SONOMA PHARMACEUTICALS, INC. Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of Operations (kind 10-Q)

The next dialogue of our monetary situation and outcomes of operations
must be learn along with the condensed consolidated monetary
statements and notes to these statements included elsewhere on this Quarterly
Report on Type 10-Q as of September 30, 2022 and our audited consolidated
monetary statements for the yr ended March 31, 2022 included in our Annual
Report on Type 10-Okay, filed with the Securities and Trade Fee on July
13, 2022.



This report accommodates forward-looking statements inside the that means of the
Personal Securities Litigation Reform Act of 1995. When used on this report, the
phrases "anticipate," "counsel," "estimate," "plan," "challenge," "proceed,"
"ongoing," "potential," "anticipate," "predict," "imagine," "intend," "could," "will,"
"ought to," "might," "would," "proposal," and related expressions are supposed to
establish forward-looking statements.



Ahead-looking statements are topic to dangers and uncertainties that would
trigger our precise outcomes to vary materially from these projected. These dangers
and uncertainties embrace, however usually are not restricted to the dangers described in our
Annual Report on Type 10-Okay together with: the impression of the Covid pandemic on the
total financial system and our outcomes of operations; our skill to turn into worthwhile;
the impression of adjustments to reimbursement ranges from third-party payors or
elevated pricing stress on account of rebates; the impression of the Invekra transaction
on our enterprise and outcomes of operations; our dependence on third-party
distributors; sure tax impacts of inter-company loans between us and our
Mexican subsidiary; the progress and timing of our improvement packages and
regulatory approvals for our merchandise; the advantages and effectiveness of our
merchandise; the flexibility of our merchandise to fulfill current or future regulatory
requirements; the progress and timing of medical trials and doctor research; our
expectations and capabilities referring to the gross sales and advertising and marketing of our present
merchandise and our product candidates; our skill to compete with different firms
which might be creating or promoting merchandise which might be aggressive with our merchandise;
the institution of strategic partnerships for the event or sale of
merchandise; the danger our analysis and improvement efforts don't result in new
merchandise; the timing of commercializing our merchandise; our skill to penetrate
markets by our gross sales drive, distribution community, and strategic enterprise
companions to realize a foothold out there and generate engaging margins; the
skill to realize specified income objectives inside a specified time-frame, if at
all, or to scale back prices; the end result of discussions with the U.S. Meals and Drug
Administration, or FDA, and different regulatory companies; the content material and timing of
submissions to, and choices made by, the FDA and different regulatory companies,
together with demonstrating to the satisfaction of the FDA the protection and efficacy
of our merchandise; our skill to fabricate adequate quantities of our merchandise
for commercialization actions; our skill to guard our mental
property and function our enterprise with out infringing on the mental
property of others; our skill to proceed to develop our mental property
portfolio; the danger we could must indemnify our distributors or different third
events; dangers attendant with conducting a good portion of our enterprise
exterior the US; our skill to adjust to advanced federal and state
fraud and abuse legal guidelines, together with state and federal anti-kickback legal guidelines; dangers
related to adjustments to well being care legal guidelines; our skill to draw and retain
certified administrators, officers and workers; our expectations referring to the
focus of our income from worldwide gross sales; our skill to develop to
and commercialize merchandise in markets exterior the wound care market; our skill
to guard our info know-how and infrastructure; and the impression of any
future adjustments in accounting rules or practices typically with respect to
public firms. These forward-looking statements communicate solely as of the date
hereof. We expressly disclaim any obligation or enterprise to launch publicly
any updates or revisions to any forward-looking statements contained herein to
mirror any change in our expectations with regard thereto or any change in
occasions, situations or circumstances on which any such assertion relies, besides
as required by regulation.



Our Enterprise



We're a worldwide healthcare chief for creating and producing stabilized
hypochlorous acid, or HOCl, merchandise for a variety of purposes, together with
wound care, animal well being care, eye care, oral care and dermatological
situations. Our merchandise scale back infections, itch, ache, scarring and dangerous
inflammatory responses in a secure and efficient method. In-vitro and medical
research of HOCl present it to have spectacular antipruritic, antimicrobial,
antiviral and anti inflammatory properties. Our stabilized HOCl instantly
relieves itch and ache, kills pathogens and breaks down biofilm, doesn't sting
or irritate pores and skin and oxygenates the cells within the space handled, aiding the
physique in its pure therapeutic course of.







  16






Enterprise Channels

Our core market differentiation relies on being the main developer and
producer of stabilized hypochlorous acid, or HOCl, options. In contrast to lots of our
rivals, we've got been in enterprise for over 20 years, and in that point, we
have developed vital scientific data of how finest to develop and
manufacture HOCl merchandise backed by a long time of research and information assortment. HOCl
is thought to be among the many most secure and most-effective methods to alleviate itch,
irritation and burns whereas stimulating pure therapeutic by elevated
oxygenation and eliminating persistent microorganisms and biofilms.



We promote our merchandise into many markets each within the U.S. and internationally. In
worldwide markets, we ship a wide range of merchandise to 55 nations. Our core
technique is to work with companions each in the US and around the globe
to market and distribute our merchandise. In some circumstances, we market and promote our personal
merchandise.



Dermatology



Now we have developed distinctive, differentiated, prescription-strength and secure
dermatologic merchandise that assist paths to therapeutic amongst numerous key
dermatologic situations. Our merchandise are primarily focused on the remedy of
pimples, the administration of scars and eczema/atopic dermatitis. We're strategically
centered on introducing modern new merchandise which might be supported by human
medical information with purposes that tackle particular dermatological procedures
at present in demand. As well as, we search for markets the place we will present
efficient product line extensions and pricing to new product households.



In the US, we accomplice with EMC Pharma, LLC to promote our prescription
dermatology merchandise. Pursuant to our settlement with EMC Pharma, we manufacture
merchandise for EMC Pharma and EMC Pharma has the correct to market, promote and
distribute them to sufferers and clients for an preliminary time period of 5 years,
topic to assembly minimal buy and different necessities.



On September 28, 2021, we launched a brand new over-the-counter product, Regenacyn®
Superior Scar Gel, which is clinically confirmed to enhance the general look
of scars whereas lowering ache, itch, redness, and irritation. On the identical day,
we launched Regenacyn® Plus, a prescription-strength scar gel which is accessible
as an office-dispense product by doctor workplaces.



On October 27, 2022, we launched two new over-the-counter dermatology merchandise
in the US, Reliefacyn® Superior Itch-Burn-Rash-Ache Aid Hydrogel
for the alleviation of crimson bumps, rashes, shallow pores and skin fissures, peeling, and
signs of eczema/atopic dermatitis, and Rejuvacyn® Superior Pores and skin Restore
Cooling Mist for administration of minor pores and skin irritations following beauty
procedures in addition to each day pores and skin well being and hydration.

In June 2022, the Pure Merchandise Affiliation licensed Rejuvacyn Superior as a
Pure Private Care Product.

Our client merchandise can be found by Amazon.com, our web site and third
social gathering distributors.

We promote dermatology merchandise in Europe, Asia, and Brazil by a distributor
community. In these worldwide markets, we've got a community of companions, ranging
from nation particular distributors to giant pharmaceutical firms to
full-service gross sales and advertising and marketing firms. We work with our worldwide
companions to create merchandise they'll market of their house nation. Some merchandise
we develop and manufacture are non-public label whereas others use branding we've got
already developed. Now we have created or co-developed a variety of merchandise for
worldwide markets utilizing our core HOCl know-how.







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First Help and Wound Care

Our HOCl-based wound care merchandise are supposed for the remedy of acute and
power wounds in addition to first- and second-degree burns. They work by first
eradicating overseas materials and particles from the pores and skin floor and moistening the
pores and skin, thereby bettering wound therapeutic. Second, our HOCl merchandise help within the
wound therapeutic course of by eradicating microorganisms. Since HOCl is a crucial
constituent of our innate immune system and is shaped and launched by the
macrophages throughout phagocytosis, it's advantageous to different wound-irrigation
and antiseptic options, as extremely organized cell constructions comparable to human
tissue can tolerate the motion of our wound care answer whereas single-celled
microorganisms can't. On account of its distinctive chemistry, our wound remedy answer
is rather more secure than related merchandise available on the market and due to this fact maintains
a lot larger ranges of hypochlorous acid over its shelf life.



In the US, we promote our wound care merchandise on to hospitals,
physicians, nurses, and different healthcare practitioners and not directly by
non-exclusive distribution preparations. In Europe, we promote our wound care
merchandise by a various community of distributors.



To reply to market demand for our HOCl technology-based merchandise, we launched
our first direct to client over-the-counter product in the US in
February 2021. Microcyn® OTC Wound and Pores and skin Cleanser is formulated for house use
with out prescription to assist handle and cleanse wounds, minor cuts, and burns,
together with sunburns and different pores and skin irritations. Microcyn OTC is accessible with out
prescription by our on-line retailer.

In June 2022, the Pure Merchandise Affiliation licensed Microcyn OTC as a
Pure Private Care Product.

In March 2021, we acquired approval to market and use our HOCl merchandise as
biocides beneath Article 95 of the European Biocidal Merchandise Regulation in
France, Germany and Portugal. The approval applies to our merchandise MucoClyns™
for human hygiene to be marketed and commercialized by us, MicrocynAH® for
animal heath marketed and commercialized by our accomplice, Petagon Restricted,
and MicroSafe for disinfectant use to be marketed and commercialized by our
accomplice, MicroSafe Group DMCC.

In September 2022, our accomplice Te Arai BioFarma Ltd. acquired approval to market
and promote our Microdacyn and Microdacyn Hydrogel merchandise in Taiwan.

Eye Care



Our prescription product Acuicyn™ is an antimicrobial prescription answer for
the remedy of blepharitis and the each day hygiene of eyelids and lashes and
helps handle crimson, itchy, crusty and infected eyes. It's robust sufficient to kill
the micro organism that causes discomfort, quick sufficient to offer close to instantaneous reduction,
and delicate sufficient to make use of as typically as wanted. In the US, our accomplice
EMC Pharma is promoting our prescription-based eye care product by its
distribution community.



On September 28, 2021, we launched Ocucyn® Eyelid & Eyelash Cleanser, which is
offered on to customers on Amazon.com, by our on-line retailer, and thru
third social gathering distributors. Ocucyn® Eyelid & Eyelash Cleanser, designed for
on a regular basis use, is a secure, mild, and efficient answer for good eyelid and
eyelash hygiene.



In worldwide markets we depend on distribution companions to promote our eye
merchandise. On Could 19, 2020, we entered into an expanded license and distribution
settlement with our current accomplice, Brill Worldwide S.L. for our
Microdacyn60® Eye Care HOCl-based product. Beneath the license and distribution
settlement, Brill has the correct to market and distribute our eye care product
beneath the non-public label Ocudox™ in Italy, Germany, Spain, Portugal, France, and
the United Kingdom for a interval of 10 years, topic to assembly annual minimal
gross sales portions. In return, Brill paid us a one-time payment, and the agreed upon
provide costs. In elements of Asia, Dyamed Biotech markets our eye product beneath
the non-public label Ocucyn.







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Oral, Dental and Nasal Care

We promote a wide range of oral, dental, and nasal merchandise around the globe.

In late 2020, we launched a HOCl-based product within the dental, head and neck
markets known as Endocyn®, a biocompatible root canal irrigant. Within the U.S., we
promote our dental merchandise by U.S.-based distributors.

In worldwide markets, our product Microdacyn60® Oral Care treats mouth and
throat infections and thrush. Microdacyn60 answer assists in lowering
irritation and ache, gives soothing cough reduction and doesn't comprise any
dangerous chemical substances. It doesn't stain enamel, is non-irritating, non-sensitizing,
has no contraindications and is prepared to be used with no mixing or dilution. In New
Zealand and Australia, our accomplice Te Arai BioFarma Ltd. markets our oral
product beneath their label Oracyn® Oral Care. Our accomplice, Dyamed Biotech, is
searching for regulatory clearance to market Oracyn® Oral Care in elements of Asia. On
January 18, 2022, we partnered with Anlicare Worldwide to hunt regulatory
clearances for our dental and oral merchandise in China and Macau.



Our worldwide nasal care product Sinudox™ primarily based on our HOCl know-how is
supposed for nasal irrigation. Sinudox Hypotonic Nasal Hygiene clears and cleans
a blocked nostril, stuffy nostril and sinuses by ancillary components that will have a
native antimicrobial impact. Sinudox is offered by Amazon in Europe. In New
Zealand and Australia, our accomplice Te Arai markets our nasal product beneath

their
label Nasocyn® Nasal Care.



Animal Well being Care



MicrocynAH® is a HOCl-based topical product that cleans, debrides and treats a
extensive spectrum of animal wounds and infections. It's supposed for the secure and
fast remedy of a wide range of animal afflictions together with cuts, burns,
lacerations, rashes, sizzling spots, rain rot, post-surgical websites, pink eye signs
and wounds to the outer ear of any animal.



For our animal well being merchandise offered within the U.S. and Canada, we partnered with
Manna Professional Merchandise, LLC to convey reduction to pets and peace of thoughts to their
homeowners. Manna Professional distributes non-prescription merchandise to nationwide pet-store
retail chains, farm animal specialty shops, in the US and Canada,
comparable to Chewy.com, PetSmart, Tractor Provide, Cabela's, PetExpress, and Bass Professional
Outlets. On August 2, 2022, we introduced the launch of a MicrocynVS® line of
merchandise solely for veterinarians for the administration of wound, pores and skin, ear
and eye afflictions in all animal species. We granted DV Medical Provide Inc. the
non-exclusive proper to distribute and promote MicrocynVS merchandise in veterinarian
clinics and practices all through the US.



For the Asian and European markets, on Could 20, 2019, we partnered with Petagon,
Restricted, a world importer and distributor of high quality pet meals and
merchandise for an preliminary time period of 5 years. We provide Petagon with all
MicrocynAH merchandise offered by Petagon. On August 3, 2020, Petagon acquired a
license from the Individuals's Republic of China for the import of veterinary drug
merchandise manufactured by us. That is the best classification Petagon and
Sonoma can obtain for animal well being merchandise in China.



Floor Disinfectants



In-vitro and medical research of HOCl present it to have spectacular antipruritic,
antimicrobial, antiviral and anti inflammatory properties. HOCl has been
formulated as a disinfectant and sanitizer answer for our accomplice MicroSafe
and is offered in quite a few nations. It's designed for use to spray in aerosol
format in areas and environments prone to function a breeding floor for the
unfold of infectious illness, which might end in epidemics or pandemics. The
medical-grade floor disinfectant answer is utilized in hospitals worldwide to
shield docs and sufferers. In Could 2020, Nanocyn® Disinfectant & Sanitizer
acquired approval to be entered into the Australian Register of Therapeutic
Items, or ARTG to be used towards the coronavirus SARS-CoV-2, or COVID-19, and was
additionally approved in Canada to be used towards COVID-19. Nanocyn has additionally met the
stringent environmental well being and social/moral standards of Good Environmental
Selection Australia, or GECA, changing into one of many only a few eco-certified,
all-natural disinfectant options in Australia.







  19

Via our accomplice MicroSafe, we promote arduous floor disinfectant merchandise into
Europe, the Center East and Australia.

On July 31, 2021, we granted MicroSafe the non-exclusive proper to promote and
distribute Nanocyn in the US offered that MicroSafe safe U.S. EPA
approval. In April of 2022, MicroSafe secured the EPA approval for Nanocyn®
Disinfectant & Sanitizer, that means that it will possibly now be offered in the US
as a floor disinfectant, and it was subsequently added to the EPA's listing N for
use towards COVID-19. In June 2022, the EPA added Nanocyn to Listing Q as a
disinfectant for Rising Viral Pathogens, together with Monkeypox. We intend to
construct upon this ground-breaking approval by securing additional approvals of this
nature. Nanocyn is a hospital-grade disinfectant and manufactured by us utilizing
our patented HOCl know-how. Nanocyn is at present offered by MicroSafe in Europe,
the Center East and Australia.



Extra Data



Buyers and others ought to word that we announce materials monetary info
utilizing our firm web site (www.sonomapharma.com), our investor relations web site
(ir.sonomapharma.com), SEC filings, press releases, public convention calls and
webcasts. The data on, or accessible by, our web sites isn't
integrated by reference on this Quarterly Report on Type 10-Q.

Outcomes of Persevering with Operations

Comparability of the Three and Six Months Ended September 30, 2022 and 2021

Income



The next desk reveals our consolidated whole income and income by
geographic area for the three and 6 months ended September 30, 2022 and
2021:



                      Three Months Ended
                         September 30,
(In 1000's)         2022          2021        $ Change       % Change
United States       $      973      $ 1,347     $     (374 )         (28% )
Europe                   1,170          919            251            27%
Asia                       330          437           (107 )         (24% )
Latin America              394          518           (124 )         (24% )
Remainder of the World          464          523            (59 )         (11% )
Whole               $    3,331      $ 3,744     $     (413 )         (11% )




                      Six Months Ended
                        September 30,
(In 1000's)        2022         2021       $ Change       % Change
United States       $   1,842     $ 2,939     $  (1,097 )         (37% )
Europe                  2,012       1,688           324            19%
Asia                    1,155         638           517            81%
Latin America           1,444       1,083           361            33%
Remainder of the World         861       1,080          (219 )         (20% )
Whole               $   7,314     $ 7,428     $    (114 )          (2% )








  20






The lower in United States revenues for the three and 6 months ended
September 30, 2022 in comparison with the identical intervals within the prior yr of $374,000
and $1,097,000 is primarily the results of divesting our prescription dermatology
enterprise to our accomplice, EMC Pharma. Divesting our prescription dermatology
enterprise resulted in a discount of revenues, nonetheless, we additionally eradicated
vital bills associated to that line of merchandise together with a direct gross sales
drive. The lower can also be partially on account of a decline in gross sales of our
over-the-counter animal well being care merchandise. These quantities had been partially
offset by a rise in wound care and prescription animal well being care product
gross sales.

The rise in Europe income for the three and 6 months ended September 30,
2022 was attributable to a rise in demand for our wound care merchandise in addition to
the introduction of a number of new merchandise into Europe.



The lower in Asia income for the three months and the rise for the six
months ended September 30, 2022 is because of lumpiness in ordering with elevated
orders within the first quarters and decrease orders within the second quarter. Revenues
from our worldwide distributors are usually uneven on account of clients putting
bigger however much less frequent orders to learn from amount reductions and lowered
delivery prices when ordering adequate portions to fill normal sized
delivery containers.



The lower in Latin America income for the three months ended September 30,
2022 was attributable to a decline in manufacturing for one among our clients. Our
contract with Invekra resulted in 2021 and since then we've got continued to
manufacture product for them at decrease portions however larger margins. The
improve in Latin America income for the six months ended September 30, 2022
was primarily the results of service income from promoting equipment to a buyer
for $750,000, which administration expects to be a one-time occasion. This improve was
partially offset by a decline in overflow manufacturing for one among our
clients.

The lower in Remainder of World income for the three and 6 months ended
September 30, 2022 was primarily the results of decreased disinfectant gross sales in
the Center East partially offset by a rise in gross sales in New Zealand.

Price of Income and Gross Revenue

The price of income and gross revenue metrics for the three and 6 months ended
September 30, 2022 and 2021 are as follows:

                                           Three Months Ended
                                              September 30,
(In 1000's, apart from percentages)      2022          2021       Change       % Change
Price of Income                          $    1,995      $ 2,503     $  (508 )         (20% )
Price of Income as a % of Income               60%          67%         (7% )
Gross Revenue                             $    1,336      $ 1,241     $    95             8%
Gross Revenue as a % of Income                  40%          33%          7%




                                           Six Months Ended
                                             September 30,

(In 1000's, apart from percentages)     2022         2021       Change      % Change
Price of Income                          $   4,532     $ 4,734     $  (202 )         (4% )
Price of Income as a % of Income              62%         64%         (2% )
Gross Revenue                             $   2,782     $ 2,694     $    88 

3%

Gross Revenue as a % of Income                 38%         36%          2%




The rise in gross revenue margin for the three months ended September 30,
2022 was primarily the results of producing larger unit volumes within the Mexico
manufacturing facility, partially offset by a decline in margins in the
Netherlands because of product combine and delivery prices to Europe. The
improve in gross revenue margin for the six months ended September 30, 2022 is
primarily as a result of sale of equipment to a buyer for $750,000, which
administration expects to be a one-time occasion.







  21

Analysis and Growth Expense

The analysis and improvement metrics as of September 30, 2022 and 2021 are as
follows:



                                        Three Months Ended
                                           September 30,
(In 1000's, apart from
percentages)                          2022              2021           Change        % Change

Analysis and Growth Expense   $         -       $        10     $      (10 )         (100% )
Analysis and Growth Expense
as a % of Income                           0%              0.3%          (0.3% )





                                         Six Months Ended
                                           September 30,
(In 1000's, apart from
percentages)                          2022              2021           Change         % Change

Analysis and Growth Expense   $         6       $        95     $       (89 )          (94% )
Analysis and Growth Expense
as a % of Income                           0%                1%             (1% )

For the three months ended September 30, 2022, analysis and improvement bills
decreased because of lowered medical trial expense.

Promoting, Basic and Administrative Expense

The promoting, common and administrative expense metrics are as follows:

                                       Three Months Ended
                                          September 30,
(In 1000's, apart from
percentages)                          2022             2021          Change         % Change
Promoting, Basic and
Administrative Expense (SG&A)      $     2,067      $    2,195     $      (128 )           (6% )
SG&A Expense as a % of Income             62%             59%             

3%




                                        Six Months Ended
                                         September 30,
(In 1000's, apart from
percentages)                          2022            2021          Change         % Change
Promoting, Basic and
Administrative Expense (SG&A)      $     4,362     $    4,468     $      (106 )           (2% )
SG&A Expense as a % of Income             60%            60%             

0%




The decline in Promoting, Basic and Administrative expense for the three and 6
months ended September 30, 2022 was $128,000 and $106,000, respectively, and was
the results of ongoing efforts to comprise bills throughout all elements of the
firm.







  22

Curiosity Earnings (Expense), web

Curiosity (expense) revenue, web for the three and 6 months ended September 30,
2022 was $2,500 and $2,500, respectively, in comparison with $4,000, and $5,000 for the
three and 6 months ended September 30, 2021, respectively.



Different (Expense) Earnings, web



Different (expense) revenue for the three and 6 months ended September 30, 2022 was
$(189,000) and $(256,000) respectively, in comparison with $723,000 and $531,000,
respectively, for the three and 6 months ended September 30, 2021. The
lower in different revenue (expense) relates primarily to the popularity of PPP
mortgage forgiveness within the quantity of $723,000 within the prior yr and, to a lesser
extent, to alternate price fluctuations.



Earnings taxes

Earnings tax expense for the three and 6 months ended September 30, 2022 was
$100,000 and $65,000.

Web Loss

The next desk gives the web loss for every interval together with the
computation of fundamental and diluted web revenue per share:

                                       Three Months Ended September 30,             Six Months Ended September 30,
(In 1000's, besides per share
information)                                    2022                     2021                2022                  2021
Numerator:
Web loss                           $          (1,017 )       $          (100 )   $        (1,904 )     $        (1,198 )

Denominator:
Weighted-average variety of
widespread shares excellent: fundamental               3,101                   2,344               3,101                 2,219
Weighted-average variety of
widespread shares excellent:
diluted                                        3,101                   2,344               3,101                 2,219

Web revenue (loss) per share:
fundamental                              $           (0.33 )       $         (0.04 )   $         (0.61 )     $         (0.54 )
Web revenue (loss) per share:
diluted                            $           (0.33 )       $         (0.04 )   $         (0.61 )     $         (0.54 )








  23

Liquidity and Capital Sources

We reported a web lack of $1,017,000 and $1,904,000 for the three and 6 months
ended September 30, 2022. At September 30, 2022 and March 31, 2022, our
accrued deficit amounted to $186,267,000 and $184,363,000, respectively. As
of September 30, 2022, we had money and money equivalents of $3,351,000 in contrast
to $8,392,000 on September 30, 2021. Since our inception, considerably all of
our operations have been financed by gross sales of fairness securities. Different
sources of financing that we've got used up to now embrace our revenues, royalty
funds from licensing our merchandise, in addition to numerous loans and the sale of
sure property to Invekra, Petagon, and Microsafe.



The next desk presents a abstract of our consolidated money flows for
working, investing and financing actions for the six months ended September
30, 2022, and 2021 as properly balances of money and money equivalents and dealing
capital:



                                                          Six Months Ended September 30,
(In 1000's)                                              2022                  2021
Web money offered by (utilized in):
Working actions                                   $        (3,363 )     $        (2,527 )
Investing actions                                              (210 )                 (38 )
Financing actions                                              (565 )               6,711

Impact of alternate charges on money                                    93                    26
Web change in money and money equivalents                         (4,045 )               4,172
Money and money equivalents, starting of the interval     $         7,396       $         4,220
Money and money equivalents, finish of the interval           $         3,351       $         8,392
Working capital (1), finish of interval                     $         8,866     

 $        13,943

(1) Outlined as present property minus present liabilities

Web money utilized by working actions in the course of the six months ended September 30,
2022 was $3,363,000, primarily on account of a web lack of $1,904,000, and a lower
in deferred income of $1,149,000.



Web money utilized by working actions in the course of the six months ended September 30,
2021 was $2,527,000, primarily on account of a web lack of $1,198,000, a rise in
accounts receivable of $595,000 and forgiveness on PPP loans of $723,000.

Web money utilized by investing actions was $210,000 for the six months ended
September 30, 2022, primarily associated to long run deposits and purchases of
gear.

Web money utilized by investing actions was $38,000 for the six months ended
September 30, 2021, primarily associated to Invekra deferred income, partially
offset by purchases of kit.

Web money utilized by financing actions was $565,000 for the six months ended
September 30, 2022, primarily on account of principal funds on long-term debt of
$460,000 and funds of PPP mortgage of $120,000.

  24

Web money offered by financing actions was $6,711,000 for the six months
ended September 30, 2021, primarily associated to the proceeds from issuance of
widespread inventory of $6,892,000 and principal funds on long-term debt of $397,000.

We anticipate revenues to fluctuate and will incur losses within the foreseeable future
and might have to lift further capital to pursue our product improvement
initiatives, to penetrate markets for the sale of our merchandise and proceed as a
going concern. We can't present any assurances that we will increase
further capital.



Administration believes that we've got entry to capital sources by potential
public or non-public fairness choices, debt financings, company collaborations or
different means; nonetheless, we can't present any assurance that new financing can be
accessible on commercially acceptable phrases, if in any respect. If the financial local weather
within the U.S. deteriorates, our skill to lift further capital may very well be
negatively impacted. If we're unable to safe further capital, we could also be
required to take further measures to scale back prices with a purpose to preserve our
money in quantities adequate to maintain operations and meet our obligations. These
measures might trigger vital delays in our continued efforts to
commercialize our merchandise, which is vital to the conclusion of our enterprise
plan and our future operations. These issues increase substantial doubt about our
skill to proceed as a going concern.

Materials Developments and Uncertainties

We're uncovered to threat from decline in overseas foreign money for each the euro and
the Mexico peso versus the U.S. greenback. Most not too long ago there was a pointy
decline within the euro versus the U.S. greenback which has impacted our monetary
outcomes.



As we've got beforehand mentioned in our annual report on Type 10-Okay filed with the
SEC on July 13, 2022, we face a considerable Mexico tax legal responsibility, intercompany
debt, unpaid technical help costs and accrued curiosity. These quantities
usually are not due till 2027. Right now, administration believes there are adequate
property on the stability sheet to greater than cowl any tax obligation with out
interrupting our operations or enterprise. Now we have engaged tax professionals to
evaluation all choices to restrict our publicity to those quantities and to proceed in a
method that's most advantageous to us.



Because the pandemic continues to impression economies worldwide, we're carefully watching
inflation, elevated volatility inside monetary markets, delivery prices, provide
chain points and labor prices. Right now, we've got seen a rise in delivery
prices nonetheless, the general impression of those points has been minimal. The
potential impression to our enterprise operations, buyer demand and provide chain
on account of elevated delivery prices could in the end impression gross sales. We proceed to
consider our end-to-end provide chain and assess alternatives to refine the
impression on gross sales. At the moment, our clients pay for a lot of the delivery bills
essential to get merchandise to their house nations, together with elevated delivery
prices, if any. Now we have not but confronted labor shortages nonetheless it's potential we
could have difficulties retaining and discovering certified workers in a decent labor
market sooner or later. Moreover, total inflation tendencies could put stress
on our product pricing and/or prices.

We additionally carefully monitor total financial situations, client sentiment and the
prospect of a recession in the US which can impression our monetary
outcomes.

On August 16, 2022, the U.S. authorities enacted the Inflation Discount Act. The
Inflation Discount Act introduces a brand new 15% company minimal tax, primarily based on
adjusted monetary assertion revenue of sure giant companies. Relevant
companies could be allowed to assert a credit score for the minimal tax paid towards
common tax in future years. The minimal tax impression applies beginning in 2023.
The Inflation Discount Act additionally contains an excise tax that might impose a 1%
surcharge on inventory repurchases. This excise tax is efficient January 1, 2023.

The Firm is at present evaluating the impact of the Inflation Discount Act on
its consolidated monetary statements.

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Use of Estimates



The preparation of consolidated monetary statements in conformity with
accounting ideas usually accepted in the US requires
administration to make estimates and assumptions that have an effect on the reported quantities of
property and liabilities and disclosures of contingent liabilities on the dates of
the consolidated monetary statements and the reported quantities of revenues and
bills in the course of the reporting intervals. Precise outcomes might differ from these
estimates. Important estimates and assumptions embrace reserves and
write-downs associated to receivables and inventories, the recoverability of
long-lived property, the valuation allowance associated to our deferred tax property,
valuation of fairness and spinoff devices, debt reductions, valuation of
investments and the estimated amortization intervals of upfront product licensing
charges acquired from clients.

Off-Stability Sheet Transactions

We at present don't have any off-balance sheet preparations which have or are moderately
prone to have a present or future materials impact on our monetary situation,
adjustments in monetary situation, revenues or bills, outcomes of operations,
liquidity, capital expenditures or capital sources.

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