Sonoma Pharmaceuticals Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
SNOA$1.11+3.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-08.
0001683168-24-000781
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001683168-24-005371
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 99 previous paragraphs and 95 current paragraphs.
50 unchanged; 33 reworded; 10 added; 16 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 12 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
In April 2024, we announced expansion of our Microcyn Negative Pressure Wound Therapy Solution products line, now available in 250mL, 450mL and 990mL sizes to meet the diverse needs of healthcare professionals and patients.
Current report
In July 2024, we announced an expansion of our distributor base in Europe through a new partnership with Smart Healthcare Company (SHC) s.r.o. for the distribution of Microdacyn60® wound care products into Ukraine.
Current report
Results of Operations
Current report
The increase in Latin America revenue for the three months ended June 30, 2024 of $393,000 was primarily due to timing of customer orders for overflow manufacturing.
Current report
Other Income (Expense), net
Current report
Income Tax (Expense) Benefit
Current report
Income tax (expense) benefit for the three months ended June 30, 2024 and 2023 was $(146,000) and $33,000, respectively. The expense for the current year is primarily related to the use of our deferred tax asset in Mexico and, to a lesser extent, our deferred tax asset in Netherlands. The benefit for the prior year was related to our Mexico deferred tax asset.
Current report
Sources of Liquidity
Current report
Cash Flows
Current report
We are exposed to risk from foreign currency devaluation for both the Mexico Peso and the Euro versus the US dollar. Risk related to foreign currency valuation tends to be unpredictable and can be affected by various factors outside of our control.
Removed paragraphs (16)
Previous report
In April 2023, we introduced a new pediatric dermatology and wound care product for over-the-counter use, Pediacyn™ All Natural Skin Care & First Aid For Children.
Previous report
In January 2024, we entered into a license agreement with NovaBay Pharmaceuticals, Inc. for the sale and marketing of Avenova®-branded Ocudox products in the European Union through our European distribution network.
Previous report
In late 2020, we launched a HOCl-based product in the dental, head and neck markets called Endocyn®, a biocompatible root canal irrigant. In the U.S., we sell Endocyn through U.S.-based distributors.
Previous report
Results of Continuing Operations
Previous report
The decrease in Latin America revenue for the three months ended December 31, 2023 of $16,000 was primarily the result of the timing of orders from our partner in Mexico. The decrease in Latin America revenue for the nine months ended December 31, 2023 of $662,000 was primarily due to service revenue recorded from selling machinery to a customer for $750,000 in the prior period. Management expects this to be a one-time event.
Previous report
The increase in gross profit margin of $41,000 for the nine months ended December 31, 2023, as compared to the prior period, was primarily due to an increase in revenue in the current period.
Previous report
Other Expense, net
Previous report
Income tax benefit (expense)
Previous report
Income tax benefit (expense) for the three and nine months ended December 31, 2023 was $57,000 and ($96,000), respectively. Income tax expense for the three and nine months ended December 31, 2022 was ($34,000) and ($98,000), respectively.
Previous report
On October 26, 2023, we entered into a placement agency agreement with Maxim Group LLC (“Maxim”), pursuant to which Maxim agreed to use its reasonable best efforts to solicit offers to purchase up to an aggregate of 8,500,000 shares of our common stock, par value $0.0001 per share. We agreed to pay Maxim a cash fee equal to 8.0% of the gross proceeds from the offering, plus reimbursement of up to $75,000 of legal fees and other expenses. Additionally, on October 26, 2023, we entered into a securities purchase agreement with the purchasers party thereto for the sale and issuance of an aggregate of up to 8,500,000 shares of our common stock at a public offering price of $0.20 per share.
Previous report
The closing of the offering occurred on October 30, 2023. In connection with the offering, we sold 8,500,000 shares of the our common stock for aggregate gross proceeds of $1,700,000 and net proceeds of $1,446,000, after deducting placement agent fees and other offering expenses.
Previous report
On December 15, 2023, we entered into an Equity Distribution Agreement (the “Agreement”), with Maxim Group LLC (“Maxim”), pursuant to which we may offer and sell, from time to time, through Maxim, as sales agent or principal, shares of our common stock, $0.0001 par value per share.
Previous report
Subject to the terms and conditions of the Agreement, Maxim will use commercially reasonable efforts consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the rules of the Nasdaq Capital Market to sell shares from time to time based upon our instructions, including any price, time or size limits specified by us. Under the Agreement, Maxim may sell shares by any method deemed to be an “at the market” offering as defined in Rule 415 under the U.S. Securities Act of 1933, as amended, or any other method permitted by law, including in privately negotiated transactions. Maxim’s obligations to sell shares under the Agreement are subject to satisfaction of certain conditions, including customary closing conditions for transactions of this nature. We will pay Maxim a commission of 3% of the aggregate gross proceeds from each sale of shares and we have agreed to provide Maxim with customary indemnification and contribution rights. We also agreed to reimburse Maxim for certain specified expenses of up to $20,000. On January 11, 2024, we sold 1,923,100 shares of our common stock for gross proceeds of approximately $392,000 and net proceeds of approximately $356,000.
Previous report
We expect revenues to fluctuate and may incur losses in the foreseeable future and may need to raise additional capital to pursue our product development initiatives, to penetrate markets for the sale of our products and continue as a going concern. We cannot provide any assurances that we will be able to raise additional capital.
Previous report
Management believes that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, we cannot provide any assurance that new financing will be available on commercially acceptable terms, if at all. If the economic climate in the U.S. deteriorates, our ability to raise additional capital could be negatively impacted. If we are unable to secure additional capital, we may be required to take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in our continued efforts to commercialize our products, which is critical to the realization of our business plan and our future operations. These matters raise substantial doubt about our ability to continue as a going concern.
Previous report
We are exposed to risk from decline in foreign currency for both the Euro and the Mexico Peso versus the U.S. dollar. Most recently there has been a sharp decline in the Euro versus the U.S. dollar which has impacted our financial results.
Reworded paragraphs (33)
Previous wording
We are a global healthcare leader for developing and producing stabilized hypochlorous acid, or HOCl, products for a wide range of applications, including wound care, eye, oral and nasal care, dermatological conditions, podiatry, animal health care and non-toxic disinfectants. Our products reduce infections, scarring and harmful inflammatory responses in a safe and effective manner. In-vitro and clinical studies of HOCl show it to have impressive antipruritic, antimicrobial, antiviral and anti-inflammatory properties. Our stabilized HOCl immediately relieves itch and pain, kills pathogens and breaks down biofilm, does not sting or irritate skin and oxygenates the cells in the area treated, assisting the body in its natural healing process. We sell our products either directly or via partners in 55 countries worldwide.
Current wording
We are a global healthcare leader for developing and producing stabilized hypochlorous acid, or HOCl, products for a wide range of applications, including wound care, eye care, oral care, dermatological conditions, podiatry, animal health care and non-toxic disinfectants. Our products are clinically proven to reduce itch, pain, scarring, and irritation safely and without damaging healthy tissue. In-vitro and clinical studies of HOCl show it to safely manage skin abrasions, lacerations, minor irritations, cuts, and intact skin. We sell our products either directly or via partners in 55 countries worldwide.
Previous wording
We sell our products based on our HOCl technology into many markets both in the U.S. and internationally. Our core strategy is to work with partners to market and distribute our products. In some cases, we market and sell our own products.
Current wording
We sell our products into many markets both in the U.S. and internationally. In international markets, we ship a variety of products to 55 countries. Our core strategy is to work with partners both in the United States and around the world to market and distribute our products. In some cases, we market and sell our own products.
Previous wording
In September 2021, we launched a new over-the-counter product, Regenacyn® Advanced Scar Gel, which is clinically proven to improve the overall appearance of scars while reducing pain, itch, redness, and inflammation. On the same day, we launched Regenacyn® Plus, a prescription-strength scar gel which is available as an office dispense product through physician offices.
Current wording
In September 2021, we launched a new over-the-counter product, Regenacyn® Advanced Scar Gel, which is clinically proven to improve the overall appearance of scars while reducing pain, itch and redness. On the same day, we launched Regenacyn Plus, a prescription-strength scar gel which is available as an office dispense product through physician offices.
Previous wording
In international markets we rely on distribution partners to sell our eye products. On May 19, 2020, we entered into an expanded license and distribution agreement with our existing partner, Brill International S.L., for our Microdacyn60® Eye Care HOCl-based product. Under the license and distribution agreement, Brill has the right to market and distribute our eye care product under the private label Ocudox™ in Italy, Germany, Spain, Portugal, France, and the United Kingdom for a period of 10 years, subject to meeting annual minimum sales quantities. In return, Brill paid us a one-time fee and the agreed upon supply prices. In parts of Asia, Dyamed Biotech markets our eye product under the private label Ocucyn.
Current wording
In international markets we rely on distribution partners to sell our eye products. In May 2020, we entered into an expanded license and distribution agreement with our existing partner, Brill International S.L., for our Microdacyn60® Eye Care HOCl-based product. Under the license and distribution agreement, Brill has the right to market and distribute our eye care product under the private label Ocudox™ in Italy, Germany, Spain, Portugal, France, and the United Kingdom for a period of 10 years, subject to meeting annual minimum sales quantities. In return, Brill paid us a one-time fee, and the agreed upon supply prices. In parts of Asia, Dyamed Biotech markets our eye product under the private label Ocucyn.
Previous wording
On April 11, 2023, we launched Podiacyn™ Advanced Everyday Foot Care direct to consumers for over-the-counter use in the United States, intended for management of foot odors, infections, and irritations, as well as daily foot health and hygiene. Podiacyn is available through Amazon.com, our online store, and third-party distributors.
Current wording
In April 2023, we launched Podiacyn TM Advanced Everyday Foot Care direct to consumers for over-the-counter use in the United States, intended for management of foot odors, infections, and irritations, as well as daily foot health and hygiene. Podiacyn is available through Amazon.com, our online store and third-party distributors.
Previous wording
For our animal health products sold in the U.S. and Canada, we partner with Manna Pro Products, LLC. Manna Pro distributes non-prescription products to national pet-store retail chains and farm animal specialty stores such as Chewy.com, PetSmart, Tractor Supply, Cabela’s, PetExpress, and Bass Pro Shops. In August 2022, we announced the launch of a MicrocynVS® line of products exclusively for veterinarians for the management of wound, skin, ear and eye afflictions in all animal species.
Current wording
For our animal health products sold in the U.S. and Canada, we partner with Compana Pet Brands. Compana distributes non-prescription products to national pet-store retail chains and farm animal specialty stores, such as PetSmart, Tractor Supply, Cabela’s, PetExpress, Bass Pro Shops, and Menards. In August 2022, we announced the launch of a MicrocynVS® line of products exclusively for veterinarians for the management of wound, skin, ear and eye afflictions in all animal species.
Previous wording
For the Asian and European markets, on May 20, 2019, we partnered with Petagon, Limited, an international importer and distributor of quality pet food and products for an initial term of five years. We supply Petagon with all MicrocynAH products sold by Petagon. On August 3, 2020, Petagon received a license from the People’s Republic of China for the import of veterinary drug products manufactured by us. This is the highest classification Petagon and Sonoma can receive for animal health products in China.
Current wording
For the Asian and European markets, in May 2019 we partnered with Petagon an international importer and distributor of quality pet food and products for an initial term of five years. We supply Petagon with all MicrocynAH products sold by Petagon. In August 2020, Petagon received a license from the People’s Republic of China for the import of veterinary drug products manufactured by us. This is the highest classification Petagon and Sonoma can receive for animal health products in China.
Previous wording
On July 31, 2021, we granted MicroSafe the non-exclusive right to sell and distribute Nanocyn in the United States provided that MicroSafe secure U.S. EPA approval. In April of 2022, MicroSafe secured the EPA approval for Nanocyn® Disinfectant & Sanitizer, meaning that it can now be sold in the United States as a surface disinfectant. Nanocynwas subsequently added to the EPA’s list N for use against COVID-19. In June 2022, the EPA added Nanocyn to List Q as a disinfectant for Emerging Viral Pathogens, including Ebola virus, Mpox, and SARS-CoV-2, and in March 2023 the EPA added Nanocyn to Lists G and H, for use against Methicillin Resistant Staphylococcus Aureus (MRSA), Salmonella, Norovirus, Poliovirus, and as a fungicide. Nanocyn also received the Green Seal® Certification after surpassing a series of rigorous standards that measure environmental health, sustainability and product performance. Nanocyn is currently sold by MicroSafe in Europe, the Middle East and Australia.
Current wording
In July 2021, we granted MicroSafe the non-exclusive right to sell and distribute Nanocyn in the United States provided that MicroSafe secure U.S. EPA approval. In April of 2022, MicroSafe secured the EPA approval for Nanocyn® Disinfectant & Sanitizer, meaning that it can now be sold in the United States as a surface disinfectant, and it was subsequently added to the EPA’s list N for use against COVID-19. In June 2022, the EPA added Nanocyn to List Q as a disinfectant for Emerging Viral Pathogens, including Ebola virus, Mpox, and SARS-CoV-2, and in March 2023 the EPA added Nanocyn to Lists G and H, for use against Methicillin Resistant Staphylococcus Aureus (MRSA), Salmonella, Norovirus, Poliovirus, and as a fungicide. Nanocyn also received the Green Seal® Certification after surpassing a series of rigorous standards that measure environmental health, sustainability and product performance. Nanocyn is currently sold by MicroSafe in Europe, the Middle East and Australia.
Previous wording
Comparison of the Three and Nine Months Ended December 31, 2023 and 2022
Current wording
Comparison of the Three Months Ended June 30, 2024 and 2023
Previous wording
The following table shows our consolidated total revenue and revenue by geographic region for the three and nine months ended December 31, 2023 and 2022:
Current wording
The following table shows our consolidated total revenue and revenue by geographic region for the three months ended June 30, 2024 and 2023:
Previous wording
The increase in United States revenue of $107,000 for the three months ended December 31, 2023 and decrease in United States revenue of $389,000 for the nine months ended December 31, 2023, were primarily the result of fluctuations in over-the-counter animal health care sales.
Current wording
The decrease in United States revenue of $164,000 for the three months ended June 30, 2024, was primarily the result of fluctuations in timing of orders of over-the-counter animal health care products.
Previous wording
The increase in Europe revenue for the three and nine months ended December 31, 2023 of $113,000 and $371,000, respectively, was the result of increased demand for our products.
Current wording
The increase in Europe revenue for the three months ended June 30, 2024 of $218,000 was the result of a general increase in demand for our products.
Previous wording
The increase in Asia revenue for the three months ended December 31, 2023 of $8,000 and decrease of revenue in Asia of $222,000 for the nine months ended December 31, 2023, was primarily due to timing of orders. Revenues from our international distributors tend to fluctuate from period to period due to customer placement of larger but less frequent orders to benefit from quantity discounts and reduced shipping costs.
Current wording
The decrease in Asia revenue of $385,000 for the three months ended June 30, 2024 was primarily due to timing of orders. Revenues from our international distributors tend to fluctuate from period to period due to customer placement of larger but less frequent orders to benefit from quantity discounts and reduced shipping costs.
Previous wording
The decrease in Rest of World revenue for the three and nine months ended December 31, 2023 of $18,000 and $60,000, respectively, was primarily due to timing of customer orders.
Current wording
The decrease in Rest of World revenue for the three months ended June 30, 2024 of $98,000 was primarily due to timing of customer orders.
Previous wording
The cost of revenue and gross profit metrics for the three and nine months ended December 31, 2023 and 2022 are as follows:
Current wording
The cost of revenue and gross profit metrics for the three months ended June 30, 2024 and 2023 are as follows:
Previous wording
The increase in gross profit margin of $629,000 for the three months ended December 31, 2023, as compared to the prior period, was primarily due to overall product mix, redeployment of labor to research and development projects in the current year and higher costs of materials and transportation in the prior period.
Current wording
The increase in gross profit of $102,000 for the three months ended June 30, 2024, as compared to the prior period, was primarily due to overall product mix, and higher costs of materials and transportation in the prior period.
Previous wording
The research and development expense metrics as of December 31, 2023 and 2022 are as follows:
Current wording
The research and development expense metrics for the three months ended June 30, 2024 and 2023 are as follows:
Previous wording
Increases in research and development expenses for the three and nine months ended December 31, 2023 of $601,000 and $1,456,000, respectively, were due to increased product development and expanded regulatory efforts in the U.S. and Europe to support new product releases.
Current wording
Increases in research and development expenses for the three months ended June 30, 2024 of $145,000 was primarily due to increased product development and expanded regulatory efforts in the U.S. and Europe to support new product releases.
Previous wording
The selling, general and administrative expense metrics are as of December 31, 2023 and 2022 are as follows:
Current wording
The selling, general and administrative expense metrics for the three months ended June 30, 2024 and 2023 are as follows:
Previous wording
The decline in selling, general and administrative expense for the three and nine months ended December 31, 2023 of $962,000 and $1,546,000, respectively, was the result of ongoing efforts to contain expenses across all parts of the company.
Current wording
The decline in selling, general and administrative expenses for the three months ended June 30, 2024 of $110,000 was the result of ongoing efforts to contain expenses across all parts of the company.
Previous wording
Other expense, net for the three and nine months ended December 31, 2023 was $79,000 and $380,000, respectively, compared to $71,000 and $322,000, respectively, for the three and nine months ended December 31, 2022. The changes in other expense, net primarily relate to exchange rate fluctuations.
Current wording
Other income (expense), net for the three months ended June 30, 2024 was $176,000 compared to other income (expense), net of $(211,000) for the three months ended June 30, 2023. The change in other income (expense), net primarily relates to exchange rate fluctuations.
Previous wording
We reported a net loss of $866,000 and $1,939,000 for the three months ended December 31, 2023 and 2022, respectively, and $3,768,000 and $3,843,000 for the nine months ended December 31, 2023 and 2022, respectively. At December 31, 2023 and March 31, 2023, our accumulated deficit amounted to $193,282,000 and $189,514,000, respectively. As of December 31, 2023, we had cash and cash equivalents of $2,406,000 compared to $2,634,000 on December 31, 2022. Since our inception, substantially all of our operations have been financed through sales of equity securities. Other sources of financing that we have used to date include our revenues, royalty payments from licensing our products, as well as various loans and the sale of certain assets to Invekra, Petagon, and Microsafe.
Current wording
We reported a net loss of $1,143,000 and $1,418,000 for the three months ended June 30, 2024 and June 30, 2023, respectively. At June 30, 2024 and March 31, 2024, our accumulated deficit amounted to $195,492,000 and $194,349,000, respectively. At June 30, 2024 and March 31, 2024, we had cash and cash equivalents of $2,589,000 and $3,128,000, respectively. At June 30, 2024 and March 31, 2024, we had working capital of $8,176,000 and $8,829,000, respectively.
Previous wording
The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the nine months ended December 31, 2023 and 2022, as well as balances of cash and cash equivalents and working capital:
Current wording
The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the three months ended June 30, 2024 and 2023 as well balances of cash and cash equivalents and working capital:
Previous wording
Net cash used in operating activities during the nine months ended December 31, 2022 was $3,711,000, primarily due to a net loss of $3,843,000, and a decrease in deferred revenue of $1,204,000, offset by $569,000 of stock based compensation.
Current wording
Net cash used by operating activities during the three months ended June 30, 2024 was $912,000, primarily due to a net loss of $1,143,000 offset by stock related compensation expense of $107,000.
Previous wording
Net cash used in operating activities during the nine months ended December 31, 2023 was $2,550,000, primarily due to a net loss of $3,768,000, an increase in accounts receivables of $221,000, and an increase in inventory of $93,000, offset by stock compensation of $447,000 and an increase in prepaid expenses of $546,000.
Current wording
Net cash used by operating activities during the three months ended June 30, 2023 was $215,000, primarily due to a net loss of $1,418,000 offset by stock related compensation expense of $177,000, decrease in accounts receivable of $191,000, decrease in inventory of $230,000 and a combined increase in accounts payable and accrued liabilities of $394,000.
Previous wording
Net cash used in investing activities was $20,000 for the nine months ended December 31, 2023, primarily related to purchases of equipment.
Current wording
Net cash used in investing activities was $5,000 for three months ended June 30, 2024, primarily related to the purchase of equipment.
Previous wording
Net cash used in investing activities was $176,000 for the nine months ended December 31, 2022, primarily related to long term deposits and purchases of equipment.
Current wording
Net cash used in investing activities was $17,000 for three months ended June 30, 2023, primarily related to the purchase of equipment.
Previous wording
Net cash provided by financing activities was $1,054,000 for the nine months ended December 31, 2023, primarily due to the sale of common stock for net proceeds of $1,446,000 offset by principal payments on short-term debt of $387,000.
Current wording
Net cash provided by financing activities was $636,000 for the three months ended June 30, 2024, primarily due to the sale of common stock of $748,000 offset by $119,000 of principal payments on a short-term loan related to financing of insurance premiums.
Previous wording
Net cash used in financing activities was $883,000 for the nine months ended December 31, 2022, primarily due to principal payments on short-term debt of $674,000 and payments of PPP loan of $120,000.
Current wording
Net cash used in financing activities was $135,000 for the three months ended June 30, 2023, primarily related to principal payments on a short-term loan related to financing of insurance premiums.
Previous wording
We rely on certain key customers for a significant portion of our revenues. A small number of customers may represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent period.
Current wording
We rely on certain key customers for a significant portion of our revenues. In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent period.
Previous wording
As we have previously discussed in our annual report on Form 10-K filed with the SEC on June 21, 2023, we face a substantial Mexico tax liability, intercompany debt, unpaid technical assistance charges and accrued interest. These amounts are not due until 2027. At this time, management believes there are sufficient assets on the balance sheet to more than cover any tax obligation without interrupting our operations or business. We have engaged tax professionals to review all options to limit our exposure to these amounts and to proceed in a manner that is most advantageous to us.
Current wording
We face a substantial Mexico tax liability, intercompany debt, unpaid technical assistance charges and accrued interest. These amounts are due in 2027. At this time, management believes there are sufficient assets on the balance sheet to more than cover any tax obligation without interrupting our operations or business. We have engaged tax professionals to review all options to limit our exposure to these amounts and to proceed in a manner that is most advantageous to us.
Previous wording
We also closely monitor overall economic conditions, consumer sentiment and the prospect of a recession in the United States which may impact our financial results.
Current wording
We also closely monitor overall economic conditions and consumer sentiment and the prospect of a recession in the United States which may impact our financial results.
Previous wording
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories, the recoverability of long-lived assets, the valuation allowance related to our deferred tax assets, valuation of equity and derivative instruments, debt discounts, valuation of investments and the estimated amortization periods of upfront product licensing fees received from customers.
Current wording
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories, the valuation allowance relating to our deferred tax assets, valuation of equity and the estimated amortization periods of upfront product licensing fees received from customers. Periodically, we evaluate and adjust estimates accordingly.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Since our inception, substantially all of our operations have been financed through sales of equity securities. Other sources of financing that we have used to date include our revenues, as well as various loans and the sale of certain assets to customers.
Current report — wording carried from elsewhere
Since July 1, 2023, substantially all of our operations have been financed through cash on hand and the following transactions: