Sonoma Pharmaceuticals(SNOA) - 2026 Q3 - Quarterly Report

Revenue Performance - Total revenue for the three months ended December 31, 2025, was $4,349,000, representing a 22% increase from $3,564,000 in the same period of 2024[86] - Revenue in the United States increased by 98% to $1,218,000, primarily due to higher sales of over-the-counter products and increased sales by new and existing distributors[87] - Revenue in Europe rose by 24% to $1,560,000, driven by increased demand for products[88] - Revenue in Asia increased by 38% to $800,000, while revenue from the Rest of the World decreased by 11% to $253,000[86] - Revenue in Latin America decreased by 38% to $518,000, primarily due to the timing of customer orders for overflow manufacturing[89] - Total revenue for the nine months ended December 31, 2025 was $13,968,000, an increase of $3,434,000 (33%) compared to the prior year, with U.S. revenue up 90%[97] Product Development and Innovation - The company has developed unique dermatologic products targeting conditions such as redness, irritation, and eczema, with a focus on innovative new products supported by clinical data[66] - In January 2024, the company launched Lumacyn Clarifying Mist, an all-natural daily toner for skin care, expanding its product line in the U.S.[68] - A Master Supply Agreement was entered into with WellSpring Pharmaceutical Corporation for the sale of Microcyn technology-based products to large retailers in the U.S., with an initial term of two years[69] - The company announced a new application of HOCl technology for intraoperative pulse lavage irrigation treatment, launched in the U.S. in November 2023[74] - The Microcyn Negative Pressure Wound Therapy Solution product line was expanded in April 2024, now available in sizes of 250mL, 450mL, and 990mL[75] Financial Performance - For the three months ended December 31, 2025, gross profit increased by $380,000 (30%) to $1,650,000, driven by higher revenue and product mix improvements[90] - Gross profit for the nine months ended December 31, 2025 increased by $1,297,000 (33%) to $5,234,000, attributed to revenue growth and product mix[100] - Research and development expenses for the three months ended December 31, 2025 rose by $130,000 (30%) to $557,000, primarily due to increased product development for new releases[91] - Research and development expenses for the nine months ended December 31, 2025 increased by $323,000 (23%) to $1,726,000, supporting new product development[101] - Selling, general and administrative expenses decreased by $103,000 (5%) to $1,771,000, reflecting ongoing cost control efforts[93] - Net loss for the nine months ended December 31, 2025 was $2,594,000, compared to a net loss of $2,681,000 in the prior year[106] - Cash and cash equivalents at the end of the period were $2,561,000, down from $5,374,000 at the beginning of the period[111] - Net cash used in operating activities for the nine months ended December 31, 2025 was $3,414,000, primarily due to the net loss and increases in inventory and prepaid expenses[112] - The company reported an accumulated deficit of $200,400,000 as of December 31, 2025, indicating ongoing financial challenges[107] Risk Factors - The company is exposed to risks from foreign currency devaluation, particularly with the Mexico Peso and Euro against the US dollar[118] - There is a substantial Mexico tax liability and intercompany debt due in 2027, but management believes there are sufficient assets to cover these obligations[119] - The company is monitoring global economic conditions, including risks of economic downturns and consumer sentiment, which may impact financial results[120] - The One Big Beautiful Bill Act ("OBBBA") enacted in July 2025 is expected to have an insignificant impact on deferred tax assets and liabilities[121] - Management makes estimates and assumptions that affect reported amounts of assets and liabilities, which could differ from actual results[122] - There are currently no off-balance sheet arrangements that could materially affect the company's financial condition[123] - As a smaller reporting company, the company is electing scaled disclosure reporting obligations and is not required to provide certain market risk information[124]