ELITE PHARMACEUTICALS INC /NV/ 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations for the six months ended September 30, 2025 and 2024 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended March 31, 2025. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. Unless expressly indicated or the context requires otherwise, the terms “Elite”, the “Company”, “we”, “us”, and “our” refer to Elite Pharmaceuticals, Inc. and subsidiary. Background Elite Pharmaceuticals, Inc., a Nevada corporation (the “Company”, “Elite”, “Elite Pharmaceuticals”, the “registrant”, “we”, “us” or “our”) was incorporated on October 1, 1997 under the laws of the State of Delaware, and its wholly-owned subsidiary, Elite Laboratories, Inc. (“Elite Labs”), was incorporated on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of Nevada. We are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, and the manufacture of generic pharmaceuticals. Our strategy includes developing generic versions of controlled-release drug products with high barriers to entry. We occupy manufacturing, warehouse, laboratory and office space at 135, 144 and 165 Ludlow Avenue in Northvale, NJ (the “Northvale Facility”). The Northvale Facility operates under Current Good Manufacturing Practice and is a United States Drug Enforcement Agency registered facility for research, development, and manufacturing. We are also party to an operating lease for office space at Pompano Beach, Florida. Strategy We focus our efforts on the following areas: (i) manufacturing of a line of generic pharmaceutical products with approved Abbreviated New Drug Applications (“ANDAs”); (ii) development of additional generic pharmaceutical products; (iii) development of the other product candidates in our pipeline including products co-developed with partners; (iv) commercial exploitation of our products either by sales under our own label, license and the collection of royalties, or through the manufacture of our formulations; and (v) development of new products for sale under our own label, and the expansion of our licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations. We continue to evaluate opportunities for the development of various types of drug products, including branded drug products which require New Drug Applications (“NDAs”) under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration Act of 1984 as well as generic drug products which require ANDAs. We believe that our business strategy enables us to reduce our risk by having a diverse product portfolio. Recent Developments On April 30, 2025 the Company announced the commercial launch of its generic version of Percocet® (Oxycodone hydrochloride and acetaminophen tablets, “Oxy APAP”). Oxy APAP is indicated for the relief of moderate to moderately severe pain. On June 16, 2025, the Company reported positive results from a pivotal bioequivalence study for an undisclosed anticoagulant generic drug problem. IQVIA, a legal global provider of advanced analytics, technology solutions, and clinical research services to the life sciences industry, reported branded product sales of Percocet® for the twelve months ending April 2025 of $27 billion. There is no generic product on the market, and the brand has an unexpired patent listed in the Orange Book. Commercialization of a generic product depends on successful filing, United States Food and Drug Administration (“FDA”) approval, and addressing the unexpired patent. The studies conducted were open-label, randomized, balanced, single oral dose, two-treatment, two-period, two-sequence, crossover bioequivalence studies in normal, healthy, adult, human subjects under fasting conditions. The results indicated that the generic product is bioequivalent to the branded product. The Company is compiling the data for this product to file an ANDA with the FDA. On November 12, 2025, the Company announced that it received approval from the FDA for an ANDA for a generic version of Requip XL ® (Ropinirole Extended-Release Tablets USP), with strengths of 2mg, 4mg, 6mg, 8mg and 12mg tablets. Ropinirole belongs to a class of drugs known as non-ergoline dopamine agonist used to treat symptoms of Parkinson’s disease. This product will be marketed and sold under the Elite Laboratories, Inc. label. 1 Commercial Products We own, license, contract manufacture or have contractual rights to receive royalties from the following products currently approved for commercial sale: Product Branded Product Equivalent Therapeutic Category Launch Date Phentermine HCl 37.5mg tablets (“Phentermine 37.5mg”) Adipex-P® Bariatric April 2011 Phendimetrazine Tartrate 35mg tablets (“Phendimetrazine 35mg”) Bontril® Bariatric November 2012 Phentermine HCl 15mg and 30mg capsules (“Phentermine 15mg” and “Phentermine 30mg”) Adipex-P® Bariatric April 2013 Naltrexone HCl 50mg tablets (“Naltrexone 50mg”) Revia® Pain September 2013 Isradipine 2.5mg and 5mg capsules (“Isradipine 2.5mg” and “Isradipine 5mg”) N/A Cardiovascular January 2015 Trimipramine Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine 100mg”) Surmontil® Antidepressant May 2017 Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg” and “Amphetamine IR 30mg”) Adderall® Central Nervous System (“CNS”) Stimulant April 2019 Dantrolene Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”) Dantrium® Muscle Relaxant June 2019 Dextroamphetamine Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and 30mg capsules (“Amphetamine ER 5mg”, “Amphetamine ER 10mg”, “Amphetamine ER 15mg”, “Amphetamine ER 20mg”, “Amphetamine ER 25mg”, and “Amphetamine ER 30mg”) Adderall XR® Central Nervous System (“CNS”) Stimulant March 2020 Loxapine Succinate 5mg, 10mg, 25mg and 50gm capsules (“Loxapine 5mg”, “Loxapine 10mg”, “Loxapine 25mg”, and Loxapine 50mg”) Loxapine® Antipsychotic May 2021 Methotrexate Sodium 2.5mg tablets (“Methotrexate 2.5mg”) Otrexup PF® Antimetabolite August 2024 Acetaminophen and Codeine Phosphate 300mg/15mg, 300mg/30mg, 300mg/60mg tablets (“APAP Codeine 300mg/15mg”, “APAP Codeine 300mg/30mg”, and “APAP Codeine 300mg/60mg”) Tylenol® with Codeine Pain October 2024 Acetaminophen and Hydrocodone Bitartrate 325mg/2.5mg, 325mg/5mg, 325mg/7.5mg and 325mg/10mg tablets (“APAP Hydrocodone 325mg/2.5mg”, “APAP Hydrocodone 325mg/5mg”, APAP Hydrocodone 325mg/7.5mg and APAP Hydrocodone 325mg/10mg”) Norco® Pain December 2024 Lisdexamfetamine Dimesylate 10mg, 20mg, 30mg, 40mg, 50mg, 60mg and 70mg capsules (“Lisdex 10mg”, “Lisdex 20mg”, “Lisdex 30mg”, “Lisdex 40mg”, “Lisdex 50mg”, “Lisdex 60mg” and “Lisdex 70mg”) Vyvanse® ADHD December 2024 Oxycodone Hydrochloride and Acetaminophen 5mg/325mg, 7.5mg/325mg and 10mg/325mg tablets (“Oxy APAP 5/325”, “Oxy APAP 7.5/325” and “Oxy APAP 10/325”) Percocet® Pain April 2025 2 Products Under FDA Review SequestOx™ - Immediate Release Oxycodone with sequestered Naltrexone SequestOx™ is our abuse-deterrent candidate for the management of moderate to severe pain where the use of an opioid analgesic is appropriate. SequestOx™ is an immediate-release Oxycodone Hydrochloride containing sequestered Naltrexone which incorporates 5mg, 10mg, 15mg, 20mg and 30mg doses of oxycodone into capsules. In January 2016, the Company submitted a 505(b)(2) NDA for SequestOx™, after receiving a waiver of the $2.3 million filing fee from the FDA. In March 2016, the Company received notification of the FDA’s acceptance of this filing and that such filing has been granted priority review by the FDA with a target action under the Prescription Drug User Fee Act (“PDUFA”) of July 14, 2016. On July 15, 2016, the FDA issued a Complete Response Letter, (“CRL”), regarding the NDA. The CRL stated that the review cycle for the SequestOx™ NDA was complete and the application is not ready for approval in its present form. On July 7, 2017, the Company reported topline results from a pivotal bioequivalence fed study for SequestOx™. The mean Tmax (the amount of time that a drug is present at the maximum concentration in serum) of SequestOx™ was 4.6 hr. with a range of 0.5 hr. to 12 hr. and the mean Tmax of the comparator, Roxicodone®, was 3.4 hr. with a range of 0.5 hr. to 12 hr. A key objective for the study was to determine if the reformulated SequestOx™ had a similar Tmax to the comparator when taken with a high fat meal. Based on these results, the Company paused clinical trials for this formulation of SequestOx™. On January 30, 2018, the Company reported positive topline results from a pilot study conducted for a modified SequestOx™ wherein, based on the results of this pilot study, the modified SequestOx™ formulation is expected to achieve bioequivalence with a Tmax range equivalent to the reference product when conducted in a pivotal trial under fed conditions. The Company has provided the pilot data to the FDA, requesting clarification as to the requirements for resubmission of the NDA. The FDA has provided guidance for repeated bio-equivalence studies in order to bridge the new formulation to the original SequestOx™ studies. Due to the prohibitive cost of such repeated bio-equivalence studies and the uncertain commercial viability given the regulatory and competitive landscape, the Company has paused development of this product candidate. There can be no assurances of the Company conducting future clinical trials, or if such trials are conducted, there can be no assurances of the success of any future clinical trials, or if such trials are successful, there can be no assurances that an intended future resubmission of the NDA product filing, if made, will be accepted by or receive marketing approval from the FDA. In addition, even if marketing authorization is received, there can be no assurances that there will be future revenues or profits, or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments made to secure this marketing authorization. Generic Products Filed Currently the Company has filed the following ANDA’s which have been accepted for review by the FDA: ● Generic dopamine agonist accepted for review in December 2022 ● Generic opiate analgesic for pain management accepted for review in September 2023 Approved Products Not Yet Commercialized Doxycycline Hyclate Tablets The Company received approval in April 2022 from the FDA of an ANDA for a generic version of an antibiotic product, Doxycycline Hyclate Tablets. The product is jointly owned by Elite and Praxgen Pharmaceuticals LLC, formerly SunGen Pharma LLC, (“Praxgen”). Methadone Hydrochloride Tablets Pursuant to the Nostrum Asset Purchase Agreement, dated June 17, 2024, by and between the Company and Nostrum Laboratories Inc., the Company acquired all rights in and to the approved ANDA for Methadone Hydrochloride Tablets and a royalty-free, non-exclusive perpetual license to use the manufacturing technology, proprietary information, processes, techniques, protocols, methods, know-how and improvements necessary or used to manufacture this product. Ropinirole Extended-Release Tablets USP On November 12, 2025, the Company announced, that it received approval from the FDA for a generic version of Requip XL® (Ropinirole Extended-Release Tablets USP), with strengths of 2 mg, 4 mg, 6 mg, 8 mg, and 12 mg tablets. Ropinirole belongs to a class of drugs known as a non-ergoline dopamine agonist used to treat symptoms of Parkinson’s disease. This product will be marketed and sold under the Elite Laboratories, Inc. label. There can be no assurances in relation to any of the above approved products not yet commercialized, that there will be future revenues of profits, or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments made to secure these marketing authorizations. 3 Discontinued and Transferred Products As part of standard operating practices, the Company, from time to time, as relevant, conducts evaluations of all ANDAs owned, consisting, without limitation, of ANDAs acquired or approved prior to the quarter ended September 30, 2025 and ANDAs acquired or approved during the quarter ended September 30, 2025. Such evaluations include, without limitation, costs and benefits analyses relating to each ANDA owned, with such costs including those fees required under the FDA’s Generic Drug User Fee Amendment which is significantly influenced by the number of ANDAs owned, and other costs and benefits taking into consideration various specific market factors for each ANDA. Those ANDAs with a cost/benefit profile not consistent with management criteria for continuation are identified for disposition and effort is made to determine the optimal course of action to achieve disposition of the ANDA. The Company did not discontinue or transfer an ANDAs during the quarter ended September 30, 2025. Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, costs and expenses and related disclosures. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. The following discussion addresses our most critical accounting estimates, which are those that are both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates. Revenue Recognition - Manufacturing Fees The Company’s revenues are offset by variable consideration, which may include, without limitation, chargebacks, distribution fees, rebates, group purchasing organization fees, prompt payment cash discounts, consideration payable to the customer, billbacks, Medicaid and other government pricing programs, price protection and shelf stock adjustments, sales returns and profit shares. The Company’s estimates for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a change in the amount of total consideration it expects to receive as well as updating estimate assumptions to reflect current and/or historical trends. Like most competitors in this market, our marketing partners also give credits for chargebacks to wholesalers that have contracts with our marketing partners, prospectively, for their sales to hospitals, group purchasing organizations, pharmacies, or other customers. We do the same in the case of prospective direct sales made by us. A chargeback is the difference between the price the wholesaler pays and the price that the wholesaler’s end-customer pays for a product. Although, our marketing partners establish, and prospectively we would also establish reserves based on prior experience and best estimates of the impact that these policies may have in subsequent periods, we cannot ensure that such reserves established are adequate or that actual product returns, rebates, allowances, and chargebacks will not exceed estimates. Differences between established reserves and actual amounts of such credits and charges, could result in a material adverse effect on our business, financial condition, results of operations, cash flow and stock price. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not be realizable in the future. On July 4, 2025, tax legislation known as the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The Company has evaluated the impact of U.S. tax law changes introduced by OBBBA on our consolidated financial statements and the impact to the current year’s financial statements is not material. 4 Results of Operations The following set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results. Three months ended September 30, 2025 compared to the three months ended September 30, 2024 Revenue, Cost of manufacturing and Gross profit: For the Three Months Ended September 30, Change 2025 2024 Dollars Percentage Manufacturing fees $ 36,196,254 $ 18,225,190 $ 17,971,064 99 % Licensing fees 125,450 655,155 (529,705 ) (81 )% Total revenue 36,321,704 18,880,345 17,441,359 92 % Cost of manufacturing 22,248,671 10,682,917 11,565,754 108 % Gross profit $ 14,073,033 $ 8,197,428 $ 5,875,605 72 % Gross profit - percentage 39 % 43 % Total revenues for the three months ended September 30, 2025 increased by $17.4 million or 92%, to $36.3 million, as compared to $18.9 million, for the corresponding period of the prior year. Manufacturing fees revenue increased by $18.0 million, or 99%, to $36.2 million primarily due to revenues relating to increased revenues from the Elite label products that were commercialized in both the current period and comparable period of the prior year as well as sales of new products, including, without limitation, the Lisdexamfetamine products, which were commercially launched subsequent to the comparable period of the prior year and are expected to continue in periods subsequent to September 30, 2025. Licensing fees revenue decreased by $529,705, or 81%. This decrease is primarily due to the Company’s transitioned focus on marketing of the Elite label products, which does not result in license fee revenues. The Company’s last remaining licensing agreement expired in accordance with its terms on September 10, 2025. Accordingly, other than minimal residual licensing fees that may be received prospectively, there is no contractual framework in place for achieving license fees revenues going forward. Cost of manufacturing consists of manufacturing and assembly costs. Our cost of manufacturing increased by $11.6 million or 108%, to $22.2 million as compared to $10.7 million for the corresponding period in the prior fiscal year. This increase was due to an increased volume of products sold during the three months ended September 30, 2025, as compared to the comparable period of the prior fiscal year, as noted above. Our gross profit margin was 39% during the three months ended September 30, 2025 as compared to 43% during the comparable period of the prior fiscal year. The decrease is primarily due to sales in the current quarter consisting of a higher proportion of indirect sales through wholesalers, which yield lower gross profit margins as compared to direct sales to pharmaceutical chains, as compared to the proportion of indirect sales through wholesalers achieved during the comparable period of the prior year. Operating expenses: For the Three Months Ended September 30, Change 2025 2024 Dollars Percentage Operating expenses: Research and development $ 1,385,306 $ 1,966,094 $ (580,788 ) (30 )% General and administrative 4,029,199 2,273,744 1,755,455 77 % Non-cash compensation 49,918 52,329 (2,411 ) (5 )% Depreciation and amortization 394,864 420,318 (25,454 ) (6 )% Total operating expenses $ 5,859,287 $ 4,712,485 $ 1,146,802 24 % Operating expenses for the three months ended September 30, 2025 increased by $1.1 million, or 24%, to $5.9 million as compared to $4.7 million for the corresponding period in the prior fiscal year, largely due to an increase in general and administrative costs of $1.8 million, offset by a decrease in research and development expenses of $0.6 million Research and development costs during the three months ended September 30, 2025 were $1.4 million, a decrease of $0.6 million, or 30%, from approximately $2.0 million of such costs for the comparable period of the prior year. The decrease was the result of more laboratory resources being allocated to supporting commercial operations as well as the number, timing and nature of product development activities during the three months ended September 30, 2025, as compared to the comparable period of the prior fiscal year. General and administrative expenses for the three months ended September 30, 2025 were $4.0 million, an increase of $1.8 million or approximately 77% from the comparable period of the prior fiscal year. This increase is due to largely due to increased human resource costs resulting from increased headcounts as well as increased costs of financial, tax and other regulatory compliance costs as compared to the comparable period of the prior year. Non-cash compensation expense for the three months ended September 30, 2025 and 2024 was less than $0.1 million. 