Avid Bioservices, Inc. Form 10-K/A

 true 2023 FY restated financials 0000704562

 2023-06-09

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 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 ________________________

 FORM 10-K/A

 (Amendment No. 1)

 (Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended April 30, 2023

 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from _____ to _____

 Commission file number: 001-32839

 (Exact name of Registrant as specified in its
charter)

 Delaware

 95-3698422

 (State or other jurisdiction of incorporation or organization)

 (I.R.S. Employer Identification No.)

 14191 Myford Road, Tustin, California

 92780

 (Address of principal executive offices)

 (Zip Code)

 (714) 508-6100

 (Registrant's telephone number, including area code)

 Securities registered pursuant to Section 12(b) of the Act:

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which registered

 Common Stock, $0.001 par value per share

 CDMO

 The NASDAQ Stock Market LLC

 Securities registered pursuant to Section 12(g) of the Act: None

 Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes No

(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes No

has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 Yes No

is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and
"emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 **

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 ** Determination
as of the filing of the original Annual Report on Form 10-K for the fiscal year ended April 30, 2023.

 If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.

has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.

 If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.

 Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant period pursuant to § 240.10D-1(b).

is a shell company (as defined in Rule 12b-2 of the Act). Yes
 No

 The aggregate market value of the shares of common
stock held by non-affiliates of the registrant as of October 31, 2022, the last business day of the registrant's most recently completed
second fiscal quarter, was approximately $ 887.3 million, calculated based on the closing price of the registrant's common stock
as reported by The NASDAQ Capital Market.

 62,729,154 shares of registrant's common
stock were outstanding as of June 9, 2023.

 DOCUMENTS INCORPORATED BY REFERENCE

 Part III of this report incorporates certain
information by reference from the registrant's proxy statement for the annual meeting of stockholders, which proxy statement was
filed with the Securities and Exchange Commission on August 28, 2023.

 Explanatory Note

 Avid
Bioservices, Inc. (the "Company") is filing this Amendment No. 1 on Form 10-K/A (the "Amended Report") to amend
and restate its consolidated financial statements and related footnote information as of April 30, 2023 and for the fiscal year ended
April 30, 2023 (the "Restated Financial Statements"), previously included in its Annual Report on Form 10-K filed with the
Securities and Exchange Commission ("SEC") on June 21, 2023 (the "Original Report"). This Amended Report also
amends certain other information in the Original Report and includes the effects of the errors described below on the unaudited
condensed consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q for the fiscal periods ended
October 31, 2022 and January 31, 2023, as listed in "Items Amended in
this Amended Report" below.

 Background and Effect of Restatement

 As
previously reported in a Current Report on Form 8-K, filed by the Company with the SEC on March 6, 2024, on February 29, 2024, the
Company received an acceleration notice (the "Acceleration Notice") from a holder of its 1.250% Exchangeable Senior Notes
due 2026 (the "2026 Notes"). The Acceleration Notice stipulated, among other things, that (i) the Company did not remove
the restrictive legend on the 2026 Notes by March 17, 2022 as required under the indenture governing the 2026 Notes (the "2026
Notes Indenture"), (ii) due to such failure, additional interest accrued thereafter at a rate of 0.50% per annum (the "Additional
Interest"), (iii) such Additional Interest had not been paid by the Company as of the date of the Acceleration Notice, which constituted
an event of default under the 2026 Notes Indenture (the "Event of Default"), and (iv) such holder was the beneficial owner
of at least 25% in aggregate principal amount of the outstanding 2026 Notes and therefore had the right to accelerate all of the 2026
Notes. As a result of the Event of Default, such holder declared 100% of the principal
amount of, and accrued and unpaid interest on, the 2026 Notes to be due and payable immediately.

 Following the receipt
of the Acceleration Notice and a re-evaluation of the accounting for its 2026 Notes, the Company determined that the 2026 Notes should
have been classified as a current liability following the Event of Default, resulting in an understatement of current liabilities on
the Company's consolidated balance sheet.

 On March 11, 2024, the Audit Committee of
the Company's Board of Directors (the "Audit Committee") determined, based on management's recommendation, that
as a result of the classification of the 2026 Notes as long-term liabilities, the consolidated financial statements included in the Original
Report should no longer be relied upon.

 The Company also
determined that its interest expense for fiscal 2023 was understated as a result of the failure to reflect the Additional Interest. This
and other related adjustments to correct certain related misstatements pertaining to the 2023 fiscal period that the Company has determined
to be immaterial, both individually and in the aggregate, are reflected in the restated consolidated financial statements included in
this Amended Report.

 Items Amended in this Amended Report

 This Amended Report presents the Original
Report, amended and restated in its entirety, with modifications as necessary to the following items to reflect the foregoing restatement
and Note 11, Subsequent Events:

 Part
 I, Item 1A. Risk Factors;

 Part
 I, Item 7. Management's Discussion and Analysis of Financial Condition and Results
 of Operations;

 Part
 II, Item 8. Financial Statements and Supplementary Data

 Part
 II, Item 9A. Controls and Procedures; and

 Part
 IV, Item 15. Exhibits, Financial Statement Schedules.

 This Amended Report also includes the effects
of this error on the unaudited condensed consolidated financial statements included in the Company's Quarterly Reports on Form
10-Q for the fiscal periods ended October 31, 2022 and January 31, 2023. For further detail regarding the effect of the restatement on
such previously reported consolidated financial statements, refer to Note 1 of the notes to the consolidated financial statements included
herein.

 In addition, in accordance with applicable
SEC rules, this Amended Report includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 from our
principal executive officer and principal financial officer dated as of the filing date of this Amended Report.

 Except
as described above and in Note 11, Subsequent Events, this Amended Report does not amend, update or change any other items or
disclosures in the Original Report and does not purport to reflect any information or events subsequent to the filing thereof. As such,
except as described above and in Note 11, Subsequent Events, this Amended Report speaks only as of the date the Original Report
was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original Report to give
effect to any subsequent events. Among other things, forward-looking statements made in the Original Report have not been revised to
reflect events, results or developments that occurred or facts that became known to us after the date of the Original Report. Accordingly,
this Amended Report should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Report,
provided, however, as disclosed in our Current Report on Form 8-K filed with the SEC on March 12, 2024, the consolidated financial
statements included in the Company's Quarterly Reports on Form 10-Q for the fiscal periods ended July 31, 2023 and October 31,
2023 should no longer be relied upon.

 Control Considerations

 As a result of the information described above,
management has concluded that the Company's disclosure controls and procedures were not effective at the reasonable assurance level
and the Company's internal control over financial reporting was not effective as of the end of each of the periods covered by the
restatement in this Amended Report. In connection with the restatement, the Company has identified a material weakness in the operation
of internal control over financial reporting with respect to the review of information related to the 2026 Notes. For additional detail
regarding the material weakness identified and a discussion of management's evaluation of our disclosure controls and procedures
and internal control over financial reporting, see Part II, Item 9A, "Controls and Procedures" of this Amended Report.

 Form 10-K/A

 For the Fiscal Year Ended April 30, 2023

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion And Analysis Of Financial Condition And Results Of Operations

 Item 7A.

 Quantitative And Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements And Supplementary Data

 Item 9.

 Changes In And Disagreements With Accountants On Accounting And Financial Disclosures

 Item 9A.

 Controls And Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosures Regarding Foreign Jurisdictions That Prevent Inspections

 Item 10.

 Directors, Executive Officers And Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters

 Item 13.

 Certain Relationships And Related Transactions, And Director Independence

 Item 14.

 Principal Accounting Fees and Services

 Item 15.

 Exhibits And Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 SIGNATURE

 i

 Cautionary Note on Forward-Looking Statements

 In this Amended Report, unless the context
otherwise indicates, the terms "we," "us," "our," "Company" and "Avid" refer
to Avid Bioservices, Inc. and its consolidated subsidiary. In addition to historical information, this Amended Report contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve risks and uncertainties.
The inclusion of forward-looking statements should not be regarded as a representation by us or any other person that the objectives
or plans will be achieved because our actual results may differ materially from any forward-looking statement. The words "may,"
"should," "plans," "believe," "anticipate," "estimate," "expect,"
their opposites and similar expressions are intended to identify forward-looking statements, but the absence of these words does not
necessarily mean that a statement is not forward-looking. We caution readers that such statements are not guarantees of future performance
or events and are subject to a number of factors that may tend to influence the accuracy of the statements including, but not limited
to, those risk factors outlined in the section titled, "Risk Factors," as well as those discussed elsewhere in this Amended
Report. You should not unduly rely on these forward-looking statements, which speak only as of the date of the Original Report. We undertake
no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of the Original Report
or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports filed
by us from time to time with the Securities and Exchange Commission ("SEC") after the date of the Original Report.

 Avid Bioservices is a registered trademark
of Avid Bioservices, Inc. All other brand names or trademarks appearing in this Amended Report are the property of their respective
holders.

 PART
I

 Item 1.
 Business

 Overview

 We are a dedicated contract development and manufacturing
organization ("CDMO") that provides a comprehensive range of services from process development to Current Good Manufacturing
Practices ("CGMP") clinical and commercial manufacturing of biologics for the biotechnology and biopharmaceutical industries.
With 30 years of experience producing biologics, our services include clinical and commercial drug substance manufacturing, bulk packaging,
release and stability testing and regulatory submissions support. We also provide a variety of process development services, including
upstream and downstream development and optimization, analytical method development, cell line development, testing and characterization.

 Business Strategy

 We continue to execute on a growth strategy that
seeks to align with the growth of the biopharmaceutical drug substance contract services market. That strategy encompasses the following
continuing objectives:

 Invest in additional manufacturing capacity, capabilities and resources required for us to achieve our
long-term growth strategy and meet the growth-demand of our customers' programs, moving from development through to commercial manufacturing;

 Broaden our market awareness through a diversified yet flexible marketing strategy;

 Expand our customer base and programs with existing customers for both process development and manufacturing
service offerings;

 Explore and invest in strategic opportunities both within our core business as well as in adjacent and/or
synergistic service offerings in order to enhance and/or broaden our capabilities; and

 Increase operating profit margin to best in class industry standards.

 Our Competitive Strengths

 We believe that we are well positioned to address
the market for outsourced development and manufacturing of biopharmaceuticals derived from mammalian cell culture, due to the following
factors:

 Expertise in Mammalian Cell Culture Manufacturing: We believe that continued consolidation in the
CDMO industry has resulted in a limited number of qualified, agile and independent CDMOs with mammalian cell culture-based biologics development
and manufacturing capabilities. The mammalian cell culture production method is highly suitable for manufacturing complex molecules (examples
include monoclonal antibodies, next-generation antibodies and recombinant proteins), and we believe the benefits of the mammalian cell
culture production method have played a significant role in accelerating the proliferation of biologics therapies. We believe we are well
positioned in the industry, given our expertise in mammalian cell culture for biologics manufacturing.

 Broad Spectrum of Services to Support Customers from Early Stage Development to Commercial: We
provide fully integrated and customized biomanufacturing services that support our customers from the early preclinical stage to commercial
launch and supply. We believe pharmaceutical companies generally prefer to engage with CDMOs that are able to work with a product throughout
its lifecycle and have long-standing track records of regulatory compliance and quality control. Our Process Development, CGMP Drug Substance
Biomanufacturing, Project Management, Quality Systems and Quality Control are all supported by modern facilities designed to meet customer
needs from early stage development to commercial supply. We differentiate our capabilities through several key criteria: (i) we employ
a customer-centric approach and collaborate with our customers to tailor customized development and manufacturing services; (ii) our agile
manufacturing and development capabilities allow for rapid responses to shifting production requirements, leading to strong customer satisfaction
and retention; and (iii) our single-use bioreactors contribute to enhanced manufacturing efficiency for our customers and reduce our
capital spending needs.

 Strong Regulatory Track Record: Historically, developing the expertise to comply with stringent
regulatory audits and validation requirements has been a challenge for both pharmaceutical companies and CDMOs, and has been seen as a
significant barrier to entry for many CDMOs, as facilities can take years to construct and properly validate. We believe pharmaceutical
companies place a premium on working with CDMOs that can ensure a high degree of regulatory compliance, which decreases execution risk.
We have a strong regulatory track record, consisting of a 20-year inspection history. Since 2005 we have successfully completed eight
pre-approval inspections, including six U.S. Food and Drug Administration ("FDA") inspections since 2013, none of which resulted
in any Form 483 observations by the FDA. Further, we routinely successfully comply with audits by large pharmaceutical companies.

 Modern and Optimized Infrastructure: With the recent expansion of our Myford facility and the ongoing
construction of our single purpose-built cell and gene therapy development and CGMP manufacturing facility, as further discussed below,
we continue to position our business to capitalize on increasing demand in the biologics manufacturing industry for modular cleanroom
space, onsite analytical and process development laboratories and single-use bioreactors. These developments have driven demand among
pharmaceutical companies for facilities that can develop and produce pilot scale batches (up to 200 liters) in process development using
a process train that matches the single-use bioreactors in CGMP production. With single-use bioreactors ranging from 200 to 2,000 liters,
our CGMP Myford facility offering more than 20,000 liters of total capacity is designed to provide our customers with the desired efficiency,
flexibility and capacity.

 Significant Manufacturing Experience with a Proven Track Record: We have 30 years of experience
producing monoclonal antibodies and recombinant proteins, over 18 years of CGMP commercial manufacturing experience and over 15 years
of experience with single-use bioreactor technology. We believe this experience, combined with our management team's and board of
directors' deep experience in the CDMO and pharmaceutical industry, positions us to take advantage of positive long-term industry
trends.

 Our Growth Strategy

 We believe we have a significant opportunity to
continue to drive organic growth by leveraging our strengths, broadening our capabilities, increasing our capacity and improving our market
visibility through the following strategies:

 Diversify Customer Base: We have diversified and expanded our customer base and have
 developed marketing and sales strategies designed to further diversify our customer base and drive new customer acquisitions, while
 also continuing to leverage our existing relationships to support new programs with our existing customers.

 Expand Service Offerings: We have invested in strategic opportunities to expand our service
 offerings. During fiscal 2022, we expanded our CDMO service offering into viral vector development and
 manufacturing services for the rapidly growing cell and gene therapy ("CGT") market. In addition, during fiscal 2023, we
 added in-house cell line development services, further rounding out our mammalian cell offering.

 Expand Process Development Capabilities: We have expanded our process development
 capabilities in order to make our operations more attractive to emerging, mid-sized and large pharmaceutical companies. For example,
 during calendar year 2019 we expanded our total available process development and laboratory space, upgrading the infrastructure and
 equipment within our existing process development laboratories, and implementing new state-of-the-art technologies and equipment
 (including benchtop bioreactors and pilot scale manufacturing up to 200 liters) designed to facilitate efficient, high-throughput
 development of innovative upstream and downstream manufacturing processes that transfer directly into our CGMP manufacturing
 facility. In the fourth quarter of fiscal 2023, we further expanded the process development capacity of our mammalian cell culture
 services by adding new suites within our existing process development laboratory space that have the potential to increase our
 revenue generating capabilities by approximately $25 million. We will continue to explore the addition of capabilities and services
 that bring value to our customers, enhancing their processing design, speeding their time to market and supporting these activities
 with state-of-the-art analytics.

 Expand Manufacturing Footprint and Enhance Efficiencies: During fiscal 2021, we initiated a
 two-phased expansion of our Myford facility. The first phase, which expanded the production capacity of our
 Myford facility by adding an additional downstream processing suite, was completed in January 2022. The second
 phase, which was completed in March 2023, further expanded our capacity with the addition of a second manufacturing train,
 including both upstream and downstream processing suites. During fiscal 2022, we initiated the construction of a world-class, single
 purpose-built CGT development and CGMP manufacturing facility in Costa Mesa, California. In June 2022, we completed the first phase
 of our two-phase construction plan with the opening of our new analytical and process development laboratories. The second phase of
 construction is the build-out of CGMP manufacturing suites, which is expected to be online by the third quarter of calendar 2023.
 Upon completion of the entire build out of our CGT facility, we estimate that this expansion, combined with our existing facilities,
 which includes the recently completed Myford facility expansion, has the potential to bring our total annual revenue generating
 capacity to approximately $400 million, depending on the mix of projects.

 Increase Operating Margins: We believe we have the opportunity to drive operating margin expansion
by utilizing our available capacity, and implementing continuous process efficiencies. We believe increased facility capacity utilization
resulting from the growth strategies described herein will improve operating margins.

 Reinvest in Equipment and Facilities: We believe that re-investing in our laboratory and manufacturing
equipment and facilities is strategically important to meet future customer demand. For example, as discussed above, we recently completed
two mammalian cell capacity expansion projects and continue to advance the build-out of our CGT facility, which we believe will allow
us to meet the demands of our growing backlog of customer projects.

 Explore & Invest in Strategic Opportunities: We will evaluate potential synergistic strategic
opportunities, that we believe would add:

 o
 Capabilities/services to our existing biologics development and manufacturing offerings that enhance our
ability to provide our customers with more tailored and better solutions; and/or

 o
 Adjacent capabilities/services to service other segments of the biologic's development and manufacturing
segment of the market, that we feel would value our experience, in particular our technical, commercial and regulatory experience, all
combined with a high touch, flexible and customer-centric level of service.

 Our Facilities

 Mammalian Cell Facilities

 Our 84,000 square foot Myford facility, located
in Orange County, California, utilizes single-use equipment up to the 2,000-liter manufacturing scale to accommodate a fully disposable
biomanufacturing process for products from clinical development to commercial supply. In April 2023, we announced the completion of our
newly expanded manufacturing capacity within the Myford facility which included the addition of both upstream and downstream CGMP manufacturing
suites. Our Myford facility includes single-use bioreactors (200-liter to 2,000-liter), four downstream processing suites, quality control
labs for environmental and analytical testing, and cell bank cryofreezers, warehousing and material storage (including walk-in cold rooms),
offering more than 20,000 liters of total capacity.

 Following the recent completion of our newly expanded
Myford facility, we transitioned customer products previously manufactured in our Franklin facility to our Myford facility. As a result,
our manufacturing services have fully transition to a single-use disposable platform.

 Our state-of-the art upstream, downstream and
pilot-scale development space is located on the same campus as our Myford facility. During the fourth quarter of fiscal 2023, we further
expanded the process development capacity of our mammalian cell culture services by adding new suites within our existing process development
laboratory space, which has doubled our total process development capacity.

 Cell and Gene Therapy Facility

 We have taken and continue to take steps to explore
and invest in strategic opportunities to expand our service offerings. During fiscal 2022, we commenced the expansion of our CDMO service
offering into viral vector development and manufacturing services for the rapidly growing CGT market. This expansion consists of a two-phased
approach to the construction of a world-class, single purpose-built CGT development and CGMP manufacturing facility in Costa Mesa, California
(the "CGT Facility"). In June 2022, we completed the first phase with the opening of our new analytical and process development
laboratories. The second phase of construction includes the build-out of CGMP manufacturing suites, which are expected to be online by
the end of the third quarter of calendar 2023.

 Manufacturing and Raw Materials

 We manufacture CGMP pharmaceutical-grade products
for our customers. The process for manufacturing generally uses commercially available raw materials from multiple suppliers, and in some
instances, from a single source supplier. We rely on third parties to supply most of the necessary raw materials and supplies for the
products we manufacture on behalf of our customers and our inability to obtain such raw materials or supplies may adversely impact our
business, financial condition, and results of operations. See "Risk Factors—Risks Related to Our Business" for additional
discussion of raw materials supplied by third party vendors for the products we manufacture for our customers.

 Regulatory Matters

 We have a strong and proven regulatory track
record, including 20 years of inspection history. To date, we have been audited and qualified by large and small domestic and
foreign biotechnology companies interested in the production of biologic material for clinical and commercial use. Additionally, we
have been audited by several regulatory agencies, including the FDA, the European Medicines Agency ("EMA"), the
Brazilian Health Surveillance Agency ("ANVISA"), the Canadian Health Authority ("Health Canada"), the
California Department of Health and the Australian Department of Health.

 We are required to comply with the regulatory
requirements of various local, state, national and international regulatory bodies having jurisdiction in the countries or localities
where we manufacture products or where our customers' products are distributed. In particular, we are subject to laws and regulations
concerning research and development, testing, manufacturing processes, equipment and facilities, including compliance with CGMPs, labeling
and distribution, import and export, and product registration and listing. As a result, our facilities are subject to regulation by the
FDA, as well as regulatory bodies of other jurisdictions where our customers have marketing approval for their products including, but
not limited to, the EMA, ANVISA, Health Canada, and the Australian Department of Health. We are also required to comply with environmental,
health and safety laws and regulations, as discussed in "Environmental and Safety Matters" below. These regulatory requirements
impact many aspects of our operations, including manufacturing, developing, labeling, packaging, storage, distribution, import and export
and record keeping related to customers' products. Noncompliance with any applicable regulatory requirements can result in government
refusal to approve facilities for manufacturing products or products for commercialization.

 Our customers' products must undergo pre-clinical
and clinical evaluations relating to product safety and efficacy before they are approved as commercial therapeutic products. The regulatory
authorities having jurisdiction in the countries in which our customers intend to market their products may delay or put on hold clinical
trials, delay approval of a product or determine that the product is not approvable. The FDA or other regulatory agencies can delay approval
of a drug if our manufacturing facilities are not able to demonstrate compliance with CGMPs, pass other aspects of pre-approval inspections
(i.e., compliance with filed submissions) or properly scale up to produce commercial supplies. The FDA and comparable government authorities
having jurisdiction in the countries in which our customers intend to market their products have the authority to withdraw product approval
or suspend manufacturing if there are significant problems with raw materials or supplies, quality control and assurance or the product
is deemed adulterated or misbranded. If new legislation or regulations are enacted or existing legislation or regulations are amended
or are interpreted or enforced differently, we may be required to obtain additional approvals or operate according to different manufacturing
or operating standards or pay additional fees. This may require a change in our manufacturing techniques or additional capital investments
in our facilities.

 Environmental and Safety Matters

 Certain products manufactured by us involve the
use, storage and transportation of toxic and hazardous materials. Our operations are subject to extensive laws and regulations relating
to the storage, handling, emission, transportation and discharge of materials into the environment and the maintenance of safe working
conditions. We maintain environmental and industrial safety and health compliance programs and training at our facilities.

 Prevailing legislation tends to hold companies
primarily responsible for the proper disposal of their waste even after transfer to third party waste disposal facilities. Other future
developments, such as increasingly strict environmental, health and safety laws and regulations, and enforcement policies, could result
in substantial costs and liabilities to us and could subject the handling, manufacture, use, reuse or disposal of substances or pollutants
at our facilities to more rigorous scrutiny than at present.

 Intellectual Property

 We do not currently own any patents and do not
have any patent applications pending in the United States or any foreign countries. However, we have acquired and developed and continue
to acquire and develop knowledge and expertise ("know-how") and trade secrets in the provision of process development and
manufacturing services. Our know-how and trade secrets may not be patentable, but they are valuable in that they enhance our ability to
provide high-quality services to our customers. We typically place restrictions in our agreements with third-parties, which contractually
restrict their right to use and disclose any of our proprietary technology with which they may be involved. In addition, we have internal
non-disclosure safeguards, including confidentiality agreements, with our employees.

 We also own trademarks to protect the names of
our services. Trademark protection continues in some countries as long as the trademark is used, and in other countries, as long as the
trademark is registered. Trademark registration is for fixed terms and can be renewed indefinitely.

 Segment Information

 Our business is organized into one reportable
operating segment, our contract manufacturing and development services segment. In
addition, we had no foreign-based operations and no long-lived assets located in foreign countries as of and for the fiscal years ended
April 30, 2023, 2022 and 2021.

 Customers

 Revenues have historically been derived from a
small customer base. Although we continue to expand our customer base, we remain dependent on a limited number of customers for a substantial
majority of our revenues. For the fiscal years ended April 30, 2023, 2022 and 2021, we derived approximately 65%, 60% and 76% of our revenues
from our top three customers, respectively. The loss of, or a significant reduction of business from, any of our primary customers could
have a material adverse effect on our business, financial condition and results of operations. Refer to Note 2, "Summary of Significant
Accounting Policies" of the Notes to Consolidated Financial Statements for additional financial information regarding our customer
concentration.

 Seasonality

 Our business is not subject to seasonality. However,
the timing of customer orders, the scale, scope, mix, and the duration of our fulfillment of such customer orders can result in variability
in our periodic revenues.

 Backlog

 Our backlog represents, as of a point in
time, expected future revenue from work not yet completed under signed contracts. As of April 30, 2023, our backlog was
approximately $191 million, a 25% increase as compared to approximately $153 million as of April 30, 2022. While we anticipate a
significant amount of our backlog will be recognized over the next five (5) fiscal quarters, our backlog is subject to a number of
risks and uncertainties, including but not limited to: the risk that a customer timely cancels its commitments prior to our
initiation of services, in which case we may be required to refund some or all of the amounts paid to us in advance under those
canceled commitments; the risk that a customer may experience delays in its program(s) or otherwise, which could result in the
postponement of anticipated services; the risk that we may not successfully execute on all customer projects; and the risk that
commencement of customer projects may be postponed due to supply chain delays, any of which could have a negative impact on our
liquidity, reported backlog and future revenues and profitability.

 Competition

 Our competition in the CDMO market includes a
number of full-service contract manufacturers and large pharmaceutical companies that have the ability to insource manufacturing. Also,
some pharmaceutical companies have been seeking to divest all or portions of their manufacturing capacity, and any such divested assets
may be acquired by our competitors. Some of our significantly larger and global competitors have substantially greater financial, marketing,
technical and other resources than we do. Moreover, additional competition may emerge and may, among other things, create downward pricing
pressure, which could negatively impact our financial condition and results of operations.

 Human Capital

 As of April 30,
2023, we had 365 employees. All of our employees are based in Orange County, California, with the exception of a small number of
employees primarily within our sales, marketing and supply chain functions who are located in various other states. None of our
employees are represented by labor unions or are covered by a collective bargaining agreement with respect to their employment. We
have not experienced any work stoppages, and we consider our relationship with our employees to be good.

 We consider talent acquisition,
development, engagement and retention a key driver to our business success and are committed to developing a comprehensive, cohesive and
positive company culture focused on quality and a commitment to the safety and health of our employees, customers and the general public.
We accomplish these initiatives through the following:

 Talent Acquisition
and Retention

 We are dedicated to
attracting and retaining exceptional talent, recognizing their vital contribution to our success. In a highly competitive employment market,
particularly for science, technology, engineering and math ("STEM") skills, our talent acquisition team employs a comprehensive
approach. We embrace alternative degree paths, establish collaborative relationships with organizations, schools, and universities, and
have launched an internship program to build a pipeline of early-career talent.

 Total Rewards

 We have implemented a
total rewards program which we believe allows us to compete for top talent in the Southern California market. Our total rewards philosophy
has been to create investment in our workforce by offering competitive compensation and benefits package. We provide all full-time employees
with compensation packages that include base salary, annual discretionary incentive bonuses, and long-term equity awards. We also offer
comprehensive employee benefits, including life, disability, and health insurance (including medical, dental and vision), dependent care
and flexible spending accounts, paid time off, leaves (including medical, maternity and paternity leaves), Employee Stock Purchase Program,
a 401(k) plan with a company match and educational assistance. It is our expressed intent to be an employer of choice in our industry
by providing market-competitive compensation and benefits package.

 Health, Safety,
and Wellness

 The health, safety, and
wellness of our employees is a priority in which we have always invested and will continue to do so. We provide our employees and their
families with access to a variety of innovative, flexible, and convenient health and wellness programs. Program benefits are intended
to provide protection and security, so employees can have peace of mind concerning events that may require time away from work or that
may impact their financial well-being.

 Diversity, Equity,
and Inclusion

 We believe a diverse
workforce is critical to our success and we are fundamentally committed to creating and maintaining a work environment in which employees
are treated fairly, with dignity, decency, respect and in accordance with all applicable laws. We strive to create a professional work
environment that is free from all forms of harassment, discrimination and bullying in the workplace, including sexual harassment and any
form of retaliation. We are an equal opportunity employer and we strive to administer all human resources actions and policies without
regard to race, color, religion, sex, national origin, ethnicity, age, disability, sexual orientation, gender identification or expression,
past or present military or veteran status, marital status, familial status, or any other status protected by applicable law. Our management
team and employees are expected to exhibit and promote honest, ethical, and respectful conduct in the workplace. All employees must adhere
to a code of business conduct and ethics and our employee handbook, which combined, define standards for appropriate behavior and are
annually trained to help prevent, identify, report, and stop any type of discrimination and harassment. Our recruitment, hiring, development,
training, compensation, and advancement is based on qualifications, performance, skills, and experience without regard to gender, race,
or ethnicity.

 Training and Development

 We believe in encouraging
employees in becoming lifelong learners by providing ongoing learning and leadership training opportunities. As part of onboarding of
new employees, we provide comprehensive training regarding CGMP, environmental, health and safety practices, as well as job function specific
training. Many of these training programs are repeated annually and are supplemented by other periodic training programs to maintain and
improve employee awareness of safety and other issues. Several times per year we provide supervisory training to newly promoted, or soon
to be promoted employees, as well as sponsor more senior employees' participation in external leadership programs. We listen to
the needs of our employees and employ appropriate training methods ranging from in-house, partnering with outside vendors, attending conferences
and networking events. Additionally, we applied for and received training funds through a State of California program supporting the biotechnology
industry through the development of future biotech workers. This program provides us with additional funds to help supplement our training
programs.

 We have a formal annual review process not only
to determine pay and equity adjustments tied to individual contributions, but to identify areas where training and development may be
needed. In addition, we strive to provide real-time recognition of employee performance, including through a web-based portal where employees
can be nominated for various levels of spot awards and accumulate points towards the purchase of gifts.

 Company Culture

 We are committed to instilling
a company culture that is focused on integrity, transparency, quality and respect. We expect our employees to observe the highest levels
of business ethics, integrity, mutual respect, tolerance and inclusivity. Our employee handbook and Code of Business Conduct and Ethics
set forth policies reflecting these values and provide direction for registering complaints in the event of any violation of our policies.
We maintain an "open door" policy at all levels of our organization and any form of retaliation against an employee is strictly
prohibited.

 Employee Engagement

 We believe that in order to be successful, we
must build and maintain a relationship with our employees that focuses on transparency and listening to their recommendations. We proactively
communicate through all-employee meetings, department meetings, one-on-one meetings and check-ins. Employee input regarding our organizational
climate is solicited at least annually through a combination of internal and external surveys solicited from all employees. We routinely
use the information gathered in these processes to address identified key areas for improvement.

 Corporate Responsibility and Sustainability

 In fiscal 2022 we engaged a third-party consultant
to assist us with our establishment of a more formal environmental, social, governance ("ESG") and sustainability program.
Working with the consultant, and under the oversight of our Corporate Governance Committee, we embarked on a comprehensive initiative
to assess, benchmark and prioritize our ESG and sustainability practices. In addition, our executive leadership team assembled
a working team to formally launch the first phase of this initiative focusing on sustainable procurement and other environmental initiatives,
including the engagement of EcoVadis, a leading global corporate social responsibility and sustainability company, to help us establish
and enhance processes supporting strong ESG practices throughout our supply chain. This arrangement provides an independent supplier assessment
against 21 criteria in categories of environment, labor and human rights, ethics, and sustainable procurement. During fiscal 2023 we focused
on building our supplier procurement program with EcoVadis, ultimately onboarding more than 90% of our procurement spend with rated suppliers
in the EcoVadis program. As we continue to build our sustainable procurement program, we have also approved a supplier code of conduct,
which formalizes our commitment to build a network of suppliers consisting of ethical and reliable partners. In addition to our sustainable
procurement program, we have formalized an executive steering team to drive overall ESG initiatives and their associated workstreams for
our people, community and environment.

 Company Information

 We were originally incorporated in the State of
California in June 1981 and reincorporated in the State of Delaware in September 1996. Our principal executive offices are located
at 14191 Myford Road, Tustin, California, 92780 and our telephone number is (714) 508-6100. Our principal website address is www.avidbio.com.
The information on, or that can be accessed through, our website is not part of this Amended Report.

 Available Information

 This Amended Report, our Quarterly Reports on Form 10-Q,
our Current Reports on Form 8-K, and our proxy statements, and all amendments to those reports filed with or furnished to the SEC
are available, free of charge, through the SEC's website at www.sec.gov and our website at www.avidbio.com as soon as reasonably
practicable after such reports are electronically filed with or furnished to the SEC. The information on, or that can be accessed through,
our website is not part of this Amended Report.

 Item 1A.
 Risk Factors

 You should carefully consider
the risks and uncertainties described below, together with all of the other information contained in this Amended Report, including
our consolidated financial statements and the related notes thereto, before making a decision to invest in our securities. The risks
and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that
we currently believe are not material, also may become important factors that affect us and impair our business operations. The occurrence
of any of the events or developments discussed in the risk factors below could have a material and adverse impact on our business, financial
condition, results of operations and cash flows and, in such case, our future prospects would likely be materially and adversely affected.
The risk factors under the headings below marked with an asterisk (*) reflect additions or modifications to the risk factors included
in the Original Report to reflect the impact of the restatement referred to in the forepart of this Amended Report, as well as Note 11,
Subsequent Events. Other than such marked risk factors and certain risk factors related to the 2026 Notes that have been deleted because
they are no longer applicable, the below risk factors have not been updated to reflect events or conditions subsequent to the date of
the Original Report.

 Risks Related to Our Business

 A significant portion of our revenues comes
from a limited number of customers.

 Our revenues have historically been derived from
a limited number of customers. Although we continue to expand our customer base, we remain dependent on a limited number of customers
for a substantial majority of our revenues. For example, for the fiscal years ended April 30, 2023, 2022 and 2021, we derived approximately
65%, 60% and 76% of our revenues from our top three customers, respectively. The loss of, or a significant reduction of business from,
any of our primary customers could have a material adverse effect on our business, financial condition, and results of operations.

 We generally do not have long-term customer
contracts and our backlog cannot be relied upon as a future indicator of revenues.

 We generally do not have long-term contracts with
our customers, and existing contracts and purchase commitments may be canceled under certain circumstances. As a result, we are exposed
to market and competitive price pressures on every order, and our agreements with customers do not provide assurance of future revenues.
Our customers are not required to make minimum purchases and, in certain circumstances, may cease using our services at any time without
penalty. Our backlog should not be relied on as a measure of anticipated demand or future revenue, because the orders constituting our
backlog may be subject to changes in delivery schedules or cancellation without significant penalty to the customer. Any reductions, cancellations
or deferrals in customer orders would negatively impact our business.

 We are making a significant investment by
expanding our CDMO service offering into the development and manufacture of viral vectors which will subject us to a number of risks and
uncertainties that could adversely affect our operations and financial results.

 Our expansion of our CDMO service offering into viral vector development and manufacturing services for the cell and gene therapy market
involves a number of risks that could adversely affect our operations and financial results, including the following risks:

 we may experience delays in the construction of the manufacturing facility, including delays in the receipt,
installation and/or validation of necessary equipment;

 we may experience significant cost overruns associated with the construction of the facility;

 our entry into a new service offering may distract our executive teams' focus on our core mammalian
cell culture operations;

 we may be unable to timely hire qualified individuals to manage and our viral vector operations; and

 we may experience delays and other challenges engaging viral vector customers due to our lack of operating
experience in the viral vector market.

 In addition to the foregoing, we have commenced
a service offering that is currently dominated by a small number of larger organizations with established viral vector operations and
significantly greater financial resources with whom we may experience difficulties in competing for talent and customers. If we are unable
to manage these risks, our business and operating results could be materially harmed.

 We have made a significant capital investment in our
Myford facility in order to meet potential future mammalian cell culture development and manufacturing needs and, as a result, we depend
on the success of attracting new and retaining existing customers' business.

 In the fourth quarter of fiscal 2023, we
completed the expansion of our Myford facility, which significantly expanded its production capacity. This expansion represents a
substantial investment in our manufacturing capabilities, and has resulted in a significant increase in our fixed costs. If we are
not able to utilize the additional capacity from this expansion, our margins could be adversely affected. Further, our future
revenues may not be sufficient to ensure the economical operation of this expanded capacity, in which case, our results of
operations could be adversely affected.

 Our rapid growth during the past three fiscal
years may not be indicative of our future growth, and if we continue to grow rapidly, we may fail to manage our growth effectively.

 From the fiscal year ended April 30, 2020 through
the fiscal year ended April 30, 2023, our revenues have increased from $59.7 million to $149.3 million, representing growth in revenues
of 150% over the three year period. We believe our ability to continue to experience revenue growth will depend on a number of factors,
including our ability to:

 complete the construction of our cell and gene therapy facility;

 continue to expand our customer base, and identify and focus on additional development and manufacturing
opportunities with existing customers;

 effectively compete with our competitors in the contract development and manufacturing sector;

 continue to broaden our market awareness through a diversified, yet flexible, marketing strategy; and

 selectively pursue complementary or adjacent service offerings, either organically or through acquisition.

 Moreover, we continue to expand our headcount
and operations. We grew from 227 employees as of April 30, 2020 to 365 employees as of April 30, 2023. We anticipate that we will continue
to expand our operations and headcount in the near term and beyond. This potential future growth could place a significant strain on our
management, administrative, operational and financial resources, company culture and infrastructure. Our success will depend in part on
our ability to manage this growth effectively while retaining personnel. To manage the expected growth of our operations and personnel,
we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Failure
to effectively manage growth could result in difficulty or delays in adding new customers, maintaining our strong quality systems, declines
in quality or customer satisfaction, increases in costs, system failures, difficulties in introducing new features or solutions, the need
for more capital than we anticipate or other operational difficulties, and any of these difficulties could harm our business performance
and results of operations.

 We rely on third parties to supply most
of the necessary raw materials and supplies for the products we manufacture on behalf of our customers and our inability to obtain such
raw materials or supplies may adversely impact our business, financial condition, and results of operations.

 Our operations require various raw materials,
including proprietary media, resins, buffers, and filters, in addition to numerous additional raw materials supplied primarily by third
parties. We or our customers specify the raw materials and other items required to manufacture their product and, in some cases, specify
the suppliers from whom we must purchase these raw materials. In certain instances, the raw materials and other items can only be supplied
by a limited number of suppliers and, in some cases, a single source, or in limited quantities. If third-party suppliers do not supply
raw materials or other items on a timely basis, it may cause a manufacturing run to be delayed or canceled which would adversely impact
our financial condition and results of operations. Additionally, we do not have long-term supply contracts with any of our single source
suppliers. If we experience difficulties acquiring sufficient quantities of required materials or products from our existing suppliers,
or if our suppliers are found to be non-compliant with the FDA's quality system regulation, CGMPs or other applicable laws or regulations,
we would be required to find alternative suppliers. If our primary suppliers become unable or unwilling to perform, any resulting delays
or interruptions in the supply of raw materials required to support our manufacturing of CGMP pharmaceutical-grade products would ultimately
delay our manufacture of products for our customers, which could materially and adversely affect our financial condition and operating
results. Furthermore, third-party suppliers may fail to provide us with raw materials and other items that meet the qualifications and
specifications required by us or our customers. If third-party suppliers are not able to provide us with raw materials that meet our or
our customers' specifications on a timely basis, we may be unable to manufacture their product or it could prevent us from delivering
products to our customers within required timeframes. Any such delay in delivering our products may create liability for us to our customers
for breach of contract or cause us to experience order cancellations and loss of customers. In the event that we manufacture products
with inferior quality components and raw materials, we may become subject to product liability claims caused by defective raw materials
or components from a third-party supplier or from a customer, or our customer may be required to recall its products from the market.

 We, and certain of our customers may, maintain
cash at financial institutions, often in balances that exceed federally-insured limits. The failure of financial institutions could adversely
affect our access to our funds, our ability to pay operational expenses or make other payments, and the ability of our customers to
pay us for our services.

 We, and certain of our customers may,
maintain cash in accounts that exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limits. If such
banking institutions were to fail, we and/or potentially certain of our customers could lose all or a portion of those amounts held
in excess of such insurance limitations. For example, the FDIC took control of Silicon Valley Bank on March 10, 2023. Although we
did not have any cash or cash equivalents at Silicon Valley Bank and the Federal Reserve subsequently announced that account holders
would be made whole, the FDIC may not make all account holders whole in the event of future bank failures. In addition, even if
account holders are ultimately made whole with respect to a future bank failure, account holders' access to their accounts and
assets held in their accounts may be substantially delayed. Any material loss that we and/or our customers may experience in the
future or inability for a material time period to access our or their cash and cash equivalents could have an adverse effect on our
ability to pay our operational expenses or make other payments, and/or our customers' ability to pay us for services rendered
(or may cause them to cancel scheduled services) which could adversely affect our business.

 All of our manufacturing facilities are
situated in Orange County, California, which increases our exposure to significant disruption to our business as a result of unforeseeable
developments in a single geographic area.

 We operate our manufacturing facilities in Orange
County, California. It is possible that we could experience prolonged periods of reduced production due to unforeseen catastrophic events
occurring in or around our facilities. It is also possible that operations could be disrupted due to other unforeseen circumstances such
as power outages, explosions, fires, floods, earthquakes or accidents. As a result, we may be unable to shift manufacturing capabilities
to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be
encountered, and we may suffer damage to our reputation. Our financial condition and results of our operations could be materially adversely
affected were such events to occur.

 Our manufacturing services are highly complex,
and if we are unable to provide quality and timely services to our customers, our business could suffer.

 The manufacturing services we offer are highly
complex, due in part to strict regulatory requirements. A failure of our quality control systems in our facilities could cause problems
to arise in connection with facility operations for a variety of reasons, including equipment malfunction, viral contamination, failure
to follow specific manufacturing instructions, protocols and standard operating procedures, problems with raw materials or environmental
factors. Such problems could affect production of a single manufacturing run or a series of runs, requiring the destruction of products,
or could halt manufacturing operations altogether. In addition, our failure to meet required quality standards may result in our failure
to timely deliver products to our customers, which, in turn, could damage our reputation for quality and service. Any such incident could,
among other things, lead to increased costs, lost revenue, reimbursement to customers for lost drug substance, damage to and possibly
termination of existing customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses
with respect to other manufacturing runs. With respect to our commercial manufacturing, if problems are not discovered before the product
is released to the market, we may be subject to regulatory actions, including product recalls, product seizures, injunctions to halt manufacture
and distribution, restrictions on our operations, civil sanctions, including monetary sanctions, and criminal actions. In addition, such
issues could subject us to litigation, the cost of which could be significant.

 If we do not enhance our existing, or introduce
new, service offerings in a timely manner, our offerings may become obsolete or noncompetitive over time, customers may not buy our offerings
and our revenues and profitability may decline.

 Demand for our manufacturing services may change
in ways that we may not anticipate due to evolving industry standards and customer needs that are increasingly sophisticated and varied,
as well as the introduction by others of new offerings and technologies that provide alternatives to our offerings. In the event we are
unable to offer or enhance our service offerings or expand our manufacturing infrastructure to accommodate requests from our customers
and potential customers, our offerings may become obsolete or noncompetitive over time, in which case our revenue and operating results
would suffer. For example, if we are unable to respond to changes in the nature or extent of the technological or other needs of our customers
through enhancing our offerings, our competition may develop offerings that are more competitive than ours, and we could find it more difficult
to renew or expand existing agreements or obtain new agreements. Potential innovations intended to facilitate enhanced or new offerings
generally will require a substantial capital investment before we can determine their commercial viability, and we may not have financial
resources sufficient to fund all desired innovations. Even if we succeed in creating enhanced or new offerings, however, they may still
fail to result in commercially successful offerings or may not produce revenue in excess of our costs of development, and they may be
rendered obsolete by changing customer preferences or the introduction by our competitors of offerings embodying new technologies or features.
Finally, the marketplace may not accept our innovations due to, among other things, existing patterns of clinical practice, the need for
regulatory clearance and/or uncertainty over market access or government or third-party reimbursement.

 If we use hazardous and biological materials
in a manner that causes injury or violates applicable law, we may be liable for damages.

 Our contract manufacturing operations involve
the controlled use of hazardous materials and chemicals. We are subject to federal, state and local laws and regulations in the United
States governing the use, manufacture, storage, handling and disposal of hazardous materials and chemicals. Although we believe that our
procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we may incur significant
additional costs to comply with applicable laws in the future. Also, even if we are in compliance with applicable laws, we cannot completely
eliminate the risk of contamination or injury resulting from hazardous materials or chemicals. As a result of any such contamination or
injury, we may incur liability, or local, city, state or federal authorities may curtail the use of these materials and interrupt our business
operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our
resources. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations
may impair our contract manufacturing operations, which could materially harm our business, financial condition and results of operations.

 Our business, financial
condition, and results of operations may be adversely affected by pandemics or similar public health crises.

 Public health crises
such as pandemics or similar outbreaks may affect our operations and those of third parties on which we rely, including our customers
and suppliers. Our business, financial condition, and results of operations may be affected by: disruptions in our customers' abilities
to fund, develop, or bring to market products as anticipated; delays in or disruptions to the conduct of clinical trials by our customers;
cancellations of contracts or confirmed orders from our customers; and inability, difficulty, or additional cost or delays in obtaining
key raw materials, components, and other supplies from our existing supply chain; among other factors caused by a public health crises.

 For example, the COVID-19
pandemic led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public
health safety measures. The extent to which future pandemics impact our operations and/or those of our customers and suppliers will depend
on future developments, which are highly uncertain and unpredictable, including the duration or recurrence of outbreaks, potential future
government actions, new information that will emerge concerning the severity and impact of that pandemic and the actions to contain the
pandemic or address its impact in the short and long term, among others.

 The business disruptions
associated with a global pandemic could impact the business, product development priorities and operations of our customers and suppliers.
For example, disruptions in supply chains and disruptions to the operations of the FDA and other drug regulatory authorities, could result
in, among other things, delays of inspections, reviews, and approvals of our customers' products, as well as the volume and timing
of orders from these customers. Such disruptions could result in delays in the development programs of our customers or impede the commercial
efforts for our customers' approved products, resulting in potential reductions or delays in orders from our customers which could
have a material negative effect on our business in the future.

 Potential product liability claims, errors
and omissions claims in connection with services we perform and potential liability under indemnification agreements between us and our
officers and directors could adversely affect us.

 We manufacture products intended for use in humans.
These activities could expose us to risk of liability for personal injury or death to persons using such products. We seek to reduce our
potential liability through measures such as contractual indemnification provisions with customers (the scope of which may vary by customer,
and the performances of which are not secured) and insurance maintained by us and our customers. We could be materially adversely affected
if we are required to pay damages or incur defense costs in connection with a claim that is outside the scope of the indemnification agreements,
if the indemnity, although applicable, is not performed in accordance with its terms or if our liabilities exceed the amount of applicable
insurance or indemnity. In addition, we could be held liable for errors and omissions in connection with the services we perform. Although
we currently maintain product liability and errors and omissions insurance with respect to these risks, such coverage may not be adequate
or continue to be available on terms acceptable to us.

 We also indemnify our officers and directors for
certain events or occurrences while the officer or director is serving at our request in such capacity. The maximum potential amount of
future payments we could be required to make under these indemnification agreements is unlimited. Although we have a director and officer
insurance policy that covers a portion of any potential exposure, we could be materially and adversely affected if we are required to
pay damages or incur legal costs in connection with a claim above such insurance limits.

 Any claims beyond our insurance coverage
limits, or that are otherwise not covered by our insurance, may result in substantial costs and a reduction in our available capital resources.

 We maintain property insurance, employer's
liability insurance, product liability insurance, general liability insurance, business interruption insurance, and directors' and
officers' liability insurance, among others. Although we maintain what we believe to be adequate insurance coverage, potential claims
may exceed the amount of insurance coverage or may be excluded under the terms of the policy, which could cause an adverse effect on our
business, financial condition and results from operations. Generally, we would be at risk for the loss of inventory that is not within
customer specifications. These amounts could be significant. In addition, in the future we may not be able to obtain adequate insurance
coverage or we may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage.

 Third parties may claim that our services
or our customer's products infringe on or misappropriate their intellectual property rights.

 Any claims that our services infringe the rights
of third parties, including claims arising from any of our customer engagements, regardless of their merit or resolution, could be costly
and may divert the efforts and attention of our management and technical personnel. We may not prevail in such proceedings, given the
complex technical issues and inherent uncertainties in intellectual property litigation. If such proceedings result in an adverse outcome,
we could be required, among other things, to pay substantial damages, discontinue the use of the infringing technology, expend significant
resources to develop non-infringing technology, license such technology from the third party claiming infringement (which license may
not be available on commercially reasonable terms or at all) and/or cease the manufacture, use or sale of the infringing processes or
offerings, any of which could have a material adverse effect on our business.

 In addition, our customers' products may
be subject to claims of intellectual property infringement and such claims could materially affect our business if their products cease
to be manufactured and they have to discontinue the use of the infringing technology which we may provide. Any of the foregoing could
affect our ability to compete or could have a material adverse effect on our business, financial condition and results of operations.

 We depend on key personnel and the loss
of key personnel could harm our business and results of operations.

 We depend on our ability to attract and retain
qualified scientific and technical employees, as well as a number of key executives. These employees may voluntarily terminate their employment
with us at any time. We may not be able to retain key personnel, or attract and retain additional qualified employees. We do not maintain
key-man or similar policies covering any of our senior management or key personnel. Our inability to attract and retain key personnel
would have a material adverse effect on our business.

 We have federal and state net operating
loss, or NOL, carry forwards which could be used to offset/defer federal and state income taxes. Our ability to use such carry forwards
to offset future taxable income may be subject to certain limitations related to changes in ownership of our stock and decisions by California
and other states to limit or suspend NOL carry forwards.*

 As of April 30, 2023, we had federal and state
NOL carry forwards of approximately $442.4 million and $294.7 million, respectively. These NOL carry forwards could potentially be used
to offset certain future federal and state income tax liabilities. The federal net operating loss carry forwards generated prior to January
1, 2018 expire in fiscal years 2024 through 2038, unless previously utilized. The federal net operating loss generated after January 1,
2018 of $77.9 million can be carried forward indefinitely. Utilization of net operating losses generated subsequent to 2020 are limited
to 80% of future taxable income. However, utilization of NOL carry forwards may be subject to a substantial annual limitation pursuant
to Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions due to ownership changes that have
occurred previously or that could occur in the future. In general, an ownership change, as defined by Section 382, results from transactions
increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over
a three-year period. A Section 382 analysis has been completed through the fiscal year ended April 30, 2022, which it was determined that
no such change in ownership had occurred. However, ownership changes occurring subsequent to April 30, 2022 may impact the utilization
of our NOL carry forwards and other tax attributes. Additionally, states may impose other limitations on the use of state NOL carry forwards.
Any limitation may result in expiration of a portion of the carry forwards before utilization. If we were not able to utilize our carry
forwards, we would be required to use our cash resources to pay taxes that would otherwise have been offset, thereby reducing our liquidity.

 We have recorded significant deferred tax
assets, and we might never realize their full value, which would result in a charge against our earnings.*

 As of April 30, 2023, we had deferred tax assets
of $113.8 million. Realization of our deferred tax assets is dependent upon our generating sufficient taxable income in future years
to realize the tax benefit from those assets. Deferred tax assets are reviewed on a periodic basis for realizability. A charge against
our earnings would result if, based on the available evidence, it is more likely than not that some portion of the deferred tax asset
will not be realized beyond our existing valuation allowance, if any. This could be caused by, among other things, deterioration in performance,
including as a result of the substantial increase in interest expense we will incur on the 2029 Notes, adverse market conditions,
adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the services provided
by our business and a variety of other factors.

 If a deferred tax asset net of our valuation allowance,
if any, was determined to be not realizable in a future period, the charge to earnings would be recognized as an expense in our results
of operations in the period the determination is made. Additionally, if we are unable to utilize our deferred tax assets, our cash
flow available to fund operations could be adversely affected. Depending on future circumstances, it is possible that we might never
realize the full value of our deferred tax assets. Any future impairment charges related to a significant portion of our deferred tax
assets could have an adverse effect on our financial condition and results of operations.

 Our
effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued
amounts.

 Our effective tax rate is derived from a combination
of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that
will become payable in each such place. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous
factors, including the impact of stock-based compensation, changes in the mix of our profitability between tax jurisdictions, the results
of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes
in accounting for income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly
different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial

 In addition, in the fourth quarter of fiscal 2022,
we determined, based on our facts and circumstances, that it was more likely than not that our deferred tax assets would be realized and,
as a result, we fully released our valuation allowance related to federal and state deferred tax assets. This resulted in a substantial
increase in our reported net income and our earnings per share compared to our operating results for fiscal 2022. As such, fiscal 2022
net income is not indicative of the actual or future profitability trend of our business. Starting in fiscal 2023, we
commenced recording income tax expense at an estimated tax rate that approximates statutory tax rates, which could result in a significant
reduction in our net income and net income per share.

 We may be subject to various litigation
claims and legal proceedings.

 We, as well as certain of our directors and officers,
may be subject to claims or lawsuits during the ordinary course of business. Regardless of the outcome, these lawsuits may result in significant
legal fees and expenses and could divert management's time and other resources. If the claims contained in these lawsuits are successfully
asserted against us, we could be liable for damages and be required to alter or cease certain of our business practices. Any of these
outcomes could cause our business, financial performance and cash position to be negatively impacted.

 We have become increasingly dependent on
information technology and any breakdown, interruption or breach of our information technology systems could subject us to liability or
interrupt the operation of our business, which could have a material adverse effect on our business, financial condition, results of operations
and cash flows.

 We are increasingly dependent upon sophisticated
information technology systems and infrastructure in connection with the conduct of our business. We must constantly update our information
technology infrastructure and our various current information technology systems throughout the organization may not continue to meet
our current and future business needs. Furthermore, modification, upgrade or replacement of such systems may be costly. In addition, due
to the size and complexity of these systems, any breakdown, interruption, corruption or unauthorized access to or cyber-attack on these
systems could create system disruptions, shutdowns or unauthorized disclosure of confidential information. While we attempt to take appropriate
security and cyber-security measures to protect our data and information technology systems and to prevent such breakdowns and unauthorized
breaches and cyber-attacks, these measures may not be successful and these breakdowns and breaches in, or attacks on, our systems and
data may not be prevented. Such breakdowns, breaches or attacks may cause business interruption and could have a material adverse effect
on our business, financial condition, results of operations and cash flows and could cause the market value of our shares of common stock
to decline, and we may suffer financial damage or other loss, including fines or criminal penalties because of lost or misappropriated
information.

 Increasing attention
to ESG matters may impact our business, financial results or stock price.

 Companies across all industries are facing increasing
scrutiny from stakeholders related to their ESG practices and disclosures, including
practices and disclosures related to climate change, diversity and inclusion and governance standards. Investor advocacy groups, certain
institutional investors, lenders, investment funds and other influential investors are also increasingly focused on ESG practices and
disclosures and in recent years have placed increasing importance on the implications and social cost of their investments. In addition,
government organizations are enhancing or advancing legal and regulatory requirements specific to ESG matters. The heightened stakeholder
focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and
expectations and the associated reporting requirements. A failure to adequately meet stakeholder expectations may result in noncompliance,
the loss of business, reputational impacts, diluted market valuation, an inability to attract customers and an inability to attract and
retain top talent. In addition, our adoption of certain standards or mandated compliance to certain requirements could necessitate additional
investments that could have an adverse effect on our results of operations.

 We may seek to grow our business through
acquisitions of complementary businesses, and the failure to manage acquisitions, or the failure to integrate them with our existing business,
could harm our financial condition and operating results.

 From time to time, we may consider opportunities
to acquire other companies, products or technologies that may enhance our manufacturing capabilities, expand the breadth of our markets
or customer base, or advance our business strategies. Potential acquisitions involve numerous risks, including: problems assimilating
the acquired service offerings, products or technologies; issues maintaining uniform standards, procedures, quality control and policies;
unanticipated costs associated with acquisitions; diversion of management's attention from our existing business; risks associated
with entering new markets in which we have limited or no experience; increased legal and accounting costs relating to the acquisitions
or compliance with regulatory matters; and unanticipated or undisclosed liabilities of any target.

 We have no current commitments with respect to
any acquisition. We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully
complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired service
offerings, products or technologies. Our potential inability to integrate any acquired service offerings, products or technologies effectively
may adversely affect our business, financial condition, and results of operations.

 Risks Related to Our Customers

 The consumers of the products we manufacture
for our customers may significantly influence our business, financial condition, and results of operations.

 We depend on, and have no control over, consumer
demand for the products we manufacture for our customers. Consumer demand for our customers' products could be adversely affected
by, among other things, delays in health regulatory approval, the inability of our customers to demonstrate the efficacy and safety of
their products, the loss of patent and other intellectual property rights protection, the emergence of competing or alternative products,
including generic drugs and the degree to which private and government payment subsidies for a particular product offset the cost to consumers
and changes in the marketing strategies for such products. Additionally, if the products we manufacture for our customers do not gain
market acceptance, our revenues and profitability may be adversely affected.

 We believe that continued changes to the healthcare
industry, including ongoing healthcare reform, adverse changes in government or private funding of healthcare products and services, legislation
or regulations governing the privacy of patient information or patient access to care, or the delivery, pricing or reimbursement of pharmaceuticals
and healthcare services or mandated benefits, may cause healthcare industry participants to purchase fewer services from us or influence
the price that others are willing to pay for our services. Changes in the healthcare industry's pricing, selling, inventory, distribution
or supply policies or practices could also significantly reduce our revenue and profitability.

 If production volumes of key products that we
manufacture for our customers decline, our financial condition and results of operations may be adversely affected.

 Our customers' failure to receive
or maintain regulatory approval for their product candidates could negatively impact our revenues and profitability.

 Our success depends upon the regulatory
approval of the products we manufacture. As such, if our customers experience a delay in, or a failure to receive, approval for any
of their product candidates or fail to maintain regulatory approval of their products, and we are not able to manufacture these
products, our revenue and profitability could be adversely affected. Additionally, if the FDA or a comparable foreign regulatory
authority does not approve of our facilities for the manufacture of a customer product, or if it withdraws such approval in the
future, our customers may choose to identify alternative manufacturing facilities and/or relationships, which could significantly
impact our ability to expand our manufacturing capacity and capabilities and achieve profitability.

 We depend on spending and demand from our
customers for our contract manufacturing and development services and any reduction in spending or demand, whether due to a deterioration
in macroeconomic conditions or unfavorable research and development results, could have a material adverse effect on our revenues and
profitability.

 The amount that our customers spend on the development
and manufacture of their products or product candidates, particularly the amount our customers choose to spend on outsourcing these services
to us, substantially impacts our revenue and profitability. During times of greater economic uncertainty, such as the biopharmaceutical
industry is currently experiencing, our smaller customers with products in earlier stages of development tend to be much more negatively
impacted due to the tightening of the access to capital. As a result, such earlier stage customers may be forced to delay or cancel our
services in an effort to conserve cash which could have a material adverse effect on our revenues and profitability. In addition, the
outcomes of our customers' research, development and marketing also significantly influence the amount that our customers choose
to spend on our services and offerings. Our customers determine the amounts that they will spend on our services based upon, among other
things, the clinical and market success of their products, available resources and their need to develop new products which, in turn,
depend upon a number of other factors, including their competitors' research, development and product initiatives and the anticipated
market for any new products, as well as clinical and reimbursement scenarios for specific products and therapeutic areas. Further, increasing
consolidation in the pharmaceutical industry may impact such spending, particularly in the event that any of our customers choose to develop
or acquire integrated manufacturing operations. Any reduction in customer spending on biologics development and related services as a
result of these and other factors could have a material adverse effect on our business, financial condition, and results of operations.

 If we are unable to protect the confidentiality
of our customers' proprietary information, we may be subject to claims.

 Many of the formulations used and processes developed
by us in the manufacture of our customers' products are subject to trade secret protection, patents or other intellectual property
protections owned or licensed by such customer. While we make significant efforts to protect our customers' proprietary and confidential
information, including requiring our employees to enter into agreements protecting such information, if any of our employees breach
the non-disclosure provisions in such agreements, or if our customers make claims that their proprietary information has been disclosed,
our reputation may suffer damage and we may become subject to legal proceedings that could require us to incur significant expense and
divert our management's time, attention and resources.

 Risks Related to the Industry in Which We Operate

 Failure to comply with existing and future
regulatory requirements could adversely affect our business, financial condition, and results of operations.

 Our industry is highly regulated. We are required
to comply with the regulatory requirements of various local, state, provincial, national and international regulatory bodies having jurisdiction
in the countries or localities in which we manufacture products or in which our customers' products are distributed. In particular,
we are subject to laws and regulations concerning development, testing, manufacturing processes, equipment and facilities, including compliance
with CGMPs, import and export, and product registration and listing, among other things. As a result, most of our facilities are subject
to regulation by the FDA, as well as regulatory bodies of other jurisdictions where our customers have marketing approval for their products
including, but not limited to, the EMA, ANVISA and/or Health Canada, depending on the countries in which our customers market and sell
the products we manufacture on their behalf. As we expand our operations, we may be exposed to more complex and new regulatory and administrative
requirements and legal risks, any of which may require expertise in which we have little or no experience. It is possible that compliance
with new regulatory requirements could impose significant compliance costs on us. Such costs could have a material adverse effect on our
business, financial condition and results of operations.

 These regulatory requirements impact many aspects
of our operations, including manufacturing, developing, storage, distribution, import and export and record keeping related to customers'
products. Noncompliance with any applicable regulatory requirements can result in government refusal to approve: (i) facilities for testing
or manufacturing products or (ii) products for commercialization. The FDA and other regulatory agencies can delay, limit or deny approval
for many reasons, including:

 changes to the regulatory approval process, including new data requirements for product candidates in
those jurisdictions, including the United States, in which our customers may be seeking approval;

 that a customer's product candidate may not be deemed to be safe or effective;

 the inability of the regulatory agency to provide timely responses as a result of its resource constraints;
and

 that the manufacturing processes or facilities may not meet the applicable requirements.

 In addition, if new legislation or regulations
are enacted or existing legislation or regulations are amended or are interpreted or enforced differently, we may be required to obtain
additional approvals or operate according to different manufacturing or operating standards. This may require a change in our development
and manufacturing techniques or additional capital investments in our facilities. Any related costs may be significant. If we fail to
comply with applicable regulatory requirements in the future, then we may be subject to warning letters and/or civil or criminal penalties
and fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, restrictions on the import and export
of our products, debarment, exclusion, disgorgement of profits, operating restrictions and criminal prosecution and the loss of contracts
and resulting revenue losses. Inspections by regulatory authorities that identify any deficiencies could result in remedial actions, production
stoppages or facility closure, which would disrupt the manufacturing process and supply of product to our customers. In addition, such
failure to comply could expose us to contractual and product liability claims, including claims by customers for reimbursement for lost
or damaged active pharmaceutical ingredients or recall or other corrective actions, the cost of which could be significant.

 In addition, certain products we manufacture must
undergo pre-clinical and clinical evaluations relating to product safety and efficacy before they are approved as commercial therapeutic
products. The regulatory authorities having jurisdiction in the countries in which our customers intend to market their products may delay
or put on hold clinical trials or delay approval of a product or determine that the product is not approvable. The FDA or other regulatory
agencies can delay approval of a drug if our manufacturing facility, including any newly commissioned facility, is not able to demonstrate
compliance with CGMPs, pass other aspects of pre-approval inspections or properly scale up to produce commercial supplies. The FDA and
comparable government authorities having jurisdiction in the countries in which we or our customers intend to market their products have
the authority to withdraw product approval or suspend manufacture if there are significant problems with raw materials or supplies, quality
control and assurance or the product we manufacture is adulterated or misbranded. If our manufacturing facilities and services are not
in compliance with FDA and comparable government authorities, we may be unable to obtain or maintain the necessary approvals to continue
manufacturing products for our customers, which would materially adversely affect our financial condition and results of operations.

 We operate in a highly competitive market
and competition may adversely affect our business.

 We operate in a market that is highly competitive.
Our competition in the contract manufacturing market includes full-service contract manufacturers and large pharmaceutical companies offering
third-party manufacturing services to fill their excess capacity. We may also compete with the internal operations of those pharmaceutical
companies that choose to source their product offerings internally. In addition, most of our competitors may have substantially greater
financial, marketing, technical or other resources than we do. Moreover, additional competition may emerge, particularly in lower-cost
jurisdictions such as India and China, which could, among other things, result in a decrease in the fees paid for our services, which
may adversely affect our financial condition and results of operations.

 Risks Related to the Ownership of Our Common
Stock

 We have identified a material weakness
in our internal control over financial reporting, which if not remediated, could adversely affect our business.*

 Our management is responsible for establishing
and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise
required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses
identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual
or interim financial statements will not be prevented or detected on a timely basis.

 As described elsewhere in this Amended Report,
we have identified a material weakness in our internal control over financial reporting. As a result of this material weakness, our management
has concluded that our internal control over financial reporting was not effective as of April 30, 2023. For additional detail and a
discussion of management's consideration of the material weakness identified, see Part II, Item 9A, "Controls and Procedures"
included in this Amended Report.

 Management,
under the oversight of the Audit Committee, has designed the necessary controls to remediate the material weakness.
These controls include the initial and periodic review of covenants, acceleration clauses, events of default, and other pertinent
information in our debt agreements to enable management to assess whether any of these provisions impact our financial
reporting.

 Any failure to maintain such internal control
could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our
financial statements are not accurate, investors may not have a complete understanding, or an inaccurate understanding, of our financial
results or financial condition. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions
or investigations by the Nasdaq Stock Market, the SEC or other regulatory authorities. In either case, a material adverse effect on our
business could result from ineffective internal controls. Ineffective internal controls could also cause investors to lose confidence
in our reported financial information, which could have a negative effect on the trading price of our common stock.

 We can give no assurance that the measures
we plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements
of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial
reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in
the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair
presentation of our financial statements.

 Our issuance of additional capital stock
pursuant to our stock incentive plan, or in connection with financings, acquisitions, or otherwise will dilute the interests of other
security holders and may depress the price of our common stock.*

 We expect
to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards
to employees, directors and consultants under our stock incentive plan. We may also raise capital through equity financings in the future.
As part of our growth strategy, we may seek to acquire companies and issue equity securities to pay for any such acquisition. Any such
issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the
per share value of our common stock to decline. Furthermore, if we issue additional equity or convertible debt securities, the new equity
securities could have rights senior to those of our common stock. For example, if we elect to settle our conversion obligation under
our 7.00% Convertible Senior Notes due 2029 ("2029 Notes") in shares of our common stock or a combination of cash
and shares of our common stock, the issuance of such common stock may dilute the ownership interests of our stockholders and sales in
the public market could adversely affect prevailing market prices.

 Our highly volatile stock price may adversely
affect the liquidity of our common stock.

 The market price of our common stock has generally
been highly volatile and is likely to continue to be highly volatile. For instance, the market price of our common stock has ranged from
$5.08 to $34.51 per share over the last three fiscal years ended April 30, 2023.

 The market price of our common stock may be significantly
impacted by many factors including the following:

 the loss of a significant customer;

 significant changes in our financial results or that of our competitors, including our ability to continue
as a going concern;

 the ability to meet our revenue guidance;

 the offering and sale of shares of our common stock, either sold at market prices or at a discount under
an equity transaction;

 significant changes in our capital structure;

 published reports by securities analysts;

 actual or purported short squeeze trading activity;

 announcements of partnering transactions, joint ventures, strategic alliances, and any other transaction
that involves the development, sale or use of our technologies or competitive technologies;

 regulatory developments, including possible delays in the regulatory approval of our customers'
products which we manufacture;

 outcomes of significant litigation, disputes and other legal or regulatory proceedings;

 general stock trends in the biotechnology and pharmaceutical industry sectors;

 public concerns as to the safety and effectiveness of the products we manufacture;

 economic trends and other external factors including, but not limited to, interest rate fluctuations,
economic recession, inflation, foreign market trends, national crisis, and disasters; and

 healthcare reimbursement reform and cost-containment measures implemented
by government agencies.

 These and other external factors have caused and
may continue to cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors
from readily selling their shares of our common stock, and may otherwise negatively affect the liquidity of our common stock.

 Anti-takeover provisions in our certificate
of incorporation, amended and restated bylaws, the Indenture, as well as provisions of Delaware law could prevent or delay a change in
control of our company, even if such change in control would be beneficial to our stockholders.*

 Provisions of our certificate of incorporation
and amended and restated bylaws could discourage, delay or prevent a merger, acquisition or other change in control of our company, even
if such change in control would be beneficial to our stockholders. These include: authorizing the issuance of "blank check"
preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;
no provision for the use of cumulative voting for the election of directors; limiting the ability of stockholders to call special meetings;
requiring all stockholder actions to be taken at a meeting of our stockholders (i.e. no provision for stockholder action by written consent);
and establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can
be acted upon by stockholders at stockholder meetings.

 Further,
in connection with our 2029 Notes issuances, we entered into an indenture dated as of March 12, 2024 (as amended or supplemented, the
"Indenture") with U.S. Bank Trust Company, National Association, as trustee. Certain provisions in the Indenture could make
it more difficult or more expensive for a third party to acquire us. For example, if a takeover would constitute a fundamental change,
holders of the 2029 Notes will have the right to require us to repurchase their 2029 Notes in cash. In addition, if a takeover constitutes
a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their 2029 Notes in connection
with such takeover. In either case, and in other cases, our obligations under the 2029 Notes and the Indenture could increase the cost
of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management.

 In addition, Section 203 of the Delaware General
Corporation Law prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets
or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock.

 Our amended and restated bylaws
provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us
and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or
our directors, officers or employees.

 Our amended and restated bylaws provide
that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum
for any derivative action or proceeding brought on our behalf, any action asserting a breach of a fiduciary duty owed by any of our
directors, officers, or other employees to us, any action asserting a claim against us arising pursuant to the Delaware General
Corporation Law, our certificate of incorporation or our bylaws, any action to interpret, apply, enforce, or determine the validity
of our certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the internal affairs
doctrine. The choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds
favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our
directors, officers and other employees.

 We do not intend to pay dividends on our
common stock, so any returns will be limited to the value of our stock.

 We have never declared or paid any cash dividend
on our common stock. We currently anticipate that we will retain future earnings, if any, for the development, operation and expansion
of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will
therefore be limited to the appreciation of the trading price of our common stock.

 If securities or industry analysts do not
publish research reports about us, or if they issue adverse opinions about our business, our stock price and trading volume could decline.

 The research and reports that
industry or securities analysts publish about us or our business will influence the market for our common stock. If one or more analysts
who cover us issues an adverse opinion about us, our stock price would likely decline. If one or more of these analysts ceases research
coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets which, in turn, could cause
our stock price or trading volume to decline. Further, if we fail to meet the market expectations of analysts who follow our stock, our
stock price likely would decline.

 Risks Related to
Our Outstanding 2029 Notes

 We may not have
sufficient cash flow from our business to make payments on our significant debt when due, and we may incur additional indebtedness in
the future.*

 In March 2024, we
issued the 2029 Notes (see Note 11, Subsequent Events) in a private offering to qualified institutional buyers pursuant to Section
4(a)(2) under the Securities Act. We may be required to use a substantial portion of our cash flows from operations to pay interest and
principal on our indebtedness. Our ability to make scheduled payments of the principal and to pay interest on or to refinance our indebtedness,
including the 2029 Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors
beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt
and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives,
such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our
ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able
to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

 In addition, we may
incur substantial additional debt in the future, subject to the restrictions contained in our Credit Agreement and any future
debt agreements, some of which may be secured debt. We are not restricted under the terms of the Indenture governing the 2029 Notes,
from incurring additional debt, securing existing or future debt, recapitalizing our debt, repurchasing our stock, pledging our assets,
making investments, paying dividends, guaranteeing debt or taking a number of other actions that are not limited by the terms of the
Indenture governing the 2029 Notes that could have the effect of diminishing our ability to make payments on the 2029 Notes
when due.

 The conditional
conversion feature of our 2029 Notes, if triggered, may adversely affect our financial condition and operating results.*

 In the event the conditional conversion feature
of the 2029 Notes is triggered, holders of the 2029 Notes will be entitled to convert the notes at any time during specified periods
at their option. If one or more holders elect to convert their 2029 Notes, unless we elect to satisfy our conversion obligation by delivering
solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle
a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even
if holders do not elect to convert their 2029 Notes when these conversion triggers are satisfied, we could be required under applicable
accounting rules to reclassify all or a portion of the outstanding principal of the 2029 Notes as a current rather than long-term
liability, which would result in a material reduction of our net working capital.

 Our
failure to comply with the covenants under our Indenture applicable to the 2029 Notes could trigger an event of default under the
Indenture and result in the 2029 Notes being declared immediately due and payable.*

 The Indenture applicable to the 2029 Notes
 includes customary covenants and sets forth certain events of default after which the 2029 Notes
may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after
which the 2029 Notes become automatically due and payable. Events of default under the Indenture include, but are not limited to, the
following:

 •
 default in any payment of interest
 (not including additional interest (as defined in the Indenture)) on any 2029 Note when due
 and payable, and the default continues for a period of 30 days;

 •
 default in the payment of principal
 of any 2029 Note when due and payable at its stated maturity, upon any required repurchase,
 upon declaration of acceleration or otherwise;

 •
 default by us with respect to any
 mortgage, agreement or other instrument under which there may be outstanding, or by which
 there may be secured or evidenced, any indebtedness for money borrowed in excess of $10.0
 million (or its foreign currency equivalent) in the aggregate of us, (i) resulting in such
 indebtedness becoming or being declared due and payable or (ii) constituting a failure to
 pay the principal or interest of any such debt when due and payable at its stated maturity,
 upon required repurchase, upon declaration of acceleration or otherwise, and in the cases
 of clauses (i) and (ii), such acceleration shall not have been rescinded or annulled or such
 failure to pay or default shall not have been cured or waived, or such indebtedness is not
 paid or discharged, as the case may be, within 45 days of the occurrence thereof;

 •
 certain events of bankruptcy, insolvency,
 or reorganization of us; and

 •
 default in the payment of additional
 interest on any 2029 Note when due and payable, and such default continues for a period of
 30 days after written notice of such default from any holder of the 2029 Notes then outstanding
 has been received by us or the trustee.

 If, following the occurrence of an event of
default 100% of the principal of, and accrued and unpaid interest on, the 2029 Notes, is declared immediately due and payable we may
not have sufficient funds to pay or be able to obtain additional financing to make any accelerated payments.

 Item 1B.
 Unresolved Staff Comments

 Not applicable.

 Item 2.
 Properties

 Our corporate offices and CDMO
facilities are all located in Orange County, California. We currently lease an aggregate of approximately 239,000 square feet of office,
manufacturing, laboratory and warehouse space in five buildings under four separate operating lease agreements that expire on various
dates between August 2023 and May 2032. These leases contain renewal options that could extend our lease terms to between August 2035
and May 2042.

 We believe that the
facilities we lease are adequate to meet our current needs and that, if necessary, additional space would be available to
accommodate any future growth.

 Item 3.
 Legal Proceedings

 In the ordinary course of business, we are at
times subject to various legal proceedings and disputes. We make provisions for liabilities when it is both probable that a liability
has been incurred and the amount of the loss can be reasonably estimated. Such provisions, if any, are reviewed at least quarterly
and adjusted to reflect the impact of any settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other
information and events pertaining to a particular case. We currently are not a party to any legal proceedings, the adverse outcome of
which, in management's opinion, individually or in the aggregate, would have a material adverse effect on our consolidated financial
condition or results of operations.

 Item 4.
 Mine Safety Disclosures

 Not applicable.

 PART
II

 Item 5.
 Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity
Securities

 Market Information

 Our common stock is listed on
The NASDAQ Capital Market under the trading symbol "CDMO."

 Holders of Common Stock

 As of June 9, 2023, we had
605 stockholders of record of our common stock. This number does not include beneficial owners whose shares are held in street name.

 Dividend Policy

 We have never declared or paid
cash dividends on our common stock. We do not anticipate paying any cash dividends in the foreseeable future. Any future determination
to declare cash dividends will be made at the discretion of our board of directors and will depend on our financial condition, results
of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.

 Purchases of Equity Securities
by the Issuer and Affiliated Purchasers

 None.

 Performance Graph

 Notwithstanding any statement to the contrary
in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock
shall not be deemed to be "filed" with the SEC or to be "soliciting material" under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and it shall not be deemed to be incorporated by reference into any of our filings
under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate it by reference into
such filing.

 The following chart shows the
performance from April 30, 2018 through April 30, 2023 of Avid Bioservices, Inc. common stock, compared with an investment in the stocks
represented in the NASDAQ U.S. Benchmark Pharmaceuticals TR Index and the NASDAQ U.S. Benchmark TR Index assuming the investment of $100
at the beginning of the period and the reinvestment of dividends, if any. The total return data for the comparative indexes were prepared
by NASDAQ OMX Global Indexes.

 COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

VALUE OF INVESTMENT OF $100 ON APRIL 30, 2018

 The underlying data for the preceding graph is
as follows:

 2018

 April 30, 2019

 April 30, 2020

 2021

 2022

 2023

 Avid Bioservices, Inc.

 $ 100.00

 $ 130.52

 $ 166.21

 $ 583.24

 $ 366.76

 $ 491.83

 NASDAQ U.S. Benchmark Pharmaceuticals TR Index

 $ 100.00

 $ 114.15

 $ 126.28

 $ 145.85

 $ 176.87

 $ 189.25

 NASDAQ U.S. Benchmark TR Index

 $ 100.00

 $ 112.69

 $ 111.81

 $ 168.96

 $ 163.44

 $ 165.51

 Item 6.
 [reserved]

 Item 7.
 Management's Discussion And Analysis Of Financial Condition And Results Of Operations

 The following discussion
and analysis should be read in conjunction with our audited Consolidated Financial Statements and the related notes thereto set forth
in "Item 8—Financial Statements and Supplementary Data". In addition to historical information, this discussion and
analysis contains forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those
set forth under "Item 1A—Risk Factors" and elsewhere in this Amended Report.

 For discussion related to
changes in financial condition and our results of operations for fiscal year 2022 compared to fiscal year 2021, refer to "Part II,
Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual
Report on Form 10-K for the fiscal year ended April 30, 2022, which was filed with the SEC on June 29, 2022.

 Restatement of Previously
Issued Financial Statements

 The following information
has been adjusted to reflect the restatement of our consolidated financial statements as described in the "Explanatory Note"
at the beginning of this Amended Report and in Note 1 of the notes to the consolidated financial statements included herein. In addition,
the information under the captions "Liquidity and Capital Resources" and "Cash Requirements" takes into account
the events described in Note 11 of the notes to the consolidated financial statements included herein.

 Overview

 We are a dedicated contract development and manufacturing
organization ("CDMO") that provides a comprehensive range of services from process development to Current Good Manufacturing
Practices ("CGMP") clinical and commercial manufacturing of biologics for the biotechnology and biopharmaceutical industries.
With 30 years of experience producing biologics, our services include clinical and commercial product manufacturing, bulk packaging, release
and stability testing and regulatory submissions support. We also provide a variety of process development services, including upstream
and downstream development and optimization, analytical methods development, cell line development, testing and characterization.

 Strategic
Objectives

 We have a growth strategy that seeks to align
with the growth of the biopharmaceutical drug substance contract services market. That strategy encompasses the following objectives:

 Invest in additional manufacturing capacity, capabilities and resources required for us to achieve our
long-term growth strategy and meet the growth-demand of our customers' programs, moving from development through to commercial manufacturing;

 Broaden our market awareness through a diversified yet flexible marketing strategy;

 Continue to expand our customer base and programs with existing customers for both process development
and manufacturing service offerings;

 Explore strategic opportunities both within our core business as well as in adjacent and/or synergistic
biologic service offerings in order to enhance and/or broaden our capabilities; and

 Increase
 our operating profit margin to best-in-class within our industry.

 Fiscal Year 2023 Highlights

 The following summarizes select highlights from
our fiscal year ended April 30, 2023:

 Reported revenues of $149.3 million, an increase of 25%, or $29.7 million, compared to fiscal 2022;

 Expanded our customer base and programs with existing customers and ended the year with a backlog of approximately
$191 million compared to $153 million at the end of fiscal 2022;

 Entered into a credit agreement with Bank of America that provides for a revolving credit facility
 in an amount equal to the lesser of (i) $50 million, and (ii) a borrowing base calculated as the sum of (a) 80% of the value of
 certain of our eligible accounts receivable, plus (b) up to 100% of the value of eligible cash collateral, provided we remain in compliance
 with the underlying financial covenant in the credit agreement;

 Announced the official opening of our additional CGMP mammalian cell manufacturing suites within our Myford
facility. This milestone marked the completion of our two-phased expansion of our Myford facility;

 Announced the completion of our mammalian cell process development laboratory expansion, which has doubled
our total process development process capacity;

 Further enhanced our mammalian cell offerings with the addition of in-house cell line development services;

 Announced the official opening of our analytical and process development suites within our cell and gene
therapy facility; and

 Continued to advance the build-out of CGMP manufacturing suites in our cell and gene therapy facility.

 Facility Expansions

 During fiscal year 2021, we announced plans for
a two-phased expansion of our Myford facility. The first phase, which expanded the production capacity of our Myford facility by adding
an additional downstream processing suite, was completed in January 2022. The second phase, which was recently completed in March 2023,
further expanded our capacity with the addition of a second manufacturing train, including both upstream and downstream processing suites.

 In June 2022, we announced plans to further expand
the process development capacity of our mammalian cell culture services, by adding new suites within our existing process development
laboratory space. This expansion was completed in April 2023.

 During fiscal year 2022, we announced plans to
expand our CDMO service offerings into viral vector development and manufacturing services for the rapidly growing cell and gene therapy
("CGT") market. This expansion consists of a two-phased approach to the construction of a world-class, single purpose-built
CGT development and CGMP manufacturing facility in Costa Mesa, California (the "CGT Facility"). In June 2022, we completed
the first phase with the opening of our new analytical and process development laboratories. The second phase of construction is the build
out of CGMP manufacturing suites, which is expected to be online by the end of the third calendar quarter of 2023. We estimate that as
of April 30, 2023, the remaining cost to complete our CGT Facility construction is approximately $14 million.

 Upon completion of these expansion projects, we
estimate that our combined facilities will have the potential to bring our total revenue generating capacity to up to approximately $400
million annually, depending on the mix of future customer projects.

 Performance and Financial Measures

 In assessing the performance of our business,
we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of
our business are revenues, gross profit, selling, general and administrative expenses, operating income, interest expense, other income
(expense), net, and income tax (expense) benefit.

 We intend for this discussion to provide the reader
with information that will assist in understanding our consolidated financial statements, the changes in certain key items in those consolidated
financial statements from period to period and the primary factors that accounted for those changes.

 Revenues are derived from services provided under
our customer contracts and are disaggregated into manufacturing and process development revenue streams. Manufacturing revenue generally
represents revenue from the manufacturing of customer products derived from mammalian cell culture covering clinical through commercial
manufacturing runs. Process development revenue generally represents revenue from services associated with the custom development of a
manufacturing process and analytical methods for a customer's product.

 Gross Profit

 Gross profit is equal to revenues less cost of
revenues. Cost of revenues reflects the direct cost of labor, overhead and material costs. Direct labor costs primarily include compensation,
benefits, recruiting fees, and stock-based compensation within the manufacturing, process and analytical development, quality assurance,
quality control, validation, supply chain, project management and facilities functions. Overhead costs primarily include the rent, common
area maintenance, utilities, property taxes, security, materials and supplies, software, small equipment and deprecation costs incurred
at our manufacturing and laboratory locations.

 Selling, General and Administrative Expenses

 Selling, general and administrative ("SG&A")
expenses are composed of corporate-level expenses, including compensation, benefits, recruiting fees and stock-based compensation of corporate
functions such as executive management, finance and accounting, business development, legal, human resources, information technology,
and other centralized services. SG&A expenses also include corporate legal fees, audit and accounting fees, investor relation expenses,
non-employee director fees, corporate facility related expenses, and other expenses relating to our general management, administration,
and business development activities.

 Interest Expense

 Interest expense consists of interest costs related
to our outstanding convertible senior notes, revolving credit facility and finance lease, including amortization of debt issuance costs.

 Other Income (Expense), Net

 Other income (expense), net primarily consists
of interest earned on our cash and cash equivalents, net of gains (losses) from the disposal of long-lived assets.

 Income Tax Expense (Benefit)

 We are subject to taxation in the United States
and various states jurisdictions in which we conduct our business. We prepare our income tax provision based on our interpretation of
the income tax accounting rules and each jurisdiction's enacted tax laws and regulations. For additional information refer to Note
7, Income Taxes, of the notes to consolidated financial statements.

 Results
of Operations

 The following table compares
the operating results of our operations for the fiscal years ended April 30, 2023 and 2022 (in thousands):

 Fiscal
 Year Ended
 April
 30,

 2023

 2022

 $ Change

 $

 $
 119,597

 $
 29,669

 117,786

 82,949

 34,837

 31,480

 36,648

 (5,168
)

 21,226

 6,653

 21,226

 6,653

 3,601

 15,422

 (11,821
)

 (3,013
)

 (2,680
)

 (333
)

 1,002

 (81
)

 1,083

 1,590

 12,661

 (11,071
)

 Income tax expense (benefit)

 1,331

 (115,011
)

 (116,342
)

 $

 $

 $
 (127,413
)

 Fiscal Year 2023 Compared to Fiscal Year 2022

 Revenues were
$149.3 million in fiscal 2023, compared to $119.6 million in fiscal 2022, an increase of approximately $29.7 million or 25%. The year-over-year
increase in revenues can primarily be attributed to increases in manufacturing runs and process development services provided to new customers.
The increase in revenues was attributed to the following components of our revenue streams:

 $ in millions

 Net increase in manufacturing revenues

 $ 26.1

 Net increase in process development revenues

 3.6

 Total increase in revenues

 $ 29.7

 Gross
Profit

 Gross profit was $31.5 million (21% gross margin)
in fiscal 2023 compared to $36.6 million (31% gross margin) in fiscal 2022, a decrease of approximately $5.2 million. The decrease in
gross profit can primarily be attributed to increases in compensation and benefit related expenses and facility and equipment related
costs, partially offset by increased revenues. During fiscal 2023 as compared with fiscal 2022, our labor, overhead and depreciation expenses
increased primarily due to the hiring of personnel and additional facility and equipment related costs in anticipation of the commissioning
of our mammalian and cell and gene therapy CGMP facility expansions. This decrease in margin was partially offset by a current year period
benefit to margin from revenue associated with a change in variable consideration under a contract where uncertainties have been resolved.
In addition, the same period in the prior year included a margin benefit from unutilized capacity fees.

 We expect our gross profit will continue to
be impacted in the near-term due to our increased fixed costs base related to the recent hiring of personnel, additional facility and
equipment related costs, and increased depreciation expense from our facility expansion efforts.

 Selling,
General and Administrative Expenses

 SG&A expenses were $27.9
million in fiscal 2023, compared to $21.2 million in fiscal 2022, an increase of $6.7 million, or 31%. The net increase in SG&A expenses
was attributed to the following components:

 $ in millions

 Increase in compensation and benefit related expenses

 $ 4.7

 Increase in legal and accounting fees

 0.5

 Increase in consulting and other professional fees

 0.4

 Increase travel and related expenses

 0.4

 Increase in facility and related expenses

 0.3

 Increase in trade show expenses

 0.2

 Net increase in all other SG&A expenses

 0.2

 Total increase in SG&A expenses

 $ 6.7

 As a percentage of revenues, SG&A expenses
for the fiscal 2023 and fiscal 2022 were 19% and 18%, respectively. SG&A expenses are generally not directly proportional to revenues,
but we expect such expenses to increase over time to support the needs of our growing company.

 Operating Income

 Operating income was $3.6 million for fiscal 2023,
compared to $15.4 million for fiscal 2022. This $11.8 million decrease in year-over-year operating income can be attributed to the $5.2
million decrease in gross profit described above combined with the $6.7 million increase in SG&A expenses described above.

 Interest Expense (as
restated)

 Interest expense was $3.0 million in fiscal
2023, compared to $2.7 million for fiscal 2022. This $0.3 million increase can primarily be attributed to additional interest expense
of $0.4 million incurred during fiscal 2023 in connection with the Event of Default associated with our 2026 Notes. For further detail,
refer to Note 3, Debt, of the notes to consolidated financial statements included herein.

 Other Income (Expense),
net

 Other income (expense), net ("OI&E")
was income of $1.0 million for fiscal 2023 compared to expense of $0.1 million for fiscal 2022. The $1.1 million increase in year-over-year
OI&E can primarily be attributed to an increase in interest income of $0.8 million combined with a $0.3 million decrease in loss on
disposal of property and equipment.

 Income Tax Expense (Benefit) (as restated)

 Income tax expense was $1.3 million in fiscal
2023 compared to income tax benefit of $115.0 million in fiscal 2022. The increase in income tax expense is due to the recording of our
first year of income tax expense in the current year whereas in the prior year there was a non-cash income tax benefit due to the release
of our valuation allowance during the fourth quarter of fiscal 2022 (as described in Note 7 of the notes to consolidated financial statements).
Our effective tax rate for fiscal 2023 was approximately 84% and was computed based on the U.S. federal statutory tax rate of
21% adjusted primarily for the tax impact of state income taxes, stock-based compensation, non-deductible officers' compensation
and transportation fringe benefits.

 Critical
Accounting Policies and Estimates

 Our discussion and analysis
of our consolidated financial condition and results of operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of
our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues, expenses and related disclosures. We review our estimates and assumptions on an ongoing basis. We base our estimates on historical
experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments
about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what
we anticipate and different assumptions or estimates about the future could change our reported results. While our significant accounting
policies are more fully described in Note 2 of the notes to consolidated financial statements, we believe the following accounting policies
to be critical to the assumptions and estimates used in the preparation of our consolidated financial statements.

 Revenue Recognition

 We recognize revenue when we transfer promised
goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods
or services. To determine revenue recognition for contracts with customers we perform the following five steps: (i) identify the contract(s)
with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.

 Revenue recognized from services
provided under our customer contracts is disaggregated into manufacturing and process development revenue streams.

 Manufacturing revenue

 Manufacturing revenue generally represents revenue
from the manufacturing of customer products recognized over time utilizing an input method that compares the cost of cumulative work-in-process
to date to the most current estimates for the entire cost of the performance obligation. Under a manufacturing contract, a quantity of
manufacturing runs are ordered at a specified scale with prescribed delivery dates, where the product is manufactured according to the
customer's specifications and typically includes only one performance obligation. Each manufacturing run represents a distinct service
that is sold separately and has stand-alone value to the customer. The products are manufactured exclusively for a specific customer and
have no alternative use. The customer retains control of its product during the entire manufacturing process and can make changes to the
process or specifications at its request. Under these agreements, we are entitled to consideration for progress to date that includes
an element of profit margin.

 Process development revenue

 Process development revenue generally represents
revenue from services associated with the custom development of a manufacturing process and analytical methods for a customer's
product. Process development revenue is recognized over time utilizing an input method that compares the cost of cumulative work-in-process
to date to the most current estimates for the entire cost of the performance obligation. Under a process development contract, the customer
owns the product details and process, which has no alternative use. These process development projects are customized to each customer
to meet its specifications and typically includes only one performance obligation. Each process represents a distinct service that is
sold separately and has stand-alone value to the customer. The customer also retains control of its product as the product is being created
or enhanced by our services and can make changes to its process or specifications upon request. Under these agreements, we are entitled
to consideration for progress to date that includes an element of profit margin.

 The timing of revenue recognition, billings and
cash collections results in billed accounts receivables, contract assets (unbilled receivables), and contract liabilities (customer deposits
and deferred revenue). Contract assets are recorded when our right to consideration is conditioned on something other than the passage
of time. Contract assets are reclassified to accounts receivable on the consolidated balance sheet when our rights become unconditional.
Contract liabilities represent customer deposits and deferred revenue billed and/or received in advance of our fulfillment of performance
obligations. Contract liabilities convert to revenue as we perform our obligations under the contract.

 The transaction price for services provided under
our customer contracts reflects our best estimates of the amount of consideration to which we are entitled in exchange for providing goods
and services to our customers. For contracts with multiple performance obligations, we allocate transaction price to each performance
obligation identified in a contract on a relative standalone selling price basis. We generally determine relative standalone selling prices
based on the price observed in the customer contract for each distinct performance obligation. If observable standalone selling prices
are not available, we may estimate the applicable standalone selling price based on the pricing of other comparable services or on a price
that we believe the market is willing to pay for the applicable service.

 In determining the transaction price, we also
considered the different sources of variable consideration including, but not limited to, discounts, credits, refunds, price concessions
or other similar items. We have included in the transaction price some or all of an amount of variable consideration, utilizing the most
likely method, only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will
not occur when the uncertainty associated with the variable consideration is subsequently resolved. The actual amount of consideration
ultimately received may differ.

 In addition, our customer contracts generally
include provisions entitling us to a cancellation or postponement fee when a customer cancels or postpones its commitments prior to our
initiation of services, therefore not utilizing their reserved capacity. The determination of such cancellation and postponement fees
are based on the terms stated in the related customer contract but are generally considered substantive for accounting purposes and create
an enforceable right and obligation due to us when the cancellation or postponement occurs. Accordingly, we recognize such fees, subject
to variable consideration, as revenue upon the cancellation or postponement date utilizing the most likely method.

 Management may be required to exercise judgment
in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price,
estimating the stand-alone selling prices of identified performance obligations, estimating variable consideration, and estimating the
progress towards the satisfaction of performance obligations. If actual results in the future vary from our estimates, the estimates will
be adjusted, which will affect revenues in the period that such variances become known.

 Stock-based Compensation

 We maintain equity compensation
plans, which provide the ability for us to grant stock options, restricted stock units, performance stock units and other forms of stock-based
awards. The estimated fair value of stock options granted to employees in exchange for services is measured at the grant date, using a
fair value based method, such as a Black-Scholes option valuation model, and is recognized as expense on a straight-line basis over the
requisite service periods, which is generally the vesting period. The fair value of restricted stock units and performance stock units
is measured at the grant date based on the closing market price of our common stock on the date of grant. For restricted stock units,
the fair value is recognized as expense on a straight-line basis over the requisite service periods. For performance stock units, which
are subject to performance conditions, the fair value is recognized as expense on a straight-line basis over the requisite service periods
when the achievement of such performance condition is determined to be probable. If a performance condition is not determined to be probable
or is not met, no stock-based compensation expense is recognized, and any previously recognized expense is reversed. Forfeitures are recognized
as a reduction of stock-based compensation expense as they occur.

 The use of a valuation model
requires us to make certain estimates and assumptions with respect to selected model inputs. The expected volatility is based on the daily
historical volatility of our common stock covering the estimated expected term. The expected term of options granted reflects actual historical
exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. The risk-free interest rate
is based on U.S. Treasury notes with terms within the contractual life of the option at the time of grant. The expected dividend yield
assumption is based on our expectation of future dividend payouts. We have never declared or paid any cash dividends on our common stock
and currently do not anticipate paying such cash dividends.

 Valuation Allowance

 We utilize the liability
method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the differences between
the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled. Significant judgment is required by management to
determine our provision for income taxes, our deferred tax assets and liabilities, and the valuation allowance to record against our
net deferred tax assets, which are based on complex and evolving tax regulation. We provide a valuation allowance when it is more
likely than not that our deferred tax assets will not be realized. On a periodic basis, we reassess the valuation allowance on our
deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. In the fourth
quarter of fiscal 2022, we reassessed the valuation allowance noting the shift of positive evidence outweighing negative evidence,
including significant revenue growth, continued profitability, and expectations regarding future profitability. After assessing both
the positive evidence and negative evidence, we determined it was more likely than not that our deferred tax assets would be
realized and therefore fully released our valuation allowance related to federal and state deferred tax assets on April 30, 2022 (as
described in Note 7, Income Taxes, of the notes to consolidated financial statements). We maintained the same position that
our federal and state deferred tax assets did not require a valuation allowance as of April 30, 2023.

 Liquidity
and Capital Resources

 Our principal sources of liquidity are our existing
cash and cash equivalents on hand. As of April 30, 2023, we had cash and cash equivalents of $38.5 million. Further, as of April 30,
2023, there was $143.8 million aggregate principal outstanding on our 2026 Notes, which due to an Event of Default on October 15, 2022
(as further described in Note 1 of the notes to consolidated financial statements), are classified as a current liability on the consolidated
balance sheet at April 30, 2023.

 On February 29, 2024, a holder of at least
25% of the 2026 Notes declared 100% of the principal amount of, and accrued and unpaid interest
on, the 2026 Notes to be due and payable immediately (as further described in Note 1 of the notes to consolidated financial statements).

 On March 12, 2024, we completed a private
offering (the "Offering") of $160.0 million aggregate principal amount of 7.00% convertible senior notes due 2029 (the "2029
Notes") to qualified institutional buyers pursuant to Section 4(a)(2) of the Securities Act. We received net proceeds from the
Offering of approximately $153.5 million, after deducting placement agent's commissions and other debt issuance related expenses
of approximately $6.5 million (as further described in Note 11 of the notes to consolidated financial statements).

 Subsequent
to the closing of the Offering, during March 2024, we used approximately $146.1 million of the net proceeds to (i) repurchase for
cash, $141.0 million aggregate principal amount of the 2026 Notes in privately negotiated transactions with certain holders of the
2026 Notes plus accrued and unpaid interest of $2.3 million, and (ii) repay in full, the remaining outstanding 2026 Notes balance by
depositing the required payoff amount of $2.8 million, representing principal and accrued and unpaid interest, with the trustee
under the indenture for the 2026 Notes, following which no 2026 Notes remained outstanding (as further described in Note 11 of the
notes to consolidated financial statements).

 As a result, we believe that our existing
cash on hand and our anticipated cash flows from operating activities will be sufficient to fund our operations for at least the next
12 months from the date of this Amended Report.

 If our existing cash and
cash equivalents on hand and our anticipated cash flows from operations are not sufficient to support our operations or capital requirements,
then we may, in the future, draw on our existing revolving credit facility (which was amended on March 12, 2024 to, among other things,
waive the events of default under the revolving credit facility as a result of the aforementioned acceleration of the 2026 Notes), which
is subject to covenant compliance and availability (as described in Note 3 of the notes to consolidated financial statements) and/or
obtain additional equity or debt financing to fund our future operations. We may raise these funds at the appropriate time, accessing
the form of capital that we determine is most appropriate considering the markets available to us and their respective costs of capital,
such as through the issuance of debt or through the public offering of our securities. These financings may not be available on acceptable
terms, or at all. Our ability to raise additional capital in the equity and debt markets is dependent on several factors including, but
not limited to, the market demand for our common stock. The market demand or liquidity of our common stock is subject to a number of
risks and uncertainties including, but not limited to, our financial results, economic and market conditions, and global financial crises
and economic downturns, which may cause extreme volatility and disruptions in capital and credit markets. In addition, even if we are
able to raise additional capital, it may not be at a price or on terms that are favorable to us or it may contain restrictions on the
operations of our business.

 Cash Flows

 The following table compares
our cash flow activities for the fiscal years ended April 30, 2023 and 2022 (in thousands):

 2023

 2022

 $ Change

 Net cash (used in) provided by operating activities

 $
 (12,722
)

 $
 9,465

 $
 (22,187
)

 $
 (77,803
)

 $
 (56,411
)

 $
 (21,392
)

 $
 2,901

 $
 3,197

 $
 (296
)

 Net Cash Used in Operating Activities

 Net cash used in operating activities during fiscal 2023 was a result of net income of $0.3 million combined with non-cash adjustments to net loss of $20.7 million
primarily related to stock-based compensation, depreciation and amortization expense, amortization of debt issuance costs and deferred
income taxes, offset by a reduction in working capital as a result of a net change in operating assets and liabilities of $33.7 million.

 Net Cash Used in Investing Activities

 Net cash used in investing activities during
fiscal 2023 consisted of $77.8 million used to acquire property and equipment primarily related to the expansion of our Myford
facility and the construction of our CGT Facility.

 Net Cash Provided by Financing Activities

 Net cash provided by financing activities during
fiscal 2023 consisted of $3.4 million in net proceeds from the issuance of common stock under our equity compensation plans, offset by
$0.5 million in principal payments on a finance lease.

 Cash Requirements

 Our material cash requirements include the following
contractual and other obligations.

 Convertible Senior Notes Due 2029

 In March 2024, we completed the Offering of
$160.0 million aggregate principal amount of 2029 Notes. We received net proceeds from the Offering of approximately $153.5 million,
after deducting placement agent's commissions and other debt issuance related expenses of approximately $6.5 million.

 The 2029 Notes are senior unsecured obligations
and accrue interest at a rate of 7.00% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning
on September 1, 2024. The 2029 Notes mature on March 1, 2029, unless earlier repurchased by us or converted at the option of the holders.
The 2029 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our
election in the manner and subject to the terms and conditions provided in the indenture governing the 2029 Notes.

 We may not redeem the 2029 Notes prior to
the March 1, 2029 maturity date. For additional information regarding our 2029 Notes, see Note 11 of the notes to consolidated financial

 Leases

 We lease certain office, manufacturing, laboratory,
and warehouse space located in Orange County, California under operating lease agreements. Our leased facilities have original lease terms
ranging from 7 to 12 years, contain multi-year renewal options, and scheduled rent increases of 3% on either an annual or biennial basis.
We also lease certain manufacturing equipment under a 5-year finance lease that expires in December 2026. As of April 30, 2023, we had
outstanding lease payment obligations of $79.3 million, of which $4.8 million is payable in fiscal 2024, $4.7 million is payable in fiscal
2025, $4.8 million is payable in fiscal 2026, $4.6 million is payable in fiscal 2027, $4.0 million is payable in fiscal 2028, and $56.4
million is payable thereafter.

 Capital Expenditures

 We currently anticipate that cash required
for capital expenditures during fiscal 2024 is approximately $32 million, which includes accrued and unpaid capital expenditures of
approximately $14 million as of April 30, 2023. The remaining costs are primarily related to the completion of our cell and gene
therapy facility as further discussed in the "Facility Expansions" section above.

 Revolving Credit Facility

 In March 2023, we entered into a credit agreement
with Bank of America, N.A., as administrative agent and letter of credit issuer, which was subsequently amended on October 27, 2023
and March 12, 2024 (as amended, the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility
(the "Revolving Credit Facility") in an amount equal to the lesser of (i) $50 million, and (ii) a borrowing base calculated
as the sum of (a) 80% of the value of certain of our eligible accounts receivable, plus (b) up to 100% of the value of eligible cash
collateral. The Revolving Credit Facility will mature on October 25, 2024 and is secured by substantially all of our assets. As
of April 30, 2023, there were no outstanding loans under the Revolving Credit Facility.

 Loans under the Revolving Credit Facility will
bear interest at either (1) a term Secured Overnight Financing Rate ("SOFR") rate for a specified interest period plus a
SOFR adjustment (equal to 0.10%) plus a margin of 1.60% or (2) base rate plus a margin of 0.60% at our option. Interest
on any outstanding loans is due and payable monthly and the principal balance is due at maturity. In addition, we pay a quarterly unused
revolving line facility fee of 0.25% per annum on the average unused facility.

 The Credit Agreement includes certain customary
affirmative and negative covenants, including limitations on mergers, consolidations and sales of assets, limitations on liens, limitations
on certain restricted payments and investments, limitations on transactions with affiliates and limitations on incurring additional indebtedness.
In addition, the Credit Agreement requires maintenance of a minimum consolidated EBITDA, as defined in the Credit Agreement, of $15 million
for the most recently completed four (4) fiscal quarters as measured at the end of each fiscal quarter. As of April 30, 2023, we were
in compliance with the Credit Agreement's financial covenant.

 The Credit Agreement also provides for certain
customary events of defaults, including, among others, failure to make payments, breach of representations and warranties, and default
of covenants. For additional information regarding our Credit Agreement, see Note 3 of the notes to consolidated financial statements.

 Recently
Issued Accounting Pronouncements

 For a discussion of recent accounting pronouncements
applicable to us, see Note 2, Summary of Significant Accounting Policies, of the notes to consolidated financial statements.

 Item 7A.
 Quantitative And Qualitative Disclosures About Market Risk

 Our cash and cash equivalents
are primarily invested in money market funds with one major commercial bank with the primary objective to preserve our principal balance.
Our deposits held with this bank exceed the amount of government insurance limits provided on our deposits and, therefore, we are exposed
to credit risk in the event of default by the major commercial bank holding our cash balances. However, these deposits may be redeemed
upon demand. In addition, while changes in U.S. interest rates would affect the interest earned on our cash balances at April 30, 2023,
such changes would not have a material adverse effect on our financial condition or results of operations, based on historical movements
in interest rates.

 Our 2026 Notes bear
interest at a fixed rate of 1.25% per year and therefore would not be affected by changes in U.S. interest rates.

 Loans under our Revolving Credit Facility will
bear interest at either (1) a term SOFR rate for a specified interest period plus a SOFR
adjustment (equal to 0.10%) plus a margin of 1.40% or (2) base rate plus a margin of 0.40% at our option. As of April 30, 2023, we had no loans outstanding
under our Revolving Credit Facility.

 Item 8.
 Financial Statements And Supplementary Data

 Index to Consolidated Financial
Statements

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)

 Consolidated Balance Sheets as of April 30, 2023 and 2022

 Consolidated Statements of Income and Comprehensive Income for each of the three years in the period ended April 30, 2023

 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended April 30, 2023

 Consolidated Statements of Cash Flows for each of the three years in the period ended April 30, 2023

 Notes to Consolidated Financial Statements

 Report of Independent Registered Public Accounting
Firm

 To the Stockholders and the Board of Directors
of Avid Bioservices, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying consolidated
balance sheets of Avid Bioservices, Inc. (the Company) as of April 30, 2023 and 2022, the related consolidated statements of income and
comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended April 30, 2023, and the
related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated
financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at April 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in
the period ended April 30, 2023, in conformity with U.S. generally accepted accounting principles.

 We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting
as of April 30, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework), and our report dated June 21, 2023, except for the effect of the material weakness described
in the third paragraph of that report, as to which the date is April 24, 2024, expressed an adverse opinion thereon.

 Restatement
of 2023 Financial Statements

 As discussed in Note 1 to the consolidated
financial statements, the 2023 consolidated financial statements have been restated to correct misstatements.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matter

 The critical audit matter communicated below
is a matter arising from the current period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does
not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it
relates.

 Estimated costs at completion for projects

 Description of the Matter

 As discussed in Note 2 to the consolidated
 financial statements, the Company's revenue was $149.3 million for the year ended April 30, 2023, including manufacturing and process
 development revenues which are primarily recognized over time utilizing an input method that compares the cost of cumulative work in process
 to date to the most current estimates for the entire cost of the performance obligation.

 Revenue is significant to our audit
 because the revenue recognition assessment process involves inherent uncertainty, uses subjective assumptions, and the amounts involved
 are material to the consolidated financial statements taken as a whole. The subjective assumptions relate to the estimated total costs
 expected to be incurred for each customer.

 How We Addressed the Matter in Our Audit

 We obtained an understanding,
 evaluated the design and tested the operating effectiveness of controls over the Company's revenue review process including
 controls over management's review of the estimated total costs at completion. For example, we tested controls over the
 Company's development and monitoring of the total estimated costs and of the review of the significant estimates and
 assumptions by management as revenue is recognized over time.

 To test revenue recognized, we performed
 audit procedures that included, among others, testing the assumptions and underlying data used by the Company in its computations and
 testing the accuracy of the computations. We inspected evidence supporting the amount of actual costs incurred. We performed corroborative
 inquiries of individuals outside of the accounting department to assess the reasonableness of management's estimated total costs
 to understand the progress to date. We performed sensitivity analyses, including assessing the reasonableness of the estimated total costs
 to be incurred based on similar completed contracts. In addition, we performed hindsight analyses of revenues recognized by comparing
 prior cost estimates to actual costs incurred to evaluate the historical accuracy of management estimates.

 /s/ Ernst & Young LLP

 We have served as the Company's auditor
since 1999.

 Irvine, California

 June 21, 2023,
except for the effects of the restatement disclosed in Note 1, and Note 11 of the consolidated financial statements, as to which the
date is April 24, 2024

 AVID BIOSERVICES,
INC.

 CONSOLIDATED BALANCE
SHEETS

 (in
thousands, except par value)

 2023

 2022

 $
 38,542

 $
 126,166

 18,298

 20,547

 9,609

 5,369

 43,908

 26,062

 Prepaid expenses and other current assets

 2,094

 1,879

 112,451

 180,023

 177,770

 92,955

 42,772

 36,806

 113,751

 115,082

 4,473

 4,627

 $
 451,567

 $
 429,843

 $
 24,593

 $
 9,504

 8,780

 8,418

 37,352

 53,798

 –

 1,358

 2,969

 2,440

 1,072

 215,146

 75,761

 –

 139,577

 45,690

 37,886

 1,562

 2,093

 262,398

 255,317

 –

 –

 Preferred stock, $ 0.001 par value; 5,000 shares authorized; no shares issued and outstanding at respective dates

 –

 –

 Common stock, $ 0.001 par value; 150,000 shares authorized; 62,692 and 61,807 shares issued and outstanding at respective dates

 620,224

 605,841

 ( 431,118
)

)

 189,169

 $
 451,567

 $
 429,843

 See accompanying notes to consolidated financial

 AVID BIOSERVICES,
INC.

 CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME

 (in
thousands, except per share information)

 Year Ended April 30,

 2023

 2022

 2021

 $

 $
 119,597

 $
 95,868

 117,786

 82,949

 66,561

 31,480

 36,648

 29,307

 21,226

 17,064

 21,226

 17,064

 3,601

 15,422

 12,243

 ( 3,013
)

 ( 2,680
)

 ( 1,164
)

 1,002

 ( 81
)

 1,590

 12,661

 Income tax expense (benefit)

 1,331

 ( 115,011
)

 –

 $

 $

 $

 $

 $

 $

 Series E preferred stock accumulated dividends

 –

 –

)

 Impact of Series E preferred stock redemption

 –

 –

 ( 3,439
)

 Net income attributable to common stockholders

 $

 $

 $
 3,318

 Net income per share attributable to common stockholders:

 Basic

 $
 0.00

 $
 2.08

 $
 0.06

 $
 0.00

 $
 1.84

 $
 0.06

 Basic

 62,268

 61,484

 58,222

 63,782

 70,474

 59,426

 See accompanying notes to consolidated financial

 AVID BIOSERVICES,
INC.

 CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY

 (in
thousands, except per share information)

 Preferred Stock

 Common Stock

 Additional Paid-In

 Total Stockholders'

 Amount

 Amount

 Capital

 Equity

 Balances at April 30, 2020

 1,648

 $

 56,483

 $

 $
 612,909

 $
 ( 571,071
)

 $
 41,896

 Series E preferred stock dividends paid ($ 2.705 per
 share)

 –

 –

 –

 –

)

 –

)

 Conversion of Series E preferred
 stock to common stock

 ( 28
)

 –

 –

 –

 –

 –

 Redemption of Series E preferred
 stock

 ( 1,620
)

 ( 2
)

 –

 –

 ( 40,488
)

 –

 ( 40,490
)

 Common stock issued, net of
 issuance costs of $ 2,359

 –

 –

 3,833

 32,137

 –

 32,141

 Common stock issued under equity
 compensation plans

 –

 –

 3,983

 –

 3,984

 Equity component of convertible
 senior notes

 –

 –

 –

 –

 42,431

 –

 42,431

 Purchase of capped calls related
 to convertible senior notes

 –

 –

 –

 –

 ( 12,837
)

 –

 ( 12,837
)

 –

 –

 –

 –

 3,854

 –

 3,854

 –

 –

 –

 –

 –

 Balances at April 30, 2021

 –

 –

 61,069

 637,534

 ( 559,859
)

 77,736

 Cumulative-effect adjustment
 from modified retrospective adoption of ASU 2020-06

 –

 –

 –

 –

 ( 42,431
)

 ( 41,621
)

 Common stock issued under equity
 compensation plans

 –

 –

 3,358

 –

 3,359

 –

 –

 –

 –

 7,380

 –

 7,380

 –

 –

 –

 –

 –

 –

 –

 61,807

 605,841

)

 –

 –

 3,405

 –

 3,406

 –

 –

 –

 –

 –

 Net income (as restated)

 –

 –

 –

 –

 –

 Balances at April 30, 2023 (as restated)

 –

 $
 –

 62,692

 $

 $
 620,224

 $
 ( 431,118
)

 $
 189,169

 See accompanying notes to consolidated
financial statements.

 AVID BIOSERVICES,
INC.

 CONSOLIDATED STATEMENTS
OF CASH FLOWS

 (in
thousands)

 2023

 2022

 2021

 $

 $

 $

 Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 7,380

 3,854

 7,210

 4,480

 3,453

 Amortization of debt discount and issuance costs

 1,046

 1,030

 1,331

 ( 115,082
)

 –

 Loss on disposal and/or impairment of property and equipment

 –

 2,249

 ( 1,705
)

 ( 10,236
)

 ( 4,240
)

 ( 2,812
)

 ( 17,846
)

 ( 14,191
)

 ( 988
)

 ( 61
)

 ( 4,232
)

 ( 1,260
)

 ( 943
)

 ( 608
)

 ( 376
)

 5,775

 ( 16,446
)

 3,029

 21,649

 1,333

 1,279

 Net cash (used in) provided by operating activities

 ( 12,722
)

 9,465

 31,182

 ( 77,803
)

 ( 56,411
)

 ( 9,864
)

 ( 77,803
)

 ( 56,411
)

 ( 9,864
)

 3,406

 3,359

 3,984

 Proceeds from issuance of common stock, net of issuance costs

 –

 –

 32,141

 Proceeds from issuance of convertible senior notes, net of issuance costs

 –

 –

 138,464

 Purchases of capped calls related to convertible senior notes

 –

 –

 ( 12,837
)

 Repayment of note payable

 –

 –

 ( 4,379
)

 Dividends paid on preferred stock

 –

 –

)

 Redemption of preferred stock

 –

 –

 ( 37,051
)

 Impact of preferred stock redemption

 –

 –

 ( 3,439
)

 Principal payments on finance leases

 ( 505
)

 ( 162
)

 ( 93
)

 2,901

 3,197

 112,335

 Net (decrease) increase in cash, cash equivalents and restricted cash

 ( 87,624
)

 ( 43,749
)

 133,653

 170,265

 36,612

 $
 38,892

 $

 $
 170,265

 $
 1,118

 $
 1,670

 $

 $

 $

 $
 –

 Supplemental disclosures of non-cash activities:

 $
 14,361

 $
 1,190

 $
 3,939

 See accompanying notes to consolidated financial

 NOTES

 Note 1 – Description of Company and Basis
of Presentation

 We are a dedicated contract
development and manufacturing organization ("CDMO") that provides a comprehensive range of services from process development
to Current Good Manufacturing Practices ("CGMP") clinical and commercial manufacturing of biologics for the biotechnology
and biopharmaceutical industries.

 Except where specifically noted
or the context otherwise requires, references to "Avid," the "Company," "we," "us," and
"our," in this Amended Report refer to Avid Bioservices, Inc. and its subsidiary.

 Basis of Presentation and
Preparation

 The accompanying consolidated
financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and
include our accounts and those of our subsidiary. All intercompany accounts and transactions among the consolidated entities
have been eliminated in the consolidated financial statements.

 The preparation of our consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported
in our consolidated financial statements and accompanying notes. Management's estimates are based on historical information available
as of the date of the consolidated financial statements and on various other assumptions that are believed to be reasonable under the
circumstances. Accounting estimates and judgments are inherently uncertain and actual results could differ materially from these estimates.

 Segment Reporting

 Our business operates
in one operating segment, our contract manufacturing and development services segment. Accordingly, we reported our financial results
for one reportable segment. All our identifiable assets are in the United States.

 Restatement of Previously
Issued Consolidated Financial Statements

 On
February 29, 2024, we received an acceleration notice (the "Acceleration Notice") from a holder of our 1.250%
Exchangeable Senior Notes due 2026 (the "2026 Notes"). The Acceleration Notice stipulated, among other things, that (i)
we did not remove the restrictive legend on the 2026 Notes by March 17, 2022 as required under the indenture governing the 2026
Notes (the "2026 Notes Indenture"), (ii) due to such failure, additional interest had accrued thereafter at a rate of
0.50% per annum (the "Additional Interest"), (iii) such Additional Interest had not been paid by us as of the date of
the Acceleration Notice, which constitutes an event of default under the 2026 Notes Indenture (the "Event of Default"),
and (iv) such holder was the beneficial owner of at least 25% in aggregate principal amount of the outstanding 2026 Notes and
therefore had the right to accelerate all of the 2026 Notes. As a result of the Event of Default, such
holder declared 100% of the principal amount of, and accrued and unpaid interest on, the 2026 Notes to be due and payable
immediately.

 Following the receipt
of the Acceleration Notice and a re-evaluation of the accounting for the 2026 Notes, we determined that the 2026 Notes should have been
classified as a current liability beginning on October 15, 2022, resulting in an understatement of current liabilities on our consolidated
balance sheet. The re-classification of the 2026 Notes to a current liability resulted in negative working capital and created a substantial
doubt regarding our ability to continue as a going concern. However, this substantial doubt has been resolved through the subsequent issuance
of the 2029 Notes, as further described in Note 11, Subsequent Events. We also determined that our interest expense for fiscal
2023 was understated in our consolidated statement of income and comprehensive income as a result of the failure to reflect the Additional
Interest. This and other related adjustments and the related tax effect to correct certain related misstatements pertaining to the 2023
fiscal period that we have determined to be immaterial, both individually and in the aggregate, are reflected in the restated consolidated
financial statements included in this Amended Report. In addition to this note, Notes 2, 3, 7, 8, 11, and 12 to the restated consolidated
financial statements included in this Amended Report have been updated and restated or added, as applicable, to reflect the impacts from
the restatement.

 The impact on the line items
within our consolidated financial statements as of and for the fiscal year ended April 30, 2023 previously filed in our Annual Report
on Form 10-K for the fiscal year ended April 30, 2023 are as follows (in thousands, except par value and per share information):

 Schedule of consolidated
 financial statements

 As of April 30, 2023

 Consolidated Balance Sheet

 $
 38,542

 $
 –

 $
 38,542

 18,298

 –

 18,298

 9,609

 –

 9,609

 43,908

 –

 43,908

 Prepaid expenses and other current assets

 2,094

 –

 2,094

 112,451

 –

 112,451

 177,369

 177,770

 42,772

 –

 42,772

 113,639

 113,751

 4,473

 –

 4,473

 –

 $
 451,054

 $

 $
 451,567

 $
 24,593

 $
 –

 $
 24,593

 8,780

 –

 8,780

 37,352

 –

 37,352

 –

 1,358

 –

 1,358

 1,626

 2,440

 73,709

 141,437

 215,146

 ( 140,623
)

 –

 45,690

 –

 45,690

 1,562

 –

 1,562

 261,584

 262,398

 –

 –

 –

 Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding at respective dates

 –

 –

 –

 Common stock, $0.001 par value; 150,000 shares authorized; 62,692 and 61,807 shares issued and outstanding at respective dates

 –

 620,224

 –

 620,224

 ( 430,817
)

 ( 301
)

 ( 431,118
)

 189,470

 ( 301
)

 189,169

 $
 451,054

 $

 $
 451,567

 NOTES

 Schedule of consolidated statement of income and comprehensive income

 Year Ended April 30, 2023

 Consolidated Statement of Income and Comprehensive Income

 $

 $
 –

 $

 117,786

 –

 117,786

 31,480

 –

 31,480

 –

 –

 3,601

 –

 3,601

 ( 2,600
)

 ( 413
)

 ( 3,013
)

 Other income, net

 1,002

 –

 1,002

 2,003

 ( 413
)

 1,590

 Income tax expense

 1,443

 ( 112
)

 1,331

 $

 $
 ( 301
)

 $

 $

 $
 ( 301
)

 $

 Net income per share:

 Basic

 $
 0.01

 $
)

 $
 0.00

 $
 0.01

 $
)

 $
 0.00

 Basic

 62,268

 –

 62,268

 63,782

 –

 63,782

 Schedule of condensed consolidated statement of stockholders' equity

 Year Ended April 30, 2023

 Total

 Adjustments

 Total

 $
)

 $

 $
 –

 $
)

 $

 –

 3,406

 –

 –

 3,406

 –

 –

 –

 ( 301
)

 Balances at April 30, 2023

 $
 ( 430,817
)

 $
 189,470

 $
 ( 301
)

 $
 ( 431,118
)

 $
 189,169

 NOTES

 Schedule of consolidated statement of cash flows

 Year Ended April 30, 2023

 Consolidated Statement of Cash Flows

 $

 $
 ( 301
)

 $

 Adjustments to reconcile net income to net cash used in operating activities:

 –

 7,210

 –

 7,210

 Amortization of debt issuance costs

 1,046

 –

 1,046

 1,443

 ( 112
)

 1,331

 Loss on disposal and/or impairment of property and equipment

 –

 2,249

 –

 2,249

 ( 4,240
)

 –

 ( 4,240
)

 ( 17,846
)

 –

 ( 17,846
)

 ( 61
)

 –

 ( 61
)

 –

 –

 ( 16,446
)

 –

 ( 16,446
)

 1,333

 Net cash used in operating activities

 ( 12,887
)

 ( 12,722
)

 ( 77,638
)

 ( 165
)

 ( 77,803
)

 ( 77,638
)

 ( 165
)

 ( 77,803
)

 3,406

 –

 3,406

 Principal payments on finance leases

 ( 505
)

 –

 ( 505
)

 2,901

 –

 2,901

 Net decrease in cash, cash equivalents and restricted cash

 ( 87,624
)

 –

 ( 87,624
)

 –

 $
 38,892

 –

 $
 38,892

 $
 1,118

 $
 –

 $
 1,118

 $

 $
 –

 $

 Supplemental disclosures of non-cash activities:

 $
 14,125

 $

 $
 14,361

 NOTES

 Note 2 – Summary of Significant Accounting
Policies

 Cash and Cash Equivalents

 We consider all short-term investments readily
convertible to cash, without notice or penalty, with an initial maturity of 90 days or less to be cash equivalents.

 Restricted Cash

 Under the terms of an operating
lease related to one of our facilities (Note 4), we are required to maintain a letter of credit as collateral. Accordingly, at April 30,
2023 and 2022, restricted cash of $ 0.4 million was pledged as collateral under the letter of credit.

 The following table provides a reconciliation
of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts
shown in the consolidated statements of cash flows (in thousands):

 Schedule of restricted cash

 As of April 30,

 2023

 2022

 2021

 $
 38,542

 $
 126,166

 $
 169,915

 Total cash, cash equivalents and restricted cash

 $
 38,892

 $

 $
 170,265

 Revenue Recognition

 We recognize revenue in accordance with the authoritative
guidance of ASC 606, Revenue from Contracts with Customers. Under ASC 606, we recognize revenue when we transfer promised goods
or services to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods
or services. To determine revenue recognition for contracts with customers, we perform the following five steps: (i) identify the contract(s)
with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.

 Revenue recognized from services provided under
our customer contracts is disaggregated into manufacturing and process development revenue streams.

 Manufacturing revenue

 Manufacturing revenue generally represents revenue
from the manufacturing of customer products recognized over time utilizing an input method that compares the cost of cumulative work-in-process
to date to the most current estimates for the entire cost of the performance obligation. Under a manufacturing contract, a quantity of
manufacturing runs are ordered at a specified scale with prescribed delivery dates, where the product is manufactured according to the
customer's specifications and typically includes only one performance obligation. Each manufacturing run represents a distinct service
that is sold separately and has stand-alone value to the customer. The products are manufactured exclusively for a specific customer and
have no alternative use. The customer retains control of its product during the entire manufacturing process and can make changes to the
process or specifications at its request. Under these agreements, we are entitled to consideration for progress to date that includes
an element of profit margin.

 Process development revenue

 Process development revenue generally represents
revenue from services associated with the custom development of a manufacturing process and analytical methods for a customer's
product. Process development revenue is recognized over time utilizing an input method that compares the cost of cumulative work-in-process
to date to the most current estimates for the entire cost of the performance obligation. Under a process development contract, the customer
owns the product details and process, which has no alternative use. These process development projects are customized to each customer
to meet its specifications and typically includes only one performance obligation. Each process represents a distinct service that is
sold separately and has stand-alone value to the customer. The customer also retains control of its product as the product is being created
or enhanced by our services and can make changes to its process or specifications upon request. Under these agreements, we are entitled
to consideration for progress to date that includes an element of profit margin.

 NOTES

 The
following table summarizes our manufacturing and process development revenue streams (in thousands):

 Disaggregation of revenue

 2023

 2022

 2021

 Manufacturing revenues

 $
 125,416

 $
 99,282

 $
 83,678

 Process development revenues

 23,850

 20,315

 12,190

 Total revenues

 $

 $
 119,597

 $
 95,868

 The timing of revenue recognition, billings and
cash collections results in billed accounts receivable, contract assets (unbilled receivables), and contract liabilities (customer deposits
and deferred revenue). Contract assets are recorded when our right to consideration is conditioned on something other than the passage
of time. Contract assets are reclassified to accounts receivable on the consolidated balance sheet when our rights become unconditional.
Contract liabilities represent customer deposits and deferred revenue billed and/or received in advance of our fulfillment of performance
obligations. Contract liabilities convert to revenue as we perform our obligations under the contract.

 During the fiscal years ended April 30, 2023 and
2022, we recognized revenue of $ 40.8 million and $ 34.0 million, respectively, for which the contract liability was recorded in a prior
period.

 The transaction price for services provided under
our customer contracts reflects our best estimates of the amount of consideration to which we are entitled in exchange for providing goods
and services to our customers. For contracts with multiple performance obligations, we allocate transaction price to each performance
obligation identified in a contract on a relative standalone selling price basis. We generally determine relative standalone selling prices
based on the price observed in the customer contract for each distinct performance obligation. If observable standalone selling prices
are not available, we may estimate the applicable standalone selling price based on the pricing of other comparable services or on a price
that we believe the market is willing to pay for the applicable service.

 In determining the transaction price, we also
considered the different sources of variable consideration including, but not limited to, discounts, credits, refunds, price concessions
or other similar items. We have included in the transaction price some or all of an amount of variable consideration, utilizing the most
likely method, only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will
not occur when the uncertainty associated with the variable consideration is subsequently resolved. The actual amount of consideration
ultimately received may differ.

 In addition, our customer contracts generally
include provisions entitling us to a cancellation or postponement fee when a customer cancels or postpones its commitments prior to our
initiation of services, therefore not utilizing their reserved capacity. The determination of such cancellation and postponement fees
are based on the terms stated in the related customer contract but are generally considered substantive for accounting purposes and create
an enforceable right and obligation due to us when the cancellation or postponement occurs. Accordingly, we recognize such fees, subject
to variable consideration, as revenue upon the cancellation or postponement date utilizing the most likely method.

 NOTES

 Management may be required to exercise judgment
in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price,
estimating the stand-alone selling prices of identified performance obligations, estimating variable consideration, and estimating the
progress towards the satisfaction of performance obligations. If actual results in the future vary from our estimates, the estimates will
be adjusted, which will affect revenues in the period that such variances become known.

 During the fiscal year ended April 30, 2023, we
recognized revenue of $ 3.0 million for changes in estimates for variable consideration under a contract where uncertainties had been resolved.
During the fiscal year ended April 30, 2022, changes in estimates for variable consideration resulted in a decrease in revenues of $ 14.7
million. These changes in estimates for variable consideration can primarily be attributed to a dispute with a customer, which was resolved
during the fiscal year ended April 30, 2023, over the payment of certain cancellation fees incurred in fiscal 2022 and due to us under
the terms of the contract (Note 10).

 We apply the practical expedient available under
ASC 606 that permits us not to disclose the value of unsatisfied performance obligations for contracts with an original expected length
of one year or less. As of April 30, 2023, we do not have any unsatisfied performance obligations for contracts greater than one year.

 Costs incurred to obtain a contract are not material.
These costs are generally employee sales commissions, which are expensed as incurred and included in selling, general and administrative
expense in the consolidated statements of income and comprehensive income.

 Accounts Receivable, Net

 Accounts receivable is primarily comprised of
amounts owed to us for services provided under our customer contracts and are recorded at the invoiced amount net of an allowance for
doubtful accounts, if necessary. We apply judgment in assessing the ultimate realization of our receivables and we estimate an allowance
for doubtful accounts based on various factors, such as the aging of our receivables, historical experience, and the financial condition
of our customers.

 Based on our analysis of our accounts receivable
balance as of April 30, 2023, we determined an allowance for doubtful accounts of $ 0.5 million was deemed necessary.

 Based on our analysis of our accounts receivable
balance as of April 30, 2022, we determined an allowance for doubtful accounts of $ 18.4 million was deemed necessary, which amount was
primarily related to a dispute with a customer over the payment of certain cancellation fees due to us under the terms of the contract.
The contract dispute with the customer was resolved during the fiscal year ended April 30, 2023 (Note 10).

 Concentrations of Credit
Risk and Customer Base

 Financial instruments that potentially subject
us to concentrations of credit risk consist of cash and cash equivalents, accounts receivable, net and contract assets. As of April 30,
2023 and 2022, we maintain our cash balances primarily with a major commercial bank and our deposits held with the bank exceed the amount
of government insurance limits provided on our deposits. We are exposed to credit risk in the event of default by the major commercial
bank holding our cash balances to the extent of the cash amounts recorded on the accompanying consolidated balance sheets exceed the amount
of government insurance limits provided on our deposits.

 NOTES

 Our accounts receivable from
amounts billed for services provided under customer contracts are derived from a limited number of customers. Most customer contracts
require up-front payments and installment payments during the service period. We perform periodic evaluations of the financial condition
of our customers and generally do not require collateral, but we can terminate any contract if a material default occurs. At April 30,
2023 and 2022, approximately 76% and 84%, respectively, of our accounts receivable, net were due from our top ten customers.

 Our revenues are derived from
a limited number of customers. Historically, these customers have not entered into long-term contracts because their need for drug supply
depends on a variety of factors, including a product's stage of development, the timing of regulatory filings and approvals, the
product needs of their collaborators, if applicable, their financial resources and the market demand with respect to a commercial product.

 The table below identifies
each of our customers that accounted for 10% or more of our total revenues during any of the fiscal years ended April 30, 2023, 2022
and 2021:

 Concentration of revenues

 Customer

 Geographic Location

 2023

 2022

 2021

 Halozyme Therapeutics, Inc. (1)

 U.S.

 %

 %

 %

 IGM Biosciences, Inc.

 U.S.

 *

 *

 Gilead Sciences, Inc.

 U.S.

 –

 *

 ______________

 (1)
 Revenues are
derived from the manufacture of multiple therapeutics that our customer uses in various products and product candidates.

 *
 Represents a percentage less than 10% of our total revenues.

 We attribute revenue to the individual countries
where the customer is headquartered. Approximately 100 % of our revenues for the fiscal years ended April 30, 2023 and 2022 were derived
from U.S. based customers.

 Leases

 We account for our leases in accordance with the
authoritative guidance of ASC 842, Leases. We determine if an arrangement is or contains a lease at inception. Our operating leases
with a term greater than one year are included in operating lease right-of-use ("ROU") assets, operating lease liabilities
and operating lease liabilities, less current portion in our consolidated balance sheets. ROU assets represent our right to use an underlying
asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at the lease commencement date, based on the present value of lease payments over the lease
term. In determining the net present value of lease payments, we use our incremental borrowing rate which represents an estimated rate
of interest that we would have to pay to borrow equivalent funds on a collateralized basis at the lease commencement date.

 Our operating leases may include options to extend
the lease which are included in the lease term when it is reasonably certain that we will exercise a renewal option. Operating lease expense
is recognized on a straight-line basis over the expected lease term.

 NOTES

 Our finance lease with a term greater than one
year is included as an asset within property and equipment, net and a lease liability equal to the present value of the minimum lease
payments is included in other current liabilities and finance lease liabilities, less current portion in our consolidated balance sheets.
The present value of the finance lease payments is calculated using the implicit interest rate in the lease. Finance lease ROU assets
are amortized on a straight-line basis over the expected useful life of the asset and the carrying amount of the lease liability is adjusted
to reflect interest, which is recorded as interest expense.

 Leases with an initial term of 12 months or less
are not recorded on our consolidated balance sheets and lease expense for these short-term leases is recognized on a straight-line basis
over the lease term. We have also elected the practical expedient to not separate lease components from non-lease components.

 Inventory consists of raw materials
inventory and is valued at the lower of cost, determined by the first-in, first-out method, or net realizable value. We periodically review
raw materials inventory for potential impairment and adjust inventory to its net realizable value based on the estimate of future use
and reduce the carrying value of inventory as deemed necessary.

 Property and Equipment

 Property and equipment is recorded
at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the related asset, which are generally as follows:

 Schedule of estimated useful lives of property

 Description

 Estimated Useful Life

 Leasehold improvements

 Shorter of estimated useful life or lease term

 Laboratory and manufacturing equipment

 5 – 15 years

 Computer equipment and software

 3 – 5 years

 Furniture, fixtures and office equipment

 5 – 10 years

 Costs for property and equipment
not yet placed into service have been capitalized as construction-in-progress. These costs are primarily related to equipment and leasehold
improvements associated with our manufacturing facilities, and will be depreciated in accordance with the above guidelines once placed
into service. Interest costs incurred during construction of major capital projects are capitalized as construction-in-progress until
the underlying asset is ready for its intended use, at which point the interest costs are amortized as depreciation expense over the life
of the underlying asset. Interest capitalized as construction-in-progress for the fiscal years ended April 30, 2023 and 2022, was $ 0.8
million and $ 0.2 million, respectively. All of our property and equipment are located in the United States. Property and equipment consist
of the following (in thousands):

 Schedule of property and equipment

 2023

 2022

 Leasehold improvements

 $
 97,514

 $
 37,345

 Laboratory and manufacturing equipment

 35,501

 30,089

 Computer equipment and software

 5,028

 5,326

 Furniture, fixtures and office equipment

 1,681

 Construction-in-progress

 68,414

 43,809

 Total property and equipment, gross

 208,138

 117,412

 Less: accumulated depreciation and amortization

 ( 30,368
)

 ( 24,457
)

 Total property and equipment, net

 $
 177,770

 $
 92,955

expense for the fiscal years ended April 30, 2023, 2022 and 2021 was $ 7.2 million, $ 4.5 million and $ 3.5 million, respectively.

 NOTES

 Capitalized Software Implementation
Cost s

 We capitalize certain implementation
costs incurred under cloud computing hosting arrangements. Costs incurred during the application development stage related to the implementation
of the hosting arrangement are capitalized and included within other assets on the accompanying consolidated balance sheets. Amortization
of capitalized implementation costs is recognized on a straight-line basis over the term of the associated hosting arrangement when it
is ready for its intended use. Costs related to preliminary project activities and post-implementation activities are expensed as incurred.

 Impairment

 Long-lived assets are reviewed for impairment
in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or
changes in circumstances that indicate that their carrying value may not be recoverable. If such events or changes in circumstances arise,
we compare the carrying amount of the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the
long-lived assets. If the long-lived assets are determined to be impaired, any excess of the carrying value of the long-lived assets over
its estimated fair value is recognized as an impairment loss. For the fiscal year ended April 30, 2023, there were indicators of impairment
of the value of certain long-lived assets that resulted in an impairment loss of $ 0.1 million, which amount is included in selling, general
and administrative expenses in the consolidated statements of income and comprehensive income. For the fiscal year ended April 30, 2022,
there were no indicators of impairment of the value of our long-lived assets and no impairment losses were recognized.

 Fair Value of Financial Instruments

 The carrying amounts in the
accompanying consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, net, accounts payable and
accrued liabilities approximate their fair values due to their short-term maturities.

 Fair Value Measurements

 Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy:

 Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets
or liabilities.

 Level 2 – Observable inputs other than quoted prices included in Level 1, such as assets or liabilities
whose values are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices
of instruments with similar attributes in active markets.

 Level 3 – Unobservable inputs that are supported by little or no market activity and significant
to the overall fair value measurement of the assets or liabilities; therefore requiring the company to develop its own valuation techniques
and assumptions.

 As of April 30, 2023 and
2022, we did not have any Level 2 or Level 3 financial assets and our cash equivalents of $ 28.7
million and $ 116.3
million, respectively, were invested in money market funds with a major commercial bank and carried at fair value based on
quoted market prices for identical securities (Level 1 inputs). We consider the fair value of our convertible senior notes to be a
Level 2 financial liability due to limited trading activity of the convertible senior notes. Refer to Note 3, Debt, of the notes to
the consolidated financial statements for further details. We did not have any other Level 2 or Level 3 financial liabilities as of
April 30, 2023 and 2022.

 NOTES

 Stock-Based Compensation

 We account for stock options,
restricted stock units, performance stock units and other stock-based awards granted under our equity compensation plans in accordance
with the authoritative guidance of ASC 718, Compensation – Stock Compensation. The estimated fair value of stock options
granted to employees in exchange for services is measured at the grant date, using a fair value based method, such as a Black-Scholes
option valuation model, and is recognized as expense on a straight-line basis over the requisite service periods. The fair value of restricted
stock units and performance stock units is measured at the grant date based on the closing market price of our common stock on the date
of grant. For restricted stock units, the fair value is recognized as expense on a straight-line basis over the requisite service periods.
For performance stock units, which are subject to performance conditions, the fair value is recognized as expense on a straight-line basis
over the requisite service periods when the achievement of such performance condition is determined to be probable. If a performance condition
is not determined to be probable or is not met, no stock-based compensation expense is recognized, and any previously recognized expense
is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

 Debt Issuance Costs

 Debt issuance costs related to convertible senior
notes are recorded as a deduction that is netted against the principal value of the debt and are amortized to interest expense using the
effective interest method over the contractual term of the debt (Note 3).

 Debt issuance costs related to the revolving credit
facility are included in prepaid expenses and other current assets in the consolidated balance sheet at April 30, 2023 and are amortized
to interest expense over the contractual term of the revolving credit facility (Note 3).

 Advertising Costs

 Advertising costs are expensed as incurred and
included in selling, general and administrative expenses in the consolidated statements of income and comprehensive income. For the fiscal
years ended April 30, 2023, 2022 and 2021, advertising costs were $ 0.7 million, $ 0.6 million, and $ 0.3 million, respectively.

 Income Taxes

 We utilize the liability method of accounting
for income taxes in accordance with ASC 740, Income Taxes ("ASC 740"). Under the liability method, deferred taxes are
determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted
tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. We provide a valuation
allowance when it is more likely than not that our deferred tax assets will not be realized. On a periodic basis, we reassess the valuation
allowance on our deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets.
In the fourth quarter of fiscal 2022, we reassessed the valuation allowance noting the shift of positive evidence outweighing negative
evidence, including significant revenue growth, continued profitability, and expectations regarding future profitability. After assessing
both the positive evidence and negative evidence, we determined it was more likely than not that our deferred tax assets would be realized
and therefore released our valuation allowance related to federal and state deferred tax assets as of April 30, 2022, resulting in a benefit
from income taxes of $ 115.0 million. We maintained the same position, that our federal and state deferred tax assets did not require a
valuation allowance, as of April 30, 2023 (Note 7).

 We are required to file federal and state income
tax returns in various jurisdictions. The preparation of these returns requires us to interpret the applicable tax laws in effect in such
jurisdictions, which could affect the amount paid by us.

 NOTES

 Comprehensive Income

 Comprehensive income is the change in equity during
a period from transactions and other events and circumstances from non-owner sources. Comprehensive income is equal to our net income
for all periods presented.

 Accounting Standards Not
Yet Adopted

 In June 2016, the Financial Accounting
Standards Board ("FASB") issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses of Financial Instruments ("ASU 2016-13"). The standard changes the methodology for measuring credit losses on
financial instruments and the timing of when such losses are recorded. In November 2019, the FASB issued ASU 2019-10, Financial
Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which
required entities to make a one-time determination of whether an entity is eligible to be a smaller reporting company as of November
15, 2019 for the purpose of determining the effective date of ASU 2016-13. We determined that we were eligible to be a smaller
reporting company as of November 15, 2019, and therefore, ASU 2016-13 is effective for fiscal years beginning after December 15,
2022, which will be our fiscal year 2024 beginning May 1, 2023. We do not anticipate the adoption of this standard will have a
material impact on our consolidated financial statements.

 Note
3 – Debt (as restated)

 Convertible Senior Notes
Due 2026

 In March 2021, we issued $ 143.8
million in aggregate principal amount of 1.25% exchangeable senior notes due 2026 (the "2026 Notes") in a
private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The net proceeds we received from
the issuance of 2026 Notes was $ 138.5
million, after deducting initial purchaser discounts and other debt issuance related expenses of $ 5.3
million.

 The 2026 Notes are senior unsecured
obligations and accrue interest at a rate of 1.25 %
per annum, payable semi-annually in arrears on March 15 and September 15 of each year. The 2026 Notes mature on March
15, 2026, unless earlier redeemed or repurchased by us or converted at the option of the holders. The 2026 Notes are
convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election in the
manner and subject to the terms and conditions provided in the indenture (the "2026 Notes Indenture") governing the 2026
Notes.

 The initial conversion rate for the 2026 Notes
is approximately 47.1403 shares of our common stock per $1,000 principal amount, which represents an initial conversion price of approximately
$21.21 per share of our common stock. The conversion rate is subject to adjustments upon the occurrence of certain events in accordance
with the terms of the 2026 Notes Indenture. In addition, following certain corporate events that occur prior to the maturity date, we
will, in certain circumstances, increase the conversion rate for a holder who elects to convert their 2026 Notes in connection with such
a fundamental change, as defined in the 2026 Notes Indenture.

 Holders of the 2026 Notes may convert their 2026
Notes at their option at any time prior to the close of business on the business day immediately preceding September 15, 2025, only under
the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending July 31, 2021, if the last reported
sale price of our common stock for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending
on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion
price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the "measurement
period") in which the trading price (as defined in the 2026 Notes Indenture) per $1,000 principal amount of the 2026 Notes for each
trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the exchange
rate on each such trading day; (3) if we call any or all of the 2026 Notes for redemption, at any time prior to the close of business
on the second scheduled trading day immediately preceding the redemption date; and (4) upon the occurrence of specified corporate events
as described in the Indenture.

 NOTES

 On or after September 15, 2025 until the close
of business on the second scheduled trading day immediately preceding the maturity date, holders at their option may convert their 2026
Notes at any time, regardless of the foregoing circumstances.

 We may not redeem the 2026 Notes prior to March
20, 2024. On or after March 20, 2024, the 2026 Notes are redeemable for cash, whole or in part, at our option, if the last reported sale
price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive)
during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day
immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount to
be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

 If we undergo a fundamental change (as defined
in the 2026 Notes Indenture), holders may require us to repurchase for cash all or any portion of their 2026 Notes at a fundamental change
repurchase price equal to 100% of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid interest to, but excluding
the redemption date.

 The 2026 Notes Indenture contains customary terms
and covenants, including that upon certain events of default occurring and continuing, the trustee or the holders of at least 25% in aggregate
principal amount of the outstanding 2026 Notes may declare the entire principal of all the 2026 Notes plus accrued and unpaid interest
to be immediately due and payable.

 As described in Note 1, on February 29, 2024,
as a result of the Event of Default, a holder of at least 25% aggregate principal amount of 2026 Notes declared
100% of the principal amount of, and accrued and unpaid interest on, the 2026 Notes to be due and payable immediately.

 Furthermore, due to the Event of Default, conditions
allowing the trustee or the holders of at least 25% in aggregate principal amount of the outstanding 2026 Notes to declare the entire
principal of the outstanding 2026 Notes to be immediately due and payable had been met as of October 15, 2022 and, therefore, the 2026
Notes are classified as a current liability on the consolidated balance sheet at April 30, 2023.

 As of April 30, 2022, the conditions allowing
holders of the 2026 Notes to convert had not been met and, therefore, the 2026 Notes are classified as a long-term liability on the consolidated
balance sheet at April 30, 2022.

 Refer also to Note 11, Subsequent Events,
for further information regarding the subsequent repurchase and/or payoff of the 2026 Notes.

 In accounting for the issuance of the 2026 Notes,
prior to the adoption of ASU 2020-06, Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts
in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity
("ASU 2020-06"), we separated the 2026 Notes into debt and equity components. The carrying amount of the debt component on
the date of the issuance was $ 99.7 million and was determined based on a binomial lattice model, which yielded an effective discount rate
of 8.78 % and was derived with the assistance of a third-party valuation. The equity component was allocated a value of $ 44.1 million,
representing the difference between the par value of the 2026 Notes and the fair value of the debt component. The equity component was
not remeasured as long as it continued to meet the conditions for equity classification, and the equity component was recorded as additional
paid-in capital within stockholders' equity. The difference between the principal amount of the 2026 Notes and the debt component,
or the debt discount, was amortized to interest expense using the effective interest method over the contractual term of the 2026 Notes.

 In accounting for the issuance costs related to
the 2026 Notes, prior to the adoption of ASU 2020-06, we allocated the total amount incurred to the debt and equity components of the
2026 Notes based on their relative values. Issuance costs attributable to the debt component were $ 3.7 million and were being amortized
to interest expense using the effective interest method over the contractual term of the 2026 Notes. Issuance costs attributable to the
equity component were $ 1.6 million and were netted with the equity component in additional paid-in capital within stockholders'
equity.

 On May 1, 2021, we elected to early adopt ASU
2020-06 using the modified retrospective transition method. Under such transition method, prior period financial information and disclosures
are not adjusted and continue to be reported under the accounting standards that were in effect prior to our adoption of ASU 2020-06.

 NOTES

 The adoption of ASU 2020-06 resulted in the re-combination
of the debt and equity components of the 2026 Notes into a single debt instrument, which resulted in a $42.4 million decrease in additional
paid-in capital from the derecognition of the bifurcated equity component, a $41.6 million increase in convertible senior notes, net from
the derecognition of the discount associated with the bifurcated equity component, or debt discount, and $0.8 million decrease to the
May 1, 2021 opening balance of accumulated deficit, representing the cumulative non-cash interest expense recognized related to the amortization
of the debt discount associated with the bifurcated equity component of the 2026 Notes. Additionally, we derecognized the allocation of
the issuance costs to the equity component and all issuance costs related to the 2026 Notes are being amortized to interest expense using
the effective interest method over the contractual term of the 2026 Notes which is included in the cumulative adjustment to the opening
balance of accumulated deficit.

 The net carrying amount of the 2026 Notes is as
follows (in thousands):

 Schedule of net carrying amount of the debt component

 April 30, 2023

 April 30, 2022

 Principal

 $
 143,750

 $
 143,750

 Unamortized issuance costs

 ( 3,127
)

 ( 4,173
)

 Net carrying amount

 $

 $
 139,577

 As of April 30, 2023 and 2022, the estimated fair
value of the 2026 Notes was approximately $ 157.3 million and $ 167.1 million, respectively. The fair value was determined based
on the last actively traded price per $ 100 of the 2026 Notes for the periods ended April 30, 2023 and 2022 (Level 2).

 The following table summarizes the interest expense
recognized related to the 2026 Notes for the fiscal years ended April 30, 2023, 2022 and 2021 (in thousands):

 Schedule of interest expenses

 2023

 2022

 2021

 Contractual interest expense

 $
 1,808

 $
 1,603

 $

 Amortization of issuance costs

 1,046

 1,030

 Amortization of debt discount (1)

 –

 –

 Total interest expense associated with 2026 Notes

 $
 2,854

 $
 2,633

 $
 1,161

 _______________

 (1)
 As discussed above, the adoption of ASU 2020-06 on May 1, 2021 resulted in the re-combination of the debt
and equity components of the 2026 Notes into a single debt instrument. Accordingly, the unamortized debt discount balance and the
net carrying amount of the equity component were derecognized.

 The effective annual interest rate of the 2026
Notes for the fiscal years ended April 30, 2023, 2022 and 2021 was 2.31%, 2.03%, and 9.65%, respectively. The effective annual interest
rate is computed using the contractual interest and the amortization of debt issuance costs. However, due to the Event of Default as described
in Note 1, the fiscal year ended April 30, 2023 contractual interest rate also included an additional interest rate and a default interest
rate. In addition, prior to the adoption of ASU 2020-06 on May 1, 2021, the effective annual interest rate calculation also included the
amortization of the debt discount.

 Capped Call Transactions

 In connection with the issuance of the 2026 Notes,
we entered into privately negotiated capped call transactions (the "Capped Calls") with certain financial institution counterparties
(the "Option Counterparties"). We used $12.8 million of the net proceeds from the issuance of the 2026 Notes to pay the cost
of the Capped Calls. The Capped Calls cover, subject to customary anti-dilution adjustments, the aggregate number of shares of our common
stock that initially underlie the 2026 Notes, and are generally expected to reduce the potential dilution of our common stock upon any
conversion of the 2026 Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped
Calls. The cap share price of the Capped Calls is approximately $28.02 per share, which represents a premium of 75% over the last reported
sale price of our common stock on March 9, 2021 and is subject to certain adjustments under the terms of the Capped Calls. However, there
would nevertheless be dilution upon conversion of the 2026 Notes to the extent that such market price exceeds the capped share price
as measured under the terms of the Capped Calls.

 NOTES

 We evaluated the Capped Calls under ASC 815-10
and determined that they should be accounted for as a separate transaction from the 2026 Notes and that the Capped Calls met the criteria
for equity classification. Therefore, the cost of $12.8 million to purchase the Capped Calls was recorded as a reduction to additional
paid-in capital in the consolidated balance sheet at April 30, 2021. The Capped Calls will not be subsequently remeasured as long as the
conditions for equity classification continue to be met. During fiscal years 2023 and 2022, there were no conversions of our 2026 Notes,
and therefore, there was no activity with respect to the Capped Calls. We believe the conditions for equity classification continue to
be met as of April 30, 2023 and 2022.

 As described in Note 11, during March 2024, in
connection with our repurchase and payoff of the remaining balance of the 2026 Notes we entered into transactions to unwind all of our
Capped Calls. As a result, we received $1.3 million in net proceeds from the unwinding of the Capped Calls.

 Revolving Credit Facility

 On March 14, 2023, we entered into a credit agreement
with Bank of America, N.A., as administrative agent and letter of credit issuer, which was subsequently amended on October 27, 2023 (as
amended, the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility (the "Revolving Credit
Facility") in an amount equal to the lesser of (i) $50 million, and (ii) a borrowing base calculated as the sum of (a) 80% of the
value of certain of our eligible accounts receivable, plus (b) up to 100% of the value of eligible cash collateral. The Revolving Credit
Facility will mature on October 25, 2024 and is secured by substantially all of our assets. As of April 30, 2023, there were no outstanding
loans under the Revolving Credit Facility.

 As a result of the Acceleration Event associated
with the 2026 Notes (Note 1), such occurrence resulted in a cross-default under our Credit Agreement. On March 12, 2024, we entered into
Amendment No. 2 to the Credit Agreement which, among other things, (i) waives the events of default under the Credit Agreement as a result
of the acceleration of our 2026 Notes, (ii) permits the issuance of our 2029 Notes and the repayment of our 2026 Notes (Note 11) and
(iii) adjusts the financial covenant in the Credit Agreement.

 Loans under the Revolving Credit Facility will
bear interest at either (1)
a term Secured Overnight Financing Rate ("SOFR") rate for a specified interest period plus a SOFR adjustment (equal to 0.10%)
plus a margin of 1.60% or (2) base rate plus a margin of 0.60% at our option. Interest on any outstanding loans is due and payable
monthly and the principal balance is due at maturity. In addition, we pay a quarterly unused revolving line facility fee of 0.25 %
per annum on the average unused facility.

 The Credit Agreement includes certain customary
affirmative and negative covenants, including limitations on mergers, consolidations and sales of assets, limitations on liens, limitations
on certain restricted payments and investments, limitations on transactions with affiliates and limitations on incurring additional indebtedness.
In addition, the Credit Agreement requires maintenance of a minimum consolidated EBITDA, as defined in the Credit Agreement, of $ 15 million
for the most recently completed four (4) fiscal quarters as measured at the end of each fiscal quarter. As of April 30, 2023, we were
in compliance with the Credit Agreement's financial covenant.

 The Credit Agreement also provides for certain
customary events of defaults, including, among others, failure to make payments, breach of representations and warranties, and default
of covenants.

 Note 4 – Leases

 We currently lease certain office, manufacturing,
laboratory and warehouse space located in Orange County, California under operating lease agreements. Our leased facilities have original
lease terms ranging from 7 to 12 years, contain multi-year renewal options, and scheduled rent increases of 3% on either an annual or
biennial basis. Multi-year renewal options were included in determining the right-of-use asset and lease liability for three of our leases
as we considered it reasonably certain that we would exercise such renewal options. In addition, certain of our leases provide for periods
of free rent, lessor improvements and tenant improvement allowances, of which certain of these improvements have been classified as leasehold
improvements and/or are being amortized over the shorter of the estimated useful life of the improvements or the remaining life of the
lease.

 NOTES

 Certain of our operating facility leases require
us to pay property taxes, insurance and common area maintenance. While these payments are not included as part of our lease liabilities,
they are recognized as variable lease cost in the period they are incurred.

 We also lease certain manufacturing equipment
under a 5-year finance lease that commenced in the second quarter of fiscal year 2022.

 The components of our lease
costs for the fiscal years ended April 30, 2023, 2022 and 2021, were as follows (in thousands):

 Schedule of lease costs

 2023

 2022

 2021

 Operating lease cost

 $
 4,386

 $
 3,872

 $
 3,151

 Variable lease cost

 1,408

 Short-term lease cost

 Finance lease costs:

 Amortization of right-of-use assets

 Interest on lease liabilities

 Total lease costs

 $
 6,711

 $
 5,421

 $
 4,301

 Supplemental consolidated balance sheet and other
information related to our leases as of April 30, 2023 and 2022 were as follows (in thousands, except weighted average data):

 Balance sheet classification of leases

 April
 30,

 Leases

 Classification

 2023

 2022

 Assets

 Operating

 $
 42,772

 $
 36,806

 Finance

 2,529

 2,728

 Total leased assets

 $
 45,301

 $
 39,534

 Liabilities

 Current:

 Operating

 $
 1,358

 $
 2,969

 Finance

 Non-current:

 Operating

 45,690

 37,886

 Finance

 1,562

 2,093

 Total lease liabilities

 $
 49,141

 $
 43,453

 Operating and finance leases

 Weighted average remaining lease term (years):

 Operating leases

 16.6

 12.4

 Finance lease

 3.7

 4.7

 Weighted average discount rate

 Operating leases

 6.0 %

 3.3 %

 Finance lease

 5.3 %

 5.3 %

 NOTES

 Supplemental cash flow information related to
our leases were as follows (in thousands):

 Schedule of supplemental cash flow information related to leases

 2023

 2022

 2021

 Cash paid for amounts included in the measurement of lease liabilities:

 Operating cash flows from operating leases

 $
 4,069

 $
 2,376

 $
 2,972

 Operating cash flows from finance leases

 Financing cash flows from finance leases

 Non-cash transactions:

 Right-of-use assets obtained upon operating lease modifications and reassessments, net

 $
 9,267

 $
 4,554

 $
 –

 Right-of-use assets obtained in exchange for operating lease obligations

 $
 –

 $
 16,093

 $
 –

 Decapitalization of right-of-use assets upon impairment

 $

 $
 –

 $
 –

 Property and equipment obtained in exchange for finance lease obligation

 $
 –

 $
 2,760

 $
 –

 As of April 30, 2023, the maturities of our lease
liabilities, which includes those derived from lease renewal options that we considered it reasonably certain that we would exercise,
were as follows (in thousands):

 Schedule of maturities of operating lease liabilities

 Fiscal Year Ending April 30,

 Operating Leases

 Finance Lease

 Total

 2024

 $
 4,140

 $

 $
 4,769

 2025

 4,060

 4,689

 2026

 4,167

 4,796

 2027

 4,199

 4,618

 2028

 4,036

 –

 4,036

 Thereafter

 56,418

 –

 56,418

 Total lease payments

 $
 77,020

 $
 2,306

 $
 79,326

 Less: imputed interest

 ( 29,972
)

 ( 213
)

 ( 30,185
)

 Total lease liabilities

 $
 47,048

 $
 2,093

 $
 49,141

 Note 5 – Stockholders' Equity

 Series E Preferred Stock
Redemption and Dividends

 During the fourth quarter of fiscal 2021 and prior
to the redemption discussed below, holders of our 10.50% Series E Convertible Preferred Stock (the "Series E Preferred Stock")
converted an aggregate of 28,168 shares of Series E Preferred Stock into 33,514 shares of our common stock determined by dividing the
liquidation amount of $25.00 per share by the conversion price of $ 21.00 per share, rounded down to the nearest whole number.

 NOTES

 On April 12, 2021 (the "Redemption
Date"), we redeemed all then current remaining outstanding shares of our Series E Preferred Stock at a per share price equal to
the $ 25.00 liquidation amount plus accrued and unpaid dividends up to, but excluding, the Redemption Date. In connection with the completed
redemption, we incurred a charge of $ 3.4 million related to the excess of the redemption value paid upon redemption over the carrying
value of our Series E Preferred Stock which is included in impact of preferred stock redemption in the consolidated statements of income
and comprehensive income for the fiscal year ended April 30, 2021. As a result of the completed redemption, our Series E Preferred Stock
is no longer issued and outstanding.

 Holders of our Series E Preferred
Stock were entitled to receive cumulative dividends at the rate of 10.50% per annum based on the liquidation preference of $ 25.00 per
share, or $ 2.625 per annum per share, and were payable quarterly in cash, on or about the first day of each January, April, July, and
October. In addition, in April 2021, accrued and unpaid dividends of $ 0.08021 per share was paid to holders of Series E Preferred Stock
in connection with the redemption of our Series E Preferred Stock discussed above. For the fiscal year ended April 30, 2021, we paid aggregate
cash dividends of $ 4.5 million for then issued and outstanding shares of our Series E Preferred Stock. No cash dividend amounts were paid
for the fiscal years ended April 30, 2023 and 2022.

 Sale
of Common Stock

 During the third quarter of
fiscal 2021, we completed an underwritten public offering pursuant to which we sold 3,833,335 shares of our common stock at the public
offering price of $ 9.00 per share, including 500,000 shares sold pursuant to the underwriters' full exercise of their option to
purchase additional shares. The aggregate gross proceeds we received from the public offering were $ 34.5 million, before deducting underwriting
discounts and commissions and other offering related expenses of $ 2.4 million.

 During the fiscal years ended
April 30, 2023 and 2022, we had no offerings of our common stock.

 Shares of Common Stock Authorized and Reserved
for Future Issuance

 As of April 30, 2023, 62,691,885
shares of our common stock were issued and outstanding.

 Our common stock outstanding
as of April 30, 2023 excluded the following shares of common stock reserved for future issuance (in thousands):

 Schedule of common stock reserved for future issuance

 Stock Incentive Plans

 8,338

 Employee Stock Purchase Plan

 Conversion of Convertible Notes

 6,776

 Total common stock reserved for future issuance

 16,077

 NOTES

 Note
6 – Equity Compensation Plans

 Stock
Incentive Plans

 The Avid Bioservices, Inc. 2018
Omnibus Incentive Plan (the "2018 Plan") is a stockholder-approved plan, which provides, among other things, the ability for
us to grant stock options, restricted stock units, performance stock units and other forms of stock-based awards. The 2018 Plan replaced
our 2009, 2010 and 2011 Stock Incentive Plans (the "Prior Plans"). However, any awards outstanding under the Prior Plans as
of the 2018 Plan's effective date continue to remain subject to and be paid under the applicable Prior Plan, and any shares subject
to outstanding awards under the Prior Plans that subsequently expire, terminate, or are surrendered or forfeited for any reason without
issuance of shares automatically become available for issuance under the 2018 Plan. In October 2021, our stockholders approved an amendment
to the 2018 Plan to increase the number of authorized shares reserved for issuance under the 2018 plan by 3.4 million shares.

 The 2018 Plan and the Prior
Plans are collectively referred to as the "Stock Plans". As of April 30, 2023, we had an aggregate of 8,337,807 shares of
our common stock reserved for issuance under the Stock Plans, of which 3,926,550 shares were subject to outstanding stock options, restricted
stock units and performance stock units and 4,411,257 shares were available for future grants of stock-based awards.

 Stock Options

 We ceased granting stock options
during fiscal 2022. Stock options previously granted under our Stock Plans were granted at an exercise price not less than the fair market
value of our common stock on the date of grant. Stock options granted to employees generally vest over a four-year period from the date
of grant and stock options granted to non-employee directors generally vest over a period of one to three years from the date of grant.
Stock options granted under the 2018 Plan have a contractual term of seven years; however, the maximum contractual term of any stock option
granted under the Stock Plans is ten years.

 The estimated fair value of
stock options is measured at the grant date, using a fair value-based method, such as a Black-Scholes option valuation model, and is amortized
as stock-based compensation expense on a straight-line basis over the requisite service period of the award, which is generally the vesting
period. The use of a valuation model requires us to make certain estimates and assumptions with respect to selected model inputs. The
expected volatility is based on the daily historical volatility of our common stock covering the estimated expected term. The expected
term of options granted reflects actual historical exercise activity and assumptions regarding future exercise activity of unexercised,
outstanding options. The risk-free interest rate is based on U.S. Treasury notes with terms within the contractual life of the option
at the time of grant. The expected dividend yield assumption is based on our expectation of future dividend payouts. We have never declared
or paid any cash dividends on our common stock and currently do not anticipate paying such cash dividends.

 There were no stock options granted during the fiscal year ended April 30, 2023. The grant date fair value for stock options granted during
the fiscal years ended April 30, 2022 and 2021 were based on the following weighted-average assumptions used within the Black-Scholes
option valuation model:

 Schedule of fair value assumptions for options

 2022

 2021

 Risk-free interest rate

 0.86 %

 0.32 %

 Expected life (in years)

 4.37

 4.69

 Expected volatility

 68.64 %

 81.42 %

 Expected dividend yield

 –

 –

 NOTES

 The following summarizes our stock option transaction
activity for the fiscal year ended April 30, 2023:

 Schedule of stock option activity

 Stock Options
 (in thousands)

 Grant Date
 Weighted
 Average Exercise Price

 Weighted
 Average
 Remaining
 Contractual
 Life (in years)

 Aggregate
 Intrinsic
 Value (1)
 (in thousands)

 Outstanding at May 1, 2022

 2,505

 $
 6.88

 Granted

 –

 –

 Exercised

 ( 366
)

 $
 7.06

 Canceled or expired

 ( 60
)

 $
 9.89

 Outstanding at April 30, 2023

 2,079

 $
 6.76

 3.69

 $
 23,654

 Vested and expected to vest

 2,079

 $
 6.76

 3.69

 $
 23,654

 Exercisable at April 30, 2023

 1,595

 $
 6.52

 3.59

 $
 18,447

 ______________

 (1)
 Aggregate intrinsic value represents the difference between the exercise price of an option and the closing
market price of our common stock on April 28, 2023 (the last trading day of fiscal year 2023), which was $18.05 per share.

 The weighted-average grant date fair value of
stock options granted during the fiscal years ended April 30, 2022 and 2021 was $ 13.09 and $ 4.74 per share, respectively. There were no
stock options granted during the fiscal year ended April 30, 2023.

 The aggregate intrinsic value
of stock options exercised during the fiscal years ended April 30, 2023, 2022 and 2021 was $ 3.5 million, $ 8.1 million and $ 3.9 million,
respectively. Cash received from stock options exercised during fiscal years ended April 30, 2023, 2022 and 2021 totaled $ 2.6 million,
$ 2.7 million and $ 3.6 million, respectively.

 We issue shares of common stock
that are reserved for issuance under the Stock Plans upon the exercise of stock options, and we do not expect to repurchase shares of
common stock from any source to satisfy our obligations under our compensation plans.

 As of April 30, 2023, the total
estimated unrecognized compensation cost related to non-vested stock options was $1.3 million. This cost is expected to be recognized
over a weighted average vesting period of 0.99 years based on current assumptions.

 NOTES

 Restricted Stock

 A restricted stock unit ("RSU")
represents the right to receive one share of our common stock upon the vesting of such unit. RSUs granted to employees generally vest
over a four-year period from the date of grant and RSUs granted to non-employee directors generally vest over a period of one to three
years from the date of grant. The estimated fair value of RSUs is based on the closing market value of our common stock on the date of
grant and is amortized as stock-based compensation expense on a straight-line basis over the period of vesting.

 The following summarizes our
RSUs transaction activity for the fiscal year ended April 30, 2023:

 Schedule of RSU activity

 (in thousands)

 Weighted Average
 Grant Date

 Fair Value

 Outstanding at May 1, 2022

 $
 14.89

 Granted

 $
 17.63

 Vested

 ( 366
)

 $
 15.09

 Forfeited

 ( 50
)

 $
 17.32

 Outstanding at April 30, 2023

 1,006

 $
 16.83

 The weighted-average grant date
fair value of RSUs granted during the fiscal years ended April 30, 2023, 2022 and 2021 was $ 17.63, $ 25.20 and $ 7.29 per share, respectively.

 The total fair value of RSUs
vested during the fiscal years ended April 30, 2023, 2022 and 2021 was $ 6.3 million, $ 5.5 million and $ 0.7 million, respectively.

 As of April 30, 2023, the total
estimated unrecognized compensation cost related to non-vested RSUs was $ 15.4 million. This cost is expected to be recognized over a weighted
average vesting period of 2.53 years.

 Performance Stock Units

 The Compensation Committee of
the Board of Directors grants PSUs to our executives. The PSUs are subject to annual vesting over three consecutive fiscal year performance
periods with the first one-third vesting on April 30 of the year following the grant date, and each successive one-third vesting on April
30 of the following two years respectively (each a "Performance Period"). Each PSU that vests represent the right to receive
one share of our common stock. The number of shares that will vest for each Performance Period, if any, is based upon the attainment of
certain predetermined financial metrics for each such Performance Period. Depending on the actual financial metrics achieved relative
to the target financial metrics for such Performance Periods, the number of PSUs issued could range from 0% to 200% of the target amount.
The number of granted shares included in the table below is based on a maximum 200% achievement of each financial metric during each Performance
Period (the "Maximum Performance Target"). If a financial metric is achieved at a rate below the Maximum Performance Target,
or is not achieved, the corresponding portion of the PSUs that do not vest are forfeited.

 NOTES

 The following summarizes our
PSUs transaction activity for the fiscal year ended April 30, 2023:

 Schedule of PSU activity

 (in
 thousands)

 Weighted Average

 Grant Date

 Fair Value

 Outstanding at May 1, 2022

 $
 25.31

 Granted

 $
 18.09

 Vested

 ( 161
)

 $
 20.75

 Forfeited

 ( 158
)

 $
 20.69

 Outstanding at April 30, 2023

 $
 19.70

 The weighted-average grant
date fair value of PSUs granted during the fiscal years ended April 30, 2023 and 2022, was $ 18.09 and $ 25.36 per share, respectively.
There were no PSUs granted during the fiscal year ended April 30, 2021.

 The total fair value of PSUs
vested during the fiscal years ended April 30, 2023 and 2022 was $ 3.3 million and $ 2.1 million, respectively. No PSUs vested during the
fiscal year ended April 30, 2021.

 As
of April 30, 2023, there was $ 10.3 million of total estimated unrecognized compensation cost related to non-vested PSUs associated with
the Performance Periods ending April 30, 2024 and 2025 based on the Maximum Performance Target achievement of each financial metric during
such Performance Periods. This cost is expected to be recognized over a weighted average vesting period of 1.39 years, however, we will
assess the likelihood of achieving the predetermined financial metrics associated with each Performance Period on a quarterly basis and
the expense recognized, if any, will be adjusted accordingly.

 Employee
Stock Purchase Plan

 The Avid Bioservices, Inc. 2010
Employee Stock Purchase Plan (the "ESPP") is a stockholder-approved plan under which employees can purchase shares of our
common stock, based on a percentage of their compensation, subject to certain limits. The purchase price per share is equal to the lower
of 85% of the fair market value of our common stock on the first trading day of the six-month offering period or on the last trading day
of the six-month offering period. Offering Periods commence on or about the first day of January and July of each year.

 During the fiscal years ended
April 30, 2023, 2022 and 2021, a total of 68,646, 44,364 and 72,409 shares of our common stock were purchased, respectively, under the
ESPP at a weighted average purchase price per share of $ 12.22, $ 14.50 and $ 5.84, respectively. As of April 30, 2023, we had 963,316 shares
of our common stock reserved for issuance under the ESPP.

 The fair value of the shares
purchased under the ESPP was determined using a Black-Scholes option valuation model (see explanation of valuation model inputs above
under "Stock Options") and is recognized as expense on a straight-line basis over the requisite service period (or six-month
offering period).

 NOTES

 The weighted average grant date fair value of purchase
rights under the ESPP during fiscal years ended April 30, 2023, 2022 and 2021 was $ 4.93,
$ 8.62
 and $ 3.17,
respectively, based on the following weighted-average Black-Scholes option valuation model inputs:

 Schedule of ESPP Fair value assumptions

 2023

 2022

 2021

 Risk-free interest rate

 3.76 %

 0.15 %

 0.14 %

 Expected life (in years)

 0.50

 0.50

 0.50

 Expected volatility

 68.60 %

 59.91 %

 75.50 %

 Expected dividend yield

 –

 –

 –

 Stock-based
Compensation Expense

included in our consolidated statements of income and comprehensive income was comprised of the following (in thousands):

 Schedule of share-based compensation expense

 2023

 2022

 2021

 $
 3,876

 $
 2,540

 $
 1,404

 Selling, general and administrative expense

 7,102

 4,840

 2,450

 Total

 $

 $
 7,380

 $
 3,854

 Note 7 – Income Taxes

 Deferred income tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax
bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available
evidence, are not expected to be realized.

 At April 30, 2023, management
assessed the realizability of deferred tax assets and evaluated the need for a valuation allowance for deferred tax assets on a jurisdictional
basis. This evaluation utilizes the framework contained in ASC 740 wherein management analyzes all positive and negative evidence available
at the balance sheet date to determine whether all or some portion of our deferred tax assets will not be realized. Under this guidance,
a valuation allowance must be established for deferred tax assets when it is more-likely-than-not that the asset will not be realized.
In assessing the realization of our deferred tax assets, management considers all available evidence, both positive and negative.

 Management's evaluation
placed significant emphasis on guidance in ASC 740, which states that "a cumulative loss in recent years is a significant piece
of negative evidence that is difficult to overcome." In fiscal 2022, we transitioned from a cumulative loss in recent years to cumulative
income. This transition coupled with additional positive evidence enabled us to fully release our valuation allowance as of April 30,
2022. We maintained the same position that our deferred tax assets did not require a valuation allowance as of April 30, 2023.

 NOTES

 The valuation allowance did
 no t change
for the fiscal year ended April 30, 2023. For the fiscal year ended April 30, 2022, $122.7 million was released through our consolidated
statements of income and comprehensive income and $( 11.3)
million was recognized related to the valuation adjustments for the adoption of ASU 2020-06, which was reflected as an adjustment to
our opening consolidated balance sheet on May 1, 2021.

 We are subject to taxation in
the United States and various states jurisdictions. We have not been notified that we are under audit by the IRS or any state taxing authorities
and our federal and state returns from April 30, 2020 and April 30, 2019, respectively, remain open for examination. Due to the presence
of net operating loss ("NOL") carryforwards the tax authorities can also examine years prior to the standard statute of limitations.

 At April 30, 2023, we had federal
NOL carry forwards of approximately $ 442.4 million. The federal NOL carry forwards generated prior to January 1, 2018 expire in fiscal
years 2024 through 2038, unless previously utilized. The federal NOL generated after January 1, 2018 of $77.9 million can be carried forward
indefinitely. Utilization of NOLs generated subsequent to 2020 are limited to 80% of future taxable income. We also have California state
NOL carry forwards of approximately $ 294.7 million at April 30, 2023, which begin to expire in fiscal year 2024. We also have other state
NOL carry forwards of approximately $ 0.9 million at April 30, 2023, which begin to expire in fiscal year 2037.

 Additionally, the future utilization
of our NOL carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Section
382, as a result of ownership changes. A Section 382 analysis has been completed through April 30, 2022, and it was determined that no
significant change in ownership had occurred. However, ownership changes occurring subsequent to April 30, 2022 may impact the utilization
of NOL carry forwards and other tax attributes in future periods.

 At April 30, 2023, we had $ 5.8
million and $ 1.5 million of federal and California research and development credit carry forwards. The California research credits do
not expire and the federal credits begin to expire in fiscal year 2026.

 The provision for income taxes
on our net income before income taxes for the fiscal years ended April 30, 2023, 2022 and 2021 is comprised of the following (in thousands):

 Schedule of provision for income taxes

 2023

 2022

 2021

 Federal income taxes at statutory rate

 $

 $
 2,659

 $
 2,355

 State income taxes, net of valuation allowance

 –

 Expiration and adjustments of deferred tax assets

 –

 –

 Change in federal valuation allowance

 –

 ( 122,703
)

 2,450

 Stock-based compensation including 162M limitations

 ( 1,153
)

 ( 240
)

 Research and development credits

 –

 –

 ( 4,958
)

 Adjustment for federal benefit of state

 –

 5,326

 –

 Permanent differences

 Other, net

 ( 170
)

 ( 62
)

 Income tax expense (benefit)

 $
 1,331

 $
 ( 115,011
)

 $
 –

 NOTES

 Deferred income taxes reflect the net effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income
tax purposes. Significant components of our deferred tax assets and deferred tax liabilities at April 30, 2023 and 2022 are as follows
(in thousands):

 Schedule of deferred tax assets and deferred tax liabilities

 2023

 2022

 Net operating losses

 $
 112,194

 $
 99,710

 Research and development credits

 5,569

 5,550

 2,589

 2,710

 Deferred revenue

 2,420

 5,494

 Lease liabilities

 12,742

 11,107

 Accrued liabilities

 2,360

 Accrued compensation

 1,781

 1,705

 Total deferred tax assets

 139,655

 127,061

 Less valuation allowance

 –

 –

 Total deferred tax assets, net of valuation allowance

 139,655

 127,061

 Deferred tax liabilities:

 Fixed assets

 ( 14,320
)

 ( 1,972
)

 ROU assets

 ( 11,584
)

 ( 10,007
)

 Total deferred tax liabilities

 ( 25,904
)

 ( 11,979
)

 Net deferred tax assets

 $
 113,751

 $
 115,082

 In accordance with ASC 740, we are required to
recognize the impact of an uncertain tax position in the consolidated financial statements when it is more likely than not the position
will be sustained upon examination by the tax authorities. An uncertain tax position will not be recognized if it has less than a 50%
likelihood of being sustained upon examination by the tax authorities. Unrecognized tax positions at April 30, 2023 and 2022 are as follows
(in thousands):

 Schedule of unrecognized tax positions

 2023

 2022

 Unrecognized tax positions, beginning of year

 $
 5,133

 $
 1,600

 Gross (decrease) increase – prior period tax positions

 ( 1,693
)

 3,533

 Unrecognized tax positions, end of year

 $
 3,440

 $
 5,133

 If recognized, the unrecognized tax positions will
impact our income tax benefit or effective tax rate. We do not expect any significant increases or decreases to our unrecognized tax positions
within the next 12 months.

 It is our policy to recognize interest and penalties
related to income tax matters in interest expense and other income (expense), net, respectively, in our consolidated statements of income
and comprehensive income. For the fiscal years ended April 30, 2023 and 2021, we did not incur any interest or penalties. For the fiscal
year ended April 30, 2022, we recognized an immaterial amount of interest and penalties.

 NOTES

 Note 8 – Net Income
Per Common Share

 Basic net income per common
share is computed by dividing our net income attributable to common stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted net income per common share is computed by dividing our net income attributable to common stockholders
by the sum of the weighted average number of shares of common stock outstanding during the period plus the potential dilutive effects
of stock options, unvested RSUs and PSUs, shares of common stock expected to be issued under our ESPP, 2026 Notes and Series E
Preferred Stock outstanding during the period.

 Net income attributable to common
stockholders represents our net income less Series E Preferred Stock accumulated dividends and the impact of Series E Preferred Stock
redemption.

 The potential dilutive effect
of stock options, unvested RSUs and PSUs, and shares of common stock expected to be issued under our ESPP during the period are calculated
in accordance with the treasury stock method, but are excluded if their effect is anti-dilutive. The potential dilutive effect of our
2026 Notes and Series E Preferred Stock outstanding during the period are calculated using the if-converted method assuming the conversion
of our 2026 Notes and Series E Preferred Stock as of the earliest period reported or at the date of issuance, if later, but are excluded
if their effect is anti-dilutive. A reconciliation of the numerators and the denominators of the basic and dilutive net income per common
share computations are as follows (in thousands, except per share amounts):

 Schedule of earnings per share, basic and diluted

 2023

 2022

 2021

 Numerator

 $

 $

 $

 Series E preferred stock accumulated dividends

 –

 –

)

 Impact of Series E preferred stock redemption

 –

 –

 ( 3,439
)

 Net income attributable to common stockholders, basic

 $

 $

 $
 3,318

 Add interest expense on 2026 Notes, net of tax

 –

 1,954

 –

 Net income attributable to common stockholders, diluted

 $

 $
 129,626

 $
 3,318

 Denominator

 Weighted average basic common shares outstanding

 62,268

 61,484

 58,222

 Effect of dilutive securities:

 Stock options

 1,248

 1,830

 RSUs, PSUs and ESPP

 2026 Notes

 –

 6,776

 –

 Weighted average dilutive common shares outstanding

 63,782

 70,474

 59,426

 Net income per share attributable to common stockholders:

 Basic

 $
 0.00

 $
 2.08

 $
 0.06

 $
 0.00

 $
 1.84

 $
 0.06

 NOTES

 The following table presents the potential
dilutive securities excluded from the calculation of diluted net income (loss) per common share for the periods presented as the
effect of their inclusion would have been anti-dilutive (in thousands):

 Schedule of antidilutive shares

 2023

 2022

 2021

 Stock options

 RSUs, PSUs and ESPP

 –

 2026 Notes

 6,776

 –

 Series E Preferred Stock

 –

 –

 1,864

 Total

 7,075

 3,621

 Note 9 – Employee Benefit Plan

 We maintain a 401(k) Plan pursuant to section
401(k) of the Internal Revenue Code that allows participating employees to defer a portion of their compensation on a tax deferred basis
up to the maximum amount permitted by the Internal Revenue Code. We are not required to make matching contributions under the 401(k) Plan.
However, we match 50% of employee contributions of up to 6% of their annual eligible compensation. Total expense recognized by us for
matching contributions to the 401(k) Plan for the fiscal years ended April 30, 2023, 2022 and 2021 was $ 0.9 million, $ 0.6 million and
$ 0.5 million, respectively.

 Note 10 – Commitments and Contingencies

 In the ordinary course of business,
we are at times subject to various legal proceedings and disputes. We make provisions for liabilities when it is both probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. Such provisions, if any, are reviewed at least
quarterly and adjusted to reflect the impact of any settlement negotiations, judicial and administrative rulings, advice of legal counsel,
and other information and events pertaining to a particular case. We currently are not a party to legal proceedings, the adverse
outcome of which, in management's opinion, individually or in the aggregate, would have a material adverse effect on our consolidated
financial condition or results of operations.

 Humanigen Arbitration

 On December 17, 2021, we filed
a Demand for Arbitration claiming more than $20.5 million in damages against Humanigen, Inc. ("Humanigen") with the American
Arbitration Association ("AAA") entitled, Avid Bioservices, Inc. v. Humanigen, Inc. (AAA Case No. 01-21-0018-0523).
The Demand contains three claims for: (1) breach of contract concerning the process development and manufacturing master services agreement
("MSA"); (2) anticipatory breach of contract concerning the capacity expansion and contribution/commitment letter ("Letter
Agreement"); and (3) trade libel and commercial disparagement. On January 6, 2022, Humanigen filed an Answer to our Demand, denying
the allegations and asserting affirmative defenses. On July 1, 2022, Humanigen filed its counterclaims against us in the form of a complaint
in the Orange County Superior Court (Case No. 30-2022-01268184) alleging three claims for (1) breach of the MSA seeking return or reimbursement
of the amounts Humanigen paid us before cancelling the MSA, (2) declaratory relief that Humanigen has no remaining obligations under
the Letter Agreement, and (3) unfair business practices. On July 19, 2022, we filed a motion with the state court to compel all claims
by Humanigen against us to arbitration before the AAA. On October 17, 2022, the state court granted our motion to compel all of Humanigen's
claims against us to arbitration and denied Humanigen's motion to stay the arbitration. As a result of the court having granted
our motion, on November 3, 2022, Humanigen filed its Demand for Arbitration realleging the breach of the MSA and unfair business practices
claims which it had initially filed in state court. On November 10, 2022, we filed an Answer to Humanigen's Demand, denying the
allegations and asserting affirmative defenses. On February 21, 2023, we entered into a Confidential Settlement and Mutual Releases Agreement
with Humanigen resolving the arbitration proceeding and all disputes between the parties.

 NOTES

 Note 11 – Subsequent Events

 Acceleration of Convertible Senior Notes Due
2026

 As described in Note
1, on February 29, 2024, as a result of the Event of Default, a holder of at least 25% aggregate principal amount of 2026 Notes declared
100% of the principal amount of, and accrued and unpaid interest on, the 2026 Notes to be due and payable immediately.

 Sale and Issuance of Convertible Senior Notes
Due 2029

 On March 12, 2024, we completed a private
offering (the "Offering") of $160.0 million aggregate principal amount of 7.00% convertible senior notes due 2029 (the
"2029 Notes") to qualified institutional buyers pursuant to Section 4(a)(2) of the Securities Act. We received net
proceeds from the Offering of approximately $153.5 million, after deducting placement agent's commissions and other debt
issuance related expenses of approximately $6.5 million.

 Subsequent to the closing of the Offering,
during March 2024, we used approximately $146.1 million of the net proceeds to (i) repurchase for cash, $141.0 million aggregate
principal amount of the 2026 Notes (Note 3) in privately negotiated transactions with certain holders of the 2026 Notes plus accrued
and unpaid interest of $2.3 million, and (ii) repay in full, the remaining outstanding 2026 Notes balance by depositing the required
payoff amount of $2.8 million, representing principal and accrued and unpaid interest, with the trustee under the 2026 Notes
Indenture, following which no 2026 Notes remained outstanding.

 The 2029 Notes are senior unsecured obligations
and accrue interest at a rate of 7.00% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning
on September 1, 2024. The 2029 Notes mature on March 1, 2029, unless earlier repurchased by us or converted at the option of the holders.
The 2029 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election
in the manner and subject to the terms and conditions provided in the indenture (the "2029 Notes Indenture") governing the
2029 Notes.

 The initial conversion rate for the 2029 Notes
is approximately 101.1250 shares of our common stock per $1,000 principal amount, which represents an initial conversion price of approximately
$9.89 per share of our common stock. The conversion rate is subject to adjustments upon the occurrence of certain events in accordance
with the terms of the 2029 Notes Indenture. In addition, following certain corporate events that occur prior to the maturity date, we
will, in certain circumstances, increase the conversion rate for a holder who elects to convert their 2029 Notes in connection with such
a fundamental change, as defined in the 2029 Notes Indenture.

 Holders of the 2029 Notes may convert their 2029
Notes at their option at any time prior to the close of business on the business day immediately preceding September 1, 2028, only under
the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending July 31, 2024 (and only during such
fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during
any 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater
than or equal to 130% of the conversion price for the 2029 Notes on each applicable trading day; (2) during the five business day period
after any five consecutive trading day period (the "measurement period") in which the trading price (as defined in the 2029
Notes Indenture) per $1,000 principal amount of the 2029 Notes for each trading day of the measurement period was less than 98% of the
product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence
of specified corporate events as described in the 2029 Notes Indenture.

 On or after September 1, 2028 until the close
of business on the second scheduled trading day immediately preceding the maturity date, holders at their option may convert all or any
portion of their 2029 Notes at any time, regardless of the foregoing circumstances. We may not redeem the 2029 Notes prior to the
March 1, 2029 maturity date.

 NOTES

 If we undergo a fundamental change (as defined
in the 2029 Notes Indenture), holders may require us to repurchase for cash all or any portion of their 2029 Notes at a fundamental change
repurchase price equal to 100% of the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest to, but
excluding the fundamental change repurchase date.

 The 2029 Notes Indenture includes customary terms
and covenants, including that upon certain events of default occurring and continuing, if we fail to comply with any of our other agreements
contained in the 2029 Notes or the 2029 Notes Indenture for 60 days after receipt of written notice of such failure from the trustee or
the holders of at least 25% in aggregate principal amount of the outstanding 2029 Notes may declare the entire principal of all the 2029
Notes plus accrued and unpaid interest to be immediately due and payable.

 Capped Call Transactions

 During March 2024, in
connection with our repurchase and payoff of the remaining balance of the 2026 Notes, as further described above, we entered into transactions
to unwind all of our Capped Calls (Note 3). As a result, we received $1.3 million in net proceeds from the unwinding of the Capped Calls.

 Revolving Credit Facility

 On March 12, 2024, we entered into Amendment
No. 2 to the Credit Agreement (Note 3) which, among other things, (i) waives the events of default under the Credit Agreement as a result
of the acceleration of the 2026 Notes, (ii) permits the issuance of the 2029 Notes and the repayment of the 2026 Notes and (iii)
adjusts certain financial covenant in the Credit Agreement.

 NOTES

 Note 12 – Restatement of Previously Reported
Fiscal 2023 Interim Financial Statements (Unaudited)

 The impact from the restatement
described in Note 1 on the line items within our unaudited condensed consolidated financial statements as of and for the three and nine
months ended January 31, 2023 previously filed in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2023 are as follows
(in thousands, except par value and per share information):

 NOTES

 The impact on the line items
within our unaudited condensed consolidated financial statements as of and for the three and nine months ended January 31, 2023 previously
filed in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2023 are as follows (in thousands, except par value and per
share information):

 Schedule of consolidated balance sheet

 As of January 31, 2023

 Condensed Consolidated Balance Sheet

 $
 59,916

 $
 –

 $
 59,916

 14,826

 –

 14,826

 10,388

 –

 10,388

 45,102

 –

 45,102

 Prepaid expenses and other current assets

 2,111

 –

 2,111

 132,343

 –

 132,343

 164,292

 164,410

 34,463

 –

 34,463

 114,580

 114,817

 4,402

 –

 4,402

 –

 $
 450,430

 $

 $
 450,785

 $
 36,392

 $
 –

 $
 36,392

 8,400

 –

 8,400

 37,750

 –

 37,750

 –

 140,359

 140,359

 3,024

 –

 3,024

 1,753

 2,383

 87,319

 140,989

 228,308

 140,359

 ( 140,359
)

 –

 35,659

 –

 35,659

 1,698

 –

 1,698

 265,035

 265,665

 –

 –

 –

 Preferred stock, $0.001 par value; 5,000 shares authorized;

 no shares issued and outstanding at respective dates

 –

 –

 –

 Common stock, $0.001 par value; 150,000 shares authorized; 62,523 and 61,807 shares issued and outstanding at respective dates

 –

 615,841

 –

 615,841

 ( 430,508
)

 ( 275
)

 ( 430,783
)

 185,395

 ( 275
)

 185,120

 $
 450,430

 $

 $
 450,785

 NOTES

 Schedule of consolidated statement of income and comprehensive income

 Three Months Ended January 31, 2023

 Income (Loss) and Comprehensive Income (Loss)

 (as
reported)

 (as
restated)

 $
 38,018

 $
 –

 $
 38,018

 28,193

 –

 28,193

 9,825

 –

 9,825

 7,107

 –

 7,107

 7,107

 –

 7,107

 2,718

 –

 2,718

 ( 620
)

 ( 16
)

 ( 636
)

 –

 2,530

 ( 16
)

 2,514

 Income tax expense

 2,069

 2,761

 Net income (loss)

 $

 $
 ( 708
)

 $
 ( 247
)

 Comprehensive income (loss)

 $

 $
 ( 708
)

 $
 ( 247
)

 Net income (loss) per share:

 Basic

 $
 0.01

 $
)

 $
 ( 0.00
)

 $
 0.01

 $
)

 $
 ( 0.00
)

 Basic

 62,388

 –

 62,388

 63,726

 5,438

 69,164

 Nine Months Ended January 31, 2023

 Income and Comprehensive Income

 $
 109,467

 $
 –

 $
 109,467

 86,378

 –

 86,378

 23,089

 –

 23,089

 20,320

 –

 20,320

 20,320

 –

 20,320

 2,769

 –

 2,769

 ( 1,841
)

 ( 513
)

 ( 2,354
)

 –

 1,555

 ( 513
)

 1,042

 Income tax expense

 ( 238
)

 $

 $
 ( 275
)

 $

 $

 $
 ( 275
)

 $

 Net income per share:

 Basic

 $
 0.01

 $
 –

 $
 0.01

 $
 0.01

 $
 –

 $
 0.01

 Basic

 62,166

 –

 62,166

 63,634

 –

 63,634

 NOTES

 Schedule of condensed consolidated statement of stockholders' equity

 Three Months Ended January 31, 2023

 Total

 Total

 Balances at October 31, 2022

 $
 ( 430,969
)

 $
 181,195

 $

 $
 ( 430,536
)

 $
 181,628

 –

 –

 –

 –

 2,744

 –

 –

 2,744

 Net income (loss)

 ( 708
)

 ( 247
)

 ( 247
)

 Balances at January 31, 2023

 $
 ( 430,508
)

 $
 185,395

 $
 ( 275
)

 $
 ( 430,783
)

 $
 185,120

 Nine Months Ended January 31, 2023

 Total

 Total

 $
)

 $

 $
 –

 $
)

 $

 –

 2,573

 –

 –

 2,573

 –

 7,427

 –

 –

 7,427

 ( 275
)

 Balances at January 31, 2023

 $
 ( 430,508
)

 $
 185,395

 $
 ( 275
)

 $
 ( 430,783
)

 $
 185,120

 NOTES

 Schedule of consolidated statement of cash flows

 Nine Months Ended January 31, 2023

 Cash Flows

 $

 $
 ( 275
)

 $

 Adjustments to reconcile net income to net cash used in operating activities:

 7,427

 –

 7,427

 5,326

 –

 5,326

 Amortization of debt issuance costs

 –

 ( 237
)

 Loss on disposal of property and equipment

 –

 5,721

 –

 5,721

 ( 5,019
)

 –

 ( 5,019
)

 ( 19,040
)

 –

 ( 19,040
)

 ( 7
)

 –

 ( 7
)

 2,904

 –

 2,904

 ( 18
)

 –

 ( 18
)

 ( 16,048
)

 –

 ( 16,048
)

 1,164

 Net cash used in operating activities

 ( 15,686
)

 ( 181
)

 ( 15,867
)

 ( 52,761
)

 ( 52,580
)

 ( 52,761
)

 ( 52,580
)

 2,573

 –

 2,573

 Principal payments on finance lease

 ( 376
)

 –

 ( 376
)

 2,197

 –

 2,197

 Net decrease in cash, cash equivalents and restricted cash

 ( 66,250
)

 –

 ( 66,250
)

 –

 $
 60,266

 –

 $
 60,266

 $

 $

 $

 $

 $
 –

 $

 Supplemental disclosures of investing non-cash activities:

 $
 23,984

 $

 $
 24,283

 NOTES

 The impact from the restatement on the line items within our unaudited
condensed consolidated financial statements as of and for the three and six months ended October 31, 2022 previously filed in our Quarterly
Report on Form 10-Q for the quarter ended October 31, 2022 are as follows (in thousands, except par value and per share information):

 Schedule of consolidated balance sheet

 As of October 31, 2022

 Condensed Consolidated Balance Sheet

 $
 77,292

 $
 –

 $
 77,292

 20,580

 –

 20,580

 6,528

 –

 6,528

 39,061

 –

 39,061

 Prepaid expenses and other current assets

 2,480

 –

 2,480

 145,941

 –

 145,941

 139,386

 ( 49
)

 139,337

 35,373

 –

 35,373

 116,647

 117,577

 4,153

 –

 4,153

 –

 $
 441,850

 $

 $
 442,731

 $
 23,328

 $
 –

 $
 23,328

 6,007

 –

 6,007

 48,446

 –

 48,446

 –

 140,097

 140,097

 3,111

 –

 3,111

 1,485

 1,933

 82,377

 140,545

 222,922

 140,097

 ( 140,097
)

 –

 36,350

 –

 36,350

 1,831

 –

 1,831

 260,655

 261,103

 –

 –

 –

 Preferred
stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding at respective dates

 –

 –

 –

 Common stock, $0.001 par value; 150,000 shares authorized; 62,308 and 61,807 shares issued and outstanding at respective dates

 –

 612,102

 –

 612,102

 ( 430,969
)

 ( 430,536
)

 181,195

 181,628

 $
 441,850

 $

 $
 442,731

 NOTES

 Schedule of consolidated statement of income and comprehensive income

 Three Months Ended October 31, 2022

 Loss and Comprehensive Loss

 $
 34,757

 $
 –

 $
 34,757

 30,610

 –

 30,610

 4,147

 –

 4,147

 6,831

 –

 6,831

 6,831

 –

 6,831

 Operating loss

 ( 2,684
)

 –

 ( 2,684
)

 ( 703
)

 ( 174
)

 ( 877
)

 Other income, net

 –

 Net loss before income taxes

 ( 3,242
)

 ( 174
)

 ( 3,416
)

 Income tax benefit

 ( 2,086
)

 ( 810
)

 ( 2,896
)

 Net loss

 $
 ( 1,156
)

 $

 $
 ( 520
)

 Comprehensive loss

 $
 ( 1,156
)

 $

 $
 ( 520
)

 Net loss per share:

 Basic

 $
 ( 0.02
)

 $
 0.01

 $
)

 $
 ( 0.02
)

 $
 0.01

 $
)

 Basic

 62,204

 –

 62,204

 62,204

 –

 62,204

 Six Months Ended October 31, 2022

 Income and Comprehensive Income

 (as
reported)

 (as
restated)

 $
 71,449

 $
 –

 $
 71,449

 58,185

 –

 58,185

 13,264

 –

 13,264

 13,213

 –

 13,213

 13,213

 –

 13,213

 –

 ( 1,221
)

 ( 497
)

 ( 1,718
)

 Other income, net

 –

 Net loss before income taxes

 ( 975
)

 ( 497
)

 ( 1,472
)

 Income tax benefit

 ( 1,383
)

 ( 930
)

 ( 2,313
)

 $

 $

 $

 $

 $

 $

 Net income per share:

 Basic

 $
 0.01

 $
 –

 $
 0.01

 $
 0.01

 $
)

 $
 ( 0.00
)

 Basic

 62,054

 –

 62,054

 63,574

 6,776

 70,350

 NOTES

 Schedule of condensed consolidated statement of stockholders' equity

 Three Months Ended October 31, 2022

 Total

 Total

 Balances at July 31, 2022

 $
 ( 429,813
)

 $
 178,999

 $
 ( 203
)

 $
 ( 430,016
)

 $
 178,796

 –

 –

 –

 –

 2,786

 –

 –

 2,786

 Net loss

 ( 1,156
)

 ( 1,156
)

 ( 520
)

 ( 520
)

 Balances at October 31, 2022

 $
 ( 430,969
)

 $
 181,195

 $

 $
 ( 430,536
)

 $
 181,628

 Six Months Ended October 31, 2022

 Total

 Total

 $
)

 $

 $
 –

 $
)

 $

 –

 1,578

 –

 –

 1,578

 –

 4,683

 –

 –

 4,683

 Balances at October 31, 2022

 $
 ( 430,969
)

 $
 181,195

 $

 $
 ( 430,536
)

 $
 181,628

 NOTES

 Schedule of consolidated statement of cash flows

 Six Months Ended October 31, 2022

 Cash Flows

 $

 $

 $

 Adjustments to reconcile net income to net cash used in operating activities:

 4,683

 –

 4,683

 3,409

 –

 3,409

 Amortization of debt issuance costs

 –

 ( 1,565
)

 ( 930
)

 ( 2,495
)

 Loss on disposal of property and equipment

 –

 ( 33
)

 –

 ( 33
)

 ( 1,159
)

 –

 ( 1,159
)

 ( 12,999
)

 –

 ( 12,999
)

 ( 127
)

 –

 ( 127
)

 5,346

 –

 5,346

 ( 2,411
)

 –

 ( 2,411
)

 ( 5,352
)

 –

 ( 5,352
)

 Net cash used in operating activities

 ( 8,771
)

 ( 155
)

 ( 8,926
)

 ( 41,432
)

 ( 41,277
)

 ( 41,432
)

 ( 41,277
)

 1,578

 –

 1,578

 Principal payments on finance leases

 ( 249
)

 –

 ( 249
)

 1,329

 –

 1,329

 Net decrease in cash, cash equivalents and restricted cash

 ( 48,874
)

 –

 ( 48,874
)

 –

 $
 77,642

 –

 $
 77,642

 $

 $

 $

 $

 $
 –

 $

 Supplemental disclosures of non-cash activities:

 $
 8,478

 $

 $
 8,584

 NOTES

 In connection with the restatement of the 2023
fiscal period we did correct certain errors for the three-month period ended July 31, 2022 that when aggregated are not material to any
of our previously issued annual or interim financial statements. The effects of the correction of these immaterial errors on the line
items within our unaudited condensed consolidated financial statements as of and for the three months ended July 31, 2022 previously filed
in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2022 are as follows (in thousands, except par value and per share
information):

 Schedule of consolidated balance sheet

 As of July 31, 2022

 Condensed Consolidated Balance Sheet

 (corrections)

 $
 115,137

 $
 –

 $
 115,137

 25,945

 –

 25,945

 7,078

 –

 7,078

 30,354

 –

 30,354

 Prepaid expenses

 2,121

 –

 2,121

 180,635

 –

 180,635

 114,929

 ( 55
)

 114,874

 36,093

 –

 36,093

 114,472

 114,520

 4,740

 –

 4,740

 –

 $
 451,219

 $
 ( 7
)

 $
 451,212

 $
 30,461

 $
 –

 $
 30,461

 5,300

 –

 5,300

 52,775

 –

 52,775

 3,152

 –

 3,152

 1,655

 1,851

 93,343

 93,539

 139,837

 –

 139,837

 37,077

 –

 37,077

 1,963

 –

 1,963

 272,220

 272,416

 Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding at respective dates

 –

 –

 –

 Common stock, $0.001 par value; 150,000 shares authorized; 62,165 and 61,807 shares issued and outstanding at respective dates

 –

 608,750

 –

 608,750

 ( 429,813
)

 ( 203
)

 ( 430,016
)

 178,999

 ( 203
)

 178,796

 $
 451,219

 $
 ( 7
)

 $
 451,212

 NOTES

 Schedule of consolidated statement of income and comprehensive income

 Three Months Ended July 31, 2022

 Income and Comprehensive Income

 (corrections)

 $
 36,692

 $
 –

 $
 36,692

 27,575

 –

 27,575

 9,117

 –

 9,117

 6,382

 –

 6,382

 6,382

 –

 6,382

 2,735

 –

 2,735

 ( 518
)

 ( 323
)

 ( 841
)

 –

 2,267

 ( 323
)

 1,944

 Income tax expense

 ( 120
)

 $
 1,564

 $
 ( 203
)

 $
 1,361

 $
 1,564

 $
 ( 203
)

 $
 1,361

 Net income per share:

 Basic

 $
 0.03

 $
)

 $
 0.02

 $
 0.02

 $
 –

 $
 0.02

 Basic

 61,905

 –

 61,905

 63,333

 –

 63,333

 Schedule of condensed consolidated statement of
 stockholders' equity

 Three Months Ended July 31, 2022

 Total

 Total

 (corrections)

 $
)

 $

 $
 –

 $
)

 $

 –

 1,012

 –

 –

 1,012

 –

 1,897

 –

 –

 1,897

 1,564

 1,564

 ( 203
)

 1,361

 1,361

 Balances at July 31, 2022

 $
 ( 429,813
)

 $
 178,999

 $
 ( 203
)

 $
 ( 430,016
)

 $
 178,796

 NOTES

 Schedule of consolidated statement of cash flows

 Three Months Ended July 31, 2022

 Condensed Consolidated Statement of Cash
 Flows

 (corrections)

 $
 1,564

 $
 ( 203
)

 $
 1,361

 Adjustments to reconcile net income to net cash used in operating activities:

 1,897

 –

 1,897

 1,590

 –

 1,590

 Amortization of debt issuance costs

 –

 ( 48
)

 Loss on disposal of property and equipment

 –

 ( 5,398
)

 –

 ( 5,398
)

 ( 1,709
)

 –

 ( 1,709
)

 ( 4,292
)

 –

 ( 4,292
)

 ( 355
)

 –

 ( 355
)

 4,242

 –

 4,242

 ( 3,118
)

 –

 ( 3,118
)

 ( 1,023
)

 –

 ( 1,023
)

 Net cash used in operating activities

 ( 5,034
)

 ( 55
)

 ( 5,089
)

 ( 6,924
)

 ( 6,869
)

 ( 6,924
)

 ( 6,869
)

 1,012

 –

 1,012

 Principal payments on finance lease

 ( 83
)

 –

 ( 83
)

 –

 Net decrease in cash, cash equivalents and restricted cash

 ( 11,029
)

 –

 ( 11,029
)

 –

 $
 115,487

 $
 –

 $
 115,487

 $

 $
 –

 $

 $

 $
 –

 $

 Supplemental disclosures of non-cash activities:

 $
 16,674

 $
 –

 $
 16,674

 Unpaid financial lease obligation

 $

 $
 –

 $

 Item 9.
 Changes In And Disagreements With Accountants On Accounting
And Financial Disclosures

 None.

 Item 9A.
 Controls And Procedures

 Evaluation of Disclosure Controls and Procedures

 The term "disclosure controls and procedures"
defined in Rule 13a-15(e) under the Exchange Act refers to the controls and other procedures of a company that are designed to ensure
that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized
and reported within the required time periods. In designing and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired
control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of April 30, 2023. Based on that evaluation, our chief executive officer and our
chief financial officer concluded our disclosure controls and procedures were not effective as of April 30, 2023, as a result of the
material weakness described below.

 Management's Report
on Internal Control Over Financial Reporting

 Management is responsible for establishing and
maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial
reporting. The Company's internal control over financial reporting is a process designed, as defined in Rule 13a-15(f) under
the Exchange Act, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with generally accepted accounting principles.

 The Company's internal control over financial
reporting is supported by written policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the Company's assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company's
management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company's assets that could have a material effect on the consolidated financial statements. Because of
its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

 In connection with the preparation of the Company's
annual consolidated financial statements, management of the Company has undertaken an assessment of the effectiveness of the Company's
internal control over financial reporting based on criteria established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework). Management's assessment included an evaluation of the design
of the Company's internal control over financial reporting and testing of the operational effectiveness of the Company's internal
control over financial reporting.

 Based on this assessment, because of the material
weakness described below, management has concluded that the Company's internal control over financial reporting was not effective
as of April 30, 2023.

 A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 Management
identified a material weakness in our internal control over financial reporting related to the lack of an effectively designed
control activity in accounting for debt and related interest. Specifically, our debt internal controls did not include the periodic
review of covenants, acceleration clauses, events of default, and other pertinent information in our debt agreements as of April 30,
2023.

 Our internal control over financial
reporting as of April 30, 2023 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated
in their report included herein.

 Remediation Efforts of
Material Weakness

 Management, under the oversight
of the Audit Committee, has designed the necessary controls to remediate the foregoing material weakness. These controls include the
initial and periodic review of covenants, acceleration clauses, events of default, and other pertinent information in our debt agreements
to enable management to assess whether any of these provisions impact our financial reporting.

 Changes in Internal Control
over Financial Reporting

 Except for the material
weakness described above, Management has determined that, as of April 30, 2023, there were no significant changes in our internal
control over financial reporting during the fourth quarter of the fiscal year ended April 30, 2023 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.

 Report of Independent Registered Public Accounting
Firm

 To the Stockholders and the Board of Directors
of Avid Bioservices, Inc.

 Opinion on Internal Control over Financial
Reporting

 We have audited Avid Bioservices, Inc.'s
internal control over financial reporting as of April 30, 2023, based on criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because
of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Avid Bioservices,
Inc. (the Company) has not maintained effective internal control over financial reporting as of April 30, 2023, based on the COSO criteria.

 In our report dated June 21, 2023, we expressed
an unqualified opinion that the Company maintained, in all material respects, effective internal control over financial reporting as of
April 30, 2023, based on the COSO criteria. Management has subsequently identified a deficiency in controls related to accounting for
debt and related interest, and has further concluded that such deficiency represented a material weakness as of April 30, 2023. As a result,
management has revised its assessment, as presented in the accompanying Management's Report on Internal Control over Financial Reporting;
to conclude that the Company's internal control over financial reporting was not effective as of April 30, 2023. Accordingly, our
present opinion on the effectiveness of internal control over financial reporting as of April 30, 2023, as expressed herein, is different
from that expressed in our previous report.

 A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material
weakness has been identified and included in management's assessment. Management has identified a material weakness in controls
related to accounting for debt and related interest.

 We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Avid
Bioservices, Inc. (the Company) as of April 30, 2023 and 2022, the related consolidated statements of income and comprehensive
income, stockholders' equity and cash flows for each of the three years in the period ended April 30, 2023, and
the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the
"consolidated financial statements"). This material weakness was considered in determining the nature, timing and extent
of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated
June 21, 2023, except for the effects of the restatement disclosed in Note 1, and Note 11 of the consolidated financial statements,
as to which the date is April 24, 2024, which expressed an unqualified opinion on those financial statements.

 Basis for Opinion

 The Company's management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects.

 Our audit included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 Definition and Limitations of Internal Control
Over Financial Reporting

 A company's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial statements.

 Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

 /s/ Ernst & Young LLP

 Irvine, California

 June 21, 2023, except
for the effect of the material weakness described in the third paragraph above, as to which the date
is April 24, 2024

 Item 9B.
 Other Information

 None.

 Item 9C.
 Disclosures regarding foreign jurisdictions that prevent inspections

 None.

 Item 10.
 Directors, Executive Officers And Corporate Governance

 The information required by
this Item regarding our directors, executive officers and committees of our board of directors is incorporated by reference to the information
set forth under the captions, "Election of Directors," "Executive Compensation" and "Corporate Governance"
in our 2023 Definitive Proxy Statement filed with the SEC on August 28, 2023 (the "2023 Definitive Proxy Statement").

 Information required by this
Item regarding our code of ethics is incorporated by reference to the information set forth under the caption, "Corporate Governance"
in our 2023 Definitive Proxy Statement.

 Item 11.
 Executive Compensation

 The information required by
this Item is incorporated by reference to the information set forth under the captions, "Director Compensation," "Compensation
Discussion and Analysis" and "Executive Compensation" in our 2023 Definitive Proxy Statement.

 Item 12.
 Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters

 Other than as set forth below,
the information required by this Item is incorporated by reference to the information set forth under the caption, "Security Ownership
of Certain Beneficial Owners, Directors and Management" in our 2023 Definitive Proxy Statement.

 Equity Compensation Plan
Information

 The following table summarizes our compensation
plans under which our equity securities are authorized for issuance as of April 30, 2023:

 Plan Category

 (a)
 Number of Securities to be Issued Upon the Exercise of Outstanding Options, Warrants and Rights

 (b)
 Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($/share)

 (c)
 Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))

 Equity compensation plans approved by stockholders (1)

 3,926,550

 6.76

 4,411,257

 Employee Stock Purchase Plan approved by stockholders

 –

 –

 963,316

 Total

 3,926,550

 6.76 (2)

 5,374,573

 (1)
 Represents stock options, restricted stock units and performance stock units under our stockholder approved
equity compensation plans referred to as the 2018 Omnibus Incentive Plan, the 2011 Stock Incentive Plan and the 2010 Stock Incentive Plan.

 (2)
 Represents the weighted-average exercise price of outstanding stock options as there are no exercise prices
for restricted stock units and performance stock units.

 Item 13.
 Certain Relationships And Related Transactions, And Director Independence

 The information required by
this Item is incorporated by reference to the information set forth under the captions, "Certain Relationships and Related Transactions,"
"Director Independence" and "Compensation Committee Interlocks and Insider Participation" in our 2023 Definitive
Proxy Statement.

 Item 14.
 Principal Accounting Fees and Services

 The information required by
this Item is incorporated by reference to the information set forth under the caption, "Independent Registered Public Accounting
Firm Fees" in our 2023 Definitive Proxy Statement.

 Item 15.
 Exhibits And Financial Statement Schedules

 (a)
 Documents filed as part of this Amended Report on Form 10-K/A:

 (1)
 Consolidated Financial Statements

 Index to Consolidated Financial Statements

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB ID:
42)

 Consolidated Balance Sheets as of April 30, 2023 and 2022

 Consolidated Statements of Income and Comprehensive Income for each
of the three years in the period ended April 30, 2023

 Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended April 30, 2023

 Consolidated Statements of Cash Flows for each of the three years in
the period ended April 30, 2023

 Notes to Consolidated Financial Statements

 (2)
 Financial
Statement Schedules

 The following schedule is filed
as part of this Amended Report on Form 10-K/A:

 Schedule II – Valuation and Qualifying Accounts for each of the three years in the period ended April 30, 2023

 All other schedules are omitted because they are not applicable or
the required information is included in the consolidated financial statements or notes thereto.

 (3)
 Exhibits

 The exhibits listed in the accompanying
index to exhibits are filed or incorporated by reference as part of this Amended Report on Form 10-K/A.

 Item 16.
 FORM 10-K SUMMARY

 None.

 Schedule II – Valuation and Qualifying
Accounts (in thousands)

 Balance at Beginning of

 Balance at

End of

 Period

 Additions

 Deductions

 Period

 Allowance for doubtful accounts

 Year ended April 30, 2023

 $
 18,392

 $

 $
 (18,392
)

 $

 Year ended April 30, 2022

 $
 –

 $
 21,464

 $
 (3,072
)

 $
 18,392

 Year ended April 30, 2021

 $
 –

 $
 –

 $
 –

 $
 –

 EXHIBIT INDEX

 Incorporated by Reference

 Exhibit

 Number

 Description

 Form

 Date

 Filed

 Exhibit

 Number

 Filed

 Herewith

 2.1

 Agreement and Plan of Merger, dated as of April 30, 2021, by and between Avid SPV, LLC and Avid Bioservices, Inc.

 5/5/2021

 2.1

 3.1

 Restated Certificate of Incorporation, as filed with the Delaware Secretary of State on July 2, 2021

 7/7/2021

 3.1

 3.2

 Certificate of Amendment to Restated Certificate of Incorporation, as filed with the Delaware Secretary of State on October 19, 2022

 10/21/2022

 3.1

 3.2

 Amended and Restated Bylaws

 9/15/2020

 3.2

 4.1

 Indenture, dated as of March 12, 2021, by and among Avid SPV, LLC, Avid Bioservices, Inc. and U.S. Bank National Association, as trustee

 3/12/2021

 4.1

 4.2

 First Supplemental Indenture, dated as of April 30, 2021, by and among Avid SPV, LLC, Avid Bioservices, Inc. and U.S. Bank National Association, as trustee

 5/5/2021

 4.1

 4.3

 Form of Note, between U.S.
 Bank National Association, as trustee and Avid SPV, LLC (included as Exhibit A to 4.1)

 3/12/2021

 4.2

 4.4

 Description of Registrant's Securities

 6/21/2023

 4.4

 10.1*

 2010 Stock Incentive Plan

 8/27/2010

 A

 10.2*

 Form of Stock Option Award Agreement under 2010 Stock Incentive Plan

 S-8

 12/9/2010

 4.17

 10.3*

 2010 Employee Stock Purchase Plan

 8/27/2010

 B

 10.4*

 Amendment to the 2010 Employee Stock Purchase Plan

 8/26/2016

 B

 10.5*

 2011 Stock Incentive Plan

 8/26/2011

 A

 10.6*

 Form of Stock Option Award Agreement under 2011 Stock Incentive Plan

 S-8

 12/12/2011

 4.20

 10.7*

 First Amendment to 2011 Stock Incentive Plan

 8/27/2012

 A

 10.8*

 Second Amendment to 2011 Stock Incentive Plan

 8/26/2013

 A

 10.9*

 Third Amendment to 2011 Stock Incentive Plan

 7/14/2015

 4.24

 10.10*

 Form of Amendment to Stock Option Award Agreement Under 2011 Stock Incentive Plan related to Non-Employee Director stock option awards

 7/14/2015

 4.27

 10.11*

 Fourth Amendment to 2011 Stock Incentive Plan

 8/28/2015

 B

 10.12*

 Avid Bioservices, Inc. 2018 Omnibus Incentive Plan

 8/17/2018

 A

 10.13*

 Form of Stock Option Award Agreement under 2018 Omnibus Incentive Plan

 S-8

 12/10/2018

 4.2

 10.14*

 Form of Restricted Stock Unit Award Agreement under 2018 Omnibus Incentive Plan

 S-8

 12/10/2018

 4.3

 10.15

 Lease and Agreement of Lease between TNCA, LLC, as Landlord, and Avid Bioservices, Inc., as Tenant, dated as of December 24, 1998

 3/12/1999

 10.48

 10.16

 First Amendment to Lease and Agreement of Lease between TNCA, LLC, as Landlord, and Avid Bioservices, Inc., as Tenant, dated December 22, 2005

 12/23/2005

 99.1 99.2

 10.17*

 Amended and Restated Employment Agreement by and between Avid Bioservices, Inc. and Mark R. Ziebell, effective December 27, 2012

 12/27/2012

 10.27

 10.18**

 Asset Assignment and Purchase Agreement by and between Avid Bioservices, Inc. and OncXerna (formerly known as Oncologie, Inc., dated February 12, 2018

 7/16/2018

 10.11

 Incorporated by Reference

 Exhibit

 Number

 Description

 Form

 Date

 Filed

 Exhibit

 Number

 Filed Herewith

 10.19*

 Employment Agreement by and between Avid Bioservices, Inc. and Daniel R. Hart, effective June 26, 2019

 6/27/2019

 10.7

 10.20*

 Amendment to 2010 Employee Stock Purchase Plan

 8/21/2019

 A

 10.21*

 Employment Agreement by and between Avid Bioservices, Inc. and Nicholas S. Green, effective July 30, 2020

 9/1/2020

 10.8

 10.22

 Form of Capped Call Transactions Confirmation

 3/12/2021

 10.1

 10.23*

 Form of Notice of Performance Stock Unit Award under 2018 Omnibus Incentive Plan

 7/14/2021

 10.1

 10.24 *

 First amendment to the Avid Bioservices, Inc. 2018 Omnibus Incentive Plan

 8/27/2021

 A

 10.25 *

 Form of Notice of Performance Stock Unit Award under 2018 Omnibus Incentive
Plan

 7/14/2022

 10.1

 10.26 *

 Executive Severance Plan adopted December 5, 2022

 12/9/2022

 10.1

 10.27

 Credit Agreement, dated as of March 14, 2023, among Avid Bioservices,
Inc., as the Borrower, the Guarantors Party Hereto, the Lenders Party Hereto, and Bank of America, N.A., as Administrative Agent and
L/C Issuer

 3/15/2023

 10.1

 23.1

 Consent of Independent Registered Public Accounting Firm

 X

 Power of Attorney

 6/21/2023

 31.1

 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended

 X

 31.2

 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended

 X

 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350

 X

 101.INS

 X

 101.SCH

 X

 101.CAL

 X

 101.DEF

 X

 101.LAB

 X

 101.PRE

 X

 *

 **

 This Exhibit is a management contract or a
 compensation plan or arrangement.

 Portions omitted pursuant to a request of confidentiality
 filed separately with the SEC.

 SIGNATURE

 Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.

 Date: April 24, 2024

 By:

 /s/ Nicholas S. Green

 Nicholas S. Green,
 President and Chief Executive
Officer

 (Principal Executive Officer)