Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Mar. 31, 2017 | Jun. 26, 2017 | Sep. 30, 2016 | |
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, 2017 | ||
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 | 4,300,138 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 | ||
Entity public float | $ 18,125,593 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Mar. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 17,461 | $ 7,469 |
Accounts receivable, net | 2,108 | 1,508 |
Inventories, net | 2,221 | 1,595 |
Prepaid expenses and other current assets | 616 | 1,505 |
Current portion of deferred consideration, net of discount | 237 | 0 |
Current assets of discontinued operations (Note 4) | 0 | 811 |
Total current assets | 22,643 | 12,888 |
Property and equipment, net | 1,239 | 850 |
Deferred consideration, net of discount, less current portion | 1,497 | 0 |
Other assets | 80 | 65 |
Total assets | 25,459 | 13,803 |
Current liabilities: | ||
Accounts payable | 1,255 | 1,337 |
Accrued expenses and other current liabilities | 1,302 | 1,526 |
Deferred revenue | 345 | 274 |
Deferred revenue Invekra (Note 4) | 176 | 0 |
Current portion of long-term debt | 123 | 114 |
Current portion of capital leases | 74 | 0 |
Taxes payable | 13 | 0 |
Current liabilities of discontinued operations (Note 4) | 0 | 300 |
Total current liabilities | 3,288 | 3,551 |
Long-term deferred revenue Invekra (Note 4) | 527 | 0 |
Long-term debt, less current portion | 45 | 0 |
Long-term capital leases, less current portion | 168 | 0 |
Long-term liabilities of discontinued operations (Note 4) | 0 | 112 |
Total liabilities | 4,028 | 3,663 |
Commitments and Contingencies (Note 12) | ||
Stockholders' Equity | ||
Convertible preferred stock, $0.0001 par value; 714,286 shares authorized, none issued and outstanding at March 31, 2017 and March 31, 2016, respectively | 0 | 0 |
Common stock, $0.0001 par value; 12,000,000 shares authorized at March 31, 2017 and March 31, 2016, 4,289,322 and 4,196,873 shares issued and outstanding at March 31, 2017 and March 31, 2016, respectively (Note 13) | 1 | 1 |
Additional paid-in capital | 168,709 | 166,368 |
Accumulated deficit | (143,101) | (152,375) |
Accumulated other comprehensive loss | (4,178) | (3,854) |
Total stockholders' equity | 21,431 | 10,140 |
Total liabilities and stockholders' equity | $ 25,459 | $ 13,803 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Mar. 31, 2016 |
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 | 4,289,322 | 4,196,873 |
Common stock shares outstanding | 4,289,322 | 4,196,873 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Product | $ 11,957 | $ 8,077 |
Product licensing fees and royalties | 0 | 231 |
Service | 868 | 1,061 |
Total revenues | 12,825 | 9,369 |
Cost of revenues | ||
Product | 6,419 | 5,840 |
Service | 738 | 881 |
Total cost of revenues | 7,157 | 6,721 |
Gross profit | 5,668 | 2,648 |
Operating expenses | ||
Research and development | 1,576 | 1,806 |
Selling, general and administrative | 17,066 | 15,556 |
Total operating expenses | 18,642 | 17,362 |
Loss from operations | (12,974) | (14,714) |
Interest expense | (3) | (3) |
Interest income | 22 | 2 |
Gain due to change in fair value of derivative liabilities | 0 | 11 |
Other income (expense), net | 18 | (20) |
Loss from continuing operations before income taxes | (12,937) | (14,724) |
Income tax benefit | 4,268 | 0 |
Loss from continuing operations | (8,669) | (14,724) |
Income from discontinued operations (net of tax) (Note 4) | 17,943 | 4,562 |
Net income (loss) | $ 9,274 | $ (10,162) |
Net income (loss) per common share: basic and diluted - Continuing operations | $ (2.05) | $ (4.48) |
Net income (loss) per common share: basic and diluted - Discontinued operations | 4.25 | 1.39 |
Net income (loss) per common share: basic and diluted | $ 2.20 | $ (3.09) |
Weighted-average number of common shares used in common per share calculations: basic and diluted | 4,224 | 3,289 |
Other comprehensive income (loss) | ||
Net income (loss) | $ 9,274 | $ (10,162) |
Foreign currency translation adjustments | (324) | (347) |
Comprehensive income (loss) | $ 8,950 | $ (10,509) |
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, 2015 | 3,009,017 | ||||
Beginning balance, amount at Mar. 31, 2015 | $ 1 | $ 157,773 | $ (142,213) | $ (3,507) | $ 12,054 |
Issuance of common stock in connection with At-the-Market issuances of common stock, net of commissions, expenses and other offering costs, shares | 450,919 | ||||
Issuance of common stock in connection with At-the-Market issuances of common stock, net of commissions, expenses and other offering costs, amount | 3,150 | 3,150 | |||
Issuance of common stock and common stock purchase warrants in connection with March 23, 2016 closing of offering, net of commissions, expenses and other offering costs, shares | 680,000 | ||||
Issuance of common stock and common stock purchase warrants in connection with March 23, 2016 closing of offering, net of commissions, expenses and other offering costs, amount | 2,994 | 2,994 | |||
Issuance of common stock upon exercise of common stock purchase warrants, shares | 2,220 | ||||
Issuance of common stock upon exercise of common stock purchase warrants, value | 14 | 14 | |||
Issuance of common stock purchase warrants for payment of service fees, value | 128 | 128 | |||
Issuance of common stock for settlement of service fees, shares | 41,704 | ||||
Issuance of common stock for settlement of service fees, value | 286 | 286 | |||
Stock based compensation related to issuance of common stock restricted stock grants, shares | 13,013 | ||||
Stock based compensation related to issuance of common stock restricted stock grants, value | 64 | 64 | |||
Stock-based compensation expense, net of forfeitures | 1,959 | 1,959 | |||
Foreign currency translation adjustment | (347) | (347) | |||
Net income (loss) | (10,162) | (10,162) | |||
Ending balance, shares at Mar. 31, 2016 | 4,196,873 | ||||
Ending 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 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities | ||
Net loss from continuing operations | $ (8,669) | $ (14,724) |
Net income from discontinued operations, net of tax | 17,943 | 4,562 |
Net income (loss) | 9,274 | (10,162) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 248 | 244 |
Change in provision for doubtful accounts | (1) | (5) |
Change in provision for discounts, rebates, distributor fees and returns | 19 | 470 |
Change in provision for obsolete inventory | 0 | 77 |
Gain on sale of Latin American assets, net of tax | (15,399) | 0 |
Income tax benefit | (4,268) | 0 |
Stock-based compensation | 2,145 | 2,151 |
Service provider expenses settled with common stock | 98 | 190 |
Gain due to change in fair value of derivative liabilities | 0 | (11) |
Foreign currency transaction gains | (36) | (38) |
Loss on disposal of property and equipment | 10 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 34 | (1,282) |
Inventories | (675) | (382) |
Prepaid expenses and other current assets | 979 | (751) |
Accounts payable | (58) | 429 |
Accrued expenses and other current liabilities | (298) | 919 |
Deferred revenue | (239) | (595) |
Net cash used in operating activities | (8,167) | (8,746) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (394) | (345) |
Proceeds from sale of long-term investment | 0 | 4,538 |
Proceeds from sale of Latin American assets, net of costs | 18,639 | 0 |
Deposits | (21) | (2) |
Net cash provided by investing activities | 18,224 | 4,191 |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock net of offering costs | 0 | 6,144 |
Proceeds from exercise of common stock options | 7 | 0 |
Proceeds from exercise of common stock purchase warrants | 91 | 14 |
Principal payments on long-term debt | (130) | (119) |
Net cash (used in) provided by financing activities | (32) | 6,039 |
Effect of exchange rate on cash and cash equivalents | (33) | (151) |
Net increase in cash and cash equivalents | 9,992 | 1,333 |
Cash and cash equivalents, beginning of year | 7,469 | 6,136 |
Cash and cash equivalents, end of year | 17,461 | 7,469 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 3 | 3 |
Non-cash operating and financing activities: | ||
Service provider expenses settled with common stock | 98 | 96 |
Insurance premiums financed | 120 | 146 |
Automobiles financed using long-term debt | 64 | 0 |
Automobiles financed using capital leases | 242 | 0 |
Sale of Latin American assets to Invekra: Assets sold and liabilities transferred: | ||
Deferred consideration - current, net | 237 | 0 |
Deferred consideration - long-term, net | 1,497 | 0 |
Taxes payable | (13) | 0 |
Deferred revenue - current | (176) | 0 |
Deferred revenue - long-term | (527) | 0 |
Total assets sold and liabilities transferred | $ 1,018 | $ 0 |
1. Organization and Recent Deve
1. Organization and Recent Developments | 12 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Recent Developments | Organization Sonoma Pharmaceuticals, Inc., formerly known as Oculus Innovative Sciences, 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 that develops and markets solutions for the treatment of dermatological conditions and advanced tissue care. The Company’s products, which are sold throughout the United States and 39 countries around the world, have improved patient outcomes for more than five million patients globally by reducing infections, itch, pain, scarring, odor and harmful inflammatory responses. Effective December 6, 2016, the Company changed its name from Oculus Innovative Sciences, Inc. to Sonoma Pharmaceuticals, Inc. Reverse Stock Split Effective June 24, 2016, the Company effected a reverse stock split of its common stock, par value $0.0001 per share. Every 5 shares of common stock were reclassified and combined into one share of common stock. No fractional shares were issued as a result of the reverse stock split. Instead, stockholders entitled to receive fractional shares received cash in the amount equal to the closing price per share of the Company’s common stock as reported on the NASDAQ Capital Market as of 5:00 p.m. Eastern Time on June 24, 2016, multiplied by the fraction of one share owned by the stockholder. The reverse stock split reduced the number of shares of the Company’s common stock outstanding from 21,004,857 to 4,200,756. The total number of authorized shares of common stock was also proportionally decreased by a ratio of 1:5 and the par value per share of the common stock continued to be $0.0001. All common shares and per share amounts contained in the consolidated financial statements have been retroactively adjusted to reflect a 1 for 5 reverse stock split. |
2. Liquidity and Financial Cond
2. Liquidity and Financial Condition | 12 Months Ended |
Mar. 31, 2017 | |
Liquidity And Financial Condition | |
Liquidity and Financial Condition | The Company reported a net income of $9,274,000 for the year ended March 31, 2017. At March 31, 2017 and March 31, 2016, the Company’s accumulated deficit amounted to $143,101,000 and $152,375,000, respectively. The Company had working capital of $19,355,000 and $9,337,000 as of March 31, 2017 and March 31, 2016, 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, penetrate markets for the sale of its products. On October 27, 2016, the Company, along with its Mexican subsidiary and manufacturer Oculus Technologies of Mexico, S.A. de C.V., closed on an asset purchase agreement with Invekra, S.A.P.I de C.V., an affiliate of Laboratorios Sanfer S.A. de C.V., for the sale of certain of its Latin America assets for an aggregate purchase price of $22,000,000, with $18,000,000 paid in cash upon closing, $1,500,000 paid on March 16, 2017 upon delivery of certain equipment and technology, and $2,500,000 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 per cent on net sales of certain products in Latin America, excluding Mexico. Since the $2,500,000 will be paid in foreign currency, the Company may receive more or less than $2,500,000 due to currency fluctuations. The Company currently anticipates that its cash and cash equivalents will be sufficient to meet its working capital requirements to continue its sales and marketing and research and development efforts for at least 12 months from the date of filing this annual report. |
3. Summary of Significant Accou
3. Summary of Significant Accounting Policies | 12 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
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”), formerly known as Oculus Innovative Sciences, B.V. 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. Reclassifications Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2017 presentation. These reclassifications have no impact on the Company’s previously reported net loss. 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 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. 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, 2017, one customer represented 26%, one customer represented 12%, and one customer represented 10% of the net accounts receivable balance. At March 31, 2017, one customer represented 12% and two customers each represented 10% of net revenues. At March 31, 2016, one customer represented 33% of the net accounts receivable balance. At March 31, 2016, one customer represented 40%, one customer represented 15%, one customer represented 14% and two customers each represented 12% 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, 2017 and 2016 in the amounts of $14,000 and $15,000, respectively. Additionally at March 31, 2017 and 2016 the Company has allowances of $672,000 and $653,000, 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 market. 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 reserves to reduce the carrying amounts of inventories to their net realizable value in the amounts of $61,000 and $164,000 at March 31, 2017 and 2016, respectively, which is included in cost of product revenues on the Company’s accompanying consolidated statements of comprehensive income (loss). 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, 2017 and 2016, 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, 2017 and 2016, 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, 2017 and 2016, research and development expense amounted to $1,576,000 and $1,806,000, respectively. Advertising Costs Advertising costs are charged to operations as incurred. Advertising costs amounted to $149,000 and $175,000, for the years ended March 31, 2017 and 2016 respectively. Advertising costs are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss). Shipping and Handling Costs The Company classifies amounts billed to customers related to shipping and handling in sale transactions as product revenues. Shipping and handling costs incurred are recorded in cost of product revenues. For the years ended March 31, 2017 and 2016, the Company recorded revenue related to shipping and handling costs of $49,000 and $59,000, respectively. 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 $324,000 and $347,000 for the years ended March 31, 2017 and 2016, respectively, and were recorded in other comprehensive income (loss) in the accompanying consolidated statements of comprehensive income (loss). Foreign currency transaction gains (losses) relate primarily to trade payables and receivables between subsidiaries OTM and SP Europe. These transactions are expected to be settled in the foreseeable future. The Company recorded foreign currency transaction gains of $36,000 and $38,000 for the years ended March 31, 2017 and 2016, respectively. The related were recorded in other income (expense), net, in the accompanying consolidated statements of comprehensive income (loss). 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 income (loss) or cash flows. Comprehensive Income (Loss) Other comprehensive income (loss) 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, 2017 and 2016 were $4,178,000 and $3,854,000, respectively. Net Income (Loss) per Share The Company computes basic net income (loss) per share by dividing net income (loss) 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 income (loss) per share for the years ended March 31, 2017 and 2016 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive. March 31, 2017 2016 Restricted stock units 34,000 – Options to purchase common stock 899,000 753,000 Warrants to purchase common stock 1,344,000 1,485,000 2,277,000 2,238,000 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. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers Revenue Recognition 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, In January 2016, the FASB issued ASU 2016-01 Financial Instruments-Overall, which address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Earlier application is permitted under specific circumstances. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This amendment will provide guidance on the presentation and classification of specific cash flow items to improve consistency within the statement of cash flows. ASU 2016-15 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. 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 not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) – Scope of Modification Accounting Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”), SEC and/or other standards-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, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
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, subject to mutual extension (“Supply Agreement”). During the year ended March 31, 2017, the Company reported $1,299,000 of Latin America product revenue related to the Supply Agreement with Invekra. 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 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 carrying value of the assets and liabilities of discontinued operations on the consolidated balance sheets as of March 31, 2017 and March 31, 2016 were as follows: March 31, 2017 March 31, 2016 Assets Accounts receivable (net) $ – $ 766,000 Inventories – 45,000 Total current assets of discontinued operations $ – $ 811,000 Liabilities Deferred revenue $ – $ 300,000 Total current liabilities of discontinued operations $ – $ 300,000 Deferred revenue, less current portion $ – $ 112,000 Total long-term liabilities of discontinued operations $ – $ 112,000 The operations of its Latin American business included in discontinued operations is summarized as follows: Year Ended March 31, 2017 2016 Revenues $ 3,105,000 $ 5,715,000 Cost of revenues 561,000 1,153,000 Income from discontinued operations before tax 2,544,000 4,562,000 Gain on disposal of discontinued operations before income taxes 19,679,000 – Total income from discontinued operations, before tax 22,223,000 4,562,000 Income tax expense (4,280,000 ) – Income from discontinued operations, net of tax $ 17,943,000 $ 4,562,000 |
5. Accounts Receivable
5. Accounts Receivable | 12 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts receivable, net consists of the following: March 31, 2017 2016 Accounts receivable $ 2,794,000 $ 2,176,000 Less: allowance for doubtful accounts (14,000 ) (15,000 ) Less: discounts, rebates, distributor fees and returns (672,000 ) (653,000 ) $ 2,108,000 $ 1,508,000 |
6. Inventories
6. Inventories | 12 Months Ended |
Mar. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories, net consist of the following: March 31, 2017 2016 Raw materials $ 1,480,000 $ 1,059,000 Finished goods 741,000 536,000 $ 2,221,000 $ 1,595,000 |
7. Prepaid Expenses and Other C
7. Prepaid Expenses and Other Current Assets | 12 Months Ended |
Mar. 31, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consist of the following: March 31, 2017 2016 Prepaid insurance $ 587,000 $ 405,000 Prepaid rebates – 378,000 Other prepaid expenses and other current assets 29,000 722,000 $ 616,000 $ 1,505,000 |
8. Property and Equipment
8. Property and Equipment | 12 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and equipment consists of the following: March 31, 2017 2016 Manufacturing, lab, and other equipment $ 3,319,000 $ 3,075,000 Office equipment 324,000 298,000 Furniture and fixtures 91,000 83,000 Leasehold improvements 536,000 307,000 4,270,000 3,763,000 Less: accumulated depreciation and amortization (3,031,000 ) (2,913,000 ) $ 1,239,000 $ 850,000 Depreciation and amortization expense amounted to $248,000 and $244,000 for the years ended March 31, 2017 and 2016, respectively. During the year ended March 31, 2017 and 2016, 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 income (loss). |
9. Accrued Expenses and Other C
9. Accrued Expenses and Other Current Liabilities | 12 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consist of the following: March 31, 2017 2016 Salaries and related costs $ 681,000 $ 693,000 Professional fees 79,000 557,000 Other 542,000 276,000 $ 1,302,000 $ 1,526,000 |
10. Long-Term Debt
10. Long-Term Debt | 12 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Financing of Insurance Premiums On January 25, 2016, the Company entered into a note agreement for $146,000 with an interest rate of 6.25% per annum. This instrument was issued in connection with financing insurance premiums. The note was payable in monthly installments of $17,000. During the year ended March 31, 2016, the Company made principal and interest payments of $32,000 and $1,000, respectively. During the year ended March 31, 2017, the Company made principal and interest payments in the amounts of 114,000 and $1,000, respectively. 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. The remaining balance of $76,000 is included in the current portion of long-term debt in the accompanying consolidated balance sheet. 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. The remaining balance of $36,000 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. The remaining balance of this note amounted to $22,000 at March 31, 2017, 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. The remaining balance of this note amounted to $34,000 at March 31, 2017, of which $6,000 is included in the current portion of long-term debt in the accompanying consolidated balance sheet. Minimum note payments due in years subsequent to March 31, 2017 are as follows: For Years Ending March 31, 2018 $ 127,000 2019 13,000 2020 13,000 2021 13,000 2022 6,000 Total minimum payments $ 172,000 Less: amounts representing interest (4,000 ) Present value of payments 168,000 Less: current portion (123,000 ) Long-term portion $ 45,000 |
11. Capital Leases
11. Capital Leases | 12 Months Ended |
Mar. 31, 2017 | |
Leases [Abstract] | |
Capital Leases | During March 2017, the Company entered into a fleet capital lease under which the aggregate present value of the minimum lease payments amounted to $280,000. The present value of the minimum lease payments was calculated using discount rates of ranging from 9.7% to 10.6%. Lease payments, including amounts representing interest, amounted to $750 for the year ended March 31, 2017. The remaining principal balance on these obligations amounted to $242,000 at March 31, 2007, including $74,000 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 $115 for the years ended March 31, 2017. Minimum capital lease payments due in years subsequent to March 31, 2017 are as follows: For Years Ending March 31, 2018 $ 102,000 2019 98,000 2020 80,000 Total minimum lease payments $ 280,000 Less: amounts representing interest (38,000 ) Present value of minimum lease payments 242,000 Less: current portion (74,000 ) Long-term portion $ 168,000 |
12. Commitments and Contingenci
12. Commitments and Contingencies | 12 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
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 its 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, 2017, with an option to extend for a one year period. The Company gave notice to extend the lease to May 31, 2018. The payment is $1,200 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. Minimum lease payments for non-cancelable operating leases are as follows: For Years Ending March 31, 2018 $ 371,000 2019 253,000 2020 89,000 Total minimum lease payments $ 713,000 Rental expense amounted to $429,000 and $442,000 for the years ended March 31, 2017 and 2016, respectively and is recorded in the accompanying consolidated statement of comprehensive income (loss). Legal Matters The Company, 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 income (loss). 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 our health and welfare plans, vacation and reimbursement of expenses. As of March 31, 2017, 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, 2017, 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, 2017 | |
Stockholders' Equity | |
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. Reverse Stock Split Effective June 24, 2016, the Company effected a reverse stock split of its common stock, par value $0.0001 per share. Every 5 shares of common stock were reclassified and combined into one share of common stock. No fractional shares were issued as a result of the reverse stock split. Instead, stockholders entitled to receive fractional shares received cash in the amount equal to the closing price per share of the Company’s common stock as reported on the NASDAQ Capital Market as of 5:00 p.m. Eastern Time on June 24, 2016, multiplied by the fraction of one share owned by the stockholder. The reverse stock split reduced the number of shares of the Company’s common stock outstanding from 21,004,857 to 4,200,756. The total number of authorized shares of common stock was also proportionally decreased by a ratio of 1:5 and the par value per share of the common stock continued to be $0.0001. All common shares and per share amounts contained in the consolidated financial statements have been retroactively adjusted to reflect a 1 for 5 reverse stock split. 