Annual Report for Fiscal Year Ending March 31, 2026 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to provide a reader of our consolidated financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial data included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review Item 1A of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Results of Operations:

For the Years Ended March 31, 2026 and 2025

Revenue, Cost of manufacturing and Gross profit:

		For the Years Ended March 31,								Change
		2026				2025				Dollars				Percentage
Manufacturing fees		$	147,810,122			$	81,986,079			$	65,824,043				80	%
Licensing fees			1,059,997				2,057,850				(997,853	)			(48	)%
Total revenue			148,870,119				84,043,929				64,826,190				77	%
Cost of manufacturing			73,845,784				43,957,274				29,888,510				68	%
Gross profit		$	75,024,335			$	40,086,655			$	34,937,680				87	%
Gross profit - percentage			50	%			48	%

Total 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 fees revenue increased by $65.8 million, or 80%, as compared to the comparable period of the prior year. This increase is primarily due 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.

Licensing fees revenue decreased by $1.0 million, or 48% as compared to the comparable period of the prior year. This decrease is primarily due to the Company's transitioning away from licensing product to third parties to marketing of the Elite label, which does not result in revenues earned from licensing fees.

Cost of manufacturing consists of manufacturing and assembly costs. Our cost of manufacturing increased by $29.9 million or 68%, to $73.8 million as compared to $44.0 million for the comparable period of the prior year. 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.

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

Operating expenses:

		For the Years Ended March 31,								Change
		2026				2025				Dollars				Percentage
Operating expenses:
Research and development		$	5,742,955			$	7,964,837			$	(2,221,882	)			(28	)%
General and administrative			17,596,803				9,001,930				8,594,873				95	%
Non-cash compensation			176,507				227,565				(51,058	)			(22	)%
Impairment of intangible assets			847,012				1,603,426				(756,414	)			(47	)%
Depreciation and amortization			1,547,874				1,688,429				(140,555	)			(8	)%
Total operating expenses		$	25,911,151			$	20,486,187			$	5,424,964				26	%

Operating 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 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.

Research 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 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.

General 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.

Non-cash 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.

Depreciation 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 fiscal year.

Impairment 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.

As a result of the foregoing, our income from operations during the year ended March 31, 2026 was $49.1 million, compared to income from operations of $19.6 million for the comparable period of the prior year.

Other income (expense):

		For the Years Ended March 31,								Change
		2026				2025				Dollars				Percentage
Other income (expense):
Change in fair value of derivative financial instruments - warrants		$	7,855,607			$	(18,901,185	)		$	26,756,792				(142	)%
Interest expense and amortization of debt issuance costs			(396,664	)			(772,367	)			375,703				(49	)%
Interest income			207,857				20,944				186,913				892	%
Other income			34,500				-				34,500				-	%
Other income (expense), net		$	7,701,300			$	(19,652,608	)		$	27,353,908				(139	)%

Other 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 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. The closing 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 31, 2025. 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 fiscal year. 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.

As 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.

Income Taxes:

The 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,
		2026				2025
Income tax expense		$	(11,941,798	)		$	(4,262,519	)

Income 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.

Liquidity and Capital Resources

Capital Resources

		March 31, 2026				March 31, 2025				Change
Current assets		$	112,106,551			$	57,739,147			$	54,367,404
Current liabilities		$	17,391,464			$	11,840,435			$	5,551,029
Working capital		$	94,715,087			$	45,898,712			$	48,816,375

The Company considers cash and working capital balances as several of the factors the Company uses in evaluating its performance. As of March 31, 2026, the Company had cash on hand of $29.8 million and accounts receivable to be collected within expected operating cycles of $59.7 million. The Company believes that the working capital surplus of $94.7 million, which includes these cash and accounts receivable resources, and the continuation of ongoing operations, are sufficient to fund operations through the next twelve months. For the year ended March 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 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.

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

Summary of Cash Flows:

		For the Years Ended March 31,
		2026				2025
Net cash provided by operating activities		$	23,748,094			$	7,455,639
Net cash used in investing activities		$	(925,626	)		$	(2,399,832	)
Net cash used in financing activities		$	(4,322,309	)		$	(825,740	)

Net 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,

Net 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, offset by depreciation and other non-cash expenses totaling $26.9 million and reduced by the change in operating assets and liabilities totaling $15.2 million.

Net cash used in investing activities for the year ended March 31, 2026 was comprised of purchases of property and equipment of approximately $0.9 million.

Net 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.

Net 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.

Net 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.

East West Bank

On July 1, 2022, 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 10 years and bears interest at a rate of 4.75% fixed for 5 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 March 31, 2026, 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 March 31, 2026, and through the date of filing of this Annual Report on Form 10-K, 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 through the issuance of new tax-exempt bonds (the "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. The net proceeds, after payment of issuance costs, were used (i) to redeem the outstanding tax-exempt Bonds originally issued by the Authority on September 2, 1999, (ii) 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, 2026, all of the proceeds were utilized by the Company for such stated purposes.

Interest is payable semi-annually on March 1 and September 1 of each year. The Bonds are collateralized by a first lien on the Company's facility and equipment acquired with the proceeds of the original and refinanced 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 Bonds and are being amortized over the life of the Bonds. Amortization of Bond issuance costs amounted to $14,178 for the fiscal year ended March 31, 2026.

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 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 2015 and the Company is current on all NJEDA Bond interest and principal payments.

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

Recent Developments

On 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.

On 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.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that would be considered material to investors.

Effects of Inflation

We are subject to price risks arising from price fluctuations in the market prices of the products that we sell. Management does not believe that inflation risk is material to our business or our consolidated financial position, results of operations, or cash flows.

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 U.S. generally accepted accounting principles ("GAAP"). The preparation of our 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, or us in the case of prospective direct sales made by the Company, also give credits for chargebacks to wholesalers that have contracts with our marketing partners, or us, prospectively, for their sales to hospitals, group purchasing organizations, pharmacies, or other customers. 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.