5 Depreciation and amortization expenses from the three months ended September 30, 2025 were $0.4 million, essentially flat as compared to $0.4 million for the comparable period in the prior fiscal year. As a result of the foregoing, our income from operations during the three months ended September 30, 2025 was $8.2 million, compared to income from operations of $3.5 million for the comparable period of the prior fiscal year. Other income (expense): For the Three Months Ended September 30, Change 2025 2024 Dollars Percentage Other income (expenses): Change in fair value of derivative financial instruments - warrants $ 7,519,649 $ (12,754,735 ) $ 20,274,384 (159 )% Interest expense and amortization of debt issuance costs (82,470 ) (255,136 ) 172,666 (68 )% Interest income 4,922 5,902 (980 ) (17 )% Other income 34,500 — 34,500 — % Other income (expenses), net $ 7,476,601 $ (13,003,969 ) $ 20,480,570 (157 )% Net other income (expenses) for the three months ended September 30, 2025 was $7.5 million, an increase in net other income of $20.5 million from a net other (expense) of $13.0 million for the comparable period of the prior fiscal year. The increase in net other income was primarily due to an increase of $20.3 million relating to the change in fair value of derivative financial instruments and a decrease in interest expense of $0.2 million, as compared to the comparable period of the prior year. The change in the fair value of derivative instruments is determined in large part by the change in the closing price of the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse relationship between changes in the closing price of the Company’s Common Stock and other income or (expense) being recorded. The decrease in interest expense is primarily related to the Company servicing a lesser principal amount of loans payable during the three months ended September 30, 2025 as compared to the comparable period of the prior year. As a result of the foregoing, our net income before income taxes for the three months ended September 30, 2025 was $15.7 million, compared to net loss before income taxes of $9.5 million for the comparable period of the prior fiscal year. Six months ended September 30, 2025 compared to the six months ended September 30, 2024 Revenue, Cost of manufacturing and Gross profit: For the Six Months Ended September 30, Change 2025 2024 Dollars Percentage Manufacturing fees $ 75,974,017 $ 36,669,108 $ 39,304,909 107 % Licensing fees 558,784 1,014,300 (455,516 ) (45 )% Total revenue 76,532,801 37,683,408 38,849,393 103 % Cost of manufacturing 35,233,798 21,011,202 14,222,596 68 % Gross profit $ 41,299,003 $ 16,672,206 $ 24,626,797 148 % Gross profit - percentage 54 % 44 % Total revenues for the six months ended September 30, 2025 increased by $38.8 million or 103%, to $76.5 million, as compared to $37.7 million, for the corresponding period of the prior year. Manufacturing fees revenue increased by $39.3 million, or 107%, primarily due to revenues relating to increased revenues from the Elite label products that were commercialized in both the current period and comparable period of the prior year as well as sales of new products, including, without limitation, the Lisdexamfetamine products, which were commercially launched subsequent to the comparable period of the prior year and are expected to continue in periods subsequent to September 30, 2025. Licensing fees revenue decreased by $0.5 million, or 45%. This decrease is primarily due to the Company’s transitioned focus on marketing of the Elite label, which does not result in license fee revenues. The Company’s last remaining licensing agreement expired in accordance with its terms on September 10, 2025. Accordingly, other than minimal residual licensing fees that may be received prospectively, there is no contractual framework in place for achieving license fees revenues going forward. 6 Cost of manufacturing consists of manufacturing and assembly costs. Our cost of manufacturing increased by $14.2 million or 68%, to $35.2 million as compared to $21.0 million for the corresponding period in the prior fiscal year. This increase was due to an increased volume of products sold during the six months ended September 30, 2025, as compared to the comparable period of the prior fiscal year, as noted above. Our gross profit margin was 54% during the six months ended September 30, 2025 as compared to 44% during the comparable period of the prior fiscal year. The increase is primarily due to sales achieved during the current quarter being comprised of a greater proportion of higher margin products as compared to sales achieved during the comparable period of the prior year and sales during the six month period ended September 30, 2025 consisting of a greater proportion of direct sales to pharmaceutical chains, which yield higher gross profit margins as compared to indirect sales to wholesalers, as compared to the comparable period of the prior year. It should be noted that the higher gross profit percentage during the six months ended September 30, 2025 is higher that that of the three months ended September 30, 2025, as per above, with such being due to the latter half of the six month period ended September 30, 2025 consisting of an increased proportion of indirect sales through wholesalers, as compared to the former half of the six month period ended September 30, 2025. Operating expenses: For the Six Months Ended September 30, Change 2025 2024 Dollars Percentage Operating expenses: Research and development $ 3,060,270 $ 4,129,621 $ (1,069,351 ) (26 )% General and administrative 7,433,283 4,242,898 3,190,385 75 % Non-cash compensation 102,247 104,658 (2,411 ) (2 )% Depreciation and amortization 789,750 846,030 (56,280 ) (7 )% Total operating expenses $ 11,385,550 $ 9,323,207 $ 2,062,343 22 % Operating expenses for the six months ended September 30, 2025 increased by $2.1 million, or 22%, to $11.4 million as compared to $9.3 million for the corresponding period in the prior fiscal year, largely due to an increase in general and administrative expenses of $3.2 million, offset by a decrease in research and development expenses of $1.1 million. Research and development costs during the six months ended September 30, 2025 were $3.1 million, a decrease of $1.1 million, or 26%, from approximately $4.1 million of such costs for the comparable period of the prior year. The decrease was the result of more laboratory resources being allocated to supporting commercial operations as well as the number, timing and nature of product development activities during the six months ended September 30, 2025, as compared to the comparable period of the prior fiscal year. General and administrative expenses for the six months ended September 30, 2025 were $7.4 million as compared to $4.2 million for the corresponding period in the prior fiscal year, an increase of $3.2 million or approximately 75% . This increase is largely due to increased human resource costs resulting from increased headcounts as well as increased costs of financial, tax and other regulatory compliance as compared to the comparable period of the prior year. Non-cash compensation expense for the six months ended September 30, 2025 and 2024 was less than $0.1 million. Depreciation and amortization expenses from the six months ended September 30, 2025 were $0.8 million, essentially flat from $0.8 million for the comparable period of the prior year. As a result of the foregoing, our income from operations during the six months ended September 30, 2025 was $29.9 million, compared to income from operations of $7.3 million for the comparable period of the prior fiscal year. Other income (expense): For the Six Months Ended September 30, Change 2025 2024 Dollars Percentage Other expense (income): Change in fair value of derivative financial instruments - warrants $ (14,589,888 ) $ (15,537,648 ) $ 947,760 (6 )% Interest expense and amortization of debt issuance costs (241,396 ) (505,917 ) 264,521 (52 )% Interest income 9,464 11,292 (1,828 ) (16 )% Other income 34,500 12,000 22,500 188 % Other (expense) income, net $ (14,787,320 ) $ (16,020,273 ) $ 1,232,953 (8 )% Net other (expense) income for the six months ended September 30, 2025 was a net other expense of $14.8 million, a decrease of $1.2 million from a net other expense of $16.0 million for the comparable period of the prior fiscal year. The decrease was primarily due to a decrease in other expenses of $0.9 million relating to the change in fair value of derivative instruments and a decrease in interest expense and amortization debt issuance costs of $0.3 million. The change in the fair value of derivative instruments is determined in large part by the change in the closing price of the Company’s Common Stock as of the end of the period, as compared to the closing price at the beginning of the period, with a strong inverse relationship between changes in the closing price of the Company’s Common Stock and other income or (expense) being recorded. The decrease in interest expense is primarily related to the Company servicing a lesser principal amount of loans payable during the six months ended September 30, 2025 as compared to the comparable period of the prior year As a result of the foregoing, our net income before income taxes for the six months ended September 30, 2025 was $15.1 million, compared to net loss before income taxes of $8.7 million for the comparable period of the prior fiscal year. 7 Liquidity and Capital Resources Capital Resources September 30, 2025 March 31, 2025 Change Current assets $ 85,793,698 $ 57,739,147 $ 28,054,551 Current liabilities $ 10,673,516 $ 11,840,435 $ (1,166,919 ) Working capital $ 75,120,182 $ 45,898,712 $ 29,221,470 Our working capital (total current assets less total current liabilities) increased by $29.2 million from $45.9 million as of March 31, 2025 to $75.1 million as of September 30, 2025, with such increase being primarily related to the increase cash, finished goods inventory and accounts receivable, associated with increased customer orders and shipments during the six months ended September 30, 2025 and a decrease in current liabilities during the same period. Summary of Cash Flows: For the Six Months Ended September 30, 2025 2024 Net cash provided by operating activities $ 19,880,115 $ 4,601,307 Net cash used in investing activities $ (321,538 ) $ (1,645,722 ) Net cash used in financing activities $ (4,247,152 ) $ (495,592 ) Net cash provided by operating activities for the six months ended September 30, 2025 was $19.9 million, which included, without limitation, net income of $7.8 million, increased by fair value of derivative financial instruments - warrants of $14.6 million, and other non-cash expenses of $1.9 million, deferred tax expenses of $6.6 million, and reduced by increases in operating assets and liabilities totaling $11.0 million. Net cash used in investing activities for the six months ended September 30, 2025 was comprised of purchases of property and equipment of approximately $0.3 million. Net cash used in financing activities was $4.2 million for the six months ended September 30, 2025 compared to net cash used in financing activities of $0.5 million for the corresponding period of the prior year. Net cash used in financing activities consisted primarily of payments of bond and loan principal totaling $4.1 million and payments on principal on finance lease obligations of $0.2 million. Net cash used in financing activities of $0.5 million during the prior fiscal year was due to payments of bond and loan principal totaling $0.3 million and payments on principal on finance lease obligations of $0.2 million. East West Bank On July 1, 2022, East West Bank (“EWB”) provided a mortgage loan (“EWB Mortgage Loan”) in the amount of $2.55 million for the purchase of the property at 135-137 Ludlow Avenue, which was formerly a lease held by the Company. The EWB Mortgage Loan matures in ten years and bears interest at a fixed rate of 4.75% fixed for the first five years then adjustable at WSJP plus 0.5% with floor rate of 4.5%. The total transaction costs associated with the EWB Mortgage Loan incurred as of September 30, 2025, were $13,251, which are being amortized on a monthly basis over ten years, beginning in July 2022. The EWB Mortgage Loan contains customary representations, warranties and covenants. These covenants include maintaining a minimum debt coverage ratio of 1.50 to 1.00 tested annually and a minimum trailing 12-month debt coverage ratio of 1.50 to 1.00. As of September 30, 2025, and through the date of filing of this Quarterly Report on Form 10-Q, the Company was not aware of the existence of any violations of financial covenants included in the EWB Mortgage Loan. NJEDA Bonds On August 31, 2005, the Company successfully completed a refinancing of a prior 1999 bond issue (the “1999 Bonds”) through the issuance of new tax-exempt bonds (the “NJEDA Bonds”). The refinancing involved borrowing $4,155,000, evidenced by a 6.5% Series A Note in the principal amount of $3,660,000 maturing on September 1, 2030 and a 9% Series B Note in the principal amount of $495,000 maturing on September 1, 2012. The net proceeds, after payment of issuance costs, were used (i) to redeem the outstanding tax-exempt 1999 Bonds originally issued by the New Jersey Economic Development Authority on September 2, 1999, (ii) to refinance other equipment financing and (iii) for the purchase of certain equipment to be used in the manufacture of pharmaceutical products. As of March 31, 2016, all of the proceeds were utilized by the Company for such stated purposes. The NJEDA Bonds are collateralized by a first lien on the Company’s facility and equipment acquired with the proceeds of the 1999 Bonds and NJEDA Bonds. The related Indenture requires the maintenance of a debt service reserve fund of $366,000 in relation to the Series A Notes. Bond issue costs of $354,454 were paid from the proceeds of the NJEDA Bonds and are being amortized over the life of the NJEDA bonds. Amortization of bond issuance costs amounted to $7,089 for the six months ended September 30, 2025. The NJEDA Bonds require the Company to make an annual principal payment on September 1st of varying amounts as specified in the loan documents and semi-annual interest payments on March 1st and September 1st, equal to interest due on the outstanding principal at the applicable rate for the semi-annual period just ended. In addition, the Company had previously received Notices of Default from the Trustee of the NJEDA Bonds as a result of the utilization of the debt service reserve fund being used to pay interest payments as well as the Company’s failure to make scheduled principal payments. All monetary defaults were cured during Fiscal Year 2015 and the Company is current on all NJEDA Bond interest and principal payments. As of the date of filing of this Quarterly Report on Form 10-Q, there are no interest or principal amounts in arrears. The Series B Notes were retired, at par in July 2014. 8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this Item.