What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-06-28 compared with 2022-07-13 · 48 added, 68 removed, 233 unchanged (33% of the section changed)

13 unchanged sentences

We believe that we are gaining more awareness in medico-legal circles and publications and from presentations at medical meetings.

believe that improvement in the quality of sales representatives carrying our AEM product line, along with increased marketing efforts

believe that improvement in the quality of sales representatives carrying our AEM products line, along with increased marketing efforts

and the introduction of new products, may provide the basis for increased sales and continuing profitable operations.

42 unchanged sentences

Net product revenue for the fiscal year ended March 31, 2023 (“FY

22”) was $6,914,678, and for the fiscal year ended March 31, 2021 (“FY 21”), net revenue was $7,010,657, a decrease

The decrease of AEM product net revenue is attributable to business lost from hospitals that used AEM technology during the year.

revenue for the fiscal year ended March 31, 2022 decreased primarily as a result of the decrease in non-essential surgical procedures

performed during this period due to the COVID-19 pandemic.

At March 31, 2022, we

had approximately $136,000 of backorders due to a constraint by our product vendors in supplying us with product materials.

23”) was $6,885,158, and for the fiscal year ended March 31, 2022 (“FY 22”), net revenue was $6,914,678, or no percentage

Product revenue for the fiscal year ended March 31, 2023 decreased primarily as a result of the decrease in non-essential surgical

procedures performed during this period due to the COVID-19 pandemic.

Net service revenue for FY 23 was $463,356, and for FY 22 net service revenue

8 unchanged sentences

Gross profit.

Gross profit in FY 22 was $3,788,418, which represented a decrease of $116,685, or 3%, from gross profit in FY 21 of $3,905,103.

profit margin was 49% of net revenue for FY 22 and 52% of net revenue for FY 21.

Gross profit decreased in FY 22 from FY 21 due principally

to higher material costs.

Our supplier agreements with GPOs include fixed pricing, with no allowance for inflationary pricing.

Our product revenue from GPOs in FY 22 was approximately 82% of our total product revenue.

we had increased product vendor costs that were not allowed to be passed on to our GPO customers and resulted in a compressed gross profit

Gross profit in FY 23 was $4,032,533, which represented an increase of $244,115, or 6%, from gross profit in FY 22 of $3,788,418.

profit margin was 52% of net product revenue for FY 22 and 49% of net product revenue for FY 21.

Gross profit increased in FY 23 from

FY 22 due principally to higher selling prices and high margin service revenue.

Our product revenue from GPOs in FY 22 was approximately

79% of our total product revenue.

In FY 23, we had increased product vendor costs that were not allowed

to be passed on to our GPO customers for most of the fiscal year and resulted in a compressed gross profit margin.

marketing expenses.

Sales and marketing expenses were $2,084,110 in FY 22, an increase of $63,675, or 3%, from $2,020,435 in FY 21.

The increase was the result of increased advertising, trade shows and travel.

The increase was partially offset by lower sales samples.

Sales and marketing expenses were $2,032,415 in FY 23, a decrease of $51,695, or 2%, from $2,084,110 in FY 22.

The decrease was the result of decreased advertising.

and administrative expenses.

General and administrative expenses were $1,486,796 in FY 23, an increase of $105,709, or 8%, from $1,381,087

The increase was the result of increased insurance costs.

The net increase was partially offset by decreased outside services .

The increase was the result of decreased allocations.

and development expenses.

Research and development expenses were $918,155 in FY 22, an increase of $348,613 or 61%, from $$569,542

The increase was the result of increased test and prototype materials, outside services and a write-off of tooling, all of which

relate to the development of new products.

Other income, net.

Other income, net of $134,935

for FY 21 included a tariff refund of $75,161 and a non-cash reduction of accounts payables of $56,435.

Net loss in FY 22 of $65,594 represented a loss in crease of $650,328 compared

to FY 21 net income of $584,734.

The loss increase was principally the result of decreased gross profit and increased operating expenses,

as discussed above.

Research and development expenses were $816,119 in FY 23, a decrease of $102,036 or 11%, from $918,155 in

The decrease was the result of decreased patent costs and test materials.

Other (expense), net.

Other (expense), net

of $21,148 for FY 23 was primarily for interest expense of $19,529.

Net (loss) in FY 23 of $323,945 represented a loss in crease of $258,351 compared to FY 22

net loss of $65,594.

The net loss increase was principally the result of extinguishment of debt income of $533,118 in FY 22.

Liquidity and Capital

3 unchanged sentences

To date, common stock and additional paid in capital totaled $24,348,075 from our inception through March 31, 2023.

Our operations used $444,432 and provided $219,946 of cash in FY 22 and FY 21, respectively, on net revenue of $7,668,636 and $7,537,834

in FY 22 and FY 21, respectively.

Our operations used $861,485 and $444,432 of cash in FY 23 and FY 22, respectively, on net revenue of $7,348,514 and $7,668,636 in FY

23 and FY 22, respectively.

Working capital was $1,993,777 at March 31, 2023 compared to $2,325,331 at March 31, 2022.

in working capital was primarily caused by the FY 22 net loss.

The decrease in

working capital was primarily caused by the FY 23 net loss.

Current liabilities were $1,130,826 at March 31, 2023 compared to $1,276,391

at March 31, 2022.

During January

2021, we canceled our relationship with Crestmark Bank.

We had no borrowings and incurred a $20,000 exit fee.

On August 4, 2020, we received

$150,000 in loan funding from the U.S.

Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”)

program administered by the SBA, which program was expanded pursuant to the CARES Act.

The EIDL is evidenced by a promissory note, dated

August 1, 2020 in the original principal amount of $150,000 with the SBA, the lender.

Under the terms of the Note, interest accrues on

the outstanding principal at the rate of 3.75% per annum.

The term of the Note is thirty years, though it may be payable sooner upon an

event of default under the Note.

Under the Note, we will be obligated to make equal monthly payments of principal and interest of $774

beginning on August 1, 2023 through the maturity date of August 1, 2050.

The Note may be prepaid in part or in full, at any time, without

During January 2021, we entered into a note agreement with U.S.

Bank for $92,000.

The note is for five years at a 5% interest

rate and the proceeds were used to purchase equipment.

The note is secured by the equipment.

On April 17, 2020, we entered into an unsecured

promissory note under the PPP for a principal amount of $598,567.

The PPP was established under the Consolidated Appropriations Act of

2020, enacted December 27, 2020.

Under the terms of the CARES Act, a PPP loan recipient may apply for, and be granted, forgiveness for

all or a portion of loans granted under the PPP.

Such forgiveness will be determined based upon the use of loan proceeds for payroll costs,

rent and utility costs, and the maintenance of employee and compensation levels.

In the quarter that ended December 31, 2020, we achieved

the requirements for forgiveness, all of the $598,567 was forgiven, and we recognized the forgiveness as extinguishment of debt income

On February 8, 2021, we entered into a second unsecured promissory note under the PPP for a principal amount of $533,118.

During the quarter that ended September 30, 2021, we achieved the requirements for forgiveness of the second note, and we recognized the

forgiveness as extinguishment of debt income of $533,118.

On February 8,

2021, we entered into a second unsecured promissory note under the PPP for a principal amount of $533,118.

This was our second PPP loan.

During the quarter that ended September 30, 2021, we achieved the requirements for forgiveness of the second note and recognized the forgiveness

as extinguishment of debt income of $533,118.

On November 15, 2022, we entered into a loan and

security agreement with Pathward, N.A.

(formerly Crestmark Bank).

The loan is due on demand and has no financial covenants.

the agreement, we were provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable.

The interest rate is prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average monthly

loan balance.

Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit fee

of 3%, 2% and 1% during years one, two and three, respectively.

We believe that the unique performance of AEM technology

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as of March 31, 2023 is as follows:

During September 2022, we entered into a note agreement

Bank for $115,004.

The note is for five years at a 6% interest rate and the proceeds were used to purchase equipment.

is secured by the equipment.

The minimum future principal U.S.

Bank payment, by

fiscal year, as of December 31, 2022 is as follows:

Payment due by period

Contractual obligations

Less than 1 year

More than 5 years

Lease obligations

84 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis