v3.26.1
DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS
 12 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS – WARRANTS

 

The Company evaluates and accounts for its freestanding instruments in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities.

 

The Company issued warrants, with a term of ten years, to affiliates in connection with an exchange agreement dated April 28, 2017, as further described in this note below.

 

 

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The Company has 79,008,661 total warrants to purchase shares of Common Stock outstanding with a weighted average exercise price of $0.1521 as of March 31, 2026 and 2025.

 

On April 28, 2017, the Company entered into an Exchange Agreement with Hakim, the Chairman of the Board, President, and Chief Executive Officer of the Company, pursuant to which the Company issued to Hakim 24.0344 shares of its Series J Preferred and warrants to purchase an aggregate of 79,008,661 shares of its Common Stock (the “Series J Warrants” and, along with the Series J Preferred issued to Hakim, the “Securities”) in exchange for 158,017,321 shares of Common Stock owned by Hakim. The fair value of the Series J Warrants was determined to be $6,474,674 upon issuance at April 28, 2017.

 

The Series J Warrants are exercisable for a period of 10 years from the date of issuance, commencing April 28, 2020. The initial exercise price is $0.1521 per share and the Series J Warrants can be exercised for cash or on a cashless basis, including a provision within that provides the holder a choice of net cash settlement or settlement in shares upon a cashless exercise. The net cash settlement amount is the cash value obtained by subtracting the then exercise price from the closing price of the Company’s Common Stock (provided such closing price is higher than the exercise price) and multiplying the difference by the number of shares exercised. As this event is at the holder’s option, it is considered outside of the Company’s control. As a result of the net cash settlement at the option of the holder, such warrants are classified as liabilities and measured initially and subsequently at fair value.

 

The exercise price is subject to adjustment for any issuances or deemed issuances of Common Stock or Common Stock equivalents at an effective price below the then exercise price. The Series J Warrants also provide for other standard adjustments upon the happening of certain customary events.

 

The fair value of the Series J Warrants was calculated using a Black-Scholes model. The following assumptions were used in the Black-Scholes model to calculate the fair value of the Series J Warrants:

 

   March 31, 2026   March 31, 2025 
Fair value of the Company’s Common Stock  $0.3601   $0.4350 
Volatility   63.96%   82.80%
Initial exercise price  $0.1521   $0.1521 
Warrant term (in years)   1.1    2.1 
Risk free rate   3.47%   3.89%

 

The changes in warrants (Level 3 financial instruments) measured at fair value on a recurring basis were as follows:

 

Balance at March 31, 2024  $6,298,008 
Change in fair value of derivative financial instruments - warrants   18,901,185 
Balance at March 31, 2025  $25,199,193 
Change in fair value of derivative financial instruments - warrants   (7,855,607)
Balance at March 31, 2026  $17,343,586 

 

Measured on a Recurring Basis

 

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fell:

 

   Amount at Fair Value   Level 1   Level 2   Level 3 
Balance as of March 31, 2025  $25,199,193   $—   $—   $25,199,193 
Change in fair value of derivative financial instruments - warrants   (7,855,607)   —    —    (7,855,607)
Balance as of March 31, 2026  $17,343,586   $—   $—   $17,343,586 

 

   Amount at Fair Value   Level 1   Level 2   Level 3 
Balance as of March 31, 2024  $6,298,008   $—   $—   $6,298,008 
Change in fair value of derivative financial instruments - warrants   18,901,185    —    —    18,901,185 
Balance as of March 31, 2025  $25,199,193   $—   $—   $25,199,193 

 

 

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS