According to Medtech Insight, a Division of Windhover Information, there were over 90 million incidents of wounds in the United States during 2004. Of these, over six million were chronic wounds, including arterial, diabetic, pressure and venous ulcers. The remaining 84 million were acute wounds, which follow the normal process of healing and commonly include burns, traumatic wounds, and approximately 67 million surgical incisions.

Chronic wounds are wounds that do not heal within a normally expected time frame under standard care. The most frequently occurring chronic wounds are venous, arterial, pressure and diabetic foot ulcers. According to Medtech Insight, in 2004, the incidence of chronic wounds in the United States was approximately 6.1 million, comprised of 2.0 million pressure ulcers, 1.7 million arterial ulcers, 1.6 million venous ulcers and 800,000 diabetic foot ulcers. In addition to being expensive to treat, chronic wounds are debilitating, painful and can result in amputations and other serious consequences. Clinical studies suggest that, depending on the severity of the wound, up to 43% of patients with diabetic foot ulcers undergo an amputation. Furthermore, the five year survival rate for patients undergoing amputations is 20%.

Acute wounds are typically caused by traumatic injury or surgical incision and are broadly categorized as those that can be expected to heal within a definable timeframe. However, the healing process may be affected by complicating factors such as infection, leading to chronic wounds. All acute wounds have the potential for infection and may require prophylactic treatment to prevent infection. According to Medtech Insight, in 2004, about 16.2 million traumatic wounds were treated, including 8.7 million open wounds. Also according to Medtech Insight, in 2004, approximately 67 million surgical wounds were reported in the United States, including 36 million completed under anesthesia. Despite modern infection control procedures, and technologies at hospitals and surgery centers, every time the skin is opened there is a risk of infection.

Dermacyn Wound Care offered in United States is a medical device product intended for moistening absorbent wound dressings and cleaning minor cuts, minor burns, superficial abrasions and minor irritations of the skin, for moistening and lubricating absorbent wound dressings for traumatic wounds, cuts, abrasions and minor burns, and for moistening and debriding acute and chronic dermal lesions, such as stage I-IV pressure ulcers, stasis ulcers, diabetic ulcers, post-surgical wounds, first and second degree burns, abrasions and minor irritations of the skin.

Dermacyn Wound Care offered in European Union is a super-oxidized solution intended for use in the debridement, irrigation and moistening of acute and chronic wounds, ulcers, cuts, abrasions and burns. Through reducing microbial load and assisting in a moist environment, it enables the body to perform its own healing process.

Cidalcyn is a multi-purpose disinfectant cleaner for use on hard, non-porous, inanimate surfaces. Broad spectrum disinfectant kills odor-causing bacteria while chemically neutralizing odors. It is non-flammable and non-corrosive.Vetericyn Wound Care is a product used for the management of traumatic wounds, cuts, abrasions, skin irritations, post-surgical incisions and minor burns in animals. Safe for use around head and eyes.

Oculus Microcyn Disinfectant is a high-level disinfectant solution for the reprocessing of heat sensitive and other medical devices. Microcyn60 is a product used for the antiseptic treatment of wounds and infected areas and for the disinfection of medical instruments and equipment and clean-rooms.

Oxum is a super-oxidized solution intended for use in the debridement, irrigation and moistening of acute and chronic wounds, ulcers, cuts, abrasions and burns. Through reducing microbial load and assisting in a moist environment, it enables the body to perform its own healing process.

Cost of revenues increased $1.4 million, or 39%, to $4.9 million for the year ended March 31, 2006, from $3.5 million for the year ended March 31, 2005.

Research and development expense increased $946,000, or 57%, to $2.6 million in the year ended March 31, 2006, from $1.7 million in the year ended March 31, 2005.

Interest expense decreased $200,000, or 54%, to $172,000 in the year ended March 31, 2006, from $372,000 in the year ended March 31, 2005.

Other income (expense), net was $377,000 net expense in the year ended March 31, 2006, compared with $146,000 net income in the year ended March 31, 2005.