANDAs with the FDA. Our first ANDA
approval was received from the FDA in October, 1997. We did not receive any new product approvals in the three months ended June
30, 2012. Our marketing efforts relating to existing products have led to an increase in our revenues. For the three months ended
June 30, 2012, we reported net revenue of $29,874 representing an increase of 133% as compared to the three months ended June 30,
2011.



13







As of
June 30, 2012, we marketed 11products owned by us, all of which are prescription generic pharmaceutical products, and
had a pipeline that included five new products, four of which are currently subject to ANDAs under review by the FDA and one
of which is in an earlier stage of development and for which an ANDA is expected to be filed with the FDA for review. One of
these 11 products, Alendronate, we commenced marketing during the three month period ended June 30, 2012. We also marketed
two products under a Master Supply Agreement that we entered into with Jubilant in May 2011 (the “2011 Master Supply
Agreement”), one of which we commenced marketing in the quarter ended September 30, 2011 and the other of which we
commenced marketing in our fiscal quarter ended June 30, 2012.



We anticipate
that our portfolio of marketed products will continue to grow as a result of launches of products under ANDAs that have already
been approved, approval of our ANDAs currently under review by the FDA, approval of a future ANDA for a product that we have in
an earlier stage of development, products that we market under the 2011 Master Supply Agreement with Jubilant, our process of identifying
new product development opportunities and potentially acquiring from third parties ANDAs that have already been approved by the
FDA. The specific timing of our new product launches is subject to a variety of factors, some of which are beyond our control;
including the timing of FDA approval for ANDAs currently under review or that we file with respect to new products. The timing
of these and other new product launches will have a significant impact on our results of operations.



The active
compounds for our products, also called Active Pharmaceutical Ingredients (“APIs”) are purchased from specialized manufacturers,
including Jubilant, and are essential to our business operations. Each individual API must be approved by the FDA as part of the
ANDA approval process. API manufacturers are also regularly inspected by the FDA. We do not manufacture API for any of our products
in our own facility. While we believe that there are alternative suppliers available for the API used in our products, any interruption
of API supply or inability to obtain API used in our products, or any significant API price increase not passed on to our customers,
could have a material adverse impact on our business operations and financial condition.



Results of Operations



|                                                                                         |  | Three months ended June 30 |        |  |        | 
|---------------------------------------------------------------------------------------- |  | -------------------------- | ------ |  | ------ | 
|                                                                                         |  | 2012                       |        |  | 2011   | 
|                                                                                         |  | $000’s                     |        |  | $000’s | 
|Revenues                                                                                 |  |                            | 29,874 |  |        | 
|Costs of revenues (exclusive of depreciation and amortization)                           |  |                            | 10,521 |  |        | 
|Selling, general and administrative expense (exclusive of depreciation and amortization) |  |                            | 1,090  |  |        | 
|Depreciation and amortization                                                            |  |                            | 414    |  |        | 
|Income from operations                                                                   |  |                            | 17,849 |  |        | 
|Other income (expense), net                                                              |  |                            | 104    |  |        | 
|Income before income tax                                                                 |  |                            | 17,953 |  |        | 
|Income tax expense                                                                       |  |                            | 6,847  |  |        | 
|Net income                                                                               |  |                            | 11,106 |  |        | 



Revenues



We generate
revenue principally from the sale of generic pharmaceutical products, which include a variety of products and dosage forms. In
addition to our product sales revenue, from time to time we provide drug development and manufacturing services to Jubilant and
third parties. There were no revenues from these drug services during the three months ended June 30, 2012 and June 30, 2011.



14







Revenues
for the three months ended June 30, 2012 increased 133% or $17,039 to $29,874 compared to revenues of $12,835 from the
corresponding period of 2011. The increase in revenues is mainly attributable to increase in sales of Methylprednisolone and
small increase in sales of Lamotrigine and the goods that we sell pursuant to the 2011 Master Supply Agreement, Donepezil
and Risperidone ODT.



Total revenues of our top selling
products were as follows:



|                           |  | Three months ended |        |  |        |  |        |        | 
|-------------------------- |  | ------------------ | ------ |  | ------ |  | ------ | ------ | 
|                           |  | June 30            |        |  |        |  |        |        | 
|                           |  | 2012               |        |  | 2011   |  |        | Change | 
|Product                    |  | $000’s             |        |  | $000’s |  |        | $000’s | 
|Methylprednisolone tablets |  |                    | 19,871 |  |        |  | 2,732  |        | 
|Meclizine                  |  |                    | 3,532  |  |        |  | 4,009  |        | 
|Terazosin capsules         |  |                    | 2,125  |  |        |  | 2,276  |        | 
|Other product revenues     |  |                    | 4,346  |  |        |  | 3,818  |        | 
|Net product sales          |  |                    | 29,874 |  |        |  | 12,835 |        | 
|Other revenues             |  |                    | -      |  |        |  | -      |        | 
|Total revenues             |  |                    | 29,874 |  |        |  | 12,835 |        | 



During
the three month period ended June 30, 2012, our top three products (Methylprednisolone, Meclizine, and Terazosin) accounted for approximately 85% of our total net product sales and approximately 74% of our total
consolidated gross margins for such three month period.



We
launched Methylprednisolone tablets prior to July 2005. We sell Methylprednisolone tablets, which are the generic equivalent
of Medrol®, in four strengths (4 mg, 8 mg, 16 mg, and 32 mg) and a total of two pack sizes for one strength and one pack
size for the other three strengths. We believe that during each of the three month periods ended June 30, 2012 and 2011,
there were at least four competitors supplying this generic product in the U.S. market in 4mg and 8 mg strengths. We do not
believe that there are any competitors currently supplying this generic product in 16 mg or 32 mg strengths in the U.S.
market. Methylprednisolone tablets are a steroid product.In March 2011, we initiated a voluntary recall of batches of
two strengths (4 mg and 8 mg) of Methylprednisolone tablets due to some of those tablets being of low weight or not
conforming to certain physical specifications. This recall was designated a Class III recall by the FDA. In connection with
this recall, we voluntarily elected to make certain process revalidations and were out of the market for both strengths of
this product for a short period of time, which negatively impacted our revenues from Methylprednisolone tablets during out
fiscal year ended March 31, 2011 and to some extent our fiscal quarter ended June 30, 2011. We re-launched our 4 mg
Methylprednisolone dose packs in June, 2011. Because of interruptions in the supply of Methylprednisolone API that
occurred in the quarter ended June 30, 2011, we realized higher prices and higher gross margins on the Methylprednisolone
products we sold during that quarter as compared to the quarter ended June 30, 2012; however, the volume of
Methylprednisolone products sold during the quarter ended June 30, 2011 was significantly lower due to our being out of the
market for the 4mg Methylprednisolone product for most of the quarter ended June 30, 2011. There can be no assurance that we
are aware of all activities in this market or plans of our competitors. There can be no assurance that new competitors will
not commence supplying this generic product in the future. Any new competition could result in further reduction in unit
price, and perhaps sales volume, which could negatively impact our revenue and gross margin in the future.



We launched
Meclizine tablets in June 2010. We sell Meclizine tablets, which are the generic version of Antivert®, in 12.5 mg and 25 mg
strengths and two pack sizes for each strength. Since our launch of Meclizine tablets, we believe that there has been only one
competitor supplying this generic product in the U.S. market through the end of our last fiscal year. However, another competitor
has entered the market since that date. The new competition could result in significant declines in our sales volume and unit price,
which may negatively impact our revenues and gross margins in future periods.



15







We launched
Terazosin capsules in 2006. We sell Terazosin capsules, which are the generic equivalent of Hytrin®, in four strengths, 1 mg,
2 mg, 5 mg, and 10 mg and three pack sizes for each strength. During each of the three month periods ended June 30, 2012 and 2011,
there were at least four competitors supplying this generic product in the U.S. market. The level of competition with respect to
Terazosin negatively affects our gross margins from sales of this product, which decreased in the three month period ended June
30, 2012 as compared to the sales in the three month period ended June 30, 2011, respectively. Although we are not currently aware
of new competitors who have commenced distributing this generic produce in the United States since the end of the first three months
of our 2013 fiscal year, or have plans to do so, there can be no assurance that we are aware of all activities in the market or
plans of our competitors. There can be no assurance that new competitors will not commence supplying this generic product in the
future. Any new competition could result in further reduction in unit price, and perhaps sales volume, which could negatively impact
our revenue and gross margin in the future.



Our
other product revenues (“Other Product Revenues”), in addition to sales from our top  selling products,
during the three months ended June 30, 2012 consisted of sales of Lamotrigine tablets, Cyclobenzaprine tablets,
Oxcarbazepine tablets, HCTZ tablets and capsules, Prednisone tablets, Prochlorperazine tablets, Donepezil tablets and
Risperidone ODT tablets. Our revenues from sales of these other products increased during the three month period ended June
30, 2012 compared to the corresponding period of 2011. Donepezil tablets and Risperidone ODT tablets are marketed pursuant to
the 2011 Master Supply Agreement with Jubilant; we commenced marketing Donepezil tablets in the quarter ended September 30,
2011 and commenced marketing Risperidone ODT, during the quarter ended June 30, 2012. The increase in Other Product Revenues
for the quarter ended June 30, 2012 compared to the quarter ended June 30, 2011 was primarily attributable to $1,378 from the
sales of Lamotrigine tablets, Donepezil tablets and Risperidone ODT, offset by a reduction in the revenues generated from our
sales of Cyclobenzaprine tablets, Oxcarbazepine tablets, HCTZ tablets and capsules, Prednisone tablets and
Prochlorperazine tablets. We believe that there is significant competition with respect to each of these generic products and
that our pricing and gross margins for these products are always under pressure.



Gross Revenues to Total
Revenue Deductions



The
preparation of consolidated financial statements in conformity with US GAAP 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 consolidated financial statements and the results of operations during the reporting periods.
The Company’s most significant estimates relate to the determination of sales reserves, sales return, price protection
and allowances for accounts receivables and accrued liabilities, determination of useful lives for property, plant and
equipment and intangible assets, and other long lived assets for impairment and realizability of deferred tax assets.
Management believes that the estimates used in the preparation of the consolidated financial statements are prudent and
reasonable. Actual results could differ from these estimates. Appropriate changes in estimates are made as management becomes
aware of changes in circumstances surrounding the estimates.



Revenue
from sale of goods is recognized when significant risks and rewards in respect of ownership of the products are transferred to
the customer and when the following criteria are met:



16







| | · | Persuasive evidence of an arrangement
exists;
| | - | ---------------------------------------------

| | · | The price to the buyer is fixed and determinable;
and
| | - | -----------------------------------------------------

| | · | Collectability of the sales price is reasonably
assured.
| | - | --------------------------------------------------------



As
customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported
net product sales. When we recognize revenue from the sale of our products, an estimate of sales returns and allowances (“SRA”)
is recorded which reduces product sales. Accounts receivable and/or accrued liabilities are also reduced and/or increased by the
SRA amount. These adjustments include estimates for chargebacks, rebates, cash discounts and returns and other allowances, including
shelf stock adjustments. These provisions are estimated based on historical payment experience, historical relationship to revenues,
estimated customer inventory levels and current contract sales terms with direct and indirect customers. The estimation process
used to determine our SRA provision has been applied on a consistent basis and no material adjustments, other than for shelf stock
adjustments, have been necessary to increase or decrease our reserves for SRA as a result of a significant change in underlying
estimates. Historically, until the quarter ended September 30, 2011, the Company did not experience any material shelf stock adjustments
(i.e. credits issued to a customer, in accordance with specific terms agreed to with the customer, to reflect price reductions
and based upon the amount of the product the customer has in its inventory). Accordingly, the Company did not create any reserve
for the shelf stock adjustments. As a result of the Company’s currently selling certain products where the company expects
increased competition resulting in lower prices, the Company has assessed that there is a greater chance that it will experience
shelf stock adjustments than it has in the past and has established a reserve for these adjustments, which is referred to as the
“Price Protection Reserve.”



We
use a variety of methods to assess the adequacy of our SRA reserves to ensure that our financial statements are fairly stated.
This includes periodic reviews of customer inventory data, customer contract programs and product pricing trends to analyze and
validate the SRA reserves. The Company does not expect future payments of SRA to materially exceed our current estimates. However,
if future SRA payments were to materially exceed our estimates, such adjustments may have a material adverse impact on our financial
position, results of operations and cash flows.



Our
gross revenues for the three month periods ended June 30, 2012 and June 30, 2011, before deductions for chargebacks, rebates and
incentive programs (including rebates paid under federal and state government Medicaid drug reimbursement programs), sales returns
and other sales allowances were as follows (in $ thousands):



|                                             |  | Three months ended |       
|-------------------------------------------- |  | ------------------ | ------
|                                             |  | June 30            |       
|                                             |  | 2012               |       
|Description                                  |  | $000’s             |       
|Gross revenues                               |  |                    | 37,911
|Chargebacks                                  |  |                    | 3,699 
|Rebates, fees, incentives and cash discounts |  |                    | 3,421 
|Medicaid                                     |  |                    | 483   
|Returns                                      |  |                    | 351   
|Price protection reserve                     |  |                    | 83    
|Net product sales                            |  |                    | 29,874
|Net to Gross %                               |  |                    | 78.8  



17







The following tables summarize the roll forward for
the three month periods ended June 30, 2012 and June 30, 2011 in the accounts affected by the estimated provisions described below
(in $ thousands):



|                               |  | For the three months ended June 30, 2012 |      
|------------------------------ |  | ---------------------------------------- | -----
|Accounts receivable reserves   |  | Beginning balance                        |      
|Chargebacks                    |  |                                          | 1,427
|Rebates and incentive programs |  |                                          | 4,264
|Returns                        |  |                                          | 1,807
|Cash discounts and other       |  |                                          | 455  
|Price protection reserve       |  |                                          | 1,354
|Total                          |  |                                          | 9,307



|                               |  | For the three months ended June 30, 2011 |      
|------------------------------ |  | ---------------------------------------- | -----
|Accounts receivable reserves   |  | Beginning balance                        |      
|Chargebacks                    |  |                                          | 1,677
|Rebates and incentive programs |  |                                          | 1,199
|Returns                        |  |                                          | 457  
|Cash discounts and other       |  |                                          | 254  
|Price protection reserve       |  |                                          |      
|Total                          |  |                                          | 3,587



(1) Unless
specific in nature, the amount of provision or reversal of reserves related to prior periods for chargebacks is not determinable
on a product or customer specific basis; however, based upon historical analysis and analysis of activity in subsequent periods,
we have determined that our chargeback estimates remain reasonable.



Cost of Revenues



Cost of
revenues include our production and packaging costs, third party acquisition costs for materials supplied by others, inventory
reserve charges and shipping and handling costs incurred by us to transport products to customers. Cost of revenues does not include
costs for amortization, including for acquired product rights or other acquired intangibles, nor depreciation, including with respect
to our facility or equipment.



Cost of
revenues increased 35% or $2,729 to $10,521 in the three months ended June 30, 2012 compared to $7,792 for the comparable period
of 2011. This increase in cost of revenues was mainly attributable to higher product sales and change in product mix towards products
with higher manufacturing costs.



Our cost
of revenues as a percentage of net revenues in the three months ended June 30, 2012, decreased 26% from the three months ended
June 30, 2011, decreasing from 61% in the three months endedJune 30, 2011 to 35% in the three months ended June 30, 2012.
The majority of such 26% decrease was attributable to the higher volume of Methylprednisolone 4mg tablet dose packs during the
quarter ended June 30, 2012 which has a higher gross margin relative to our other products.



18







Selling, General and Administrative
Expenses



Selling,
general and administrative (“SG&A”) expenses consist mainly of personnel-related costs, advertising and promotion
costs, professional services costs and insurance and travel costs. SG&A expenses do not include any amortization or depreciation
costs.



SG&A
expenses decreased 5% or $61 to $1,090 for three months ended June 30, 2012 compared to $1,151 in the corresponding period of 2011.
The decrease in expense was the result of decrease of $69 in legal and professional charges, $45 in bank charges offset by an increase
$36 in payroll and benefits and administrative expenses.



Depreciation and Amortization



Depreciation
and amortization consists of depreciation on our real and personal property and amortization on an ANDA that we acquired in 2002.



Depreciation
and amortization increased 14% or $52 to $414 for the three months ended June 30, 2012 compared to $362 in the corresponding period
of 2011. This increase is due to the acquisition of capital assets, we acquired during our last fiscal year on which we claim depreciation
in the current period.



Other income (expense),
net



Other income
(expense), net consists of interest and other finance costs, offset against interest income.



Other income
(expense), net increased 342% or $147 to $104 for the three month period ended June 30, 2012 compared to ($43) in the corresponding
period of 2011. This increase was primarily the result of lower interest cost because of a decrease in our loans under our SBNY
credit facility, and increase in interest income on a $10,000 loan (“HSL Loan”) given to our affiliate company HSL
Holdings Inc. (“HSL Holdings”), which we funded on November 25, 2011. The HSL Loan bears interest at a rate equal to
five percent (5%) per annum.



Income Tax Expense



The income
tax expense increased by $5,691 to $6,847 for the three month period ended June 30, 2012 compared to $1,156 in the corresponding
period of 2011. The income tax expense represents the current and deferred tax due to profits made by us and our future prospects.
As our profits increased during the three months ended June 30, 2012 as compared to profits for the corresponding period of last
year, the current tax expense recognized in the period increased.



During
the quarter ended December 31, 2011, we entered into a tax sharing agreement with Jubilant Life Sciences Holdings, Inc.
(“Jubilant Holdings”), with an effective date of October 1, 2011 (the “Tax Sharing Agreement”). The
Tax Sharing Agreement sets forth, among other things, each of the Company’s and Jubilant Holding’s obligations in
connection with filing consolidated Federal, state and foreign tax returns. The agreement provides that current income tax
expense (or benefit) is computed on a separate return basis and members of the tax group shall make payments (or receive
reimbursement) to or from Jubilant Holdings to the extent their income (or losses and other credits) contribute to (or
reduce) the consolidated income tax expense. The consolidating companies are reimbursed for the net operating losses or other
tax attributes they have generated when utilized in the consolidated returns.



As of June 30, 2012, the Company
owes $2,955 towards federal taxes and $118( including carryover from previous year) towards state taxes to Jubilant Holdings under
the tax sharing agreement. The Company makes tax-sharing payments to Jubilant Holdings. equal to the taxes that the Company would
pay (or receive) if it filed a return on a stand-alone basis. During the quarter ended June 30, 2012 the Company paid $3,000 to
Jubilant Holdings under the Tax Sharing Agreement.



19







Liquidity and Capital Resources



Our
primary uses of cash are to fund working capital requirements, product development costs, and operating expenses.
Historically, we have funded our operations primarily through cash flow from operations, private placements of equity
securities to, and loan advances from, Jubilant including its affiliates and borrowings under credit facilities with banks.
As of June 30, 2012, we had $1 of outstanding borrowings under our bank credit facility with State Bank of India, New
York Branch (“SBNY”) and no amount outstanding under our credit facility with ICICI Bank Limited, New York
Branch (“ICICI Bank NY”). As of June 30, 2012, our principal sources of liquidity consisted of cash and cash
equivalents (excluding restricted cash of $35) of $8,441 and $6,499 in availability under our revolving credit facility with
SBNY and $8,500 in availability under our revolving credit facility with ICICI Bank NY.



Funding Requirements



Our future
capital requirements will depend on a number of factors, including: the continued commercial success of our existing products;
launching six products that are represented by two ANDAs that have been approved and the four ANDAs that are pending approval by
the FDA as of June 30, 2012; the development of one new product that is currently being developed by us and for which an ANDA is
expected to be filed with the FDA for review; and successfully identifying and sourcing other new product opportunities.



Our existing
$6,500 revolving credit facility with SBNY expires on November 18, 2012. In February, 2012 we entered into an additional credit
facility (the ICICI Bank Credit Facility”) with ICICI Bank NY permitting borrowings and other credit accommodation of up
to $8,500, which has one year term. Although the ICICI Bank Credit Facility should provide an additional source of liquidity, our failure to extend
our SBNY credit facility after it expires in November could adversely affect our operations. Jubilant has arranged for a Letter
of Comfort to be issued by its lender under its credit facility to SBNY, which Letter of Comfort expires no later than March 31,
2013. There can be no assurance that Jubilant will not cause such Letter of Comfort to be cancelled prior to its scheduled expiration
or that if not so cancelled prior to its scheduled expiration, that Jubilant will cause or permit a new Letter of Comfort to be
issued in substitution for the expiring Letter of Comfort. Such cancellation of the current Letter of Comfort or failure to cause
a substitute Letter of Comfort to be issued upon expiration of the current Letter of Comfort, could negatively impact our credit
facilities under our SBNY Credit Agreement, including a reduction in the maximum amount of permitted revolving loans. Although
the ICICI Bank Credit Facility should provide an additional source of liquidity, any such reduction or other negative impact could
adversely impact our operations, See - “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital Resources – Bank Facility” below for a more detailed description of our current
credit facility.



Based on
our existing business plan, we believe our existing sources of liquidity as of June 30, 2012 will be sufficient to fund our planned
operations, including the continued development of our product pipeline, for at least the next 12 months. However, we may
require additional funds earlier than we currently anticipate in the event we change our business plan or encounter unexpected
developments, including unforeseen competitive conditions within our product markets, changes in the regulatory environment, the
loss of key relationships with suppliers or customers, our inability to extend or replace our current credit facility with SBNY
when it expires in November 2012 or our credit facility with ICICI Bank NY when it expires in February 2013, the withdrawal of
the current Letter of Comfort, issued in connection with our credit facility with SBNY, prior to its scheduled expiration or the
failure of a substitute Letter of Comfort to be issued upon the expiration of the current Letter of Comfort.



