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INCOME TAXES
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 16. INCOME TAXES

 

The earnings (loss) before income taxes for the years ended March 31, 2026 and 2025 were $56.8 million and $(0.1) million, respectively.

 

Components of the provision for income taxes were (amounts in thousands):

 

For the Year Ended March 31 (in thousands)  2026   2025 
Current provision (benefit):          
Federal  $—   $— 
State and local   1,399    468 
Total current provision   1,399    468 
           
Deferred provision (benefit):          
Federal   10,335    3,871 
State and local   208    (76)
Total deferred provision   10,543    3,795 
           
Provision for income taxes  $11,942   $4,263 

 

 

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

A reconciliation between the Company’s effective tax rate and the federal statutory rate for the year ended March 31, 2026 is as follows (amounts in thousands of dollars):

 

   Amount   Percent 
   2026 
   Amount   Percent 
U.S. Federal Statutory Tax Rate  $11,682    21.00%
State and Local Income Taxes, Net of Federal Income Tax Effect (a)   1,313    2.36%
Foreign Tax Effects   —    —%
Effect of Changes in Tax Law or Rates Enacted in the Current Period   —    —%
Effect of Cross-Border Tax Laws   —    —%
Tax Credits   —    —%
Federal R&D Credits   (360)   (0.65)%
Changes in Valuation Allowance   —    —%
Nontaxable or Nondeductible Items   —    —%
Non-deductible change in fair value of derivative financial instruments   (1,650)   (2.96)%
Officer’s compensation   1,143    2.05%
Other   (186)   (0.33)%
Changes in Unrecognized Tax Benefits   —    —%
Other Adjustments   —    —%
Other   —    —%
Effective Tax Rate  $11,942    21.47%

 

(a)State taxes in New Jersey and Florida made up the majority (greater than 50 percent) of the tax effect in this category.

 

A reconciliation between the Company’s effective tax rate and the federal statutory rate for the year ended March 31, 2025 is as follows:

 

For the Year Ended March 31 (in thousands)  2025 
Federal income tax rate  $(11)
State and local taxes, net of federal benefit   293 
Non-deductible change in fair value of derivative financial instruments   3,969 
Non-deductible change in fair value of stock-based liabilities   — 
Other permanent items   17 
Prior year deferred true-up   110 
Tax credits   (115)
Change in valuation allowance   — 
Effective tax rate  $4,263 

 

 

ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The major components of deferred tax assets and liabilities as of March 31, 2026 and 2025 are as follows (amounts in thousands of dollars):

 

As of March 31 (in thousands)  2026   2025 
Deferred tax assets:          
Lease Liability  $659   $865 
Sec. 174 R&E Capitalization   123    3,104 
Allowance for Expected Credit Losses   352    92 
Net Operating Loss   2,489    10,664 
R&D Credit   5,708    5,348 
Deferred tax assets   9,331    20,073 
           
Deferred tax liabilities:          
Fixed Assets   (218)   (98)
Right of Use Asset   (669)   (898)
Intangible Assets   (621)   (711)
Deferred tax liabilities   (1,508)   (1,707)
           
Net deferred tax asset  $7,823   $18,366 

 

The Company’s income tax expense was $11.9 million and $4.3 million for the years ended March 31, 2026 and 2025, respectively.

 

As of March 31, 2026, the Company has a federal net operating loss carry forward of $11.9 million of which $10 million can be carried forward indefinitely with limitation of 80% of taxable income and the remaining $1.9 million will expire in 2037 and has no limitation. As of March 31, 2026, the Company’s has a federal research credits carryforward of $5.7 million which will begin to expire in 2032. As of March 31, 2026, the Company’s federal and state income taxes due were $0 and $1.4 million, respectively.

 

The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as a component of income tax expense. There were no amounts accrued for interest or penalties for the year ended March 31, 2026. Management does not expect any material changes in its unrecognized tax benefits in the next year.

 

There are currently no federal or state income tax examinations underway. The Company’s federal tax returns are open to examination from 2022 and its state tax returns are open to examination from 2021.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA permanently extends certain provisions of the Tax Cuts and Jobs Act, modifies aspects of the international tax framework, and restores favorable tax treatment for certain business provisions, including the immediate expensing of domestic research and development expenditures. resulting in a decrease in our deferred tax assets of approximately $3.1 million, primarily due to the immediate expensing of domestic research and development expenditures.

 

The amounts of cash income taxes paid by the Company were as follows:

 

(in thousands)  March 31, 2026 
Federal  $— 
State and Local:     
Florida   435 
New Jersey   575 
New York   108 
All Other States   33 
Income taxes, net of amounts refunded  $1,151