Sonoma Pharmaceuticals, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

NOTE 2 - Liquidity and Financial Condition

NOTE 2 - Liquidity and Financial Condition	12 Months Ended
Mar. 31, 2012
Liquidity Disclosure [Policy Text Block]	NOTE 2 — Liquidity and Financial Condition The Company incurred a net loss of $7,329,000 for the year ended March 31, 2012. At March 31, 2012, the Company’s accumulated deficit amounted to $132,314,000. The Company had working capital of $2,211,000 as of March 31, 2012. The Company may need to raise additional capital from external sources in order to continue the longer term efforts contemplated under its business plan. The Company expects to continue incurring losses for the foreseeable future and may need to raise additional capital to pursue its product development initiatives, to penetrate markets for the sale of its products, and to continue as a going concern. On April 25, 2012, the Company entered into agreements with various investors to issue up to: a) 2,360,001 shares of common stock b) 1,000 shares of Series A 0% Convertible Preferred Stock (the “Series A Preferred Stock”); and c) warrants to purchase up to 3,471,112 shares of common stock (the “Warrants”). The Company also offered up to 1,111,111 shares of common stock issuable upon conversion of the Series A Preferred Stock and 3,471,112 shares of common stock in the event the Warrants are exercised. The Warrants have an initial exercise price of $1.18 per share, are not exercisable for six months from the date of issuance, and have an exercise term of 2.5 years from the date of issuance. The Company received approximately $3,124,000 in gross proceeds from the sale of these securities. Net proceeds after deducting the placement agent commissions, legal expenses and other offering expenses, and assuming no exercise of the Warrants, was $2,833,350. The Company retained Rodman & Renshaw, LLC as the exclusive placement agent for this offering, and paid them $218,680 in placement agent commissions. On May 4, 2012, the investors converted 1,000 shares of the Series A Preferred Stock purchased in the transaction into 1,111,111 shares of common stock (Note 17). On December 22, 2011, the Company entered into agreements with institutional and accredited investors to issue 1,809,653 shares of its common stock at $1.15 per share, yielding gross proceeds of $2,081,000 and net proceeds of $1,894,000 after deducting placement agent commissions of $145,000 and other offering costs of $42,000. The offering closed on December 28, 2011 (Note 12). On June 29, 2011, the Company entered into a loan and security agreement and a supplement to the loan and security agreement with Venture Lending & Leasing VI, Inc. to borrow up to an aggregate of up to $2,500,000 (collectively, the “VLL6 Agreements”). The VLL6 Agreements provided for a first tranche of $1,500,000 and, upon meeting certain financial milestones, the Company was permitted to borrow a second tranche of $1,000,000. On June 29, 2011, the Company borrowed $1,500,000 on the first tranche. On September 30, 2011, the Company met the financial milestones and became eligible to draw the second tranche of the loan. On November 10, 2011, the Company borrowed the second tranche of $1,000,000 (Note 9). 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 through at least April 1, 2013. However, in order to execute the Company’s long-term Microcyn® product development strategy and to penetrate new and existing markets, the Company may need to raise additional funds through public or private equity offerings, debt financings, corporate collaborations or other means. Management believes that the Company has access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, the Company has not secured any commitment for new financing at this time, nor can it provide any assurance that new financing will be available on commercially acceptable terms, if needed. If the Company is unable to secure additional capital, it may be required to curtail its research and development initiatives and take additional measures to reduce costs in order to conserve its cash.

NOTE 2 - Liquidity and Financial Condition

12 Months Ended

Mar. 31, 2012

Liquidity Disclosure [Policy Text Block]

NOTE 2 — Liquidity and Financial Condition

The Company incurred a net loss of $7,329,000 for the year ended March 31, 2012. At March 31, 2012, the Company’s accumulated deficit amounted to $132,314,000. The Company had working capital of $2,211,000 as of March 31, 2012. The Company may need to raise additional capital from external sources in order to continue the longer term efforts contemplated under its business plan. The Company expects to continue incurring losses for the foreseeable future and may need to raise additional capital to pursue its product development initiatives, to penetrate markets for the sale of its products, and to continue as a going concern.

On April 25, 2012, the Company entered into agreements with various investors to issue up to: a) 2,360,001 shares of common stock b) 1,000 shares of Series A 0% Convertible Preferred Stock (the “Series A Preferred Stock”); and c) warrants to purchase up to 3,471,112 shares of common stock (the “Warrants”). The Company also offered up to 1,111,111 shares of common stock issuable upon conversion of the Series A Preferred Stock and 3,471,112 shares of common stock in the event the Warrants are exercised. The Warrants have an initial exercise price of $1.18 per share, are not exercisable for six months from the date of issuance, and have an exercise term of 2.5 years from the date of issuance. The Company received approximately $3,124,000 in gross proceeds from the sale of these securities. Net proceeds after deducting the placement agent commissions, legal expenses and other offering expenses, and assuming no exercise of the Warrants, was $2,833,350. The Company retained Rodman & Renshaw, LLC as the exclusive placement agent for this offering, and paid them $218,680 in placement agent commissions. On May 4, 2012, the investors converted 1,000 shares of the Series A Preferred Stock purchased in the transaction into 1,111,111 shares of common stock (Note 17).

On December 22, 2011, the Company entered into agreements with institutional and accredited investors to issue 1,809,653 shares of its common stock at $1.15 per share, yielding gross proceeds of $2,081,000 and net proceeds of $1,894,000 after deducting placement agent commissions of $145,000 and other offering costs of $42,000. The offering closed on December 28, 2011 (Note 12).

On June 29, 2011, the Company entered into a loan and security agreement and a supplement to the loan and security agreement with Venture Lending & Leasing VI, Inc. to borrow up to an aggregate of up to $2,500,000 (collectively, the “VLL6 Agreements”). The VLL6 Agreements provided for a first tranche of $1,500,000 and, upon meeting certain financial milestones, the Company was permitted to borrow a second tranche of $1,000,000. On June 29, 2011, the Company borrowed $1,500,000 on the first tranche. On September 30, 2011, the Company met the financial milestones and became eligible to draw the second tranche of the loan. On November 10, 2011, the Company borrowed the second tranche of $1,000,000 (Note 9).

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 through at least April 1, 2013. However, in order to execute the Company’s long-term Microcyn® product development strategy and to penetrate new and existing markets, the Company may need to raise additional funds through public or private equity offerings, debt financings, corporate collaborations or other means.

Management believes that the Company has access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, the Company has not secured any commitment for new financing at this time, nor can it provide any assurance that new financing will be available on commercially acceptable terms, if needed. If the Company is unable to secure additional capital, it may be required to curtail its research and development initiatives and take additional measures to reduce costs in order to conserve its cash.

- Definition

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

+ References + Details