The Company records revenue in accordance with ASC Topic 606 “Revenue from Contracts with Customers.” Under this guidance, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration expected to be received in exchange for those goods or services. Our principal source of revenue is product sales.

Our sales, as reported, are subject to a variety of deductions, some of which are estimated. These deductions are recorded in the same period in which the revenue is recognized. Such deductions, primarily related to the sale of our pharmaceutical products, include chargebacks from the United States Department of Veterans Affairs (“VA”), rebates in connection with our current participation in Medicare programs, distribution fees, discounts, and outdated product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period.

During 2026 and 2025, we participated in various government drug rebate programs related to the sale of Renacidin, our most important pharmaceutical product. These programs include the Veterans Affairs Federal Supply Schedule (“FSS”), and the Medicare Manufacturer Discount Program (“MDP”) (formerly the Medicare Part D Coverage Gap Discount Program (“CGDP”)). These programs require us to sell our product at a discounted price, typically given in the form of a rebate. Our sales, as reported, are net of these rebates, some of which are estimated and are recorded in the same period that the revenue is recognized.

On January 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) implemented a new Medicare Part D Manufacturer Discount Program (“Discount Program”), which replaced the prior CGDP. The new Discount Program eliminates the coverage gap benefit phase, introduces pharmaceutical manufacturer discounts in the initial and catastrophic coverage phases, and lowers the cap on enrollee out-of-pocket costs. Under the new Discount Program, additional rebates are expected to be owed by pharmaceutical manufacturers due to the restructuring of the benefit periods and removal of the cap that was in place that limited the drug manufacturer’s liability. The overall financial impact of this new program will vary depending on the products being reimbursed but it is expected to increase Medicare Part D rebates for drug manufacturers.

The Company’s status as a “specified small manufacturer” by CMS, entitles us to a multi-year phase-in period during which we would pay a lower percentage discount on drugs dispensed to beneficiaries. Based on our current level of sales through the Medicare Part D Program, we would have reduced rebate liabilities beginning in 2025, with rebates gradually increasing each year thereafter, until they reach their full phase-in by 2031. By the end of the phase in period in 2031, these rebate liabilities are expected to exceed the liabilities we have recorded under the CGDP in previous years.

As long as a valid purchase order has been received and future collection of the sale amount is reasonably assured, we recognize revenue from sales of most of our products when those products are shipped, which is when our performance obligation is satisfied. Our cosmetic, sexual wellness, and medical products are shipped EXW from our facility in Hauppauge, NY, and the risk of loss and responsibility for the shipment passes to the customer upon shipment. Sales of our medical lubricant products are deemed final upon shipment, and we have no obligation to repurchase or allow the return of these goods unless they are defective. We consider sales of our pharmaceutical products to be final upon shipment unless (a) they are found to be defective; (b) the product is damaged or lost during shipping; (c) the product is too close to its expiration date for the customer to sell; or (d) the product is expired but is not more than one year after its expiration date. These return policies are in conformance with standard pharmaceutical industry practice. We estimate an allowance for outdated material returns based on previous years’ historical returns of our pharmaceutical products.

The Company does not make sales on consignment, and the collection of the proceeds of the sale of any of our products is not contingent upon the customer being able to sell the goods to a third party.

Any allowances for returns are taken as a reduction of sales within the same period the revenue is recognized. Such allowances are determined based on historical experience under ASC Topic 606-10-32-8. At June 30, 2026 and December 31, 2025, the Company had allowances of $202,222 and $194,947, respectively, for possible outdated material returns, which is included in accrued expenses. There is no asset value associated with these outdated material returns, as these products are destroyed. We have not experienced significant fluctuations between estimated allowances and actual activity.

At June 30, 2026, the Company recorded advance payments from customers of $8,135, which are included in deferred revenue on the balance sheet. The related performance obligations associated with these payments are expected to be satisfied in the third quarter of 2026. At December 31, 2025, the Company recorded advance payments from customers of $12,177. The related performance obligations associated with these payments were satisfied in the first quarter of 2026.

The Company has distribution fee contracts with certain distributors of its pharmaceutical products that entitle them to distribution and service-related fees. The Company records distribution fees and estimates of distribution fees as offsets to revenue.

Disaggregated sales by product class are as follows:

The Company’s pharmaceutical products are marketed primarily by three of the largest U.S. pharmaceutical wholesalers. The Company’s cosmetic ingredients are marketed worldwide by five distributors, of which U.S.-based Ashland Specialty Ingredients (“ASI”) purchases the largest volume. The Company’s sexual wellness ingredients are marketed by two distributors, one that distributes the Company’s products in the United States, Canada, Mexico and France and another that distributes in the UK.

For both three-month periods ended June 30, 2026 and 2025, approximately 17% of the Company’s total sales were to customers located outside of the United States. For the six months ended June 30, 2026, approximately 20% of the Company’s total sales were to customers located outside of the United States, compared with approximately 23% for the six months ended June 30, 2025.

Disaggregated sales by geographic region are as follows:

For the six months ended June 30, 2026, approximately 72% of ASI’s sales of the Company’s products were to customers in other countries, with China accounting for approximately 38% of ASI’s sales of the Company’s products, as compared with approximately 75% of ASI’s sales going to customers in other countries for the six months ended June 30, 2025, with China accounting for approximately 40% of ASI’s sales of the Company’s products during that period.