What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-06-29 compared with 2025-06-30 · 125 added, 130 removed, 155 unchanged (62% of the section changed)

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the Years Ended March 31, 2026 and 2025

Cost of revenue and Gross profit:

Cost of manufacturing and Gross profit:

For the Years Ended March 31,

Manufacturing fees

$ 147,810,122

Licensing fees

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Gross profit - percentage

revenues for the year ended March 31, 2025 increased by $27.4 million or 48%, to $84.0 million, as compared to $56.6 million, for the

comparable period of the prior year.

This increase is primarily due to four product launches during the current fiscal year combined

with increased sales from the rest of the Elite Label product line, as compared to the comparable period of the prior year.

revenues for the year ended March 31, 2026 increased by $64.8 million or 77%, to $148.9 million, as compared to $84.0 million, for

the comparable period of the prior year.

This increase is primarily due to revenue from sales of Oxy APAP tablets launched during

the current fiscal year, Naltrexone Tablets and Phentermine Tablets which the Company began selling exclusively under the Elite Labs

label during the last half of the current fiscal year and with full year contributions of the four products launched during the

prior fiscal year, most notable Lisdex capsules, which was launched during the last quarter of the prior fiscal year and increased sales

from the existing Elite Label product line, as compared to the comparable period of the prior year.

Manufacturing

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This increase is primarily due

to four product launches during the current fiscal year, combined with increased sales from the rest of the Elite Label product line,

as compared to the comparable period of the prior year.

to revenue contributions from three products launched during the current fiscal year, combined with the full year contributions from

four products launched during the during the middle and end of the prior fiscal year and increased sales from the existing Elite Label

product line, as compared to the comparable period of the prior year.

fees revenue decreased by $1.0 million, or 48% as compared to the comparable period of the prior year.

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million as compared to $44.0 million for the comparable period of the prior year.

This increase was due to an increased volume of products

sold during the year ended March 31, 2025, as compared to the prior fiscal year, as noted above.

This increase was due to the cost of manufacturing

having a strong positive correlation with manufacturing fees, combined with an increased volume of products sold during the year ended

March 31, 2026, as compared to the prior fiscal year, as noted above.

gross profit margin was 50% during the year ended March 31, 2026 as compared to 48% during the prior fiscal year.

The increase is due

to increased manufacturing volumes resulting in decreased unit costs due to efficiencies of scale being achieved on the increased manufacturing

volume as well as the products launched during the current fiscal year having a higher proportion of direct sales as compared to product

sales during the comparable period of the prior year, resulting in lower transaction costs being charged to revenue (please note that

transaction costs are higher with indirect sales as compared to those of direct sales).

to product mix in the current fiscal year including greater proportion of higher margin products.

For the Years Ended March 31,

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Research and development

$ (2,221,882 )

General and administrative

Non-cash compensation

Depreciation and amortization

Impairment of intangible assets

Depreciation and amortization

Total operating expenses

expenses for the year ended March 31, 2026 increased by $5.4 million, or 26%, to $25.9 million as compared to $20.5 million for the prior

fiscal year, largely due to increases in research and development expenses of $1.1 million, general and administrative expenses of $1.9

million, and impairment of intangible asset expense of $1.6 million.

and development costs during the year ended March 31, 2025 were $8.0 million, an increase of $1.1 million, or 16%, from approximately

fiscal year, largely due to increases in general and administrative expenses of $8.6 million, offset by decreases in research and development

of $2.2 million, non-cash compensation of $0.1 million, depreciation and amortization of $0.1 million and impairment of intangible asset

expense of $0.8 million.

and development costs during the year ended March 31, 2026 were $5.7 million, a decrease of $2.2 million, or 28%, from approximately

$8.0 million of such costs for the prior year.

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

which consist primarily of material consumption, internal and external lab costs, human resource costs and analytical studies, during

the year ended March 31, 2025 as compared to the prior fiscal year.

and administrative expenses the year ended March 31, 2025 were $9.0 million as compared to $7.1 million for the prior fiscal year, an

increase of $1.9 million or approximately 26%, largely due to increased employee headcounts and compensation rates as compared to the

prior fiscal year as well higher operational support and infrastructure costs related to the four commercial launches during the current

fiscal year and expansion of product line distribution activities achieved during the current fiscal as compared to the comparable period

of the prior year.

compensation expense for the year ended March 31, 2025 was $0.2 million as compared to $0.2 million for the prior fiscal year, an increase

of $0.1 million or approximately 42%, with such increase being attributed to the current year including full year amortization of non-cash

compensation from employee stock options issued during the prior year, as compared to the comparable period of the prior which included

partial year periods amortization of non-cash compensation encompassing only that part of the year subsequent to the grant date of each

employee option.

and amortization expenses from the year ended March 31, 2025 were $1.7 million as compared to $1.4 million for the prior fiscal year,

an increase of $0.3 million or approximately 22%.

