What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-02-14 · 189 added, 173 removed, 119 unchanged (75% of the section changed)

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

following discussion of our financial condition and results of operations for the nine months ended December 31, 2022 and 2021 should

be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included

following discussion of our financial condition and results of operations for the three months ended June 30, 2023 and 2022 should be

read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included

elsewhere in this report.

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occupy manufacturing, warehouse, laboratory and office space at 165 Ludlow Avenue and 135 Ludlow Avenue in Northvale, NJ (the “Northvale

The Northvale Facility operates under Current Good Manufacturing Practice (“cGMP”) and is a United States

Drug Enforcement Agency (“DEA”) registered facility for research, development and manufacturing.

The Northvale Facility operates under Current Good Manufacturing Practice and is a United States

Drug Enforcement Agency registered facility for research, development and manufacturing.

We are also party to an

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(iii) development of the other

products in our pipeline including the products with our partners;

(iv) commercial exploitation of our products either by license and

product candidates in our pipeline including the products with our partners;

(iv) commercial exploitation of our products either by sales under our own label, by license and

the collection of royalties, or through the manufacture of our formulations;

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drug products which require New Drug Applications (“NDAs”) under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition

and Patent Term Restoration Act of 1984 (the “Drug Price Competition Act”).

and Patent Term Restoration Act of 1984.

believe that our business strategy enables us to reduce its risk by having a diverse product portfolio that includes generic products

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thereby allowing us to share costs of development and improve cash-flow.

the nine months ended December 31, 2022, the Company entered into an agreement with Pyros Pharmaceuticals, Inc.

pursuant to which the Company sold to Pyros its rights in and to the Company’s approved abbreviated new drug applications (ANDAs)

for its generic Sabril drug.

The Company sold its rights to Pyros for $1,000,000, which was recorded as gain on sale of ANDA during the

nine months ended December 31, 2022.

There is no further action required by the Company regarding the rights which would affect future

the quarter ended December 31, 2022, the Company entered into an agreement with Pyros Pharmaceuticals, Inc.

(“Pyros”) pursuant

to which the Company sold to Pyros its rights in and to the Company’s approved abbreviated new drug applications (ANDAs) for its

generic Sabril drug.

The Company sold its rights to Pyros for $1,000,000, which was recorded as gain on sale of ANDA during the year

ended March 31, 2023.

There is no further action required by the Company regarding the rights which would affect future periods.

conjunction with the sale of its Product to Pyros, the Company executed a Manufacturing and Supply agreement (the “Pyros Agreement”)

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of Termination of License, Supply and Distribution Agreement

September 14, 2022, the Company has provided written notice pursuant to Section 8.2 of the License, Supply and Distribution Agreement

September 14, 2022, the Company has provided written notice pursuant to the License, Supply and Distribution Agreement

between the Company and Elite Laboratories, Inc.

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commercial sale:

Product Equivalent

HCl 37.5mg tablets (“Phentermine 37.5mg”)

HCl 37.5mg tablets

Phendimetrazine

Tartrate 35mg tablets (“Phendimetrazine 35mg”)

HCl 15mg and 30mg capsules (“Phentermine 15mg” and “Phentermine 30mg”)

Naltrexone HCl 50mg tablets

(“Naltrexone 50mg”)

2.5mg and 5mg capsules (“Isradipine 2.5mg” and “Isradipine 5mg”)

Tartrate 35mg tablets

HCl 15mg and 30mg capsules

HCl 50mg tablets

2.5mg and 5mg capsules

Cardiovascular

HCl Immediate Release 5mg, 10mg, 15mg, 20mg and 30mg tablets (“OXY IR 5mg”, “Oxy IR 10mg”, “Oxy IR

15mg”, “OXY IR 20mg” and “Oxy IR 30mg”)

Maleate Immediate Release 25mg, 50mg and 100mg capsules (“Trimipramine 25mg”, “Trimipramine 50mg”, “Trimipramine

Maleate Immediate Release 25mg, 50mg and 100mg capsules

Antidepressant

Dextroamphetamine

Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg,

20mg and 30mg tablets (“Amphetamine IR 5mg”, “Amphetamine IR 7.5mg”, “Amphetamine IR 10mg”, “Amphetamine

IR 12.5mg”, “Amphetamine IR 15mg”, “Amphetamine IR 20mg” and “Amphetamine IR 30mg”)

Nervous System (“CNS”) Stimulant

Sodium Capsules 25mg, 50mg and 100mg (“Dantrolene 25mg”, “Dantrolene 50mg”, “Dantrolene 100mg”)

Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Immediate Release 5mg, 7.5mg, 10mg, 12.5mg, 15mg, 20mg

and 30mg tablets

Nervous System Stimulant

Sodium Capsules 25mg, 50mg and 100mg

Dextroamphetamine

Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and

30mg capsules (“Amphetamine ER 5mg”, “Amphetamine ER 10mg”, “Amphetamine ER 15mg”, “Amphetamine

ER 20mg”, “Amphetamine ER 25mg”, and “Amphetamine ER 30mg”)

Nervous System (“CNS”) Stimulant

Succinate 5mg, 10mg, 25mg and 50gm capsules (“Loxapine 5mg”, “Loxapine 10mg”, “Loxapine 25mg”,

and Loxapine 50mg”)

Saccharate, Amphetamine Aspartate, Dextroamphetamine Sulfate, Amphetamine Sulfate Extended Release 5mg, 10mg, 15mg, 20mg, 25mg, and 30mg

Nervous System Stimulant

Succinate 5mg, 10mg, 25mg and 50gm capsules

Antipsychotic

Under FDA Review

- Immediate Release Oxycodone with sequestered Naltrexone

is our abuse-deterrent candidate for the management of moderate to severe pain where the use of an opioid analgesic is appropriate.

is an immediate-release Oxycodone Hydrochloride containing sequestered Naltrexone which incorporates 5mg, 10mg, 15mg, 20mg and 30mg doses

of oxycodone into capsules.

January 2016, the Company submitted a 505(b)(2) New Drug Application for SequestOx™, after receiving a waiver of the $2.3 million

filing fee from the FDA.

In March 2016, the Company received notification of the FDA’s acceptance of this filing and that such

filing has been granted priority review by the FDA with a target action under the Prescription Drug User Fee Act (“PDUFA”)

of July 14, 2016.

July 15, 2016, the FDA issued a Complete Response Letter, or CRL, regarding the NDA.

The CRL stated that the review cycle for the SequestOx™

NDA is complete and the application is not ready for approval in its present form.

July 7, 2017, the Company reported topline results from a pivotal bioequivalence fed study for or SequestOx™.

The mean Tmax (the

amount of time that a drug is present at the maximum concentration in serum) of SequestOx™ was 4.6 hr.

with a range of 0.5 hr.

and the mean Tmax of the comparator, Roxicodone®, was 3.4 hr.

with a range of 0.5 hr.

A key objective for the

study was to determine if the reformulated SequestOx™ had a similar Tmax to the comparator when taken with a high fat meal.

on these results, the Company paused clinical trials for this formulation of SequestOx™.

On January 30, 2018, the Company reported

positive topline results from a pilot study conducted for a modified SequestOx™ wherein, based on the results of this pilot study,

the modified SequestOx™ formulation is expected to achieve bioequivalence with a Tmax range equivalent to the reference product

when conducted in a pivotal trial under fed conditions.

The Company has provided the pilot data to the FDA, requesting clarification

as to the requirements for resubmission of the NDA.

The FDA has provided guidance for repeated bio-equivalence studies in order to bridge

the new formulation to the original SequestOx™ studies and also extended our filing fee waiver until July 2023.

Due to the prohibitive

cost of such repeated bio-equivalence studies and the uncertain commercial viability given the regulatory and competitive landscape,

the Company has paused development of this product candidate.

can be no assurances of the Company conducting future clinical trials, or if such trials are conducted, there can be no assurances of

the success of any future clinical trials, or if such trials are successful, there can be no assurances that an intended future resubmission

of the NDA product filing, if made, will be accepted by or receive marketing approval from the FDA.

In addition, even if marketing authorization

is received, there can be no assurances that there will be future revenues or profits, or that any such future revenues or profits would

be in amounts that provide adequate return on the significant investments made to secure this marketing authorization.

Products Filed

the Company has filed a generic antimetabolite ANDA and a generic dopamine agonist ANDA and these products are under review by the FDA.

The Company also submitted an ANDA for pain management and intends to provide supplemental data in Q3 2023 to complete the filing.

Products Not Yet Commercialized

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Company received approval on September 10, 2019 from the FDA of an ANDA for a generic version of Tylenol® with Codeine (acetaminophen

and codeine phosphate).

Acetaminophen with codeine is a combination medication indicated for the management of mild to moderate pain,

where treatment with an opioid is appropriate and for which alternative treatments are inadequate.

The Company is not pursuing licensing

deals for any opioids at this time and, in light of the current market and litigation around opioid products, the Company has no plans

to commercialize this product at this time.

Company received approval on June 27, 2022 from the FDA of an ANDA for a generic version of Sabril® (Vigabatrin USP) 500 mg powder

for solution packet.

Vigabatrin is an antiepileptic drug indicated for refractory complex partial seizures and used as an adjunctive

therapy in patients who have inadequately responded to several alternative treatments.

We are evaluating potential commercial opportunities.

Company received approval on April 4, 2022 from the FDA of an ANDA for a generic version of Doxycycline (doxycycline hyclate) 100mg tablets.

Doxycycline hyclate is an antibiotic that is used to treat a wide variety of bacterial infections.

This product was co-developed and

co-owned by Elite and Praxgen Pharmaceuticals LLC, formerly SunGen Pharma LLC.

We are evaluating potential commercial opportunities.

and codeine phosphate) 300mg/7.5mg, 300mg/15mg, 300mg/30mg and 300mg/60mg tablets.

Acetaminophen with codeine is a combination medication

indicated for the management of mild to moderate pain, where treatment with an opioid is appropriate and for which alternative treatments

are inadequate.

Acetaminophen with codeine products have annual U.S.

sales of approximately $45 million according to IQVIA (formerly

QuintilesIMS Health Data).

The Company is not pursuing licensing deals for any opioids at this time until the market changes.

will wait for the market to stabilize before pursuing these opportunities.

Hyclate Tablets

Company received approval in April 2022 from the FDA of an ANDA for a generic version of an antibiotic product.

According to QVIA (formerly

QuintilesIMS Health) data, the branded product for this antibiotic and its equivalents had total annual U.S.

sales of approximately $85

million for the twelve months ending September 30, 2019.

The product is jointly owned by Elite and Praxgen Pharmaceuticals LLC, formerly

SunGen Pharma LLC, (“Praxgen”).

can be no assurances in relation to any of the above approved products not yet commercialized, that there will be future revenues of

profits, or that any such future revenues or profits would be in amounts that provide adequate return on the significant investments

made to secure these marketing authorizations.

Accounting Policies and Estimates

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may differ from these estimates and such differences may be material.

were no significant changes during the nine months ended December 31, 2022 to the items that we disclosed as our significant accounting

were no significant changes during the three months ended June 30, 2023 to the items that we disclosed as our significant accounting

policies and estimates described in “Note 1, Summary of Significant Accounting Policies” to the Company’s financial

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necessarily indicative of future results.

months ended December 31, 2022 compared to December 31, 2021

months ended June 30, 2023 compared to the three months ended June 30, 2022

Cost of revenue and Gross profit:

For the Three Months Ended December 31,

For the Three Months Ended June 30,

Manufacturing fees

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Gross profit - percentage

revenues for the three-month period ended December 31, 2022 increased by $0.28 million or 3%, to $9.25 million, as compared to $8.97

million, for the corresponding period of the prior year, primarily due to the increased sales of Amphetamine IR Tablets and Amphetamine

ER Capsules during the three month period ended December 31, 2022 as compared to the comparable period of the prior fiscal year.

Manufacturing

fees increased by $0.13 million, or 2%, primarily due to increased sales of Amphetamine IR Tablets and Amphetamine ER Capsules during

the three month period ended December 31, 2022 as compared to the comparable period of the prior fiscal year.

fees increased by $0.14 million, or 11%.

This increase is primarily due to licensing fees earned from the sale of Amphetamine ER Capsules

and Amphetamine IR Tablets during the three months ended December 31, 2022 as compared to the comparable period of the prior fiscal year.

of revenue consists of manufacturing and assembly costs.

Our costs of revenue decreased by $0.63 million or 13%, to $4.33 million as

compared to $4.96 million for the corresponding period in the prior fiscal year.

This decrease was due in large part to an improved margin

on products sold during the three months ended December 31, 2022, as compared to the comparable period of the prior fiscal year.

gross profit margin was 53% during the three months ended December 31, 2022 as compared to 45% during the comparable period of the prior

For the Three Months Ended December 31,

Operating expenses:

Research and development

General and administrative

Non-cash compensation

Depreciation and amortization

Total operating expenses

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

Operating expenses from the three months ended December 31, 2022 increased by $0.8 million, or 35%, to $3.0 million as compared

to $2.2 million for the corresponding period in the prior fiscal year.

and development costs during the three months ended December 31, 2022 were $1.4 million, an increase of $0.5 million, or 51%, from approximately

$1.0 million of such costs for the comparable period of the prior year.

The increase was a result of the timing and nature of product

development activities during the three month period ended December 31, 2022 as compared to the comparable period of the prior fiscal

and administrative expenses during the three months ended December 31, 2022 were $1.2 million, an increase of $0.3 million, or 28% from

$0.9 million of such costs for the comparable period of the prior year due to increased spending in payroll and professional expense.

compensation expense during the three months ended December 31, 2022 and December 31, 2021 was less than $0.1 million.

and amortization expenses during the three months ended December 31, 2022 were $0.3 million, which was virtually unchanged from $0.3

million in such costs for the comparable period of the prior fiscal year.

a result of the foregoing, our income from operations during the three months ended December 31, 2022 was $2.0 million, compared to income

from operations of $1.8 million for the comparable period of the prior fiscal year.

income (expense):

For the Three Months Ended December 31,

Other income (expense):

Change in fair value of derivative instruments

Interest expense and amortization of debt issuance costs

Gain on sale of ANDA

Interest income

Other (expense) income, net

income (expense) for the three months ended December 31, 2022 was $1.1 million, an increase of $0.6 million from the other income (expense)

of $0.5 million for the comparable period of the prior fiscal year.

The increase was due to the gain on sale of ANDA, offset by an increase

in interest expense and amortization of debt issuance costs during the three months ended December 31, 2022.

Please note that the change

in the fair value of derivative instruments 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, with a strong inverse relationship

between the fair value of our derivatives instruments and decreases in the closing price of the Company’s Common Stock.

see Note 11 to the Unaudited Condensed Consolidated Financial Statements above.

increase in interest expense was primarily attributable to the increased interest payments related to the loan and mortgage the Company

obtained from East West Bank.

a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the three months ended December

31, 2022 was $3.0 million, compared to net income $2.3 million for the comparable period of the prior fiscal year.

months ended December 31, 2022 compared to December 31, 2021

Cost of revenue and Gross profit:

the Nine Months Ended December 31,

Manufacturing

of manufacturing

profit - percentage

revenues for the nine months period ended December 31, 2022 increased by $0.9 million or 4%, to $25.5 million, as compared to $24.6 million,

for the corresponding period of the prior year, primarily due to the increased sales of Amphetamine IR Tablets and Amphetamine ER Capsules

during the nine months ended December 31, 2022 as compared to the comparable period of the prior fiscal year.

revenues for the three months ended June 30, 2023 increased by $1.3 million or 17%, to $9.0 million, as compared to $7.7 million, for

the corresponding period of the prior year, primarily due to increased sales of Amphetamine ER Capsules and Phentermine as compared

to the comparable period of the prior fiscal year.

Manufacturing

fees increased by $0.7 million, or 3%, primarily due to increased sales of Amphetamine IR Tablets and Amphetamine ER Capsules during

the nine months ended December 31, 2022 as compared to the comparable period of the prior fiscal year.

fees increased by $0.3 million, or 6%.

This increase is primarily due to licensing fees earned from the sale of Amphetamine ER Capsules

and Amphetamine IR Tablets during the nine months ended December 31, 2022 as compared to the comparable period of the prior fiscal year.

fees increased by $1.6 million, or 25%, primarily due to increased sales of Amphetamine ER Capsules during the three months ended

June 30, 2023 as compared to the comparable period of the prior fiscal year.

fees decreased by $0.3 million, or 20%.

This decrease is primarily due to licensing fees decreasing from the sales of Amphetamine IR

Tablets, Naltrexone Tablets, and Isradipine during the three months ended June 30, 2023 as compared to the comparable period of the prior

of revenue consists of manufacturing and assembly costs.

Our costs of revenue decreased by $0.8 million or 6%, to $12.4 million as compared

Our cost of revenue increased by $0.6 million or 15%, to $4.2 million as compared

to $3.7 million for the corresponding period in the prior fiscal year.

This decrease was due to an improved margin on products sold

during the nine months ended December 31, 2022, as compared to the comparable period of the prior fiscal year.

gross profit margin was 52% during the nine months ended December 31, 2022 as compared to 46% during the comparable period of the prior

For the Nine Months Ended December 31,

This increase was due to an increased volume of products sold during

the three months ended June 30, 2023, as compared to the comparable period of the prior fiscal year, as well as a decrease in licensing

fees revenues as noted.

gross profit margin was 53% during the three months ended June 30, 2023 as compared to 52% during the comparable period of the prior

The increase in gross profit margin is due to manufacturing efficiencies achieved in relation to increased production volumes.

For the Three Months Ended June 30,

Operating expenses:

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

Operating expenses for the nine months ended December 31, 2022 increased by $1.9 million, or 27%, to $9.1 million as compared

to $7.2 million for the corresponding period in the prior fiscal year.

and development costs during the nine months ended December 31, 2022 were $3.8 million, an increase of $0.5 million, or 14%, from approximately

Operating expenses for the three months ended June 30, 2023 increased by $0.2 million, or 6%, to $3.1 million as compared to

$3.0 million for the corresponding period in the prior fiscal year, largely due to an increase in research and development of $0.2 million.

and development costs during the three months ended June 30, 2023 were $1.1 million, an increase of $0.2 million, or 20%, from approximately

$1.0 million of such costs for the comparable period of the prior year.

The increase was a result of the timing and nature of product

development activities during the nine months ended December 31, 2022 as compared to the comparable period of the prior fiscal year.

and administrative expenses for the nine months ended December 31, 2022 were $4.4 million, an increase of $1.4 million, or 49% from $2.9

million of such costs for the comparable period of the prior year due to increased spending in payroll and professional expense.

compensation expense for the nine months ended December 31, 2022 and December 31, 2021 was less than $0.1 million.

and amortization expenses from the nine months ended December 31, 2022 were $0.9 million, which was virtually unchanged from $0.9 million

development activities during the three months ended June 30, 2023 as compared to the comparable period of the prior fiscal year.

and administrative expenses for the three months ended June 30, 2023 were $1.7 million, which was virtually unchanged from $1.7 million

in such costs for the comparable period of the prior fiscal year.

a result of the foregoing, our income from operations during the nine months ended December 31, 2022 was $4.1 million, compared to income

compensation expense for the three months ended June 30, 2023 and June 30, 2022 was less than $0.1 million.

and amortization expenses from the three months ended June 30, 2023 were $0.3 million, which was virtually unchanged from $0.3 million

in such costs for the comparable period of the prior fiscal year.

a result of the foregoing, our income from operations during the three months ended June 30, 2023 was $1.6 million, compared to income

from operations of $1.0 million for the comparable period of the prior fiscal year.

income (expense):

For the Nine Months Ended December 31,

For the Three Months Ended June 30,

Other income (expense):

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Interest expense and amortization of debt issuance costs

Gain on sale of ANDA

Interest income

Other (expense) income, net

income (expense) for the nine months ended December 31, 2022 was $0.8 million, a decrease of $0.6 million from $1.4 million for the comparable

income (expense) for the three months ended June 30, 2023 was $0.3 million, a decrease of $0.4 million from $0.7 million for the comparable

period of the prior fiscal year.

The decrease was due to decreased income relating to changes in the fair value of our outstanding derivative

warrants and increased interest expense and amortization of debt issuance costs, offset by the gain on sale of ANDA during the nine months

ended December 31, 2022.

Please note that the change in the fair value of derivative instruments 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, with a strong inverse relationship between the fair value of our derivatives instruments and decreases in the closing

price of the Company’s Common Stock.

Please see Note 11 to the Unaudited Condensed Consolidated Financial Statements above.

a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the nine months ended December

31, 2022 was $4.8 million, compared to net income $5.6 million for the comparable period of the prior fiscal year.

warrants and increased interest expense and amortization of debt issuance costs during the three months ended June 30, 2023.

that the change in the fair value of derivative instruments 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, with a strong inverse relationship

between the fair value of our derivatives instruments and decreases in the closing price of the Company’s Common Stock.

see Note 12 to the Unaudited Condensed Consolidated Financial Statements above.

The decrease in interest expense is due in large part

to the Company paying off the principal balance of the EWB loan during the fiscal year ended March 31, 2023, resulting in no interest

on the EWB loan incurred for the three months ended June 30, 2023.

a result of the foregoing, our net income before the net benefit from sale of net operating loss credits for the three months ended June

30, 2023 was $1.3 million, compared to net income of $0.3 million for the comparable period of the prior fiscal year.

and Capital Resources

December 31, 2022

June 30, 2023

March 31, 2023

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working capital (total current assets less total current liabilities) increased by $1.7 million from $13.7 million as of March 31,

to $26.5 million as of December 31, 2022, with such increase being primarily related to the cash proceeds of $14.6 million from the new

loan during the nine months ended December 31, 2022.

2023 to $15.4 million as of June 30, 2023, with such increase being primarily related to the increase in finished goods inventory and accounts receivable,

associated with increased customer orders during the three months ended June 30, 2023.

of Cash Flows:

For the Nine Months Ended December 31,

Net cash provided by operating activities

Net cash used in investing activities

For the Three Months Ended

Net cash used in operating activities

$ (2,709,815 )

Net cash provided by (used in) financing activities

cash provided by operating activities for the nine months ended December 31, 2022 was $0.4 million, which included net income of $4.8

million and increases in non-cash expenses totaling $0.9 million, offset by net changes in assets and liabilities totaling $5.3 million.

cash used in investing activities for the nine months ended December 31, 2022 was comprised of purchases of property and equipment of

approximately $5.2 million.

cash provided by financing activities was $14.2 million for the nine months ended December 31, 2022 which proceeds from loan issuances

totaling $14.6 million, offset by loan payments totaling $0.2 million.

Net cash used in investing activities

Net cash provided by financing activities

cash used in operating activities for the three months ended June 30, 2023 was $2.7 million, which included, without limitation, net income of $1.1 million, increased by depreciation and other non-cash expenses totaling $0.6 million and reduced by increases in accounts receivable and inventory totaling $4.8 million.

cash provided by financing activities was $4.0 million for the three months ended June 30, 2023 which consisted primarily of proceeds

from related party loans payable totaling $4.0 million.

Promissory Note

June 30, 2023, the Company entered into a collateralized promissory note with Davis Caskey (the “Caskey Promissory

The Caskey Promissory Note has a principal balance of $1,000,000 and an interest rate of 9% for the first year and 10%

for an optional second year.

The Caskey Promissory Note is subject to the same covenants as are contained in the Hakim Promissory

The proceeds will be used for working capital and other

business purposes.

The original maturity date of the Caskey Promissory Note is June 30, 2024, with an optional second year

The second year extension must be exercised by both parties 60 days prior to the original maturity date.

As of the date of this filing, the Company does not expect to exercise the second year extension.

Promissory Note

Company has entered into a collateralized promissory note with individual lenders with rates comparable to the EWB Term Loan but

with less restrictive covenants (the “Hakim Promissory Note”).

These covenants include filing timely tax returns and

financial statements, and an agreement not to sell, lease, or transfer a substantial portion of the Company’s assets during

the term of the Hakim Promissory Note.

On June 2, 2023, the Company entered into a Promissory Note with Nasrat Hakim, CEO

and Chairman of the Board of Directors, pursuant to which the Company borrowed funds in the aggregate principal amount of $3,000,000.

The Hakim 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.

The original maturity

date of the Hakim Promissory Note is June 2, 2024, with an optional second year extension.

The second year extension must be

exercised by both parties 60 days prior to the original maturity date.

As of the date of this filing, the Company does not expect to exercise

the second year extension.

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.

July 1, 2022, the 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 June 30, 2023, 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

As of June 30, 2023, the Company was in compliance with each financial covenant.

Park Capital – July 8, 2020 Purchase Agreement

July 8, 2020, the Company entered into a purchase agreement (the “2020 LPC Purchase Agreement”), and a registration rights

agreement, with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase

up to $25.0 million of the Company’s Common Stock, $0.001 par value per share, from time to time over the term of the 2020 LPC

Purchase Agreement, at the Company’s direction.

the nine months ended December 31, 2022 and December 31, 2021, respectively, there were no shares sold to Lincoln Park pursuant to the

2020 LPC Purchase Agreement.

In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the

2020 LPC Purchase Agreement.

Company did not issue any shares of its Common Stock pursuant to the 2020 LPC Purchase Agreement during the nine months ended December

In addition, there were no shares issued to Lincoln Park as additional commitment shares, pursuant to the 2020 LPC Agreement.

agreement, with Lincoln Park Capital Fund, LLC (“Lincoln Park”),

pursuant to which Lincoln Park has committed to purchase up to $25.0 million of the Company’s Common Stock, $0.001 par value per

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

The 2020 LPC Purchase Agreement

expired on August 1, 2023.

the three months ended June 30, 2023 and 2022, the Company did not issue any shares of Common Stock to Lincoln Park.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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What changed 10-Q

Item 2. Management’s Discussion and Analysis