What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-06-29 compared with 2022-06-29 · 88 added, 55 removed, 344 unchanged (29% of the section changed)

14 unchanged sentences

ended March 31, 2023 compared to March 31, 2022

Cost of revenue and Gross profit:

Cost of manufacturing and Gross profit:

For the Years Ended March 31,

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revenues for the year ended March 31, 2023 increased by $1.9 million or 6%, to $34.2 million, as compared to $32.3 million for the prior

year, primarily due to increased revenues from Amphetamine ER Capsules, which were launched during the prior fiscal year, and increased

revenue from the sales of Amphetamine Tablets, Naltrexone Tablets, and Loxapine Capsules as compared to prior year.

The Amphetamine

ER was launched during the prior fiscal year ended March 31, 2021.

year, primarily due to increased revenues from Amphetamine ER Capsules and Phentermine as compared to prior year.

Manufacturing

fees increased by $6.0 million, or 28%, primarily due to manufacturing revenues increased from Amphetamine ER Capsules, as compared

to the fiscal year ended March 31, 2021.

fees increased by $0.9 million, or 21%.

This increase was primarily due to licensing fees increased from the sale of Amphetamine

IR Tablets and Naltrexone Tablets as compared to the fiscal year ended March 31, 2021.

of revenue consists of manufacturing and assembly costs.

fees increased by $2.2 million, or 8%, primarily due to manufacturing revenues increased from Amphetamine ER Capsules, as compared to

the fiscal year ended March 31, 2022.

fees decreased by $0.3 million, or 6%.

This decrease was primarily due to licensing fees decreasing from the sales of Amphetamine IR Tablets, Naltrexone Tablets, and Isradipine as compared to the fiscal year ended March 31, 2022.

of manufacturing consist of manufacturing and assembly costs.

Our costs of revenue increased by $0.1 million or 1%, to $17.6 million as compared

to $17.5 million for the prior fiscal year.

This increase was due in large part to the increased manufacturing activities and related

manufacturing revenues during the year ended March 31, 2022, as compared to the prior year, and also due to there being a strong positive

correlation of costs of revenue to manufacturing revenues.

This increase was due to the increased manufacturing activities and related manufacturing

revenues during the year ended March 31, 2023, as compared to the prior year.

The increase in cost of revenues of 1%, compared with the increase in manufacturing fees of 8% is due to efficiencies

gained in the manufacturing and sale of Amphetamine ER Capsules, which were launched during fiscal year 2021.

gross profit margin was 49% during the year ended March 31, 2023 as compared to 46% during the comparable prior fiscal year.

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Research and development

$ (1,061,193 )

General and administrative

Non-cash compensation

Impairment of intangible assets

Depreciation and amortization

Total operating expenses

expenses consist of research and development costs, general and administrative, non-cash compensation and depreciation and amortization

Operating expenses totaled for $9.7 million the year ended March 31, 2022, which remained relatively unchanged as compared

to the prior year.

and development costs for the year ended March 31, 2022 were $4.1 million, a decrease of $1.1 million, or 21%, from $5.1 million of such

expenses consist of research and development costs, general and administrative, non-cash compensation and depreciation and

amortization expenses.

Operating expenses totaled for $12.9 million the year ended March 31, 2023, which increased approximately

$3.2 million, or 33%, from the prior year, largely due to increases of $2.1 million in research and development costs, $0.7 million in general and administrative

expenses, and $0.3 million in impairment of intangible assets.

The changes in balance of each line item from the prior year are outlined

and development costs for the year ended March 31, 2023 were $6.2 million, an increase of $2.1 million, or 53%, from $4.1 million of such

costs for the prior year.

The decrease was a result of the timing and nature of product development activities during the year ended

The increase was a result of the timing and nature of product development activities during the year ended

March 31, 2023 as compared to the prior year.

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of such costs for the prior year.

The increase was due in large part to the increase in payroll-related expense and professional

The increase was due in large part to the increase in payroll-related expense and professional expense.

compensation expense for the years ended March 31, 2023 and 2022 was less than $0.1 million.

Impairment of intangible assets the year ended March 31, 2023 was $0.3 million, compared with $0.0 in the prior

The increase was due to impairment of ANDA and patent intangible assets.

and amortization expenses for the year ended March 31, 2023 were $1.3 million, and remained relatively unchanged from $1.2 million of

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Change in fair value of derivative instruments

$ (1,010,283 )

Interest expense and amortization of debt issuance costs

Gain on sale of fixed assets

Gain on sale of ANDA

Interest income

PPP loan forgiveness

Other income, net

income, net for the year ended the year ended March 31, 2023 was $0.3 million, a reduction of $0.9 million from the prior year.

in other income, net was due to PPP loan forgiveness which occurred during the prior fiscal year, offset by increased gains on the fair

value of derivative instruments.

decrease in other income, net was due to the recognition of gain of $1,000,000 related to the sale of ANDA during the year ended

March 31, 2023.

Additionally, change in fair value of derivative instruments decreased by approximately $1.0 million.

expense and amortization of debt issuance costs increased by approximately $0.9 million.

The change in fair value of derivative instruments is largely due to decreases in

the Company’s stock price during the year ended March 31, 2023 compared with the prior year.

The change in interest expense

and amortization of debt issuance costs is largely due to interest incurred on the EWB loan of approximately $12.0 million and EWB

mortgage loan of approximately $2.6 million, entered into in April and July, 2022, respectively.

a result of the foregoing, our income before income taxes for the year ended March 31, 2023 was $4.0 million, compared to $6.3 million

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Company considers cash and working capital balances as several of the factors the Company uses in evaluating its performance.

As of March 31, 2022, the Company had cash on hand of $8.5 million and accounts receivable to be collected

within expected operating cycles of $3.1 million.

The Company believes that such resources, combined with the working capital

surplus of $12.2 million and the continuation of ongoing operations are sufficient to fund operations through the current operating

For the year ended March 31, 2022, the Company had income from operations totaling $5.1 million, net other income totaling

$1.2 million and a net income of $8.9 million.

The Company’s other income and net income (loss) available 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.

31, 2023, the Company had cash on hand of $7.8 million and accounts receivable to be collected within expected operating cycles of $3.1

The Company believes that such resources, combined with the working capital surplus of $13.7 million and the continuation of

ongoing operations, are sufficient to fund operations through the current operating cycle.

For the year ended March 31, 2023, the Company

had income from operations totaling $3.7 million, net other income totaling $0.3 million and a net income of $3.6 million.

The Company’s

other income and net income (loss) available 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

working capital (total current assets less total current liabilities) increased by $1.5 million from $12.2 million as of March 31, 2022

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Net cash used in investing activities

Net cash used in financing activities

$ (5,736,618 )

Net cash provided by (used in) financing activities

cash provided by operating activities for the year ended March 31, 2023 was $3.3 million, which included net income of $3.6 million,

offset by non-cash (income) expenses totaling $1.8 million and net increases in assets and decreases in liabilities totaling $2.0 million.

cash provided by operating activities for the year ended March 31, 2021 was $3.2 million, which included net income of $5.1 million and

increases in non-cash expenses totaling $0.2 million, offset by net increases in assets and decreases in liabilities totaling $2.1 million.

cash provided by operating activities for the year ended March 31, 2022 was $6.5 million, which included net income of $8.9 million,

offset by non-cash (income) expenses totaling $1.4 million and net increases in assets and decreases in liabilities totaling $1.0 million.

cash used in investing activities for the year ended March 31, 2023 was comprised of purchases of property and equipment of $5.7 million.

cash used in investing activities for the year ended March 31, 2021 was comprised of purchases of purchases of property and equipment

of $0.3 million offset by proceeds from the sale of property and equipment of less than $0.1 million.

cash used in investing activities for the year ended March 31, 2022 was comprised of purchases of property and equipment of $0.5 million.

cash provided by financing activities was $1.7 million for the year ended March 31, 2023 which contained proceeds and loan payments related

to the EWB mortgage loan and equipment loans.

cash used in financing activities was $0.7 million for the year ended March 31, 2022 which was offset primarily by loan payments.

cash used in financing activities was $0.9 million for the year ended March 31, 2021 which consisted primarily of proceeds from the payroll

protection program loan offset by loan payments.

Nasrat Promissory Note

In place of the EWB Term

Loan, the Company has entered into a collateralized promissory note with an individual lender with rates comparable to the EWB Term

Loan but with less restrictive covenants (a “Promissory Note”).

As of June 2, 2023, a Promissory Note was placed with

Nasrat Hakim, CEO and Chairman of the Board of Directors, for $3,000,000.

The Promissory Note has an interest rate of 9% for the

first year and 10% for an optional second year and the proceeds will be used for working capital and other business purposes.

East West Bank

On April 2, 2022, the Company and Elite Labs entered into a Loan and Security Agreement (the “EWB Loan Agreement”)

with East West Bank (“EWB”).

Pursuant to the EWB Loan Agreement, the Company and Elite Labs received one term loan for a principal

amount of $12,000,000 (the “EWB Term Loan”) and a revolving line of credit up to $2,000,000 (the “EWB Revolver,”

together with the “EWB Term Loan,” the EWB Loans”), each of which shall be used for working capital.

As of March 31,

2023, the principal and interest on the EWB Term Loan has been paid in full by the Company and the EWB Loan Agreement is terminated.

Lincoln Park Capital

8, 2020 Purchase Agreement

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share, from time to time over the term of the 2020 LPC Purchase Agreement, at the Company’s direction.

the year ended March 31, 2022, the Company did not issue any shares of Common Stock to Lincoln Park.

the year ended March 31, 2021 the Company issued an aggregate of 5,975,857 shares of Common Stock in the amount of $469,105 to Lincoln

Park as initial commitment shares.

The Company sold 640,543 shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during

the year ended March 31, 2021 for net proceeds totaling $42,223.

In addition, 10,094 shares were issued to Lincoln Park as additional

commitment shares, pursuant to the 2020 LPC Agreement.

The 2020 LPC Purchase Agreement expires on August 1, 2023.

the years ended March 31, 2023 and 2022, the Company did not issue any shares of Common Stock to Lincoln Park.

August 31, 2005, the Company successfully completed a refinancing of a prior 1999 bond issue through the issuance of new tax-exempt bonds

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retired, at par in July 2014.

On July 1, 2022, the East West Bank 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 leased 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 the Wall Street Journal Prime Rate (“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, 2023, were

$13,251, which are being amortized on a monthly basis over ten years, beginning in July 2022.

Sheet Arrangements

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collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate

is recorded at the lower of cost or market on a specific identification by lot number basis.

is recorded at the lower of cost or net realizable value on a specific identification by lot number basis.

Company periodically evaluates the fair value of long-lived assets, which include property and equipment and intangibles, whenever events

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and slower growth rates.

During the year ended March 31, 2023, the Company determined that circumstances occurred which indicated that impairment

of intangible assets may have occurred.

The circumstances included a decrease in the Company’s stock price during the year ended March

31, 2023, compared with the prior year.

The Company recorded impairment of approximately $0.3 million on its ANDA and patent intangible

assets during the year ended March 31, 2023.

and Development

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hierarchy under ASC Topic 820 are described as follows:

1 Unadjusted quoted prices in active markets for

identical assets or liabilities that are accessible at the measurement date.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

1 Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs include quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

quoted prices for identical or similar

assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability;

and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

that are unobservable for the asset or liability.

3 Inputs that are unobservable for the asset or liability.

carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other

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assets such as intangible assets, and property and equipment are measured at fair value only when an impairment loss is recognized.

Company did not record an impairment charge related to these assets in the periods presented.

The Company recorded impairment of approximately $0.3 million on its ANDA and patent intangible assets during the year ended March 31, 2023.

Company records treasury stock at the cost to acquire it and includes treasury stock as a component of shareholders’ equity (deficit).

18 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