This Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements which are not historical facts made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not promises or guarantees and investors are cautioned that all forward-looking statements involve risks and uncertainties, including but not limited to the impact of competitive products and pricing, product demand and market acceptance, new product development, the regulatory environment, including without limitation, reliance on key strategic alliances, availability of raw materials, fluctuations in operating results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These statements are based on management's current expectations and are naturally subject to uncertainty and changes in circumstances. We caution you not to place undue reliance upon any such forward-looking statements which speak only as of the date made. Hi-Tech is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JULY 31, 2012 AND 2011

Revenue



                         July 31, 2012       July 31, 2011         Change         % Change
 Hi-Tech Generics       $    45,922,000     $    48,969,000     $ (3,047,000 )           (6 )%
 Health Care Products         3,026,000           3,535,000         (509,000 )          (14 )%
 ECR Pharmaceuticals          3,095,000           3,707,000         (612,000 )          (17 )%

 Total                  $    52,043,000     $    56,211,000     $ (4,168,000 )           (7 )%

Net sales of Hi-Tech generic pharmaceutical products decreased primarily due to lower sales of Fluticasone Propionate nasal spray which decreased to $22,000,000 from $26,200,000 in the comparable quarter as the Company sold more units at a lower average price. In January 2012, a fourth competitor entered the generic Fluticasone Propionate nasal spray market which may lead to additional price reductions for this product. The Company also experienced lower volumes and prices on Dorzolamide products during the quarter ended July 31, 2012. Partially offsetting these declines were sales of new products such as Lidocaine sterile jelly, launched in September 2011, Nystatin oral suspension, launched in February 2012 and Lidocaine 5% ointment, launched in March 2012.

Net sales of the Health Care Products division, which markets the Company's branded OTC products, decreased due to end customer discounts and promotional pricing on Nasal Ease ®. Sales of Multibetic®, Diabetiderm®, and Diabetic Tussin® declined as well. These declines were partially offset by sales of our new product Sinus Buster ®, acquired in March 2012.

Net sales of ECR Pharmaceuticals, which sells branded prescription products, declined due to the discontinuation of Lodrane® extended release antihistamines. ECR Pharmaceuticals stopped shipping the Lodrane® products as of August 31, 2011. Sales of the discontinued Lodrane® products amounted to approximately $2,400,000 for the three months ended July 31, 2011. Increased sales of Bupap® and Dexpak® and sales from newly acquired Tussicaps® and Orbivan® partially offset the decrease in sales for the period.

Cost of Goods Sold

The increase in cost of goods sold as a percentage of net sales is primarily due to pricing declines for both Fluticasone Propionate nasal spray and Dorzolamide ophthalmic products. The Company anticipates that the cost to manufacture Fluticasone Propionate nasal spray will decline in the second half of the fiscal year due to lower input costs and new manufacturing equipment which will enable productivity improvements. Additionally, consumer discounts lowered margins in the HCP division.

Expense Items



                                    July 31, 2012          July 31, 2011            Change            % Change
Selling, general and
administrative expense             $    10,631,000        $     8,796,000        $  1,835,000                21 %
Amortization expense               $     1,757,000        $       775,000        $    982,000               127 %
Research and product
development costs                  $     4,472,000        $     3,399,000        $  1,073,000                32 %
Royalty income                     $      (635,000 )      $      (566,000 )      $    (69,000 )              12 %
Contract research income           $            -         $       (27,000 )      $     27,000              (100 )%
Interest expense                   $       156,000        $        15,000        $    141,000               940 %
Interest income and other          $       (46,000 )      $       (24,000 )      $    (22,000 )              92 %
Provision for income tax
expense                            $     2,982,000        $     7,095,000        $ (4,113,000 )             (58 )%

The increase in selling, general and administrative expenses was primarily due to 30 contract sales representatives hired in October 2011 in the ECR subsidiary to expand its sales force to new areas of the country. These 30 representatives were terminated at the end of July 2012.

Amortization expense increased due to intangible asset purchases over the last year including Tussicaps ®, purchased in August 2011 and Sinus Buster®, purchased in March 2012.

Advertising expense increased to $1,861,000 in the quarter ended July 31, 2012 from $1,339,000 in the quarter ended July 31, 2011 primarily in the HCP division to support the re-launch of Nasal Ease©.

The increase in Research and Development expenditures is due to increased spending on internal projects for the generic division, which include four projects that require clinical trails. Three of these projects requiring clinical trails were undertaken in partnership with other companies. Spending included licensing fees and expenses paid to third parties for the new project requiring clinical trails.

Royalty income was relatively flat, but will decrease in the future as royalties on sales of certain products divested by its previously owned Midlothian division came to an end in June 2012.

The effective tax rate declined to approximately 33% from 34% as the Company recorded a higher benefit from the exercise of stock options in the current period.

Income Analysis



                                      July 31, 2012         July 31, 2011           Change         % Change
Net income                           $     6,004,000       $    13,773,000       $ (7,769,000 )          (56 )%
Basic earnings per share             $          0.46       $          1.08       $      (0.62 )          (57 )%
Diluted earnings per share           $          0.44       $          1.05       $      (0.61 )          (58 )%
Weighted average common shares
outstanding, basic                        13,069,000            12,726,000            343,000              3 %
Effect of potential common
shares                                       481,000               423,000             58,000             14 %
Weighted average common shares
outstanding, diluted                      13,550,000            13,149,000            401,000              3 %

Shares outstanding increased due to the exercise of options and the current year stock option grant.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations are historically financed principally by cash flow from operations. At July 31, 2012 and April 30, 2012, working capital was approximately $177,504,000 and $167,565,000, respectively, an increase of $9,939,000 during the three months ended July 31, 2012.

Cash flows provided by operating activities were approximately $4,043,000 which is primarily due to net income in the period and a decrease in accounts receivable. Accounts payable decreased by $6,927,000 due to the timing of payments for raw materials.

Cash flows used in investing activities were $1,310,000 and were mostly for capital expenditures primarily related to capacity expansion at the Company's Amityville and Copiague facilities.

Cash flows provided by financing activities of $1,969,000 related primarily to the proceeds from exercise of stock options and the related tax benefits.

The Company believes that its financial resources consisting of current working capital and anticipated future operating revenue will be sufficient to enable it to meet its working capital requirements for at least the next 12 months. Additionally, the Company has a $10,000,000 revolving line of credit with JPMorgan Chase which remains undrawn, and an additional $3,491,000 of the equipment financing line from JPMorgan Chase. The revolving line of credit agreement expires May 27, 2013, while borrowings under the equipment line mature October 6, 2016.

REVOLVING CREDIT FACILITY

The Company entered into a Revolving Credit Agreement, effective as of June 1, 2010, with JPMorgan Chase (the "Revolving Credit Agreement"). The Revolving Credit Agreement permits the Company to borrow up to $10,000,000 pursuant to a revolving credit note ("Revolving Credit Note") for, among other things within certain sublimits, general corporate purposes, acquisitions, research and development projects and future stock repurchase programs. Loans shall bear interest at a rate equal to, at the Company's option, in the case of a CB Floating Rate Loan, as defined in the Revolving Credit Agreement, the Prime Rate, as defined in the Revolving Credit Agreement; provided that, the CB Floating Rate shall never be less than the Adjusted One Month LIBOR, or for a LIBOR Loan, at a rate equal to the Adjusted LIBOR plus the Applicable Margin, as such terms are defined in the Revolving Credit

Agreement. The Revolving Credit Agreement contains covenants customary for agreements of this type, including covenants relating to a liquidity ratio, a debt service coverage ratio and a minimum consolidated net income. Borrowings under the Revolving Credit Agreement mature on May 27, 2013.

If an event of default under the Revolving Credit Agreement shall occur and be continuing, the commitments under the Revolving Credit Agreement may be terminated and the principal amount outstanding under the Revolving Credit Agreement, together with all accrued unpaid interest and other amounts owing under the Revolving Credit Agreement and related loan documents, may be declared immediately due and payable.

The Company also entered into a $5,000,000 equipment financing agreement with JPMorgan Chase on June 1, 2010. This agreement has similar interest rates. On June 15, 2010 the Company drew down $621,000 of the equipment financing line to fund a down payment for new filling and packaging equipment. On October 13, 2011, the Company borrowed an additional $1,155,000 to finance the remaining payments for the equipment. Total borrowings under the equipment financing agreement amount to $1,509,000 as of July 31, 2012. Borrowings under the equipment financing agreement are payable in monthly installments of $30,000 through October 6, 2016.

The Company may not declare or pay dividends or distributions, other than dividends payable solely in capital stock, so long as the Revolving Credit Note remains unpaid.

RECENT ACCOUNTING PRONOUNCEMENTS:

In December 2011, the FASB updated the accounting guidance relating to offsetting assets and liabilities in financial statements. The updated guidance requires companies to disclose both gross and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The updated guidance is effective for the Company beginning in the third quarter of fiscal year 2013. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

In July 2012, the FASB issued accounting guidance to simplify the testing for a drop in value of indefinite-lived intangible assets. Under the updated guidance, an entity has the option of first performing a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired before proceeding to the quantitative impairment test under which it would calculate the asset's fair value. When performing the qualitative assessment, the entity must evaluate events and circumstances that may affect the significant inputs used to determine the fair value of the indefinite-lived intangible asset. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We do not expect this guidance to have a material impact on our financial statements.

SEASONALITY

The Company's largest selling product is Fluticasone Propionate nasal spray, an allergy medication. Sales of Fluticasone Propionate nasal spray vary from quarter to quarter due to the stronger demand for the product during the spring and fall allergy seasons. The Company also sells cough, cold and flu products which have historically experienced stronger net sales in September through March. The cough, cold and flu season in the late 2011 and early 2012 period was particularly mild. Allergy seasons and cough, cold and flu seasons vary from year to year and because of these changes in product mix and product seasonality, period-to-period comparisons within the same fiscal year are not necessarily meaningful and should not be relied on as indicative of future results.

CRITICAL ACCOUNTING POLICIES

In preparing financial statements in conformity with generally accepted accounting principles in the United States of America, we are required to make estimates and assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses for the reporting period covered thereby. As a result, these estimates are subject to an inherent degree of uncertainty. We base our estimates and judgments on our historical experience, the terms of existing contracts, our observance of trends in the industry, information that we obtain from our customers and outside sources, and on various assumptions that we believe to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments which impact our reported operating results and the carrying values of assets and liabilities. These assumptions include but are not limited to the percentage of new products which may have chargebacks and the percentage of items which will be subject to price decreases. Actual results may differ from these estimates.

Revenue recognition and accounts receivable, adjustments for returns and price adjustments, allowance for doubtful accounts and carrying value of inventory represent significant estimates made by management.

Revenue Recognition and Accounts Receivable: Revenue is recognized for product sales upon shipment and when title and risk of loss is passed to the customer and when estimates of discounts, rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments are reasonably determinable, collection is reasonably assured and the Company has no further

performance obligations. These estimates are presented in the financial statements as reductions to net revenues and accounts receivable. Estimated sales returns, allowances and discounts are provided for in determining net sales. Contract research income is recognized as work is completed and billable costs are incurred. In certain cases, contract research income is based on attainment of designated milestones.

Royalty income is related to the sale or use of our products under license agreements with third parties. For those agreements where royalties are reasonably estimable, the Company recognizes revenue based on estimates of royalties earned during the applicable period.

Adjustments for Returns and Price Adjustments: Our product revenues are typically subject to agreements with customers allowing chargebacks, rebates, rights of return, pricing adjustments and other allowances. Based on our agreements and contracts with our customers, we calculate adjustments for these items when we recognize revenue and we book the adjustments against accounts receivable and revenue. Chargebacks, primarily from wholesalers, are the most significant of these items. Chargebacks result from arrangements we have with retail customers establishing prices for products for which the end user independently selects a wholesaler from which to purchase. A chargeback represents the difference between our invoice price to the wholesaler, which is typically stated at wholesale acquisition cost, and the end customer's contract price, which is lower. We credit the wholesaler for purchases by end customers at the lower price. Therefore, we record these chargebacks at the time we recognize revenue in connection with our sales to wholesalers.

The reserve for chargebacks is computed in the following manner. The Company obtains wholesaler inventory data for the wholesalers which represent approximately 95% of our chargeback activity. This inventory is multiplied by the historical percentage of units that are charged back and by the price adjustment per unit to arrive at the chargeback accrual. This calculation is performed by product for each customer.

The calculated amount of chargebacks could be affected by other factors such as:

• A change in retail customer mix

• A change in negotiated terms with retailers

• Product sales mix at the wholesaler

• Retail inventory levels

• Changes in Wholesale Acquisition Cost (WAC)

The Company continually monitors the chargeback activity and adjusts the provisions for chargebacks when we believe that the actual chargebacks will differ from our original provisions.

Consistent with industry practice, the Company maintains a return policy that allows our customers to return product within a specified period. The Company's estimate for returns is based upon its historical experience with actual returns. While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of future returns. The Company continually monitors its estimates for returns and makes adjustments when it believes that actual product returns may differ from the established accruals.

Included in the adjustment for sales allowances and returns is a reserve for credits taken by our customers for rebates, return authorizations and other.

Sales discounts are granted for prompt payment. The reserve for sales discounts is based on invoices outstanding and assumes that 100% of available discounts will be taken.

Price adjustments, including shelf stock adjustments, are credits issued from time to time to reflect decreases in the selling prices of our products which our customer has remaining in its inventory at the time of the price reduction. Decreases in our selling prices are discretionary decisions made by us to reflect market conditions. Amounts recorded for estimated price adjustments are based upon specified terms with direct customers, estimated launch dates of competing products, estimated declines in market price and inventory held by the customer. The Company analyzes this on a case by case basis and makes adjustments to reserves as necessary.

The Company adequately reserves for chargebacks, discounts, allowances and returns in the period in which the sales takes place. No material amounts included in the provision for chargebacks and the provision for sales discounts recorded in the current period relate to sales made in the prior periods. The current provision for sales allowances and returns includes reserves for items sold in the current period, while the ending balance includes reserves for items sold in the current and prior periods. The Company has substantially and consistently used the same estimating methods. We continue to refine the methods as new data becomes available. There have been no material differences between the estimates applied and actual results.

The Company determines amounts that are material to the financial statements in consideration of all relevant circumstances including quantitative and qualitative factors. Among the items considered is the impact on individual financial statement classification, operating income and footnote disclosures and the degree of precision that is attainable in estimating judgmental items.

The following table presents the roll forward of each significant estimate as of July 31, 2012 and July 31, 2011 and for the three months then ended, respectively.

                                                    Beginning                           Actual Credits          Ending
                                                     Balance           Current            in Current           Balance
For the three months ended July 31, 2012              May 1           Provision             Period             July 31
Chargebacks                                        $ 10,477,000      $ 38,460,000      $    (35,221,000 )    $ 13,716,000
Sales discounts                                       1,813,000         2,337,000            (2,230,000 )       1,920,000
Sales allowances & returns                            5,745,000        13,787,000           (10,344,000 )       9,188,000

Total adjustment for returns & price allowances    $ 18,035,000      $ 54,584,000      $    (47,795,000 )    $ 24,824,000


For the three months ended July 31, 2011
Chargebacks                                        $  8,588,000      $ 34,908,000      $    (31,422,000 )    $ 12,074,000
Sales discounts                                       2,353,000         2,275,000            (2,900,000 )       1,728,000
Sales allowances & returns                            6,159,000         7,193,000            (5,787,000 )       7,565,000

Total adjustment for returns & price allowances    $ 17,100,000      $ 44,376,000      $    (40,109,000 )    $ 21,367,000

Allowance for Doubtful Accounts: We have historically provided credit terms to customers in accordance with what management views as industry norms. Financial terms for credit-approved customers are generally on either a net 30, 60 or 90 day basis, though most customers are entitled to a prompt payment discount. Management periodically and regularly reviews customer account activity in order to assess the adequacy of allowances for doubtful accounts, considering factors such as economic conditions and each customer's payment history and creditworthiness. If the financial condition of our customers were to deteriorate, or if they were otherwise unable to make payments in accordance with management's expectations, we would have to increase our allowance for doubtful accounts.

Inventories: We state inventories at the lower of average cost or market, with cost being determined based upon the average method. In evaluating whether inventory is to be stated at cost or market, management considers such factors as the amount of inventory on hand, estimated time required to sell existing inventory and expected market conditions, including levels of competition. We establish reserves for slow-moving and obsolete inventories based upon our historical experience, product expiration dates and management's assessment of current product demand.

Intangible Assets: The Company's intangible assets consist primarily of acquired product rights. Intangible assets are stated at cost and amortized using the straight line method over the expected useful lives of the product rights. We regularly review the appropriateness of the useful lives assigned to our product rights taking into consideration potential future changes in the markets for our products. The Company reviews each intangible asset with finite useful lives for impairment by comparing the undiscounted cash flows of each asset to the respective carrying value. The Company performs this impairment testing when events occur or circumstances change that would more likely than not reduce the undiscounted cash flows of the asset below its carrying value.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

The Company's contractual obligations and commitments are detailed in the Company's Annual Report on Form 10-K for the year ended April 30, 2012. As of July 31, 2012, the Company's remaining contractual obligations have not materially changed since April 30, 2012.

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of July 31, 2012 we are not involved in any material unconsolidated transactions.