Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Mar. 31, 2018 | Jun. 21, 2018 | Sep. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | Sonoma Pharmaceuticals, Inc. | ||
Entity Central Index Key | 1,367,083 | ||
Document Type | 10-K | ||
Document Period End Date | Mar. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --03-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 6,421,239 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,018 | ||
Entity public float | $ 22,029,606 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2018 | Mar. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 10,066 | $ 17,461 |
Accounts receivable, net | 1,537 | 2,108 |
Inventories | 2,865 | 2,221 |
Prepaid expenses and other current assets | 1,547 | 616 |
Current portion of deferred consideration, net of discount | 239 | 237 |
Total current assets | 16,254 | 22,643 |
Property and equipment, net | 1,136 | 1,239 |
Deferred consideration, net of discount, less current portion | 1,322 | 1,497 |
Other assets | 494 | 80 |
Total assets | 19,206 | 25,459 |
Current liabilities: | ||
Accounts payable | 1,272 | 1,255 |
Accrued expenses and other current liabilities | 1,406 | 1,302 |
Deferred revenue | 147 | 345 |
Deferred revenue Invekra (Note 4) | 59 | 176 |
Current portion of long-term debt | 230 | 123 |
Current portion of capital leases | 147 | 74 |
Taxes payable | 13 | |
Total current liabilities | 3,261 | 3,288 |
Long-term deferred revenue Invekra (Note 4) | 443 | 527 |
Long-term debt, less current portion | 32 | 45 |
Long-term capital leases, less current portion | 144 | 168 |
Total liabilities | 3,880 | 4,028 |
Stockholders' Equity | ||
Convertible preferred stock, $0.0001 par value; 714,286 shares authorized, none issued and outstanding at March 31, 2018 and March 31, 2017, respectively | 0 | 0 |
Common stock, $0.0001 par value; 12,000,000 shares authorized at March 31, 2018 and March 31, 2017, 6,171,736 and 4,289,322 shares issued and outstanding at March 31, 2018 and March 31, 2017, respectively (Note 13) | 1 | 1 |
Additional paid-in capital | 176,740 | 168,709 |
Accumulated deficit | (157,440) | (143,101) |
Accumulated other comprehensive loss | (3,975) | (4,178) |
Total stockholders' equity | 15,326 | 21,431 |
Total liabilities and stockholders' equity | $ 19,206 | $ 25,459 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2018 | Mar. 31, 2017 |
Statement of Financial Position [Abstract] | ||
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 |
Common stock par value | $ 0.0001 | $ 0.0001 |
Common stock shares authorized | 12,000,000 | 12,000,000 |
Common stock shares issued | 6,171,736 | 4,289,322 |
Common stock shares outstanding | 6,171,736 | 4,289,322 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive (Loss) Income - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | $ 16,658 | $ 12,825 |
Total cost of revenues | 9,348 | 7,157 |
Gross profit | 7,310 | 5,668 |
Operating expenses | ||
Research and development | 1,575 | 1,576 |
Selling, general and administrative | 19,924 | 17,066 |
Total operating expenses | 21,499 | 18,642 |
Loss from operations | (14,189) | (12,974) |
Interest expense | (40) | (3) |
Interest income | 258 | 22 |
Other (expense) income, net | (357) | 18 |
Loss from continuing operations before income taxes | (14,328) | (12,937) |
Income tax benefit | 0 | 4,268 |
Loss from continuing operations | (14,328) | (8,669) |
Income from discontinued operations (net of tax) (Note 4) | 0 | 17,943 |
Net (loss) income | $ (14,328) | $ 9,274 |
Net (loss) income per share: basic and diluted - Continuing operations | $ (3.16) | $ (2.05) |
Net (loss) income per share: basic and diluted - Discontinued operations | 0 | 4.25 |
Net (loss) income per share: basic and diluted | $ (3.16) | $ 2.20 |
Weighted-average number of common shares used in common per share calculations: basic and diluted | 4,530 | 4,224 |
Other comprehensive income (loss) | ||
Net income (loss) | $ (14,328) | $ 9,274 |
Foreign currency translation adjustments | 203 | (324) |
Comprehensive (loss) income | (14,125) | 8,950 |
Product [Member] | ||
Revenues | 15,663 | 11,957 |
Total cost of revenues | 8,669 | 6,419 |
Service [Member] | ||
Revenues | 995 | 868 |
Total cost of revenues | $ 679 | $ 738 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Accumulated Other Comprehensive Income / Loss [Member] | Total |
Beginning balance, shares at Mar. 31, 2016 | 4,196,873 | ||||
Beginning balance, amount at Mar. 31, 2016 | $ 1 | $ 166,368 | $ (152,375) | $ (3,854) | $ 10,140 |
Adjustment due to 5:1 reverse stock-split, shares | (214) | ||||
Issuance of common stock upon exercise of common stock purchase warrants, shares | 18,232 | ||||
Issuance of common stock upon exercise of common stock purchase warrants, value | 91 | 91 | |||
Issuance of common stock upon exercise of common stock options, shares | 1,250 | ||||
Issuance of common stock upon exercise of common stock options, value | 7 | 7 | |||
Issuance of common stock for settlement of service fees, shares | 20,801 | ||||
Issuance of common stock for settlement of service fees, value | 98 | 98 | |||
Stock based compensation related to issuance of common stock restricted stock grants, shares | 52,380 | ||||
Stock based compensation related to issuance of common stock restricted stock grants, value | 302 | 302 | |||
Stock-based compensation expense, net of forfeitures | 1,843 | 1,843 | |||
Foreign currency translation adjustment | (324) | (324) | |||
Net income (loss) | 9,274 | 9,274 | |||
Ending balance, shares at Mar. 31, 2017 | 4,289,322 | ||||
Ending balance, amount at Mar. 31, 2017 | $ 1 | 168,709 | (143,101) | (4,178) | 21,431 |
Cumulative adjustment to April 1, 2017 resulting from adoption of ASU No. 2016-09 | 11 | (11) | |||
Issuance of common stock in connection with December 8, 2017 closing of offering, net of commissions, expenses and other offering costs | 228,000 | ||||
Issuance of common stock in connection with December 8, 2017 closing of offering, net of commissions, expenses and other offering costs | 968 | 968 | |||
Issuance of common stock in connection with March 6, 2018 closing of offering, net of commissions, expenses and other offering costs | 1,428,570 | ||||
Issuance of common stock in connection with March 6, 2018 closing of offering, net of commissions, expenses and other offering costs | 4,500 | 4,500 | |||
Issuance of common stock upon exercise of common stock purchase warrants, shares | 9,244 | ||||
Issuance of common stock upon exercise of common stock purchase warrants, value | 47 | 47 | |||
Issuance of common stock upon exercise of common stock options, shares | 901 | ||||
Issuance of common stock upon exercise of common stock options, value | 5 | 5 | |||
Issuance of common stock for settlement of service fees, shares | 15,916 | ||||
Issuance of common stock for settlement of service fees, value | 90 | 90 | |||
Stock based compensation related to issuance of common stock restricted stock grants, shares | 199,783 | ||||
Stock based compensation related to issuance of common stock restricted stock grants, value | 1,179 | 1,179 | |||
Stock-based compensation expense, net of forfeitures | 1,231 | 1,231 | |||
Foreign currency translation adjustment | 203 | 203 | |||
Net income (loss) | (14,328) | (14,328) | |||
Ending balance, shares at Mar. 31, 2018 | 6,171,736 | ||||
Ending balance, amount at Mar. 31, 2018 | $ 1 | $ 176,740 | $ (157,440) | $ (3,975) | $ 15,326 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities | ||
Net loss from continuing operations | $ (14,328) | $ (8,669) |
Net income from discontinued operations, net of tax | 0 | 17,943 |
Net income (loss) | (14,328) | 9,274 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 490 | 248 |
Provision for (recovery of) doubtful accounts | 4 | (1) |
Provision for discounts, rebates, distributor fees and returns | 603 | 19 |
Provision for obsolete inventory | 44 | 0 |
Gain on sale of Latin American assets, net of tax | 0 | (15,399) |
Income tax benefit | 0 | (4,268) |
Stock-based compensation | 2,410 | 2,145 |
Service provider expenses settled with common stock | 90 | 98 |
Loss on disposal of property and equipment | 0 | 10 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 11 | (2) |
Inventories | (583) | (675) |
Deferred consideration, net of discount | 222 | 0 |
Prepaid expenses and other current assets | (1,065) | 979 |
Accounts payable | 9 | (58) |
Accrued expenses and other current liabilities | 48 | (298) |
Deferred revenue | (394) | (239) |
Net cash used in operating activities | (12,439) | (8,167) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (187) | (394) |
Proceeds from sale of Latin American assets, net of costs | 0 | 18,639 |
Deposits | (14) | (21) |
Net cash (used in) provided by investing activities | (201) | 18,224 |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock net of offering costs | 5,468 | 0 |
Proceeds from exercise of common stock options | 5 | 7 |
Proceeds from exercise of common stock purchase warrants | 47 | 91 |
Principal payments on long-term debt | (148) | (130) |
Principal payments on capital leases | (132) | 0 |
Net cash (used in) provided by financing activities | 5,240 | (32) |
Effect of exchange rate on cash and cash equivalents | 5 | (33) |
Net (decrease) increase in cash and cash equivalents | (7,395) | 9,992 |
Cash and cash equivalents, beginning of year | 17,461 | 7,469 |
Cash and cash equivalents, end of year | 10,066 | 17,461 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 40 | 3 |
Non-cash operating and financing activities: | ||
Service provider expenses settled with common stock | 90 | 98 |
Insurance premiums financed | 241 | 120 |
Automobiles financed using long-term debt | 0 | 64 |
Automobiles financed using capital leases | 180 | 242 |
Sale of Latin American assets to Invekra: Assets sold and liabilities transferred: | ||
Deferred consideration - current, net | 0 | 237 |
Deferred consideration - long-term, net | 0 | 1,497 |
Taxes payable | 0 | (13) |
Deferred revenue - current | 0 | (176) |
Deferred revenue - long-term | 0 | (527) |
Total assets sold and liabilities transferred | $ 0 | $ 1,018 |
1. Organization and Recent Deve
1. Organization and Recent Developments | 12 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Recent Developments | 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 is located in Petaluma, California. The Company is a specialty pharmaceutical company dedicated to identifying, developing and commercializing unique, differentiated therapies to patients living with chronic skin conditions. The Company believes its products, which are sold throughout the United States and internationally, have improved patient outcomes by treating and reducing certain skin diseases including acne, atopic dermatitis, scarring, infections, itch, pain and harmful inflammatory responses. |
2. Liquidity and Financial Cond
2. Liquidity and Financial Condition | 12 Months Ended |
Mar. 31, 2018 | |
Liquidity And Financial Condition | |
Liquidity and Financial Condition | NOTE 2 – Liquidity and Financial Condition The Company reported a net loss of $14,328,000 for the year ended March 31, 2018. At March 31, 2018 and March 31, 2017, the Company’s accumulated deficit amounted to $157,440,000 and $143,101,000, respectively. The Company had working capital of $12,993,000 and $19,355,000 as of March 31, 2018 and March 31, 2017, respectively. The Company expects to continue incurring losses for the foreseeable future and may need to raise additional capital to pursue its product development initiatives, and penetrate markets for the sale of its products. On December 8, 2017, the Company entered into an At Market Issuance Sales Agreement, with B. Riley FBR, Inc. (“B. Riley”) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $5,000,000 from time to time through B. Riley acting as its sales agent. The Company will pay B. Riley a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through B. Riley as agent. For the year ended March 31, 2018, the Company sold 228,000 shares of common stock for gross proceeds of $1,034,000 and net proceeds of $968,000 after deducting commissions and other offering expenses. On March 2, 2018, the Company entered into a placement agency agreement with Dawson James Securities, Inc. Dawson James Securities, Inc. acted as the lead placement agent and The Benchmark Company, LLC acted as a co-placement agent in the public offering. On March 6, 2018, the Company sold 1,428,570 shares of its common stock at a public offering price of $3.50 per share, for gross proceeds of $5,000,000 and net proceeds of $4,500,000 after deducting commissions and other offering expenses. The Company expects to continue incurring losses for the foreseeable future and may need to raise additional capital to pursue its product development initiatives, to penetrate markets for the sale of its products and continue as a going concern. The Company cannot provide any assurances that it will be able to raise additional capital. 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 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. |
3. Summary of Significant Accou
3. Summary of Significant Accounting Policies | 12 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 3 – Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Aquamed Technologies, Inc. (“Aquamed”), Oculus Technologies of Mexico S.A. de C.V. (“OTM”), and Sonoma Pharmaceuticals Netherlands, B.V. (“SP Europe”). Aquamed has no current operations. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of 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 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 relating to the Company’s deferred tax assets, valuation of equity and derivative instruments, fair value allocation of assets sold to Invekra, and the estimated amortization periods of upfront product licensing fees received from customers. Periodically, the Company evaluates and adjusts estimates accordingly. Revenue Recognition and Accounts Receivable The Company generates revenue from sales of its products to a customer base including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company sells products directly to end users and to distributors. The Company also entered into agreements to license its technology and products. The Company also provides regulatory compliance testing and quality assurance services to medical device and pharmaceutical companies. The Company records revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) collectability of the sale is reasonably assured. The Company requires all product sales to be supported by evidence of a sale transaction that clearly indicates the selling price to the customer, shipping terms and payment terms. Evidence of an arrangement generally consists of a contract or purchase order approved by the customer. The Company has ongoing relationships with certain customers from which it customarily accepts orders by telephone in lieu of purchase orders. The Company recognizes revenue at the time it receives confirmation that the goods were either tendered at their destination, when shipped “FOB destination,” or transferred to a shipping agent, when shipped “FOB shipping point.” Delivery to the customer is deemed to have occurred when the customer takes title to the product. Generally, 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. The selling prices of all goods are fixed, and agreed to with the customer, prior to shipment. Selling prices are generally based on established list prices. The right to return product is customarily based on the terms of the agreement with the customer. The Company estimates and accrues for potential returns and records this as a reduction of revenue in the same period the related revenue is recognized. Additionally, distribution fees are paid to certain wholesale distributors based on contractually determined rates. The Company estimates and accrues the fee on shipment to the respective wholesale distributors and recognizes the fee as a reduction of revenue in the same period the related revenue is recognized. The Company also offers cash discounts to certain customers, generally 2% of the sales price, as an incentive for prompt payment. The Company accounts for cash discounts by reducing accounts receivable by the prompt pay discount amount and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized. Additionally, the Company participates in certain rebate programs which provide discounted prescriptions to qualified patients. The Company contracts with a third-party to administer the program. The Company estimates and accrues for future rebates based on historical data for rebate redemption rates and the historical value of redemptions. Rebates are recognized as a reduction of revenue in the same period the related revenue is recognized. The estimates for future rebates and distribution fees are reported as allowances in Accounts Receivable, net in the accompanying consolidated balance sheets. The Company evaluates the creditworthiness of new customers and monitors the creditworthiness of its existing customers to determine whether an event or changes in their financial circumstances would raise doubt as to the collectability of a sale at the time in which a sale is made. Payment terms on sales made in the United States are generally 30 days and are extended up to 90 days for initial product launches, payment terms internationally generally range from prepaid prior to shipment to 90 days. In the event a sale is made to a customer under circumstances in which collectability is not reasonably assured, the Company either requires the customer to remit payment prior to shipment or defers recognition of the revenue until payment is received. The Company maintains a reserve for amounts which may not be collectible due to risk of credit losses. In the event a sale is made to a customer under circumstances in which returns cannot be estimated, the Company defers recognition of the revenue until sell-through is confirmed. Product license revenue is generated through agreements with strategic partners for the commercialization of Microcyn® products. The terms of the agreements sometimes include non-refundable upfront fees. The Company analyzes multiple element arrangements to determine whether the elements can be separated. Analysis is performed at the inception of the arrangement and as each product is delivered. If a product or service is not separable, the combined deliverables are accounted for as a single unit of accounting and recognized over the performance obligation period. When appropriate, the Company defers recognition of non-refundable upfront fees. If the Company has continuing performance obligations then such up-front fees are deferred and recognized over the period of continuing involvement. The Company recognizes royalty revenues from licensed products upon the sale of the related products. Revenue from consulting contracts is recognized as services are provided. Revenue from testing contracts is recognized as tests are completed and a final report is sent to the customer. Sales Tax and Value Added Taxes The Company accounts for sales taxes and value added taxes imposed on its goods and services on a net basis. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents may be invested in money market funds, commercial paper, variable rate demand instruments, and certificates of deposits. Concentration of Credit Risk and Major Customers Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and accounts receivable. Cash and cash equivalents are maintained in financial institutions in the United States, Mexico and the Netherlands. The Company is exposed to credit risk in the event of default by these financial institutions for amounts in excess of the Federal Deposit Insurance Corporation insured limits. Cash and cash equivalents held in foreign banks are intentionally kept at minimal levels, and therefore have minimal credit risk associated with them. The Company grants credit to its business customers, which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for trade receivables. The Company maintains allowances for potential credit losses. At March 31, 2018, one customer represented 36%, and one customer represented 18% of the net accounts receivable balance. For the year ended March 31, 2018, one customer represented 22%, one customer represented 19%, one customer represented 13%, and one customer represented 12% of net revenues. At March 31, 2017, one customer represented 26%, one customer represented 12%, and one customer represented 10% of the net accounts receivable balance. For the year ended March 31, 2017, one customer represented 12% and two customers each represented 10% of net revenues. 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 at March 31, 2018 and 2017 in the amounts of $17,000 and $14,000, respectively. Additionally at March 31, 2018 and 2017, the Company has allowances of $1,275,000 and $672,000, respectively, related to potential discounts, returns, distributor fees and rebates. The allowances are included in Accounts Receivable, net in the accompanying 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 amounts of $111,000 and $61,000 at March 31, 2018 and 2017, respectively, which is included in cost of product revenues on the Company’s accompanying consolidated statements of comprehensive (loss) income. Financial Assets and Liabilities Financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The fair value of capital lease obligations and equipment loans approximates their carrying amounts as a market rate of interest is attached to their repayment. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities Level 2 – quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions) Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer. As of March 31, 2018 and 2017, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Depreciation of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful life of the improvement or the remaining term of the lease. Estimated useful asset life by classification is as follows: Years Office equipment 3 Manufacturing, lab and other equipment 5 Furniture and fixtures 7 Upon retirement or sale, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred. Impairment of Long-Lived Assets The Company periodically reviews the carrying values of its long-lived assets when events or changes in circumstances would indicate that it is more likely than not that their carrying values may exceed their realizable values, and records impairment charges when considered necessary. Specific potential indicators of impairment include, but are not necessarily limited to: · a significant decrease in the fair value of an asset; · a significant change in the extent or manner in which an asset is used or a significant physical change in an asset; · a significant adverse change in legal factors or in the business climate that affects the value of an asset; · an adverse action or assessment by the U.S. Food and Drug Administration or another regulator; and · an accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset; and operating or cash flow losses combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with an income-producing asset. When circumstances indicate that an impairment may have occurred, the Company tests such assets for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of such assets and their eventual disposition to their carrying amounts. In estimating these future cash flows, assets and liabilities are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows generated by other such groups. If the undiscounted future cash flows are less than the carrying amount of the asset, an impairment loss, measured as the excess of the carrying value of the asset over its estimated fair value, will be recognized. The cash flow estimates used in such calculations are based on estimates and assumptions, using all available information that management believes is reasonable. During the years ended March 31, 2018 and 2017, the Company had noted no indicators of impairment. Research and Development Research and development expense is charged to operations as incurred and consists primarily of personnel expenses, clinical and regulatory services and supplies. For the years ended March 31, 2018 and 2017, research and development expense amounted to $1,575,000 and $1,576,000, respectively. Advertising Costs Advertising costs are charged to operations as incurred. Advertising costs amounted to $177,000 and $149,000, for the years ended March 31, 2018 and 2017, respectively. Advertising costs are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive (loss) income. Shipping and Handling Costs The Company classifies amounts billed to customers related to shipping and handling in sale transactions as product revenues. The corresponding shipping and handling costs incurred are recorded in cost of product revenues. For the years ended March 31, 2018 and 2017, the Company recorded revenue related to shipping and handling costs of $46,000 and $49,000, respectively. These amounts are included in product revenues in the accompanying consolidated statements of comprehensive (loss) income. Foreign Currency Reporting The Company’s subsidiary, OTM, uses the local currency (Mexican Pesos) as its functional currency and its subsidiary, SP Europe, uses the local currency (Euro) as its functional currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date, and revenue and expense accounts are translated at average exchange rates during the period. Resulting translation adjustments amounted to $203,000 and $324,000 for the years ended March 31, 2018 and 2017, respectively. These amounts were recorded in other comprehensive (loss) income in the accompanying consolidated statements of comprehensive (loss) income for the years ended March 31, 2018 and 2017. Foreign currency transaction gains (losses) relate primarily to trade payables and receivables and intercompany transactions between subsidiaries OTM and SP Europe. These transactions are expected to be settled in the foreseeable future. The Company recorded foreign currency transaction losses of $208,000, and foreign currency transaction gains of $107,000 and $36,000, for the years ended March 31, 2018 and 2017, respectively. The related amounts were recorded in other (expense) income, net, in the accompanying consolidated statements of comprehensive (loss) income. Stock-Based Compensation The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. The Company estimates the fair value of employee stock option awards using the Black-Scholes option pricing model. The Company amortizes the fair value of employee stock options on a straight-line basis over the requisite service period of the awards. Compensation expense includes the impact of an estimate for forfeitures for all stock options. The Company accounts for equity instruments issued to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based compensation charges are amortized over the vesting period or as earned. Income Taxes Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’s consolidated financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company’s consolidated financial condition, results of comprehensive (loss) income or cash flows. Comprehensive (Loss) Income Other comprehensive (loss) income includes all changes in stockholders’ equity during a period from non-owner sources and is reported in the consolidated statement of changes in stockholders’ equity. To date, other comprehensive loss consists of changes in accumulated foreign currency translation adjustments. Accumulated other comprehensive losses at March 31, 2018 and 2017 were $3,975,000 and $4,178,000, respectively. Net (Loss) Income per Share The Company computes basic net (loss) income per share by dividing net (loss) income per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic (loss) income per share for the years ended March 31, 2018 and 2017 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive. March 31, 2018 2017 Restricted stock units 32,000 34,000 Options to purchase common stock 1,393,000 899,000 Warrants to purchase common stock 1,375,000 1,344,000 2,800,000 2,277,000 Common Stock Purchase Warrants and Other Derivative Financial Instruments The Company classifies common stock purchase warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company determined that its freestanding derivatives, which principally consist of warrants to purchase common stock, satisfied the criteria for classification as equity instruments, other than certain warrants that contained reset provisions and certain warrants that required net-cash settlement that the Company classified as derivative liabilities. Preferred Stock The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Shares that are subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, preferred shares are classified as stockholders' equity. Subsequent Events Management has evaluated subsequent events or transactions occurring through the date these consolidated financial statements were issued. Adoption of Recent Accounting Standards In March 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting On April 1, 2017, the Company adopted ASU No. 2016-09. As a result of adopting ASU No. 2016-09, the Company has made an accounting policy election to account for forfeitures as they occur. This change has been applied on a modified retrospective basis, with no material impacts on the Company’s consolidated financial statements. The adoption of ASU No. 2016-09 also requires excess tax benefits and tax deficiencies be recorded in the income statement as opposed to additional paid-in capital when the awards vest or are settled and recognize all previously unrecognized excess tax benefits and tax deficiencies upon adoption as a cumulative-effect adjustment to retained earnings. As of April 1, 2017, the Company recognized excess tax benefit of approximately $533,000 as an increase to deferred tax assets. However, the entire amount was offset by a full valuation allowance. Accordingly, no cumulative-effect adjustment to retained earnings was recorded as of March 31, 2018. Recent Accounting Standards Financial Instruments In January 2016, the FASB issued ASU 2016-01 Financial Instruments-Overall Statement of Cash Flows In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”) that changes the presentation of restricted cash and cash equivalents on the statement of cash flows. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, but early adoption is permissible. The Company has determined there will not be a material impact on the Company’s consolidated financial position and results of operations upon adoption of this topic. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (Topic 840) Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments Revenue In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Identifying Performance Obligations and Licensing Narrow-Scope Improvements and Practical Expedients Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), Business Combinations In January 2017, the FASB issued an ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business Stock Compensation In May 2017, the FASB issued ASU No. 2017-09, Compensation–Stock Compensation Scope of Modification Accounting Reporting Comprehensive Income In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 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. |
4. Disposition of Latin America
4. Disposition of Latin American Operations | 12 Months Ended |
Mar. 31, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Disposition of Latin American Operations | NOTE 4 - Disposition of Latin American Operations Description of Sale to Invekra On October 27, 2016, the Company, along with its Mexican subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V. (“OTM”), closed on an asset purchase agreement with Invekra, S.A.P.I de C.V. (“Invekra”), an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of its Latin America assets. Specifically, the Company agreed to sell certain patents, patent applications, trademarks and territory rights for Mexico, the Caribbean and South America, excluding the sale of dermatology products in Brazil, as well as to build and deliver equipment that Invekra will use to produce its own product. The aggregate purchase price that Invekra will pay for the assets is $22,000,000, of which $18,000,000 was paid upon closing, $1,500,000 was paid on March 16, 2017 upon the delivery of certain equipment, and $2,500,000 is to be paid in Mexican currency in quarterly installments over a period of ten years from closing as consideration for the provision of certain services and providing technical assistance, calculated as three percent on net sales of certain products in Latin America, excluding Mexico. Because the $2,500,000 is to be paid in foreign currency, the Company may receive more or less than $2,500,000 due to currency fluctuations. In connection with the asset purchase agreement, the Company agreed to provide the technology, know-how and assistance to Invekra to enable Invekra to manufacture on its own the products as currently produced by the Company (“Technical Services Arrangement”), and continue to supply product to Invekra for a two year transition period from the Sale Date, which was extended to October 27, 2020. During the years ended March 31, 2018 and 2017, the Company reported $3,007,000 and $1,299,000, respectively, of Latin America product revenue related to the Supply Agreement with Invekra. During the year ended March 31, 2018, the Company recorded $208,000 of service revenue related to providing technical assistance and $189,000 of interest income related to a discount on deferred consideration. The Company will provide product under the Supply Agreement at a reduced price from its current price list, while Invekra builds its own manufacturing line. At the conclusion of the transition period, the Company will cease to be a supplier of product to Invekra. The Company is uncertain as to the duration of the transition period or when Invekra will complete the build out of its manufacturing line. Pursuant to the Supply Agreement, the Company is subject to a potential penalty for failure to supply the products for a consecutive period of six months. The penalty, if triggered, will require the Company to make a one-time payment of $2,000,000 to Invekra. The penalty decreases by 12.5% each quarter of the term of the supply period. The Company does not expect to incur this penalty. Accounting for the disposition For accounting purposes, the Company determined that there were three discrete components of the sale to Invekra. These components were the intellectual property and territory rights, the services to be provided under the Technical Services Arrangement and the production equipment to be manufactured for Invekra. The Company determined an arm’s length selling price for each component of the sale and then allocated the net proceeds received to the components on a relative selling price basis. The Company estimated the selling prices of each component as described below: Component of Sale Methodology to Estimate Selling Price Services under the Technical Services Arrangement Based upon revenues expected from a market participant to provide technical services at expected service levels Production equipment manufactured Based upon an expected selling price derived from costs marked up to selling price at market participant margins Intellectual property and territory rights Based upon a discounted cash flow analysis of the benefit to Invekra of producing rather than purchasing its product and operating royalty free The Company determined proceeds, net of estimated transaction costs and net of the discount to adjust for consideration to be received in the future. The total proceeds were as follows: Cash received on October 27, 2016 $ 18,000,000 Cash received on March 16, 2017 1,500,000 Face value of variable consideration ($250,000 per year for ten years) 2,500,000 Total proceeds from sale 22,000,000 Equipment costs (305,000 ) Transaction costs (556,000 ) Total proceeds, net of transaction costs 21,139,000 Discount on variable consideration (using a 7.5% discount rate) (752,000 ) Total proceeds, net of discount $ 20,387,000 Proceeds were allocated to the components of the sale based upon their relative selling prices are as follows: Services under the Technical Services Arrangement $ 708,000 Production equipment manufactured, net 192,000 Intellectual property and territory rights 19,487,000 Total proceeds $ 20,387,000 The proceeds related to the intellectual property and territory rights were included in gain on sale on the date of the sale. The proceeds allocated to the services under the Technical Services Agreement were recorded in deferred revenue as of the date of the sale and will be recognized as technical services are provided. The proceeds related to the production equipment to be manufactured were included in deferred gain and will be recognized upon delivery of the equipment. Discontinued operations As of March 31, 2017, the Company determined that the sale of its Latin American operations to Invekra qualified as a sale of a component of its business and, as such, all such activity prior to consummation of the sale is required to be included in discontinued operations on the Company’s consolidated statement of operations. This includes the direct labor and materials for the product delivered to Invekra, the revenue on the sales to Invekra and the gain on the sale to Invekra, net of tax. The operations of its Latin American business included in discontinued operations is summarized as follows: Year Ended March 31, 2018 2017 Revenues $ – $ 3,105,000 Cost of revenues – 561,000 Income from discontinued operations before tax – 2,544,000 Gain on disposal of discontinued operations before income taxes – 19,679,000 Total income from discontinued operations, before tax – 22,223,000 Income tax expense – (4,280,000 ) Income from discontinued operations, net of tax $ – $ 17,943,000 |
5. Accounts Receivable
5. Accounts Receivable | 12 Months Ended |
Mar. 31, 2018 | |
Receivables [Abstract] | |
Accounts Receivable | NOTE 5 – Accounts Receivable Accounts receivable, net consists of the following: March 31, 2018 2017 Accounts receivable $ 2,829,000 $ 2,794,000 Less: allowance for doubtful accounts (17,000 ) (14,000 ) Less: discounts, rebates, distributor fees and returns (1,275,000 ) (672,000 ) $ 1,537,000 $ 2,108,000 |
6. Inventories
6. Inventories | 12 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 6 – Inventories Inventories consist of the following: March 31, 2018 2017 Raw materials $ 1,619,000 $ 1,480,000 Finished goods 1,246,000 741,000 $ 2,865,000 $ 2,221,000 |
7. Prepaid Expenses and Other C
7. Prepaid Expenses and Other Current Assets | 12 Months Ended |
Mar. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses and Other Current Assets | NOTE 7 – Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: March 31, 2018 2017 Prepaid insurance $ 440,000 $ 587,000 Prepaid rebates 270,000 – Tax prepaid to Mexican tax authorities 215,000 – Other prepaid expenses and other current assets 622,000 29,000 $ 1,547,000 $ 616,000 The long-term portion of the prepayment to the Mexican tax authorities amounted to $399,000 and is recorded in other assets in the accompanying March 31, 2018 balance sheet. |
8. Property and Equipment
8. Property and Equipment | 12 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 8 – Property and Equipment Property and equipment consists of the following: March 31, 2018 2017 Manufacturing, lab, and other equipment $ 3,653,000 $ 3,319,000 Office equipment 361,000 324,000 Furniture and fixtures 100,000 91,000 Leasehold improvements 592,000 536,000 4,706,000 4,270,000 Less: accumulated depreciation and amortization (3,570,000 ) (3,031,000 ) $ 1,136,000 $ 1,239,000 Depreciation and amortization expense amounted to $490,000 and $248,000 for the years ended March 31, 2018 and 2017, respectively. During the year ended March 31, 2018, the Company did not incur a loss or gain on the disposal of property and equipment. During the year ended March 31, 2017, the Company realized a loss of $10,000 on the disposal of property and equipment. This amount was recorded within operating expenses in the accompanying consolidated statements of comprehensive (loss) income. |
9. Accrued Expenses and Other C
9. Accrued Expenses and Other Current Liabilities | 12 Months Ended |
Mar. 31, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Current Liabilities | NOTE 9 – Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: March 31, 2018 2017 Salaries and related costs $ 817,000 $ 681,000 Professional fees 206,000 79,000 Other 383,000 542,000 $ 1,406,000 $ 1,302,000 |
10. Long-Term Debt
10. Long-Term Debt | 12 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | NOTE 10 – Long-Term Debt Financing of Insurance Premiums On February 1, 2017, the Company entered into a note agreement for $84,000 with an interest rate of 5.60% per annum with final payment on December 1, 2017. This instrument was issued in connection with financing insurance premiums. The note is payable in monthly installments of $8,600. During the year ended March 31, 2017, the Company made principal and interest payments in the amounts of $8,000 and $340, respectively. During the year ended March 31, 2018, the Company made principal and interest payments in the amounts of $76,000 and $840, respectively. There is no outstanding balance on this note as of March 31, 2018. On March 10, 2017, the Company entered into a note agreement for $36,000 with an interest rate of 5.60% per annum with final payment on December 1, 2017. This instrument was issued in connection with financing insurance premiums. The note is payable in monthly installments of $4,100. During the year ended March 31, 2017, the Company did not pay principal or interest on this note. During the year ended March 31, 2018, the Company made principal and interest payments in the amounts of $36,000 and $400, respectively. There is no outstanding balance on this note as of March 31, 2018. On February 1, 2018, the Company entered into a note agreement for $241,000 with an interest rate of 5.81% per annum with final payment on December 1, 2018. This instrument was issued in connection with financing insurance premiums. The note is payable in monthly installments of $25,000. During the year ended March 31, 2018, the Company made principal and interest payments in the amounts of $24,000 and $1,000, respectively. The remaining balance of $217,000 is included in the current portion of long-term debt in the accompanying consolidated balance sheet. Financing of Automobiles On August 10, 2016, the Company entered into a note agreement for $26,000 with an interest rate of 2.49% per year, and a monthly payment of $432. This instrument was issued in connection with the financing of an automobile. During the year ended March 31, 2017, the Company made principal and interest payments related to this note in the amounts of $4,000 (includes a first installment payment of $2,000) and $336, respectively. During the year ended March 31, 2018, the Company made principal and interest payments related to this note in the amounts of $4,000 and $350, respectively. The remaining balance of this note amounted to $18,000 at March 31, 2018, of which $5,000 is included in the current portion of long-term debt in the accompanying consolidated balance sheet. On September 27, 2016, the Company entered into a note agreement for $38,000 with an interest rate of 0%, and monthly payment of $630. This instrument was issued in connection with the financing of an automobile. During the year ended March 31, 2017, the Company made principal payments related to this note in the amount of $4,000. During the year ended March 31, 2018, the Company made principal payments related to this note in the amount of $8,000. The remaining balance of this note amounted to $27,000 at March 31, 2018, of which $8,000 is included in the current portion of long-term debt in the accompanying consolidated balance sheet. Principal note payments due in years subsequent to March 31, 2018 are as follows: For Years Ending March 31, 2019 $ 230,000 2020 13,000 2021 13,000 2022 6,000 Total minimum payments $ 262,000 Less: current portion (230,000 ) Long-term portion $ 32,000 |
11. Capital Leases
11. Capital Leases | 12 Months Ended |
Mar. 31, 2018 | |
Leases [Abstract] | |
Capital Leases | NOTE 11 – Capital Leases During March 2017, the Company entered into a fleet capital lease. The Company at various times from March 2017 to March 31, 2018 leased automobiles through the lease agreement. The aggregate cost of the assets financed is $422,000 and for the year ended March 31, 2018 the Company recorded depreciation expense of $154,000. The present value of the minimum lease payments was calculated using discount rates of ranging from 9.7% to 10.9%. Lease payments, including amounts representing interest, amounted to $750 for the year ended March 31, 2017. Lease payments, including amounts representing interest, amounted to $168,000 for the year ended March 31, 2018. During the year ended March 31, 2018, the Company made principal and interest payments related to capital leases in the amounts of $132,000 and $37,000, respectively. The remaining principal balance on these obligations amounted to $291,000 at March 31, 2018, including $147,000 included in the current portion of capital lease obligations in the accompanying consolidated balance sheet. The Company recorded interest expense in connection with these lease agreements in the amount of $36,000 for the year ended March 31, 2018. Minimum capital lease payments due in years subsequent to March 31, 2018 are as follows: For Years Ending March 31, 2019 $ 170,000 2020 149,000 Total minimum lease payments $ 319,000 Less: amounts representing interest (28,000 ) Present value of minimum lease payments 291,000 Less: current portion (147,000 ) Long-term portion $ 144,000 |
12. Commitments and Contingenci
12. Commitments and Contingencies | 12 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 12 – Commitments and Contingencies Lease Commitments On June 23, 2016, the Company entered into Amendment No. 8 to its property lease agreement, extending the lease on its Petaluma, California facility to September 30, 2024. The lease contains an early termination right for the Company effective October 31, 2019, if the landlord is unable to accommodate the Company’s growth. Pursuant to the amendment, the Company agreed to increase the lease payment from $11,072 to $11,764 per month, commencing on October 1, 2017, with annual increases thereafter through the lease term. The Company also shares certain office and laboratory space, as well as certain laboratory equipment, in a building located at 454 North 34th Street, Seattle, Washington. The space is rented for $2,700 per month and requires a ninety-day notice for cancellation. The Company currently rents approximately 800 square feet of sales office space in Herten, the Netherlands. The office space is rented on a month to month basis at $1,700 per month and requires a sixty-day notice for cancellation. On May 12, 2016, the Company entered into a property lease agreement, on its Woodstock, Georgia sales office space. The initial term of the agreement was from June 1, 2016 expiring on May 31, 2019, with an option to extend for a one-year period. On May 1, 2018, the Company amended the lease term to run from June 1, 2018 to August 31, 2018. The payment is $1,300 per month. On August 1, 2016, the Company entered into Amendment No. 1 to its property lease agreement in Jamison, Pennsylvania. Pursuant to the amendment, the Company extended the term of the lease to July 31, 2019. Additionally, the Company agreed to lease payments of $2,369 per month for year one, $2,431 per month for year two and $2,493 per month for year three. On June 15, 2017, the Company entered into its property lease agreement, on its Fairfield, California office space. The initial term of the agreement is from June 15, 2017 expiring on October 31, 2019. The payment is $4,103 per month. Minimum lease payments for non-cancelable operating leases are as follows: For Years Ending March 31, 2019 $ 438,000 2020 245,000 2021 7,000 Total minimum lease payments $ 690,000 Rental expense amounted to $507,000 and $429,000 for the years ended March 31, 2018 and 2017, respectively. Legal Matters On March 17, 2017, the Company filed a lawsuit against Collidion, Inc. and several of its former employees, officers and directors, for the misappropriation of our confidential, proprietary and trade secret information as well as breach of fiduciary duties in the United States District Court for the Northern District of California, San Francisco Division. The Company is primarily seeking injunctive relief and damages in an amount yet to be proven at trial. No countersuit has been filed to date. The Company plans to vigorously defend its intellectual property by pursuing this lawsuit. Aside from the lawsuit described above, on occasion, 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) income. Employment Agreements On July 26, 2016, the Company entered into a new employment agreement with Jim Schutz, its President and Chief Executive Officer to update his agreements and responsibilities. The terms of the new employment agreement provide for a continued annual base salary of $250,000 or such other amount as the Board of Directors may set. In addition, Mr. Schutz is eligible to receive an annual bonus, the payment, type and amount of which is in the sole discretion of the Compensation Committee. Mr. Schutz also receives certain benefits, such as participation in the Company’s health and welfare plans, vacation and reimbursement of expenses. As of March 31, 2018, the Company had employment agreements in place with five of its key executives. The agreements provide, among other things, for the payment of nine to twenty-four months of severance compensation for terminations under certain circumstances. With respect to these agreements, at March 31, 2018, aggregated annual salaries would be $1,167,000 and potential severance payments to these key executives would be $1,417,000 if triggered. |
13. Stockholders' Equity
13. Stockholders' Equity | 12 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity | |
Stockholders' Equity | NOTE 13 – Stockholders’ Equity Authorized Capital The Company is authorized to issue up to 12,000,000 shares of common stock with a par value of $0.0001 per share and 714,286 shares of convertible preferred stock with a par value of $0.0001 per share. Description of Common Stock Each share of common stock has the right to one vote. The holders of common stock are entitled to dividends when funds are legally available and when declared by the board of directors. Description of Series B Preferred Stock On October 18, 2016, the Company’s board of directors approved, and the Company entered into, a Section 382 rights agreement, or the Rights Agreement, with Computershare Inc., or the Rights Agent. The Rights Agreement provides for a dividend of one preferred stock purchase right, or a Right, for each share of common stock, par value $0.0001 per share, of the Company outstanding on November 1, 2016, or the Record Date. Each Right entitles the holder to purchase from the Company one one-thousandth of a share of Series B Preferred Stock, par value $0.0001 per share, or the Preferred Stock, for a purchase price of $10.00, subject to adjustment as provided in the Rights Agreement. The description and terms of the rights are set forth in the Rights Agreement. In connection with the adoption of the Rights Agreement, the Company’s board of directors adopted a Certificate of Designation of Series B Preferred Stock. The Certificate of Designation was filed with the Secretary of State of the State of Delaware and became effective on October 18, 2016. The Company’s board of directors adopted the Rights Agreement to protect shareholder value by guarding against a potential limitation on the Company’s ability to use its net operating loss carryforwards, or NOLs, and other tax benefits, which may be used to reduce potential future income tax obligations. The Company has experienced and continue to experience substantial operating losses, and under the Internal Revenue Code of 1986, as amended, and rules promulgated thereunder, the Company may “carry forward” these NOLs and other tax benefits in certain circumstances to offset any current and future earnings and thus reduce our income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs and other tax benefits do not otherwise become limited, the Company believes that it will be able to carry forward a significant amount of NOLs and other tax benefits, and therefore these NOLs and other tax benefits could be a substantial asset to the Company. However, if the Company experiences an “ownership change,” as defined in Section 382 of the Code, its ability to use its NOLs and other tax benefits will be substantially limited. Generally, an ownership change would occur if our shareholders who own, or are deemed to own, 5% or more of the Company’s common stock increase their collective ownership in the Company by more than 50% over a rolling three-year period. To date no Series B Preferred Stock has been issued. At-the-Market Offering On December 8, 2017, the Company entered into an At Market Issuance Sales Agreement, with B. Riley FBR, Inc. (“B. Riley”) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $5,000,000 from time to time through B. Riley acting as its sales agent. The Company will pay B. Riley a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through B. Riley as agent. For the year ended March 31, 2018, the Company sold 228,000 shares of common stock for gross proceeds of $1,034,000 and net proceeds of $968,000 after deducting commissions and other offering expenses. Registered Direct Offering On March 2, 2018, the Company entered into a placement agency agreement with Dawson James Securities, Inc. Dawson James Securities, Inc. acted as the lead placement agent and The Benchmark Company, LLC acted as a co-placement agent in the public offering. On March 6, 2018, the Company sold 1,428,570 shares of its common stock at a public offering price of $3.50 per share, for gross proceeds of $5,000,000 and net proceeds of $4,500,000 after deducting commissions and other offering expenses. Additionally, pursuant to the placement agency agreement, the Company agreed to pay the placement agents a cash fee equal to 8% of the aggregate gross proceeds raised in the public offering, excluding any proceeds from the sale of shares to Montreux Equity Partners. The Company also issued the placement agents warrants to purchase up to 42,857 shares of its common stock. The placement agent warrants will be exercisable beginning on August 28, 2018 and ending on March 1, 2023 and have an exercise price of $4.375 per share. The Company also agreed to pay certain expenses of the placement agents, including legal and diligence fees, in any case not to exceed $65,000. Common Stock Issued to Services Providers On April 24, 2009, the Company entered into an agreement with Advocos LLC, a contract sales organization that served as part of the Company’s sales force, for the sale of the Company’s wound care products in the United States. Pursuant to the agreement, the Company agreed to pay the contract sales organization a monthly fee and potential bonuses that was based on achievement of certain levels of sales. The Company agreed to issue the contract sales organization cash or shares of common stock to settle fees for its services. The Company has determined that the fair value of the common stock was more readily determinable than the fair value of the services rendered. This agreement was terminated on September 28, 2016. Pursuant to the termination agreement the Company paid outstanding fees of $111,000, issued 14,390 shares of common stock with a fair value of $69,000, and transferred certain assets valued at $62,000 related to a product line the Company deemed to be non-core and immaterial to its operations. The expense was recorded as selling, general and administrative expense in the accompanying consolidated statement of comprehensive (loss) income for the year ended March 31, 2017. On August 1, 2016, the Company entered into an agreement with CorProminence, LLC for financial advisory services. Pursuant to the agreement, the Company agreed to pay CorProminence, LLC common stock as compensation for services provided. The Company determined that the fair value of the common stock was more readily determinable than the fair value of the services rendered. Accordingly, the Company recorded the fair market value of the stock as expense. During the year ended March 31, 2017, the Company issued 6,411 shares of common stock in connection with this agreement. During the year ended March 31, 2017, the Company recorded $29,000 of expense related to this agreement. The expense was recorded as selling, general and administrative expense in the accompanying consolidated statements of comprehensive (loss) income. During the year ended March 31, 2018, the Company entered into an agreement with Actual, Inc., a firm that provides marketing and branding consulting services. On July 27, 2017, the Company issued 2,570 shares of restricted common stock valued at $6.74 per share and on August 22, 2017, the Company issued 3,133 shares of restricted common stock valued at $5.53 per share. The aggregate fair market value of the common stock issued in July 2017 and August 2017 was $35,000. On December 1, 2017, the Company issued 5,479 shares of restricted common stock valued at $5.02 per share. On January 2, 2018, the Company issued 4,734 shares of restricted common stock valued at $5.81 per share. The aggregate fair market value of the 15,916 shares of common stock issued during the year ended March 31, 2018 was $90,000. The Company has determined that the fair value of the common stock was more readily determinable than the fair value of the services rendered. Accordingly, during year ended March 31, 2018, the Company recorded $90,000 of expense related to common stock issued. The expense was recorded as selling, general and administrative expense in the accompanying condensed consolidated statement of comprehensive (loss) income for year ended March 31, 2018. |
14. Stock-Based Compensation
14. Stock-Based Compensation | 12 Months Ended |
Mar. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | |
Stock-Based Compensation | NOTE 14 – Stock-Based Compensation 2006 Stock Plan The board initially adopted the 2006 Stock Incentive Plan on August 25, 2006. On December 14, 2006, the stockholders approved the 2006 Stock Incentive Plan which became effective at the close of the Company’s initial public offering. The 2006 Stock Incentive Plan was later amended and restated by a unanimous board resolution on April 26, 2007, and such amendments were subsequently approved by the stockholders. On September 10, 2009, the Company’s shareholders approved a subsequent amendment to the 2006 Stock Incentive Plan. The 2006 Stock Incentive Plan, as amended and restated, is hereafter referred to as the “2006 Plan.” The 2006 Plan provided for the granting of incentive stock options to employees and the granting of non-statutory stock options to employees, non-employee directors, advisors and consultants. The 2006 Plan also provided for grants of restricted stock, stock appreciation rights and stock unit awards to employees, non-employee directors, advisors and consultants. In accordance with the 2006 Plan the stated exercise price may not be less than 100% and 85% of the estimated fair market value of common stock on the date of grant for ISOs and NSOs, respectively, as determined by the board of directors at the date of grant. With respect to any 10% stockholder, the exercise price of an ISO or NSO shall not be less than 110% of the estimated fair market value per share on the date of grant. Options issued under the 2006 Plan generally have a ten-year term. During the year ended March 31, 2017, the 2006 Plan expired. No additional equity will be granted from the 2006 Plan. All outstanding options will remain outstanding until exercised or expired. 2011 Stock Plan On September 12, 2011, upon recommendation of the board, the stockholders approved the Company’s 2011 Stock Incentive Plan (the “2011 Plan”). The 2011 Plan is effective as of June 21, 2012. The 2011 Plan provides for the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code to employees, and the grant of non-statutory stock options and stock purchase rights to employees, non-employee directors, advisors and consultants. The 2011 Plan also permits the grant of stock appreciation rights, stock units and restricted stock. The board has initially authorized 85,572 of the Company’s common stock for issuance under the 2011 Plan, in addition to automatic increases provided for in the 2011 Plan through April 1, 2021. The number of shares of the Company’s common stock reserved for issuance under the 2011 Plan will automatically increase, with no further action by the stockholders, at the beginning of each fiscal year by an amount equal to the lesser of (i) 15% of the outstanding shares of the Company’s common stock on the last day of the immediately preceding year, or (ii) an amount approved by the Company’s board of directors. Options issued under the 2011 Plan will generally have a ten-year term. In accordance with the 2011 Plan, the stated exercise price of an employee incentive stock option shall not be less than 100% of the estimated fair market value of a share of common stock on the date of grant, and the stated exercise price of an non-statutory option shall not be less 85% of the estimated fair market value of a share of common stock on the date of grant, as determined by the board of directors. An employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company shall not be eligible for the grant of an employee incentive stock option unless such grant satisfies the requirements of Section 422(c)(5) of the Internal Revenue Code. Shares subject to awards that expire unexercised or are forfeited or terminated for any other reason will again become available for issuance under the 2011 Plan. No participant in the 2011 Plan can receive option grants, stock appreciation rights, restricted shares, or stock units for more than 21,428 shares in the aggregate in any calendar year. As provided under the 2011 Plan, the aggregate number of shares authorized for issuance as awards under the 2011 Plan automatically increases on April 1 of each year by in an amount equal to the lesser of (i) 15% of the outstanding shares on the last day of the immediately preceding year, or (ii) an amount determined by the board. During the year ended March 31, 2016, the board of directors approved an increase of 451,352 shares authorized for issuance. During the year ended March 31, 2017, the board of directors approved an increase of 629,504 shares authorized for issuance. During the year ended March 31, 2018, the board of directors approved an increase of 643,383 shares authorized for issuance. 2016 Stock Plan On September 2, 2016, upon recommendation of the board, the stockholders approved the Company’s 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan is effective as of September 2, 2016. The 2016 Plan provides for the grant of options, including incentive stock options as defined in Section 422 of the Internal Revenue Code to employees, stock appreciation rights, restricted awards, performance share awards and performance compensation awards to employees, non-employee directors, advisors and consultants. Options issued under the 2016 Plan will generally have a ten-year term. In accordance with the 2016 Plan, the stated exercise price of an employee incentive stock option or a non-statutory stock option shall not be less than 100% of the estimated fair market value of a share of common stock on the date of grant. An employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company shall not be eligible for the grant of an employee incentive stock option unless such grant satisfies the requirements of Section 422(c)(5) of the Internal Revenue Code. Shares subject to awards that expire unexercised or are forfeited or terminated for any other reason will again become available for issuance under the 2016 Plan. No participant in the 2016 Plan can receive more than 100,000 option grants, or other awards with respect to more than 120,000 shares in the aggregate in any calendar year. The board has authorized 400,000 of the Company’s common stock for issuance under the 2016 Plan, in addition to automatic increases provided for in the 2016 Plan through April 1, 2026. The number of shares of the Company’s common stock reserved for issuance under the 2016 Plan will automatically increase, with no further action by the stockholders, at the beginning of each fiscal year by an amount equal to the lesser of (i) 8% of the outstanding shares of the Company’s common stock on the last day of the immediately preceding year, or (ii) an amount determined by the Company’s board of directors. During the year ended March 31, 2018, the board of directors approved an increase of 343,137 shares authorized for issuance. Performance Based Awards Program The Company’s Compensation Committee approved a short-term performance-based bonus program for fiscal year 2016 with predetermined objectives related to revenue and expense targets. In the event the fiscal year 2016 objectives were met, eighty-percent of the options would have vested on June 30, 2016. On August 21, 2015, certain executives and senior managers were granted an aggregate of 75,500 stock options in connection with this program. The stock options have an exercise price of $5.80 and expire ten years from the date of grant. At March 31, 2016, it was determined targets were met related to 50,400 stock options which vested on June 30, 2016. At March 31, 2016, 10,000 stock options expired due to targets that were not met. The vesting of the remaining 15,100 stock options was at the discretion of the Company’s Compensation Committee. The Company’s Compensation Committee determined 14,772 of the 15,100 discretionary stock options vested at June 30, 2016 and 228 of the discretionary stock options expired unvested. The Company also approved a long-term market-based stock option bonus program for senior managers. Vesting of the stock options granted as part of this program is contingent upon the achievement of four separate target stock prices. The market-based options vest based on the 30-trading day trailing average of the stock price of the Company’s common stock with options vesting in 25% increments at each of the target stock prices. On the last day of each quarter, the chief executive officer and/or chief financial officer will determine if any of the target stock prices have been met by evaluating the period between the quarter end date and the grant date of the option. In the event that a target stock price has been met, the senior manager will be notified that such options have vested. At the end of five years from the date of the grant, if the stock target prices have not been met, then the unvested portion of the option will expire. On August 21, 2015, certain senior managers were granted an aggregate of 23,750 stock options in connection with this program. The stock options have an exercise price of $5.80 and if they vest will expire ten years from the date of grant. None of these options vested as of March 31, 2018. Stock-Based Compensation On April 1, 2017, the Company adopted ASU 2016-09 and, as a result, made a Company-wide accounting policy change with respect to accounting for forfeitures. The Company applied a modified retrospective approach for adoption of the new policy and accordingly recorded an $11,000 increase to opening accumulated deficit at April 1, 2017. In accordance with the adoption of the accounting policy, the Company no longer estimates forfeitures based on historical experience and no longer reduces compensation expense based on the expected forfeitures. Beginning April 1, 2017, the Company will record forfeitures as they occur and will reduce compensation cost at the time of forfeiture. The Company issues service, performance and market-based stock options to employees and non-employees. The Company estimates the fair value of service and performance stock option awards using the Black-Scholes option pricing model. The Company estimates the fair value of market-based stock option awards using a Monte-Carlo simulation. Compensation expense for stock option awards is amortized on a straight-line basis over the awards’ vesting period. Compensation expense includes the impact of an estimate for forfeitures for all stock options. The expected term of the stock options represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities and Exchange Commission's Staff Accounting Bulletin No. 110 for “plain vanilla” options. The expected stock price volatility for the Company’s stock options was determined by using an average of the historical volatilities of the Company and its industry peers. The Company will continue to analyze the stock price volatility and expected term assumptions as more data for the Company’s common stock and exercise patterns become available. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company estimated the fair value of employee and non-employee stock options using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service periods of the respective awards. The fair value of employee stock options was estimated using the following weighted-average assumptions: Year Ended March 31, 2018 2017 Fair value of the Company’s common stock on date of grant $ 6.78 $ 4.87 Expected term 6.42 yrs 5.73 yrs Risk-free interest rate 2.04% 1.91% Dividend yield 0.00% 0.00% Volatility 120.8% 126.0% Fair value of options granted $ 5.97 $ 4.12 Share-based awards compensation expense is as follows: Year Ended March 31, 2018 2017 Cost of revenues $ 169,000 $ 248,000 Research and development 159,000 245,000 Selling, general and administrative 2,082,000 1,652,000 Total stock-based compensation $ 2,410,000 $ 2,145,000 At March 31, 2018, there were unrecognized compensation costs of $2,253,000 related to stock options which is expected to be recognized over a weighted-average amortization period of 1.99 years. At March 31, 2018, there were unrecognized compensation costs of $150,000 related to restricted stock which is expected to be recognized over a weighted-average amortization period of 1.41 years. No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options. Stock-Based Award Activity Stock-based awards outstanding at March 31, 2018 under the various plans are as follows: Unvested Plan Stock Options Restricted Stock Total 2006 Plan 163,000 – 163,000 2011 Plan 1,000,000 9,000 1,009,000 2016 Plan 230,000 23,000 253,000 1,393,000 32,000 1,425,000 Stock-based awards available for grant as of March 31, 2018 1,455,000 Stock options award activity is as follows: Number of Shares Weighted- Average Exercise Price Weighted- Average Contractual Term Aggregate Intrinsic Value Outstanding at April 1, 2017 899,000 $ 17.87 Options granted 554,000 6.78 Options exercised (1,000 ) 5.27 Options forfeited (51,000 ) 6.78 Options expired (8,000 ) 222.37 Outstanding at March 31, 2018 1,393,000 $ 12.70 7.45 $ – Exercisable at March 31, 2018 796,000 $ 17.32 6.35 $ – 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 $3.68 per share at March 31, 2018. 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, 2017 34,000 $ 7.27 Restricted stock awards granted 199,000 5.58 Restricted stock awards vested (201,000 ) 5.72 Restricted stock awards forfeited – – Unvested restricted stock awards outstanding at March 31, 2018 32,000 $ 6.46 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. |
15. Income Taxes
15. Income Taxes | 12 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 15 – Income Taxes The Company has the following net deferred tax assets: March 31, 2018 2017 Deferred tax assets: Net operating loss carryforwards $ 25,487,000 $ 33,394,000 Research and development tax credit carryforwards 1,789,000 1,746,000 Stock-based compensation 3,697,000 5,439,000 Allowances and accruals 1,118,000 1,232,000 Other deferred tax assets 284,000 240,000 State income taxes 1,000 4,000 Basis difference in assets (3,000 ) 1,000 Total deferred tax assets $ 32,373,000 $ 42,056,000 Deferred tax assets 32,373,000 42,056,000 Valuation allowance (32,373,000 ) (42,056,000 ) Deferred tax assets $ – $ – The Company’s income tax expense/(benefits) consist of the following: Year Ended March 31, 2018 2017 Current: State $ 37,000 $ 6,000 Foreign 13,000 – 50,000 6,000 Deferred: Federal – (3,272,000 ) State – (158,000 ) Foreign – (844,000 ) $ 50,000 $ (4,268,000 ) For the year ended March 31, 2018, $50,000 of income tax expenses was reported in other (expense) income in the accompanying consolidated statement of comprehensive (loss) income. A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for continuing operations is as follows: Year Ended March 31, 2018 2017 Expected federal statutory rate 30.8% 34.0% State income taxes, net of federal benefit 0.5% 1.2% Research and development credit 0.3% 0.3% Foreign earnings taxed at different rates (0.3% ) (1.0% ) Effect of state net operating loss expiration (0.9% ) (2.3% ) Effect of permanent differences (4.2% ) 0.0% True-up of state deferred assets 7.7% (7.4% ) Tax cuts and Jobs Act impact (103.7% ) (0.0% ) (69.8% ) 24.8% Change in valuation allowance 68.5% 8.2% Totals (1.3% ) 33.0% As of March 31, 2018, the Company had net operating loss carryforwards for Federal, California and Foreign income tax purposes of approximately $100,050,000, $35,765,000 and $3,435,000, respectively, which will begin to expire in the years 2021, 2028 and 2028, respectively, if not utilized. The remaining states net operating loss carryforwards will expire at various dates, if not utilized, beginning in the fiscal year ending March 31, 2018. The Company also had, at March 31, 2018, federal and state research credit carryforwards of approximately $948,000 and $790,000, respectively. The federal credits will expire, if not utilized at various dates, beginning in the fiscal year ending March 31, 2025, and the state credits do not expire. The Company also had, at March 31, 2018 foreign tax credits carryforwards of approximately $50,000. The foreign credits will expire, if not utilized at various dates, beginning in the fiscal year ending March 31, 2023. The Company has completed a study to assess whether a change in control has occurred or whether there have been multiple changes of control since the Company’s formation through March 31, 2018. The Company determined, based on the results of the study, no change in control occurred for purposes of Internal Revenue Code section 382. The Company, after considering all available evidence, fully reserved for these and its other deferred tax assets since it is more likely than not such benefits will not be realized in future periods. The Company has incurred losses for both financial reporting and income tax purposes for the year ended March 31, 2018. Accordingly, the Company is continuing to fully reserve for its deferred tax assets. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred income tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly. On April 1, 2017, the Company adopted ASU No. 2016-09. As a result of adopting ASU No. 2016-09, the Company has made an accounting policy election to account for forfeitures as they occur. This change has been applied on a modified retrospective basis, with no material impacts on the Company’s financial statements. The adoption of ASU No. 2016-09 also requires excess tax benefits and tax deficiencies be recorded in the income statement as opposed to additional paid-in capital when the awards vest or are settled and recognize all previously unrecognized excess tax benefits and tax deficiencies upon adoption as a cumulative-effect adjustment to retained earnings. As of April 1, 2017, the Company recognized excess tax benefit of approximately $533,000 as an increase to deferred tax assets. However, the entire amount was offset by a full valuation allowance. Accordingly, an $11,000 cumulative-effect adjustment to retained earnings was recorded as of March 31, 2018. The Company only recognizes tax benefits from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. To date, the Company has not recognized such tax benefits in its consolidated financial statements. The Company has identified its federal tax return and its state tax return in California as major tax jurisdictions. The Company also filed tax returns in foreign jurisdictions, principally Mexico and the Netherlands. The Company’s evaluation of uncertain tax matters was performed for tax years ended through March 31, 2018. Generally, the Company is subject to audit for the years ended March 31, 2017, 2016 and 2015, and may be subject to audit for amounts relating to net operating loss carryforwards generated in periods prior to March 31, 2017. The Company has elected to retain its existing accounting policy with respect to the treatment of interest and penalties attributable to income taxes, and continues to reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of its income tax provision or benefit as well as its outstanding income tax assets and liabilities. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments, other than those identified above that would result in a material change to its financial position. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduces the federal corporate income tax rate from 35% to 21% effective January 1, 2018, which the Company expects will positively impact its future effective tax rate and after-tax earnings in the United States. The Company recognized a decrease related to its federal deferred tax assets and deferred tax liabilities, before the valuation allowance. As change in the valuation allowance completely offsets the change in deferred taxes, therefore there was no impact on the consolidated financial statements related to the rate change. The Company may also be affected by certain other aspects of the Tax Act including, without limitation, provisions regarding repatriation of accumulated foreign earnings and deductibility of capital expenditures. However, these assessments are based on preliminary review and analysis of the Tax Act and are subject to change as the Company continues to evaluate these highly complex rules as additional interpretive guidance is issued. The Company is also in the process of determining the impacts of the new Global Intangibles Low-Taxed Income (“GILTI”) tax law and has not yet included any potential GILTI tax or elected any related accounting policy. The Company will continue to analyze the effects of the Tax Act and any additional impacts of the Tax Act will be recorded as they are identified during the measurement period. Also on December 22, 2017, the SEC staff issued Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provides guidance on accounting for the impact of the Tax Act. As permitted by SAB 118, both of the tax benefits recorded by us for the fiscal year ended March 31, 2018 represent provisional amounts based on our current best estimates. Any adjustments made to those provisional amounts will be included in income from operations and recorded as an adjustment to tax expense through the fiscal year ending March 31, 2019.The recorded, provisional amounts reflect assumptions made based upon our current interpretation of the Tax Act, and may change as we receive additional clarification and guidance in the form of technical corrections to the Tax Act or regulations issued by the U.S. Treasury. The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized tax benefits will increase or decrease within 12 months of March 31, 2018. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business. |
16. Employee Benefit Plan
16. Employee Benefit Plan | 12 Months Ended |
Mar. 31, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plan | NOTE 16 – Employee Benefit Plan The Company has a program to contribute and administer a qualified 401(k) plan. Under the 401(k) plan, the Company matches employee contributions to the plan up to 4% of the employee’s salary. Company contributions to the plan amounted to an aggregate of $281,000 and $196,000 for the years ended March 31, 2018 and 2017, respectively. |
17. Geographic Information
17. Geographic Information | 12 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Geographic Information | NOTE 17 – Geographic Information 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 shows the Company’s product revenues by geographic region: Year Ended March 31, 2018 2017 United States $ 8,372,000 $ 6,580,000 Latin America 3,007,000 1,299,000 Europe and Rest of the World 4,284,000 4,078,000 Total $ 15,663,000 $ 11,957,000 In connection with the Company’s sale of its Latin American business to Invekra, product revenues were reclassified from continuing operations to discontinued operations as follows: Year Ended March 31, 2018 2017 Product revenues $ – $ 2,693,000 Product license fees and royalties – 412,000 Total product related revenues $ – $ 3,105,000 The Company’s service revenues amounted to $995,000 and $868,000 for the years ended March 31, 2018 and 2017, respectively. |
18. Subsequent Events
18. Subsequent Events | 12 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
18. Subsequent Events | NOTE 18 – Subsequent Events At Market Sales Issuance On December 8, 2017, the Company entered into an At Market Issuance Sales Agreement, with B. Riley FBR, Inc. under which the Company may issue and sell shares of common stock having an aggregate offering price of up to $5,000,000 from time to time through B. Riley acting as its sales agent. The Company will pay B. Riley a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through B. Riley as agent. From April 1, 2018 through June 11, 2018, the Company sold 245,132 shares of common stock for gross proceeds of $946,000 and net proceeds of $916,000 after deducting commissions and other offering expenses. |
3. Summary of Significant Acc25
3. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Aquamed Technologies, Inc. (“Aquamed”), Oculus Technologies of Mexico S.A. de C.V. (“OTM”), and Sonoma Pharmaceuticals Netherlands, B.V. (“SP Europe”). Aquamed has no current operations. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of 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 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 relating to the Company’s deferred tax assets, valuation of equity and derivative instruments, fair value allocation of assets sold to Invekra, and the estimated amortization periods of upfront product licensing fees received from customers. Periodically, the Company evaluates and adjusts estimates accordingly. |
Revenue Recognition and Accounts Receivable | Revenue Recognition and Accounts Receivable The Company generates revenue from sales of its products to a customer base including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company sells products directly to end users and to distributors. The Company also entered into agreements to license its technology and products. The Company also provides regulatory compliance testing and quality assurance services to medical device and pharmaceutical companies. The Company records revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) collectability of the sale is reasonably assured. The Company requires all product sales to be supported by evidence of a sale transaction that clearly indicates the selling price to the customer, shipping terms and payment terms. Evidence of an arrangement generally consists of a contract or purchase order approved by the customer. The Company has ongoing relationships with certain customers from which it customarily accepts orders by telephone in lieu of purchase orders. The Company recognizes revenue at the time it receives confirmation that the goods were either tendered at their destination, when shipped “FOB destination,” or transferred to a shipping agent, when shipped “FOB shipping point.” Delivery to the customer is deemed to have occurred when the customer takes title to the product. Generally, 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. The selling prices of all goods are fixed, and agreed to with the customer, prior to shipment. Selling prices are generally based on established list prices. The right to return product is customarily based on the terms of the agreement with the customer. The Company estimates and accrues for potential returns and records this as a reduction of revenue in the same period the related revenue is recognized. Additionally, distribution fees are paid to certain wholesale distributors based on contractually determined rates. The Company estimates and accrues the fee on shipment to the respective wholesale distributors and recognizes the fee as a reduction of revenue in the same period the related revenue is recognized. The Company also offers cash discounts to certain customers, generally 2% of the sales price, as an incentive for prompt payment. The Company accounts for cash discounts by reducing accounts receivable by the prompt pay discount amount and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized. Additionally, the Company participates in certain rebate programs which provide discounted prescriptions to qualified patients. The Company contracts with a third-party to administer the program. The Company estimates and accrues for future rebates based on historical data for rebate redemption rates and the historical value of redemptions. Rebates are recognized as a reduction of revenue in the same period the related revenue is recognized. The estimates for future rebates and distribution fees are reported as allowances in Accounts Receivable, net in the accompanying consolidated balance sheets. The Company evaluates the creditworthiness of new customers and monitors the creditworthiness of its existing customers to determine whether an event or changes in their financial circumstances would raise doubt as to the collectability of a sale at the time in which a sale is made. Payment terms on sales made in the United States are generally 30 days and are extended up to 90 days for initial product launches, payment terms internationally generally range from prepaid prior to shipment to 90 days. In the event a sale is made to a customer under circumstances in which collectability is not reasonably assured, the Company either requires the customer to remit payment prior to shipment or defers recognition of the revenue until payment is received. The Company maintains a reserve for amounts which may not be collectible due to risk of credit losses. In the event a sale is made to a customer under circumstances in which returns cannot be estimated, the Company defers recognition of the revenue until sell-through is confirmed. Product license revenue is generated through agreements with strategic partners for the commercialization of Microcyn® products. The terms of the agreements sometimes include non-refundable upfront fees. The Company analyzes multiple element arrangements to determine whether the elements can be separated. Analysis is performed at the inception of the arrangement and as each product is delivered. If a product or service is not separable, the combined deliverables are accounted for as a single unit of accounting and recognized over the performance obligation period. When appropriate, the Company defers recognition of non-refundable upfront fees. If the Company has continuing performance obligations then such up-front fees are deferred and recognized over the period of continuing involvement. The Company recognizes royalty revenues from licensed products upon the sale of the related products. Revenue from consulting contracts is recognized as services are provided. Revenue from testing contracts is recognized as tests are completed and a final report is sent to the customer. |
Sales Tax and Value Added Taxes | Sales Tax and Value Added Taxes The Company accounts for sales taxes and value added taxes imposed on its goods and services on a net basis. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents may be invested in money market funds, commercial paper, variable rate demand instruments, and certificates of deposits. |
Concentration of Credit Risk and Major Customers | Concentration of Credit Risk and Major Customers Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and accounts receivable. Cash and cash equivalents are maintained in financial institutions in the United States, Mexico and the Netherlands. The Company is exposed to credit risk in the event of default by these financial institutions for amounts in excess of the Federal Deposit Insurance Corporation insured limits. Cash and cash equivalents held in foreign banks are intentionally kept at minimal levels, and therefore have minimal credit risk associated with them. The Company grants credit to its business customers, which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for trade receivables. The Company maintains allowances for potential credit losses. At March 31, 2018, one customer represented 36%, and one customer represented 18% of the net accounts receivable balance. For the year ended March 31, 2018, one customer represented 22%, one customer represented 19%, one customer represented 13%, and one customer represented 12% of net revenues. At March 31, 2017, one customer represented 26%, one customer represented 12%, and one customer represented 10% of the net accounts receivable balance. For the year ended March 31, 2017, one customer represented 12% and two customers each represented 10% of net revenues. |
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 at March 31, 2018 and 2017 in the amounts of $17,000 and $14,000, respectively. Additionally at March 31, 2018 and 2017, the Company has allowances of $1,275,000 and $672,000, respectively, related to potential discounts, returns, distributor fees and rebates. The allowances are included in Accounts Receivable, net in the accompanying consolidated balance sheets. |
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 amounts of $111,000 and $61,000 at March 31, 2018 and 2017, respectively, which is included in cost of product revenues on the Company’s accompanying consolidated statements of comprehensive (loss) income. |
Financial Assets and Liabilities | Financial Assets and Liabilities Financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The fair value of capital lease obligations and equipment loans approximates their carrying amounts as a market rate of interest is attached to their repayment. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities Level 2 – quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions) Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer. As of March 31, 2018 and 2017, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Depreciation of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful life of the improvement or the remaining term of the lease. Estimated useful asset life by classification is as follows: Years Office equipment 3 Manufacturing, lab and other equipment 5 Furniture and fixtures 7 Upon retirement or sale, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company periodically reviews the carrying values of its long-lived assets when events or changes in circumstances would indicate that it is more likely than not that their carrying values may exceed their realizable values, and records impairment charges when considered necessary. Specific potential indicators of impairment include, but are not necessarily limited to: · a significant decrease in the fair value of an asset; · a significant change in the extent or manner in which an asset is used or a significant physical change in an asset; · a significant adverse change in legal factors or in the business climate that affects the value of an asset; · an adverse action or assessment by the U.S. Food and Drug Administration or another regulator; and · an accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset; and operating or cash flow losses combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with an income-producing asset. When circumstances indicate that an impairment may have occurred, the Company tests such assets for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of such assets and their eventual disposition to their carrying amounts. In estimating these future cash flows, assets and liabilities are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows generated by other such groups. If the undiscounted future cash flows are less than the carrying amount of the asset, an impairment loss, measured as the excess of the carrying value of the asset over its estimated fair value, will be recognized. The cash flow estimates used in such calculations are based on estimates and assumptions, using all available information that management believes is reasonable. During the years ended March 31, 2018 and 2017, the Company had noted no indicators of impairment. |
Research and Development | Research and Development Research and development expense is charged to operations as incurred and consists primarily of personnel expenses, clinical and regulatory services and supplies. For the years ended March 31, 2018 and 2017, research and development expense amounted to $1,575,000 and $1,576,000, respectively. |
Advertising Costs | Advertising Costs Advertising costs are charged to operations as incurred. Advertising costs amounted to $177,000 and $149,000, for the years ended March 31, 2018 and 2017, respectively. Advertising costs are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive (loss) income. |
Shipping and Handling Costs | Shipping and Handling Costs The Company classifies amounts billed to customers related to shipping and handling in sale transactions as product revenues. The corresponding shipping and handling costs incurred are recorded in cost of product revenues. For the years ended March 31, 2018 and 2017, the Company recorded revenue related to shipping and handling costs of $46,000 and $49,000, respectively. These amounts are included in product revenues in the accompanying consolidated statements of comprehensive (loss) income. |
Foreign Currency Reporting | Foreign Currency Reporting The Company’s subsidiary, OTM, uses the local currency (Mexican Pesos) as its functional currency and its subsidiary, SP Europe, uses the local currency (Euro) as its functional currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date, and revenue and expense accounts are translated at average exchange rates during the period. Resulting translation adjustments amounted to $203,000 and $324,000 for the years ended March 31, 2018 and 2017, respectively. These amounts were recorded in other comprehensive (loss) income in the accompanying consolidated statements of comprehensive (loss) income for the years ended March 31, 2018 and 2017. Foreign currency transaction gains (losses) relate primarily to trade payables and receivables and intercompany transactions between subsidiaries OTM and SP Europe. These transactions are expected to be settled in the foreseeable future. The Company recorded foreign currency transaction losses of $208,000, and foreign currency transaction gains of $107,000 and $36,000, for the years ended March 31, 2018 and 2017, respectively. The related amounts were recorded in other (expense) income, net, in the accompanying consolidated statements of comprehensive (loss) income. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. The Company estimates the fair value of employee stock option awards using the Black-Scholes option pricing model. The Company amortizes the fair value of employee stock options on a straight-line basis over the requisite service period of the awards. Compensation expense includes the impact of an estimate for forfeitures for all stock options. The Company accounts for equity instruments issued to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based compensation charges are amortized over the vesting period or as earned. |
Income Taxes | Income Taxes Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’s consolidated financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company’s consolidated financial condition, results of comprehensive (loss) income or cash flows. |
Comprehensive Income (Loss) | Comprehensive (Loss) Income Other comprehensive (loss) income includes all changes in stockholders’ equity during a period from non-owner sources and is reported in the consolidated statement of changes in stockholders’ equity. To date, other comprehensive loss consists of changes in accumulated foreign currency translation adjustments. Accumulated other comprehensive losses at March 31, 2018 and 2017 were $3,975,000 and $4,178,000, respectively. |
Net Income (Loss) Per Share | Net (Loss) Income per Share The Company computes basic net (loss) income per share by dividing net (loss) income per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic (loss) income per share for the years ended March 31, 2018 and 2017 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive. March 31, 2018 2017 Restricted stock units 32,000 34,000 Options to purchase common stock 1,393,000 899,000 Warrants to purchase common stock 1,375,000 1,344,000 2,800,000 2,277,000 |
Common Stock Purchase Warrants and Other Derivative Financial Instruments | Common Stock Purchase Warrants and Other Derivative Financial Instruments The Company classifies common stock purchase warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company determined that its freestanding derivatives, which principally consist of warrants to purchase common stock, satisfied the criteria for classification as equity instruments, other than certain warrants that contained reset provisions and certain warrants that required net-cash settlement that the Company classified as derivative liabilities. |
Preferred Stock | Preferred Stock The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Shares that are subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, preferred shares are classified as stockholders' equity. |
Subsequent Events | Subsequent Events Management has evaluated subsequent events or transactions occurring through the date these consolidated financial statements were issued. |
Adoption of Recent Accounting Standards | Adoption of Recent Accounting Standards In March 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting On April 1, 2017, the Company adopted ASU No. 2016-09. As a result of adopting ASU No. 2016-09, the Company has made an accounting policy election to account for forfeitures as they occur. This change has been applied on a modified retrospective basis, with no material impacts on the Company’s consolidated financial statements. The adoption of ASU No. 2016-09 also requires excess tax benefits and tax deficiencies be recorded in the income statement as opposed to additional paid-in capital when the awards vest or are settled and recognize all previously unrecognized excess tax benefits and tax deficiencies upon adoption as a cumulative-effect adjustment to retained earnings. As of April 1, 2017, the Company recognized excess tax benefit of approximately $533,000 as an increase to deferred tax assets. However, the entire amount was offset by a full valuation allowance. Accordingly, no cumulative-effect adjustment to retained earnings was recorded as of March 31, 2018. |
Recent Accounting Pronouncements | Recent Accounting Standards Financial Instruments In January 2016, the FASB issued ASU 2016-01 Financial Instruments-Overall Statement of Cash Flows In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”) that changes the presentation of restricted cash and cash equivalents on the statement of cash flows. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, but early adoption is permissible. The Company has determined there will not be a material impact on the Company’s consolidated financial position and results of operations upon adoption of this topic. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (Topic 840) Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments Revenue In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Identifying Performance Obligations and Licensing Narrow-Scope Improvements and Practical Expedients Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), Business Combinations In January 2017, the FASB issued an ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business Stock Compensation In May 2017, the FASB issued ASU No. 2017-09, Compensation–Stock Compensation Scope of Modification Accounting Reporting Comprehensive Income In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 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. |
3. Summary of Significant Acc26
3. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Property and equipment estimated useful life | Years Office equipment 3 Manufacturing, lab and other equipment 5 Furniture and fixtures 7 |
Net Loss Per Share | March 31, 2018 2017 Restricted stock units 32,000 34,000 Options to purchase common stock 1,393,000 899,000 Warrants to purchase common stock 1,375,000 1,344,000 2,800,000 2,277,000 |
4. Disposition of Latin Ameri27
4. Disposition of Latin American Operations (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of proceeds from disposition | Cash received on October 27, 2016 $ 18,000,000 Cash received on March 16, 2017 1,500,000 Face value of variable consideration ($250,000 per year for ten years) 2,500,000 Total proceeds from sale 22,000,000 Equipment costs (305,000 ) Transaction costs (556,000 ) Total proceeds, net of transaction costs 21,139,000 Discount on variable consideration (using a 7.5% discount rate) (752,000 ) Total proceeds, net of discount $ 20,387,000 |
Allocation of proceeds | Services under the Technical Services Arrangement $ 708,000 Production equipment manufactured, net 192,000 Intellectual property and territory rights 19,487,000 Total proceeds $ 20,387,000 |
Schedule of income from discontinued operations | Year Ended March 31, 2018 2017 Revenues $ – $ 3,105,000 Cost of revenues – 561,000 Income from discontinued operations before tax – 2,544,000 Gain on disposal of discontinued operations before income taxes – 19,679,000 Total income from discontinued operations, before tax – 22,223,000 Income tax expense – (4,280,000 ) Income from discontinued operations, net of tax $ – $ 17,943,000 |
5. Accounts Receivable (Tables)
5. Accounts Receivable (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Receivables [Abstract] | |
Accounts receivable | March 31, 2018 2017 Accounts receivable $ 2,829,000 $ 2,794,000 Less: allowance for doubtful accounts (17,000 ) (14,000 ) Less: discounts, rebates, distributor fees and returns (1,275,000 ) (672,000 ) $ 1,537,000 $ 2,108,000 |
6. Inventories (Tables)
6. Inventories (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | March 31, 2018 2017 Raw materials $ 1,619,000 $ 1,480,000 Finished goods 1,246,000 741,000 $ 2,865,000 $ 2,221,000 |
7. Prepaid Expenses and Other30
7. Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid expenses and other current assets | March 31, 2018 2017 Prepaid insurance $ 440,000 $ 587,000 Prepaid rebates 270,000 – Tax prepaid to Mexican tax authorities 215,000 – Other prepaid expenses and other current assets 622,000 29,000 $ 1,547,000 $ 616,000 |
8. Property and Equipment (Tabl
8. Property and Equipment (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | March 31, 2018 2017 Manufacturing, lab, and other equipment $ 3,653,000 $ 3,319,000 Office equipment 361,000 324,000 Furniture and fixtures 100,000 91,000 Leasehold improvements 592,000 536,000 4,706,000 4,270,000 Less: accumulated depreciation and amortization (3,570,000 ) (3,031,000 ) $ 1,136,000 $ 1,239,000 |
9. Accrued Expenses and Other32
9. Accrued Expenses and Other Current Liabilities (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other current liabilities | March 31, 2018 2017 Salaries and related costs $ 817,000 $ 681,000 Professional fees 206,000 79,000 Other 383,000 542,000 $ 1,406,000 $ 1,302,000 |
10. Long-Term Debt (Tables)
10. Long-Term Debt (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of minimum future debt payments | For Years Ending March 31, 2019 $ 230,000 2020 13,000 2021 13,000 2022 6,000 Total minimum payments $ 262,000 Less: current portion (230,000 ) Long-term portion $ 32,000 |
11. Capital Leases (Tables)
11. Capital Leases (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Leases [Abstract] | |
Schedule of minimum capital lease payments | For Years Ending March 31, 2019 $ 170,000 2020 149,000 Total minimum lease payments $ 319,000 Less: amounts representing interest (28,000 ) Present value of minimum lease payments 291,000 Less: current portion (147,000 ) Long-term portion $ 144,000 |
12. Commitments and Contingen35
12. Commitments and Contingencies (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum operating lease payments | For Years Ending March 31, 2019 $ 438,000 2020 245,000 2021 7,000 Total minimum lease payments $ 690,000 |
14. Stock-Based Compensation (T
14. Stock-Based Compensation (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | |
Weighted-average assumptions of fair value of employee stock options | Year Ended March 31, 2018 2017 Fair value of the Company’s common stock on date of grant $ 6.78 $ 4.87 Expected term 6.42 yrs 5.73 yrs Risk-free interest rate 2.04% 1.91% Dividend yield 0.00% 0.00% Volatility 120.8% 126.0% Fair value of options granted $ 5.97 $ 4.12 |
Employee stock-based compensation expense | Year Ended March 31, 2018 2017 Cost of revenues $ 169,000 $ 248,000 Research and development 159,000 245,000 Selling, general and administrative 2,082,000 1,652,000 Total stock-based compensation $ 2,410,000 $ 2,145,000 |
Plan summary | Unvested Plan Stock Options Restricted Stock Total 2006 Plan 163,000 – 163,000 2011 Plan 1,000,000 9,000 1,009,000 2016 Plan 230,000 23,000 253,000 1,393,000 32,000 1,425,000 Stock-based awards available for grant as of March 31, 2018 1,455,000 |
Schedule of option activity | Number of Shares Weighted- Average Exercise Price Weighted- Average Contractual Term Aggregate Intrinsic Value Outstanding at April 1, 2017 899,000 $ 17.87 Options granted 554,000 6.78 Options exercised (1,000 ) 5.27 Options forfeited (51,000 ) 6.78 Options expired (8,000 ) 222.37 Outstanding at March 31, 2018 1,393,000 $ 12.70 7.45 $ – Exercisable at March 31, 2018 796,000 $ 17.32 6.35 $ – |
Schedule of unvested restricted stock activity | Number of Shares Weighted Average Award Date Fair Value per Share Unvested restricted stock awards outstanding at April 1, 2017 34,000 $ 7.27 Restricted stock awards granted 199,000 5.58 Restricted stock awards vested (201,000 ) 5.72 Restricted stock awards forfeited – – Unvested restricted stock awards outstanding at March 31, 2018 32,000 $ 6.46 |
15. Income Taxes (Tables)
15. Income Taxes (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Deferred tax assets | March 31, 2018 2017 Deferred tax assets: Net operating loss carryforwards $ 25,487,000 $ 33,394,000 Research and development tax credit carryforwards 1,789,000 1,746,000 Stock-based compensation 3,697,000 5,439,000 Allowances and accruals 1,118,000 1,232,000 Other deferred tax assets 284,000 240,000 State income taxes 1,000 4,000 Basis difference in assets (3,000 ) 1,000 Total deferred tax assets $ 32,373,000 $ 42,056,000 Deferred tax assets 32,373,000 42,056,000 Valuation allowance (32,373,000 ) (42,056,000 ) Deferred tax assets $ – $ – |
Schedule of income tax expense | Year Ended March 31, 2018 2017 Current: State $ 37,000 $ 6,000 Foreign 13,000 – 50,000 6,000 Deferred: Federal – (3,272,000 ) State – (158,000 ) Foreign – (844,000 ) $ 50,000 $ (4,268,000 ) |
Reconciliation of federal income tax rate to effective rate | Year Ended March 31, 2018 2017 Expected federal statutory rate 30.8% 34.0% State income taxes, net of federal benefit 0.5% 1.2% Research and development credit 0.3% 0.3% Foreign earnings taxed at different rates (0.3% ) (1.0% ) Effect of state net operating loss expiration (0.9% ) (2.3% ) Effect of permanent differences (4.2% ) 0.0% True-up of state deferred assets 7.7% (7.4% ) Tax cuts and Jobs Act impact (103.7% ) (0.0% ) (69.8% ) 24.8% Change in valuation allowance 68.5% 8.2% Totals (1.3% ) 33.0% |
17. Geographic Information (Tab
17. Geographic Information (Tables) | 12 Months Ended |
Mar. 31, 2018 | |
Segments, Geographical Areas [Abstract] | |
Schedule of geographic sales | Year Ended March 31, 2018 2017 United States $ 8,372,000 $ 6,580,000 Latin America 3,007,000 1,299,000 Europe and Rest of the World 4,284,000 4,078,000 Total $ 15,663,000 $ 11,957,000 |
Revenues reclassified from continuing operations to discontinued operations | Year Ended March 31, 2018 2017 Product revenues $ – $ 2,693,000 Product license fees and royalties – 412,000 Total product related revenues $ – $ 3,105,000 |
2. Liquidity and Financial Co39
2. Liquidity and Financial Condition (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Net income (loss) | $ (14,328,000) | $ 9,274,000 |
Accumulated deficit | (157,440,000) | (143,101,000) |
Working capital | $ 12,993,000 | 19,355,000 |
Proceeds from sale of stock, net | $ 0 | |
Public Offering [Member] | ||
Stock issued new, shares | 1,428,570 | |
Proceeds from sale of stock, gross | $ 5,000,000 | |
Proceeds from sale of stock, net | $ 4,500,000 | |
At-the-Market Issuance Sales Agreement [Member] | ||
Stock issued new, shares | 228,000 | |
Proceeds from sale of stock, gross | $ 1,034,000 | |
Proceeds from sale of stock, net | $ 968,000 |
3. Summary of Significant Acc40
3. Summary of Significant Accounting Policies (Details-Useful lives) | 12 Months Ended |
Mar. 31, 2018 | |
Furniture and fixtures [Member] | |
Useful asset life | 7 years |
Manufacturing, lab and other equipment [Member] | |
Useful asset life | 5 years |
Office equipment [Member] | |
Useful asset life | 3 years |
3. Summary of Significant Acc41
3. Summary of Significant Accounting Policies (Details - Antidilutive shares) - shares | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Antidilutive shares | 2,800,000 | 2,277,000 |
Restricted Stock Units (RSUs) [Member] | ||
Antidilutive shares | 32,000 | 34,000 |
Stock Options [Member] | ||
Antidilutive shares | 1,393,000 | 899,000 |
Warrants [Member] | ||
Antidilutive shares | 1,375,000 | 1,344,000 |
3. Summary of Significant Acc42
3. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Allowance for doubtful accounts | $ 17,000 | $ 14,000 |
Allowance for sales discounts, rebates, distributor fees and returns | 1,275,000 | 672,000 |
Inventory reserves | 111,000 | 61,000 |
Transfers in or out of Level 3 | 0 | 0 |
Asset impairment charges | 0 | 0 |
Research and development expenses | 1,575,000 | 1,576,000 |
Advertising costs | 177,000 | 149,000 |
Revenues | 16,658,000 | 12,825,000 |
Foreign currency translation adjustment | 203,000 | (324,000) |
Foreign currency transaction loss | 208,000 | 208,000 |
Foreign currency transaction gain | 107,000 | 36,000 |
Accumulated other comprehensive loss | (3,975,000) | (4,178,000) |
Shipping and Handling [Member] | ||
Revenues | $ 46,000 | $ 49,000 |
Accounts Receivable [Member] | One Customer [Member] | ||
Significant customer concentration | 36.00% | 26.00% |
Accounts Receivable [Member] | One Customer [Member] | ||
Significant customer concentration | 18.00% | 12.00% |
Accounts Receivable [Member] | CustomerCMember | ||
Significant customer concentration | 10.00% | |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 22.00% | 12.00% |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 19.00% | 10.00% |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 13.00% | 10.00% |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 12.00% |
4. Disposition of Latin Ameri43
4. Disposition of Latin American Operations (Details - Proceeds received) - Latin American Assets [Member] - USD ($) | 7 Months Ended | 12 Months Ended |
Oct. 27, 2016 | Mar. 16, 2017 | |
Cash received | $ 18,000,000 | $ 1,500,000 |
Face value of variable consideration ($250,000 per year for ten years) | 2,500,000 | |
Total proceeds from sale | 22,000,000 | |
Equipment costs | (305,000) | |
Transaction costs | (556,000) | |
Total proceeds, net of transaction costs | 21,139,000 | |
Discount on variable consideration (using a 7.5% discount rate) | (752,000) | |
Total proceeds, net of discount | $ 20,387,000 |
4. Disposition of Latin Ameri44
4. Disposition of Latin American Operations (Details - Allocation of Proceeds) - Latin American Assets [Member] | 7 Months Ended |
Oct. 27, 2016USD ($) | |
Total proceeds, net of discount | $ 20,387,000 |
Services under the Technical Services Arrangement [Member] | |
Total proceeds, net of discount | 708,000 |
Production equipment manufactured [Member] | |
Total proceeds, net of discount | 192,000 |
Intellectual property and territory rights [Member] | |
Total proceeds, net of discount | $ 19,487,000 |
4. Disposition of Latin Ameri45
4. Disposition of Latin American Operations (Details - Revenues of discontinued operations) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income from discontinued operations, net of tax | $ 0 | $ 17,943,000 |
Latin American Business [Member] | ||
Revenues | 0 | 3,105,000 |
Cost of Revenues | 0 | 561,000 |
Income from discontinued operations before tax | 0 | 2,544,000 |
Gain on disposal of discontinued operations before income taxes | 0 | 19,679,000 |
Total income from discontinued operations, before tax | 0 | 22,223,000 |
Income Tax benefit (expense) | 0 | (4,280,000) |
Income from discontinued operations, net of tax | $ 0 | $ 17,943,000 |
4. Disposition of Latin Ameri46
4. Disposition of Latin American Operations (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | $ 16,658,000 | $ 12,825,000 |
Product [Member] | ||
Revenues | 15,663,000 | 11,957,000 |
Service [Member] | ||
Revenues | 995,000 | 868,000 |
Latin America [Member] | Product [Member] | Supply Agreement [Member] | ||
Revenues | 3,007,000 | $ 1,299,000 |
Latin America [Member] | Service [Member] | Technical Assistance [Member] | ||
Revenues | 208,000 | |
Latin America [Member] | Service [Member] | Interest Income [Member] | ||
Revenues | $ 189,000 |
5. Accounts Receivable (Details
5. Accounts Receivable (Details) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Receivables [Abstract] | ||
Accounts receivable | $ 2,829,000 | $ 2,794,000 |
Less: allowance for doubtful accounts | (17,000) | (14,000) |
Less: discounts, rebates, distributor fees and returns | (1,275,000) | (672,000) |
Accounts receivable, net | $ 1,537,000 | $ 2,108,000 |
6. Inventories (Details)
6. Inventories (Details) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw Materials | $ 1,619,000 | $ 1,480,000 |
Finished goods | 1,246,000 | 741,000 |
Inventories, net | $ 2,865,000 | $ 2,221,000 |
7. Prepaid Expenses and Other49
7. Prepaid Expenses and Other Current Assets (Details) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid insurance | $ 440,000 | $ 587,000 |
Prepaid rebates | 270,000 | 0 |
Tax prepaid to Mexican tax authorities | 215,000 | 0 |
Other prepaid expenses and other current assets | 622,000 | 29,000 |
Total prepaid expenses and other current assets | $ 1,547,000 | $ 616,000 |
7. Prepaid Expenses and Other50
7. Prepaid Expenses and Other Current Assets (Details Narrative) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Tax prepaid to Mexican tax authorities | $ 494,000 | $ 80,000 |
Mexican Tax Authority [Member] | ||
Tax prepaid to Mexican tax authorities | $ 399,000 |
8. Property and Equipment (Deta
8. Property and Equipment (Details) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Manufacturing, lab, and other equipment | $ 3,653,000 | $ 3,319,000 |
Office equipment | 361,000 | 324,000 |
Furniture and fixtures | 100,000 | 91,000 |
Leasehold improvements | 592,000 | 536,000 |
Property and equipment, gross | 4,706,000 | 4,270,000 |
Less: accumulated depreciation and amortization | (3,570,000) | (3,031,000) |
Property and equipment, net | $ 1,136,000 | $ 1,239,000 |
8. Property and Equipment (De52
8. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization | $ 490,000 | $ 248,000 |
Loss on disposal of equipment | $ 0 | $ (10,000) |
9. Accrued Expenses and Other53
9. Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Payables and Accruals [Abstract] | ||
Salaries and related costs | $ 817,000 | $ 681,000 |
Professional fees | 206,000 | 79,000 |
Other | 383,000 | 542,000 |
Accrued expenses and other current liabilities | $ 1,406,000 | $ 1,302,000 |
10. Long-Term Debt (Details - M
10. Long-Term Debt (Details - Minimum note payments) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Debt Disclosure [Abstract] | ||
Minimum note payment 2019 | $ 230,000 | |
Minimum note payment 2020 | 13,000 | |
Minimum note payment 2021 | 13,000 | |
Minimum note payment 2022 | 6,000 | |
Total minimum note payments | 262,000 | |
Less: current portion | (230,000) | $ (123,000) |
Long-term portion | $ 32,000 | $ 45,000 |
10. Long-Term Debt (Details Nar
10. Long-Term Debt (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Note payable | $ 262,000 | |
Note payable, current portion | $ 230,000 | $ 123,000 |
Insurance Premium Note [Member] | ||
Debt issuance date | Feb. 1, 2017 | |
Debt face amount | $ 84,000 | |
Debt interest rate | 5.60% | |
Debt maturity date | Dec. 1, 2017 | |
Principal payments made | $ 76,000 | 8,000 |
Interest payments made | 840 | 340 |
Note payable, current portion | $ 76,000 | |
Payment frequency | monthly | |
Periodic payment amount | $ 8,600 | |
Insurance Premiums 2nd Note [Member] | ||
Debt issuance date | Mar. 10, 2017 | |
Debt face amount | $ 36,000 | |
Debt interest rate | 5.60% | |
Debt maturity date | Dec. 1, 2017 | |
Principal payments made | $ 36,000 | |
Interest payments made | 400 | |
Note payable, current portion | $ 36,000 | |
Payment frequency | monthly | |
Periodic payment amount | $ 4,100 | |
Insurance Premiums 3rd Note [Member] | ||
Debt issuance date | Feb. 1, 2018 | |
Debt face amount | $ 241,000 | |
Debt interest rate | 5.81% | |
Debt maturity date | Dec. 1, 2018 | |
Principal payments made | $ 24,000 | |
Interest payments made | $ 1,000 | |
Payment frequency | monthly | |
Periodic payment amount | $ 25,000 | |
Auto Loan [Member] | ||
Debt issuance date | Aug. 10, 2016 | |
Debt face amount | $ 26,000 | |
Debt interest rate | 2.49% | |
Principal payments made | $ 4,000 | 4,000 |
Interest payments made | 350 | 336 |
Note payable | 18,000 | |
Note payable, current portion | $ 5,000 | |
Payment frequency | monthly | |
Periodic payment amount | $ 432 | |
Auto Loan 2 [Member] | ||
Debt issuance date | Sep. 27, 2016 | |
Debt face amount | $ 38,000 | |
Debt interest rate | 0.00% | |
Principal payments made | $ 8,000 | $ 4,000 |
Note payable | 27,000 | |
Note payable, current portion | 6,000 | |
Periodic payment amount | $ 630 |
11. Capital Leases (Details)
11. Capital Leases (Details) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Leases [Abstract] | ||
Minimum capital lease payments due 2019 | $ 170,000 | |
Minimum capital lease payments due 20120 | 149,000 | |
Total minimum lease payments | 319,000 | |
Less: amounts representing interest | (28,000) | |
Present value of minimum lease payments | 291,000 | |
Less: current portion | (147,000) | $ (74,000) |
Long-term portion | $ 144,000 | $ 168,000 |
11. Capital Leases (Details Nar
11. Capital Leases (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Leases [Abstract] | ||
Cost of assets financed | $ 422,000 | |
Depreciation expense | $ 154,000 | |
Discount rate of minimum lease payments | 9.7% to 10.9% | |
Capital lease payments | $ 168,000 | $ 750 |
Principal payments related to capital leases | 132,000 | $ 0 |
Interest payments related to capital leases | 37,000 | |
Interest expense | $ 36,000 |
12. Commitments and Contingen58
12. Commitments and Contingencies (Details) | Mar. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease due 2019 | $ 438,000 |
Operating lease due 2020 | 245,000 |
Operating lease due 2021 | 7,000 |
Total minimum lease payments | $ 690,000 |
12. Commitments and Contingenic
12. Commitments and Contingenices (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Rent expense | $ 507,000 | $ 429,000 |
Aggregated annual salaries | 1,167,000 | |
Potential severance | $ 1,417,000 | |
Petaluma Lease [Member] | ||
Lease expiration date | Sep. 30, 2024 | |
Early termination date | Oct. 31, 2019 | |
Current monthly lease payment | $ 11,072 | |
Seattle Lease [Member] | ||
Lease expiration date/terms | 90 day notice | |
Current monthly lease payment | $ 2,700 | |
Netherlands Lease [Member] | ||
Lease expiration date/terms | month-to-month | |
Current monthly lease payment | $ 1,700 | |
Georgia office [Member] | ||
Lease expiration date | Aug. 31, 2018 | |
Current monthly lease payment | $ 1,300 | |
Jamison, PA Lease [Member] | ||
Lease expiration date | Jul. 31, 2019 | |
Current monthly lease payment | $ 2,369 | |
Fairfield, CA [Member] | ||
Lease expiration date | Oct. 31, 2019 | |
Lease expiration date/terms | monthly | |
Current monthly lease payment | $ 4,103 |
13. Stockholders' Equity (Detai
13. Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Common stock outstanding | 6,171,736 | 4,289,322 |
Proceeds from sale of stock, net | $ 0 | |
Advocos [Member] | ||
Issuance of common stock for services, shares | 14,390 | |
Issuance of common stock for services, amount | $ 69,000 | |
Assets transfered | 62,000 | |
Contract fees paid | $ 111,000 | |
CorProminence [Member] | ||
Issuance of common stock for services, shares | 6,411 | |
Issuance of common stock for services, amount | $ 29,000 | |
Actual, Inc. [Member] | ||
Issuance of common stock for services, shares | 15,916 | |
Issuance of common stock for services, amount | $ 90,000 | |
Public Offering [Member] | ||
Stock issued new, shares issued | 1,428,570 | |
Proceeds from sale of stock, gross | $ 5,000,000 | |
Proceeds from sale of stock, net | $ 4,500,000 | |
Public Offering [Member] | Warrants [Member] | ||
Warrants issued | 42,857 | |
Warrants maturity date | Mar. 1, 2023 | |
Warrants exercise price | $ 4.375 | |
At-the-Market Issuance Sales Agreement [Member] | ||
Stock issued new, shares issued | 228,000 | |
Proceeds from sale of stock, gross | $ 1,034,000 | |
Proceeds from sale of stock, net | $ 968,000 |
14. Stock-Based Compensation (D
14. Stock-Based Compensation (Details-Assumptions) - $ / shares | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Weighted average assumptions for calculating fair value of stock options | ||
Fair value of common stock on date of grant | $ 6.78 | $ 4.87 |
Expected term | 6 years 5 months 1 day | 5 years 8 months 23 days |
Risk-free interest rate | 2.04% | 1.91% |
Dividend yield | 0.00% | 0.00% |
Volatility | 120.80% | 126.00% |
Fair value of options granted, per share | $ 5.97 | $ 4.12 |
14. Stock-Based Compensation 62
14. Stock-Based Compensation (Details-Stock-based compensation) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Total stock-based compensation | $ 2,410,000 | $ 2,145,000 |
Cost of revenues [Member] | ||
Total stock-based compensation | 169,000 | 248,000 |
Research and development [Member] | ||
Total stock-based compensation | 159,000 | 245,000 |
Selling, general and administrative [Member] | ||
Total stock-based compensation | $ 2,082,000 | $ 1,652,000 |
14. Stock-Based Compensation 63
14. Stock-Based Compensation (Details-Plans) | Mar. 31, 2018shares |
Options outstanding | 1,393,000 |
Restricted stock units outstanding | 32,000 |
Total options and restricted stock units outstanding | 1,425,000 |
Stock-based awards available for grant | 1,455,000 |
2006 Plan [Member] | |
Options outstanding | 163,000 |
Restricted stock units outstanding | 0 |
Total options and restricted stock units outstanding | 163,000 |
2011 Plan [Member] | |
Options outstanding | 1,000,000 |
Restricted stock units outstanding | 9,000 |
Total options and restricted stock units outstanding | 1,009,000 |
2016 Plan [Member] | |
Options outstanding | 230,000 |
Restricted stock units outstanding | 23,000 |
Total options and restricted stock units outstanding | 253,000 |
14. Stock-Based Compensation 64
14. Stock-Based Compensation (Details-Option activity) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Options | ||
Outstanding at end of period | 1,393,000 | |
Weighted Average Exercise Price | ||
Granted | $ 6.78 | $ 4.87 |
Stock Options [Member] | ||
Options | ||
Outstanding at beginning of period | 899,000 | |
Granted | 554,000 | |
Exercised | (1,000) | |
Forfeited | (51,000) | |
Expired | (8,000) | |
Outstanding at end of period | 1,393,000 | 899,000 |
Exercisable at end of period | 796,000 | |
Weighted Average Exercise Price | ||
Outstanding at beginning of period | $ 17.87 | |
Granted | 6.78 | |
Exercised | 5.27 | |
Forfeited | 6.78 | |
Expired | 222.37 | |
Outstanding at end of period | 12.7 | $ 17.87 |
Exercisable at end of period | $ 17.32 | |
Weighted Average Contractual Term | ||
Outstanding at end of period | 7 years 5 months 12 days | |
Exercisable at end of period | 6 years 4 months 6 days | |
Aggregate Intrinsic Value | ||
Outstanding at end of period | $ 0 | |
Exercisable at end of period | $ 0 |
14. Stock-Based Compensation 65
14. Stock-Based Compensation (Details-Restricted stock activity) - Restricted Stock Units (RSUs) [Member] | 12 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Restricted stock award activity | |
Unvested restricted stock awards, beginning balance | shares | 34,000 |
Restricted stock awards granted | shares | 199,000 |
Restricted stock awards vested | shares | (201,000) |
Restricted stock awards forfeited | shares | 0 |
Unvested restricted stock awards, ending balance | shares | 32,000 |
Weighted average award date fair value per share, outstanding beginning balance | $ / shares | $ 7.27 |
Weighted average award date fair value per share, granted | $ / shares | 5.58 |
Weighted average award date fair value per share, vested | $ / shares | 5.72 |
Weighted average award date fair value per share, forfeited | $ / shares | 0 |
Weighted average award date fair value per share, outstanding ending balance | $ / shares | $ 6.46 |
14. Stock-Based Compensation 66
14. Stock-Based Compensation (Details Narrative) - USD ($) | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2016 | |
2011 Plan [Member] | |||
Increase in shares authorized for issuance | 643,383 | 629,504 | |
2016 Plan [Member] | |||
Increase in shares authorized for issuance | 343,137 | ||
Shares initially authorized for issuance | 400,000 | ||
Restricted Stock Units (RSUs) [Member] | |||
Unrecognized compensation costs | $ 150,000 | ||
Weighted average amortization period | 1 year 4 months 28 days | ||
Stock Options [Member] | |||
Options expired | 8,000 | ||
Aggregate intrinsic value per share | $ 3.68 | ||
Unrecognized compensation costs | $ 2,253,000 | ||
Weighted average amortization period | 1 year 11 months 26 days | ||
Long Term Performance Based Awards [Member] | August 21, 2015 [Member] | |||
Options granted | 23,750 | ||
Options vested | 0 | ||
Short Term Performance Based Awards [Member] | August 21, 2015 [Member] | |||
Options vested | 50,400 | ||
Short Term Performance Based Awards [Member] | August 21, 2015 [Member] | Discretionary vesting [Member] | |||
Options vested | 14,772 | ||
Options expired | 228 | ||
Performance Based Awards [Member] | August 21, 2015 [Member] | |||
Options granted | 75,500 | ||
Options expired | 10,000 |
15. Income Taxes (Details-Defer
15. Income Taxes (Details-Deferred taxes) - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 25,487,000 | $ 33,394,000 |
Research and development tax credit carryforwards | 1,789,000 | 1,746,000 |
Stock-based compensation | 3,697,000 | 5,439,000 |
Allowances and accruals | 1,118,000 | 1,232,000 |
Other deferred tax assets | 284,000 | 240,000 |
State income taxes | 1,000 | 4,000 |
Basis difference in assets | (3,000) | 1,000 |
Total deferred tax assets | 32,373,000 | 42,056,000 |
Deferred tax liabilities: | ||
Deferred tax assets | 32,373,000 | 42,056,000 |
Valuation allowance | (32,373,000) | (42,056,000) |
Deferred tax assets | $ 0 | $ 0 |
15. Income Taxes (Details-Incom
15. Income Taxes (Details-Income tax expense) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Current: | ||
Current State income tax expense | $ 37,000 | $ 6,000 |
Current Foreign Tax Expense | 13,000 | 0 |
Current Income Tax Expense | 50,000 | 6,000 |
Deferred: | ||
Federal deferred income tax | 0 | (3,272,000) |
State deferred income tax | 0 | (158,000) |
Foreign deferred income tax | 0 | (844,000) |
Total deferred income tax | $ 50,000 | $ (4,268,000) |
15. Income Taxes (Details-Recon
15. Income Taxes (Details-Reconciliation of tax rate) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Expected federal statutory rate | 30.80% | 34.00% |
State income taxes, net of federal benefit | 0.50% | 1.20% |
Research and development credit | 0.30% | 0.30% |
Foreign earnings taxed at different rates | (0.30%) | (1.00%) |
Effect of state operating loss expiration | (0.90%) | (2.30%) |
Effect of permanent differences | (4.20%) | (0.00%) |
True-ups of state deferred assets | 7.70% | (7.40%) |
Tax cuts and Jobs Act impact | (103.70%) | (0.00%) |
Total effective rate | (69.80%) | 24.80% |
Change in valuation allowance | 68.50% | 8.20% |
Totals | (1.30%) | 33.00% |
15. Income Taxes (Details Narra
15. Income Taxes (Details Narrative) | 12 Months Ended |
Mar. 31, 2018USD ($) | |
Foreign tax credit carryforward | $ 50,000 |
Foreign tax credit expiration date | Mar. 31, 2023 |
State and Local Jurisdiction [Member] | |
Net operating loss carryforwards | $ 35,765,000 |
Operating loss beginning expiration dates | Mar. 31, 2028 |
State research credit carryfowards | $ 790,000 |
Foreign Tax Authority [Member] | |
Net operating loss carryforwards | $ 3,435,000 |
Operating loss beginning expiration dates | Mar. 31, 2028 |
Foreign tax credit carryforward | $ 50,000 |
Foreign tax credit expiration date | Mar. 31, 2023 |
Federal [Member] | |
Net operating loss carryforwards | $ 100,050,000 |
Operating loss beginning expiration dates | Mar. 31, 2021 |
Federal research credit carryforwards | $ 948,000 |
Research credit expiration date | Mar. 31, 2025 |
16. Employee Benefit Plan (Deta
16. Employee Benefit Plan (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Retirement Benefits [Abstract] | ||
Company contributions to 401(k) plan | $ 281,000 | $ 196,000 |
17. Geographic Information (Det
17. Geographic Information (Details - Geographic regions) - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | $ 16,658,000 | $ 12,825,000 |
Product [Member] | ||
Revenues | 15,663,000 | 11,957,000 |
Product [Member] | Sales Revenue, Segment [Member] | United States [Member] | ||
Revenues | 8,372,000 | 6,580,000 |
Product [Member] | Sales Revenue, Segment [Member] | Latin America [Member] | ||
Revenues | 3,007,000 | 1,299,000 |
Product [Member] | Sales Revenue, Segment [Member] | Europe and Other [Member] | ||
Revenues | $ 4,284,000 | $ 4,078,000 |
17. Segment and Geographic Info
17. Segment and Geographic Information (Details - Reclassified to Discontinued operations) - Segment Discontinued Operations [Member] - Latin America [Member] - USD ($) | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | $ 0 | $ 3,105,000 |
Product [Member] | ||
Revenues | 0 | 2,693,000 |
License fees and royalties [Member] | ||
Revenues | $ 0 | $ 412,000 |
17. Segment and Geographic In74
17. Segment and Geographic Information (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | $ 16,658 | $ 12,825 |
Service [Member] | ||
Revenues | $ 995 | $ 868 |
18. Subsequent Events (Details
18. Subsequent Events (Details Narrative) - USD ($) | 2 Months Ended | 12 Months Ended |
Jun. 11, 2018 | Mar. 31, 2017 | |
Proceeds from sale of stock, net | $ 0 | |
Subsequent Event [Member] | At-the-Market Issuance Sales Agreement [Member] | ||
Stock issued new, shares | 245,132 | |
Proceeds from sale of stock, gross | $ 946,000 | |
Proceeds from sale of stock, net | $ 916,000 |