UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
OR
For the transition period from ____________ to ______________
Commission file number:
(Name of registrant as specified in its charter)
| (State or other jurisdiction of Incorporation or Organization) | (I.R.S. Employer identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name or former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| The |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated Filer ☐ | Accelerated Filer ☐ |
| Smaller reporting company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐
The number of shares outstanding of the registrant’s common stock, par value $0.0001 per share, as of August 10, 2023 was .
SONOMA PHARMACEUTICALS, INC.
Index
| 2 |
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
June 30, 2023 | March 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current portion of deferred consideration, net of discount | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease, right of use assets | ||||||||
| Deferred tax asset | ||||||||
| Deferred consideration, net of discount, less current portion | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Deferred revenue Invekra | ||||||||
| Short-term debt | ||||||||
| Operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term deferred revenue Invekra | ||||||||
| Withholding tax payable | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 5) | ||||||||
| Stockholders’ Equity | ||||||||
| Convertible preferred stock, $ par value; shares authorized at June 30, 2023 and March 31, 2023, respectively, shares issued and outstanding at June 30, 2023 and March 31, 2023, respectively | ||||||||
| Common stock, $ par value; shares authorized at June 30, 2023 and March 31, 2023, respectively, and shares issued and outstanding at June 30, 2023 and March 31, 2023, respectively (Note 7) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Research and development | ||||||||
| Selling, general and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other expense, net | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share: basic and diluted | $ | ) | $ | ) | ||||
| Weighted-average number of shares used in per common share calculations: basic and diluted | ||||||||
| Other comprehensive loss | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Foreign currency translation adjustments | ( | ) | ||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Deferred income tax expense | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Deferred consideration | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Operating lease right-of-use assets | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Withholding tax payable | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payment on ATM agreement offering | ( | ) | ||||||
| Principal payments on PPP loan | ( | ) | ||||||
| Payment of long-term deposits | ( | ) | ||||||
| Principal payments on short-term debt | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate on cash and cash equivalents | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Three Months ended June 30, 2023 and 2022
(In thousands, except share amounts)
(Unaudited)
| Series C Preferred Stock ($0.0001 par Value) | Common Stock ($0.0001 par Value) | Additional Paid in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Cost in connection with ATM | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Employee stock-based compensation expenses | – | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | ||||||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Series C Preferred Stock ($0.0001 par Value) | Common Stock ($0.0001 par Value) | Additional Paid in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Employee stock-based compensation expenses | – | – | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Rounded to nearest thousand unless specified)
(Unaudited)
| Note 1. | Organization and Recent Developments |
Organization
Sonoma Pharmaceuticals, Inc. (the “Company”) was incorporated under the laws of the State of California in April 1999 and was reincorporated under the laws of the State of Delaware in December 2006. The Company’s principal office was moved to Woodstock, Georgia from Petaluma, California in June 2020 and to Boulder, Colorado in October 2022. The Company is a global healthcare leader for developing and producing stabilized hypochlorous acid (“HOCl”) products for a wide range of applications, including wound care, animal health care, eye care, oral care and dermatological conditions. The Company’s products reduce infections, itch, pain, scarring and harmful inflammatory responses in a safe and effective manner. In-vitro and clinical studies of HOCl show it to have impressive antipruritic, antimicrobial, antiviral and anti-inflammatory properties. The Company’s stabilized HOCl immediately relieves itch and pain, kills pathogens and breaks down biofilm, does not sting or irritate skin and oxygenates the cells in the area treated assisting the body in its natural healing process. The Company sells its products either directly or via partners in 55 countries worldwide.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and for the three months then ended have been prepared in accordance with the accounting principles generally accepted in the United States of America for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of June 30, 2023, and the condensed consolidated statements of comprehensive income (loss), cash flows, and changes in stockholders’ equity for the three months ended June 30, 2023 and 2022 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the condensed consolidated financial position, operating results and cash flows for the periods presented. The results for the three months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending March 31, 2024 or for any future interim period. The condensed consolidated balance sheet at March 31, 2023 has been derived from audited consolidated financial statements. These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended March 31, 2023, and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on June 21, 2023.
| Note 2. | Liquidity and Financial Condition |
The Company reported a net loss of $
Management believes that the Company has access to additional capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, the Company cannot provide any assurance that other new financings will be available on commercially acceptable terms, if needed. If the economic climate in the U.S. deteriorates, the Company’s ability to raise additional capital could be negatively impacted. If the Company is unable to secure additional capital, it may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays in the Company’s continued efforts to commercialize its products, which is critical to the realization of its business plan and the future operations of the Company. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
| 7 |
| Note 3. | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories, the valuation allowance relating to the Company’s deferred tax assets, valuation of equity and the estimated amortization periods of upfront product licensing fees received from customers. Periodically, the Company evaluates and adjusts estimates accordingly.
Reclassification
During the three months ended June 30, 2023, the
Company aligned its accounting policy to conform the presentation of certain costs it views as research and development efforts. These
costs are now included in research and development, whereas they were previously included in cost of revenues. The three months ended
June 30, 2022 has been reclassified to conform to the current period presentation. The reclassification increased research and development
by $
The following table provides the net loss for each period along with the computation of basic and diluted net loss per share:
| For the Three Months Ended June 30, | ||||||||
| (In thousands, except per share data) | 2023 | 2022 | ||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average number of common shares outstanding: basic and diluted | ||||||||
| Net loss per share: basic and diluted | $ | ) | $ | ) | ||||
The computation of basic and diluted loss per share for the three months ended June 30, 2023 and 2022 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Common stock to be issued upon vesting of restricted stock units | ||||||||
| Common stock to be issued upon exercise of options | ||||||||
| Common stock to be issued upon exercise of warrants | ||||||||
| Common stock to be issued upon exercise of common stock units (1) | ||||||||
| (1) |
| 8 |
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”), Topic 606 Revenue from Contracts with Customers (“Topic 606”). Revenue is recognized when the Company transfers promised goods or services to the customer, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company derives the majority of its revenue through sales of its products directly to end users and to distributors. The Company also sells products to a customer base, including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company has also entered into agreements to license its technology and products.
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which it expects to be entitled.
For all of the Company’s sales to non-consignment distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e. when its performance obligation is satisfied), which typically occurs when title passes to the customer upon shipment but could occur when the customer receives the product based on the terms of the agreement with the customer. For product sales to its value-added resellers, non-stocking distributors and end-user customers, the Company grants return privileges to its customers, and because the Company has a long history with its customers, the Company is able to estimate the amount of product that will be returned. Sales incentives and other programs that the Company may make available to these customers are considered to be a form of variable consideration, and the Company maintains estimated accruals and allowances using the expected value method. With the movement of these sales to a full distributor model in fiscal year 2022, the Company no longer provides these arrangements although the Company still receives some returns from the period prior to the year ended March 31, 2023.
The Company has entered into consignment arrangements, in which goods are left in the possession of another party to sell. As products are sold from the customer to third parties, the Company recognizes revenue based on a variable percentage of a fixed price. Revenue recognized varies depending on whether a patient is covered by insurance or is not covered by insurance. In addition, the Company may incur a revenue deduction related to the use of the Company’s rebate program.
Sales to stocking distributors are made under terms with fixed pricing and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. Revenue from sales to distributors is recognized upon the transfer of control to the distributor.
The Company assessed the promised goods and services in the technical support to Invekra for a ten-year period as being a distinct service that Invekra can benefit from on its own and is separately identifiable from any other promises within the contract. Given that the distinct service is not substantially the same as other goods and services within the Invekra contract, the Company accounted for the distinct service as a performance obligation.
Accounts Receivable
Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns. Estimates for cash discounts and sales returns are based on analysis of contractual terms and historical trends.
| 9 |
The Company’s policy is to reserve for uncollectible
accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically
reviews its accounts receivable to determine whether an allowance for doubtful accounts is necessary based on an analysis of past due
accounts and other factors that may indicate that the realization of an account may be in doubt. Other factors that the Company considers
include its existing contractual obligations, historical payment patterns of its customers and individual customer circumstances, an analysis
of days sales outstanding by customer and geographic region, and a review of the local economic environment and its potential impact on
government funding and reimbursement practices. Account balances deemed to be uncollectible are charged to the allowance after all means
of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts represents
probable credit losses of $
Inventories
Inventories are stated at the lower of cost, cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis), or net realizable value.
Due to changing market conditions, estimated future
requirements, age of the inventories on hand and production of new products, the Company regularly reviews inventory quantities on hand
and records a provision to write down excess and obsolete inventory to its estimated net realizable value. The Company recorded a provision
to reduce the carrying amounts of inventories to their net realizable value in the amount of $
Recent Accounting Standards
Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
| Note 4. | Condensed Consolidated Balance Sheet |
Inventories, net
Inventories, net consist of the following:
| June 30, | March 31, | |||||||
| 2023 | 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Inventories, net | $ | $ | ||||||
Leases
The Company's operating leases are comprised primarily of facility leases. The Company did not have any finance leases as of June 30, 2023 and March 31, 2023. Balance sheet information related to our leases is presented below:
| June 30, | March 31, | |||||||
| 2023 | 2023 | |||||||
| Operating leases: | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Operating lease liabilities – current | ||||||||
| Operating lease liabilities – non- current | ||||||||
| 10 |
Other information related to leases is presented below:
| Three Months Ended June 30, 2023 | ||||
| Operating lease cost | $ | |||
| Other information: | ||||
| Operating cash flows from operating leases | ( | ) | ||
| Weighted-average remaining lease term – operating leases (in months) | ||||
| Weighted-average discount rate – operating leases | ||||
As of June 30, 2023, the annual minimum lease payments of our operating lease liabilities were as follows:
| For Years Ending March 31, | ||||
| 2024 (excluding the three months ended June 30, 2023) | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total future minimum lease payments, undiscounted | ||||
| Less: imputed interest | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
| Note 5. | Commitments and Contingencies |
Legal Matters
The Company may be involved in legal matters arising in the ordinary course of business including matters involving proprietary technology. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company is or could become involved in litigation may have a material adverse effect on its business and financial condition of comprehensive loss.
