SNOA 10-K & 10-Q changes, risk factors and insider trading

Since 2004, we loaned substantial amounts to our Mexico subsidiary Oculus Technologies of Mexico, S.A. de C.V. at various interest rates to fund their operations. As of March 31, 2025,2026, our Mexico subsidiary owes approximately $10.9$12.3 million in principal, $8.6$10.4 million in technical assistance payments and $26.4$32.2 million in accrued interest. interest. The intercompany loans mature in 2027.2032 and were extended 5 years during the current fiscal year. There is no guarantee that our Mexican subsidiary will be able to pay any or all of the amounts due. If we were to forgive the debt or if we were to convert the debt to equity, it would be subject to Mexico income tax at 30%, or approximately $13.8 $16.5 million, as well as Mexican withholding tax of 15%.

Although we have a significant number of customers in each of the geographic markets that we operate in, we rely on certain key customers for a significant portion of our revenues. For the year ended March 31, 2025, customer B represented 21% and2026, customer C represented 18%15% of net revenues. For the year ended March 31, 2024, customer A represented 17%,2025, customer B represented 15% 21% and customer C represented 14%18% of net 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. The loss of any of these customers could adversely affect our revenues.

The Medical Devices Regulation was adopted in the EU on May 26, 2017 to replace the existing Medical Device Directive, and became applicable on May 26, 2021, with a transition period until extended to December 31, 2028 for non-implantable Class IIb and lower risk devices. We received a CE certificate for 39 of our Class IIB medical devices under the Medical Device Directive. Under the new Medical Devices Regulation, certain devices are classified in higher classes, new devices are classified, and certain new obligations are imposed on manufacturers and distributors. In addition, the pre-market approval and post-market surveillance requirements are enhanced.

IfQuality issues, concerns about safety or efficacy of our productsproducts, fail or failure to comply with FDA and other governmental regulations,regulations orcould result in recall of our products are deemed defective, we may be required to recall our productsand and we could suffer adverse public relations that could adversely impact our sales, operating results, and reputation which would adversely affect ourand business operations.

We grant credit to our business customers, which are primarily located in Mexico, Europe and the United States. Collateral is generally not required for trade receivables. We maintain allowances for potential credit losses. We rely on certain key customers for a significant portion of revenues. At March 31, 2025,2026, customer DA represented 24%12% and customer C represented 19% of our net accounts receivable balance. At March 31, 2024,2025, customer BD represented 13%24% of our net accounts receivable balance and customer D represented 17% of our net accounts receivable balance. While we believe we have a varied customer base and have experienced strong collections in the past, if current economic conditions disproportionately impact any one of our key customers, including reductions in their purchasing commitments to us or their ability to pay their obligations, it could have a material adverse effect on our revenues and liquidity. We have not purchased insurance on our accounts receivable balances.

As of March 31, 2025,2026, we had outstanding options to purchase an aggregate of 73,081129,163 shares of our common stock at a weighted average exercise price of $43.27$23.94 per share and a weighted average contractual term of 8.828.79 years. In addition, 14,67082,290 shares of our common stock were available on March 31, 20252026 for future option grants under our 2016 Equity Incentive Plan, our 2021 Equity Incentive Plan and our 2024 Equity Incentive Plan. To the extent any additional options are granted and exercised, there will be further dilution to stockholders and investors. Until the options expire, these holders will have an opportunity to profit from any increase in the market price of our common stock without assuming the risks of ownership. Holders of options may convert or exercise these securities at a time when we could obtain additional capital on terms more favorable than those provided by the options. The exercise of the options will dilute the voting interest of the owners of presently outstanding shares by adding a substantial number of additional shares of our common stock.

We have filed several registration statements with the SEC, so that substantially all of the shares of our common stock which are issuable upon the exercise of outstanding warrants and options may be sold in the public market. The sale of our common stock issued or issuable upon the exercise of the warrantsoptions and options described above, or the perception that such sales could occur, may adversely affect the market price of our common stock.

Nasdaq monitors our ongoing compliance with its minimum listing requirements. If we fail to satisfy the continued listing requirements of the Nasdaq Capital Market, such as the minimum closing bid price requirement and corporate governance requirements, Nasdaq may take steps to delist our common stock. TheIn January 2026, Nasdaq filed a proposed rule change with the Securities and Exchange Commission to adopt a continued listing requirement requiring companies listed on the Nasdaq Capital Market to maintain a minimum Market Value of Listed Securities of $5 million. If adopted, companies that fail to maintain this threshold for a specified period may be subject to immediate suspension and delisting of our common stock from Nasdaq would havewithout a materialcompliance adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of its common stock as a result of that delisting would adversely affect our ability to raise capital on terms acceptable to the Company, if at all.period.

On an ongoing basis, we evaluate our estimates and judgments. Areas in which we exercise significant judgment include, but are not necessarily limited to, our valuation of accounts receivable, inventory, income taxes, and equity transactions (compensatory and financing).taxes.

On an ongoing basis, we evaluate our estimates and judgments. We base our estimates and judgments on a variety of factors including our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary.

The increase in Europe revenuerevenues forincreased the25% yearas ended March 31, 2025 of $742,000 was thea result of a general increase in increased demand for our products and,and morefavorable specifically,exchange an increase in demand for our wound care products due to recent world events.rates.

TheLatin increaseAmerica inrevenues Asiadecreased revenue of $19,000 for the year ended March 31, 2025 was20%, primarily due to timing of customer orders.orders for overflow manufacturing.

DecreaseIncrease in research and development expenses for the year ended March 31, 20252026 of $57,00025% was primarily due to decreasedincreased product development expenses in the U.S. in the current period and decreased regulatory efforts in Europe following the successful transition to MDR.support new product releases.

The decreaseincrease in selling, general and administrative expenses for the year ended March 31, 20252026 of $214,0003% was theprimarily result of ongoing effortsdue to containinflation expensesdriven acrosssalary allincreases partsin of the company.Mexico.

Other Income (Expense), Income, net

Other income (expense), income, net for the year ended March March 31, 20252026 was $803,000($958,000) compared to $(330,000)$803,000 for the year ended March 31, 2024.2026. The change in other incomeOther (expense), income, net in the current period primarily relates to exchange rate fluctuationsfluctuations, andoffset toby athe lesser extent incomerecognition of $245,000 for employee retention credits approved from calendar year 2020. In fiscal 2026 we expect to recognize income of approximately $350,000$374,000 related to approved calendar year 2021 employee retention credits. credits.Other (expense) income, net in the prior period primarily relates to exchange rate fluctuations.

Income Tax Benefit (Expense) Benefit

Income tax benefit (expense) for the year ended March 31, 2026 and 2025 was $244,000 and ($550,000), respectively. The benefit for the yearscurrent ended March 31, 2025 and 2024period was $(550,000)related andto $196,000,an respectively.expected tax loss in Mexico this fiscal year. The expense for the currentprior yearperiod is primarily related to the use of our deferred tax asset in Mexico and, to a lesser extent, an increase in our deferred tax asset in Netherlands. The benefit for the prior year was related to our Mexico deferred tax asset.

Since April 1, 2024,2025, substantially all of our operations have been financed through cash on hand and proceeds of $3,079,000, net of offering expenses, from the salefollowing of common stock during the fiscal year ended March 31, 2025.transactions:

Net cash used in operating activities during the year year ended March 31, 20252026 was $88,000,$3,933,000, primarily due to our net loss of $3,457,000,$3,175,000 offset by stock compensation of $224,000,$255,000, a decreaseincrease in accounts receivable of $434,000,$122,000, aan decreaseincrease in prepaid expenses of $1,086,000$1,312,000 and ana increasedecrease in accounts payable of $416,000.$871,000.

Net cash used in operating activities during the year ended March 31, 20242025 was $2,398,000,$88,000, primarily due to our net loss of $4,835,000,$3,457,000 offset by stock compensation of $516,000,$224,000, a decrease in inaccounts inventoryreceivable of $184,000, and$434,000, a decrease in prepaid expenses of $1,107,000.$1,086,000 and an increase in accounts payable of $416,000.

We currently forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently do not anticipate thatspending a$500,000 materialto amountpurchase willequipment beto purchasedincrease efficiency in operations for the year ended March 31, 2026.2027. If we purchase capital equipment, weWe expect to pay cash for those expenditures or to finance them through equipment leases.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 valuation allowance relating to the Company’s deferred tax assets, and the valuation of equity.. assets. Periodically, the Company evaluates and adjusts estimates accordingly.

ThereOther than the risks set forth below, there have been no material changes from risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended March 31, 2025, 2026, as filed with the SEC June 17, 2025.16, 2026.

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q as of DecemberJune 31,30, 20252026 and our audited consolidated financial statements for the the year ended March 31, 20252026 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on June 17, 2025. 2026.

We have developed unique, differentiated, and safe dermatologic products that support paths to healing for various dermatologic conditions. Our products are primarily targeted at therelieving treatment of rednesspain and irritation,itch from skin irritations, the management of scars and managing symptoms of eczema/atopic dermatitis. In Europe and the United Kingdom, Kingdom, we have developed products to treatassist in the treatment of acne. We are strategically focused on introducing innovative new products that are supported by human clinical data with applications that address specific dermatological procedures currently in demand. In addition, we look for markets where we can provide effective product line extensions and pricing to new product families.

Other over-the-counter dermatology products in the United States include Regenacyn® Advanced Scar Gel, which is clinically proven to improve the overall appearance of scars while reducing pain, itch and redness, Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel for the alleviation of red bumps, rashes, shallow skin fissures, peeling, and symptoms of eczema/atopic dermatitis, and Rejuvacyn® Advanced Skin Repair Cooling Mist for management of minor skin irritations following cosmetic procedures as well as daily skin health and hydration. Rejuvacyn is certified as a Natural Personal Care Product by the Natural Products Association, and Reliefacyn received the National Eczema Association Seal of AcceptanceTM in 2023, the National Psoriasis Foundation Seal of Recognition in 2025 and the National Rosacea Society Seal of Acceptance in 2025. In January 2024, we launched LumacynTM Clarifying Mist, a direct-to-consumer skin care product in the United States. Lumacyn is an all-natural daily toner to soothe skin, reduce redness and irritation,cleanse andthe manage blemishes by reducing infection.skin.

In the United States, our prescription product Acuicyn® Eyelid & Eyelash Cleanser is an effective solution for symptoms of blepharitis and the daily hygiene of eyelids and lashes, and helps manage red, itchy, crusty and inflamed eyes. It is strong enough to kill the bacteria that causes discomfort, fast enough to provide near instant relief, and gentle enough to use as often as needed.lashes.

We sell Ocucyn® Eyelid & Eyelash Cleanser to consumers through our online store,store and third party distributors. Ocucyn is designed for everyday use as a safe, gentle, and effective solution for good eyelid and eyelash hygiene. In international markets we rely on distribution partners to sell our eye products.

In April 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 our online store and third-party distributors.

MicrocynAH® is an HOCl-based topical product line that cleans, debrides and treatssupports healing of a wide spectrum of animal wounds and infections. It is intended for the safe and rapid treatment of a variety of animal afflictions including cuts, burns, lacerations, rashes, hot spots, rain rot, post-surgical sites, pink eye symptoms and wounds to the outer ear.

Comparison of the Three Months Ended DecemberJune 30, 31, 20252026 and 20242025

RevenueRevenues

The following table shows our consolidated total revenuerevenues and revenuerevenues by geographic region for the three months ended DecemberJune 31,30, 20252026 and 20242025:

Revenues in the U.S. increased 98%,141%, primarily as a result of an increase in sales of over-the-counter products and increasingincreased sales by new and existing distributors.

Europe revenues increased 24%34% as a result of increased demand for our products.products and favorable exchange rates.

Revenues in Asia increased 38%37% and Rest of World revenues decreasedincreased 11%.52% due to timing of customer orders. Revenues from these regions tend to fluctuate when viewed on a quarterly basis due to customers placing larger, but less frequent, orders to benefit from quantity discounts and reduced shipping costs when ordering larger quantities.

Latin America revenues decreasedincreased 38%,11%, primarily due to timing of customer orders for overflow manufacturing.

Cost of RevenueRevenues and Gross Profit

The cost of revenuerevenues and gross profit metrics for the three months ended DecemberJune 31,30, 20252026 and 20242025 are as follows:

The increaseIncrease in gross profit of $380,000 for the three months ended DecemberJune 31,30, 2025,2026 asof compared to the prior period,76% was primarily due to an increase in revenuerevenues. Gross profit % also increased due to improvements made in our manufacturing process and overallcustomer product mix.

The research and development expense metrics for the three months ended DecemberJune 31,30, 20252026 and 20242025 are as follows:

The increaseIncrease in research and development expenses for the three months ended DecemberJune 31,30, 20252026 of $130,0001% was primarily due to increased product development to support new product releases.

The selling, general and administrative expense metrics for the three months ended DecemberJune 31,30, 20252026 and 20242025 are as follows:

The decreaseincrease in selling, general and administrative expenses for the three months ended DecemberJune 31,30, 20252026 of $103,0003% was theprimarily result of ongoing effortsdue to controlinflation expenses.driven salary increases in Mexico.

Other (Expense) Income,Expense, net

Other (expense) income,expense, net for the three months ended endedJune December30, 31, 20252026 was $(271,000)$290,000 compared to $112,000$147,000 for the three months ended DecemberJune 31,30, 2024.2025. Other (expense) income,expense, net in the current period primarily primarily relates to exchange rate fluctuations.

We reported a net loss of $2,594,000$330,000 and $2,681,000$1,241,000 for the ninethree months ended DecemberJune 31,30, 20252026 and December 31, 2024,2025, respectively. At DecemberJune 31,30, 20252026 and March 31, 2025,2026, our accumulated deficit amounted to $200,400,000$201,311,000 and $197,806,000,$200,981,000, respectively. At DecemberJune 31,30, 20252026 and March 31, 2025,2026, we had cash and cash equivalents of $2,561,000$5,338,000 and $5,374,000, $2,399,000, respectively. At DecemberJune 31,30, 20252026 and March 31, 2025,2026, we had working capital of $7,928,000$10,821,000 and $8,552,000,$7,268,000, respectively. Since respectively.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.

Since JanuaryJuly 1, 2025, substantially all of our operations operations have been financed through cash on hand and the following transactions:

The following table presents a summary of our our unaudited condensed consolidated cash flows for operating, investing and financing activities for the ninethree months ended DecemberJune 30, 31,2026 and 2025 and 2024 as well as balances of cash and cash equivalents and working capital:

Net cash used in operating activities during the ninethree months ended DecemberJune 31,30, 20252026 was $3,414,000,$649,000, primarily due to our net loss of $2,594,000,$330,000, an increase in accounts receivable of $650,000 an increase in inventory of $484,000, and$81,000, an increase in prepaid expenses of $1,226,000,$364,000 offset by stock compensation of $58,000 and an increase in accounts payable of $589,000, a decrease in accounts receivable of $46,000 and stock compensation of $120,000.$216,000.

Net cash providedused byin operating activities during the the ninethree months ended DecemberJune 31,30, 20242025 was $7,000,$2,015,000, primarily due to aour net loss of $2,681,000$1,241,000, offsetan by a decrease in prepaid expenses of $1,547,000, a decreaseincrease in accounts receivable of $219,000$216,000 an increase in inventory of $652,000, an increase in prepaid expenses of $819,000 offset by stock compensation of $57,000 and an increase in accounts payable of $864,000.$1,026,000.

Net cash used in investing activities was $163,000$2,000 for the ninethree months ended DecemberJune 31,30, 2025,2026, primarily related to the purchase of equipment.

Net cash used in investing activities was $33,000$106,000 for ninethe three months ended DecemberJune 31,30, 2024,2025, primarily related to the purchase of equipment.