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. April 2014 At-the-Market Offering On April 2, 2014, the Company entered into an At-the-Market Issuance Sales Agreement with MLV & Co. LLC under which the Company can issue and sell shares of its common stock having an aggregate offering price of up to $9,159,000 from time to time through MLV acting as its sales agent. To date, the Company has raised an aggregate $4,706,000 in connection with this agreement. The Company will pay MLV a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock sold through MLV as agent under the Sales Agreement. For the year ended March 31, 2016, the Company sold 450,919 shares for gross proceeds of $3,263,000 and net proceeds of $3,150,000 after deducting commissions and other offering expenses. No shares were sold during the year ended March 31, 2017. March 2016 Underwritten Public Offering On March 18, 2016, the Company entered into an underwriting agreement with Dawson James Securities, Inc. with respect to the issuance and sale of an aggregate of 680,000 units, each unit consisting of one share of common stock, par value $0.0001 per share, together with one quarter (0.25) of one warrant to purchase one share of common stock at an exercise price equal to $5.00 per share, in an underwritten public offering. The public offering price for each unit, consisting of one share of common stock together with one quarter (0.25) of one warrant, was $5.00. Because the Company is prohibited from issuing fractional shares, the warrants can only be exercised in lots of four, which means that each holder must exercise four March 2016 Warrants to receive one share of common stock, or a total of 170,000 shares. The warrants have an initial exercise price of $5.00 per share and have a term of three years. Pursuant to the underwriting agreement, the Company paid Dawson James Securities, Inc. a cash fee equal to 8% of the aggregate gross proceeds raised in this offering and also paid $50,000 in legal fees and expenses of the underwriter’s legal counsel. The gross proceeds from the sale of the shares of common stock and the warrants was $3,400,000, and net proceeds of $2,994,000 after deducting underwriting commissions and other estimated offering expenses. 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. During the year ended March 31, 2016, the Company issued 41,704 shares of common stock, with a fair market value of $203,000, in connection with this agreement. The Company has determined that the fair value of the common stock was more readily determinable than the fair value of the services rendered. During the year ended March 31, 2016, the Company recorded $107,000 of expense related to stock issued pursuant to this agreement and settled $96,000 of fees accrued in prior periods. The expense was recorded as selling, general and administrative expense in the accompanying consolidated statement of comprehensive income (loss) for the year ended March 31, 2016. 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 income (loss) 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 income (loss). Common Stock Purchase Warrants On March 31, 2016, the Company issued Dawson James Securities, Inc. a warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $5.00 per share in connection with a service agreement. The warrants were non-forfeitable at date of issuance. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: Fair value of the underlying stock $4.75; risk-free interest rate 0.01%; contractual life of 3 years; dividend yield of 0%; and volatility of 87%. The fair value of the warrants amounted to $128,000 and was recorded as selling, general and administrative expense in the accompanying consolidated statement of comprehensive income (loss) for the year ended March 31, 2017. |
14. Stock-Based Compensation
14. Stock-Based Compensation | 12 Months Ended |
Mar. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | |
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. 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. 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. 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. 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, 2017. Stock-Based Compensation 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 estimates forfeitures based on historical experience and reduces compensation expense accordingly. The estimated forfeiture rates used during the year ended March 31, 2017 ranged from 5.24% to 8.17%. The estimated forfeiture rates used during the year ended March 31, 2016 ranged from 1.18% to 4.71%. 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, 2017 2016 Fair value of the Company’s common stock on date of grant $ 4.87 $ 5.90 Expected term 5.73 yrs 6.39 yrs Risk-free interest rate 1.91% 1.63% Dividend yield 0.00% 0.00% Volatility 126.0% 93.0% Fair value of options granted $ 4.12 $ 4.45 Share-based awards compensation expense is as follows: Stock-based Stock-based Cost of revenues $ 248,000 $ 364,000 Research and development 245,000 339,000 Selling, general and administrative 1,652,000 1,320,000 Total stock-based compensation $ 2,145,000 $ 2,023,000 At March 31, 2017, there were unrecognized compensation costs of $624,000 related to stock options which is expected to be recognized over a weighted-average amortization period of 2.03 years. At March 31, 2017, there were unrecognized compensation costs of $219,000 related to restricted stock which is expected to be recognized over a weighted-average amortization period of 1.59 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, 2017 under the various plans are as follows: Plan Stock Options Restricted Stock Total 2006 Plan 170,000 – 170,000 2011 Plan 573,000 34,000 607,000 2016 Plan 156,000 – 156,000 899,000 34,000 933,000 Stock-based awards available for grant as of March 31, 2017 1,170,000 Stock options award activity is as follows: Number of Weighted- Weighted- Aggregate Outstanding at April 1, 2016 753,000 $ 20.91 Options granted 190,000 4.87 Options exercised (1,000 ) 5.80 Options forfeited (19,000 ) 7.10 Options expired (24,000 ) 19.85 Outstanding at March 31, 2017 899,000 $ 17.87 7.46 $ 459,000 Exercisable at March 31, 2017 711,000 $ 21.05 7.08 $ 459,000 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 $7.17 per share at March 31, 2017. 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, 2016 – $ – Restricted stock awards granted 86,000 6.05 Restricted stock awards vested (52,000 ) 5.27 Restricted stock awards forfeited – – Unvested restricted stock awards outstanding at March 31, 2017 34,000 $ 7.27 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, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company has the following net deferred tax assets: March 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $ 33,394,000 $ 36,454,000 Research and development tax credit carryforwards 1,746,000 1,710,000 Stock-based compensation 5,439,000 5,083,000 Reserves and accruals 1,232,000 1,111,000 Other deferred tax assets 240,000 241,000 State income taxes 4,000 (1,000 ) Basis difference in assets 1,000 8,000 Total deferred tax assets $ 42,056,000 $ 44,606,000 Net deferred tax asset 42,056,000 44,606,000 Valuation allowance (42,056,000 ) (44,606,000 ) Net deferred tax asset $ – $ – The Company’s income tax expense/(benefits) consist of the following: Years Ended March 31, 2017 2016 Current: State $ 6,000 $ 2,000 Deferred: Federal (3,272,000 ) – State (158,000 ) – Foreign (844,000 ) – $ (4,268,000 ) $ 2,000 A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for continuing operations is as follows: Years Ended March 31, 2017 2016 Expected federal statutory rate 34.0% 34.0% State income taxes, net of federal benefit 1.2% 1.8% Research and development credit 0.3% 0.4% Foreign earnings taxed at different rates (1.0% ) (0.7% ) Effect of state net operating loss expiration (2.3% ) (5.5% ) Effect of permanent differences 0.0% 3.3% Impact of foreign exchange rate fluctuations on foreign deferred income taxes 0.0% (8.5% ) Impact of change in foreign net operating loss 0.0% (6.3% ) Cancellation of stock options and other true-ups 0.0% 0.0% True-up of state deferred assets (7.4% ) (11.4% ) 24.8% 7.1% Change in valuation allowance 8.2% (7.1% ) Totals 33.0% ) 0.0% As of March 31, 2017, the Company had net operating loss carryforwards for Federal, California and Foreign income tax purposes of approximately $87,000,000, $31,000,000 and $4,000,000, respectively, which will begin to expire in the years 2020, 2018 and 2017, respectively, if not utilized. The state and foreign 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, 2017, federal and state research credit carryforwards of approximately $905,000 and $790,000, respectively. The federal credits will expire, if not utilized at various dates, beginning in the fiscal year ending March 31, 2024, and the state credits do not expire. The Company also had, at March 31, 2017 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, 2017. 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 period s. The Company has incurred income for both financial reporting and income tax purposes for the year ended March 31, 2017, solely as a result of the gain on disposal of discontinued operations. Without such disposal, the Company has incurred losses for both financial reporting and income tax purposes. 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 As a result of certain realization requirements of Accounting Standards Codification Topic 718, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at March 31, 2017 that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting purposes. Equity will be increased by approximately $533,000 if and when such deferred tax assets are ultimately realized. 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, 2017. Generally, the Company is subject to audit for the years ended March 31, 2016, 2015 and 2014, and may be subject to audit for amounts relating to net operating loss carryforwards generated in periods prior to March 31, 2015. 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. 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, 2017. 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, 2017 | |
Retirement Benefits [Abstract] | |
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 $196,000 and $158,000 for the years ended March 31, 2017 and 2016, respectively. |
17. Geographic Information
17. Geographic Information | 12 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
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, 2017 2016 $ Change % Change United States $ 6,580,000 $ 4,371,000 $ 2,209,000 51% Latin America 1,299,000 – 1,299,000 100% Europe and Rest of the World 4,078,000 3,706,000 372,000 10% 11,957,000 8,077,000 3,880,000 48% Product License Fees and Royalties – 231,000 (231,000 ) (100)% Total $ 11,957,000 $ 8,308,000 $ 3,649,000 44% 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, 2017 2016 Product revenues $ 2,693,000 $ 4,965,000 Product license fees and royalties 412,000 750,000 Total product related revenues $ 3,105,000 $ 5,715,000 The Company’s service revenues amounted to $868,000 and $1,061,000 for the years ended March 31, 2017 and 2016, respectively. |
3. Summary of Significant Acc24
3. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Mar. 31, 2017 | |
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”), formerly known as Oculus Innovative Sciences, B.V. 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. |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2017 presentation. These reclassifications have no impact on the Company’s previously reported net loss. |
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 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. 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, 2017, one customer represented 26%, one customer represented 12%, and one customer represented 10% of the net accounts receivable balance. At March 31, 2017, one customer represented 12% and two customers each represented 10% of net revenues. At March 31, 2016, one customer represented 33% of the net accounts receivable balance. At March 31, 2016, one customer represented 40%, one customer represented 15%, one customer represented 14% and two customers each represented 12% 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, 2017 and 2016 in the amounts of $14,000 and $15,000, respectively. Additionally at March 31, 2017 and 2016 the Company has allowances of $672,000 and $653,000, 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 market. 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 reserves to reduce the carrying amounts of inventories to their net realizable value in the amounts of $61,000 and $164,000 at March 31, 2017 and 2016, respectively, which is included in cost of product revenues on the Company’s accompanying consolidated statements of comprehensive income (loss). |
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, 2017 and 2016, 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, 2017 and 2016, 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, 2017 and 2016, research and development expense amounted to $1,576,000 and $1,806,000, respectively. |
Advertising Costs | Advertising Costs Advertising costs are charged to operations as incurred. Advertising costs amounted to $149,000 and $175,000, for the years ended March 31, 2017 and 2016 respectively. Advertising costs are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss). |
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. Shipping and handling costs incurred are recorded in cost of product revenues. For the years ended March 31, 2017 and 2016, the Company recorded revenue related to shipping and handling costs of $49,000 and $59,000, respectively. |
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 $324,000 and $347,000 for the years ended March 31, 2017 and 2016, respectively, and were recorded in other comprehensive income (loss) in the accompanying consolidated statements of comprehensive income (loss). Foreign currency transaction gains (losses) relate primarily to trade payables and receivables between subsidiaries OTM and SP Europe. These transactions are expected to be settled in the foreseeable future. The Company recorded foreign currency transaction gains of $36,000 and $38,000 for the years ended March 31, 2017 and 2016, respectively. The related were recorded in other income (expense), net, in the accompanying consolidated statements of comprehensive income (loss). |
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 income (loss) or cash flows. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Other comprehensive income (loss) 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, 2017 and 2016 were $4,178,000 and $3,854,000, respectively. |
Net Income (Loss) Per Share | Net Income (Loss) per Share The Company computes basic net income (loss) per share by dividing net income (loss) 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 income (loss) per share for the years ended March 31, 2017 and 2016 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive. March 31, 2017 2016 Restricted stock units 34,000 – Options to purchase common stock 899,000 753,000 Warrants to purchase common stock 1,344,000 1,485,000 2,277,000 2,238,000 |
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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers Revenue Recognition 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, In January 2016, the FASB issued ASU 2016-01 Financial Instruments-Overall, which address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Earlier application is permitted under specific circumstances. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This amendment will provide guidance on the presentation and classification of specific cash flow items to improve consistency within the statement of cash flows. ASU 2016-15 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. 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 not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) – Scope of Modification Accounting Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”), SEC and/or other standards-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 Acc25
3. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Property and equipment estimated useful life | Years Office equipment 3 Manufacturing, lab and other equipment 5 Furniture and fixtures 7 |
Antidilutive shares | March 31, 2017 2016 Restricted stock units 34,000 – Options to purchase common stock 899,000 753,000 Warrants to purchase common stock 1,344,000 1,485,000 2,277,000 2,238,000 |
4. Disposition of Latin Ameri26
4. Disposition of Latin American Operations (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
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 discontinued assets and liabilities | March 31, 2017 March 31, 2016 Assets Accounts receivable (net) $ – $ 766,000 Inventories – 45,000 Total current assets of discontinued operations $ – $ 811,000 Liabilities Deferred revenue $ – $ 300,000 Total current liabilities of discontinued operations $ – $ 300,000 Deferred revenue, less current portion $ – $ 112,000 Total long-term liabilities of discontinued operations $ – $ 112,000 |
Schedule of income from discontinued operations | Year Ended March 31, 2017 2016 Revenues $ 3,105,000 $ 5,715,000 Cost of revenues 561,000 1,153,000 Income from discontinued operations before tax 2,544,000 4,562,000 Gain on disposal of discontinued operations before income taxes 19,679,000 – Total income from discontinued operations, before tax 22,223,000 4,562,000 Income tax expense (4,280,000 ) – Income from discontinued operations, net of tax $ 17,943,000 $ 4,562,000 |
5. Accounts Receivable (Tables)
5. Accounts Receivable (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
Accounts receivable | March 31, 2017 2016 Accounts receivable $ 2,794,000 $ 2,176,000 Less: allowance for doubtful accounts (14,000 ) (15,000 ) Less: discounts, rebates, distributor fees and returns (672,000 ) (653,000 ) $ 2,108,000 $ 1,508,000 |
6. Inventories (Tables)
6. Inventories (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | March 31, 2017 2016 Raw materials $ 1,480,000 $ 1,059,000 Finished goods 741,000 536,000 $ 2,221,000 $ 1,595,000 |
7. Prepaid Expenses and Other29
7. Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid expenses and other current assets | March 31, 2017 2016 Prepaid insurance $ 587,000 $ 405,000 Prepaid rebates – 378,000 Other prepaid expenses and other current assets 29,000 722,000 $ 616,000 $ 1,505,000 |
8. Property and Equipment (Tabl
8. Property and Equipment (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | March 31, 2017 2016 Manufacturing, lab, and other equipment $ 3,319,000 $ 3,075,000 Office equipment 324,000 298,000 Furniture and fixtures 91,000 83,000 Leasehold improvements 536,000 307,000 4,270,000 3,763,000 Less: accumulated depreciation and amortization (3,031,000 ) (2,913,000 ) $ 1,239,000 $ 850,000 |
9. Accrued Expenses and Other31
9. Accrued Expenses and Other Current Liabilities (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other current liabilities | March 31, 2017 2016 Salaries and related costs $ 681,000 $ 693,000 Professional fees 79,000 557,000 Other 542,000 276,000 $ 1,302,000 $ 1,526,000 |
10. Long-Term Debt (Tables)
10. Long-Term Debt (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of minimum future debt payments | For Years Ending March 31, 2018 $ 127,000 2019 13,000 2020 13,000 2021 13,000 2022 6,000 Total minimum payments $ 172,000 Less: amounts representing interest (4,000 ) Present value of payments 168,000 Less: current portion (123,000 ) Long-term portion $ 45,000 |
11. Capital Leases (Tables)
11. Capital Leases (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Leases [Abstract] | |
Schedule of minimum capital lease payments | For Years Ending March 31, 2018 $ 102,000 2019 98,000 2020 80,000 Total minimum lease payments $ 280,000 Less: amounts representing interest (38,000 ) Present value of minimum lease payments 242,000 Less: current portion (74,000 ) Long-term portion $ 168,000 |
12. Commitments and Contingen34
12. Commitments and Contingencies (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum operating lease payments | For Years Ending March 31, 2018 $ 371,000 2019 253,000 2020 89,000 Total minimum lease payments $ 713,000 |
14. Stock-Based Compensation (T
14. Stock-Based Compensation (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
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, 2017 2016 Fair value of the Company’s common stock on date of grant $ 4.87 $ 5.90 Expected term 5.73 yrs 6.39 yrs Risk-free interest rate 1.91% 1.63% Dividend yield 0.00% 0.00% Volatility 126.0% 93.0% Fair value of options granted $ 4.12 $ 4.45 |
Employee stock-based compensation expense | Stock-based Stock-based Cost of revenues $ 248,000 $ 364,000 Research and development 245,000 339,000 Selling, general and administrative 1,652,000 1,320,000 Total stock-based compensation $ 2,145,000 $ 2,023,000 |
Plan summary | Plan Stock Options Restricted Stock Total 2006 Plan 170,000 – 170,000 2011 Plan 573,000 34,000 607,000 2016 Plan 156,000 – 156,000 899,000 34,000 933,000 Stock-based awards available for grant as of March 31, 2017 1,170,000 |
Schedule of option activity | Number of Weighted- Weighted- Aggregate Outstanding at April 1, 2016 753,000 $ 20.91 Options granted 190,000 4.87 Options exercised (1,000 ) 5.80 Options forfeited (19,000 ) 7.10 Options expired (24,000 ) 19.85 Outstanding at March 31, 2017 899,000 $ 17.87 7.46 $ 459,000 Exercisable at March 31, 2017 711,000 $ 21.05 7.08 $ 459,000 |
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, 2016 – $ – Restricted stock awards granted 86,000 6.05 Restricted stock awards vested (52,000 ) 5.27 Restricted stock awards forfeited – – Unvested restricted stock awards outstanding at March 31, 2017 34,000 $ 7.27 |
15. Income Taxes (Tables)
15. Income Taxes (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Deferred tax assets | March 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $ 33,394,000 $ 36,454,000 Research and development tax credit carryforwards 1,746,000 1,710,000 Stock-based compensation 5,439,000 5,083,000 Reserves and accruals 1,232,000 1,111,000 Other deferred tax assets 240,000 241,000 State income taxes 4,000 (1,000 ) Basis difference in assets 1,000 8,000 Total deferred tax assets $ 42,056,000 $ 44,606,000 Net deferred tax asset 42,056,000 44,606,000 Valuation allowance (42,056,000 ) (44,606,000 ) Net deferred tax asset $ – $ – |
Schedule of income tax expense | Years Ended March 31, 2017 2016 Current: State $ 6,000 $ 2,000 Deferred: Federal (3,272,000 ) – State (158,000 ) – Foreign (844,000 ) – $ (4,268,000 ) $ 2,000 |
Reconciliation of federal income tax rate to effective rate | Years Ended March 31, 2017 2016 Expected federal statutory rate 34.0% 34.0% State income taxes, net of federal benefit 1.2% 1.8% Research and development credit 0.3% 0.4% Foreign earnings taxed at different rates (1.0% ) (0.7% ) Effect of state net operating loss expiration (2.3% ) (5.5% ) Effect of permanent differences 0.0% 3.3% Impact of foreign exchange rate fluctuations on foreign deferred income taxes 0.0% (8.5% ) Impact of change in foreign net operating loss 0.0% (6.3% ) Cancellation of stock options and other true-ups 0.0% 0.0% True-up of state deferred assets (7.4% ) (11.4% ) 24.8% 7.1% Change in valuation allowance 8.2% (7.1% ) Totals 33.0% ) 0.0% |
17. Geographic Information (Tab
17. Geographic Information (Tables) | 12 Months Ended |
Mar. 31, 2017 | |
Segments, Geographical Areas [Abstract] | |
Schedule of geographic sales | Year Ended March 31, 2017 2016 $ Change % Change United States $ 6,580,000 $ 4,371,000 $ 2,209,000 51% Latin America 1,299,000 – 1,299,000 100% Europe and Rest of the World 4,078,000 3,706,000 372,000 10% 11,957,000 8,077,000 3,880,000 48% Product License Fees and Royalties – 231,000 (231,000 ) (100)% Total $ 11,957,000 $ 8,308,000 $ 3,649,000 44% |
Revenues reclassified from continuing operations to discontinued operations | Year Ended March 31, 2017 2016 Product revenues $ 2,693,000 $ 4,965,000 Product license fees and royalties 412,000 750,000 Total product related revenues $ 3,105,000 $ 5,715,000 |
1. Organization and Recent De38
1. Organization and Recent Developments (Details Narrative) | 12 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reverse stock split | Effective June 24, 2016, the Company effected a reverse stock split of its common stock, par value $0.0001 per share. Every 5 shares of common stock were reclassified and combined into one share of common stock |
2. Liquidity and Financial Co39
2. Liquidity and Financial Condition (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Liquidity And Financial Condition | ||
Net income (loss) | $ 9,274,000 | $ (10,162,000) |
Accumulated deficit | (143,101,000) | (152,375,000) |
Working capital | 19,355,000 | $ 9,337,000 |
Gross consideration transferred in sale of Latin American assets | $ 22,000,000 |
3. Summary of Significant Acc40
3. Summary of Significant Accounting Policies (Details-Useful lives) | 12 Months Ended |
Mar. 31, 2017 | |
Office equipment [Member] | |
Useful asset life | 3 years |
Manufacturing, lab and other equipment [Member] | |
Useful asset life | 5 years |
Furniture and fixtures [Member] | |
Useful asset life | 7 years |
3. Summary of Significant Acc41
3. Summary of Significant Accounting Policies (Details - Antidilutive shares) - shares | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Antidilutive shares | 2,277,000 | 2,238,000 |
Restricted Stock Units (RSUs) [Member] | ||
Antidilutive shares | 34,000 | 0 |
Stock Options [Member] | ||
Antidilutive shares | 899,000 | 753,000 |
Warrants [Member] | ||
Antidilutive shares | 1,344,000 | 1,485,000 |
3. Summary of Significant Acc42
3. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Allowance for doubtful accounts | $ 14,000 | $ 15,000 |
Allowance for sales discounts, rebates, distributor fees and returns | 672,000 | 653,000 |
Inventory reserves | 61,000 | 164,000 |
Transfers in or out of Level 3 | 0 | 0 |
Asset impairment charges | 0 | 0 |
Research and development expenses | 1,576,000 | 1,806,000 |
Advertising costs | 149,000 | 175,000 |
Shipping and handling costs | 49,000 | 59,000 |
Foreign currency translation adjustment | (324,000) | (347,000) |
Foreign currency transaction gain (loss) | 36,000 | 38,000 |
Accumulated other comprehensive loss | $ (4,178,000) | $ (3,854,000) |
Accounts Receivable [Member] | One Customer [Member] | ||
Significant customer concentration | 26.00% | 33.00% |
Accounts Receivable [Member] | One Customer [Member] | ||
Significant customer concentration | 12.00% | |
Accounts Receivable [Member] | One Customer [Member] | ||
Significant customer concentration | 10.00% | |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 12.00% | 40.00% |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 15.00% | |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 14.00% | |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 10.00% | |
Revenues [Member] | One Customer [Member] | ||
Significant customer concentration | 10.00% | |
Revenues [Member] | Two Customers [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 - Assets and liabilities of discontinued operations) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Assets | ||
Total current assets of discontinued operations | $ 0 | $ 811,000 |
Liabilities | ||
Total current liabilities of discontinued operations | 0 | 300,000 |
Total Long-term liabilities of discontinued operations | 0 | 112,000 |
Latin American Business [Member] | ||
Assets | ||
Accounts receivable (net) | 0 | 766,000 |
Inventories | 0 | 45,000 |
Total current assets of discontinued operations | 0 | 811,000 |
Liabilities | ||
Deferred Revenue | 0 | 300,000 |
Total current liabilities of discontinued operations | 0 | 300,000 |
Deferred Revenue, less current portion | 0 | 112,000 |
Total Long-term liabilities of discontinued operations | $ 0 | $ 112,000 |
4. Disposition of Latin Ameri46
4. Disposition of Latin American Operations (Details - Revenues of discontinued operations) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | $ 3,105,000 | $ 5,715,000 |
Income from discontinued operations, net of tax | 17,943,000 | 4,562,000 |
Latin American Business [Member] | ||
Revenues | 3,105,000 | 5,715,000 |
Cost of Revenues | 561,000 | 1,153,000 |
Income from discontinued operations before tax | 2,544,000 | 4,562,000 |
Gain on disposal of discontinued operations before income taxes | 19,679,000 | 0 |
Total income from discontinued operations, before tax | 22,223,000 | 4,562,000 |
Income Tax benefit (expense) | (4,280,000) | 0 |
Income from discontinued operations, net of tax | $ 17,943,000 | $ 4,562,000 |
5. Accounts Receivable (Details
5. Accounts Receivable (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Receivables [Abstract] | ||
Accounts receivable | $ 2,794,000 | $ 2,176,000 |
Less: allowance for doubtful accounts | (14,000) | (15,000) |
Less: discounts, rebates, distributor fees and returns | (672,000) | (653,000) |
Accounts receivable, net | $ 2,108,000 | $ 1,508,000 |
6. Inventories (Details)
6. Inventories (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw Materials | $ 1,480,000 | $ 1,059,000 |
Finished goods | 741,000 | 536,000 |
Inventories, net | $ 2,221,000 | $ 1,595,000 |
7. Prepaid Expenses and Other49
7. Prepaid Expenses and Other Current Assets (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid insurance | $ 587,000 | $ 405,000 |
Prepaid rebates | 0 | 378,000 |
Other prepaid expenses and other current assets | 29,000 | 722,000 |
Total prepaid expenses and other current assets | $ 616,000 | $ 1,505,000 |
8. Property and Equipment (Deta
8. Property and Equipment (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Property, Plant and Equipment [Abstract] | ||
Manufacturing, lab, and other equipment | $ 3,319,000 | $ 3,075,000 |
Office equipment | 324,000 | 298,000 |
Furniture and fixtures | 91,000 | 83,000 |
Leasehold improvements | 536,000 | 307,000 |
Property and equipment, gross | 4,270,000 | 3,763,000 |
Less: accumulated depreciation and amortization | (3,031,000) | (2,913,000) |
Property and equipment, net | $ 1,239,000 | $ 850,000 |
8. Property and Equipment (De51
8. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization | $ 248,000 | $ 244,000 |
Loss on disposal of equipment | $ (10,000) | $ 0 |
9. Accrued Expenses and Other52
9. Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Payables and Accruals [Abstract] | ||
Salaries and related costs | $ 681,000 | $ 693,000 |
Professional fees | 79,000 | 557,000 |
Other | 542,000 | 276,000 |
Accrued expenses and other current liabilities | $ 1,302,000 | $ 1,526,000 |
10. Long-Term Debt (Details - M
10. Long-Term Debt (Details - Minimum note payments) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Debt Disclosure [Abstract] | ||
Minimum note payment 2018 | $ 127,000 | |
Minimum note payment 2019 | 13,000 | |
Minimum note payment 2020 | 13,000 | |
Minimum note payment 2021 | 13,000 | |
Minimum note payment 2022 | 6,000 | |
Total minimum note payments | 172,000 | |
Less: amounts representing interest | (4,000) | |
Present value of payments | 168,000 | |
Less: current portion | (123,000) | $ (114,000) |
Long-term portion | $ 45,000 | $ 0 |
10. Long-Term Debt (Details Nar
10. Long-Term Debt (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Note payable | $ 172,000 | |
Note payable, current portion | $ 123,000 | $ 114,000 |
Insurance Premium Note [Member] | ||
Debt issuance date | Jan. 25, 2016 | |
Debt face amount | $ 146,000 | |
Debt interest rate | 6.25% | |
Principal payments made | $ 114,000 | 32,000 |
Interest payments made | $ 1,000 | $ 1,000 |
Payment frequency | monthly | |
Periodic payment amount | $ 17,000 | |
Insurance Premiums 2nd 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 | $ 8,000 | |
Interest payments made | 340 | |
Note payable, current portion | $ 76,000 | |
Payment frequency | monthly | |
Periodic payment amount | $ 8,600 | |
Insurance Premiums 3rd Note [Member] | ||
Debt issuance date | Mar. 10, 2017 | |
Debt face amount | $ 36,000 | |
Debt interest rate | 5.60% | |
Debt maturity date | Dec. 1, 2017 | |
Note payable, current portion | $ 36,000 | |
Payment frequency | monthly | |
Periodic payment amount | $ 4,100 | |
Auto Loan [Member] | ||
Debt issuance date | Aug. 10, 2016 | |
Debt face amount | $ 26,000 | |
Debt interest rate | 2.49% | |
Principal payments made | $ 4,000 | |
Interest payments made | 336 | |
Note payable | 22,000 | |
Note payable, current portion | $ 5,000 | |
Payment frequency | monthly | |
Periodic payment amount | $ 432 | |
Auto Loan [Member] | ||
Debt issuance date | Sep. 27, 2016 | |
Debt face amount | $ 38,000 | |
Debt interest rate | 0.00% | |
Principal payments made | $ 4,000 | |
Note payable | 34,000 | |
Note payable, current portion | 6,000 | |
Periodic payment amount | $ 630 |
11. Capital Leases (Details)
11. Capital Leases (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Leases [Abstract] | ||
Minimum capital lease payments due 2018 | $ 102,000 | |
Minimum capital lease payments due 2019 | 98,000 | |
Minimum capital lease payments due 2020 | 80,000 | |
Total minimum lease payments | 280,000 | |
Less: amounts representing interest | (38,000) | |
Present value of minimum lease payments | 242,000 | |
Less: current portion | (74,000) | $ 0 |
Long-term portion | $ 168,000 | $ 0 |
11. Capital Leases (Details Nar
11. Capital Leases (Details Narrative) | 12 Months Ended |
Mar. 31, 2017USD ($) | |
Leases [Abstract] | |
Present value of minimum lease payments, discount rate range | 9.7% to 10.6% |
Capital lease payments | $ 750 |
12. Commitments and Contingen57
12. Commitments and Contingencies (Details) | Mar. 31, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease due 2018 | $ 371,000 |
Operating lease due 2019 | 253,000 |
Operating lease due 2020 | 89,000 |
Total minimum lease payments | $ 713,000 |
12. Commitments and Contingenic
12. Commitments and Contingenices (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Rent expense | $ 429,000 | $ 442,000 |
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 | May 31, 2018 | |
Current monthly lease payment | $ 1,200 | |
Jamison, PA Lease [Member] | ||
Lease expiration date | Jul. 31, 2019 | |
Current monthly lease payment | $ 2,369 |
13. Stockholders' Equity (Detai
13. Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | 36 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | |
Reverse stock split | Effective June 24, 2016, the Company effected a reverse stock split of its common stock, par value $0.0001 per share. Every 5 shares of common stock were reclassified and combined into one share of common stock | ||
Common stock outstanding | 4,289,322 | 4,196,873 | 4,289,322 |
Fair value of warrants | $ 128,000 | ||
Advocos [Member] | |||
Issuance of common stock for services, shares | 14,390 | 41,704 | |
Issuance of common stock for services, amount | $ 69,000 | $ 203,000 | |
Stock expense related to transactions | 107,000 | ||
Assets transfered | $ 62,000 | ||
Stock issuance costs paid accrued in prior periods | $ 96,000 | ||
CorProminence [Member] | |||
Issuance of common stock for services, shares | 6,411 | ||
Issuance of common stock for services, amount | $ 29,000 | ||
Dawson James Securities, Inc. [Member] | |||
Warrants issued | 50,000 | ||
Fair value of warrants | $ 128,000 | ||
At-the-Market Issuance Sales Agreement [Member] | |||
Stock sold new, shares issued | 450,919 | ||
Proceeds from sale of stock, gross | $ 3,263,000 | $ 4,706,000 | |
Proceeds from sale of equity, net | 3,150,000 | ||
March 2016 Underwritten Public Offering [Member] | |||
Proceeds from sale of stock, gross | 3,400,000 | ||
Proceeds from sale of equity, net | 2,994,000 | ||
Legal fees and expenses related to offering | $ 50,000 | ||
After Split [Member] | |||
Common stock outstanding | 4,200,756 | 4,200,756 | |
Before Split [Member] | |||
Common stock outstanding | 21,004,557 | 21,004,557 |
14. Stock-Based Compensation (D
14. Stock-Based Compensation (Details-Assumptions) - $ / shares | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Weighted average assumptions for calculating fair value of stock options | ||
Expected term | 5 years 8 months 23 days | 6 years 4 months 20 days |
Risk-free interest rate | 1.91% | 1.63% |
Dividend yield | 0.00% | 0.00% |
Volatility | 126.00% | 93.00% |
Fair value of options granted, per share | $ 4.12 | $ 4.45 |
14. Stock-Based Compensation 61
14. Stock-Based Compensation (Details-Stock-based compensation) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Total stock-based compensation | $ 2,145,000 | $ 2,023,000 |
Cost of revenues [Member] | ||
Total stock-based compensation | 248,000 | 364,000 |
Research and development [Member] | ||
Total stock-based compensation | 245,000 | 339,000 |
Selling, general and administrative [Member] | ||
Total stock-based compensation | $ 1,652,000 | $ 1,320,000 |
14. Stock-Based Compensation 62
14. Stock-Based Compensation (Details-Plans) | Mar. 31, 2017shares |
Restricted stock units outstanding | 34,000 |
Total options and restricted stock units outstanding | 933,000 |
Stock-based awards available for grant | 1,170,000 |
2006 Plan [Member] | |
Options outstanding | 170,000 |
Restricted stock units outstanding | 0 |
Total options and restricted stock units outstanding | 170,000 |
2011 Plan [Member] | |
Options outstanding | 573,000 |
Restricted stock units outstanding | 34,000 |
Total options and restricted stock units outstanding | 607,000 |
2016 Plan [Member] | |
Options outstanding | 156,000 |
Restricted stock units outstanding | 0 |
Total options and restricted stock units outstanding | 156,000 |
14. Stock-Based Compensation 63
14. Stock-Based Compensation (Details-Option activity) - Stock Options [Member] | 12 Months Ended |
Mar. 31, 2017USD ($)$ / sharesshares | |
Options | |
Outstanding at beginning of period | shares | 753,000 |
Granted | shares | 190,000 |
Exercised | shares | (1,000) |
Forfeited | shares | (19,000) |
Expired | shares | (24,000) |
Outstanding at end of period | shares | 899,000 |
Exercisable at end of period | shares | 711,000 |
Weighted Average Exercise Price | |
Outstanding at beginning of period | $ / shares | $ 20.91 |
Granted | $ / shares | 4.87 |
Exercised | $ / shares | 5.80 |
Forfeited | $ / shares | 7.10 |
Expired | $ / shares | 19.85 |
Outstanding at end of period | $ / shares | 17.87 |
Exercisable at end of period | $ / shares | $ 21.05 |
Weighted Average Contractual Term | |
Outstanding at end of period | 7 years 5 months 16 days |
Exercisable at end of period | 7 years 29 days |
Aggregate Intrinsic Value | |
Outstanding at end of period | $ | $ 459,000 |
Exercisable at end of period | $ | $ 459,000 |
14. Stock-Based Compensation 64
14. Stock-Based Compensation (Details-Restricted stock activity) - Restricted Stock Awards [Member] | 12 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Restricted stock award activity | |
Unvested restricted stock awards, beginning balance | shares | 0 |
Restricted stock awards granted | shares | 86,000 |
Restricted stock awards vested | shares | (52,000) |
Restricted stock awards forfeited | shares | 0 |
Unvested restricted stock awards, ending balance | shares | 34,000 |
Weighted average award date fair value per share, outstanding beginning balance | $ / shares | $ 0 |
Weighted average award date fair value per share, granted | $ / shares | 6.05 |
Weighted average award date fair value per share, vested | $ / shares | 5.27 |
Weighted average award date fair value per share, forfeited | $ / shares | 0 |
Weighted average award date fair value per share, outstanding ending balance | $ / shares | $ 7.27 |
14. Stock-Based Compensation 65
14. Stock-Based Compensation (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Performance Based Awards [Member] | August 21, 2015 [Member] | ||
Options granted | 75,500 | |
Options expired | 10,000 | |
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 | |
Long Term Performance Based Awards [Member] | August 21, 2015 [Member] | ||
Options granted | 23,750 | |
Options vested | 0 | |
Stock Options [Member] | ||
Options expired | 24,000 | |
Aggregate intrinsic value per share | $ 7.17 | |
Unrecognized compensation costs | $ 624,000 | |
Weighted average amortization period | 2 years 10 days | |
Restricted Stock Awards [Member] | ||
Unrecognized compensation costs | $ 219,000 | |
Weighted average amortization period | 1 year 7 months 2 days | |
2011 Plan [Member] | ||
Increase in shares authorized for issuance | 629,504 | 451,352 |
2016 Plan [Member] | ||
Shares authorized for issuance | 400,000 |
15. Income Taxes (Details-Defer
15. Income Taxes (Details-Deferred taxes) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 33,394,000 | $ 36,454,000 |
Research and development tax credit carryforwards | 1,746,000 | 1,710,000 |
Stock-based compensation | 5,439,000 | 5,083,000 |
Reserves and accruals | 1,232,000 | 1,111,000 |
Other deferred tax assets | 240,000 | 241,000 |
State income taxes | 4,000 | (1,000) |
Basis difference in assets | 1,000 | 8,000 |
Total deferred tax assets | 42,056,000 | 44,606,000 |
Deferred tax liabilities: | ||
Net deferred tax asset | 42,056,000 | 44,606,000 |
Valuation allowance | (42,056,000) | (44,606,000) |
Net deferred tax asset | $ 0 | $ 0 |
15. Income Taxes (Details-Incom
15. Income Taxes (Details-Income tax expense) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Current: | ||
Current State income tax expense | $ 6,000 | $ 2,000 |
Deferred: | ||
Federal deferred income tax | (3,272,000) | 0 |
State deferred income tax | (158,000) | 0 |
Foreign deferred income tax | (844,000) | 0 |
Total deferred income tax | $ (4,268,000) | $ 2,000 |
15. Income Taxes (Details-Recon
15. Income Taxes (Details-Reconciliation of tax rate) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Expected federal statutory rate | 34.00% | 34.00% |
State income taxes, net of federal benefit | 1.20% | 1.80% |
Research and development credit | 0.30% | 0.40% |
Foreign earnings taxed at different rates | (1.00%) | (0.70%) |
Effect of state operating loss expiration | (2.30%) | (5.50%) |
Effect of permanent differences | (0.00%) | 3.30% |
Impact of foreign exchange rate fluctuations on foreign deferred income taxes | 0.00% | (8.50%) |
Impact of change in foreign net operating loss | 0.00% | (6.30%) |
Cancellation of stock options and other true-ups | 0.00% | 0.00% |
True-ups of state deferred assets | (7.40%) | (11.40%) |
Total effective rate | 24.80% | 7.10% |
Change in valuation allowance | 8.20% | (7.10%) |
Totals | 33.00% | 0.00% |
15. Income Taxes (Details Narra
15. Income Taxes (Details Narrative) | 12 Months Ended |
Mar. 31, 2017USD ($) | |
Foreign tax credit carryforward | $ 50,000 |
Foreign tax credit expiration date | Mar. 31, 2023 |
Federal [Member] | |
Net operating loss carryforwards | $ 87,000,000 |
Operating loss beginning expiration dates | Mar. 31, 2020 |
Federal research credit carryforwards | $ 905,000 |
Research credit expiration date | Mar. 31, 2024 |
State and Local Jurisdiction [Member] | |
Net operating loss carryforwards | $ 31,000,000 |
Operating loss beginning expiration dates | Mar. 31, 2018 |
State research credit carryfowards | $ 790,000 |
Foreign Tax Authority [Member] | |
Net operating loss carryforwards | $ 4,000,000 |
Operating loss beginning expiration dates | Mar. 31, 2017 |
Foreign tax credit carryforward | $ 50,000 |
Foreign tax credit expiration date | Mar. 31, 2023 |
16. Employee Benefit Plan (Deta
16. Employee Benefit Plan (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Retirement Benefits [Abstract] | ||
Company contributions to 401(k) plan | $ 196,000 | $ 158,000 |
17. Geographic Information (Det
17. Geographic Information (Details - Geographic regions) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Sales revenue from geographical territories | $ 11,957,000 | $ 8,077,000 |
Product license fees and royalties | 0 | 231,000 |
Total product, licensing fees and royalties | 11,957,000 | 8,308,000 |
Increase (decrease) in sales revenue | 3,880,000 | |
Increase (decrease) in product license fees and royalties | $ (231,000) | |
Percent change in sales revenue | 48.00% | |
Increase (decrease) in total product revenues | $ 3,649,000 | |
Percent change in total product revenues | 44.00% | |
Sales Revenue, Segment [Member] | United States [Member] | ||
Sales revenue from geographical territories | $ 6,580,000 | 4,371,000 |
Increase (decrease) in sales revenue | $ 2,209,000 | |
Percent change in sales revenue | 51.00% | |
Sales Revenue, Segment [Member] | Latin America [Member] | ||
Sales revenue from geographical territories | $ 1,299,000 | 0 |
Increase (decrease) in sales revenue | $ 1,299,000 | |
Percent change in sales revenue | 100.00% | |
Sales Revenue, Segment [Member] | Europe and Other [Member] | ||
Sales revenue from geographical territories | $ 4,078,000 | $ 3,706,000 |
Increase (decrease) in sales revenue | $ 372,000 | |
Percent change in sales revenue | 10.00% |
17. Geographic Information (D72
17. Geographic Information (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Discontinued revenues | $ 3,105,000 | $ 5,715,000 |
Product Revenues [Member] | ||
Discontinued revenues | 2,693,000 | 4,965,000 |
License fees and royalties [Member] | ||
Discontinued revenues | $ 412,000 | $ 750,000 |