This increase is due to depreciation expense being recorded on an increased fixed asset

base which resulted from additional investments in capital manufacturing facilities.

of intangible assets for the year ended March 31, 2025 was $1.6 million related to the impairment of the Dantrolene intangible asset,

an ANDA product, as a result of the Company choosing to abandon the Dantrolene capsules based on reassessments of the expected future

cash flows for these products and its withdrawal of the ANDA for Phentermine 37.5 mg capsules.

No impairment of intangible assets were recorded for the prior fiscal year.

The decrease was a result of greater proportion of laboratory and regulatory resources

being allocated to supporting increasing commercial operations as well as the timing and nature of product development activities, which

consist primarily of material consumption, internal and external lab costs, human resource costs and analytical studies, during the year

ended March 31, 2026 as compared to the prior fiscal year.

and administrative expenses during the year ended March 31, 2026 were $17.6 million as compared to $9.0 million for the prior fiscal

year, an increase of $8.6 million or approximately 95%, largely due to increased employee compensation rates and bonuses as compared

to the prior fiscal year as well higher operational support and infrastructure costs related to product launches and expansion of product line distribution activities and increases in technology, legal, audit and consulting costs during the current year as compared to the

comparable period of the prior year.

compensation expenses during the year ended March 31, 2026 was $0.18 million as compared to $0.23 million for the prior fiscal year, a

decrease of $0.05 million or approximately 22%, with such decrease being attributed to the current year including full year amortization

of non-cash compensation from employee stock options issued during the prior year, as compared to the comparable period of the prior

which included partial year periods amortization of non-cash compensation encompassing only that part of the year subsequent to the grant

date of each employee option.

and amortization expenses during the year ended March 31, 2026 were $1.55 million as compared to $1.69 million for the prior fiscal year,

a decrease of $0.14 million or approximately 8%.

This decrease is due to depreciation charges relating to current fiscal year fixed asset

additions being less than depreciation charges for investments made in prior periods which achieved full depreciation during the current

of intangible assets for the year ended March 31, 2026 was $0.8 million as compared to $1.6 million for the prior fiscal year, a

decrease of $0.8 million or approximately 47%.

This decrease is related to impairments of ANDAs for Loxapine Capsules and

patent development costs during the current year being less than the impairments recorded during the comparable period of

the prior year.

Impairments of intangible assets are recorded when, after assessments and evaluation, an entity concludes that the fair value of an indefinite lived

intangible asset is more likely than not impaired.

a result of the foregoing, our income from operations during the year ended March 31, 2026 was $49.1 million, compared to income from

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$ (18,901,185 )

$ (5,776,297 )

$ (13,124,888 )

Change in fair value of stock-based liabilities

Interest expense and amortization of debt issuance costs

Gain from settlement agreements

Interest income

Other (expense) income, net

$ (19,652,608 )

$ (10,325,677 )

Other income (expense), net

$ (19,652,608 )

income (expense) for the year ended March 31, 2025 was an other expense of $19.7 million, an increase in net other (expense) of $9.3

income (expense) for the year ended March 31, 2026 was an other income of $7.7 million, an increase in net other income (expense) of

$27.4 million from other (expense) of $19.7 million for the comparable period of the prior year.

The increase was primarily due to increases

in other expenses of $13.1 million relating to the change in fair value of warrant derivative instruments, $1.8 million relating to

gain from settlement agreements that were recorded in the prior year, but not the current year, offset by a net decrease in other income

(expense) of $5.7 million relating to a change in fair value of stock based liabilities that was recorded as an other expense in the

prior year and not in the current year.

The change in the fair value of derivative instruments and stock-based liabilities is determined

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

closing price at the beginning of the period, with a strong inverse relationship between the fair value of the Company’s derivative

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

The increase in interest

expense associated with the loans payable is due in large part to the current year including additional loan principal amounts in the

current year, as compared to the comparable period of the prior year and relating to financing of facility expansion as well as the current

year results of operations including full year interest expense on financings executed during the prior year, with the prior year incurring

partial year interest expense on such financings.

a result of the foregoing, our net loss before income taxes for the year ended March 31, 2025 was $0.1 million, compared to net income

in other income of $26.8 million relating to the change in warrant derivative instruments.

The change in the fair value

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

Common Stock as of the end of the period, as compared to the closing price at the beginning of the period.

There is a strong correlation between changes in the closing price of the Company’s Common Stock and other income or (expense) recorded, with increases in the closing price of Common Stock resulting in other expenses and decreases in the closing price

of Common Stock resulting in other income.

price of the Company’s Common Stock at the end of the fiscal year ended March 31, 2026 of $0.36 per share was lower than the comparable

price at the end of the fiscal year ended March 31, 2025 of $0.44 per share, resulting in the Company recording net other income of $7.9

million for the fiscal year ended March 31, 2026.

This compares with the closing price of the Company’s Common stock at the end

of the fiscal year ended March 31, 2025 of $0.44 per share being greater than the comparable price at the end of the fiscal ended March

31, 2024 of $0.15 per share, resulting in the Company recording a net other (expense) of $18.9 million for the fiscal year ended March

Interest expense decreased by $0.4 million or 49% from $0.8 million in the prior fiscal year to $0.4 million in the current

This decrease in interest expense is due to the decreased loan principal balances existing during the current fiscal as

compared to the comparable period of the prior fiscal year, which resulted from the Company’s payment of outstanding loan principal

amounts in accordance with the terms of the underlying loans.

a result of the foregoing, our net income before income taxes for the year ended March 31, 2026 was $56.8 million, compared to net loss

before income taxes of $0.1 million for the comparable period of the prior year.

Company recorded tax (expense)/benefit of approximately 8,175% and 4,242% of (loss) income before income tax expense, for the years

ended March 31, 2025 and 2024, respectively.

The decrease of the effective tax rate for the current period as compared to the prior

period is primarily due to the release of the valuation allowance on the Company’s deferred tax assets as of March 31, 2024

and the nondeductible fair market value change in the Company’s warrant derivative liabilities.

Company recorded tax expense of approximately (21)% and 8,175% of income (loss) before income tax expense, for the years ended March

31, 2026 and 2025, respectively.

The decrease of the effective tax rate for the current period as compared to the prior period is primarily

due to the release of the valuation allowance on the Company’s deferred tax assets as of March 31, 2025 and the nondeductible fair

market value change in the Company’s warrant derivative liabilities.

For the Years Ended March 31,

Income tax expense

$ (11,941,798 )

$ (4,262,519 )

tax expense for the year ended March 31, 2026 was $11.9 million as compared to $4.3 million for the year ended March 31, 2025,

an increase of $7.6 million or 180%.

The increase was due to the Company’s net income before income taxes being approximately $56.9

million greater this year than the comparable period of the prior year, combined with there being a strong positive correlation between

net income before taxes and income tax expense.

Please also note that income tax expense includes certain non-deductible expenses and

non-taxable income items, including, without limitation income and expenses relating to the change in fair value of derivative liabilities.

and Capital Resources

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Current assets

Current liabilities

$ 112,106,551

Current liabilities

Working capital

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For the year ended March

31, 2025, the Company had income from operations totaling $19.6 million, net other expense totaling $19.7 million and a net loss attributable

31, 2026, the Company had income from operations totaling $49.1 million, net other income totaling $7.7 million and a net income attributable

to common shareholders of $44.9 million.

The Company’s other income (expense) and net loss attributable to common shareholders are

significantly influenced by the fluctuations in the fair value of warrant derivatives with such fair value bearing a strong inverse correlation

to the market share price of the Company’s Common Stock.

The Company’s other income and net income attributable to common shareholders are significantly

influenced by the fluctuations in the fair value of warrant derivatives, as noted above, with there being a strong correlation between changes in

the market share price of Common Stock and other income or expenses recorded in relation to the change in fair value of the warrant derivatives.

working capital (total current assets less total current liabilities) increased by $48.8 million from $45.9 million as of March 31,

to $45.9 million as of March 31, 2025, with such increase being primarily related to the increase in finished goods inventory and accounts

receivable, associated with increased customer orders during the year ended March 31, 2025 and a decrease of $1.2 million in total current

liabilities over the same period, due to decreases in accrued expenses, primarily driven by a decrease in the accrual of the co-development

profit split as of March 31, 2025 compared to the prior year.

2025 to $94.7 million as of March 31, 2026, with such increase being primarily related to the increases in cash of $18.5 million,

inventory of $5.0 million, and accounts receivable of $30.5 million, offset by increases in current liabilities of $5.6 million, as

compared to the comparable balances as of March 31, 2025.

The increase in cash, inventory, and accounts receivable are primarily due

to increased customer orders and revenues achieved during the year ended March 31, 2026 as compared to the comparable period of the

The increase in current liabilities is primarily due to increased trade accounts payables as of March 31, 2026 as

compared to March 31, 2025 resulting from increased commercial operations and increased accrued expenses, as of March 31, 2026

compared to March 31, 2025 resulting from increases in accruals for employee bonuses, taxes, audit, legal and professional fees,

salaries and other similar expenses.

of Cash Flows:

For the Years Ended March 31,

Net cash provided by (used in) operating activities

$ (3,235,115 )

Net cash provided by operating activities

Net cash used in investing activities

$ (2,399,832 )

Net cash (used in) provided by financing activities

Net cash used in financing activities

$ (4,322,309 )

cash provided by operating activities for the year ended March 31, 2026 was $23.7 million, which included a net income of $44.9 million,

offset by depreciation and other non-cash expenses totaling $6.8 million and reduced by the change in operating assets and liabilities

totaling $27.9 million,

cash provided by operating activities for the year ended March 31, 2025 was $7.5 million, which included a net loss of $4.3 million,

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totaling $15.2 million.

cash used in operating activities for the year ended March 31, 2024 was $3.2 million, which included net income of $20.1 million, increased

by depreciation and other non-cash expenses totaling $11.4 million and reduced by the change in operating assets and liabilities totaling

$11.9 million and tax benefit of $20.0 million.

cash used in investing activities for the year ended March 31, 2026 was comprised of purchases of property and equipment of approximately

$1.6 million and purchases of intangible assets consisting of ANDA products of approximately $0.9 million.

cash used in investing activities for the year ended March 31, 2024 was comprised of purchases of property and equipment of approximately

$0.9 million.

cash used in financing activities was $0.8 million for the year ended March 31, 2025 which consisted primarily of payments of bond, loan,

and finance lease principal.

cash provided by financing activities was $3.3 million for the year ended March 31, 2024 which consisted primarily of proceeds from related

party loans payable totaling $4.0 million offset by payments of bond, loan, and finance lease principal totaling $0.7 million.

Promissory Note

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

fewer restrictive covenants.

These covenants include filing timely tax returns and financial statements, and an agreement not to sell,

lease, or transfer a substantial portion of the Company’s assets during the term of the note.

On June 2, 2023, the Company entered

into a Promissory Note with Nasrat Hakim, CEO and Chairman of the Board of Directors, pursuant to which the Company borrowed funds in

the aggregate principal amount of $3,000,000 (the “Hakim Promissory Note”).

The Hakim Promissory Note has an interest rate

of 9% for the first year and 10% for an optional second year and the proceeds were used for working capital and other business purposes.

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

The second year extension

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

The Hakim Promissory

Note was paid in full on June 2, 2025, in accordance with its terms and conditions.

Promissory Note

June 30, 2023, the Company entered into a collateralized promissory note with Davis Caskey, a member of the Board of Directors (the

“Caskey Promissory Note”).

The Caskey Promissory Note has a principal balance of $1,000,000 and an interest rate of 9%

for the first year and 10% for an optional second year.

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

in the Hakim Promissory Note.

The proceeds were used for working capital and other business purposes.

The original maturity date of

the Caskey Promissory Note is June 30, 2024, with an optional second year extension.

The second year extension of the Caskey

Promissory Note was agreed to by both parties, with the maturity date being extended to June 30, 2025.

The Caskey Promissory Note

was paid in full on June 26, 2025, in accordance with its terms and conditions.

cash used in investing activities for the year ended March 31, 2025 was comprised of purchases of property and equipment of approximately

$1.6 million and purchases of intangible assets consisting of ANDA products of approximately $0.9 million.

cash used in financing activities was $4.3 million for the year ended March 31, 2026 which consisted primarily of payments of bond and

related party loan principal totaling $4.3 million and payments on principal on finance lease obligations of $0.4 million, offset by

proceeds received from the exercise of stock options of $0.3 million.

cash used in financing activities was $0.8 million for the year ended March 31, 2025 which consisted primarily of payments of bond and

loan principal totaling $0.5 million and payments on principal of finance lease obligations of $0.3 million.

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

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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.

$3,660,000 maturing on September 1, 2030.

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

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

the Risk Factor in Part I, Item 1A entitled “ We have substantial indebtedness which may adversely affect our financial condition

NJEDA Bonds ”.

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

The Series B Notes were

retired at par in July 2014.

April 30, 2025, the Company announced the commercial launch of its generic version of Percocet ® (Oxy APAP Tablets).

APAP Tablets are indicated for the relief of moderate to moderately severe pain.

April 2, 2026, we announced the commercial launch of our generic methadone hydrochloride 5 mg and 10 mg tablets.

The product is marketed

and sold under the Elite Labs label and represents an expansion of the Company’s generic product portfolio.

June 1, 2026, we filed an Abbreviated New Drug Application with the US Food and Drug Administration for a generic version of an undisclosed

drug product in the class of medications called anticoagulants.

On June 12, 2026, pursuant

to a stipulated dismissal agreed to by both parties, the District Court of New Jersey signed an order dismissing the patent infringement

suit filed by Purdue Pharma against the Company in November 2023.

Sheet Arrangements

17 unchanged sentences

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.

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.

Recognition - Manufacturing Fees

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

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.

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.

most competitors in this market, our marketing partners, or us in the case of prospective direct sales made by the Company, also give

22 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis