Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion highlights the principal
factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods
described. This discussion should be read in conjunction with our financial statements and the related notes included in this report.
This discussion contains forward-looking statements. Please see “Cautionary Note Regarding Forward-Looking Statements” for
a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
18
Results of Operations
Comparison of Results of Operations for the
fiscal years ended December 31, 2023 and 2022
During our fiscal year ended December 31, 2023,
we generated revenues of $24,092,787, compared to revenues of $4,345,603 in 2022. The increase was the result of twelve months of Nora
Pharma sales included in the 2023 results compared to only seventy-two days of sales in 2022 (October 20, 2022, the date of acquisition
of Nora Pharma, through December 31, 2022). The cost of sales in 2023 and 2022 for generating these revenues was $15,753,616 and $2,649,028,
respectively.
General and administrative (“G&A”)
expenses for our fiscal year ended December 31, 2023, were $13,124,470, compared to $28,697,325 during our fiscal year ended December
31, 2022, a decrease of $15,572,855. However, excluding the one-time impairment of goodwill in the amount of $18,326,719 from the 2022
G&A expenses, reveals an increase in G&A expenses of $2,753,864 in 2023. This increase is due to G&A expenses incurred by
Nora Pharma during all of 2023, compared to only 72 days of G&A expenses included in 2022.
We had interest income of $811,974 in 2023, compared
to interest income of $518,650 in 2022. We incurred $137,308 in interest expense in 2023, compared to $39,412 in interest expense in 2022.
As a result, we incurred a net loss of $4,506,044
for the year ended December 31, 2023, compared to a net loss of $26,744,440 for the year ended December 31, 2022.
Liquidity and Capital Resources
As of December 31, 2023, we had cash and cash equivalents of $16,292,347.
On February 17, 2022, we completed an underwritten
public offering of common stock and warrants for gross proceeds of $8 million. We received net proceeds of approximately $6.8 million
from the offering.
On March 14, 2022, we completed a private placement
of common stock and warrants for gross proceeds of $8 million. We received net proceeds of approximately $6.8 million from the private
placement.
On April 28, 2022, we completed a private placement
of common stock and warrants for gross proceeds of approximately $19.5 million. We received net proceeds of approximately $16.8 million
from the private placement.
During the fiscal years ended December 31, 2022
and 2023, we received aggregate proceeds of $13,196,681 in connection with warrant exercises.
On May 16, 2023, we completed a private placement
of common stock and warrants for gross proceeds of approximately $5 million. We received net proceeds of approximately $4.1 million from
the private placement.
Cash flows used in investing activities were $656,150
during the year ended December 31, 2023, compared to $14,619,390 during our fiscal year ended December 31, 2022. The reason for the decrease
was due to the acquisition of Nora Pharma which took place on October 20, 2022. Net cash flows provided by financing activities were $3,425,587
in 2023, compared to $39,465,107 in 2022. The decrease was primarily a result of three (3) rounds of financing which took place in February,
March, and April 2022 and only one (1) relatively small financing in 2023. Net cash used in operations was $8,775,111 in 2023, compared
to $5,248,358 in 2022. The increase was due to expansion of Nora Pharma drugs portfolio.
19
We are not generating adequate revenues from our
operations to fully implement our business plan as set forth herein. We believe our existing cash will be sufficient to fund our pharmaceuticals
sales operations and research and development activities for the next 24 months. There is no assurance our estimates will be accurate.
We have no committed sources of capital and we anticipate that we will need to raise additional capital in the future, including for further
research and development activities and possibly clinical trials, as well as expansion of our generic pharmaceuticals operations. Additional
capital may not be available on terms acceptable to us, or at all.
Critical Accounting Estimates
The discussion and analysis of our financial condition
and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis,
we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Leases
We follow the guidance in ASC 842 “ Accounting
for Leases ,” as amended, which requires us to evaluate the lease agreements we enter into to determine whether they represent
operating or capital leases at the inception of the lease.
Our wholly owned subsidiary, Nora Pharma, currently
occupies a 23,500 square foot facility located at 1565 Boulevard Lionel-Boulet, Varennes, Quebec, Canada, J3X 1P7 pursuant to a lease
agreement that expires in January 2030, with an option to extend for 5 years. This site is composed of 18,500 square feet of warehouse
space and 5,000 square feet of executive office space. The facility houses all administrative, marketing, quality control, regulatory
affairs, and other operations personal, as well as a Health Canada licensed warehouse space. We pay a monthly rent of $27,250 CAD (approximately
$19,900 USD), including taxes.
Recently Adopted Accounting Standards
In February 2020, the FASB issued ASU 2020-02, Financial
Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin
No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) which amends
the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for
the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify
the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company
is in the process of determining the effects adoption will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt
– Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815 – 40) , (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with
characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU2020-06
amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. The Company is evaluating the impact of this guidance on its unaudited consolidated financial statements.
20
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet
arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for a smaller reporting company.
21