If required,
additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely
affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities or
by selling convertible debt securities, further dilution to our existing stockholders may result. To the extent our capital resources
are insufficient to meet our future capital requirements, we will need to finance our future cash needs through public or private
equity offerings, debt financings or collaboration arrangements. Some of these transactions may be with Jubilant and its affiliates
and some may be with third parties.



20







If adequate
funds are not available, we may be required to terminate, significantly modify or delay the development or commercialization of
new products. We may elect to raise additional funds even before we need them if the conditions for raising capital are favorable.



Cash Flows



On June
30, 2012, cash and cash equivalents (excluding restricted cash $35) on hand totaled $8,441, working capital (excluding cash and
cash equivalents) totaled $41,878 and our current ratio (current assets to current liabilities) was approximately 5.78to
1. Our working capital as of June 30, 2012 increased approximately $2,965 to $41,878 compared to our working capital as of March
31, 2012 (which was $38,913) primarily because of an increase of accounts receivable and by reduction in accounts payable and due
to related parties.



The following
tables summarize our cash flows provided by/(used in) operating, investing and financing activities for the three months ended June 30,
2012 and June 30, 2011.



|                                                     |  | For the three months ended June 30, (in thousands) |       
|---------------------------------------------------- |  | -------------------------------------------------- | ------
|                                                     |  | 2012                                               |       
|Net cash provided by/(used in):                      |  |                                                    |       
|Operating activities                                 |  |                                                    | 8,534 
|Investing activities                                 |  |                                                    | (2,228
|Financing activities                                 |  |                                                    | 1     
|Net increase (decrease) in cash and cash equivalents |  | $                                                  | 6,307 



Operating
activities:   Cash flows from operations represent net income adjusted for certain non-cash items
and changes in assets and liabilities. Net cash provided by operating activities was $8,534 for the three month period ended June
30, 2012, compared to $1,350 for the comparable period of 2011. This net increase in cash in the three months period of our 2013
fiscal year compared to the corresponding period of our 2012 fiscal year was primarily due to an increase in income from operations
of $18,369 (after adjustments of noncash items amounting to $7,263). Accounts receivable in the three month period of our
2013 fiscal year increased over the comparable period of the prior year as a result of higher sales causing a $1,991 use of cash.
There is a cash utilization of $ 7,912 for accounts payable and other current liabilities, including due to related parties. Other
current assets including tax paid in advance decreased by $93 during the three month period ended June 30, 2012 as compared to
the corresponding period of our 2012 fiscal year.



Investing
activities:  Investing cash flows consist primarily of capital expenditures and proceeds from sales of property, plant
or equipment and a short term loan, given to an affiliate company. Net cash used in investing activities was $2,228 for the three
months ended June 30, 2012, compared to $926 for the three month period ended June 30, 2011. The primary reason for this increase
was a greater investment in equipment purchases and facility modification.Duringeach of those periods, capital
expenditures primarily consisted of the purchase of equipment to replace old equipments and also support increased production at
our Salisbury, Maryland facility.



Financing
activities:  Financing cash flows consist primarily of borrowings and repayments of debt. Net cash provided
from financing activities was $1 for the three months ended June 30, 2012, compared to $788 used in the three months ended
June 30, 2011. The increase in cash flow from financing activities was primarily attributable to the elimination of the
installments on a term loan facility we had with SBNY that was fully repaid in October 2011, and an installment of which was
paid during the three months ended June 30, 2011, offset against borrowings under our revolving credit facility with SBNY
during that period, compared to $1 of borrowings during the three month period ended June 30, 2012. Financing activities
during the three months ended June 30, 2011 consisted of net borrowings under our SBNY Revolver of $212 and the repayment of
$996 (gross $1,000 less amortized debt initiation cost of $4) principal amount of SBNY Term Loans.



21







Bank Facilities





Cadista
Pharmaceuticals has been a party to a Credit Agreement (as amended, the “SBNY Credit Agreement”) with State Bank of
India, New York Branch (“SBNY”) and Bank of Baroda entered into in September 2006, and which has subsequently been
amended. The facilities under the Credit Agreement initially included a $3,000 Revolving Credit Facility (the “SBNY Revolver”)
and initial advances of $8,000 in term loans (“SBNY Term Loans”). Proceeds of SBNY Term Loans were used principally
to renovate and expand our facility in Salisbury, Maryland and to purchase equipment for that facility. Proceeds from loans under
the SBNY Revolver are used primarily for working capital purposes. Principal on the SBNY Term Loans was payable in eight equal
installments of principal every six months commencing 12 months after the weighted average drawdown date, which was April 24, 2007,
with the final payment of $1,000 paid on October 24, 2011. The SBNY Term Loans bore interest, payable monthly, at a rate of six
month LIBOR plus 165 basis points. The original SBNY Credit Agreement was amended in February 2010 to increase the total amount
available under the SBNY Revolver to $6,500 and increase the applicable interest rate under the Revolver from six months LIBOR
plus 175 basis points to six month LIBOR plus 275 basis points. The SBNY Revolver is payable upon demand, pursuant to the terms
of the SBNY Credit Agreement. Interest on the SBNY Revolver is payable monthly. The principal of the SBNY Revolver can be prepaid
without penalty or premium. As of June 30, 2012, there was $1 outstanding under the SBNY Revolver.



The SBNY
Revolver is secured by all of Cadista Pharmaceuticals’ goods and inventory, accounts receivable, contract rights and current
assets. Term Loans under the SBNY Credit Agreement were secured by all other assets of Cadista Pharmaceuticals not securing the
SBNY Revolver. Loans under the SBNY Credit Agreement are guaranteed by Cadista Holdings Inc. Loans under the Credit Agreement were
initially guaranteed by Jubilant Pharma Pte. Limited, which guarantee was terminated by mutual agreement in October 2007. Jubilant
Pharma Pte Limited had pledged its stock of Cadista Holdings Inc. to secure Cadista Pharmaceuticals’ obligations under the
SBNY Credit Agreement, and Generic Pharmaceuticals Holdings Inc. (an indirect majority owned subsidiary of Jubilant Pharma Pte.
Ltd. and an indirect wholly-owned subsidiary of Jubilant) to whom such shares were transferred on September 30, 2011, has continued
such pledge. The guarantee of Cadista Holdings Inc. is secured by a pledge of stock of Cadista Pharmaceuticals held by Cadista
Holdings Inc. In connection with the amendment of the Original SBNY Credit Agreement in February 2010, increasing the maximum amount
under the SBNY Revolver from $3,000 to $6,500, State Bank of India, Corporate Accounts Group, New Delhi, India Branch (“SBI
CAG”), with whom Jubilant has a credit facility, issued a letter of comfort (the “Original Letter of Comfort”)
in favor of SBNY providing for the following: (i) that the security for Jubilant’s credit
facility with SBI CAG would not be released so long as any liabilities of Cadista Pharmaceuticals, to SBI NY, including amounts
under the SBNY Revolver, remain outstanding: and (ii) SBI CAG’s obligation to indemnify and hold SBI NY harmless, and pay
any claim submitted by SBI NY arising from a default by Cadista Pharmaceuticals, for up to $3,500 principal amount of loans funded
by SBI NY under the SBNY Revolver, together with accrued interest thereon and other fees and commissions arising under the SBNY
Credit Agreement. The Original Letter of Comfort expired in March 31, 2011, and was replaced by a similar letter of comfort (the
“Replacement Letter of Comfort”) issued by SBI CAG in favor of SBI NY on April 21, 2011. Upon the expiration of the
Original Letter of Comfort until the issuance of the Replacement Letter of Credit, the maximum amount of the SBNY Revolver was
reduced by $1,500 from $6,500 to $5,000 and Jubilant pledged $2,000 of collateral to SBI NY to secure the SBNY Revolver.



The Replacement
Letter of Comfort was issued pursuant to Jubilant’s credit facility with SBI CAG. The Replacement Letter of Comfort was effective
until the earlier of (a) March 31, 2012 or (b) the date that all liabilities of Cadista Pharmaceuticals to SBI NY have been extinguished.
The Replacement Letter of Comfort has been extended to have an expiration date of March 31, 2013. However, there can be no assurance
that Jubilant will not cause the Replacement Letter of Comfort to be cancelled prior to its scheduled expiration or that if not
so cancelled prior to its scheduled expiration, that Jubilant will cause or permit such Letter of Comfort to be extended or a new
Letter of Comfort to be issued in substitution for the expiring Replacement Letter of Comfort. Such cancellation of the Replacement
Letter of Comfort or failure to cause a substitute Letter of Comfort to be issued upon expiration of the Replacement Letter of
Comfort, would constitute a default under the SBNY Credit Agreement and could negatively impact our credit facilities under our
SBNY Credit Agreement, including a reduction in the maximum amount under the SBNY Revolver or termination of such facility. Any
such reduction or other negative impact could cause us to reduce or curtail some or all of our operations, or otherwise negatively
affect our results of operations.



22







The SBNY
Credit Agreement requires Cadista Pharmaceuticals to maintain a ratio (“Leverage Ratio”) of (i) unconsolidated long
and short term indebtedness for borrowed money not subordinated to the bank (including capitalized leases, guarantees, mandatory
redeemable stock and letters of credit) to (ii) EBITDA of no more than 3:1 as measured on the last day of Cadista Pharmaceuticals
fiscal year. “EBITDA” is determined at the end of each fiscal year on an unconsolidated basis and consists of net income
plus the following: interest expense; depreciation expense; amortization expense; income tax expense; and research and development
expense. The Credit Agreement also requires Cadista Pharmaceuticals to maintain a ratio (“Interest Coverage Ratio”)
of EBITDA to interest expense (the sum of all interest charges for a period, on an unconsolidated basis) of no less than 2.0:1
as measured on the last day of each fiscal year. Cadista Pharmaceuticals was in compliance with these ratios at the end of each
of fiscal years 2011 and 2012.



The SBNY
Credit Agreement contains various other covenants, including covenants restricting Cadista Pharmaceuticals’ ability to incur
additional indebtedness to banks and other financial institutions, create liens, make certain investments, sell assets, or enter
into a merger or acquisition. Cadista Pharmaceuticals is permitted to pay dividends so long as there is no breach of the financial
covenants.



On February
2, 2012 Cadista Pharmaceuticals entered into an amendment to its credit agreement with SBNY effectuating the following changes:
(i) modifications to reflect that SBNY’s security interest will rank pari passu to the security interest of ICICI Bank Limited,
New York Branch (“ICICI Bank NY”), which is described below, in those items of collateral in which both ICICI Bank
NY and SBNY will have a security interest; (ii) the extension of the expiration date of the revolving credit facility from March
21, 2012 to November 18, 2012; (iii) establishing a $1,000 sub-limit for the issuance of letters of credit under the revolving
credit facility; and (iv) requiring Cadista Pharmaceuticals to obtain a rating by a reputable credit agency no later than September
30, 2012, failing which Cadista Pharmaceuticals will be required to pay additional interest of 0.5% on the total commitment until
it obtains such a rating.



Our existing
$6,500 revolving credit facility with SBNY expires on November 18, 2012. If we are unable to obtain an extension or replacement
of such facility when it expires in November 2012, our operations could be adversely impacted.



On February
2, 2012 Cadista Pharmaceuticals entered into a credit facility agreement (the “ICICI Bank Credit Facility Agreement”)
with ICICI Bank NY, providing for borrowings and other credit accommodations of up to $8,500 (the “Maximum Amount”).
The ICICI Bank Credit Facility Agreement contemplates that ICICI Bank NY may extend the following loans and credit accommodations
to Cadista Pharmaceuticals to be used, depending upon the facility, for purchasing raw materials or capital equipment for its manufacturing
process or working capital purposes: revolving loans (“ICICI Bank Revolving Loans;” and the credit facility pursuant
to which such loans are issued, the “ICICI Bank Revolving Loan Credit Facility”); the issuance of letters of credit
for Cadista Pharmaceuticals account (the “ICICI Bank Letters of Credit Facility”); and a facility enabling Cadista
Pharmaceuticals to discount and receive payment for certain customer invoices (the “ICICI Bank Bill Discounting Facility”).
The ICICI Bank Credit Facility Agreement has a term that expires on the first anniversary of the agreement.



ICICI Bank
Revolving Loans are extended and required to be repaid so that the ICICI Bank Revolving Loans, together with the amounts drawn
under or due and owing under the ICICI Banks Letters of Credit Facility and the ICICI Bank Bill Discounting Facility, do not exceed
a specified percentage of the sum of (i) accounts receivable satisfying certain criteria and subject to certain adjustments and
(ii) inventory created and used in Cadista Pharmaceutical’s ordinary course of business. The ICICI Bank Letters of Credit
Facility provides for the issuance of letters of credit, with durations ending prior to the first anniversary of the ICICI Bank
Credit Facility Agreement. The ICICI Bank Bill Discounting Facility provides for advances, based upon invoices issued to specified
customers, subject to a sublimit per customer of $4,000 in the aggregate. The aggregate amount of loans and credit accommodations
that are provided under the three facilities is capped at the Maximum Amount.



23







If not
otherwise payable before, all amounts under all three facilities are due on the expiration date of the ICICI Bank Credit Facility
Agreement. The ICICI Bank Revolving Loans may be payable earlier on demand. Cadista Pharmaceuticals is required to promptly reimburse
ICICI Bank NY for all amounts drawn under the letters of credit, which reimbursement may be in the form of an ICICI Bank Revolving
Loan to the extent Cadista Pharmaceuticals is able to borrow such amount under the ICICI Bank Revolving Loan Credit Facility at
that time. Advances under the ICICI Bank NY’s Bill Discounting Facility are payable 120 days after the advance (or if earlier,
upon the demand for repayment of the ICICI Bank Revolving Loans).



Interest
on outstanding amounts of ICICI Bank Revolving Loans accrues at a rate equal to the three month LIBOR rate plus three and three-fourths
percent (3.75%) per annum. Interest on the outstanding amount of advances under the ICICI Bank Bill Discounting Facility accrues
at a rate equal to the three month LIBOR rate plus three (3%) per annum. Interest on both facilities is payable monthly.



The ICICI
Bank Credit Facility Agreement requires Cadista Pharmaceuticals to maintain as of March 31 and September 30 of each fiscal year:
(i) an asset coverage ratio equal to the “Bank’s Pro Rata Share of Borrower’s Assets” (as defined in the
ICICI Bank Credit Facility Agreement) divided by the amounts then outstanding under the ICICI Bank Credit Facility Agreement (and
the other credit documents executed in connection therewith) of not less than 1.40; and (ii) a ratio of its outstanding long-term
debt, plus outstanding amounts of working capital or short term debt of Cadista Pharmaceuticals, divided by “EBITDA”
(i.e. earnings before interest, taxes, depreciation, and amortization) of no more than 3.00. For purposes of the ICICI Bank NY
Credit Facility Agreement: the “Bank’s Pro Rata Share of Borrower’s Assets” is equal to the product of:
(x) 8.5 divided by 15 (which is the proportion that the Maximum Amount bears to the combined maximum amounts that may be borrowed
or credit accommodations provided under the SBNY Revolver and the ICICI Bank Credit Facility Agreement), and (y) Cadista Pharmaceutical’s
current assets. If Cadista Pharmaceutical’s financial statements reflect negative EBITDA for any six (6) month period, it
may be required to fund a reserve account with ICICI Bank in an amount equal to six (6) months of interest payable on the principal
amount outstanding under the ICICI Bank Credit Facility Agreement for the prior six (6) month period.



The ICICI
Bank Credit Facility Agreement contains various covenants, including: covenants restricting changes in control (including that
Jubilant Life Sciences Limited maintain at least a 51% equity interest in Cadista Pharmaceuticals ); upon ICICI Bank NY’s
request, requiring Cadista Pharmaceuticals to obtain a credit rating with respect to itself or the loan transactions; covenants
restricting the repayment of affiliate indebtedness; and other restrictions similar to those contained in the SBNY Credit Agreement.
All indebtedness of Cadista Pharmaceuticals to Cadista is subordinated to Cadista Pharmaceutical’s obligations to ICICI Bank
NY.



The ICICI
Bank NY Credit Facility is secured by Cadista Pharmaceutical’s goods, inventory, accounts receivable, contract rights and
current assets. ICICI Bank NY’s security interest ranks pari passu with the security interest of SBNY in the same assets.



Off-Balance Sheet Arrangements



We have
not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring
debt or operating our business. We do not have any material off-balance sheet arrangements that have, or are reasonably likely
to have, a current or future effect on our financial condition, net revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.



Critical Accounting Policies



Our critical
accounting policies are set forth in the Annual Report on Form 10-K for our fiscal year ended March 31, 2012, which contains our
audited financial statements for our fiscal year ended March 31, 2012. There has been no change, update or revision to our critical
accounting policies subsequent to our filing of such Form 10-K. The application of these accounting policies involves the exercise
of judgment and use of assumptions as to future uncertainties, and as a result, actual results could differ from these estimates.



Recent Accounting Pronouncements



See Note
1(b), “Summary of Significant Accounting Policies – Recent Accounting Pronouncements,” for a discussion of new
accounting guidance. The Company believes that there has not been and there will be no material impact of the adoption of these
new accounting pronouncements on its financial statements.



24







Item 3. Quantitative and Qualitative Disclosure
about Market Risk



Our market
risks relate primarily to changes in interest rates. Our bank credit facilities bear floating interest rates that are tied to LIBOR
and, therefore, our statements of operations and our cash flows will be exposed to changes in interest rates. A one percentage
point increase in LIBOR would cause an increase to the interest expense on our borrowings under our bank credit facility with SBNY
and ICICI of approximately Nil (based on outstanding balances at June 30, 2012). We historically have not engaged in interest rate
hedging activities related to our interest rate risk.



At June 30,
2012, we had cash and cash equivalents of $8,476, inclusive of restricted cash. These amounts are held primarily in cash and money
market funds. We do not enter into investments for trading or speculative purposes. The HSL Loan bears interest at a rate equal
to five percent (5%) per annum, has a current maturity date of November 30, 2012, and payment may be demanded at any time by us
upon 30 days’ prior notice. Due to the short-term nature of these investments, we believe that we do not have any material
exposure to changes in the fair value of our investment portfolio (including the HSL Loan) as a result of changes in interest rates.



While we
operate primarily in the U.S., we do have foreign currency considerations. We generally incur sales and pay our expenses in U.S.
Dollars. All of our vendors that supply us with API are located in a number of foreign jurisdictions, including India, and we believe
they generally incur their respective operating expenses in local currencies. As a result, these suppliers may be exposed to currency
rate fluctuations and experience an effective increase in their operating expenses in the event their local currency fluctuate
vis-à-vis the U.S. Dollar. In this event, such suppliers may elect to stop providing us with these services or attempt to
pass these increased costs back to us through increased prices for API sourcing that they supply to us. Historically we have not
used derivatives to protect against adverse movements in currency rates.



We do not have any
foreign currency or any other material derivative financial instruments.



Item 4. Controls
and Procedures



| | (a) | Evaluation of disclosure controls and procedures.
| | --- | -------------------------------------------------



The Company’s management,
with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The Company’s
disclosure controls and procedures are designed to provide reasonable assurance that information is recorded, processed, summarized
and reported accurately and on a timely basis in the Company’s periodic reports filed with the SEC. Based upon such evaluation,
the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective to provide such reasonable assurance. Notwithstanding the foregoing,
a control system, no matter how well designed and operated, can provide only reasonable, not absolute assurance that it will detect
or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s
periodic reports.



| | (b) | Changes in internal controls over financial reporting.
| | --- | ------------------------------------------------------



In the three months ended June
30, 2012, there has been no change in our internal controls over financial reporting that has materially affected, or is reasonably
likely to affect, our internal control over financial reporting.



25







PART II



OTHER INFORMATION



Item 6. Exhibits



| | 31.1 | Certification of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14 and 15d-14
of the Securities Exchange Act of 1934.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------



| | 31.2 | Certification of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14 and 15d-14
of the Securities Exchange Act of 1934.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------



| | 32.1 | Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|* | 101.1 | The following materials from Cadista’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2012 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated
Statements of Income, (iii) the Consolidated Statements of Cash Flows, and (iv) notes to the Consolidated Financial Statements.
|- | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



* To be filed by Amendment



26







SIGNATURES



Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|Date : August 17, 2012 | CADISTA HOLDINGS INC.  
|---------------------- | -----------------------
|                       |                        
|                       | By :  /s/ Scott Delaney
|                       | Scott Delaney          
|                       | Chief Executive Officer
|                       |                        
|                       | By : /s/ Kamal Mandan  
|                       | Kamal Mandan           
|                       | Chief Financial Officer



27







EXHIBIT INDEX



|  | EXHIBIT NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                        
|- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |             |  |                                                                                                                                                                                                                                                                                                                                                                    
|  | 31.1        |  | Certification of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934.                                                                                                                                                                                                                             
|  |             |  |                                                                                                                                                                                                                                                                                                                                                                    
|  | 31.2        |  | Certification of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934.                                                                                                                                                                                                                             
|  |             |  |                                                                                                                                                                                                                                                                                                                                                                    
|  | 32.1        |  | Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                  
|  |             |  |                                                                                                                                                                                                                                                                                                                                                                    
|* | 101.1       |  | The following materials from Cadista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Cash Flows, and (iv) notes to the Consolidated Financial Statements.



* To be filed by Amendment





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