Employment Agreements
The Company has employment agreements in place with two of its key executives. These executive employment agreements provide, among other things, for the payment of up to eighteen months of severance compensation for terminations under certain circumstances.
Amendments
On June 16, 2023, we entered into an amended and restated employment agreement with our Chief Executive Officer, Amy Trombly. The amended and restated agreement provides that, in the event of termination upon change of control either without cause or for good reason, Ms. Trombly is entitled to receive, in addition to the other benefits described therein, a lump sum severance equal to one and a half times her base salary and one and a half times her target annual bonus. All other material terms of the amended and restated agreement remain unchanged from her prior employment agreement.
On June 16, 2023, we amended and restated our employment agreement with Bruce Thornton, our Chief Operating Officer. Under the amended and restated agreement, Mr. Thornton will serve as Executive Vice President and Chief Operating Officer of the Company. Mr. Thornton will no longer receive a monthly car allowance; however, his base salary is adjusted to include such amount. The amended and restated agreement also provides that, in the event of termination upon change of control either without cause or for good reason, Mr. Thornton is entitled to receive, in addition to the other benefits described therein, to a lump sum severance equal to one and a half times his base salary and one and a half times his target annual bonus. The agreement further provides that upon termination for any reason, Mr. Thornton’s outstanding and vested equity awards shall remain exercisable for 18 months following termination. Either party may terminate the employment agreement for any reason upon at least 60 days prior written notice. All other material terms of his amended and restated agreement remain unchanged from his prior employment agreement.
| 11 |
Bonus Grants
On June 16, 2023, the Compensation Committee of
the Board of Directors approved annual bonus awards of $
Equity Awards
On June 16, 2023, the Compensation Committee of the Board of Directors approved an equity award of shares of the Company’s common stock to each of Ms. Trombly and Mr. Thornton, to be issued to on June 30, 2023, at a valuation based on the five day weighted trailing average of the Company’s stock price on the day of grant. In addition, the Compensation Committee also approved a one-time cash payment by the Company as reimbursement for estimated taxes payable with respect to such equity awards.
As of June 30, 2023, with respect to these agreements,
aggregated annual salaries is $
Related Party Transactions
During the three months ended June 30, 2023 and
2022, the Company incurred $
| Note 6. | Debt |
Financing of Insurance Premiums
On February 1, 2022, the Company entered into
a note agreement for $
On February 1, 2023, the Company entered into
a note agreement for $
| Note 7. | Stockholders’ Equity |
Authorized Capital
The Company is authorized to issue up to shares of common stock with a par value of $ per share and shares of convertible preferred stock with a par value of $ per share.
| Note 8. | Stock-Based Compensation |
For the three months ended June 30, 2023 and 2022, the Company incurred $ and $ of stock-based compensation expense, respectively. All stock-based compensation incurred is included in selling, general and administrative expense in the accompanying condensed consolidated statements of comprehensive loss.
At June 30, 2023, there was unrecognized compensation costs of $ related to stock options which is expected to be recognized over a weighted-average amortization period of years.
| 12 |
Stock options award activity is as follows:
| Number of Shares | Weighted- Average Exercise Price | |||||||
| Outstanding at April 1, 2023 | $ | |||||||
| Options forfeited | ( | ) | ||||||
| Options expired | ( | ) | ||||||
| Outstanding at June 30, 2023 | $ | |||||||
| Exercisable at June 30, 2023 | $ | |||||||
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock, or $ per share at June 30, 2023.
Restricted stock award activity is as follows:
Number of Shares | Weighted Average Award Date Fair Value per Share | |||||||
| Unvested restricted stock awards outstanding at April 1, 2023 | $ | |||||||
| Restricted stock awards granted | ||||||||
| Restricted stock awards vested | ( | ) | ||||||
| Unvested restricted stock awards outstanding at June 30, 2023 | $ | |||||||
The Company did not capitalize any cost associated with stock-based compensation.
The Company issues new shares of common stock upon exercise of stock options or release of restricted stock awards.
| Note 9. | Income Taxes |
At the end of each interim reporting period, the Company determines the income tax provision by using an estimate of the annual effective tax rate, adjusted for discrete items occurring in the quarter.
Our effective tax rate for the three months ended June 30, 2023 was 2.1%. The Company’s effective tax rate for the three months ended June 30, 2023 differed from the federal statutory tax rate of 21% primarily due to the valuation allowance recognized against deferred tax assets in the U.S. and Netherlands.
Judgment is required in determining whether deferred tax assets will be realized in full or in part. Management assesses the available positive and negative evidence on a jurisdictional basis to estimate if deferred tax assets will be recognized and when it is more likely than not that all or some deferred tax assets will not be realized, and a valuation allowance must be established. As of June 30, 2023, the Company continues to maintain a valuation allowance in the U.S. and Netherlands.
| Note 10. | Revenue Disaggregation |
The Company generates product revenues from products which are sold into the human and animal healthcare markets, and the Company generates service revenues from laboratory testing services which are provided to medical device manufacturers.
The following table presents the Company’s disaggregated revenues by source:
| Three Months Ended June 30, | ||||||||
| Product | 2023 | 2022 | ||||||
| Human Care | $ | $ | ||||||
| Animal Care | ||||||||
| Total Product | ||||||||
| Service and Royalty | ||||||||
| Total | $ | $ | ||||||
| 13 |
The following table shows the Company’s revenues by geographic region:
| Three Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| United States | $ | $ | ||||||
| Europe | ||||||||
| Asia | ||||||||
| Latin America | ||||||||
| Rest of the World | ||||||||
| Total | $ | $ | ||||||
The Company’s service revenues in Latin
America amounted to $
| Note 11. | Significant Customer Concentrations |
For the three months ended June 30, 2023, customer
A represented
At June 30, 2023, customer D represented
| Note 12. | Subsequent Events |
Management has evaluated subsequent events or transactions occurring through the date the condensed consolidated financial statements were issued.
None.
| 14 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q as of June 30, 2023 and our audited consolidated financial statements for the year ended March 31, 2023 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on June 21, 2023.
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “anticipate,” “suggest,” “estimate,” “plan,” “aim,” “seek,” “project,” “continue,” “ongoing,” “potential,” “expect,” “predict,” “believe,” “intend,” “may,” “will,” “should,” “could,” “would,” “likely,” “proposal,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to the risks described in our Annual Report on Form 10-K including: our ability to become profitable; our dependence on third-party distributors; certain tax impacts of inter-company loans between us and our Mexican subsidiary; the progress and timing of our development programs and regulatory approvals for our products; the benefits and effectiveness of our products; the ability of our products to meet existing or future regulatory standards; the progress and timing of clinical trials and physician studies; our expectations and capabilities relating to the sales and marketing of our current products and our product candidates; our ability to compete with other companies that are developing or selling products that are competitive with our products; the establishment of strategic partnerships for the development or sale of products; the risk our research and development efforts do not lead to new products; the timing of commercializing our products; our ability to penetrate markets through our sales force, distribution network, and strategic business partners to gain a foothold in the market and generate attractive margins; the ability to attain specified revenue goals within a specified time frame, if at all, or to reduce costs; the outcome of discussions with the U.S. Food and Drug Administration, or FDA, and other regulatory agencies; the content and timing of submissions to, and decisions made by, the FDA and other regulatory agencies, including demonstrating to the satisfaction of the FDA the safety and efficacy of our products; our ability to manufacture sufficient amounts of our products for commercialization activities; our ability to protect our intellectual property and operate our business without infringing on the intellectual property of others; our ability to continue to expand our intellectual property portfolio; the risk we may need to indemnify our distributors or other third parties; risks attendant with conducting a significant portion of our business outside the United States; our ability to comply with complex federal and state fraud and abuse laws, including state and federal anti-kickback laws; risks associated with changes to health care laws; our ability to attract and retain qualified directors, officers and employees; our expectations relating to the concentration of our revenue from international sales; our ability to expand to and commercialize products in markets outside the wound care market; our ability to protect our information technology and infrastructure; and the impact of any future changes in accounting regulations or practices in general with respect to public companies. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by law.
Our Business
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. In-vitro and clinical studies of HOCl show it to have impressive antipruritic, antimicrobial, antiviral and anti-inflammatory properties. Our stabilized HOCl immediately relieves itch and pain, kills pathogens and breaks down biofilm, does not sting or irritate skin and oxygenates the cells in the area treated, assisting the body in its natural healing process. We sell our products either directly or via partners in 55 countries worldwide.
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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. HOCl is known to be among the safest and most-effective ways to relieve itch, inflammation and burns while stimulating natural healing through increased oxygenation and eliminating persistent microorganisms and biofilms.
We sell our products into many markets both in the U.S. and internationally. In international markets, we ship a variety of products to 55 countries. 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. Our products are primarily targeted at the treatment of redness and irritation, the management of scars and symptoms of eczema/atopic dermatitis. We are strategically focused on introducing innovative new products that are supported by human clinical data with applications that address specific dermatological procedures currently in demand. 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. 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.
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.
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 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. These products, along with Regenacyn® Plus Scar Gel, will be marketed and sold directly to dermatology practices and medical spas.
On April 11, 2023, we introduced a new pediatric dermatology and wound care product for over-the-counter use, Pediacyn™ All Natural Skin Care & First Aid For Children.
Our consumer products are available through Amazon.com, our website and third-party distributors.
We sell dermatology products in Europe and Asia through a distributor network. In these international markets, we have a network of partners, ranging from country specific distributors to large pharmaceutical companies to full-service sales and marketing companies. We work with our international partners to create products they can market in their home country. Some products we develop and manufacture are private label while others use branding we have already developed. We have created or co-developed a wide range of products for international markets using our core HOCl technology.
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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. Secondly, our HOCl products assist in the wound healing process by removing microorganisms. 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. 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.
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. 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. Microcyn® OTC Wound and Skin Cleanser is formulated for home use without prescription to help manage and cleanse wounds, minor cuts, and burns, including sunburns and other skin irritations. Microcyn OTC is available without prescription through Amazon.com, our online store and third-party distributors.
In March 2021, we received approval to market and use our HOCl products as biocides under Article 95 of the European Biocidal Products Regulation in France, Germany and Portugal. The approval applies to our products MucoClyns™ for human hygiene to be marketed and commercialized by us, MicrocynAH® for animal heath marketed and commercialized through our partner, Petagon Limited, and MicroSafe for disinfectant use to be marketed and commercialized through our partner, MicroSafe Group DMCC.
In June 2022, the Natural Products Association certified Microcyn OTC as a Natural Personal Care Product in the United States.
In June 2023, we announced a new application of our HOCl technology for intraoperative pulse lavage irrigation treatment, which can replace commonly used IV bags in a variety of surgical procedures. 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.
Eye Care
Our prescription product Acuicyn™ is an antimicrobial prescription solution for the treatment of blepharitis and the daily hygiene of eyelids and lashes and helps manage red, itchy, crusty and inflamed eyes. It is strong enough to kill the bacteria that causes discomfort, fast enough to provide near instant relief, and gentle enough to use as often as needed. 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. 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. 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. Under the license and distribution agreement, Brill has the right to market and distribute our eye care product under the private label Ocudox™ in Italy, Germany, Spain, Portugal, France, and the United Kingdom for a period of 10 years, subject to meeting annual minimum sales quantities. In return, Brill paid us a one-time fee, and the agreed upon supply prices. In parts of Asia, Dyamed Biotech markets our eye product under the private label Ocucyn.
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Oral, Dental and Nasal Care
We sell a variety of oral, dental, and nasal products around the world.
In late 2020, we launched a HOCl-based product in the dental, head and neck markets called Endocyn®, a biocompatible root canal irrigant. In the U.S., we sell our dental products through U.S.-based distributors.
In international markets, our product Microdacyn60® Oral Care treats mouth and throat infections and thrush. Microdacyn60 solution 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 intended for nasal irrigation. 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.
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 Europe, we sell our wound care products for podiatric use through a diverse network of distributors.
On April 11, 2023, we launched Podiacyn™ 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.
Animal Health Care
MicrocynAH® is a HOCl-based topical product that cleans, debrides and treats a wide spectrum of animal wounds and infections. It is intended for the safe and rapid treatment of a variety of animal afflictions including cuts, burns, lacerations, rashes, hot spots, rain rot, post-surgical sites, pink eye symptoms and wounds to the outer ear of any animal.
For our animal health products sold in the U.S. and Canada, we partnered with Manna Pro Products, LLC to bring relief to pets and peace of mind to their owners. 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. 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.
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. On August 3, 2020, Petagon received a license from the People’s Republic of China for the import of veterinary drug products manufactured by us. This is the highest classification Petagon and Sonoma can receive for animal health products in China.
Surface Disinfectants
Our HOCl technology has been formulated as a disinfectant and sanitizer solution for our partner MicroSafe and is sold in numerous countries. It is designed to be used to spray in aerosol format in areas and environments likely to serve as a breeding ground for the spread of infectious disease, which could result in epidemics or pandemics. The medical-grade surface disinfectant solution is used in hospitals worldwide to protect doctors and patients. In May 2020, Nanocyn® Disinfectant & Sanitizer received approval to be entered into the Australian Register of Therapeutic Goods, or ARTG for use against the coronavirus SARS-CoV-2, or COVID-19, and was also authorized in Canada for use against COVID-19. 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.
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Through our partner MicroSafe, we sell hard surface disinfectant products into Europe, the Middle East and Australia.
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 April of 2022, MicroSafe secured the EPA approval for Nanocyn® Disinfectant & Sanitizer, meaning that it can now be sold in the United States as a surface disinfectant, and it was subsequently added to the EPA’s list N for use against COVID-19. In June 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. 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 manufactured by us using our patented HOCl technology. Nanocyn is currently sold by MicroSafe in Europe, the Middle East and Australia.
Additional Information
Investors and others should note that we announce material financial information using our company website (www.sonomapharma.com), our investor relations website (ir.sonomapharma.com), SEC filings, press releases, public conference calls and webcasts. The information on, or accessible through, our websites is not incorporated by reference in this Quarterly Report on Form 10-Q.
Results of Operations
Comparison of the Three Months Ended June 30, 2023 and 2022
Revenue
The following table shows our consolidated total revenue and revenue by geographic region for the three months ended June 30, 2023 and 2022:
Three Months Ended June 30, | ||||||||||||||||
| (In thousands) | 2023 | 2022 | $ Change | % Change | ||||||||||||
| United States | $ | 806,000 | $ | 871,000 | $ | (65,000 | ) | (7% | ) | |||||||
| Europe | 1,070,000 | 841,000 | 229,000 | 27% | ||||||||||||
| Asia | 862,000 | 920,000 | (58,000 | ) | (6% | ) | ||||||||||
| Latin America | 487,000 | 1,048,000 | (561,000 | ) | (54% | ) | ||||||||||
| Rest of the World | 202,000 | 303,000 | (101,000 | ) | (33% | ) | ||||||||||
| Total | $ | 3,427,000 | $ | 3,983,000 | $ | (556,000 | ) | (14% | ) | |||||||
The decrease in United States revenues for the three months ended June 30, 2023 compared to the same period in the prior year of $65,000, is primarily the result of a slight decline in animal health over-the-counter sales.
The increase in Europe revenue for the three months ended June 30, 2023 compared to the same period in the prior year of $229,000 was due to increased demand for our products and selling them in different parts of Europe.
Revenues related to Asia are derived from our international distributors and tend to be choppy when viewed on a quarterly basis due to customers placing larger but less frequent orders to benefit from quantity discounts and reduced shipping costs when ordering sufficient quantities to fill standard sized shipping containers.
The decrease in Latin America revenue for the three months ended June 30, 2023 was primarily the result of service revenue from selling machinery to a customer for $750,000 in the prior period which management expects to be a one-time event.
Revenues related to Rest of World are derived from our international distributors and tend to be choppy when viewed on a quarterly basis due to customers placing larger but less frequent orders to benefit from quantity discounts and reduced shipping costs when ordering sufficient quantities to fill standard sized shipping containers.
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Cost of Revenue and Gross Profit
The cost of revenue and gross profit metrics are as follows:
Three Months ended June 30, | ||||||||||||||||
| (In thousands, except for percentages) | 2023 | 2022 | $ Change | % Change | ||||||||||||
| Cost of Revenue | $ | 2,223 | $ | 2,337 | $ | (114 | ) | (5 | )% | |||||||
| Cost of Revenue as a % of Revenue | 65% | 59% | ||||||||||||||
| Gross Profit | $ | 1,204 | $ | 1,646 | $ | (442 | ) | (27 | )% | |||||||
| Gross Profit as a % of Revenue | 35% | 41% | ||||||||||||||
The decline in the gross margin is the result of the one-time event last year of selling machinery to a customer, and changes in product mix and territories to which products are shipped.
Research and Development Expense
The research and development metrics are as follows:
Three Months ended June 30, | ||||||||||||||||
| (In thousands, except for percentages) | 2023 | 2022 | $ Change | % Change | ||||||||||||
| Research and Development Expense | $ | 325 | $ | 206 | $ | 119 | 58% | |||||||||
| Research and Development Expense as a % of Revenue | 9% | 5% | ||||||||||||||
For the three months ended June 30, 2023, research and development expenses increased as a result of clinical expenses.
Selling, General and Administrative Expense
The selling, general and administrative expense metrics are as follows:
Three Months ended June 30, | ||||||||||||||||
| (In thousands, except for percentages) | 2023 | 2022 | $ Change | % Change | ||||||||||||
| Selling, General and Administrative Expense | $ | 2,119 | $ | 2,295 | $ | (176 | ) | (8% | ) | |||||||
| Selling, General and Administrative Expense as a % of Revenue | 62% | 58% | ||||||||||||||
Selling, general and administrative expenses were essentially flat for the three months ended June 30, 2023 as compared to the previous year. Revenues were down 14% when comparing the quarter ended June 30, 2023 to the quarter ended June 30, 2022, resulting in an increase in selling, general and administrative expenses as a percentage of revenues.
Other Expense, net
Other expense, net for the three months ended June 30, 2023 of $211,000 increased by $144,000 when compared to other expense, net of $67,000 for the three months ended June 30, 2022. The increase in other expense, net relates primarily to fluctuations in foreign exchange.
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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 Three Months Ended June 30, | ||||||||
| (In thousands, except per share data) | 2023 | 2022 | ||||||
| Numerator: | ||||||||
| Net loss | $ | (1,418 | ) | $ | (887 | ) | ||
| Denominator: | ||||||||
| Weighted-average number of common shares outstanding: basic and diluted | 4,936 | 3,101 | ||||||
| Net loss per share: basic and diluted | $ | (0.29 | ) | $ | (0.29 | ) | ||
Liquidity and Capital Resources
We reported a net loss of $1,418,000 and $887,000 for the three months ended June 30, 2023 and 2022, respectively. At June 30, 2023 and March 31, 2023, our accumulated deficit amounted to $190,932,000 and $189,514,000, respectively. We had working capital of $9,546,000 and $10,081,000 as of June 30, 2023 and March 31, 2022, respectively.
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.
Management believes that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, it is possible that new financing will not 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. 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. These measures could cause significant delays in our continued efforts to commercialize our products, which is critical to the realization of our business plan and our future operations. These matters raise substantial doubt about our ability to continue as a going concern.
Sources of Liquidity
As of June 30, 2023, we had cash and cash equivalents of $3,544,000. Since our inception, substantially all of our operations have been financed through sales of equity securities. Other sources of financing that we have used to date include our revenues, as well as various loans and the sale of certain assets to Invekra, Petagon, Microsafe and Infinity Labs.
Cash Flows
The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the three months ended June 30, 2023 and 2022 as well balances of cash and cash equivalents and working capital:
| Three Months ended June 30, | ||||||||
| (In thousands) | 2023 | 2022 | ||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (215 | ) | $ | (1,533 | ) | ||
| Investing activities | (17 | ) | (23 | ) | ||||
| Financing activities | (135 | ) | (387 | ) | ||||
| Effect of exchange rates on cash | 91 | 133 | ||||||
| Net change in cash and cash equivalents | (276 | ) | (1,810 | ) | ||||
| Cash and cash equivalents, beginning of the period | 3,820 | 7,396 | ||||||
| Cash and cash equivalents, end of the period | $ | 3,544 | $ | 5,586 | ||||
| Working capital (1), end of period | $ | 9,546 | $ | 9,963 | ||||
| (1) | Defined as current assets minus current liabilities. |
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As of June 30, 2023, we had cash and cash equivalents of $3,544,000, compared to $5,586,000 as of June 30, 2022.
Net cash used by operating activities during the three months ended June 30, 2023 was $215,000, primarily due to a net loss of $1,418,000 offset by stock related compensation expense of $177,000, increase in accounts receivable of $191,000, increase in inventory of $230,000 and a combined increase in accounts payable and accrued liabilities of $394,000.
Net cash used by operating activities during the three months ended June 30, 2022 was $1,533,000, primarily due to a net loss of $887,000 and a decrease in deferred revenue.
Net cash used in investing activities was $17,000 for three months ended June 30, 2023, primarily related to the purchase of equipment.
Net cash used in investing activities was $23,000 for three months ended June 30, 2022, primarily related to the purchase of equipment.
Net cash used in financing activities was $135,000 for the three months ended June 30, 2023, primarily related to principal payments on a short-term loan related to financing of insurance premiums.
Net cash used in financing activities was $387,000 for the three months ended June 30, 2022, primarily related to principal payments on PPP loan and short-term debt of $350,000 and to a payment of a long-term deposit.
Material Trends and Uncertainties
We rely on certain key customers for a significant portion of our revenues. In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent period.
We are exposed to risk from decline in foreign currency for both the Euro and the Mexico Peso versus the U.S. dollar. Most recently there has been a sharp decline in the Euro versus the U.S. dollar which has impacted our financial results.
As we have previously discussed in our annual report on Form 10-K filed with the SEC on June 21, 2023, we face a substantial Mexico tax liability, intercompany debt, unpaid technical assistance charges and accrued interest. These amounts are not due until 2027. At this time, management believes there are sufficient assets on the balance sheet to more than cover any tax obligation without interrupting our 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 us.
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 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. Furthermore, overall inflation tendencies may put pressure on our product pricing and/or costs.
We also closely monitor overall economic conditions, consumer sentiment and the prospect of a recession in the United States which may impact our financial results.
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. Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories, the recoverability of long-lived assets, the valuation allowance related to our deferred tax assets, valuation of equity and derivative instruments, debt discounts, valuation of investments and the estimated amortization periods of upfront product licensing fees received from customers.
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Off-Balance Sheet Transactions
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
As a smaller reporting company, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information required by this Item.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of our most recent fiscal quarter. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2023.
Notwithstanding the material weaknesses, management believes the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. generally accepted accounting principles.
Management’s Remediation Measures
Management, with oversight from the Audit Committee of our Board of Directors, is actively engaged in remediation efforts to address the material weaknesses identified in the management’s evaluation of internal controls and procedures. Management has taken a number of actions to remediate the material weaknesses described above, including the following:
| · | Improved monitoring and risk assessment activities to address these control deficiencies. | |
| · | Hired an interim Chief Financial Officer in April 2023 and a Controller in July 2023. | |
| · | Separated the preparation of the financial reports from review of the financial reports. | |
| · | Implemented additional process-level controls over revenue recognition of new contracts. | |
| · | Developed and delivered further internal controls training to individuals associated with these control deficiencies and enhanced training provided to all personnel who have financial reporting or internal control responsibilities in these areas. The training includes a review of individual roles and responsibilities related to internal controls, proper oversight and reemphasizes the importance of completing the control procedures. | |
| · | Did a detailed review of income taxes and our intercompany agreements which uncovered the fact that we should be accruing withholding taxes that will be paid to Mexico when intercompany interest and Technical Assistance payments are made to Mexico from the United States and that we will not be eligible for a tax credit in the United States because of our Net Operating Loss positions. |
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These improvements are targeted at strengthening our internal control over financial reporting and remediating the material weaknesses. We remain committed to an effective internal control environment and management believes that these actions and the improvements management expects to achieve as a result, will effectively remediate the material weaknesses. However, the material weaknesses in our internal control over financial reporting will not be considered remediated until the controls operate for a sufficient period of time and management has concluded, through testing that these controls operate effectively. As of the date of filing this Quarterly Report on Form 10-Q, management is in the process of testing and evaluating these additional controls to determine whether they are operating effectively. We have hired appropriate accounting staff to establish effective internal controls and processes.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not finished our testing our remediated controls and sufficient time has not elapsed to make the determination these controls are operating effectively.
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PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings |
On occasion, we may be involved in legal matters arising in the ordinary course of our business including matters involving proprietary technology. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which we are or could become involved in litigation may have a material adverse effect on our business, financial condition or results of comprehensive loss.
| Item 1A. | Risk Factors |
There have been no material changes from risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended March 31, 2023, as filed with the SEC June 21, 2023.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
We did not issue any unregistered securities during the quarter ended June 30, 2023 and through August 10, 2023.
| Item 3. | Default Upon Senior Securities |
We did not default upon any senior securities during the quarter ended June 30, 2023.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
None.
| 25 |
| Item 6. | Exhibits |
Exhibit Index
| Exhibit No. | Description |
| 3.1 | Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., effective January 30, 2006 (included as exhibit 3.1 of the Company’s Annual Report on Form 10-K filed June 20, 2007, and incorporated herein by reference). |
| 3.2 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., effective October 22, 2008 (included as exhibit A in the Company’s Definitive Proxy Statement on Schedule 14A filed July 21, 2008, and incorporated herein by reference). |
| 3.4 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective March 29, 2013 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 22, 2013, and incorporated herein by reference). |
| 3.5 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective December 4, 2014 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 8, 2014, and incorporated herein by reference). |
| 3.6 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective October 22, 2015 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 27, 2015, and incorporated herein by reference). |
| 3.7 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective June 24, 2016 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 28, 2016, and incorporated herein by reference). |
| 3.8 | Certificate of Amendment of Restated Certificate of Incorporation of Sonoma Pharmaceuticals, Inc., as amended, effective December 6, 2016 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 7, 2016, and incorporated herein by reference). |
| 3.9 | Amended and Restated Bylaws, as amended, of Sonoma Pharmaceuticals, Inc., effective December 6, 2016 (included as exhibit 3.2 to the Company’s Current Report on Form 8-K filed December 7, 2016, and incorporated herein by reference). |
| 3.10 | Certificate of Designation of Preferences, Rights and Limitations of Series A 0% Convertible Preferred Stock, filed with the Delaware Secretary of State on April 24, 2012 (included as exhibit 4.2 to the Company’s Current Report on Form 8-K, filed April 25, 2012, and incorporated herein by reference). |
| 3.11 | Certificate of Designation of Series B Preferred Stock, effective October 18, 2016 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 21, 2016, and incorporated herein by references). |
| 3.12 | Certificate of Amendment of Restated Certificate of Incorporation of Sonoma Pharmaceuticals, Inc., as amended, effective June 19, 2019 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 19, 2019, and incorporated herein by reference). |
| 4.1 | Specimen Common Stock Certificate (included as exhibit 4.1 to the Company’s Annual Report on Form 10-K filed June 28, 2017, and incorporated herein by reference). |
| 4.2 | Section 382 Rights Agreement, dated as of October 18, 2016, between Oculus Innovative Sciences, Inc. and Computershare Inc., which includes the Form of Certificate of Designation of Series B Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Stock as Exhibit C (included as exhibit 4.1 to the Company’s Current Report on Form 8-K filed October 21, 2016, and incorporated herein by reference). |
| 4.3 | Form of Placement Agent Warrant granted to Dawson James Securities, Inc. and The Benchmark Company, LLC in connection with the March 2, 2018 public offering, dated March 6, 2018 (included as exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 6, 2018, and incorporated herein by reference). |
| 4.4 | Form of Placement Agent Warrant granted to Dawson James Securities, Inc. in connection with the November 2019 public offering (included as exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 29, 2019, and incorporated herein by reference). |
| 10.1 | Form of Indemnification Agreement between Oculus Innovative Sciences, Inc. and its officers and directors (included as exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). |
| 10.2 | Office Lease Agreement, dated May 18, 2006, between Oculus Technologies of Mexico, S.A. de C.V. and Antonio Sergio Arturo Fernandez Valenzuela (translated from Spanish) (included as exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). |
| 26 |
| 10.3 | Office Lease Agreement, dated July 2003, between Oculus Innovative Sciences, B.V. and Artikona Holding B.V. (translated from Dutch) (included as exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). |
| 10.4 | Form of Director Agreement (included as exhibit 10.20 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). |
| 10.5 | Amended and Restated Oculus Innovative Sciences, Inc. 2006 Stock Incentive Plan and related form stock option plan agreements (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 2, 2007, and incorporated herein by reference). |
| 10.6 | Amendment to Office Lease Agreement, effective February 15, 2008, by and between Oculus Innovative Sciences Netherlands B.V. and Artikona Holding B.V. (translated from Dutch) (included as exhibit 10.44 to the Company’s Annual Report on Form 10-K filed June 13, 2008, and incorporated herein by reference). |
| 10.7 | Oculus Innovative Sciences, Inc. 2011 Stock Incentive Plan (included as exhibit A in the Company’s Definitive Proxy Statement on Schedule 14A filed July 29, 2011, and incorporated herein by reference). |
| 10.8† | Exclusive Sales and Distribution Agreement, dated November 6, 2015, by and between Oculus Innovative Sciences, Inc. and Manna Pro Products, LLC (included as exhibit 10.1 to the Company’s 8-K filed March 23, 2016 and incorporated herein by reference). |
| 10.9† | Asset Purchase Agreement dated October 27, 2016, between Oculus Innovative Sciences, Inc. and Invekra, S.A.P.I de C.V. (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 31, 2016, and incorporated herein by reference). |
| 10.10† | Amendment Agreement to Acquisition Option dated October 27, 2016, by and between More Pharma Corporation S. de R.L. de C.V. and Oculus Technologies of Mexico, S.A. de C.V. (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 31, 2016, and incorporated herein by reference). |
| 10.11 | 2016 Equity Incentive Plan (included as exhibit A in the Company’s Definitive Proxy Statement on Schedule 14A filed July 29, 2016, and incorporated herein by reference). |
| 10.12 | Securities Purchase Agreement entered into by and between Sonoma Pharmaceuticals, Inc. and Montreux Equity Partners V, L.P., dated March 1, 2018 (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 6, 2018, and incorporated herein by reference). |
| 10.13† | Exclusive License and Distribution Agreement entered into by and between Sonoma Pharmaceuticals, Inc. and EMS.S.A., dated June 4, 2018 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 5, 2018, and incorporated herein by reference). |
| 10.14 | Warrant Agency Agreement entered into by and among Sonoma Pharmaceuticals, Inc., Computershare, Inc. and Computershare Trust Company, N.A., dated November 21, 2018 (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 21, 2018, and incorporated herein by reference). |
| 10.15⸸+ | Asset Purchase Agreement dated May 14, 2019, between Sonoma Pharmaceuticals, Inc. and Petagon, Ltd. (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 22, 2019, and incorporated herein by reference). |
| 10.16⸸+ | Asset Purchase Agreement dated February 21, 2020, between Sonoma Pharmaceuticals, Inc. and MicroSafe Group, DMCC (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 27, 2020, and incorporated herein by reference.) |
| 10.17⸸+ | License, Distribution and Supply Agreement by and between Sonoma Pharmaceuticals, Inc. and Brill International, S.L. dated May 19, 2020 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 26, 2020, and incorporated herein by reference.) |
| 10.18 | Consulting Agreement between the Company and Dr. Robert Northey, dated May 30, 2020. (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 4, 2020, and incorporated herein by reference.) |
| 10.19⸸+ | Asset Purchase Agreement between the Company and Infinity Labs SD, Inc., dated June 24, 2020 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 30, 2020, and incorporated herein by reference.) |
| 10.20+ | Woodstock Lease Agreement between the Company and Fowler Crossing Partners, LP, dated October 1, 2018. |
| 10.21⸸ | Licensing Agreement between Sonoma Pharmaceuticals, Inc. and MicroSafe Group, effective July 27, 2020 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 6, 2020, and incorporated herein by reference). |
| 10.22⸸ | Licensing and Distribution Agreement between Sonoma Pharmaceuticals, Inc. and Gabriel Science, LLC, effective December 14, 2020 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 17, 2020, and incorporated herein by reference). |
| 10.23⸸ | Exclusive Supply and Distribution Agreement between the Company and EMC Pharma, LLC, dated March 26, 2021 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 31, 2021, and incorporated herein by reference). |
| 10.24 | Amended and Restated Employment Agreement by and between the Company and Amy Trombly, dated June 16, 2023 (included as exhibit 10.38 to the Company’s Current Report on Form 10-K filed on June 21, 2023, and incorporated herein by reference). |
| 10.25 | Amended and Restated Employment Agreement by and between the Company and Bruce Thornton, dated June 16, 2023 (included as exhibit 10.39 to the Company’s Current Report on Form 8-K filed on June 21, 2023, and incorporated herein by reference). |
| 27 |
| 10.26 | At-The-Market Offering Agreement, by and between the Company and H.C. Wainwright & Co., LLC, dated July 30, 2021 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 30, 2021, and incorporated herein by reference). |
| 10.27 | 2021 Equity Incentive Plan (included as appendix on the Company’s proxy statement filed on July 29, 2021 and incorporated herein by reference). |
| 10.28+⸸ | Exclusive License and Distribution Agreement between the Company and Dyamed Biotech Pte Ltd., dated November 4, 2021 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 9, 2021, and incorporated herein by reference). |
| 10.29+⸸ | Non-Exclusive Distribution and Supply Agreement between the Company and Salus Medical, LLC dated January 19, 2022 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 20, 2022, and incorporated herein by reference). |
| 10.30+⸸ | Exclusive License and Distribution Agreement between Sonoma Pharmaceuticals, Inc. and Anlicare International dated January 18, 2022 (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 20, 2022, and incorporated herein by reference). |
| 10.31 | At-The-Market Offering Agreement, by and between the Company and Ladenburg Thalmann & Co. Inc., dated December 23, 2022 (included as exhibit 1.1 to the Company’s Current Report on Form 8-K filed on December 23, 2022, and incorporated herein by reference). |
| 10.32 | Sonoma Pharmaceuticals, Inc. Non-Employee Director Compensation Program and Stock Ownership Guidelines, revised by the Board of Directors on December 29, 2022 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 30, 2022, and incorporated herein by reference). |
| 10.33+⸸ | Exclusive Distribution and Supply Agreement, dated January 26, 2023, by and between Sonoma Pharmaceuticals, Inc. and Daewoong Pharmaceutical Co., Ltd. (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 31, 2023, and incorporated herein by reference). |
| 10.34 | Amendment to At-The-Market Offering Agreement, by and between the Company and Ladenburg Thalmann & Co. Inc., dated February 24, 2023 (included as exhibit 1.1 to the Company’s Current Report on Form 8-K filed on February 24, 2023, and incorporated herein by reference). |
| 10.35 | Consulting Agreement, by and between the Company and Jerome Dvonch, dated April 7, 2023 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 13, 2023, and incorporated herein by reference). |
| 10.36 | Offer letter to John Dal Poggetto dated July 11, 2023 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 14, 2023, and incorporated herein by reference). |
| 10.37 | Consulting Agreement, by and between the Company and Jerome Dvonch Consulting, LLC, effective August 15, 2023 (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 14, 2023, and incorporated herein by reference). |
| 14.1 | Code of Business Conduct (included as Exhibit 14.1 to the Company’s Current Report on Form 8-K filed on January 23, 2017, and incorporated herein by reference). |
| 21.1 | List of Subsidiaries (included as Exhibit 21.1 to the Company’s Annual Report on Form 10-K on June 28, 2017, and incorporated herein by reference). |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1* | Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted in inline XBRL, and included in exhibit 101). |
| * | Filed herewith. |
| † | Confidential treatment has been granted with respect to certain portions of this agreement. |
| ⸸ | Certain portions of the exhibit have been omitted to preserve the confidentiality of such information. The Company will furnish copies of any such information to the SEC upon request. |
| + | The schedules to the exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules to the SEC upon request. |
Copies of above exhibits not contained herein are available to any stockholder, upon payment of a reasonable per page fee, upon written request to: Chief Financial Officer, Sonoma Pharmaceuticals, Inc., 5445 Conestoga Court, Suite 150, Boulder, Colorado 80301.
| 28 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: August 10, 2023 | By: | /s/ Amy Trombly | |
|
Amy Trombly President and Chief Executive Officer, (Principal Executive Officer) |
|||
| Date: August 10, 2023 | /s/ Jerome Dvonch | ||
| Jerome Dvonch | |||
| Interim Chief Financial Officer | |||
|
(Principal Financial and Principal Accounting Officer) |
| 29 |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Amy Trombly, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sonoma Pharmaceuticals, Inc. for the quarter ended June 30, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Amy Trombly | ||
| Date: August 10, 2023 | Amy Trombly | ||
| Chief Executive Officer | |||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Jerome Dvonch, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sonoma Pharmaceuticals, Inc. for the quarter ended June 30, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Jerome Dvonch | ||
| Date: August 10, 2023 | Jerome Dvonch | ||
|
Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officers of Sonoma Pharmaceuticals, Inc., a Delaware corporation (the “Company”), do hereby certify, to such officers’ knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: August 10, 2023 | By: | /s/ Amy Trombly | |
|
Amy Trombly Chief Executive Officer (Principal Executive Officer) |
|||
| Date: August 10, 2023 | By: | /s/ Jerome Dvonch | |
|
Jerome Dvonch Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Common stock par value | $ 0.0001 | $ 0.0001 |
| Common stock shares authorized | 24,000,000 | 24,000,000 |
| Common stock shares issued | 5,141,596 | 4,933,550 |
| Common stock shares outstanding | 5,141,596 | 4,933,550 |
| Convertible Preferred Stock [Member] | ||
| Convertible preferred stock par value | $ 0.0001 | $ 0.0001 |
| Convertible preferred stock shares authorized | 714,286 | 714,286 |
| Convertible preferred stock shares issued | 0 | 0 |
| Convertible preferred stock shares outstanding | 0 | 0 |
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Income Statement [Abstract] | ||
| Revenues | $ 3,427 | $ 3,983 |
| Cost of revenues | 2,223 | 2,337 |
| Gross profit | 1,204 | 1,646 |
| Operating expenses | ||
| Research and development | 325 | 206 |
| Selling, general and administrative | 2,119 | 2,295 |
| Total operating expenses | 2,444 | 2,501 |
| Loss from operations | (1,240) | (855) |
| Other expense, net | (211) | (67) |
| Loss before income taxes | (1,451) | (922) |
| Income tax benefit | 33 | 35 |
| Net loss | (1,418) | (887) |
| Other comprehensive loss | ||
| Foreign currency translation adjustments | 511 | (65) |
| Comprehensive loss | $ (907) | $ (952) |
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Income Statement [Abstract] | ||
| Net loss per share: basic | $ (0.29) | $ (0.29) |
| Net loss per share: diluted | $ (0.29) | $ (0.29) |
| Weighted-average number of shares: basic | 4,936 | 3,101 |
| Weighted-average number of shares: diluted | 4,936 | 3,101 |
Organization and Recent Developments |
3 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 | |||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| Organization and Recent Developments |
Organization
Sonoma Pharmaceuticals, Inc. (the “Company”) was incorporated under the laws of the State of California in April 1999 and was reincorporated under the laws of the State of Delaware in December 2006. The Company’s principal office was moved to Woodstock, Georgia from Petaluma, California in June 2020 and to Boulder, Colorado in October 2022. The Company is a global healthcare leader for developing and producing stabilized hypochlorous acid (“HOCl”) products for a wide range of applications, including wound care, animal health care, eye care, oral care and dermatological conditions. The Company’s products reduce infections, itch, pain, scarring and harmful inflammatory responses in a safe and effective manner. In-vitro and clinical studies of HOCl show it to have impressive antipruritic, antimicrobial, antiviral and anti-inflammatory properties. The Company’s stabilized HOCl immediately relieves itch and pain, kills pathogens and breaks down biofilm, does not sting or irritate skin and oxygenates the cells in the area treated assisting the body in its natural healing process. The Company sells its products either directly or via partners in 55 countries worldwide.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and for the three months then ended have been prepared in accordance with the accounting principles generally accepted in the United States of America for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of June 30, 2023, and the condensed consolidated statements of comprehensive income (loss), cash flows, and changes in stockholders’ equity for the three months ended June 30, 2023 and 2022 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the condensed consolidated financial position, operating results and cash flows for the periods presented. The results for the three months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending March 31, 2024 or for any future interim period. The condensed consolidated balance sheet at March 31, 2023 has been derived from audited consolidated financial statements. These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended March 31, 2023, and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on June 21, 2023.
|
Liquidity and Financial Condition |
3 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 | |||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| Liquidity and Financial Condition |
The Company reported a net loss of $1,418,000 and $887,000 for the three months ended June 30, 2023 and 2022, respectively. At June 30, 2023 and March 31, 2023, the Company’s accumulated deficit amounted to $190,932,000 and $189,514,000, respectively. The Company had working capital of $9,546,000 and $10,081,000 as of June 30, 2023 and March 31, 2023, respectively. During the three months ended June 30, 2023 and 2022, net cash used in operating activities amounted to $215,000 and $1,533,000, respectively.
Management believes that the Company has access to additional capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, the Company cannot provide any assurance that other new financings will be available on commercially acceptable terms, if needed. If the economic climate in the U.S. deteriorates, the Company’s ability to raise additional capital could be negatively impacted. If the Company is unable to secure additional capital, it may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays in the Company’s continued efforts to commercialize its products, which is critical to the realization of its business plan and the future operations of the Company. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
|
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories, the valuation allowance relating to the Company’s deferred tax assets, valuation of equity and the estimated amortization periods of upfront product licensing fees received from customers. Periodically, the Company evaluates and adjusts estimates accordingly.
Reclassification
During the three months ended June 30, 2023, the Company aligned its accounting policy to conform the presentation of certain costs it views as research and development efforts. These costs are now included in research and development, whereas they were previously included in cost of revenues. The three months ended June 30, 2022 has been reclassified to conform to the current period presentation. The reclassification increased research and development by $200,000 and decreased cost of revenues by the same amount. The reclassification had no impact on total operating costs, earnings from operations, net earnings, earnings per share or total equity.
The following table provides the net loss for each period along with the computation of basic and diluted net loss per share:
The computation of basic and diluted loss per share for the three months ended June 30, 2023 and 2022 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”), Topic 606 Revenue from Contracts with Customers (“Topic 606”). Revenue is recognized when the Company transfers promised goods or services to the customer, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company derives the majority of its revenue through sales of its products directly to end users and to distributors. The Company also sells products to a customer base, including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company has also entered into agreements to license its technology and products.
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which it expects to be entitled.
For all of the Company’s sales to non-consignment distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e. when its performance obligation is satisfied), which typically occurs when title passes to the customer upon shipment but could occur when the customer receives the product based on the terms of the agreement with the customer. For product sales to its value-added resellers, non-stocking distributors and end-user customers, the Company grants return privileges to its customers, and because the Company has a long history with its customers, the Company is able to estimate the amount of product that will be returned. Sales incentives and other programs that the Company may make available to these customers are considered to be a form of variable consideration, and the Company maintains estimated accruals and allowances using the expected value method. With the movement of these sales to a full distributor model in fiscal year 2022, the Company no longer provides these arrangements although the Company still receives some returns from the period prior to the year ended March 31, 2023.
The Company has entered into consignment arrangements, in which goods are left in the possession of another party to sell. As products are sold from the customer to third parties, the Company recognizes revenue based on a variable percentage of a fixed price. Revenue recognized varies depending on whether a patient is covered by insurance or is not covered by insurance. In addition, the Company may incur a revenue deduction related to the use of the Company’s rebate program.
Sales to stocking distributors are made under terms with fixed pricing and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. Revenue from sales to distributors is recognized upon the transfer of control to the distributor.
The Company assessed the promised goods and services in the technical support to Invekra for a ten-year period as being a distinct service that Invekra can benefit from on its own and is separately identifiable from any other promises within the contract. Given that the distinct service is not substantially the same as other goods and services within the Invekra contract, the Company accounted for the distinct service as a performance obligation.
Accounts Receivable
Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns. Estimates for cash discounts and sales returns are based on analysis of contractual terms and historical trends.
The Company’s policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance for doubtful accounts is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Other factors that the Company considers include its existing contractual obligations, historical payment patterns of its customers and individual customer circumstances, an analysis of days sales outstanding by customer and geographic region, and a review of the local economic environment and its potential impact on government funding and reimbursement practices. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts represents probable credit losses of $0 and $0 at June 30, 2023 and March 31, 2023, respectively. Additionally, at June 30, 2023 and March 31, 2023 the Company had allowances of $17,000 and $16,000, respectively, related to potential discounts, returns, distributor fees and rebates. The allowances are included in Accounts Receivable, net in the accompanying condensed consolidated balance sheets.
Inventories
Inventories are stated at the lower of cost, cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis), or net realizable value.
Due to changing market conditions, estimated future requirements, age of the inventories on hand and production of new products, the Company regularly reviews inventory quantities on hand and records a provision to write down excess and obsolete inventory to its estimated net realizable value. The Company recorded a provision to reduce the carrying amounts of inventories to their net realizable value in the amount of $247,000 and $236,000 at June 30, 2023 and March 31, 2023, respectively, which is included in cost of revenues on the Company’s accompanying condensed consolidated statements of comprehensive loss.
Recent Accounting Standards
Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
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Condensed Consolidated Balance Sheet |
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| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Condensed Consolidated Balance Sheet |
Inventories, net
Inventories, net consist of the following:
Leases
The Company's operating leases are comprised primarily of facility leases. The Company did not have any finance leases as of June 30, 2023 and March 31, 2023. Balance sheet information related to our leases is presented below:
Other information related to leases is presented below:
As of June 30, 2023, the annual minimum lease payments of our operating lease liabilities were as follows:
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Commitments and Contingencies |
3 Months Ended | ||
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Jun. 30, 2023 | |||
| Commitments and Contingencies Disclosure [Abstract] | |||
| Commitments and Contingencies |
Legal Matters
The Company may be involved in legal matters arising in the ordinary course of business including matters involving proprietary technology. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company is or could become involved in litigation may have a material adverse effect on its business and financial condition of comprehensive loss.
Employment Agreements
The Company has employment agreements in place with two of its key executives. These executive employment agreements provide, among other things, for the payment of up to eighteen months of severance compensation for terminations under certain circumstances.
Amendments
On June 16, 2023, we entered into an amended and restated employment agreement with our Chief Executive Officer, Amy Trombly. The amended and restated agreement provides that, in the event of termination upon change of control either without cause or for good reason, Ms. Trombly is entitled to receive, in addition to the other benefits described therein, a lump sum severance equal to one and a half times her base salary and one and a half times her target annual bonus. All other material terms of the amended and restated agreement remain unchanged from her prior employment agreement.
On June 16, 2023, we amended and restated our employment agreement with Bruce Thornton, our Chief Operating Officer. Under the amended and restated agreement, Mr. Thornton will serve as Executive Vice President and Chief Operating Officer of the Company. Mr. Thornton will no longer receive a monthly car allowance; however, his base salary is adjusted to include such amount. The amended and restated agreement also provides that, in the event of termination upon change of control either without cause or for good reason, Mr. Thornton is entitled to receive, in addition to the other benefits described therein, to a lump sum severance equal to one and a half times his base salary and one and a half times his target annual bonus. The agreement further provides that upon termination for any reason, Mr. Thornton’s outstanding and vested equity awards shall remain exercisable for 18 months following termination. Either party may terminate the employment agreement for any reason upon at least 60 days prior written notice. All other material terms of his amended and restated agreement remain unchanged from his prior employment agreement.
Bonus Grants
On June 16, 2023, the Compensation Committee of the Board of Directors approved annual bonus awards of $162,500 for Ms. Trombly and $150,000 for Mr. Thornton.
Equity Awards
On June 16, 2023, the Compensation Committee of the Board of Directors approved an equity award of shares of the Company’s common stock to each of Ms. Trombly and Mr. Thornton, to be issued to on June 30, 2023, at a valuation based on the five day weighted trailing average of the Company’s stock price on the day of grant. In addition, the Compensation Committee also approved a one-time cash payment by the Company as reimbursement for estimated taxes payable with respect to such equity awards.
As of June 30, 2023, with respect to these agreements, aggregated annual salaries is $586,000 and potential severance payments to these key executives is $1,300,000, if triggered.
Related Party Transactions
During the three months ended June 30, 2023 and 2022, the Company incurred $0 and $27,000, respectively, in legal services from Trombly Business Law, PC. The Chief Executive Officer of the Company, Ms. Trombly is the owner of Trombly Business Law, PC, which was retained by the Company to advise on certain corporate and securities law matters. The Company ceased using Trombly Business Law, PC in July 2022.
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Debt |
3 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 | |||
| Debt Disclosure [Abstract] | |||
| Debt |
Financing of Insurance Premiums
On February 1, 2022, the Company entered into a note agreement for $748,000 with an interest rate of 4.68% per annum with final payment on January 1, 2023. This instrument was issued in connection with financing insurance premiums. The note is payable in ten monthly installment payments of principal and interest of $76,000, with the first installment beginning March 1, 2022.
On February 1, 2023, the Company entered into a note agreement for $453,000 with an interest rate of 8.98% per annum with final payment on January 1, 2024. This instrument was issued in connection with financing insurance premiums. The note is payable in eleven monthly installment payments of principal and interest of $43,000, with the first installment beginning March 1, 2023.
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Stockholders’ Equity |
3 Months Ended | ||
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Jun. 30, 2023 | |||
| Equity [Abstract] | |||
| Stockholders’ Equity |
Authorized Capital
The Company is authorized to issue up to shares of common stock with a par value of $ per share and shares of convertible preferred stock with a par value of $ per share.
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Stock-Based Compensation |
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| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation |
For the three months ended June 30, 2023 and 2022, the Company incurred $ and $ of stock-based compensation expense, respectively. All stock-based compensation incurred is included in selling, general and administrative expense in the accompanying condensed consolidated statements of comprehensive loss.
At June 30, 2023, there was unrecognized compensation costs of $ related to stock options which is expected to be recognized over a weighted-average amortization period of years.
Stock options award activity is as follows:
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock, or $ per share at June 30, 2023.
Restricted stock award activity is as follows:
The Company did not capitalize any cost associated with stock-based compensation.
The Company issues new shares of common stock upon exercise of stock options or release of restricted stock awards.
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Income Taxes |
3 Months Ended | ||
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Jun. 30, 2023 | |||
| Income Tax Disclosure [Abstract] | |||
| Income Taxes |
At the end of each interim reporting period, the Company determines the income tax provision by using an estimate of the annual effective tax rate, adjusted for discrete items occurring in the quarter.
Our effective tax rate for the three months ended June 30, 2023 was 2.1%. The Company’s effective tax rate for the three months ended June 30, 2023 differed from the federal statutory tax rate of 21% primarily due to the valuation allowance recognized against deferred tax assets in the U.S. and Netherlands.
Judgment is required in determining whether deferred tax assets will be realized in full or in part. Management assesses the available positive and negative evidence on a jurisdictional basis to estimate if deferred tax assets will be recognized and when it is more likely than not that all or some deferred tax assets will not be realized, and a valuation allowance must be established. As of June 30, 2023, the Company continues to maintain a valuation allowance in the U.S. and Netherlands.
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Revenue Disaggregation |
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| Revenue Disaggregation |
The Company generates product revenues from products which are sold into the human and animal healthcare markets, and the Company generates service revenues from laboratory testing services which are provided to medical device manufacturers.
The following table presents the Company’s disaggregated revenues by source:
The following table shows the Company’s revenues by geographic region:
The Company’s service revenues in Latin America amounted to $99,000 and $1,028,000 for the three months ended June 30, 2023 and 2022, respectively.
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Significant Customer Concentrations |
3 Months Ended | ||
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Jun. 30, 2023 | |||
| Risks and Uncertainties [Abstract] | |||
| Significant Customer Concentrations |
For the three months ended June 30, 2023, customer A represented 15%, customer B represented 14%, and customer C represented 14% of net revenue. For the three months ended June 30, 2022, customer A represented 15% and customer B represented 26% of net revenue.
At June 30, 2023, customer D represented 21%, customer A represented 15%, and customer C represented 11% of the net accounts receivable balance. At June 30, 2022 customer A represented 25% and customer D represented 18% of the net accounts receivable balance.
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Subsequent Events |
3 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 | |||
| Subsequent Events [Abstract] | |||
| Subsequent Events |
Management has evaluated subsequent events or transactions occurring through the date the condensed consolidated financial statements were issued.
None.
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Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates | Use of Estimates
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories, the valuation allowance relating to the Company’s deferred tax assets, valuation of equity and the estimated amortization periods of upfront product licensing fees received from customers. Periodically, the Company evaluates and adjusts estimates accordingly.
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| Reclassification | Reclassification
During the three months ended June 30, 2023, the Company aligned its accounting policy to conform the presentation of certain costs it views as research and development efforts. These costs are now included in research and development, whereas they were previously included in cost of revenues. The three months ended June 30, 2022 has been reclassified to conform to the current period presentation. The reclassification increased research and development by $200,000 and decreased cost of revenues by the same amount. The reclassification had no impact on total operating costs, earnings from operations, net earnings, earnings per share or total equity.
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| Net Loss per Share |
The following table provides the net loss for each period along with the computation of basic and diluted net loss per share:
The computation of basic and diluted loss per share for the three months ended June 30, 2023 and 2022 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
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| Revenue Recognition | Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”), Topic 606 Revenue from Contracts with Customers (“Topic 606”). Revenue is recognized when the Company transfers promised goods or services to the customer, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company derives the majority of its revenue through sales of its products directly to end users and to distributors. The Company also sells products to a customer base, including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company has also entered into agreements to license its technology and products.
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which it expects to be entitled.
For all of the Company’s sales to non-consignment distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e. when its performance obligation is satisfied), which typically occurs when title passes to the customer upon shipment but could occur when the customer receives the product based on the terms of the agreement with the customer. For product sales to its value-added resellers, non-stocking distributors and end-user customers, the Company grants return privileges to its customers, and because the Company has a long history with its customers, the Company is able to estimate the amount of product that will be returned. Sales incentives and other programs that the Company may make available to these customers are considered to be a form of variable consideration, and the Company maintains estimated accruals and allowances using the expected value method. With the movement of these sales to a full distributor model in fiscal year 2022, the Company no longer provides these arrangements although the Company still receives some returns from the period prior to the year ended March 31, 2023.
The Company has entered into consignment arrangements, in which goods are left in the possession of another party to sell. As products are sold from the customer to third parties, the Company recognizes revenue based on a variable percentage of a fixed price. Revenue recognized varies depending on whether a patient is covered by insurance or is not covered by insurance. In addition, the Company may incur a revenue deduction related to the use of the Company’s rebate program.
Sales to stocking distributors are made under terms with fixed pricing and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. Revenue from sales to distributors is recognized upon the transfer of control to the distributor.
The Company assessed the promised goods and services in the technical support to Invekra for a ten-year period as being a distinct service that Invekra can benefit from on its own and is separately identifiable from any other promises within the contract. Given that the distinct service is not substantially the same as other goods and services within the Invekra contract, the Company accounted for the distinct service as a performance obligation.
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| Accounts Receivable | Accounts Receivable
Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns. Estimates for cash discounts and sales returns are based on analysis of contractual terms and historical trends.
The Company’s policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance for doubtful accounts is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Other factors that the Company considers include its existing contractual obligations, historical payment patterns of its customers and individual customer circumstances, an analysis of days sales outstanding by customer and geographic region, and a review of the local economic environment and its potential impact on government funding and reimbursement practices. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts represents probable credit losses of $0 and $0 at June 30, 2023 and March 31, 2023, respectively. Additionally, at June 30, 2023 and March 31, 2023 the Company had allowances of $17,000 and $16,000, respectively, related to potential discounts, returns, distributor fees and rebates. The allowances are included in Accounts Receivable, net in the accompanying condensed consolidated balance sheets.
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| Inventories | Inventories
Inventories are stated at the lower of cost, cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis), or net realizable value.
Due to changing market conditions, estimated future requirements, age of the inventories on hand and production of new products, the Company regularly reviews inventory quantities on hand and records a provision to write down excess and obsolete inventory to its estimated net realizable value. The Company recorded a provision to reduce the carrying amounts of inventories to their net realizable value in the amount of $247,000 and $236,000 at June 30, 2023 and March 31, 2023, respectively, which is included in cost of revenues on the Company’s accompanying condensed consolidated statements of comprehensive loss.
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| Recent Accounting Standards | Recent Accounting Standards
Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
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Summary of Significant Accounting Policies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of computation of earnings per share |
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| Schedule of antidilutive shares |
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Condensed Consolidated Balance Sheet (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventories |
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| Schedule of lease information |
Other information related to leases is presented below:
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| Schedule of minimum operating lease liabilities |
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Stock-Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of option activity |
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| Schedule of unvested restricted stock activity |
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Revenue Disaggregation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of disaggregated revenue by source |
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| Schedule of geographic sales |
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Liquidity and Financial Condition (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Mar. 31, 2023 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| Net loss | $ 1,418 | $ 887 | |
| Accumulated deficit | 190,932 | $ 189,514 | |
| Working capital | 9,546 | $ 10,081 | |
| Net cash used in operating activities | $ 215 | $ 1,533 | |
Summary of Significant Accounting Policies (Details - Earnings per share) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Numerator: | ||
| Net loss | $ (1,418) | $ (887) |
| Denominator: | ||
| Weighted-average number of common shares outstanding: basic | 4,936 | 3,101 |
| Weighted-average number of common shares outstanding: diluted | 4,936 | 3,101 |
| Net loss per share: basic | $ (0.29) | $ (0.29) |
| Net loss per share: diluted | $ (0.29) | $ (0.29) |
Summary of Significant Accounting Policies (Details - Antidilutive shares) - shares |
3 Months Ended | |||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | 727,000 | 602,000 | ||
| Restricted Stock Units (RSUs) [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | 31,000 | 0 | ||
| Equity Option [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | 547,000 | 448,000 | ||
| Warrant [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | 103,000 | 108,000 | ||
| Common Stock Units [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | [1] | 46,000 | 46,000 | |
| ||||
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
|
| Accounting Policies [Abstract] | ||
| Increase research and development in process | $ 200 | |
| Allowance for doubtful accounts | 0 | $ 0 |
| Allowance for sales discounts, rebates, distributor fees and returns | 17 | 16 |
| Inventory reserves | $ 247 | $ 236 |
Condensed Consolidated Balance Sheets (Details - Inventories) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
| Raw materials | $ 1,395 | $ 1,764 |
| Finished goods | 1,335 | 1,094 |
| Inventories, net | $ 2,730 | $ 2,858 |
Condensed Consolidated Balance Sheets (Details - Operating lease information) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
|
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
| Operating lease right-of-use assets | $ 354 | $ 418 |
| Operating lease liabilities – current | 233 | 256 |
| Operating lease liabilities – non- current | 121 | $ 162 |
| Operating lease cost | 103 | |
| Operating cash flows from operating leases | $ (79) | |
| Operating Lease, Weighted Average Remaining Lease Term | 17 years 4 months 24 days | |
| Operating Lease, Weighted Average Discount Rate, Percent | 6.00% |
Condensed Consolidated Balance Sheets (Details - Minimum Operating lease payments) $ in Thousands |
Jun. 30, 2023
USD ($)
|
|---|---|
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
| 2024 (excluding the three months ended June 30, 2023) | $ 239 |
| 2025 | 141 |
| 2026 | 16 |
| Total future minimum lease payments, undiscounted | 396 |
| Less: imputed interest | (42) |
| Present value of future minimum lease payments | $ 354 |
Commitments and Contingencies (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Jun. 16, 2023 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Trombly Business Law [Member] | |||
| Related Party Transaction [Line Items] | |||
| Legal Fees | $ 0 | $ 27,000 | |
| Ms. Trombly [Member] | |||
| Related Party Transaction [Line Items] | |||
| Annual bonus awards | $ 162,500 | ||
| Equity awards | 100,000 | ||
| Annual salaries | $ 586,000 | ||
| Severance payments | 1,300,000 | ||
| Mr. Thornton [Member] | |||
| Related Party Transaction [Line Items] | |||
| Annual bonus awards | $ 150,000 | ||
| Equity awards | 100,000 | ||
| Annual salaries | $ 586,000 | ||
| Severance payments | $ 1,300,000 | ||
Debt (Details Narrative) - Financingof Insurance Premiums [Member] - USD ($) $ in Thousands |
Feb. 01, 2023 |
Feb. 01, 2022 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Debt face amount | $ 453 | $ 748 |
| Debt interest rate | 8.98% | 4.68% |
| Final payment date | Jan. 01, 2024 | Jan. 01, 2023 |
| Number of installements | ten monthly installment payments | |
| Principal payments made | $ 43 | $ 76 |
| First installment beginning date | Mar. 01, 2023 | Mar. 01, 2022 |
Stockholders’ Equity (Details Narrative) - $ / shares |
Jun. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Class of Stock [Line Items] | ||
| Common stock, shares authorized | 24,000,000 | 24,000,000 |
| Common stock par value | $ 0.0001 | $ 0.0001 |
| Convertible Preferred Stock [Member] | ||
| Class of Stock [Line Items] | ||
| Preferred stock, shares authorized | 714,286 | 714,286 |
| Preferred stock par value | $ 0.0001 | $ 0.0001 |
Stock-Based Compensation (Details-Option activity) - Equity Option [Member] |
3 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Number of Shares Outstanding at beginning of period | shares | 565,000 |
| Weighted- Average Exercise Price Outstanding at beginning of period | $ / shares | $ 8.84 |
| Number of Shares Options forfeited | shares | (15,000) |
| Weighted- Average Exercise Price Options forfeited | $ / shares | $ 1.46 |
| Number of Shares Options expired | shares | (3,000) |
| Weighted- Average Exercise Price Options expired | $ / shares | $ 4.60 |
| Number of Shares Outstanding at end of period | shares | 547,000 |
| Weighted- Average Exercise Price Outstanding at end of period | $ / shares | $ 11.92 |
| Number of Shares Exercisable at end of period | shares | 252,000 |
| Weighted- Average Exercise Price Exercisable at end of period | $ / shares | $ 2.50 |
Stock-Based Compensation (Details-Restricted stock activity) - Restricted Stock [Member] |
3 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Unvested restricted stock awards, beginning balance | shares | 0 |
| Weighted average award date fair value per share, outstanding beginning balance | $ / shares | $ 0 |
| Restricted stock awards granted | shares | 239,000 |
| Weighted average award date fair value per share, granted | $ / shares | $ 1.06 |
| Restricted stock awards vested | shares | (208,000) |
| Weighted average award date fair value per share, vested | $ / shares | $ 1.08 |
| Unvested restricted stock awards, ending balance | shares | 31,000 |
| Weighted average award date fair value per share, outstanding ending balance | $ / shares | $ 0.94 |
Stock-Based Compensation (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Total stock-based compensation | $ 177 | $ 214 |
| Equity Option [Member] | ||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Unrecognized compensation costs | $ 493 | |
| Weighted average amortization period | 1 year 4 months 9 days | |
| Aggregate intrinsic value per share | $ 1.07 | |
Revenue Disaggregation (Details - Disaggregation of revenue) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 3,427 | $ 3,983 |
| Product [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 3,328 | 2,955 |
| Product [Member] | Human Care [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 2,750 | 2,168 |
| Product [Member] | Animal Care [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 578 | 787 |
| Service [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 99 | $ 1,028 |
Revenue Disaggregation (Details - Geographic regions) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 3,427 | $ 3,983 |
| Revenue, Segment Benchmark [Member] | UNITED STATES | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 806 | 871 |
| Revenue, Segment Benchmark [Member] | Europe [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 1,070 | 841 |
| Revenue, Segment Benchmark [Member] | Asia [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 862 | 920 |
| Revenue, Segment Benchmark [Member] | Latin America [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 487 | 1,048 |
| Revenue, Segment Benchmark [Member] | Rest Of The World [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 202 | $ 303 |
Revenue Disaggregation (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 3,427 | $ 3,983 |
| Service [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 99 | $ 1,028 |
Significant Customer Concentrations (Details Narrative) - Customer Concentration Risk [Member] |
3 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Revenue Benchmark [Member] | Customer A [Member] | ||
| Concentration Risk [Line Items] | ||
| Concentration Risk, Percentage | 15.00% | 15.00% |
| Revenue Benchmark [Member] | Customer B [Member] | ||
| Concentration Risk [Line Items] | ||
| Concentration Risk, Percentage | 14.00% | 26.00% |
| Revenue Benchmark [Member] | Customer C [Member] | ||
| Concentration Risk [Line Items] | ||
| Concentration Risk, Percentage | 14.00% | |
| Accounts Receivable [Member] | Customer A [Member] | ||
| Concentration Risk [Line Items] | ||
| Concentration Risk, Percentage | 15.00% | 25.00% |
| Accounts Receivable [Member] | Customer C [Member] | ||
| Concentration Risk [Line Items] | ||
| Concentration Risk, Percentage | 11.00% | |
| Accounts Receivable [Member] | Customer D [Member] | ||
| Concentration Risk [Line Items] | ||
| Concentration Risk, Percentage | 21.00% | 18.00% |