10q10k10q10k.net

What changed in Sonoma Pharmaceuticals, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Sonoma Pharmaceuticals, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+229 added−224 removedSource: 10-K (2023-06-21) vs 10-K (2022-07-13)

Top changes in Sonoma Pharmaceuticals, Inc.'s 2023 10-K

229 paragraphs added · 224 removed · 177 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

90 edited+38 added−25 removed71 unchanged
Biggest changeThis validation is designed to ensure that the final product is consistently manufactured in accordance with product specifications at all manufacturing sites. Certain materials and components used in manufacturing are proprietary to Sonoma. All other raw materials and supplies utilized in the manufacturing process of our products are available from various third-party suppliers in quantities adequate to meet our needs.
Biggest changeAll other raw materials and supplies utilized in the manufacturing process of our products are available from various third-party suppliers in quantities adequate to meet our needs. 10 We believe we own a sufficient factory space and equipment to produce an adequate amount of product to meet anticipated future requirements for at least the next two years.
Due to its unique chemistry, our wound treatment solution is much more stable than similar products on the market and therefore maintains much higher levels of hypochlorous acid over its shelf life. 3 In the United States, we sell our wound care products directly to hospitals, physicians, nurses, and other healthcare practitioners and indirectly through several non-exclusive distribution arrangements.
Due to its unique chemistry, our wound treatment solution is much more stable than similar products on the market and therefore maintains much higher levels of hypochlorous acid over its shelf life. 3 In the United States, we sell our wound care products directly to hospitals, physicians, nurses, and other healthcare practitioners and indirectly through non-exclusive distribution arrangements.
The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. 18 Health Information Privacy and Security Individually, identifiable health information is subject to an array of federal and state regulation.
The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Health Information Privacy and Security Individually identifiable health information is subject to an array of federal and state regulation.
Although governed by the applicable country, clinical trials conducted outside of the United States typically are administered under a three-phase sequential process similar to that discussed above for medical devices. European Union Regulation Medical Device Regulation Our products are classified as medical devices in the European Union.
Although governed by the applicable country, clinical trials conducted outside of the United States typically are administered under a three-phase sequential process similar to that discussed above for medical devices. 18 European Union Regulation Medical Device Regulation Our products are classified as medical devices in the European Union.
Any future product candidates or new applications classified as medical devices will require clearance by the FDA. 15 Medical devices are subject to FDA clearance and extensive regulation under the Federal Food Drug and Cosmetic Act. Under the Federal Food Drug and Cosmetic Act, medical devices are classified into one of three classes: Class I, Class II or Class III.
Any future product candidates or new applications classified as medical devices will require clearance by the FDA. Medical devices are subject to FDA clearance and extensive regulation under the Federal Food Drug and Cosmetic Act. Under the Federal Food Drug and Cosmetic Act, medical devices are classified into one of three classes: Class I, Class II or Class III.
The European Database for Medical Devices, or Eudamed, will hold and publish information on medical devices collected from the European Commission and the national authorities. 19 Medical devices are divided into three regulatory classes: Class I, Class IIB and Class III. The nature of the conformity assessment procedures depends on the regulatory class of the product.
The European Database for Medical Devices, or Eudamed, will hold and publish information on medical devices collected from the European Commission and the national authorities. Medical devices are divided into three regulatory classes: Class I, Class IIB and Class III. The nature of the conformity assessment procedures depends on the regulatory class of the product.
When fumigated, Nanocyn has demonstrated the ability to kill a wide range of airborne pathogens and significantly reduce the spread of infectious disease. 10 Research and Development Research and development expense consists primarily of expenses for clinical studies, personnel, regulatory services and supplies.
When fumigated, Nanocyn has demonstrated the ability to kill a wide range of airborne pathogens and significantly reduce the spread of infectious disease. Research and Development Research and development expense consists primarily of expenses for clinical studies, personnel, regulatory services and supplies.
Our agreements to pay compensation to our advisory board members and physicians who provide other services for we may be subject to challenge to the extent they do not fall within relevant safe harbors under state and federal anti-kickback laws.
Our agreements to pay compensation to our advisory board members and physicians who provide other services for us may be subject to challenge to the extent they do not fall within relevant safe harbors under state and federal anti-kickback laws.
We may not be able to maintain the requirements established for CE markings for any or all of our products or be able to produce these products in a timely and profitable manner while complying with the requirements of the Medical Devices Directive and other regulatory requirements.
We may not be able to maintain the requirements established for CE markings for any or all of our products or be able to produce these products in a timely and profitable manner while complying with the requirements of the Medical Devices Regulation and other regulatory requirements.
In order to comply with the Medical Devices Directive, we must meet certain requirements relating to the safety and performance of products and, prior to marketing products, we must successfully undergo verification of products’ regulatory compliance, or conformity assessment.
In order to comply with the Medical Devices Regulation, we must meet certain requirements relating to the safety and performance of products and, prior to marketing products, we must successfully undergo verification of products’ regulatory compliance, or conformity assessment.
In order to sell medical device products within the European Union, we are required to comply with the requirements of the Medical Devices Directive, and its national implementations, including affixing CE markings on products.
In order to sell medical device products within the European Union, we are required to comply with the requirements of the Medical Devices Regulation, and its national implementations, including affixing CE markings on products.
We are subject to continued supervision and are required to report any serious adverse incidents to the appropriate authorities. We are also required to comply with additional national requirements that are beyond the scope of the Medical Devices Directive.
We are subject to continued supervision and are required to report any serious adverse incidents to the appropriate authorities. We are also required to comply with additional national requirements that are beyond the scope of the Medical Devices Regulation.
The approval applies to our products MucoClyns™ for human hygiene to be marketed and commercialized by us, MicrocynAH® for animal heath marketed and commercialized through our partner, Petagon Limited, and MicroSafe for disinfectant use to be marketed and commercialized through our partner, MicroSafe Group Dubai.
The approval applies to our products MucoClyns™ for human hygiene to be marketed and commercialized by us, MicrocynAH® for animal heath marketed and commercialized through our partner, Petagon Limited, and MicroSafe for disinfectant use to be marketed and commercialized through our partner, MicroSafe Group DMCC.
Overview We are a global healthcare leader for developing and producing stabilized hypochlorous acid, or HOCl, products for a wide range of applications, including wound care, animal health care, eye care, oral care and dermatological conditions. Our products reduce infections, itch, pain, scarring and harmful inflammatory responses in a safe and effective manner.
Overview We are a global healthcare leader for developing and producing stabilized hypochlorous acid, or HOCl, products for a wide range of applications, including wound care, eye care, oral care, dermatological conditions, podiatry, animal health care and non-toxic disinfectants. Our products reduce infections, itch, pain, scarring and harmful inflammatory responses in a safe and effective manner.
Our core strategy is to work with partners both in the United States and around the world to market and distribute our products. In some cases, we market and sell our own products. Dermatology Sonoma Dermatology has developed unique, differentiated, prescription-strength and safe dermatologic products that support paths to healing among various key dermatologic conditions.
Our core strategy is to work with partners both in the United States and around the world to market and distribute our products. In some cases, we market and sell our own products. 2 Dermatology We have developed unique, differentiated, prescription-strength and safe dermatologic products that support paths to healing among various key dermatologic conditions.
Celacyn® Scar Management Gel, U.S. 510(k) Prescription and OTC product, for the management of old and new hypertrophic and keloid scarring resulting from burns, general surgical procedures and trauma wounds.
Regenacyn® Advanced Scar Gel Regenacyn® Plus Scar Gel Celacyn® Scar Management Gel U.S. 510(k) Prescription and OTC product, for the management of old and new hypertrophic and keloid scarring resulting from burns, general surgical procedures and trauma wounds.
As a prescription product it is intended for the cleansing, irrigation, moistening, debridement and removal of foreign material including microorganisms and debris from exudating wounds, acute and chronic dermal lesions, burns, and other skin irritations. 12 Acuicyn Antimicrobial Eyelid & Eyelash Hygiene U.S. 510(k) Prescription product, Under the supervision of a healthcare professional, Acuicyn Antimicrobial Eyelid & Eyelash Hygiene is intended for the cleansing, irrigation, moistening, debridement and removal of foreign material and debris from exudating wounds, acute and chronic dermal lesions including stage I-IV pressure ulcers, stasis ulcers, diabetic ulcers, post-surgical wounds, first- and second-degree burns, abrasions, minor irritations of the skin, diabetic foot ulcers, ingrown toe nails, grafted/donor sites and exit sites.
Acuicyn Antimicrobial Eyelid & Eyelash Hygiene Ocucyn Antimicrobial Eyelid & Eyelash Hygiene U.S. 510(k) Prescription product, under the supervision of a healthcare professional, intended for the cleansing, irrigation, moistening, debridement and removal of foreign material and debris from exudating wounds, acute and chronic dermal lesions including stage I-IV pressure ulcers, stasis ulcers, diabetic ulcers, post-surgical wounds, first- and second-degree burns, abrasions, minor irritations of the skin, diabetic foot ulcers, ingrown toe nails, grafted/donor sites and exit sites.
HOCl is known to be among the safest and most-effective ways to relieve itch, inflammation and burns while stimulating natural healing through increased oxygenation and eliminating persistent microorganisms and biofilms. We sell our products into many markets both in the U.S. and internationally. In international markets, we ship products to 54 countries.
HOCl is known to be among the safest and most-effective ways to relieve itch, inflammation and burns while stimulating natural healing through increased oxygenation and eliminating persistent microorganisms and biofilms. We sell our products into many markets both in the U.S. and internationally. In international markets, we ship a variety of products to 55 countries.
Unlike many of our competitors, we have been in business for over 20 years, and in that time we have developed significant scientific knowledge of how best to develop and manufacture HOCl products backed by decades of studies and data collection.
We have been in business for over 20 years, and in that time, we have developed significant scientific knowledge of how best to develop and manufacture HOCl products backed by decades of studies and data collection.
Our products are primarily targeted at the treatment of acne, the management of scars and atopic dermatitis. We are strategically focused on introducing innovative new products that are supported by human clinical data with applications that address specific dermatological procedures currently in demand.
Our products are primarily targeted at the treatment of redness and irritation, the management of scars and symptoms of eczema/atopic dermatitis. We are strategically focused on introducing innovative new products that are supported by human clinical data with applications that address specific dermatological procedures currently in demand.
Lasercyn™ Gel U.S. 510(k) Prescription and OTC product, intended for the management of minor skin irritations following post non ablative laser therapy procedures, post microdermabrasion therapy and following superficial chemical peels, and to relieve itch and pain from minor skin irritations, lacerations, abrasions and minor burns.
Rejuvacyn® Advanced Skin Repair Cooling Mist Rejuvacyn® Plus Skin Repair Cooling Mist Lasercyn™ Gel U.S. 510(k) Prescription and OTC product, intended for the management of minor skin irritations following post non ablative laser therapy procedures, post microdermabrasion therapy and following superficial chemical peels, and to relieve itch and pain from minor skin irritations, lacerations, abrasions and minor burns.
It is also intended for use to moisten and lubricate wound dressings and for use with devices intended to irrigate wounds. OTC product, Ocucyn Antimicrobial Eyelid & Eyelash Hygiene is intended for OTC use in the management of skin abrasions, lacerations, minor irritations, cuts, and intact skin.
It is also intended for use to moisten and lubricate wound dressings and for use with devices intended to irrigate wounds. OTC product, intended for OTC use in the management of skin abrasions, lacerations, minor irritations, cuts, and intact skin.
HOCl has been formulated as a disinfectant and sanitizer solution for our partner MicroSafe Group, Dubai, and is sold in numerous countries. It is designed to be used to spray in aerosol format to areas and environments which are suspected to serve as a breeding ground for the spread of infectious disease, likely to result in epidemics or pandemics.
Surface Disinfectants Our HOCl technology has been formulated as a disinfectant and sanitizer solution for our partner MicroSafe and is sold in numerous countries. It is designed to be used to spray in aerosol format in areas and environments likely to serve as a breeding ground for the spread of infectious disease, which could result in epidemics or pandemics.
The medical-grade surface disinfectant solution is used in hospitals worldwide to keep doctors and patients protected and safe. In May 2020, Nanocyn® Disinfectant & Sanitizer, received approval to be entered into the Australian Register of Therapeutic Goods, or ARTG, as well as in Canada, for use against the coronavirus SARS-CoV-2, or COVID-19.
The medical-grade surface disinfectant solution is used in hospitals worldwide to protect doctors and patients. In May 2020, Nanocyn® Disinfectant & Sanitizer received approval to be entered into the Australian Register of Therapeutic Goods, or ARTG for use against the coronavirus SARS-CoV-2, or COVID-19, and was also authorized in Canada for use against COVID-19.
Under the False Claims Act, such suits are known as “qui tam” actions. Individuals may file suit on behalf of the government and share in any amounts received by the government pursuant to a settlement.
Certain violations of the Anti-Kickback Statute constitute per se violations of the False Claims Act. Under the False Claims Act, such suits are known as “qui tam” actions. Individuals may file suit on behalf of the government and share in any amounts received by the government pursuant to a settlement.
Under the license and distribution agreement, Brill has the right to market and distribute our eye care product under the private label Ocudox™ in Italy, Germany, Spain, Portugal, France, and the United Kingdom for a period of 10 years, subject to meeting annual minimum sales quantities.
Under the license and distribution agreement, Brill has the right to market and distribute our eye care product under the private label Ocudox™ in Italy, Germany, Spain, Portugal, France, and the United Kingdom for a period of 10 years, subject to meeting annual minimum sales quantities. In return, Brill paid us a one-time fee, and the agreed upon supply prices.
Surface Disinfectants Through our partner MicroSafe DMCC, Dubai, we sell Nanocyn®. Nanocyn is a hospital-grade disinfectant indicated to sterilize hard surfaces by spraying directly onto the surface, for medical devices by submerging the device in Nanocyn, and also for fumigation into the air.
Our MicrocynVS® line is veterinarian-strength animal care for use in vet clinics and animal hospitals. 9 Surface Disinfectants Through our partner MicroSafe DMCC, Dubai, we sell Nanocyn®. Nanocyn is a hospital-grade disinfectant indicated to sterilize hard surfaces by spraying directly onto the surface, for medical devices by submerging the device in Nanocyn, and also for fumigation into the air.
If the FDA finds that a manufacturer has failed to comply with FDA laws and regulations or that a medical device is ineffective or poses an unreasonable health risk, it can institute or seek a wide variety of enforcement actions and remedies, ranging from a public warning letter to more severe actions such as: · imposing fines, injunctions and civil penalties · requiring a recall or seizure of products · implementing operating restrictions, which can include a partial suspension or total shutdown of production · refusing requests for 510(k) clearance or pre-market approval of new products · withdrawing 510(k) clearance or pre-market approval approvals already granted · criminal prosecution The FDA also has the authority to require a company to repair, replace, or refund the cost of any medical device. 16 The FDA also administers certain controls over the export of medical devices from the United States, as international sales of medical devices that have not received FDA clearance are subject to FDA export requirements.
Although the FDA does not regulate physicians’ practice of medicine, the FDA does regulate manufacturer communications with respect to off-label use. 15 If the FDA finds that a manufacturer has failed to comply with FDA laws and regulations or that a medical device is ineffective or poses an unreasonable health risk, it can institute or seek a wide variety of enforcement actions and remedies, ranging from a public warning letter to more severe actions such as: · imposing fines, injunctions and civil penalties · requiring a recall or seizure of products · implementing operating restrictions, which can include a partial suspension or total shutdown of production · refusing requests for 510(k) clearance or pre-market approval of new products · withdrawing 510(k) clearance or pre-market approval approvals already granted · criminal prosecution The FDA also has the authority to require a company to repair, replace, or refund the cost of any medical device.
In April of 2022, MicroSafe secured the EPA approval for Nanocyn® Disinfectant & Sanitizer, meaning that it can now be sold in the United States as a surface disinfectant, and it was subsequently added to the EPA’s list N for use against COVID-19. We intend to build upon this ground-breaking approval by securing further approvals of this nature.
In April of 2022, MicroSafe secured the EPA approval for Nanocyn® Disinfectant & Sanitizer, meaning that it can now be sold in the United States as a surface disinfectant, and it was subsequently added to the EPA’s list N for use against COVID-19.
In June 2020, we relocated our principal executive offices from 1129 N. McDowell Blvd., Petaluma, California, 94954 to 645 Molly Lane, Suite 150, Woodstock, Georgia, 30189. We have two active wholly-owned subsidiaries: Oculus Technologies of Mexico, S.A. de C.V., and Sonoma Pharmaceuticals Netherlands, B.V. Our fiscal year end is March 31. Our corporate telephone number is (800) 759-9305.
In 2022, we relocated our principal executive offices from 645 Molly Lane, Suite 150, Woodstock, Georgia, 30189 to 5445 Conestoga Court, Suite 150, Boulder, Colorado 80301. We have two active wholly-owned subsidiaries: Oculus Technologies of Mexico, S.A. de C.V., and Sonoma Pharmaceuticals Netherlands, B.V. Our fiscal year end is March 31. Our corporate telephone number is (800) 759-9305.
MucoClyns™ EU CE Mark Indicated for the use in emergencies and safe to use on mucous membranes, cuts, abrasions, burns and body surfaces for the treatment immediately after an unexpected exposure to infection risk, and professional medical attention. Sinudox™ EU CE Mark Solution intended for nasal irrigation, including the moistening of cuts, abrasions and lacerations located in the nasal cavity.
MucoClyns™ EU CE Mark Indicated for the use in emergencies and safe to use on mucous membranes, cuts, abrasions, burns and body surfaces for the treatment immediately after an unexpected exposure to infection risk, and professional medical attention.
In international markets we rely on a network of distribution partners to sell our eye products. On May 19, 2020, we entered into an expanded license and distribution agreement with our existing partner, Brill International S.L. for our Microdacyn60® Eye Care HOCl-based product.
On May 19, 2020, we entered into an expanded license and distribution agreement with our existing partner, Brill International S.L. for our Microdacyn60® Eye Care HOCl-based product.
Levicyn™ SG U.S. 510(k) EU CE Mark Prescription and OTC product, for the management and relief of burning and itching associated with many common types of skin irritation, lacerations, abrasions and minor burns. As a prescription product it also relieves burning and itching and pain associated with various types of dermatoses, including radiation dermatitis and atopic dermatitis.
Levicyn™ SG U.S. 510(k) EU CE Mark Prescription and OTC product, for the management and relief of burning and itching associated with many common types of skin irritation, lacerations, abrasions and minor burns.
Levicyn™ Dermal Spray, Lasercyn™ Dermal Spray U.S. 510(k) Prescription and OTC product, for the management of skin abrasions, lacerations, minor irritations, cuts and intact skin.
Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel Reliefacyn® Plus Itch-Burn-Rash-Pain Relief Hydrogel Levicyn™ Dermal Spray, Lasercyn™ Dermal Spray U.S. 510(k) Prescription and OTC product, for the management of skin abrasions, lacerations, minor irritations, cuts and intact skin.
Animal Health Care MicrocynAH® is a HOCl-based topical product that cleans, debrides and treats a wide spectrum of animal wounds and infections. It is intended for the safe and rapid treatment of a variety of animal afflictions including cuts, burns, lacerations, rashes, hot spots, rain rot, post-surgical sites, pink eye symptoms and wounds to the outer ear of any animal.
It is intended for the safe and rapid treatment of a variety of animal afflictions including cuts, burns, lacerations, rashes, hot spots, rain rot, post-surgical sites, pink eye symptoms and wounds to the outer ear of any animal.
Under the General Health Law, a business that manufactures drugs is either required to obtain a “Sanitary Authorization” or to file an “Operating Notice.” Our Mexican subsidiary, Oculus Technologies of Mexico, S.A. de C.V., is considered a business that manufactures medical devices and therefore is not subject to a Sanitary Authorization, but rather only required to file an Operating Notice.
In addition, a medical device is defined as a device that may contain antiseptics or germicides used in surgical practice or in the treatment of continuity solutions, skin injuries or its attachments. 19 Under the General Health Law, a business that manufactures drugs is either required to obtain a “Sanitary Authorization” or to file an “Operating Notice.” Our Mexican subsidiary, Oculus Technologies of Mexico, S.A. de C.V., is considered a business that manufactures medical devices and therefore is not subject to a Sanitary Authorization, but rather only required to file an Operating Notice.
In the United States, our partner EMC Pharma is selling our prescription-based eye care product through its distribution network. On September 28, 2021, we launched Ocucyn Eyelid & Eyelash Cleanser, which is sold directly to consumers on Amazon.com. Ocucyn Eyelid & Eyelash Cleanser, designed for everyday use, is a safe, gentle, and effective solution for good eyelid & eyelash hygiene.
In the United States, our partner EMC Pharma is selling our prescription-based eye care product through its distribution network. On September 28, 2021, we launched Ocucyn® Eyelid & Eyelash Cleanser, which is sold directly to consumers on Amazon.com, through our online store, and through third party distributors.
In addition, we look for markets where we can provide effective product line extensions and pricing to new product families. In the United States, we partner with EMC Pharma, LLC to sell our prescription products for an initial term of five years, subject to meeting minimum purchase and other requirements.
In addition, we look for markets where we can provide effective product line extensions and pricing to new product families. In the United States, we partner with EMC Pharma, LLC to sell our prescription dermatology products.
We face the risk that the prices which result from the regulatory approval process would be insufficient to generate an acceptable return. 20 Available Information We make available on sonomapharma.com, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as soon as reasonably practicable after electronically filing or furnishing such materials to the Securities and Exchange Commission, or SEC.
Available Information We make available on sonomapharma.com, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as soon as reasonably practicable after electronically filing or furnishing such materials to the Securities and Exchange Commission, or SEC.
For the year ended March 31, 2021, one customer represented 32%, and one customer represented 15% of net revenues. 13 Intellectual Property Our success depends in part on an ability to obtain and maintain proprietary protection for product technology and know-how, to operate without infringing proprietary rights of others, and to prevent others from infringing on our proprietary rights.
Intellectual Property Our success depends in part on an ability to obtain and maintain proprietary protection for product technology and know-how, to operate without infringing proprietary rights of others, and to prevent others from infringing on our proprietary rights.
These side effects include bacterial resistance, stinging, burning and inflammation for topical antibiotics and stretch marks, easy bruising, tearing of the skin and, to a lesser extent, enlarged of blood vessels for topical steroids.
These side effects include bacterial resistance, stinging, burning and inflammation for topical antibiotics and stretch marks, easy bruising, tearing of the skin and, to a lesser extent, enlarged blood vessels for topical steroids. Our HOCl-based products are safe, non-toxic and have shown few side effects in clinical studies.
Manna Pro distributes non-prescription products to national pet-store retail chains, farm animal specialty stores, in the United States and Canada, such as Chewy.com, PetSmart, Tractor Supply, Cabela’s, PetExpress, and Bass Pro Shops. Additionally, we recently expanded our animal health product offerings by adding a MicrocynAH line for felines at PetSmart.
Manna Pro distributes non-prescription products to national pet-store retail chains, farm animal specialty stores, in the United States and Canada, such as Chewy.com, PetSmart, Tractor Supply, Cabela’s, PetExpress, and Bass Pro Shops.
Medical Device Regulation To date, we have received 21 510(k) clearances for use of products as medical devices in tissue care management, such as cleaning, debridement, lubricating, moistening and dressing, including for acute and chronic wounds, and in dermatology applications.
In addition, statutes, rules, regulations and policies may change and new legislation or regulations may be issued that could delay such approvals. 14 Medical Device Regulation To date, we have received 21 510(k) clearances for use of products as medical devices in tissue care management, such as cleaning, debridement, lubricating, moistening and dressing, including for acute and chronic wounds, and in dermatology applications.
On July 31, 2021, we granted MicroSafe the non-exclusive right to sell and distribute Nanocyn in the United States provided that MicroSafe secure U.S. EPA approval.
Through our partner MicroSafe, we sell hard surface disinfectant products into Europe, the Middle East and Australia. 5 On July 31, 2021, we granted MicroSafe the non-exclusive right to sell and distribute Nanocyn in the United States provided that MicroSafe secure U.S. EPA approval.
It does not stain teeth, is non-irritating, non-sensitizing, has no contraindications and is ready for use with no mixing or dilution. 9 Animal Health Care In the United States and internationally, our HOCl-based MicrocynAH® line offers topical solutions designed to relieve the common symptoms of hot spots, scratches, skin rashes post-surgical sites and irritated animal skin and promote expedited healing for all animals.
Animal Health Care In the United States and internationally, our HOCl-based MicrocynAH® line offers topical solutions designed to relieve the common symptoms of hot spots, scratches, skin rashes post-surgical sites and irritated animal skin and promote expedited healing for all animals.
Some of our competitors in the dermatology, wound care, eye, nasal and oral care, animal health care and surface disinfectant markets enjoy several competitive advantages.
We believe our HOCl-based solutions are among the most stable therapeutics available. Some of our competitors in the dermatology, wound care, eye, nasal and oral care, animal health care and surface disinfectant markets enjoy several competitive advantages.
In addition, regulatory approval of prices is required in most countries other than the United States, which could result in lengthy negotiations delaying our ability to commercialize products.
In addition, regulatory approval of prices is required in most countries other than the United States, which could result in lengthy negotiations delaying our ability to commercialize products. We face the risk that the prices which result from the regulatory approval process would be insufficient to generate an acceptable return.
On August 3, 2020, Petagon received a license from the People’s Republic of China for the import of veterinary drug products manufactured by us. This is the highest classification Petagon and Sonoma can receive for animal health products in China. Surface Disinfectants In-vitro and clinical studies of HOCl show it to have impressive antipruritic, antimicrobial, antiviral and anti-inflammatory properties.
On August 3, 2020, Petagon received a license from the People’s Republic of China for the import of veterinary drug products manufactured by us. This is the highest classification Petagon and Sonoma can receive for animal health products in China.
For the years ended March 31, 2022 and 2021, research and development expense amounted to $125,000 and $555,000, respectively. A small percentage of these expenses were borne by our customers. Manufacturing and Packaging Through June 23, 2020, we manufactured products at facilities in Petaluma, California and Zapopan, Mexico.
For the years ended March 31, 2023 and 2022, research and development expense amounted to $207,000 and $125,000, respectively. A small percentage of these expenses were borne by our customers. We manufacture all of our products at our facility in Zapopan, Mexico.
FDA regulations prohibit the advertising and promotion of a medical device for any use outside the scope of a 510(k) clearance or pre-market approval or for unsupported safety or effectiveness claims. Although the FDA does not regulate physicians’ practice of medicine, the FDA does regulate manufacturer communications with respect to off-label use.
FDA regulations prohibit the advertising and promotion of a medical device for any use outside the scope of a 510(k) clearance or pre-market approval or for unsupported safety or effectiveness claims.
Factors Affecting Competitive Position While some other companies are able to produce small molecule, HOCl-based formulations, based on our research, their products may become unstable after a relatively short period of time or have large ranges of effectiveness. We believe our HOCl-based solutions are among the most stable therapeutics available.
Our opportunity in this space relative to antibiotics is based on the insight that competing antibiotic solutions may have resistance-building properties. Factors Affecting Competitive Position While some other companies are able to produce small molecule, HOCl-based formulations, based on our research, their products may become unstable after a relatively short period of time or have large ranges of effectiveness.
Our HOCl-based solutions face significant competition in the United States from prescription products including corticosteroids, topical steroids and topical antibiotics. Our opportunity as an adjunct to these steroids is based on the insight that many doctors and patients limit steroid and antibiotic use due to potential side effects.
Our opportunity as an adjunct to these steroids is based on the insight that many doctors and patients limit steroid and antibiotic use due to potential side effects.
Fraud and Abuse Laws In the United States, we are subject to various federal and state laws pertaining to healthcare fraud and abuse, which, among other things, prohibit the offer or acceptance of remuneration intended to induce or in exchange for the purchase of products or services reimbursed under a federal healthcare program and the submission of false or fraudulent claims with the government.
Even though a new medical product may have been cleared or approved for commercial distribution, we may find limited demand for the product until adequate coverage and reimbursement have been obtained from governmental and other third-party payors. 16 Fraud and Abuse Laws In the United States, we are subject to various federal and state laws pertaining to healthcare fraud and abuse, which, among other things, prohibit the offer or acceptance of remuneration intended to induce or in exchange for the purchase of products or services reimbursed under a federal healthcare program and the submission of false or fraudulent claims with the government.
The process of obtaining these approvals and clearances, and the subsequent process of maintaining substantial compliance with appropriate federal, state, local, and foreign statutes and regulations, require the expenditure of substantial time and financial resources. In addition, statutes, rules, regulations and policies may change and new legislation or regulations may be issued that could delay such approvals.
The process of obtaining these approvals and clearances, and the subsequent process of maintaining substantial compliance with appropriate federal, state, local, and foreign statutes and regulations, require the expenditure of substantial time and financial resources.
Violations of the Anti-Kickback Statute are subject to significant fines and penalties and may lead to a company being excluded from participating in federal health care programs.
Violations of the Anti-Kickback Statute are subject to significant fines and penalties and may lead to a company being excluded from participating in federal health care programs. 17 False Claims Laws The federal False Claims Act prohibits knowingly filing a false claim, knowingly causing the filing of a false claim, or knowingly using false statements to obtain payment from the federal government.
Nanocyn has also met the stringent environmental health and social/ethical criteria of Good Environmental Choice Australia, or GECA, becoming one of the very few eco-certified, all-natural disinfectant solutions in Australia. Through our partner MicroSafe Group DMCC, Dubai, we sell hard surface disinfectant products into the U.S., Europe, the Middle East and Australia.
Nanocyn has also met the stringent environmental health and social/ethical criteria of Good Environmental Choice Australia, or GECA, becoming one of the very few eco-certified, all-natural disinfectant solutions in Australia.
Epicyn™ Antimicrobial Facial Cleanser U.S. 510(k) EU CE Mark Prescription and OTC product, management of skin abrasions, lacerations, minor irritations, cuts and intact skin. As a prescription product it is intended for the cleansing, irrigation, moistening, debridement and removal of foreign material and debris from exudating wounds, first- and second-degree burns and other skin irritations.
As a prescription product it is intended for the cleansing, irrigation, moistening, debridement and removal of foreign material and debris from exudating wounds, first- and second-degree burns and other skin irritations.
Microcyn® is a HOCl-based topical line of products designed to stimulate expedited healing by targeting a wide range of pathogens including viruses, fungi, spores and bacteria, including antibiotic-resistant strains that slow the natural healing of wounds. 8 Eye, Nasal and Oral Care Acuicyn™ Eyelid and Eyelash Hygiene Acuicyn™ offers safe and effective eyelid and eyelash hygiene.
Microcyn® OTC Advanced Wound & Skin Cleanser 7 Microcyn® Wound Care Management for Professional Use Microcyn® offers enhanced healing properties. Microcyn® is a HOCl-based topical line of products designed to stimulate expedited healing by targeting a wide range of pathogens including viruses, fungi, spores and bacteria, including antibiotic-resistant strains that slow the natural healing of wounds.
Manufacturers will be required to engage a medical device expert and carry insurance for possible liability claims. In addition, the pre-market approval and post-market surveillance requirements were enhanced.
Under the new Medical Devices Regulation, certain devices are classified in higher classes, new devices are classified, and certain new obligations are imposed on manufacturers and distributors. Manufacturers are required to engage a medical device expert and carry insurance for possible liability claims. In addition, the pre-market approval and post-market surveillance requirements are enhanced.
Additionally, each foreign country subjects such medical devices to its own regulatory requirements. In the European Union, there is a single regulatory approval process and approval is represented by the presence of a CE marking.
In the European Union, there is a single regulatory approval process and approval is represented by the presence of a CE marking.
In these international markets, we have a network of partners, ranging from country specific distributors to large pharmaceutical companies to full-service sales and marketing companies. We work with our international partners to create products they can market in their home country. Some products we develop and manufacture are private label while others use branding we have already developed.
We work with our international partners to create products they can market in their home country. Some products we develop and manufacture are private label while others use branding we have already developed. We have created or co-developed a wide range of products for international markets using our core HOCl technology.
While compliance with the Compliance Program Guidance materials is voluntary, a California law requires pharmaceutical and devices manufacturers to initiate compliance programs that incorporate the Compliance Program Guidance and the July 2002 Pharmaceuticals Research and Manufacturers of America Code on Interactions with Healthcare Professionals. 17 Due to the scope and breadth of the provisions of some of these laws, it is possible that some of our practices might be challenged by the government under one or more of these laws in the future.
While compliance with the Compliance Program Guidance materials is voluntary, a California law requires pharmaceutical and devices manufacturers to initiate compliance programs that incorporate the Compliance Program Guidance and the July 2002 Pharmaceuticals Research and Manufacturers of America Code on Interactions with Healthcare Professionals.
We sell our products either directly or via partners in 54 countries worldwide. Business Update After two years of restructuring the Company, we are now focused on growing our revenues while maintaining costs. During 2021, we built out our Boulder, Colorado office with new sales and marketing staff.
We sell our products either directly or via partners in 55 countries worldwide. Business Update Over the past three years, we have focused on restructuring Sonoma with the goal of growing our revenues while maintaining costs. During 2022, we consolidated all U.S. operations into our Boulder, Colorado office, including sales, marketing and finance staff.
Business Channels Our core market differentiation is based on being the leading developer and producer of stabilized hypochlorous acid, or HOCl, solutions.
We have an active pipeline of products and we continue to seek new regulatory clearances to expand potential markets we can sell our products into. Business Channels Our core market differentiation is based on being the leading developer and producer of stabilized hypochlorous acid, or HOCl, solutions.
At March 31, 2021, one customer represented 17% of our net accounts receivable balance, one customer represented 16% of our net accounts receivable balance, and one customer represented 14% of our net accounts receivable balance. For the year ended March 31, 2022, one customer represented 10%, one customer represented 17%, and one customer represented 21% of net revenues.
For the year ended March 31, 2023, customer A represented 16%, customer B represented 18% and customer C represented 11% of net revenues. For the year ended March 31, 2022, customer A represented 21%, customer B represented 17%, and customer C represented 10% of net revenues.
On June 24, 2020, we transitioned all of our manufacturing to Zapopan, Mexico and closed our Petaluma facility. We have developed a manufacturing process and conduct quality assurance testing on each production batch in accordance with current U.S., Mexican and international Current Good Manufacturing Practices.
We have developed a manufacturing process and conduct quality assurance testing on each production batch in accordance with current U.S., Mexican and international Current Good Manufacturing Practices. Our facility is required to meet and maintain regulatory standards applicable to the manufacture of pharmaceutical and medical device products and is certified and complies with U.S.
Pursuant to our agreement with EMC Pharma, we manufacture products for EMC Pharma and EMC Pharma markets, sells and distributes them to patients and customers. On September 28, 2021, we launched a new over-the-counter product, Regenacyn® Advanced Scar Gel, which is clinically proven to improve the overall appearance of scars while reducing pain, itch, redness, and inflammation.
On September 28, 2021, we launched a new over-the-counter product, Regenacyn® Advanced Scar Gel, which is clinically proven to improve the overall appearance of scars while reducing pain, itch, redness, and inflammation. On the same day, we launched Regenacyn® Plus, a prescription-strength scar gel which is available as an office dispense product through physician offices.
Sinudox Hypotonic Nasal Hygiene clears and cleans a blocked nose, stuffy nose and sinuses by ancillary ingredients that may have a local antimicrobial effect. Sinudox is sold through Amazon in Europe. In New Zealand and Australia, our partner Te Arai markets our nasal product under their label Nasocyn® Nasal Care.
Sinudox Hypotonic Nasal Hygiene clears and cleans a blocked nose, stuffy nose and sinuses by ancillary ingredients that may have a local antimicrobial effect. Sinudox is currently sold through Amazon in Europe. In other parts of the world, we partner with distributors to sell Sinudox.
Our Mexican facility has been approved by the Ministry of Health and is also ISO 13485 certified. Our machines are tested regularly, which is part of a validation protocol mandated by U.S., Mexican and international Current Good Manufacturing Practices, Quality Systems Regulation, and ISO requirements.
Our machines are tested regularly, which is part of a validation protocol mandated by U.S., Mexican and international Current Good Manufacturing Practices, Quality Systems Regulation, and ISO requirements. This validation is designed to ensure that the final product is consistently manufactured in accordance with product specifications at all manufacturing sites.
Brand Approval Type Summary Indication HOCl-based Products: Lasercyn™ Gel, Levicyn™ Gel U.S. 510(k) EU CE Mark Prescription and OTC product, intended for use to relieve itch and pain from minor skin irritations, lacerations, abrasions and minor burns, such as sunburn. As a prescription product it is also intended for sores, injuries, ulcers of dermal tissue and exuding wounds.
Microcyn® OTC Advanced Wound & Skin Cleanser OTC product for use in the management of skin abrasions, lacerations, minor irritations, cuts and intact skin. Lasercyn™ Gel, Levicyn™ Gel U.S. 510(k) EU CE Mark Prescription and OTC product, intended for use to relieve itch and pain from minor skin irritations, lacerations, abrasions and minor burns, such as sunburn.
Despite any measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of the products or to wrongfully obtain or use information that regarded as proprietary. Competition We compete globally across five main channels: dermatology, eye, nasal and oral care, wound and acute care, animal health and surface disinfectants with our HOCl technology.
Despite any measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of the products or to wrongfully obtain or use information that is regarded as proprietary.
Sebuderm™ U.S. 510(k) EU CE Mark Prescription-only product, manages and relieves the burning, itching, erythema, scaling, and pain experienced with seborrhea and seborrheic dermatitis. It also helps to relieve dry, waxy skin by maintaining a moist wound and skin environment, which is beneficial to the healing process.
As a prescription product it is also intended for sores, injuries, ulcers of dermal tissue and exuding wounds. Sebuderm™ U.S. 510(k) EU CE Mark Prescription-only product, manages and relieves the burning, itching, erythema, scaling, and pain experienced with seborrhea and seborrheic dermatitis.
In return, Brill will pay us a one-time fee, and the agreed upon supply prices. In parts of Asia, Dyamed Biotech markets our eye product under the private label Ocucyn. Oral, Dental and Nasal Care We sell a variety of oral, dental, and nasal products around the world.
In parts of Asia, Dyamed Biotech markets our eye product under the private label Ocucyn. Oral, Dental and Nasal Care We sell a variety of oral, dental, and nasal products around the world. In late 2020, we launched a HOCl-based product in the dental, head and neck markets called Endocyn®, a biocompatible root canal irrigant.
On April 9, 2020, we received an updated EC certificate covering 39 products in 54 countries with various approvals in Brazil, China, Southeast Asia, South Korea, India, Australia, New Zealand, and the Middle East. 11 The following table summarizes our current material regulatory approvals and clearances by brand.
Outside the United States, we sell products for dermatological and advanced tissue care with a European Conformity marking, Conformité Européenne, or CE. On April 9, 2020, we received an updated CE certificate covering 39 products in 54 countries with various approvals in Brazil, China, Southeast Asia, South Korea, India, Australia, New Zealand, and the Middle East.
Microdacyn60® Oral Care Microdacyn60 Oral Care with patented technology supports the treatment of mouth and throat infections and the debridement and moistening of mouth lesions and thrush. This adjuvant solution assists in reducing inflammation, pain, soothing cough relief and does not contain any harmful chemicals.
This adjuvant solution assists in reducing inflammation, pain, soothing cough relief and does not contain any harmful chemicals.
We also have our office dispense products Lasercyn™ Dermal Spray, Lasercyn™ Post Procedure Gel and Regenacyn™ Advanced Scar Management. We also offer Regenacyn Advanced Scar Gel for OTC purchase. Internationally, we offer GramaDerm™ Hydrogel and Solution Combo Pack to assist in the treatment of topical mild to moderate acne, Epicyn™ Scar Management Hydrogel and Pediacyn™ Atopic Dermatitis Hydrogel.
Internationally, we offer GramaDerm™ Hydrogel and Solution Combo Pack to assist in the treatment of topical mild to moderate acne, Epicyn™ Scar Management Hydrogel and Pediacyn™ Atopic Dermatitis Hydrogel. Wound Care In the United States we offer Microcyn® wound and skin care both as an OTC and prescription product.
Dermatology Our dermatology products are at the forefront of HOCl-based solutions, a safe and highly effective active ingredient designed to relieve itching, burning and inflammation and acts as a highly effective antimicrobial agent. We believe no other solutions on the market provide the same patient benefits at the levels of safety and cost.
Competition We compete globally across six main channels: dermatology, eye, nasal and oral care, wound and acute care, podiatry, animal health care and surface disinfectants with our HOCl technology. 13 Dermatology Our dermatology products are at the forefront of HOCl-based solutions, a safe and highly effective active ingredient designed to relieve itching, burning and inflammation and acts as a highly effective antimicrobial agent.
Our HOCl-based solutions compete with topical anti-infectives and antibiotics, as well as some advanced wound technologies, such as skin substitutes, growth factors and delayed release silver-based dressings. Our opportunity in this space relative to antibiotics is based on the insight that competing antibiotic solutions may have resistance-building properties.
Wound and Acute Care Markets Similar to our dermatology products, our HOCl-based wound and acute care solutions provide improved efficacy at lower costs than traditional acute care products. Our HOCl-based solutions compete with topical anti-infectives and antibiotics, as well as some advanced wound technologies, such as skin substitutes, growth factors and delayed release silver-based dressings.
To respond to market demand for our HOCl technology-based products, we launched our first direct to consumer over-the-counter product in the United States in February 2021. Microcyn® OTC Wound and Skin Cleanser is formulated for home use without prescription to help manage and cleanse wounds, minor cuts, and burns, including sunburns and other skin irritations.
Microcyn® OTC Wound and Skin Cleanser is formulated for home use without prescription to help manage and cleanse wounds, minor cuts, and burns, including sunburns and other skin irritations. Microcyn OTC is available without prescription through Amazon.com, our online store and third-party distributors.
They work by first removing foreign material and debris from the skin surface and moistening the skin, thereby improving wound healing. Second, our HOCl products assist in the wound healing process through their antimicrobial properties by removing microorganisms.
First Aid and Wound Care Our HOCl-based wound care products are intended for the treatment of acute and chronic wounds as well as first- and second-degree burns, and as an intraoperative irrigation treatment. They work by first removing foreign material and debris from the skin surface and moistening the skin, thereby improving wound healing.

… 73 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+9 added−10 removed124 unchanged
Biggest changeWe may need to raise additional capital in order to, among other things: · increase our sales and marketing efforts to drive market adoption and address competitive developments; · sustain commercialization of our current products or new products; · acquire or license technologies; · develop new products; · expand our manufacturing capabilities; and · finance capital expenditures and our general and administrative expenses. 32 Our present and future funding requirements will depend on many factors, including: · the level of research and development investment required to maintain and improve our technology position; · cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; · our efforts to acquire or license complementary technologies or acquire complementary businesses; · changes in product development plans needed to address any difficulties in commercialization; · competing technological and market developments; and · changes in regulatory policies or laws that affect our operations.
Biggest changeOur present and future funding requirements will depend on many factors, including: · the level of research and development investment required to maintain and improve our technology position; · cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; · our efforts to acquire or license complementary technologies or acquire complementary businesses; · changes in product development plans needed to address any difficulties in commercialization; · competing technological and market developments; and · changes in regulatory policies or laws that affect our operations.
There may be changes to existing trade agreements, like the, the USMCA, which went to effect on July 1, 2020, greater restrictions on free trade generally, and significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactured in Mexico, among other possible changes.
There may be changes to existing trade agreements, like the USMCA, which went to effect on July 1, 2020, greater restrictions on free trade generally, and significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactured in Mexico, among other possible changes.
The degree of future protection for our proprietary rights is more uncertain in part because legal means afford only limited protection and may not adequately protect our rights, and we will not be able to ensure that: · we were the first to invent the inventions described in patent applications; · we were the first to file patent applications for inventions; · others will not independently develop similar or alternative technologies or duplicate our products without infringing our intellectual property rights; · any patents licensed or issued to us will provide us with any competitive advantages; · we will develop proprietary technologies that are patentable; or · the patents of others will not have an adverse effect on our ability to do business.
The degree of future protection for our proprietary rights is more uncertain in part because legal means afford only limited protection and may not adequately protect our rights, and we will not be able to ensure that: · we were the first to invent the inventions described in patent applications; · we were the first to file patent applications for inventions; · others will not independently develop similar or alternative technologies or duplicate our products without infringing our intellectual property rights; 25 · any patents licensed or issued to us will provide us with any competitive advantages; · we will develop proprietary technologies that are patentable; or · the patents of others will not have an adverse effect on our ability to do business.
These provisions include: · the ability of our Board of Directors to issue and designate, without stockholder approval, the rights of up to 714,286 shares of convertible preferred stock, which rights could be senior to those of common stock; · limitations on persons authorized to call a special meeting of stockholders; and · advance notice procedures required for stockholders to make nominations of candidates for election as directors or to bring matters before meetings of stockholders.
These provisions include: · the ability of our Board of Directors to issue and designate, without stockholder approval, the rights of up to 714,286 shares of convertible preferred stock, which rights could be senior to those of common stock; · limitations on persons authorized to call a special meeting of stockholders; and 33 · advance notice procedures required for stockholders to make nominations of candidates for election as directors or to bring matters before meetings of stockholders.
A failure to obtain adequate funds may cause us to curtail certain operational activities, including regulatory trials, sales and marketing, and international operations, in order to reduce costs and sustain our business, and would have a material adverse effect on our business and financial condition. Our information technology and infrastructure may be breached or attacked.
A failure to obtain adequate funds may cause us to curtail certain operational activities, including regulatory trials, sales and marketing, and international operations, in order to reduce costs and sustain our business, and would have a material adverse effect on our business and financial condition. 31 Our information technology and infrastructure may be breached or attacked.
Any changes to USMCA (or subsequent trade agreements) could impact our operations in countries where we manufacture or sell products or source components, or materials, which could adversely affect our operating results and our business. Our sales in international markets subject us to foreign currency exchange and other risks and costs which could harm our business.
Any changes to USMCA (or subsequent trade agreements) could impact our operations in countries where we manufacture or sell products or source components, or materials, which could adversely affect our operating results and our business. 26 Our sales in international markets subject us to foreign currency exchange and other risks and costs which could harm our business.
At the same time the intercompany interest income in the United States decreases our U.S. net operating losses and reduces our ability to apply these carryforwards to offset future taxable income in the United States. 22 In addition, any interest paid to a foreign lender is subject to Mexico withholding tax of 15%.
At the same time the intercompany interest income in the United States decreases our U.S. net operating losses and reduces our ability to apply these carryforwards to offset future taxable income in the United States. In addition, any interest paid to a foreign lender is subject to Mexico withholding tax of 15%.
A number of factors may affect the market acceptance of our products or any other products we develop or acquire, including, among others: · the price of our products relative to other products for the same or similar treatments; · the perception by patients, physicians and other members of the healthcare community of the effectiveness and safety of our products for their indicated applications and treatments; · changes in practice guidelines and the standard of care for the targeted indication; · our ability to fund our sales and marketing efforts; and · the effectiveness of our sales and marketing efforts or our partners’ sales and marketing efforts. 25 Our ability to effectively promote and sell any approved products will also depend on pricing and cost-effectiveness, including our ability to produce a product at a competitive price and our ability to obtain sufficient third-party coverage or reimbursement, if any.
A number of factors may affect the market acceptance of our products or any other products we develop or acquire, including, among others: · the price of our products relative to other products for the same or similar treatments; · the perception by patients, physicians and other members of the healthcare community of the effectiveness and safety of our products for their indicated applications and treatments; · changes in practice guidelines and the standard of care for the targeted indication; · our ability to fund our sales and marketing efforts; and · the effectiveness of our sales and marketing efforts or our partners’ sales and marketing efforts. 23 Our ability to effectively promote and sell any approved products will also depend on pricing and cost-effectiveness, including our ability to produce a product at a competitive price and our ability to obtain sufficient third-party coverage or reimbursement, if any.
It is impossible to assure you that the market price of our shares of common stock will not fall in the future. 33 Our operating results may fluctuate, which could cause our stock price to decrease. Fluctuations in our operating results may lead to fluctuations, including declines, in our share price.
It is impossible to assure you that the market price of our shares of common stock will not fall in the future. Our operating results may fluctuate, which could cause our stock price to decrease. Fluctuations in our operating results may lead to fluctuations, including declines, in our share price.
We have not purchased insurance on our accounts receivable balances. 26 If we fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the market.
We have not purchased insurance on our accounts receivable balances. If we fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the market.
If we are unable to obtain quality internal and external components, mechanical and electrical parts, if our software contains defects or is corrupted, or if we are unable to attract and retain qualified technicians to manufacture our products, our manufacturing output of HOC1, or any other product candidate based on our platform that we may develop, could fail to meet required standards, our regulatory approvals could be delayed, denied or revoked, and commercialization of one or more of our products may be delayed or foregone.
If we are unable to obtain quality internal and external components, mechanical and electrical parts, if our software contains defects or is corrupted, or if we are unable to attract and retain qualified technicians to manufacture our products, our manufacturing output of HOCl, or any other product candidate based on our platform that we may develop, could fail to meet required standards, our regulatory approvals could be delayed, denied or revoked, and commercialization of one or more of our products may be delayed or foregone.
The sale of our common stock issued or issuable upon the exercise of the warrants and options described above, or the perception that such sales could occur, may adversely affect the market price of our common stock.
The sale of our common stock issued or issuable upon the exercise of the warrants and options described above, or the perception that such sales could occur, may adversely affect the market price of our common stock. 34
If our operations in any foreign country are unsuccessful, we could incur significant losses and we may not achieve profitability. 23 In addition, changes in policies or laws of the United States or foreign governments resulting in, among other things, changes in regulations and the approval process, higher taxation, currency conversion limitations, restrictions on fund transfers or the expropriation of private enterprises, could reduce the anticipated benefits of our international expansion.
If our operations in any foreign country are unsuccessful, we could incur significant losses and we may not achieve profitability. 22 In addition, changes in policies or laws of the United States or foreign governments resulting in, among other things, changes in regulations and the approval process, higher taxation, currency conversion limitations, restrictions on fund transfers or the expropriation of private enterprises, could reduce the anticipated benefits of our international expansion.
Manufacturing processes that are used to produce the smaller quantities of HOC1-based products needed for clinical tests and current commercial sales may not be successfully scaled up to allow production of significant commercial quantities. Any failure to manufacture our products to required standards on a commercial scale could result in reduced revenues, delays in generating revenue and increased costs.
Manufacturing processes that are used to produce the smaller quantities of HOCl-based products needed for clinical tests and current commercial sales may not be successfully scaled up to allow production of significant commercial quantities. Any failure to manufacture our products to required standards on a commercial scale could result in reduced revenues, delays in generating revenue and increased costs.
Our operating results and our share price may fluctuate from period to period due to a variety of factors, including: · demand by physicians, other medical staff and patients for our HOC1-based products; · reimbursement decisions by third-party payors and announcements of those decisions; · clinical trial results published by others in our industry and publication of results in peer-reviewed journals or the presentation at medical conferences; · the inclusion or exclusion of our HOC1-based products in large clinical trials conducted by others; · actual and anticipated fluctuations in our quarterly financial and operating results; · developments or disputes concerning our intellectual property or other proprietary rights; · issues in manufacturing our product candidates or products; · new or less expensive products and services or new technology introduced or offered by our competitors or by us; · the development and commercialization of product enhancements; · changes in the regulatory environment; · delays in establishing our sales force or new strategic relationships; · costs associated with collaborations and new product candidates; · introduction of technological innovations or new commercial products by us or our competitors; · litigation or public concern about the safety of our product candidates or products; · changes in recommendations of securities analysts or lack of analyst coverage; · failure to meet analyst expectations regarding our operating results; · additions or departures of key personnel; and · general market conditions.
Our operating results and our share price may fluctuate from period to period due to a variety of factors, including: · demand by physicians, other medical staff and patients for our HOCl-based products; · reimbursement decisions by third-party payors and announcements of those decisions; · clinical trial results published by others in our industry and publication of results in peer-reviewed journals or the presentation at medical conferences; · the inclusion or exclusion of our HOCl-based products in large clinical trials conducted by others; 32 · actual and anticipated fluctuations in our quarterly financial and operating results; · developments or disputes concerning our intellectual property or other proprietary rights; · issues in manufacturing our product candidates or products; · new or less expensive products and services or new technology introduced or offered by our competitors or by us; · the development and commercialization of product enhancements; · changes in the regulatory environment; · delays in establishing new strategic relationships; · costs associated with collaborations and new product candidates; · introduction of technological innovations or new commercial products by us or our competitors; · litigation or public concern about the safety of our product candidates or products; · changes in recommendations of securities analysts or lack of analyst coverage; · failure to meet analyst expectations regarding our operating results; · additions or departures of key personnel; and · general market conditions.
We currently rely on a combination of patents, patent applications, trademarks, trade secret laws, confidentiality agreements, license agreements and invention assignment agreements to protect our intellectual property rights. We also rely upon unpatented know-how and continuing technological innovation to develop and maintain our competitive position. These measures may not be adequate to safeguard our HOC1 technology.
We currently rely on a combination of patents, patent applications, trademarks, trade secret laws, confidentiality agreements, license agreements and invention assignment agreements to protect our intellectual property rights. We also rely upon unpatented know-how and continuing technological innovation to develop and maintain our competitive position. These measures may not be adequate to safeguard our HOCl technology.
An important element of our business strategy is to enter into collaborative or license arrangements under which we license our HOC1 technology to other parties for development and commercialization. We expect to seek collaborators for our potential products because of the expense, effort and expertise required to conduct clinical trials and further develop those potential product candidates.
An important element of our business strategy is to enter into collaborative or license arrangements under which we license our HOCl technology to other parties for development and commercialization. We expect to seek collaborators for our potential products because of the expense, effort and expertise required to conduct clinical trials and further develop those potential product candidates.
In addition, 982,000 shares of our common stock were available on March 31, 2022 for future option grants under our 2016 Equity Incentive Plan and our 2021 Equity Incentive Plan. To the extent any of these warrants or options are exercised and any additional options are granted and exercised, there will be further dilution to stockholders and investors.
In addition, 982,000 shares of our common stock were available on March 31, 2023 for future option grants under our 2016 Equity Incentive Plan and our 2021 Equity Incentive Plan. To the extent any of these warrants or options are exercised and any additional options are granted and exercised, there will be further dilution to stockholders and investors.
ITEM 1A. Risk Factors Risks Related to Our Business We have a history of losses, we expect to continue to incur losses and we may never achieve profitability and our March 31, 2022 audited consolidated financial statements included disclosure that casts substantial doubt regarding our ability to continue as a going concern.
ITEM 1A. Risk Factors Risks Related to Our Business We have a history of losses, we expect to continue to incur losses and we may never achieve profitability and our March 31, 2023 audited consolidated financial statements included disclosure that casts substantial doubt regarding our ability to continue as a going concern.
There is no guarantee that our Mexican subsidiary will be able to pay any or all of the amounts due. If we were to forgive the debt or if we were to convert the debt to equity, it would be subject to Mexico income tax at 30%, or approximately $11.0 million, as well as Mexican withholding tax of 15%.
There is no guarantee that our Mexican subsidiary will be able to pay any or all of the amounts due. If we were to forgive the debt or if we were to convert the debt to equity, it would be subject to Mexico income tax at 30%, or approximately $10.2 million, as well as Mexican withholding tax of 15%.
We also have interest owed on our intercompany technical assistance agreement and royalty withholding of 10% on our technical assistance agreement. This would amount to approximately $3.9 million in Mexico withholding tax at March 31, 2022, if all of the interest and technical assistance were to be repaid to us.
We also have interest owed on our intercompany technical assistance agreement and royalty withholding of 10% on our technical assistance agreement. This would amount to approximately $4.2 million in Mexico withholding tax at March 31, 2023, if all of the interest and technical assistance were to be repaid to us.
During the years ended March 31, 2022 and 2021, approximately 70% and 71% of our total revenue, respectively, were generated from sales outside of the United States. Our business is highly regulated for the use, marketing and manufacturing of our HOC1-based products both domestically and internationally.
During the years ended March 31, 2023 and 2022, approximately 74% and 70% of our total revenue, respectively, were generated from sales outside of the United States. Our business is highly regulated for the use, marketing and manufacturing of our HOCl-based products both domestically and internationally.
Since 2004, we loaned substantial amounts to our Mexico subsidiary Oculus Technologies of Mexico, S.A. de C.V. at various interest rates to fund their operations. As of March 31, 2022, our Mexico subsidiary owes approximately $11.2 million in principal, $7.3 million in technical assistance payments and $18.3 million in accrued interest. The intercompany loans mature in 2027.
Since 2004, we loaned substantial amounts to our Mexico subsidiary Oculus Technologies of Mexico, S.A. de C.V. at various interest rates to fund their operations. As of March 31, 2023, our Mexico subsidiary owes approximately $12.3 million in principal, $11.1 million in technical assistance payments and $21.8 million in accrued interest. The intercompany loans mature in 2027.
As of March 31, 2022, we had outstanding warrants exercisable for an aggregate of 108,000 shares of our common stock at a weighted average exercise price of approximately $10.33 per share. We also had units convertible into 46,000 shares of common stock at an exercise price of $11.25 per unit.
As of March 31, 2023, we had outstanding warrants exercisable for an aggregate of 104,000 shares of our common stock at a weighted average exercise price of approximately $9.27 per share. We also had units convertible into 46,000 shares of common stock at an exercise price of $11.25 per unit.
Product recalls, product liability claims, even if unmerited or unsuccessful, or any other events that cause consumers to no longer associate our brand with high quality and safe products may also result in adverse publicity, hurt the value of our brand, harm our reputation among our customers and other healthcare professionals who use or recommend the products, lead to a decline in consumer confidence in and demand for our products, and lead to increased scrutiny by federal and state regulatory agencies of our operations, any of which could have a material adverse effect on our brand, business, performance, prospects, value, results of operations and financial condition.
For the same reasons, we may also voluntarily elect to recall, restrict the use of a product or withdraw products that we consider below our standards, whether for quality, packaging, appearance or otherwise, in order to protect our brand reputation. 29 Product recalls, product liability claims, even if unmerited or unsuccessful, or any other events that cause consumers to no longer associate our brand with high quality and safe products may also result in adverse publicity, hurt the value of our brand, harm our reputation among our customers and other healthcare professionals who use or recommend the products, lead to a decline in consumer confidence in and demand for our products, and lead to increased scrutiny by federal and state regulatory agencies of our operations, any of which could have a material adverse effect on our brand, business, performance, prospects, value, results of operations and financial condition.
Our competitors may: · develop and patent processes or products earlier than we will; · develop and commercialize products that are less expensive or more efficient than any products that we may develop; · obtain regulatory approvals for competing products more rapidly than we will; and · improve upon existing technological approaches or develop new or different approaches that render our technology or products obsolete or non-competitive. 29 As a result, we may not be able to successfully commercialize any future products.
Our competitors may: · develop and patent processes or products earlier than we will; · develop and commercialize products that are less expensive or more efficient than any products that we may develop; · obtain regulatory approvals for competing products more rapidly than we will; and · improve upon existing technological approaches or develop new or different approaches that render our technology or products obsolete or non-competitive.
During the years ended March 31, 2022 and 2021, net cash used in operating activities amounted to $4,248,000 and $3,378,000, respectively. As of March 31, 2022, we had cash and cash equivalents of $7,396,000. We spent the most recent two fiscal years working to reduce our losses and have made significant progress.
During the years ended March 31, 2023 and 2022, net cash used in operating activities amounted to $6,152,000 and $4,248,000, respectively. As of March 31, 2023, we had cash and cash equivalents of $3,820,000. We spent the most recent years working to reduce our losses and have made significant progress.
In addition, as of March 31, 2022, options to purchase an aggregate of 466,000 shares of our common stock were outstanding at a weighted average exercise price of $12.09 per share and a weighted average contractual term of 8.89 years.
In addition, as of March 31, 2023, options to purchase an aggregate of 565,000 shares of our common stock were outstanding at a weighted average exercise price of $8.84 per share and a weighted average contractual term of 8.41 years.
Although we have a significant number of customers in each of the geographic markets that we operate in, we rely on certain key customers for a significant portion of our revenues. For the year ended March 31, 2022 one customer represented 21%, one customer represented 17%, and one customer represented 10% of net revenues.
Although we have a significant number of customers in each of the geographic markets that we operate in, we rely on certain key customers for a significant portion of our revenues. For the year ended March 31, 2023, customer A represented 16%, customer B represented 18% and customer C represented 11% of net revenues.
The exercise of the options and warrants will dilute the voting interest of the owners of presently outstanding shares by adding a substantial number of additional shares of our common stock. 35 We have filed several registration statements with the SEC, so that substantially all of the shares of our common stock which are issuable upon the exercise of outstanding warrants and options may be sold in the public market.
We have filed several registration statements with the SEC, so that substantially all of the shares of our common stock which are issuable upon the exercise of outstanding warrants and options may be sold in the public market.
Our Company, our products, the manufacturing facilities for our products, the distribution of our products, and our promotion and marketing materials are subject to strict and continual review and periodic inspection by the FDA and other regulatory agencies for compliance with pre-approval and post-approval regulatory requirements. 31 If we fail to comply with the FDA’s rules and regulations, we could be subject to an enforcement action by the FDA.
Our Company, our products, the manufacturing facilities for our products, the distribution of our products, and our promotion and marketing materials are subject to strict and continual review and periodic inspection by the FDA and other regulatory agencies for compliance with pre-approval and post-approval regulatory requirements.
The success of our research and development efforts may depend on our ability to find suitable collaborators to fully exploit our capabilities. If we are unable to establish collaborations or if these future collaborations are unsuccessful, our research and development efforts may be unsuccessful, which could adversely affect our results of operations and financial condition.
If we are unable to establish collaborations or if these future collaborations are unsuccessful, our research and development efforts may be unsuccessful, which could adversely affect our results of operations and financial condition.
The loss of any of these customers could adversely affect our revenues. Negative economic conditions increase the risk that we could suffer unrecoverable losses on our customers’ accounts receivable which would adversely affect our financial results. We grant credit to our business customers, which are primarily located in Mexico, Europe and the United States.
Negative economic conditions increase the risk that we could suffer unrecoverable losses on our customers’ accounts receivable which would adversely affect our financial results. We grant credit to our business customers, which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for trade receivables. We maintain allowances for potential credit losses.
Our inability to raise additional capital on acceptable terms in the future may cause us to curtail certain operational activities, including regulatory trials, sales and marketing, and international operations, in order to reduce costs and sustain the business, and such inability would have a material adverse effect on our business and financial condition.
If the number of consumers substituting our products increases, it could have a material adverse effect on sales of our products by our partners, and therefore, our revenues, financial position, cash flows and results of operations. 30 Our inability to raise additional capital on acceptable terms in the future may cause us to curtail certain operational activities, including regulatory trials, sales and marketing, and international operations, in order to reduce costs and sustain the business, and such inability would have a material adverse effect on our business and financial condition.
Parties making infringement claims on future issued patents may be able to obtain an injunction that would prevent us from selling our products or using technology that contains the allegedly infringing intellectual property, which could harm our business. 28 We could be required to indemnify third parties for alleged intellectual property infringement, which could cause us to incur significant costs.
Also, we may be unaware of pending patent applications that relate to our technology. Parties making infringement claims on future issued patents may be able to obtain an injunction that would prevent us from selling our products or using technology that contains the allegedly infringing intellectual property, which could harm our business.
Our corporate documents and Delaware law contain provisions that limit the ability of stockholders to change our management and may also enable our management to resist a takeover.
Anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law may make it more difficult for stockholders to change our management and may also make a takeover difficult. Our corporate documents and Delaware law contain provisions that limit the ability of stockholders to change our management and may also enable our management to resist a takeover.
We reported a loss from continuing operations of $5,086,000 and $4,615,000 for the years ended March 31, 2022 and 2021, respectively. At March 31, 2022 and 2021, our accumulated deficit amounted to $184,363,000 and $179,277,000, respectively. We had working capital of $10,611,000 and $8,905,000 as of March 31, 2022 and 2021, respectively.
We reported a net loss of $5,151,000 and $5,086,000 for the years ended March 31, 2023 and 2022, respectively. At March 31, 2023 and 2022, our accumulated deficit amounted to $189,514,000 and $184,363,000, respectively. We had working capital of $10,081,000 and $10,611,000 as of March 31, 2023 and 2022, respectively.
If we are forced to indemnify for claims or to pay license fees, our business and financial condition could be substantially harmed. Our international operations are subject to trade policies and trade agreements and unfavorable changes could harm our business. We have significant international operations in Mexico and Europe, and we manufacture products for export in Mexico.
Our international operations are subject to trade policies and trade agreements and unfavorable changes could harm our business. We have significant international operations in Mexico and Europe, and we manufacture products for export in Mexico.
In addition, if there is a change in law, regulation or administrative or judicial interpretations of these laws, we may have to change our business practices or our existing business practices could be challenged as unlawful, which could have a negative effect on our business, financial condition and results of operations. 30 Healthcare fraud and abuse laws are complex, and even minor, inadvertent irregularities can potentially give rise to claims that a statute or regulation has been violated.
In addition, if there is a change in law, regulation or administrative or judicial interpretations of these laws, we may have to change our business practices or our existing business practices could be challenged as unlawful, which could have a negative effect on our business, financial condition and results of operations.
The subsequent discovery of previously unknown problems with HOC1, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of our products, and could include voluntary or mandatory recall or withdrawal of products from the market.
The subsequent discovery of previously unknown problems with HOCl, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of our products, and could include voluntary or mandatory recall or withdrawal of products from the market. 24 New government regulations may be enacted and changes in FDA policies and regulations and, their interpretation and enforcement, could prevent or delay regulatory approval of our products.
These measures could cause significant delays in our efforts to further commercialize our products, which are critical to the realization of our business plan and to our future operations. These matters raise substantial doubt about our ability to continue as a going concern or become profitable.
These measures could cause significant delays in our efforts to further commercialize our products, which are critical to the realization of our business plan and to our future operations.
Any such failure to pay intercompany debt, inability to deduct income taxes or apply credits, or liability for tax payments could have a material adverse effect on our business, financial condition, and results of operations.
Any such failure to pay intercompany debt, inability to deduct income taxes or apply credits, or liability for tax payments could have a material adverse effect on our business, financial condition, and results of operations. 21 We rely on a number of key customers who may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.
If we do not protect our rights adequately, third parties could use our technology, and our ability to compete in the market would be reduced. 27 Our pending patent applications and any patent applications we may file in the future may not result in issued patents, and we do not know whether any of our in-licensed patents or any additional patents that might ultimately be issued by the U.S.
Our pending patent applications and any patent applications we may file in the future may not result in issued patents, and we do not know whether any of our in-licensed patents or any additional patents that might ultimately be issued by the U.S. Patent and Trademark Office or foreign regulatory body will protect our HOCl technology.
A successful claim against us with respect to uninsured liabilities or in excess of insurance coverage and not subject to any indemnification or contribution could have a material adverse effect on our future business, financial condition, and results of operations.
A successful claim against us with respect to uninsured liabilities or in excess of insurance coverage and not subject to any indemnification or contribution could have a material adverse effect on our future business, financial condition, and results of operations. 28 If any of our third-party contractors fail to perform their responsibilities to comply with FDA rules and regulations, the manufacture, marketing and sales of our products could be delayed, which could decrease our revenues.
For the year ended March 31, 2021, one customer represented 32%, and one customer represented 15% of net revenues. In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent period.
For the year ended March 31, 2022, customer A represented 21%, customer B represented 17%, and customer C represented 10% of net revenues. In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period.
In addition, The Nasdaq Capital Market, in general, and the market for life sciences companies, in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. 34 Anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law may make it more difficult for stockholders to change our management and may also make a takeover difficult.
In addition, The Nasdaq Capital Market, in general, and the market for life sciences companies, in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
As a result, our success depends partially on the success of these third parties in performing their responsibilities to comply with FDA rules and regulations.
Supplying the market with our HOCl technology products requires us to manage relationships with an increasing number of collaborative partners, suppliers and third-party contractors. As a result, our success depends partially on the success of these third parties in performing their responsibilities to comply with FDA rules and regulations.
New government regulations may be enacted and changes in FDA policies and regulations and, their interpretation and enforcement, could prevent or delay regulatory approval of our products. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
Even issued patents may later be found to be invalid or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts.
Any claims that are issued may not be sufficiently broad to prevent third parties from producing competing substitutes and may be infringed, designed around, or invalidated by third parties. Even issued patents may later be found to be invalid or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts.
In order for any of these collaboration or license arrangements to be successful, we must first identify potential collaborators or licensees whose capabilities complement and integrate well with ours.
If we are unable to establish collaborative agreements, we may not be able to develop and commercialize new products, which would adversely affect our business and our revenues. 27 In order for any of these collaboration or license arrangements to be successful, we must first identify potential collaborators or licensees whose capabilities complement and integrate well with ours.
Some of our distribution agreements contain commitments to indemnify our distributors against liability arising from infringement of third-party intellectual property, such as patents. We may be required to indemnify our customers for claims made against them or to contribute to license fees they are required to pay.
We could be required to indemnify third parties for alleged intellectual property infringement, which could cause us to incur significant costs. Some of our distribution agreements contain commitments to indemnify our distributors against liability arising from infringement of third-party intellectual property, such as patents.
Alternatively, potential collaborators may decide against entering into an agreement with us because of our financial, regulatory or intellectual property position or for scientific, commercial or other reasons. If we are unable to establish collaborative agreements, we may not be able to develop and commercialize new products, which would adversely affect our business and our revenues.
Alternatively, potential collaborators may decide against entering into an agreement with us because of our financial, regulatory or intellectual property position or for scientific, commercial or other reasons.
If we are unable to increase our sales to replace the outgoing Invekra revenues, our results of operations and financial condition may be adversely affected. 21 We depend on third party distributors and intend to continue to license or collaborate with third parties in various potential markets, and events involving these strategic partners or any future collaboration could delay or prevent us from developing or commercializing products.
These matters raise substantial doubt about our ability to continue as a going concern or become profitable. 20 We depend on third party distributors and intend to continue to license or collaborate with third parties in various potential markets, and events involving these strategic partners or any future collaboration could delay or prevent us from developing or commercializing products.
If the number of consumers substituting our products increases, it could have a material adverse effect on sales of our products by our partners, and therefore, our revenues, financial position, cash flows and results of operations. 24 If we fail to obtain, or experience significant delays in obtaining, additional regulatory clearances or approvals to market our current or future products, we may be unable to commercialize these products.
If we fail to realize the anticipated revenue growth of our future international operations, our business and operating results could suffer. If we fail to obtain, or experience significant delays in obtaining, additional regulatory clearances or approvals to market our current or future products, we may be unable to commercialize these products.
Collateral is generally not required for trade receivables. We maintain allowances for potential credit losses. At March 31, 2022, one customer represented 20% of the Company’s net accounts receivable balance, one customer represented 15% of the Company’s net accounts receivable balance, and one customer represented 14% of the Company’s net accounts receivable balance.
At March 31, 2023, customer A represented 22% of our net accounts receivable balance and customer D represented 21% of our net accounts receivable balance. At March 31, 2022, customer B represented 20% of our net accounts receivable balance, customer D represented 15% of our net accounts receivable balance, and customer E represented 14% of our net accounts receivable balance.
Governmental authorities can also require product recalls or impose restrictions for product design, manufacturing, labeling, clearance, or other issues. For the same reasons, we may also voluntarily elect to recall, restrict the use of a product or withdraw products that we consider below our standards, whether for quality, packaging, appearance or otherwise, in order to protect our brand reputation.
Governmental authorities can also require product recalls or impose restrictions for product design, manufacturing, labeling, clearance, or other issues.
We rely on a number of key customers who may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.
These customers may not consistently purchase our products at a particular rate over any subsequent period. The loss of any of these customers could adversely affect our revenues.
Removed
We derived a significant amount of revenue from our contract with Invekra during the fiscal years ended March 31, 2022 and 2021, and our revenues from Invekra will decline following the transition of Invekra towards their own manufacturing.
Added
If we do not protect our rights adequately, third parties could use our technology, and our ability to compete in the market would be reduced.
Removed
Our revenues from our Latin American business that we sold to Invekra on October 27, 2016 were $2,095,000 and $5,876,000 for the years ended March 31, 2022 and 2021, respectively. Most of the revenues from fiscal year 2021 were from orders prior to the ending of our transition agreement with Invekra on October, 27, 2020.
Added
We may be required to indemnify our customers for claims made against them or to contribute to license fees they are required to pay. If we are forced to indemnify for claims or to pay license fees, our business and financial condition could be substantially harmed.
Removed
Our arrangement with Invekra required us to supply product at close to our cost until October 2020 while Invekra built their own manufacturing. Since then, our revenues related to Invekra declined because we only process overflow orders for Invekra. We may continue to manufacture for Invekra at prices commensurate with the market.
Added
As a result, we may not be able to successfully commercialize any future products. The success of our research and development efforts may depend on our ability to find suitable collaborators to fully exploit our capabilities.
Removed
We expect that our overall revenues from Invekra will decrease while our margins, if any, will increase.
Added
Healthcare fraud and abuse laws are complex, and even minor, inadvertent irregularities can potentially give rise to claims that a statute or regulation has been violated.
Removed
If we fail to realize the anticipated revenue growth of our future international operations, our business and operating results could suffer.
Added
If we fail to comply with the FDA’s rules and regulations, we could be subject to an enforcement action by the FDA.
Removed
Currently, none of our products are reimbursed by federal healthcare programs, such as Medicare and Medicaid, and we do not anticipate that they will be reimbursed by such programs in the future.
Added
We may need to raise additional capital in order to, among other things: · increase our sales and marketing efforts to drive market adoption and address competitive developments; · sustain commercialization of our current products or new products; · acquire or license technologies; · develop new products; · expand our manufacturing capabilities; and · finance capital expenditures and our general and administrative expenses.
Removed
At March 31, 2021, three customers each and individually represented more than 10% of net accounts receivable balance.
Added
Our cash and cash equivalents may be exposed to failure of our banking institutions. We maintain our cash at financial institutions, in balances that exceed current FDIC insurance limits. On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation was appointed receiver of SVB.
Removed
Patent and Trademark Office or foreign regulatory body will protect our HOC1 technology. Any claims that are issued may not be sufficiently broad to prevent third parties from producing competing substitutes and may be infringed, designed around, or invalidated by third parties.
Added
While none of our cash and cash equivalents was held at SVB, if the banks where we hold deposits were to become insolvent or enter receivership, our ability to access our cash, cash equivalents and investments, including transferring funds, making payments or receiving funds, may be threatened, and this could have a material adverse effect on our business and financial condition.
Removed
Also, we may be unaware of pending patent applications that relate to our technology.
Added
The exercise of the options and warrants will dilute the voting interest of the owners of presently outstanding shares by adding a substantial number of additional shares of our common stock.
Removed
If any of our third-party contractors fail to perform their responsibilities to comply with FDA rules and regulations, the manufacture, marketing and sales of our products could be delayed, which could decrease our revenues. Supplying the market with our HOC1 technology products requires us to manage relationships with an increasing number of collaborative partners, suppliers and third-party contractors.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeWe currently lease the following material properties: Location Rent per month Purpose 360 Molly Lane, Suite 150, Woodstock, GA 30189 USD 5,507 Principal executive office 5445 Conestoga Court, Unit 150, Boulder, CO 80301 USD 3,680 Offices Industria Vidriera 81, & 87 Zapopan Industrial Norte, Zapopan, Jalisco, 45135, Mexico MXN 173,063 Office, manufacturing Industria Maderera 124, 106, 115 & 815 Zapopan Industrial Norte, Zapopan, Jalisco, 45135, Mexico MXN 191,036 Warehouse We believe that our properties will be adequate to meet our needs for at least the next 12 months.
Biggest changeWe currently lease the following material properties: Location Rent per month Purpose 5445 Conestoga Court, Unit 150, Boulder, CO 80301 USD 3,790 Principal executive office Industria Vidriera 81, & 87 Zapopan Industrial Norte, Zapopan, Jalisco, 45135, Mexico MXN 173,063 Office, manufacturing Industria Maderera 124, 106, 115 & 815 Zapopan Industrial Norte, Zapopan, Jalisco, 45135, Mexico MXN 191,036 Warehouse We believe that our properties will be adequate to meet our needs for at least the next 12 months.
ITEM 2. Properties At March 31, 2022, we have a corporate office in Woodstock, Georgia, an office in Boulder, Colorado for our sales and marketing team, and our manufacturing facility in Zapopan, Mexico.
ITEM 2. Properties At March 31, 2023, we have a corporate office in Boulder, Colorado and our manufacturing facility in Zapopan, Mexico.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed3 unchanged
Biggest changeHolders As of July 11, 2022, we had approximately 298 holders of record of our common stock. Holders of record include nominees who may hold shares on behalf of multiple owners. Dividends We have never declared or paid any cash dividends on our common stock.
Biggest changeHolders As of June 12, 2023, we had approximately 301 holders of record of our common stock. Holders of record include nominees who may hold shares on behalf of multiple owners. Dividends We have never declared or paid any cash dividends on our common stock.
Recent Sales of Unregistered Securities We did not issue any unregistered securities during the year ended March 31, 2022 and through July 11, 2022.
Recent Sales of Unregistered Securities We did not issue any unregistered securities during the year ended March 31, 2023 and through June 12, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

25 edited+5 added−12 removed8 unchanged
Biggest changeThe operations of the Micromed business included in discontinued operations is summarized as follows: Year ended March 31, 2022 2021 Revenues $ – $ 214,000 Cost of revenues – 53,000 Selling general and administrative expenses – 38,000 Income from discontinued operations before tax – 123,000 Gain on disposal of discontinued operations before income taxes – 770,000 Total income from discontinued operating, before tax – 893,000 Income Tax benefit (expense) – (228,000 ) Income from discontinued operations, net of tax $ – $ 665,000 Gain on disposal of discontinued operations for the year ended March 31, 2021, includes $770,000 of gain primarily from the value of the customer base of Micromed partially offset by a working capital adjustment. 40 Net Loss The following table provides the net loss for each period along with the computation of basic and diluted net income per share: For the Year Ended March 31, (In thousands, except per share data) 2022 2021 Numerator: Loss from continuing operations $ (5,086 ) $ (4,615 ) Income from discontinued operations – 665 Net loss $ (5,086 ) $ (3,950 ) Denominator: Weighted-average number of common shares outstanding: basic and diluted 2,653 1,996 Loss per share from continuing operations $ (1.92 ) $ (2.31 ) Income per share from discontinued operations – 0.33 Net loss per share: basic and diluted $ (1.92 ) $ (1.97 ) Liquidity and Capital Resources We reported a net loss of $5,086,000 and $3,950,000 for the years ended March 31, 2022 and 2021, respectively.
Biggest changeNet Loss The following table provides the net loss for each period along with the computation of basic and diluted net income per share: For the Year Ended March 31, (In thousands, except per share data) 2023 2022 Net loss $ (5,151 ) $ (5,086 ) Weighted-average shares outstanding: basic and diluted 3,394 2,653 Net loss per share: basic and diluted $ (1.52 ) $ (1.92 ) Liquidity and Capital Resources We reported a net loss of $5,151,000 and $5,086,000 for the years ended March 31, 2023 and 2022, respectively.
We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements. 37 On an ongoing basis, we evaluate our estimates and judgments.
We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements. 36 On an ongoing basis, we evaluate our estimates and judgments.
Capital Expenditures We currently forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently do not anticipate that a material amount will be purchased for the year ended March 31, 2023.
Capital Expenditures We currently forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently do not anticipate that a material amount will be purchased for the year ended March 31, 2024.
Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates. For a Summary of Critical Accounting Policies, please refer to Notes to Consolidated Financial Statements, Note 3.
Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates. For a Summary of all Accounting Policies, please refer to Notes to Consolidated Financial Statements, Note 3.
Interest (Expense) Income, net Interest (expense) income, net was $(10,000) and $4,000, respectively, for the years ended March 31, 2022 and March 31, 2021. 39 Forgiveness of PPP loan On May 1, 2020, we received loan proceeds in the amount of $1,310,000 under the Paycheck Protection Program (“PPP”), from Coastal States Bank in Atlanta, Georgia.
Interest (Expense) Income, net Interest (expense) income, net was $16,000 and $(10,000), respectively, for the years ended March 31, 2023 and March 31, 2022. 38 Forgiveness of PPP loan On May 1, 2020, we received loan proceeds in the amount of $1,310,000 under the Paycheck Protection Program, from Coastal States Bank in Atlanta, Georgia.
At March 31, 2022 and 2021, our accumulated deficit amounted to $184,363,000 and $179,277,000, respectively. As of March 31, 2022, we had cash and cash equivalents of $7,396,000 compared to $4,220,000 on March 31, 2021. Since our inception, substantially all of our operations have been financed through sales of equity securities.
At March 31, 2023 and 2022, our accumulated deficit amounted to $189,514,000 and $184,363,000, respectively. As of March 31, 2023, we had cash and cash equivalents of $3,820,000 compared to $7,396,000 on March 31, 2022. Since our inception, substantially all of our operations have been financed through sales of equity securities.
Management believes that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, we cannot provide any assurance that new financing will be available on commercially acceptable terms, if at all. If the economic climate in the U.S. deteriorates, our ability to raise additional capital could be negatively impacted.
We cannot provide any assurances that we will be able to raise additional capital. Management believes that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, we cannot provide any assurance that new financing will be available on commercially acceptable terms, if at all.
If we are unable to secure additional capital, we may be required to take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations.
If the economic climate in the U.S. deteriorates, our ability to raise additional capital could be negatively impacted. If we are unable to secure additional capital, we may be required to take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations.
Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
We also closely monitor overall economic conditions and consumer sentiment and the prospect of a recession in the United States which may impact our financial results. 41 Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
Currently, most of our customers pay for shipping expenses, including increased shipping costs, if any. We have not yet faced labor shortages however it is possible we may have difficulties retaining and finding qualified employees in a tight labor market in the future. Furthermore, overall inflation tendencies may put pressure on our product pricing and/or costs.
We continue to evaluate our end-to-end supply chain and assess opportunities to refine the impact on sales. Currently, most of our customers pay for shipping expenses, including increased shipping costs, if any. We have not yet faced labor shortages however it is possible we may have difficulties retaining and finding qualified employees in a tight labor market in the future.
Net cash used in operating activities during the year ended March 31, 2021 was $3,378,000, primarily due to a net loss of $3,950,000 for the period. Net cash used in investing activities for the year ended March 31, 2022 was $99,000, primarily related to the purchase of property and equipment.
Net cash used in investing activities for the year ended March 31, 2023 was $258,000, primarily related to the purchase of capital property and equipment. Net cash used in investing activities for the year ended March 31, 2022 was $99,000, primarily related to the purchase of property and equipment.
Net cash provided by financing activities for the year ended March 31, 2022 was $7,396,000 primarily related to proceeds of $7,554,000 from the sale of common stock on our At-the-Market facility with HC Wainwright, proceeds of $216,000 from the exercise of stock options and warrants, partially offset by the payments on PPP loan and long term debt.
Net cash provided by financing activities for the year ended March 31, 2022 was $7,396,000 primarily related to proceeds of $7,554,000 from the sale of common stock on our At-the-Market facility with HC Wainwright and proceeds of $216,000 from the exercise of stock options and warrants, partially offset by the payments on PPP loan and long term debt. 40 We expect revenues to fluctuate and may incur losses in the foreseeable future and may need to raise additional capital to pursue our product development initiatives, to penetrate markets for the sale of our products and continue as a going concern.
We used the loan amount for eligible purposes, such as payroll expenses. For the year ended March 31, 2022, we received approval for loan forgiveness in the amount of $723,000. Other Expense, net Other expense, net for the year ended March 31, 2022 and 2021, was $394,000 and $594,000, respectively.
We used the loan amount for eligible purposes, such as payroll expenses. For the year ended March 31, 2022, we received approval for loan forgiveness in the amount of $723,000. The remainder was not forgiven as a result of a decline in headount.
Most recently there has been a sharp decline in the Euro versus the US Dollar which has impacted our financial results. 42 As we have previously discussed in our annual report on Form 10-K filed with the SEC on July 14, 2021, we face a substantial Mexico tax liability, intercompany debt, unpaid technical assistance charges and accrued interest.
As we have previously discussed in our annual report on Form 10-K filed with the SEC on July 14, 2022, we face a substantial Mexico tax liability, intercompany debt, unpaid technical assistance charges and accrued interest. These amounts are not due until 2027.
Since April 1, 2021, substantially all of our operations have been financed through the following transactions: · Proceeds of $7,554,000 from sales on the ATM facility with HC Wainwright; and · Proceeds of $217,000 from the exercise of stock options and warrants The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the year ended March 31, 2022 and 2021 as well balances of cash and cash equivalents and working capital: Year ended March 31, (In thousands) 2022 2021 Net cash provided by (used in): Operating activities $ (4,248 ) $ (3,378 ) Investing activities (99 ) 388 Financing activities 7,396 3,308 Effect of exchange rates on cash 127 211 Net change in cash and cash equivalents 3,176 529 Cash and cash equivalents, beginning of the period 4,220 3,691 Cash and cash equivalents, end of the period $ 7,396 $ 4,220 Working capital (1) , end of period $ 10,611 $ 8,905 (1) Defined as current assets minus current liabilities. 41 As of March 31, 2022, we had cash and cash equivalents of $7,396,000 compared to $4,220,000 as of March 31, 2021.
The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the year ended March 31, 2023 and 2022 as well balances of cash and cash equivalents and working capital: Year ended March 31, (In thousands) 2023 2022 Net cash provided by (used in): Operating activities $ (6,152 ) $ (4,248 ) Investing activities (258 ) (99 ) Financing activities 2,489 7,396 Effect of exchange rates on cash 345 127 Net change in cash and cash equivalents (3,576 ) 3,176 Cash and cash equivalents, beginning of the period 7,396 4,220 Cash and cash equivalents, end of the period $ 3,820 $ 7,396 Working capital (1) , end of period $ 10,081 $ 10,611 (1) Defined as current assets minus current liabilities.
These amounts are not due until 2027. At this time, management believes there are sufficient assets on the balance sheet to more than cover any tax obligation without interrupting the Company’s operations or business.
At this time, management believes there are sufficient assets on the balance sheet to more than cover any tax obligation without interrupting the Company’s operations or business. We have engaged tax professionals to review all options to limit our exposure to these amounts and to proceed in a manner that is most advantageous to the Company.
The decrease in other expense, net relates primarily to a reduction in foreign exchange losses. Gain on Sale of Assets For the year ended March 31, 2022, we sold equipment for a gain of $150,000. Gain on the sale of assets for the year ended March 31, 2021 was $137,000.
Gain on Sale of Assets For the year ended March 31, 2023, we sold equipment for a gain of $1,000 compared to a gain of $150,000 in the year ended March 31, 2022. Income Tax Benefit (Expense) Income tax benefit (expense) for the year ended March 31, 2023 was $33,000 compared to $332,000 for the year ended March 31, 2022.
Selling, General and Administrative Expense The selling, general and administrative expense metrics are as follows: Year ended March 31, (In thousands, except for percentages) 2022 2021 Change % Change Selling, General and Administrative Expense $ 9,755 $ 9,453 $ 302 3% Selling, General and Administrative Expense as a % of Revenue 77% 50% 27% The increase in Selling, General and Administrative expense for the year ended March 31, 2022 was primarily the result of an increase in our insurance premiums.
Selling, General and Administrative Expense The selling, general and administrative expense metrics are as follows: Year ended March 31, (In thousands, except for percentages) 2023 2022 Change % Change Selling, General and Administrative Expense $ 8,840 $ 9,755 $ (915 ) (9)% Selling, General and Administrative Expense as a % of Revenue 67% 77% The decrease in Selling, General and Administrative expense for the year ended March 31, 2023 was primarily the result tight control of expenses across all categories and consolidating our U.S. operations into one office.
Research and Development Expense The research and development metrics are as follows: Year ended March 31, (In thousands, except for percentages) 2022 2021 Change % Change Research and Development Expense $ 125 $ 555 $ (430 ) (77)% Research and Development Expense as a % of Revenue 1% 3% (2)% For the year ended March 31, 2022, research and development expenses decreased as a result the closure of our research and development facility in Seattle, Washington and its relocation to our facility in Mexico.
Research and Development Expense The research and development metrics are as follows: Year ended March 31, (In thousands, except for percentages) 2023 2022 Change % Change Research and Development Expense $ 207 $ 125 $ 82 66% Research and Development Expense as a % of Revenue 2% 1% 1% For the year ended March 31, 2023, research and development expenses increased due to higher clinical trial expense and seeking third party certification of our products.
Results of Continuing Operations Comparison of the Year Ended March 31, 2022 and 2021 Revenue The following table shows our consolidated total revenue and revenue by geographic region for the year ended March 31, 2022 and 2021: Years Ended March 31, (In thousands) 2022 2021 $ Change % Change United States $ 3,807 $ 5,419 $ (1,612 ) (30% ) Latin America 2,095 5,976 (3,881 ) (65% ) Europe and Rest of the World 6,726 7,234 (508 ) (7% ) Total $ 12,628 $ 18,629 $ (6,001 ) (32% ) The decrease in United States revenues for the year ended March 31, 2022 compared to the same period in the prior year of $1.6 million, is primarily the result of our transition from a direct sales force to a distributor model for our dermatology and eye care prescription products in the United States.
Results of Continuing Operations Comparison of the Year Ended March 31, 2023 and 2022 Revenue The following table shows our consolidated total revenue and revenue by geographic region for the year ended March 31, 2023 and 2022: Years Ended March 31, (In thousands) 2023 2022 $ Change % Change United States $ 3,428 $ 3,807 $ (379 ) (10)% Europe 4,051 3,410 641 19% Asia 2,451 2,350 101 4% Latin America 2,383 2,095 288 14% Rest of the World 959 966 (7 ) (1)% Total $ 13,272 $ 12,628 $ 644 5% The decrease in United States revenues for the year ended March 31, 2023 compared to the prior year of $0.4 million is primarily the result of softening demand for our over-the-counter animal health care products, partially offset by increases in our over-the-counter eye and dermatology products.
Net cash provided by financing activities for the year ended March 31, 2021 was $3,308,000, primarily related to proceeds from the exercise of stock options and warrants of $2,287,000, and PPP loans of $1,310,000 partially offset by payments on long term debt.
Net cash provided by financing activities for the year ended March 31, 2023 was $2,489,000 primarily related to related to proceeds of $2,868,000 from the sale of common stock on our At-the-Market facility with Ladenburg Thalmann & Co. Inc. and proceeds of $515,000 from short-term notes, offset by payments on PPP loan and short-term notes.
Other sources of financing that we have used to date include our revenues, as well as various loans and the sale of certain assets to Invekra, Petagon, MicroSafe and Infinity Labs.
Other sources of financing that we have used to date include our revenues, as well as various loans and the sale of certain assets to Invekra, Petagon and MicroSafe. 39 Since April 1, 2022, substantially all of our operations have been financed through cash on hand and the following transaction: · Proceeds of $2,868,000 from the sale of common stock on our At-the-Market facility with Ladenburg Thalmann & Co.
At this time, the overall impact of these issues has been minimal. The potential impact to our business operations, customer demand and supply chain due to increased shipping costs may ultimately impact sales. We continue to evaluate our end-to-end supply chain and assess opportunities to refine the impact on sales.
The effects of the recent pandemic continue to impact economies worldwide, and we are closely watching inflation, increased volatility within financial markets, shipping costs, supply chain issues and labor costs. Any impact to our business operations, customer demand and supply chain due to increased shipping costs may ultimately impact sales.
Cost of Revenue and Gross Profit The cost of revenue and gross profit metrics are as follows: Year ended March 31, (In thousands, except for percentages) 2022 2021 Change % Change Cost of Revenue $ 8,635 $ 12,070 $ (3,435 ) (28)% Cost of Revenue as a % of Revenue 68% 65% 3% Gross Profit $ 3,993 $ 6,559 $ (2,566 ) (39)% Gross Profit as a % of Revenue 32% 35% (3)% The gross margin decrease of 3% for the year ended March 31, 2022 compared to the year ended March 31, 2021 is a result of product mix and higher sales to distributors versus sales through our direct sales force.
The increase in Latin America revenue was primarily the result of service revenue from selling machinery to a customer for $750,000, which management expects to be a one-time event, partially offset by a decline in manufacturing for one of our customers. 37 Cost of Revenue and Gross Profit The cost of revenue and gross profit metrics are as follows: Year ended March 31, (In thousands, except for percentages) 2023 2022 Change % Change Cost of Revenue $ 8,795 $ 8,635 $ 160 2% Cost of Revenue as a % of Revenue 66% 68% (2)% Gross Profit $ 4,477 $ 3,993 $ 484 12% Gross Profit as a % of Revenue 34% 32% 2% The gross margin increase of 2% for the year ended March 31, 2023 compared to the year ended March 31, 2022 is related to greater factory efficiency resulting from higher volumes of product sold and product mix.
If we purchase capital equipment, we expect to pay cash for those expenditures or to finance them through equipment leases. Material Trends and Uncertainties We are exposed to risk from decline in foreign currency for both the Euro and the Mexico Peso versus the US dollar.
If we purchase capital equipment, we expect to pay cash for those expenditures or to finance them through equipment leases. Material Trends and Uncertainties We rely on certain key customers for a significant portion of our revenues. In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period.
Removed
Under the old direct sales model, our revenues were higher due to higher retail pricing than what we agreed to with the distributors. However, our operating expenses are also much lower under this new arrangement as we do not have to manage a sales force, provide patient rebates or manage product substitutions. Revenue for our animal health products declined slightly.
Added
Revenue for wound care products increased 10% from the prior year. Our revenues in Europe increased 19% as a result of bringing on new distributors and a increase in orders from existing distributors. Our revenues in Asia increased slightly due to higher demand, and Rest of the World revenues were relatively flat.
Removed
Revenue for wound care products increased 19% from the prior year. As a result of the asset purchase agreement and arrangement we entered into on October 27, 2016 with Invekra,with our assistance Invekra built up their own manufacturing of HOCl products and we manufactured products for Invekra at cost during the transition time.
Added
Other Expense, net Other expense, net for the year ended March 31, 2023 and 2022, was $631,000 and $394,000, respectively. The increase in other expense, net relates primarily to a increase in foreign exchange losses.
Removed
Invekra began their own manufacturing in November 2020. As we previously disclosed, we expected our revenues to decline following the transition of Invekra towards their own manufacturing. Since November 2020, we continue to process overflow orders for Invekra but we do so at market prices and at lower volumes.
Added
As of March 31, 2023, we had cash and cash equivalents of $3,820,000 compared to $7,396,000 as of March 31, 2022. Net cash used in operating activities during the year ended March 31, 2023 was $6,152,000, primarily due to net loss of $5,151,000 and a decline in deferred revenue.
Removed
As a result of the foregoing, Latin America revenue declined by $3.9 million during the year ended March 31, 2022 compared to the year ended March 31, 2021. 38 The decrease in Europe and Rest of the World revenues for the year ended March 31, 2022 compared to the prior year was primarily the result of decreases in disinfectant sales in the Middle East due to the pandemic receding and to a lesser extent a slight decline in European sales.
Added
These customers may not consistently purchase our products at a particular rate over any subsequent period. We are exposed to risk from decline in foreign currency for both the Euro and the Mexico Peso versus the US dollar. Most recently there has been a sharp decline in the Euro versus the U.S. Dollar which has impacted our financial results.
Removed
We sold fixed assets no longer needed after closing our Petaluma manufacturing facility. Income Tax Benefit (Expense) Income tax benefit (expense) for the year ended March 31, 2022 was $332,000 compared to $(713,000) for the year ended March 31, 2021.
Added
Furthermore, overall inflation tendencies may put pressure on our product pricing and/or costs.
Removed
The increase in income tax benefit is the result of the reversal of the valuation allowance for Mexico as the result of three years of taxable income. Net Loss from Continuing Operations Net loss from continuing operations for the year ended March 31, 2022 and 2021, was $5,086,000 and $4,615,000, respectively.
Removed
Results of Discontinued Operations Comparison of Year ended March 31, 2022 and 2021 On June 24, 2020, we closed on an asset purchase agreement with Infinity Labs SD, Inc. We decided to divest our Micromed business, resulting in a strategic shift that had a major effect on our operations and financial results.
Removed
Therefore, the divested Micromed operations meet the criteria to be reported as discontinued operations. The related assets, liabilities, results of operations and cash flows for our Micromed business are classified as discontinued operations for all periods presented.
Removed
Net cash provided by investing activities for the year ended March 31, 2021 was $388,000, primarily related to the proceeds from the sale of our Micromed division of $610,000 partially offset by the purchase of equipment.
Removed
We expect revenues to fluctuate and may incur losses in the foreseeable future and may need to raise additional capital to pursue our product development initiatives, to penetrate markets for the sale of our products and continue as a going concern. We cannot provide any assurances that we will be able to raise additional capital.
Removed
We have engaged tax professionals to review all options to limit our exposure to these amounts and to proceed in a manner that is most advantageous to the Company. As the pandemic continues to impact economies worldwide, we are closely watching inflation, increased volatility within financial markets, shipping costs, supply chain issues and labor costs.
Removed
We also closely monitor overall economic conditions and consumer sentiment and the prospect of a recession in the United States which may impact our financial results.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item. 43
Biggest changeITEM 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Other SNOA 10-K year-over-year comparisons