10q10k10q10k.net

What changed in Sonoma Pharmaceuticals, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Sonoma Pharmaceuticals, Inc.'s 2023 and 2024 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 2024 report.

+203 added−198 removedSource: 10-K (2024-06-17) vs 10-K (2023-06-21)

Top changes in Sonoma Pharmaceuticals, Inc.'s 2024 10-K

203 paragraphs added · 198 removed · 163 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

84 edited+16 added−21 removed94 unchanged
Biggest changeCompetition 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.
Biggest changeDermatology Our dermatology products are at the forefront of HOCl-based solutions, a safe and highly effective active ingredient designed to relieve itching and burning and act 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.
In June 2022, the EPA added Nanocyn to List Q as a disinfectant for Emerging Viral Pathogens, including Ebola virus, Mpox, and SARS-CoV-2, and in March 2023 added Nanocyn to Lists G and H, for use against Methicillin Resistant Staphylococcus Aureus (MRSA), Salmonella, Norovirus, Poliovirus, and as a fungicide.
In June 2022, the EPA added Nanocyn to List Q as a disinfectant for Emerging Viral Pathogens, including Ebola virus, Mpox, and SARS-CoV-2, and in March 2023 the EPA added Nanocyn to Lists G and H, for use against Methicillin Resistant Staphylococcus Aureus (MRSA), Salmonella, Norovirus, Poliovirus, and as a fungicide.
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.
Acuicyn 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.
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.
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.
Sonomapharma.com and the information contained therein or connected thereto are not intended to be incorporated into this annual report on Form 10-K. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Sonomapharma.com and the information contained therein or connected thereto are not intended to be incorporated into this annual report on Form 10-K. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. 20
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.
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 We have developed unique, differentiated, prescription-strength and safe dermatologic products that support paths to healing among various key dermatologic conditions.
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.
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.
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.
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.
Unclassified devices are legally marketed pre-amendment devices for which a classification regulation has yet to be finalized and for which a pre-market approval is not required. Class I devices are devices for which safety and effectiveness can be assured by adherence to a set of general controls.
Unclassified devices are legally marketed pre-amendment devices for which a classification regulation has yet to be finalized and for which a pre-market approval is not required. 15 Class I devices are devices for which safety and effectiveness can be assured by adherence to a set of general controls.
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.
In addition, we look for markets where we can provide effective product line extensions and pricing to new product families. 2 In the United States, we partner with EMC Pharma, LLC to sell our prescription dermatology products.
On October 27, 2022, we launched two new over-the-counter dermatology products in the United States, Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel for the alleviation of red bumps, rashes, shallow skin fissures, peeling, and symptoms of eczema/atopic dermatitis, and Rejuvacyn® Advanced Skin Repair Cooling Mist for management of minor skin irritations following cosmetic procedures as well as daily skin health and hydration.
In October 2022, we launched two new over-the-counter dermatology products in the United States, Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel for the alleviation of red bumps, rashes, shallow skin fissures, peeling, and symptoms of eczema/atopic dermatitis, and Rejuvacyn® Advanced Skin Repair Cooling Mist for management of minor skin irritations following cosmetic procedures as well as daily skin health and hydration.
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.
Due to its unique chemistry, our wound treatment solution is also much more stable than similar products on the market and therefore maintains much higher levels of hypochlorous acid over its shelf life. 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.
Regenacyn® Plus is a prescription-strength scar gel which is available as an office dispense product through dermatology practices and medical spas. Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel and Reliefacyn® Plus Itch-Burn-Rash-Pain Relief Hydrogel Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel is intended for the alleviation of red bumps, rashes, shallow skin fissures, peeling, and symptoms of eczema/atopic dermatitis.
Regenacyn® Plus is a prescription-strength scar gel which is available as an office dispense product through dermatology practices and medical spas. 6 Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel and Reliefacyn® Plus Itch-Burn-Rash-Pain Relief Hydrogel Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel is intended for the alleviation of red bumps, rashes, shallow skin fissures, sunburn, peeling, and symptoms of eczema/atopic dermatitis.
As a prescription product it also relieves burning and itching and pain associated with various types of dermatoses, including radiation dermatitis and atopic dermatitis. 11 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 also relieves burning and itching and pain associated with various types of dermatoses, including radiation dermatitis and atopic dermatitis. 12 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.
Pursuant to our agreement with EMC Pharma, we manufacture products for EMC Pharma and EMC Pharma has the right to market, sell and distribute them to patients and customers for an initial term of five years, subject to meeting minimum purchase and other requirements.
Pursuant to our March 2021 agreement with EMC Pharma, we manufacture products for EMC Pharma and EMC Pharma has the right to market, sell and distribute them to patients and customers for an initial term of five years, subject to meeting minimum purchase and other requirements.
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.
In August 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.
Sinudox™ EU CE Mark Solution intended for nasal irrigation, including the moistening of cuts, abrasions and lacerations located in the nasal cavity. 12 Significant Customers We rely on certain key customers for a significant portion of revenues.
Sinudox™ EU CE Mark Solution intended for nasal irrigation, including the moistening of cuts, abrasions and lacerations located in the nasal cavity. 13 Significant Customers We rely on certain key customers for a significant portion of revenues.
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.
In September 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 and redness. On the same day, we launched Regenacyn® Plus, a prescription-strength scar gel which is available as an office dispense product through physician offices.
On August 2, 2022, we announced the launch of a MicrocynVS® line of products exclusively for veterinarians for the management of wound, skin, ear and eye afflictions in all animal species.
In August 2022, we announced the launch of a MicrocynVS ® line of products exclusively for veterinarians for the management of wound, skin, ear and eye afflictions in all animal species.
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.
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 expenses consist primarily of expenses for clinical studies, personnel, regulatory services and supplies.
For the Asian and European markets, on May 20, 2019, we partnered with Petagon, Limited, an international importer and distributor of quality pet food and products for an initial term of five years. We supply Petagon with all MicrocynAH products sold by Petagon.
For the Asian and European markets, in May 2019 we partnered with Petagon an international importer and distributor of quality pet food and products for an initial term of five years. We supply Petagon with all MicrocynAH products sold by Petagon.
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.
For the years ended March 31, 2024 and 2023, research and development expense amounted to $1,871,000 and $207,000, respectively. A small percentage of these expenses were borne by our customers. We manufacture all of our products at our facility in Zapopan, Mexico.
In Europe, we sell our wound care products through a diverse network of distributors. 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.
In Europe, the Middle East and Asia, we sell our wound care products through a diverse network of distributors. 3 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.
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.
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 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.
Our revenues have grown as a result of adding new customers and distributors, and organic growth from existing customers and distributors.
Our human care revenues have grown as a result of adding new customers and distributors, and through organic growth from existing customers and distributors.
Products Our products are all classified as medical devices and categorized as prescription, over-the-counter (OTC), and office dispense products. Below are some of our key products that we either sell through our own efforts or through partnership agreements.
We believe relations with employees are very good. Products Our products are all classified as medical devices and categorized as prescription, over-the-counter (OTC) and office dispense products. Below are some of our key products that we either sell through our own efforts or through partnership agreements.
Dermatology In the United States, we offer Regenacyn Advanced Scar Gel, Reliefacyn Advanced Itch-Burn-Rash-Pain Relief Hydrogel, and Rejuvacyn Advanced Skin Repair Cooling Mist for OTC purchase, and Regenacyn Plus Scar Gel, Reliefacyn Plus Itch-Burn-Rash-Pain Relief Hydrogel, and Rejuvacyn Plus Skin Repair Cooling Mist for office dispense.
Dermatology In the United States, we offer Lumacyn Clarifying Mist, Regenacyn Advanced Scar Gel and Reliefacyn Advanced Itch-Burn-Rash-Pain Relief Hydrogel for OTC purchase, and Regenacyn Plus Scar Gel and Reliefacyn Plus Itch-Burn-Rash-Pain Relief Hydrogel for office dispense.
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. 9 Our MicrocynVS® line is veterinarian-strength animal care for use in vet clinics and animal hospitals.
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 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.
Other Regulation in the United States The Physician Payments Sunshine Act The Physician Payments Sunshine Act signed into law in 2010 as part of the Affordable Care Act requires manufacturers of medical devices, drugs, biologicals, and medical supplies to track and report certain payments made to and transfers of value provided to physicians and teaching hospitals as well as to report certain ownership and investment interests held by physicians and their immediate family members.
In the European Union, there is a single regulatory approval process and approval is represented by the presence of a CE marking. 16 Other Regulation in the United States The Physician Payments Sunshine Act The Physician Payments Sunshine Act signed into law in 2010 as part of the Affordable Care Act requires manufacturers of medical devices, drugs, biologicals, and medical supplies to track and report certain payments made to and transfers of value provided to physicians and teaching hospitals as well as to report certain ownership and investment interests held by physicians and their immediate family members.
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.
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.
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.
For the year ended March 31, 2024, customer A represented 17%, customer B represented 15% and customer C represented 14% of net revenues. For the year ended March 31, 2023, customer A represented 11%, customer B represented 16% and customer C represented 18% of net revenues.
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.
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.
Endocyn Root Canal Irrigation Solution U.S.510(k) Endocyn Root Canal Irrigation Solution is intended to irrigate, cleanse, and debride root canal systems including the removal of foreign material and debris during root canal therapy. It is also intended to provide for lubrication and irrigation during root canal instrumentation.
It is also intended for use to moisten and lubricate wound dressings and for use with devices intended to irrigate wounds. Endocyn Root Canal Irrigation Solution U.S. 510(k) Endocyn Root Canal Irrigation Solution is intended to irrigate, cleanse, and debride root canal systems including the removal of foreign material and debris during root canal therapy.
With expansion into new geographic markets, we may establish additional manufacturing facilities to better serve those new markets. U.S. Regulatory Approvals and Clearances To date, we have obtained 21 U.S. Food and Drug Administration, or FDA, clearances permitting the sale of products as medical devices for Section 510(k) of the Federal Food, Drug and Cosmetic Act in the United States.
Regulatory Approvals and Clearances To date, in the United States we have obtained 21 U.S. Food and Drug Administration, or FDA, clearances permitting the sale of products as medical devices for Section 510(k) of the Federal Food, Drug and Cosmetic Act.
The intraoperative pulse lavage container is designed to be used in combination with a pulse lavage irrigation device, or flush gun, for abdominal, laparoscopic, orthopedic, and periprosthetic procedures. It is expected to be ready for commercial use in Europe in September 2023, and we anticipate commercial launch in the U.S. in 2024.
The intraoperative pulse lavage container is designed to be used in combination with a pulse lavage irrigation device, or flush gun, for abdominal, laparoscopic, orthopedic, and periprosthetic procedures. It is in trial use by hospitals in Europe and launched in the U.S. in November 2023.
In Europe, we sell our wound care products for podiatric use through a diverse network of distributors. On April 11, 2023, we launched Podiacyn TM Advanced Everyday Foot Care direct to consumers for over-the-counter use in the United States, intended for management of foot odors, infections, and irritations, as well as daily foot health and hygiene.
On April 11, 2023, we launched Podiacyn TM Advanced Everyday Foot Care direct to consumers for over-the-counter use in the United States, intended for management of foot odors, infections, and irritations, as well as daily foot health and hygiene. Podiacyn is available through Amazon.com, our online store and third-party distributors.
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.
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.
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.
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.
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.
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 are clinically proven to reduce itch, pain, scarring, and irritation safely and without damaging healthy tissue.
Violations of these laws, which are discussed more fully below, can lead to civil and criminal penalties, damages, imprisonment, fines, exclusion from participation in Medicare, Medicaid and other federal health care programs, and the curtailment or restructuring of operations. Any such violations could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Violations of these laws, which are discussed more fully below, can lead to civil and criminal penalties, damages, imprisonment, fines, exclusion from participation in Medicare, Medicaid and other federal health care programs, and the curtailment or restructuring of operations.
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.
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, we sell hard surface disinfectant products into Europe, the Middle East and Australia.
Gramaderm® EU CE Mark Various product formulations for the topical treatment of mild to moderate acne. Microdacyn60® EU CE Mark Various product formulations for the management of itching, burning and other skin irritations.
It is also intended to provide for lubrication and irrigation during root canal instrumentation. Gramaderm® EU CE Mark Various product formulations for the topical treatment of mild to moderate acne. Microdacyn60® EU CE Mark Various product formulations for the management of itching, burning and other skin irritations.
The Medical Devices Regulation was adopted in the EU on May 26, 2017 to replace the existing Medical Device Directive, and became applicable on May 26, 2021, with a transition period until May 26, 2024.
The Medical Devices Regulation was adopted in the EU on May 26, 2017 to replace the existing Medical Device Directive, and became applicable on May 26, 2021, with a transition period until May 26, 2024, which was been extended to December 31, 2028 for non-implantable Class IIb and lower risk devices.
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.
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.
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.
Animal Health Care MicrocynAH® is an 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.
Our prescription product offerings in the U.S. are sold by our partner EMC Pharma, LLC and include Epicyn® Antimicrobial Facial Cleanser, Levicyn® Antimicrobial Dermal Spray, Levicyn® Antipruritic Gel, Levicyn® Antipruritic Spray Gel, Celacyn® Scar Management Gel and Sebuderm® Topical Gel.
Reliefacyn® Plus is a prescription-strength formula available as an office dispense product through dermatology practices and medical spas. Our prescription product offerings in the U.S. are sold by our partner EMC Pharma, LLC and include Epicyn® Antimicrobial Facial Cleanser, Levicyn® Antimicrobial Dermal Spray, Levicyn® Antipruritic Gel, Levicyn® Antipruritic Spray Gel, Celacyn® Scar Management Gel and Sebuderm® Topical Gel.
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.
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.
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.
At March 31, 2024, customer B represented 13% of our net accounts receivable balance and customer D represented 17% of our net accounts receivable balance. At March 31, 2023, customer B represented 22% of our net accounts receivable balance and customer D represented 21% of our net accounts receivable balance.
It does not stain teeth, is non-irritating, non-sensitizing, has no contraindications and is ready for use with no mixing or dilution. Our international nasal care product Sinudox™ based on our HOCl technology is intended for nasal irrigation.
Microdacyn60 assists in reducing inflammation and pain, provides soothing cough relief and does not contain any harmful chemicals. It does not stain teeth, is non-irritating, non-sensitizing, has no contraindications and is ready for use with no mixing or dilution. Our international nasal care product Sinudox™ based on our HOCl technology is an electrolyzed solution intended for nasal irrigation.
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.
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.
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.
Some of our competitors in the dermatology, wound care, eye, nasal and oral care, podiatry, animal health care and surface disinfectant markets enjoy several competitive advantages.
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 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.
Podiatry Our HOCl-based wound care products are also indicated for the treatment of diabetic foot ulcers. In the United States, we sell our wound care products directly to podiatrists as well as hospitals, nurses, and other healthcare practitioners and indirectly through non-exclusive distribution arrangements.
In the United States, we sell our wound care products directly to podiatrists as well as hospitals, nurses, and other healthcare practitioners and indirectly through non-exclusive distribution arrangements. In Europe, we sell our wound care products for podiatric use through a diverse network of distributors.
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.
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.
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.
Business Channels Our core market differentiation is based on being the leading developer and producer of stabilized hypochlorous acid, or HOCl, solutions. 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.
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.
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.
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.
For our animal health products sold in the U.S. and Canada, we partner with Compana Pet Brands. Compana distributes non-prescription products to national pet-store retail chains and farm animal specialty stores, such as PetSmart, Tractor Supply, Cabela’s, PetExpress, Bass Pro Shops, and Menards.
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.
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.
Since HOCl is an important constituent of our innate immune system and is formed and released by the macrophages during phagocytosis, it is advantageous to other wound-irrigation and antiseptic solutions, as highly organized cell structures such as human tissue can tolerate the action of our wound care solution while single-celled microorganisms cannot.
Highly organized cell structures such as human tissue can tolerate the action of our wound care solution while single-celled microorganisms cannot, making our products advantageous to other wound-irrigation and antiseptic solutions.
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.
In July 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.
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.
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.
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.
In the United States, our partner EMC Pharma sells Acuicyn through its distribution network. In international markets we rely on distribution partners to sell our eye products. In May 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.
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.
Sinudox clears and cleans stuffy, runny noses and blocked or inflamed 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. 4 Podiatry Our HOCl-based wound care products are also indicated for the treatment of diabetic foot ulcers.
In June 2022, the Natural Products Association certified Rejuvacyn Advanced as a Natural Personal Care Product. On January 4, 2023, we launched a line of office dispense products exclusively for skin care professionals, including two new prescription strength dermatology products, Reliefacyn ® Plus Advanced Itch-Burn-Rash-Pain Relief Hydrogel and Rejuvacyn ® Plus Skin Repair Cooling Mist .
In January 2023, we launched a line of office dispense products exclusively for skin care professionals, including two new prescription strength dermatology products, Reliefacyn ® Plus Advanced Itch-Burn-Rash-Pain Relief Hydrogel and Rejuvacyn ® Plus Skin Repair Cooling Mist . These products, along with Regenacyn® Plus Scar Gel, are marketed and sold directly to dermatology practices and medical spas.
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.
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. Any future product candidates or new applications classified as medical devices will require clearance by the FDA.
Employees As of June 2, 2023, we employed a total of 8 full-time employees in the United States, and one full-time employee in the Netherlands. Additionally, we had 162 employees in Mexico. We are not a party to any collective bargaining agreements. We believe relations with employees are very good.
Nanocyn is currently sold by MicroSafe in Europe, the Middle East and Australia. 5 Employees As of June 17, 2024, we employed a total of 9 full-time employees in the United States, and one full-time employee in the Netherlands. Additionally, we had 162 employees in Mexico. We are not a party to any collective bargaining agreements.
Eye, Nasal and Oral Care Ocucyn® Eyelid and Eyelash Cleanser is an OTC product sold directly in the United States. 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.
Eye, Nasal and Oral Care Ocucyn® Eyelid and Eyelash Cleanser Ocucyn® Eyelid and Eyelash Cleanser is an OTC product sold directly in the United States.
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 parts of Asia, Dyamed Biotech markets our eye product under the private label Ocucyn. In September 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.
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.
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 custom label while others use branding we have already developed.
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.
We continue to invest in research and development, both in the U.S. and internationally, for our core performance-stabilized hypochlorous acid, or HOCl, technology. 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.
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.
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. 11 The following table summarizes our current material regulatory approvals and clearances by brand.
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.
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. 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.
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.
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.
Nanocyn also received the Green Seal ® Certification after surpassing a series of rigorous standards that measure environmental health, sustainability and product performance. Nanocyn is a hospital-grade disinfectant and manufactured by us using our patented HOCl technology. Nanocyn is currently sold by MicroSafe in Europe, the Middle East and Australia.
Nanocyn also received the Green Seal ® Certification after surpassing a series of rigorous standards that measure environmental health, sustainability and product performance.
Ocucyn® Eyelid & Eyelash Cleanser, designed for everyday use, is a safe, gentle, and effective solution for good eyelid and eyelash hygiene. In international markets we rely on distribution partners to sell our eye products.
Ocucyn® Eyelid & Eyelash Cleanser, designed for everyday use, is a safe, gentle, and effective solution for good eyelid and eyelash hygiene. Oral, Dental and Nasal Care We sell a variety of oral, dental, and nasal products around the world. In international markets, our product Microdacyn60® Oral Care treats mouth and throat infections and thrush.
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. 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.
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.
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.
We have created or co-developed a wide range of products for international markets using our core HOCl technology. 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.
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.
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.
We also offer Podiacyn TM Advanced Everyday Foot Care and Pediacyn TM All Natural Skin Care & First Aid For Children for over-the-counter use. Regenacyn® Advanced Scar Gel and Regenacyn® Plus Scar Gel Regenacyn® Advanced Scar Gel is clinically proven to improve the overall appearance of scars while reducing pain, itch, redness, and inflammation.
Lumacyn TM Clarifying Mist Lumacyn TM Clarifying Mist is intended for use as a daily skin toner, to soothe and cleanse the skin, reduce redness, and manage blemishes by reducing infection. Regenacyn® Advanced Scar Gel and Regenacyn® Plus Scar Gel Regenacyn® Advanced Scar Gel is clinically proven to improve the overall appearance of scars while reducing pain and itch.

… 41 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+17 added−9 removed130 unchanged
Biggest changeFor 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.
Biggest changeProduct 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. 25 If our products do not gain market acceptance, our business will suffer because we might not be able to fund future operations.
Our international operations are subject to risks, including: · local political or economic instability; · continuing restrictions related to the Covid-19 pandemic; · changes in exchange rates; · changes in governmental regulation; · changes in import/export duties; · trade restrictions; · lack of experience in foreign markets; · difficulties and costs of staffing and managing operations in certain foreign countries; · work stoppages or other changes in labor conditions; · difficulties in collecting accounts receivables on a timely basis or, at all; and · adverse tax consequences or overlapping tax structures.
Our international operations are subject to risks, including: · local political or economic instability; · continuing restrictions related to the Covid-19 pandemic; 22 · changes in exchange rates; · changes in governmental regulation; · changes in import/export duties; · trade restrictions; · lack of experience in foreign markets; · difficulties and costs of staffing and managing operations in certain foreign countries; · work stoppages or other changes in labor conditions; · difficulties in collecting accounts receivables on a timely basis, or at all; and · adverse tax consequences or overlapping tax structures.
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.
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; · 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; · 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; · reimbursement decisions by third-party payors and announcements of those decisions; · the development and commercialization of product enhancements; · changes in the regulatory environment; 33 · 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.
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.
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.
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.
An 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, the existence of these provisions, together with Delaware law, might hinder or delay an attempted takeover other than through negotiations with our Board of Directors. Our stockholders may experience substantial dilution in the value of their investment if we issue additional shares of our capital stock or other securities convertible into common stock.
In addition, the existence of these provisions, together with Delaware law, might hinder or delay an attempted takeover other than through negotiations with our Board of Directors. 34 Our stockholders may experience substantial dilution in the value of their investment if we issue additional shares of our capital stock or other securities convertible into common stock.
However, it is likely that we will not be able to control the amount and timing or resources that our collaborators or licensees devote to our programs or potential products.
However, it is likely that we will not be able to control the amount and timing of resources that our collaborators or licensees devote to our programs or potential products.
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.
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. 29 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.
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.
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. 28 Our sales in international markets subject us to foreign currency exchange and other risks and costs which could harm our business.
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.
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, 2024 audited consolidated financial statements included disclosure that casts substantial doubt regarding our ability to continue as a going concern.
Our ability to generate revenue will be diminished if we or our partners are unable to manage customer product substitutions for our prescription products. Similar to other pharmaceutical companies, patients are increasingly seeking lower-cost substitutes to our products.
Our ability to generate revenue will be diminished if our partners are unable to manage customer product substitutions for our prescription products. Similar to other pharmaceutical companies, patients are increasingly seeking lower-cost substitutes to our products.
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.
We may need to raise additional capital in the future 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; 31 · acquire or license technologies; · develop new products; · expand our manufacturing capabilities; and · finance capital expenditures and our general and administrative expenses.
The cost containment measures that health care payors and providers are instituting and the effect of any healthcare reform or changes to managed healthcare could materially and adversely affect our ability to generate revenues.
The cost containment measures that healthcare payors and providers are instituting and the effect of any healthcare reform or changes to managed healthcare could materially and adversely affect our ability to generate 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.
The exercise of the options will dilute the voting interest of the owners of presently outstanding shares by adding a substantial number of additional shares of our common stock.
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.
During the years ended March 31, 2024 and 2023, approximately 76% and 74% 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.
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.
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. 27 The policies we use to protect our trade secrets may not be effective in preventing misappropriation of our trade secrets by others.
Shares issuable upon the conversion of warrants or preferred stock or the exercise of outstanding options may substantially increase the number of shares available for sale in the public market and depress the price of our common stock.
Shares issuable upon the exercise of outstanding options may substantially increase the number of shares available for sale in the public market and depress the price of our common stock.
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.
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.
Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, and damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business, revenues and competitive position.
Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, and damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business, revenues and competitive position. 32 Our cash and cash equivalents may be exposed to failure of our banking institutions.
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.
During the years ended March 31, 2024 and 2023, net cash used in operating activities amounted to $2,398,000 and $6,152,000, respectively. As of March 31, 2024, we had cash and cash equivalents of $3,128,000. We spent the most recent years working to reduce our losses and have made significant progress.
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.
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.
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.
In addition, 125,556 shares of our common stock were available on March 31, 2024 for future option grants under our 2016 Equity Incentive Plan and our 2021 Equity Incentive Plan. To the extent any additional options are granted and exercised, there will be further dilution to stockholders and investors.
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.
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, 2024, customer A represented 17%, customer B represented 15% and customer C represented 14% 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. In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period.
For the year ended March 31, 2023, customer A represented 11%, customer B represented 16% and customer C represented 18% 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.
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 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.
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.
At March 31, 2023, customer B represented 22% of our net accounts receivable balance and customer D represented 21% of our net accounts receivable balance.
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.
We reported a net loss of $4,835,000 and $5,151,000 for the years ended March 31, 2024 and 2023, respectively. At March 31, 2024 and 2023, our accumulated deficit amounted to $194,349,000 and $189,514,000, respectively. We had working capital of $8,829,000 and $10,081,000 as of March 31, 2024 and 2023, respectively.
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.
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.
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.
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.
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.
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.
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.
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.
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
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. Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
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.
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.
By entering into collaboration, we may preclude opportunities to collaborate with other third parties who do not wish to associate with our existing third-party strategic partners. Moreover, in the event of termination of a collaboration agreement, termination negotiations may result in less favorable terms.
By entering into collaboration, we may preclude opportunities to collaborate with other third parties who do not wish to associate with our existing third-party strategic partners.
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 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.
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.
As of March 31, 2024, we had outstanding options to purchase an aggregate of 1,032,999 shares of our common stock at a weighted average exercise price of $2.42 per share and a weighted average contractual term of 8.91 years.
The FDA could request additional information, changes to product formulation(s) or clinical testing that could adversely affect the time to market and sale of products as drugs.
In addition, we do not know whether the necessary approvals or clearances will be granted or delayed for future products. The FDA could request additional information, changes to product formulation(s) or clinical testing that could adversely affect the time to market and sale of products as drugs.
Mexico’s thin capitalization rules also require taxpayers to maintain a debt-to-equity ratio of 3:1. Any interest paid to foreign related parties that results in indebtedness exceeding a ratio of 3:1 to their stockholder’s equity is not deductible for Mexican corporate income tax purposes and we did not meet that condition.
Any interest paid to foreign related parties that results in indebtedness exceeding a ratio of 3:1 to their stockholder’s equity is not deductible for Mexican corporate income tax purposes and we did not meet that condition. Therefore, we have not been able to deduct the intercompany interest on our Mexico tax returns since 2004.
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%.
It has prevented our Mexico subsidiary from accruing net operating losses in Mexico to offset potential future profits. 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.
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.
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.
Mexican tax law prevents us from deducting intercompany interest expense incurred by our Mexico subsidiary Oculus Technologies of Mexico, S.A. de C.V and requires withholding tax on payments remitted to the US. At the same time, we are unable to recognize tax benefits for foreign tax credits for U.S. tax purposes.
Moreover, in the event of termination of a collaboration agreement, termination negotiations may result in less favorable terms. 21 Mexican tax law prevents us from deducting intercompany interest expense incurred by our Mexico subsidiary Oculus Technologies of Mexico, S.A. de C.V and requires withholding tax on payments remitted to the US.
Holders of options and warrants may convert or exercise these securities at a time when we could obtain additional capital on terms more favorable than those provided by the options or warrants.
Until the options expire, these holders will have an opportunity to profit from any increase in the market price of our common stock without assuming the risks of ownership. Holders of options may convert or exercise these securities at a time when we could obtain additional capital on terms more favorable than those provided by the options.
Our ability to generate revenue will be diminished if we or our partners are unable to obtain acceptable prices or an adequate level of reimbursement from third-party payors, or our partners may face pricing pressure from private third-party payers, including customers, from rebates and restrictive reimbursement practices.
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. 30 Our ability to generate revenue will be diminished if our partners are unable to obtain acceptable prices or an adequate level of reimbursement from third-party payors, or our partners may face pricing pressure from private third-party payers, including customers, from rebates and restrictive reimbursement practices.
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%.
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 $10.7 million, as well as Mexican withholding tax of 15%. Mexico’s thin capitalization rules also require taxpayers to maintain a debt-to-equity ratio of 3:1.
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.
However, because of our substantial U.S. net operating losses, we are prevented from claiming any credit on any withholding tax for U.S. income tax purposes. 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.
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.
This would amount to approximately $4.7 million in Mexico withholding tax at March 31, 2024, if all of the interest and technical assistance were to be repaid to us. In general, the foreign related party parent can then claim a credit for these withholding taxes on their U.S. income tax return.
The machines used to manufacture our products are complex, use complicated software and must be monitored by highly trained engineers.
We have not purchased insurance on our accounts receivable balances. 26 We may experience difficulties in manufacturing our products, which could prevent us from commercializing one or more of our products. The machines used to manufacture our products are complex, use complicated software and must be monitored by highly trained engineers.
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.
If we are not able to maintain regulatory compliance, we will not be permitted to market our products and our business would suffer. 24 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.
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.
At the same time, we are unable to recognize tax benefits for foreign tax credits for U.S. tax purposes. 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.
Product modifications, including labeling the product for a new intended use, may require the submission of a new 510(k) clearance and FDA approval before the modified product can be marketed. In addition, we do not know whether the necessary approvals or clearances will be granted or delayed for future products.
Product modifications, including labeling the product for a new intended use, may require the submission of a new 510(k) clearance and FDA approval before the modified product can be marketed. 23 On November 30, 2023, the FDA issued a proposed rule to classify certain wound dressings and liquid wound washes, including hypochlorous acid, into Class II medical devices.
Governmental authorities can also require product recalls or impose restrictions for product design, manufacturing, labeling, clearance, or other issues.
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.
Removed
Therefore, we have not been able to deduct the intercompany interest on our Mexico tax returns since 2004. It has prevented our Mexico subsidiary from accruing net operating losses in Mexico to offset potential future profits.
Added
As of March 31, 2024, our Mexico subsidiary owes approximately $13.4 million in principal, $9.8 million in technical assistance payments and $12.6 million in accrued interest. The intercompany loans mature in 2027. There is no guarantee that our Mexican subsidiary will be able to pay any or all of the amounts due.
Removed
In general, the foreign related party parent can then claim a credit for these withholding taxes on their U.S. income tax return. However, because of our substantial U.S. net operating losses, we are prevented from claiming any credit on any withholding tax for U.S. income tax purposes.
Added
In addition, any interest paid to a foreign lender is subject to Mexico 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.
Removed
If our products do not gain market acceptance, our business will suffer because we might not be able to fund future operations.
Added
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.
Removed
If we are not able to maintain regulatory compliance, we will not be permitted to market our products and our business would suffer. We may experience difficulties in manufacturing our products, which could prevent us from commercializing one or more of our products.
Added
If our operations in any foreign country are unsuccessful, we could incur significant losses and we may not achieve profitability.
Removed
The policies we use to protect our trade secrets may not be effective in preventing misappropriation of our trade secrets by others.
Added
If finalized, we would be required to submit new 510(k) applications for our products and to demonstrate compliance with special controls that require specific information relating to performance testing and technical specifications, specific labeling requirements, and other requirements.
Removed
We expect capital outlays and operating expenditures to increase over the next several years as we work to expand our sales force, conduct regulatory trials, commercialize our products and expand our infrastructure.
Added
While we believe we will be able to demonstrate compliance with these special controls if the proposed rule is finalized, there is no guarantee that the FDA will issue new clearance letters for our products, and the process of obtaining additional clearances may be costly and time consuming.
Removed
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.
Added
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.
Removed
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.
Added
We rely on certain key customers for a significant portion of revenues. At March 31, 2024, customer B represented 13% of our net accounts receivable balance and customer D represented 17% of our net accounts receivable balance.
Removed
Until the options and warrants expire, these holders will have an opportunity to profit from any increase in the market price of our common stock without assuming the risks of ownership.
Added
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.
Added
Our information technology and infrastructure may be breached or attacked, which could expose us to liability, damage our reputation, compromise our confidential information or otherwise adversely affect our business.
Added
We maintain our cash at financial institutions, in balances that exceed current FDIC insurance limits.
Added
On September 22, 2023, we received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we are not in compliance with Nasdaq Listing Rule 5550(a)(2), which requires companies listed on The Nasdaq Stock Market to maintain a minimum bid price of $1 per share for continued listing.
Added
On March 21, 2024, we received a notice that Nasdaq had granted us an additional 180 calendar days, or until September 16, 2024, to regain compliance with the minimum closing bid price requirement for continued listing.
Added
Nasdaq’s letter has no immediate impact on the listing of our common stock, which will continue to be listed and traded on Nasdaq, subject to our compliance with the other continued listing requirements.
Added
We may regain compliance at any time during this compliance period if the minimum bid price for our common stock is at least $1 for a minimum of ten consecutive business days.
Added
Until Nasdaq has reached a final determination that we have regained compliance with all of the applicable continued listing requirements, there can be no assurances regarding the continued listing of our common stock or warrants on Nasdaq.
Added
The delisting of our common stock and warrants from Nasdaq would have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of its common stock as a result of that delisting would adversely affect our ability to raise capital on terms acceptable to the Company, if at all. 35 ITEM 1B.

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 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.
Biggest changeWe currently lease the following material properties: Location Rent per month Purpose 5445 Conestoga Court, Unit 150, Boulder, CO 80301 USD 3,573 Principal executive office Industria Vidriera 81, & 87 Zapopan Industrial Norte, Zapopan, Jalisco, 45135, Mexico MXN 209,811 Office, manufacturing Industria Maderera 124, 106, 115 & 815 Zapopan Industrial Norte, Zapopan, Jalisco, 45135, Mexico MXN 213,625 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, 2023, we have a corporate office in Boulder, Colorado and our manufacturing facility in Zapopan, Mexico.
ITEM 2. Properties At March 31, 2024, 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 changeRecent Sales of Unregistered Securities We did not issue any unregistered securities during the year ended March 31, 2023 and through June 12, 2023.
Biggest changeRecent Sales of Unregistered Securities We did not issue any unregistered securities during the year ended March 31, 2024 and through June 17, 2024.
Holders 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.
Holders As of June 12, 2024, we had approximately 291 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.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 6. Selected Financial Data 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.
Biggest changeITEM 6. Selected Financial Data 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. 37

Item 7. Management's Discussion & Analysis

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

23 edited+7 added−5 removed10 unchanged
Biggest changeSelling, 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.
Biggest changeResearch and Development Expense The research and development expense metrics for the year ended March 31, 2024 and 2023 are as follows: Year Ended March 31, (In thousands, except for percentages) 2024 2023 $ Change % Change Research and Development Expense $ 1,871 $ 207 $ 1,664 804% Research and Development Expense as a % of Revenues 15% 2% Increases in research and development expenses for the year ended March 31, 2024 of $1,664,000 was primarily due to increased product development and expanded regulatory efforts in the U.S. and Europe to support new product releases. 39 Selling, General and Administrative Expense The selling, general and administrative expense metrics for the years ended March 31, 2024 and 2023 are as follows: Year Ended March 31, (In thousands, except for percentages) 2024 2023 Change % Change Selling, General and Administrative Expense $ 7,575 $ 8,840 $ (1,265 ) (14% ) Selling, General and Administrative Expense as a % of Revenues 59% 67% The decline in selling, general and administrative expenses for the year ended March 31, 2024 of $1,265,000 was the result of ongoing efforts to contain expenses across all parts of the company.
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.
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. On an ongoing basis, we evaluate our estimates and judgments.
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.
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. 42 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.
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.
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, 2025.
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 used in investing activities for the year ended March 31, 2024 was $2,000, primarily related to the purchase of capital property and equipment. 41 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 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.
Net cash provided by financing activities for the year ended March 31, 2023 was $2,489,000 primarily related to proceeds of $2,868,000 from the sale of common stock, proceeds of $515,000 from short-term notes, offset by payments on our PPP loan and short-term notes.
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.
The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the years ended March 31, 2024 and 2023 as well balances of cash and cash equivalents and working capital: Year ended March 31, (In thousands) 2024 2023 Net cash provided by (used in): Operating activities $ (2,398 ) $ (6,152 ) Investing activities (2 ) (258 ) Financing activities 1,676 2,489 Effect of exchange rates on cash 32 345 Net change in cash and cash equivalents (692 ) (3,576 ) Cash and cash equivalents, beginning of the period 3,820 7,396 Cash and cash equivalents, end of the period $ 3,128 $ 3,820 Working capital (1) , end of period $ 8,829 $ 10,081 (1) Defined as current assets minus current liabilities.
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) 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.
Net Loss The following table provides the net loss for each period along with the computation of basic and diluted net loss per share: For the Year Ended March 31, (In thousands, except per share data) 2024 2023 Net loss $ (4,835 ) $ (5,151 ) Weighted-average shares outstanding: basic and diluted 9,090 3,394 Net loss per share: basic and diluted $ (0.53 ) $ (1.52 ) 40 Liquidity and Capital Resources We reported a net loss of $4,835,000 and $5,151,000 for the years ended March 31, 2024 and 2023, respectively.
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.
At March 31, 2024 and 2023, our accumulated deficit amounted to $194,349,000 and $189,514,000, respectively. As of March 31, 2024 and 2023, we had cash and cash equivalents of $3,128,000 and $3,820,000, respectively. Since our inception, substantially all of our operations have been financed through sales of equity securities.
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.
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.
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.
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.
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.
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.
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.
Any 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. Currently, most of our customers pay for shipping expenses, including increased shipping costs, if any.
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.
We face a substantial Mexico tax liability, intercompany debt, unpaid technical assistance charges and accrued interest. These amounts are due in 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.
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.
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 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.
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.
Results of Continuing Operations Comparison of the Year Ended March 31, 2024 and 2023 Revenue The following table shows our consolidated total revenue and revenue by geographic region for the year ended March 31, 2024 and 2023: Year Ended March 31, (In thousands) 2024 2023 $ Change % Change United States $ 3,058 $ 3,428 $ (370 ) (11% ) Europe 4,781 4,051 730 18% Asia 2,298 2,451 (153 ) (6% ) Latin America 1,726 2,383 (657 ) (28% ) Rest of the World 872 959 (87 ) (9% ) Total $ 12,735 $ 13,272 $ (537 ) (4% ) 38 The decrease in United States revenue of $370,000 for the year ended March 31, 2024, was primarily the result of fluctuations in over-the-counter animal health care sales.
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.
Other Expense, net Other expense, net for the year ended March 31, 2024 was $330,000 compared to $614,000 for the year ended March 31, 2023. The changes in other expense, net primarily relate to exchange rate fluctuations. Income Tax Benefit Income tax benefit for the year ended March 31, 2024 and 2023 was $196,000 and $33,000, respectively.
Net cash used in operating activities during the year ended March 31, 2022 was $4,248,000, primarily due to a net loss of $5,086,000 and partially offset by an increase from accounts receivable net provision for write-offs and returns and an increase of $900,000 from deferred revenue.
Net cash used in operating activities during the year ended March 31, 2024 was $2,398,000, primarily due to our net loss of $4,835,000, offset by stock compensation of $516,000, a decrease in inventory of $184,000, and a decrease in prepaid expenses of $1,107,000.
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 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.
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.
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 customers.
Furthermore, overall inflation tendencies may put pressure on our product pricing and/or costs.
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.
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.
Cost of Revenue and Gross Profit The cost of revenue and gross profit metrics for the year ended March 31, 2024 and 2023 are as follows: Year Ended March 31, (In thousands, except for percentages) 2024 2023 $ Change % Change Cost of Revenues $ 7,990 $ 8,795 $ (805 ) (9% ) Cost of Revenue as a % of Revenues 63% 66% Gross Profit $ 4,745 $ 4,477 $ 268 6% Gross Profit as a % of Revenues 37% 34% The increase in gross profit margin of $268,000 for the year ended March 31, 2024, as compared to the prior year, was primarily due to overall product mix, redeployment of labor to research and development projects in the current year and higher costs of materials and transportation in the prior year.
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.
The increase in Europe revenue for the year ended March 31, 2024 of $730,000 was the result of a general increase in demand for our products and, more specifically, an increase in demand for our wound care products from our customer in Poland due to recent world events.
Removed
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.
Added
The decrease in Asia revenue of $153,000 for the year ended March 31, 2024, was primarily due to timing of orders. Revenues from our international distributors tend to fluctuate from period to period due to customer placement of larger but less frequent orders to benefit from quantity discounts and reduced shipping costs.
Removed
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.
Added
The decrease in Latin America revenue for the year ended March 31, 2024 of $657,000 was primarily due to a one-time event in the prior year related to the sale of machinery to a customer. We recorded $750,000 of service revenue in the prior year in connection with this transaction.
Removed
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.
Added
The decrease in Rest of World revenue for the year ended March 31, 2024 of $87,000 was primarily due to timing of customer orders.
Removed
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.
Added
The increase is primarily related to the release of our valuation allowance on deferred tax assets in Europe.
Removed
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.
Added
Since April 1, 2023, substantially all of our operations have been financed through cash on hand and the following transactions: · Proceeds of $1,446,000, net of offering expenses, from the sale of common stock on October 26, 2023. · Proceeds of $343,000, net of offering expenses, from the sale of common stock on January 11, 2024.
Added
As of March 31, 2024 and 2023, we had cash and cash equivalents of $3,128,000 and $3,820,000, respectively.
Added
Net cash provided by financing activities for the year ended March 31, 2024 was $1,676,000 primarily related to proceeds of $1,784,000 from the sale of common stock.

Other SNOA 10-K year-over-year comparisons