Sonoma Pharmaceuticals (NASDAQ: SNOA) grows Q1 revenue to $6.406M
Sonoma Pharmaceuticals reported strong improvement for the quarter ended June 30, 2026. Revenue rose to $6,406,000, up from $4,015,000 a year earlier, a 60% increase, with 141% growth in the United States and double‑digit gains across Europe, Asia, Latin America and other regions. Gross profit increased to $2,577,000 and gross margin expanded to 40% from 36%.
The company narrowed its net loss to $330,000, or $0.09 per share, from $1,241,000, as research and development and selling, general and administrative costs grew only modestly. Operating cash outflow improved to $649,000 from $2,015,000. Equity issuance, including an underwritten unit offering and at‑the‑market sales, generated $3,536,000 of net proceeds, lifting cash to $5,338,000 and working capital to $10,821,000; management believes this, together with existing resources, will fund projected needs for at least twelve months.
Common shares outstanding increased sharply to 4,785,801, and 3,407,404 new warrants to purchase common stock were issued, creating meaningful potential dilution. The company also discloses sizable Mexico intercompany loans, accrued interest and related tax and withholding exposures, and notes new Nasdaq Market Value of Listed Securities requirements that could heighten delisting risk if thresholds are not met.
Positive
- Revenue grew 60% year over year to $6,406,000, with U.S. sales up 141% and gross margin improving to 40% from 36%, indicating stronger scale and mix.
- Net loss narrowed to $330,000 from $1,241,000, and net cash used in operating activities improved to $649,000 from $2,015,000, showing substantially reduced quarterly cash burn.
- Equity issuance provided $3,536,000 of net proceeds, increasing cash to $5,338,000 and working capital to $10,821,000, and management states this should fund operations for at least twelve months.
Negative
- Share count rose to 4,785,801 and the company issued 3,407,404 new warrants to purchase common stock, creating significant potential dilution alongside existing options and restricted stock units.
- Mexico intercompany obligations are large, including loans of $12,728,000, technical assistance charges of $10,781,000, accrued interest of $33,968,000 and related withholding tax exposure of $5,627,000, with limited ability to use U.S. tax credits.
- A new Nasdaq rule requires a minimum $5,000,000 Market Value of Listed Securities; failure to maintain this threshold for 30 consecutive trading days could lead to immediate suspension and delisting.
Filing Explained
Completed financing increased the share base and left 3,407,404 common warrants outstanding, while Nasdaq added a $5 million listing-value test.
Sonoma Pharmaceuticals’s Form 10-Q, an unaudited quarterly report, confirms that the April public offering closed on
The company sold
Because issuing additional shares increases the share count and reduces an existing holder’s percentage ownership absent offsetting changes, the completed share issuance is a direct dilution mechanism, while the warrants represent additional potential dilution if exercised.
The filing also identifies a new Nasdaq requirement approved on
Key Figures
Key Terms
hypochlorous acid medical
pre-funded warrants financial
Market Value of Listed Securities regulatory
Negative Pressure Wound Therapy medical
valuation allowance financial
withholding tax payable financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Sonoma Pharmaceuticals (SNOA) perform in the quarter ended June 30, 2026?
What drove Sonoma Pharmaceuticals (SNOA) revenue growth by region this quarter?
What is Sonoma Pharmaceuticals’ (SNOA) cash position and liquidity as of June 30, 2026?
How much dilution have recent equity offerings created for Sonoma Pharmaceuticals (SNOA) shareholders?
What major tax risks does Sonoma Pharmaceuticals (SNOA) face related to its Mexico operations?
What new Nasdaq listing risk does Sonoma Pharmaceuticals (SNOA) disclose?
How concentrated are Sonoma Pharmaceuticals’ (SNOA) revenues among major customers?
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
OR
For the transition period from ____________ to ______________
Commission file number:
(Name of registrant as specified in its charter)
| (State or other jurisdiction of Incorporation or Organization) | (I.R.S. Employer identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name or former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| The |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated Filer ☐ | Accelerated Filer ☐ |
| Smaller reporting company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares outstanding of the registrant’s
common stock, par value $0.0001 per share, as of August 6, 2026 was
SONOMA PHARMACEUTICALS, INC.
Index
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Unaudited Financial Statements | 3 |
| Condensed Consolidated Balance Sheets | 3 | |
| Condensed Consolidated Statements of Comprehensive Loss | 4 | |
| Condensed Consolidated Statements of Cash Flows | 5 | |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity | 6 | |
| Notes to Condensed Consolidated Financial Statements | 7 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 23 |
| Item 4. | Controls and Procedures | 23 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 24 |
| Item 1A. | Risk Factors | 24 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 24 |
| Item 3. | Defaults Upon Senior Securities | 24 |
| Item 4. | Mine Safety Disclosures (Not applicable.) | 24 |
| Item 5. | Other Information | 24 |
| Item 6. | Exhibits | 25 |
| Signatures | 28 | |
| 2 |
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease, right of use assets | ||||||||
| Deferred tax asset, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Short-term debt | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Total current liabilities | ||||||||
| Withholding tax payable | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 5) | – | |||||||
| Stockholders’ Equity: | ||||||||
| Convertible preferred stock, $ |
||||||||
| Common stock, $ |
||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Research and development | ||||||||
| Selling, general and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( |
) | ( |
) | ||||
| Other expense, net | ( |
) | ( |
) | ||||
| Loss from operations before income taxes | ( |
) | ( |
) | ||||
| Income tax benefit | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Net loss per share: basic and diluted | $ | ( |
) | $ | ( |
) | ||
| Weighted-average shares outstanding: basic and diluted | ||||||||
| Other comprehensive loss: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Foreign currency translation adjustments | ||||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) | ||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Deferred income tax expense | ||||||||
| Operating lease right-of-use asset | ( |
) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( |
) | ( |
) | ||||
| Inventories, net | ( |
) | ( |
) | ||||
| Prepaid expenses and other current assets | ( |
) | ( |
) | ||||
| Deferred consideration, net of discount | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ( |
) | ||||||
| Withholding tax payable | ||||||||
| Operating lease liabilities | ( |
) | ||||||
| Deferred revenue | ( |
) | ( |
) | ||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock, net of offering expenses | ||||||||
| Proceeds from exercise of employee stock options | ||||||||
| Principal payments on short-term debt | ( |
) | ( |
) | ||||
| Net cash provided by (used in) financing activities | ( |
) | ||||||
| Effect of exchange rate on cash and cash equivalents | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( |
) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025
(In thousands, except share amounts)
(Unaudited)
| Common Stock ($0.0001 par Value) |
Additional Paid in |
Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||
| Balance, March 31, 2026 | $ | – | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Proceeds from the At-the-Market sale of common stock, net of offering expenses | – | – | – | |||||||||||||||||||||
| Proceeds from the sale of common stock, net of offering expenses | – | – | – | |||||||||||||||||||||
| Employee stock-based compensation | – | – | – | – | ||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | ||||||||||||||||||||
| Net loss | – | – | – | ( |
) | – | ( |
) | ||||||||||||||||
| Balance, June 30, 2026 | $ | – | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Common
Stock ($0.0001 par Value) | Additional Paid in | Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||
| Balance, March 31, 2025 | $ | – | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
| Exercise of employee stock options | – | – | – | |||||||||||||||||||||
| Employee stock-based compensation | – | – | – | – | ||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | ||||||||||||||||||||
| Net loss | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||
| Balance, June 30, 2025 | $ | – | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to nearest thousand unless specified)
(Unaudited)
| Note 1. | Organization and Recent Developments |
Organization
Sonoma Pharmaceuticals, Inc. (the “Company”) was incorporated under the laws of the State of California in April 1999 and was reincorporated under the laws of the State of Delaware in December 2006. The Company moved its principal office from Petaluma, California to Woodstock, Georgia in June 2020 and to Boulder, Colorado in October 2022. The Company is a global healthcare leader for developing and producing stabilized hypochlorous acid (“HOCl”) products for a wide range of applications, including wound care, eye care, dermatological conditions, podiatry, animal health care, and as a non-toxic disinfectant. The Company’s products are clinically proven to reduce itch, pain, scarring, and irritation safely and without damaging healthy tissue. In-vitro and clinical studies of HOCl show it to safely manage skin abrasions, lacerations, minor irritations, cuts, and intact skin. The Company sells its products either directly or via partners in over 55 countries worldwide.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (the “SEC”) in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended March 31, 2026, and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on June 16, 2026.
| Note 2. | Liquidity and Financial Condition |
The Company reported a net loss of $
On April 24, 2026, the Company entered into an
underwriting agreement (the “Underwriting Agreement”) with Dawson James Securities, Inc. (the “Underwriter”).
At the close of the offering and following exercise of all pre-funded warrants, the Company issued
Management believes that the Company's existing cash and proceeds from the offering will be sufficient to fund its projected operating requirements for at least the next twelve months from the issuance date of these financial statements. Additionally, the Company has access to capital resources, which may include public or private equity offerings, debt financings, corporate collaborations, or other means, if and when appropriate to support strategic initiatives. However, there can be no assurance that such financings will be available on commercially acceptable terms, or at all, if pursued in the future. If the economic climate in the U.S. deteriorates, the Company’s ability to access additional capital could be negatively impacted. If the Company elects to pursue additional financing in the future, it may do so to support growth initiatives, extend its financial flexibility, or fund strategic opportunities. Any such activities could result in delays or changes to planned commercialization activities depending on timing and market conditions.
| 7 |
| Note 3. | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates and those differences could be material. Significant estimates and assumptions include the valuation allowance relating to the Company’s deferred tax asset.
Net Loss per Share
The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
The following table provides the net loss for each period along with the computation of basic and diluted net loss per share:
| Schedule of computation of basic and diluted net loss per share | ||||||||
| For the Three Months Ended June 30, | ||||||||
| (In thousands, except per share data) | 2026 | 2025 | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted-average number of common shares outstanding: basic and diluted | ||||||||
| Net loss per share: basic and diluted | $ | ( | ) | $ | ( | ) | ||
The computation of basic and diluted loss per share for the three months ended June 30, 2026 and 2025 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.
| Schedule of antidilutive shares | ||||||||
| June 30, | ||||||||
| (In thousands) | 2026 | 2025 | ||||||
| Common stock to be issued upon exercise of common stock warrants | ||||||||
| Common stock to be issued upon vesting of restricted stock units | ||||||||
| Common stock to be issued upon exercise of options | ||||||||
| 8 |
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification, Topic 606 Revenue from Contracts with Customers. Revenue is recognized when the Company transfers promised goods or services to the customer, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company derives the majority of its revenue through sales of its products directly to end users and to distributors. The Company also sells products to a customer base, including hospitals, medical centers, doctors, pharmacies, distributors and wholesalers. The Company has also entered into agreements to license its technology and products.
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which it expects to be entitled.
All of the Company’s revenue is recognized when control of the product is transferred to the customer (i.e. when its performance obligation is satisfied), which typically occurs when title passes to the customer upon shipment but could occur when the customer receives the product based on the terms of the agreement with the customer. For product sales to its value-added resellers, non-stocking distributors and end-user customers, the Company grants return privileges to its customers, and because the Company has a long history with its customers, the Company is able to estimate the amount of product that will be returned.
Sales to stocking distributors are made under terms with fixed pricing and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. Revenue from sales to distributors is recognized upon the transfer of control to the distributor.
At June 30, 2026, March 31, 2026 and March 31,
2025, the Company had deferred revenue in the amounts of $
Accounts Receivable
Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns. Estimates for cash discounts and sales returns are based on analysis of contractual terms and historical trends.
The Company’s policy is to reserve for uncollectible
accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically
reviews its accounts receivable to determine whether an allowance for doubtful accounts is necessary based on an analysis of past due
accounts and other factors that may indicate that the realization of an account may be in doubt. Other factors that the Company considers
include its existing contractual obligations, historical payment patterns of its customers and individual customer circumstances, an analysis
of days sales outstanding by customer and geographic region, and a review of the local economic environment and its potential impact on
government funding and reimbursement practices. Account balances deemed to be uncollectible are charged to the allowance after all means
of collection have been exhausted and the potential for recovery is considered remote. The Company did
| 9 |
Inventories
Inventories are stated at the lower of cost, cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis), or net realizable value.
Due to changing market conditions, estimated
future requirements, age of the inventories on hand and production of new products, the Company regularly reviews inventory
quantities on hand and records a provision to write down excess and obsolete inventory to its estimated net realizable value. At
June 30, 2026 and March 31, 2026, the Company recorded provisions to reduce the carrying amounts of inventories to their net
realizable value in the amounts of $
Segment Reporting
The Company has one primary business activity and operates in one reportable segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer who evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis. The measures of profitability and the significant segment expenses reviewed by the CODM are consistent with these financial statements and footnotes.
Recent Accounting Standards
The Company has evaluated all the recent accounting standards and determined that none are material to it.
| Note 4. | Condensed Consolidated Balance Sheet |
Inventories, net
Inventories, net consist of the following:
| Schedule of inventories, net | ||||||||
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Inventories, gross | ||||||||
| Less: allowance for obsolete and excess inventory | ( | ) | ( | ) | ||||
| Total inventories, net | $ | $ | ||||||
Leases
The Company’s operating leases are comprised primarily of facility leases. Balance sheet information related to the Company’s leases is presented below:
| Schedule of lease information | ||||||||
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Operating leases: | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liabilities – non-current | $ | $ | ||||||
| 10 |
Other information related to leases is presented below:
Three Months Ended June 30, 2026 | ||||
| Lease cost | ||||
| Operating lease cost | $ | |||
| Other information: | ||||
| Operating cash flows from operating leases | ( | ) | ||
| Weighted-average remaining lease term – operating leases (in months) | ||||
| Weighted-average discount rate – operating leases | ||||
As of June 30, 2026, the annual minimum lease payments of our operating lease liabilities were as follows:
| Schedule of minimum lease payments of operating lease liabilities | ||||
| For Years Ending March 31, | ||||
| 2027 (excluding the three months ended June 30, 2026) | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total future minimum lease payments, undiscounted | ||||
| Less: imputed interest | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
| Note 5. | Commitments and Contingencies |
Legal Matters
The Company may be involved in legal matters arising in the ordinary course of business including matters involving proprietary technology. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company is or could become involved in litigation may have a material adverse effect on its business and financial condition of comprehensive loss.
Employment Agreements
At June 30, 2026, the Company had an employment
agreement in place with one of its key executives.
| 11 |
Mexico Tax Liability
Since 2004, the Company loaned substantial amounts
to its Mexico subsidiary Oculus Technologies of Mexico, S.A. de C.V. at various interest rates to fund their operations. As of June 30,
2026 and March 31, 2026, outstanding principal amounted to approximately $
In addition, any interest paid to a foreign lender
is subject to Mexico withholding tax of 15%. The Company owes interest on its intercompany technical assistance agreement and royalty
withholding of
| Note 6. | Debt |
On February 1, 2026, the Company entered into
a note agreement for $
| Note 7. | Stockholders’ Equity |
At-the-Market Sale of Common Stock
During April 2026, the Company sold
Dawson James Securities, Inc.
Pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option (the “Over-Allotment Option”) to purchase up to 444,444 additional shares of common stock and/or 444,444 warrants to purchase an aggregate of 444,444 shares of common stock.
Pursuant to the Underwriting Agreement, the Company agreed to pay the Underwriter an aggregate fee equal to 7.5% of the gross proceeds of the offering. The Company also agreed to pay the Underwriter a non-accountable expense allowance equal to 1% of the public offering proceeds, and expenses related to the offering up to $75,000, and to issue to Dawson James Securities, Inc. or its designees a warrant for the purchase of up to 5% of the aggregate number of securities sold in the offering (the “Underwriter’s Warrant”). The Underwriter’s Warrant is exercisable for a period commencing six months following the closing of the offering and ending on the third anniversary of the closing date, with an exercise price equal to 110% of the public offering price.
| 12 |
The shares of common stock or pre-funded warrants, the warrants, the Underwriter’s Warrant and the shares issuable upon exercise of the warrants and/or the pre-funded warrants were offered to the public pursuant to the Company’s registration statement on Form S-1 and an accompanying preliminary prospectus (File No. 333-295171), which was declared effective by the SEC on April 23, 2026, and a final prospectus filed with the SEC on April 27, 2026.
The closing of the offering occurred on April
27 and 28, 2026, including full exercise of the Over Allotment Option, and the Company issued and sold (i)
The Underwriting Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriter, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement, the Company and its executive officers and directors have entered into agreements providing that the Company and each of these persons may not, without the prior written approval of the Underwriter, subject to limited exceptions, offer, sell, transfer or otherwise dispose of the Company’s securities until 90 days following the closing of the offering.
On April 28, 2026, the Company entered into warrant agency agreements with Computershare, Inc. and Computershare Trust Company, N.A., which will act as warrant agent for the Company in connection with the pre-funded warrants and the warrants issued and sold in the offering. As of May 1, 2026, all pre-funded warrants were exercised in full for nominal cash proceeds to the Company.
In connection with the offering, the Company received
gross proceeds of $
| Note 8. | Stock-Based Compensation |
For the three months ended June 30, 2026 and
2025, the Company incurred $
At June 30, 2026, there was unrecognized compensation
costs of $
Stock options award activity is as follows:
| Schedule of stock options award activity | ||||||||
| Number of Shares | Weighted- Average Exercise Price | |||||||
| Outstanding at April 1, 2026 | $ | |||||||
| Options expired | ( | ) | ||||||
| Outstanding at June 30, 2026 | $ | |||||||
| Exercisable at June 30, 2026 | $ | |||||||
The aggregate intrinsic value of stock options
is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common
stock, or $
| 13 |
Restricted stock award activity is as follows:
| Schedule of restricted stock award activity | ||||||||
Number of Shares | Weighted Average Award Date Fair Value per Share | |||||||
| Unvested restricted stock awards outstanding at April 1, 2026 | $ | |||||||
| Restricted stock awards granted | ||||||||
| Unvested restricted stock awards outstanding at June 30, 2026 | $ | |||||||
The Company issues new shares of common stock upon exercise of stock options or release of restricted stock awards.
| Note 9. | Income Taxes |
At the end of each interim reporting period, the Company determines the income tax provision by using an estimate of the annual effective tax rate, adjusted for discrete items occurring in the quarter.
Our effective tax rate for the three months ended
June 30, 2026 was
Judgment is required in determining whether deferred tax assets will be realized in full or in part. Management assesses the available positive and negative evidence on a jurisdictional basis to estimate if deferred tax assets will be recognized and when it is more likely than not that all or some deferred tax assets will not be realized, and a valuation allowance must be established. As of June 30, 2026, the Company continues to maintain a valuation allowance in the U.S.
| Note 10. | Revenue Disaggregation |
The Company generates product revenues from products which are sold into the human and animal healthcare markets.
The following table presents the Company’s disaggregated revenues by source:
| Schedule of disaggregated revenues by revenue source | ||||||||
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Human Care | $ | $ | ||||||
| Animal Care | ||||||||
| Total revenue | ||||||||
The following table shows the Company’s revenue by geographic region:
| Schedule of revenues by geographic region | ||||||||
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| United States | $ | $ | ||||||
| Europe | ||||||||
| Asia | ||||||||
| Latin America | ||||||||
| Rest of the World | ||||||||
| Total revenues | $ | $ | ||||||
| 14 |
| Note 11. | Significant Customer Concentrations |
The following table shows major customer revenue as a percentage of net revenues:
| Schedule of customer concentrations of risk | ||||||||
| For the Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Customer A | ||||||||
| Customer B | ||||||||
| Customer C | ||||||||
| Customer E | ||||||||
The following table shows major customer accounts receivable balances as a percentage of net accounts receivables:
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Customer C | ||||||||
| Customer D | ||||||||
| Customer E | ||||||||
| Customer F | ||||||||
| *% Represents less than 10% |
| Note 12. | Subsequent Events |
Management has evaluated subsequent events or transactions occurring through the date the unaudited condensed consolidated financial statements were issued. The Company does not have subsequent events to report.
| 15 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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 June 30, 2026 and our audited consolidated financial statements for the year ended March 31, 2026 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on June 17, 2026.
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “anticipate,” “suggest,” “estimate,” “plan,” “aim,” “seek,” “project,” “continue,” “ongoing,” “potential,” “expect,” “predict,” “believe,” “intend,” “may,” “will,” “should,” “could,” “would,” “likely,” “proposal,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to the risks described in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q including: our ability to become profitable; our dependence on third-party distributors; certain tax impacts of inter-company loans between us and our Mexican subsidiary; the progress and timing of our development programs and regulatory approvals for our products; the benefits and effectiveness of our products; the ability of our products to meet existing or future regulatory standards; the progress and timing of clinical trials and physician studies; our expectations and capabilities relating to the sales and marketing of our current products and our product candidates; our ability to compete with other companies that are developing or selling products that are competitive with our products; the establishment of strategic partnerships for the development or sale of products; the risk our research and development efforts do not lead to new products; the timing of commercializing our products; our ability to penetrate markets through our sales force, distribution network, and strategic business partners to gain a foothold in the market and generate attractive margins; the ability to attain specified revenue goals within a specified time frame, if at all, or to reduce costs; the outcome of discussions with the U.S. Food and Drug Administration, or FDA, and other regulatory agencies; the content and timing of submissions to, and decisions made by, the FDA and other regulatory agencies, including demonstrating to the satisfaction of the FDA the safety and efficacy of our products; our ability to successfully transition our European products to the new Medical Device Regulation, or to comply with its ongoing requirements; our ability to manufacture sufficient amounts of our products for commercialization activities; our ability to protect our intellectual property and operate our business without infringing on the intellectual property of others; our ability to continue to expand our intellectual property portfolio; the risk we may need to indemnify our distributors or other third parties; risks attendant with conducting a significant portion of our business outside the United States; fluctuations in foreign currency exchange rates; risks relative to global economic conditions, prospective tariffs or changes to trade policies; our ability to comply with complex federal and state fraud and abuse laws, including state and federal anti-kickback laws; risks associated with changes to health care laws; our ability to attract and retain qualified directors, officers and employees; our expectations relating to the concentration of our revenue from international sales; our ability to expand to and commercialize products in markets outside the wound care market; our ability to protect our information technology and infrastructure; and the impact of any future changes in accounting regulations or practices in general with respect to public companies. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by law.
Our Business
We are a global healthcare leader for developing and producing stabilized hypochlorous acid, or HOCl, products for a wide range of applications, including wound care, eye care, dermatological conditions, podiatry, animal health care and non-toxic disinfectants. Our products are clinically proven to reduce itch, pain, scarring, and irritation safely and without damaging healthy tissue. In-vitro and clinical studies of HOCl show it to safely manage skin abrasions, lacerations, minor irritations, cuts, and intact skin. We sell our products either directly or via partners in over 55 countries worldwide.
| 16 |
Business Channels
Our core market differentiation is based on being the leading developer and producer of stabilized hypochlorous acid, or HOCl, solutions. We have been in business for over 20 years, and in that time, we have developed significant scientific knowledge of how best to develop and manufacture HOCl products backed by decades of studies and data collection along with manufacturing experience.
We sell our products into many markets both in the U.S. and internationally. In international markets, we sell a variety of products into over 55 countries. Our core strategy is to work with partners both in the United States and around the world to market and distribute our products. In some cases, we market and sell our own products.
Dermatology
We have developed unique, differentiated, and safe dermatologic products that support paths to healing for various dermatologic conditions. Our products are primarily targeted at relieving pain and itch from skin irritations, the management of scars and managing symptoms of eczema/atopic dermatitis. In Europe and the United Kingdom, we have developed products to assist 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.
In the United States, we relaunched the direct sale of our prescription and office dispense dermatology products in December 2024, including Epicyn® Facial Cleanser, Levicyn® Antimicrobial Dermal Spray, Levicyn Gel, Levicyn Spray Gel, Celacyn® Scar Management Gel. We also relaunched over-the-counter Lasercyn® Dermal Spray and Lasercyn Gel.
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 and cleanse the skin.
Our consumer products are available through online retailers, our online store and third-party distributors.
In January 2023, we launched a line of office dispense products exclusively for skin care professionals, including two new prescription strength dermatology products, Reliefacyn Plus Advanced Itch-Burn-Rash-Pain Relief Hydrogel and Rejuvacyn Plus Skin Repair Cooling Mist. These products, along with Regenacyn Plus Scar Gel, are marketed and sold directly to dermatology practices and medical spas.
We sell dermatology products in international markets through distributors. In these markets, we have a network of partners, ranging from country specific distributors to large pharmaceutical companies to full-service sales and marketing companies. We work with our international partners to create products they can market in their home country. Some products we develop and manufacture are custom label while others use branding we have already developed. We have created or co-developed a wide range of products for international markets using our core HOCl technology.
| 17 |
First Aid and Wound Care
Our HOCl-based wound care products are intended for the treatment of acute and chronic wounds as well as first- and second-degree burns, and as an intraoperative irrigation treatment. They work by first removing foreign material and debris from the skin surface and moistening the skin, thereby improving wound healing. Secondly, our HOCl products assist in the wound healing process by removing microorganisms. HOCl is an important constituent of our innate immune system, formed and released by the macrophages during phagocytosis. Highly organized cell structures such as human tissue can tolerate the action of our wound care solution while single-celled microorganisms cannot, making our products advantageous to other wound-irrigation and antiseptic solutions. Due to its unique chemistry, our wound treatment solution is also much more stable than similar products on the market and therefore maintains much higher levels of hypochlorous acid over its shelf life.
In the United States, we sell our wound care products directly to hospitals, physicians, nurses, and other healthcare practitioners and indirectly through non-exclusive distribution arrangements. In Europe, the Middle East and Asia, we sell our wound care products through a diverse network of distributors.
In June 2023, we announced a new application of our HOCl technology for intraoperative pulse lavage irrigation treatment, which can replace commonly used IV bags in a variety of surgical procedures. The intraoperative pulse lavage container is designed to be used in combination with a pulse lavage irrigation device, or flush gun, for abdominal, laparoscopic, orthopedic, and periprosthetic procedures. It is in trial use by hospitals in Europe and launched in the U.S. in November 2023.
In April 2024, we announced expansion of our Microcyn Negative Pressure Wound Therapy Solution products line, now available in 250mL, 450mL and 990mL sizes to meet the diverse needs of healthcare professionals and patients.
In August 2024, we entered into a distribution agreement with Medline Industries, LP, for the marketing and distribution of our wound care products in the United States. The agreement is for an initial term of five years, subject to automatic one-year renewal periods. In October 2024, we entered into an amendment to the agreement which allows Medline to also sell our wound care products in Canada, as well as to sell additional over-the-counter wound care products to retailers in both countries.
Eye Care
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.
We sell Ocucyn® Eyelid & Eyelash Cleanser to consumers through our online 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.
Podiatry
Our HOCl-based wound care products are also indicated for the treatment of diabetic foot ulcers. In the United States, we sell our wound care products directly to podiatrists as well as hospitals, nurses, and other healthcare practitioners and indirectly through non-exclusive distribution arrangements. In Europe, we sell our wound care products for podiatric use through a diverse network of distributors.
In April 2023, we launched Podiacyn® Advanced Everyday Foot Care direct to consumers for over-the-counter use in the United States, intended for daily foot health and hygiene. Podiacyn is available through our online store and third-party distributors.
| 18 |
Animal Health Care
MicrocynAH® is an HOCl-based topical product line that cleans, debrides and supports healing of a wide spectrum of animal wounds and infections. It is intended for 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.
For our animal health products sold in the U.S., we partner with Compana Pet Brands. Compana distributes non-prescription products to national pet-store retail chains and farm animal specialty stores, such as PetSmart, Tractor Supply, and Menards.
For the Asian and European markets, in May 2019 we partnered with Petagon, an international importer and distributor of quality pet food and products, for an initial term of five years. We supply Petagon with all MicrocynAH products sold by Petagon.
Surface Disinfectants
Our HOCl technology has been formulated as a disinfectant and sanitizer solution and is sold in numerous countries. It is designed to be used to spray in aerosol format in areas and environments likely to serve as a breeding ground for the spread of infectious disease, which could result in epidemics or pandemics.
Through our partner MicroSafe, we sell hard surface disinfectant products into Europe, the Middle East and Australia.
Additional Information
Investors and others should note that we announce material financial information using our company website (www.sonomapharma.com), our investor relations website (ir.sonomapharma.com), SEC filings, press releases, public conference calls and webcasts. The information on, or accessible through, our websites is not incorporated by reference in this Quarterly Report on Form 10-Q.
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
Revenues
The following table shows our consolidated total revenues and revenues by geographic region for the three months ended June 30, 2026 and 2025:
| Three Months Ended June 30, | ||||||||||||||||
| (In thousands) | 2026 | 2025 | $ Change | % Change | ||||||||||||
| United States | $ | 2,426 | $ | 1,005 | $ | 1,421 | 141% | |||||||||
| Europe | 1,964 | 1,468 | 496 | 34% | ||||||||||||
| Asia | 910 | 662 | 248 | 37% | ||||||||||||
| Latin America | 626 | 564 | 62 | 11% | ||||||||||||
| Rest of the World | 480 | 316 | 164 | 52% | ||||||||||||
| Total | $ | 6,406 | $ | 4,015 | $ | 2,391 | 60% | |||||||||
| 19 |
Revenues in the U.S. increased 141%, primarily as a result of an increase in sales of over-the-counter products and increased sales by new and existing distributors.
Europe revenues increased 34% as a result of increased demand for our products and favorable exchange rates.
Revenues in Asia increased 37% and Rest of World revenues increased 52% due to timing of customer orders. Revenues from these regions tend to fluctuate 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 increased 11%, primarily due to timing of customer orders for overflow manufacturing.
Cost of Revenues and Gross Profit
The cost of revenues and gross profit metrics for the three months ended June 30, 2026 and 2025 are as follows:
| Three Months Ended June 30, | ||||||||||||||||
| (In thousands, except for percentages) | 2026 | 2025 | $ Change | % Change | ||||||||||||
| Cost of Revenues | $ | 3,829 | $ | 2,551 | $ | 1,278 | 50% | |||||||||
| Cost of Revenues as a % of Revenues | 60% | 64% | ||||||||||||||
| Gross Profit | $ | 2,577 | $ | 1,464 | $ | 1,113 | 76% | |||||||||
| Gross Profit as a % of Revenues | 40% | 36% | ||||||||||||||
Increase in gross profit for the three months ended June 30, 2026 of 76% was primarily due to an increase in revenues. Gross profit % also increased due to improvements made in our manufacturing process and customer mix.
Research and Development Expense
The research and development expense metrics for the three months ended June 30, 2026 and 2025 are as follows:
| Three Months Ended June 30, | ||||||||||||||||
| (In thousands, except for percentages) | 2026 | 2025 | $ Change | % Change | ||||||||||||
| Research and Development Expense | $ | 597 | $ | 594 | $ | 3 | 1% | |||||||||
| Research and Development Expense as a % of Revenues | 9% | 15% | ||||||||||||||
Increase in research and development expenses for the three months ended June 30, 2026 of 1% was primarily due to increased product development to support new product releases.
Selling, General and Administrative Expense
The selling, general and administrative expense metrics for the three months ended June 30, 2026 and 2025 are as follows:
| Three Months Ended June 30, | ||||||||||||||||
| (In thousands, except for percentages) | 2026 | 2025 | Change | % Change | ||||||||||||
| Selling, General and Administrative Expense | $ | 2,020 | $ | 1,965 | $ | 55 | 3% | |||||||||
| Selling, General and Administrative Expense as a % of Revenues | 32% | 49% | ||||||||||||||
The increase in selling, general and administrative expenses for three months ended June 30, 2026 of 3% was primarily due to inflation driven salary increases in Mexico.
| 20 |
Other Expense, net
Other expense, net for the three months ended June 30, 2026 was $290,000 compared to $147,000 for the three months ended June 30, 2025. Other expense, net in the current period primarily relates to exchange rate fluctuations.
Net Loss
The following table provides the net loss for each period along with the computation of basic and diluted net loss per share:
| Three Months Ended June 30, | ||||||||
| (In thousands, except per share data) | 2026 | 2025 | ||||||
| Net loss | $ | (330 | ) | $ | (1,241 | ) | ||
| Weighted-average shares outstanding: basic and diluted | 3,846 | 1,641 | ||||||
| Net loss per share: basic and diluted | $ | (0.09 | ) | $ | (0.76 | ) | ||
Liquidity and Capital Resources
We reported a net loss of $330,000 and $1,241,000 for the three months ended June 30, 2026 and 2025, respectively. At June 30, 2026 and March 31, 2026, our accumulated deficit amounted to $201,311,000 and $200,981,000, respectively. At June 30, 2026 and March 31, 2026, we had cash and cash equivalents of $5,338,000 and $2,399,000, respectively. At June 30, 2026 and March 31, 2026, we had working capital of $10,821,000 and $7,268,000, respectively. Since 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 July 1, 2025, substantially all of our operations have been financed through cash on hand and the following transactions:
| · | Proceeds of $3,963,000 net of offering expenses, from the sale of common stock at various dates |
Cash Flows
The following table presents a summary of our unaudited condensed consolidated cash flows for operating, investing and financing activities for the three months ended June 30, 2026 and 2025 as well as balances of cash and cash equivalents and working capital:
| Three Months ended June 30, | ||||||||
| (In thousands) | 2026 | 2025 | ||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (649 | ) | $ | (2,015 | ) | ||
| Investing activities | (2 | ) | (106 | ) | ||||
| Financing activities | 3,454 | (58 | ) | |||||
| Effect of exchange rates on cash | 136 | 410 | ||||||
| Net change in cash and cash equivalents | 2,939 | (1,769 | ) | |||||
| Cash and cash equivalents, beginning of the period | 2,399 | 5,374 | ||||||
| Cash and cash equivalents, end of the period | $ | 5,338 | $ | 3,605 | ||||
| Working capital (1), end of period | $ | 10,821 | $ | 8,259 | ||||
| (1) | Defined as current assets minus current liabilities. |
| 21 |
Net cash used in operating activities during the three months ended June 30, 2026 was $649,000, primarily due to our net loss of $330,000, an increase in accounts receivable of $650,000 an increase in inventory of $81,000, an increase in prepaid expenses of $364,000 offset by stock compensation of $58,000 and an increase in accounts payable of $216,000.
Net cash used in operating activities during the three months ended June 30, 2025 was $2,015,000, primarily due to our net loss of $1,241,000, an increase in accounts receivable of $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 $1,026,000.
Net cash used in investing activities was $2,000 for the three months ended June 30, 2026, primarily related to the purchase of equipment.
Net cash used in investing activities was $106,000 for the three months ended June 30, 2025, primarily related to the purchase of equipment.
Net cash provided by financing activities was $3,454,000 for the three months ended June 30, 2026, primarily related to the sale of common stock offset by $82,000 of principal payments on a short-term loan related to financing of insurance premiums.
Net cash used in financing activities was $58,000 for the three months ended June 30, 2025, primarily related to exercise of stock options of $23,000 offset by $81,000 of principal payments on a short-term loan related to financing of insurance premiums.
Material Trends and Uncertainties
We rely on certain key customers for a significant portion of our 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.
We are exposed to risk from foreign currency devaluation for both the Mexico Peso and the Euro versus the US dollar. Risk related to foreign currency valuation tends to be unpredictable and can be affected by various factors outside of our control.
We face a substantial Mexico tax liability, intercompany debt, unpaid technical assistance charges and accrued interest. These amounts are due in 2032. At this time, management believes there are sufficient assets on the balance sheet to cover any tax obligation without interrupting our operations or business. We have engaged tax professionals to review all options to limit our exposure to these amounts and to proceed in a manner that is most advantageous to us.
We also closely monitor global economic conditions, including the risk of economic downturn or recession, the prospect of new or increased tariffs, as well as overall consumer sentiment, any of which may impact our financial results.
Use of Estimates
The preparation of unaudited condensed 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates and those differences could be material. Significant estimates and assumptions include the valuation allowance relating to the Company’s deferred tax assets.
| 22 |
Off-Balance Sheet Transactions
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of our most recent fiscal quarter. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.
Evaluation of Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rule 13a-15(f) and 15d-15(f). Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of June 30, 2026.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 23 |
PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings |
On occasion, we may be involved in legal matters arising in the ordinary course of our business including matters involving proprietary technology. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which we are or could become involved in litigation may have a material adverse effect on our business, financial condition or results of comprehensive loss.
| Item 1A. | Risk Factors |
Other 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, 2026, as filed with the SEC June 16, 2026.
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting 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. On July 22, 2026, the Securities and Exchange Commission approved a new Nasdaq continued listing requirement requiring companies listed on the Nasdaq Capital Market to maintain a minimum Market Value of Listed Securities of $5 million. Companies that fail to maintain this threshold for 30 consecutive trading days are subject to immediate suspension and delisting without a compliance period.
The delisting of our common stock from Nasdaq would have a material 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.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
We did not issue any unregistered securities during the quarter ended June 30, 2026 and through August 6, 2026.
| Item 3. | Default Upon Senior Securities |
We did not default upon any senior securities during the quarter ended June 30, 2026.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
During the quarter ended June 30, 2026, no director
or officer
| 24 |
| Item 6. | Exhibits |
Exhibit Index
| Exhibit No. | Description | |
| 1.1 | Underwriting Agreement, dated April 24, 2026, by and between the Company and Dawson James Securities, Inc. (included as exhibit 1.1 of the Company’s Current Report on Form 8-K filed April 30, 2026, and incorporated herein by reference). | |
| 3.1 | Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., effective January 30, 2006 (included as exhibit 3.1 of the Company’s Annual Report on Form 10-K filed June 20, 2007, and incorporated herein by reference). | |
| 3.2 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., effective October 22, 2008 (included as exhibit A in the Company’s Definitive Proxy Statement on Schedule 14A filed July 21, 2008, and incorporated herein by reference). | |
| 3.4 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective March 29, 2013 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 22, 2013, and incorporated herein by reference). | |
| 3.5 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective December 4, 2014 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 8, 2014, and incorporated herein by reference). | |
| 3.6 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective October 22, 2015 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 27, 2015, and incorporated herein by reference). | |
| 3.7 | Certificate of Amendment of Restated Certificate of Incorporation of Oculus Innovative Sciences, Inc., as amended, effective June 24, 2016 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 28, 2016, and incorporated herein by reference). | |
| 3.8 | Certificate of Amendment of Restated Certificate of Incorporation of Sonoma Pharmaceuticals, Inc., as amended, effective December 6, 2016 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 7, 2016, and incorporated herein by reference). | |
| 3.9 | Amended and Restated Bylaws, as amended, of Sonoma Pharmaceuticals, Inc., effective December 6, 2016 (included as exhibit 3.2 to the Company’s Current Report on Form 8-K filed December 7, 2016, and incorporated herein by reference). | |
| 3.10 | Amendment No. 1 to Amended and Restated Bylaws, as amended, of Sonoma Pharmaceuticals, Inc., effective June 14, 2024 (included as exhibit 3.10 to the Company’s Annual Report on Form 10-K filed June 17, 2024, and incorporated herein by reference). | |
| 3.11 | Certificate of Designation of Preferences, Rights and Limitations of Series A 0% Convertible Preferred Stock, filed with the Delaware Secretary of State on April 24, 2012 (included as exhibit 4.2 to the Company’s Current Report on Form 8-K, filed April 25, 2012, and incorporated herein by reference). | |
| 3.12 | Certificate of Designation of Series B Preferred Stock, effective October 18, 2016 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 21, 2016, and incorporated herein by references). | |
| 3.13 | Certificate of Amendment of Restated Certificate of Incorporation of Sonoma Pharmaceuticals, Inc., as amended, effective June 19, 2019 (included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 19, 2019, and incorporated herein by reference). | |
| 3.14 | Certificate of Amendment of Restated Certificate of Incorporation of Sonoma Pharmaceuticals, Inc., as amended, effective August 29, 2024(included as exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 28, 2024, and incorporated herein by reference). | |
| 4.1 | Specimen Common Stock Certificate (included as exhibit 4.1 to the Company’s Annual Report on Form 10-K filed June 28, 2017, and incorporated herein by reference). | |
| 4.2 | Section 382 Rights Agreement, dated as of October 18, 2016, between Oculus Innovative Sciences, Inc. and Computershare Inc., which includes the Form of Certificate of Designation of Series B Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Stock as Exhibit C (included as exhibit 4.1 to the Company’s Current Report on Form 8-K filed October 21, 2016, and incorporated herein by reference). | |
| 4.3 | Form of Warrant (included as exhibit 4.1 of the Company’s Current Report on Form 8-K filed April 30, 2026, and incorporated herein by reference). | |
| 4.4 | Form of Pre-Funded Warrant (included as exhibit 4.2 of the Company’s Current Report on Form 8-K filed April 30, 2026, and incorporated herein by reference). | |
| 4.5 | Form of Underwriter’s Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1, as amended, originally filed April 17, 2026). |
| 25 |
| 4.6 | Warrant Agency Agreement (Common Warrants), dated April 28, 2026, by and among the Company, Computershare, Inc. and Computershare Trust Company, N.A. (included as exhibit 4.5 of the Company’s Current Report on Form 8-K filed April 30, 2026, and incorporated herein by reference). | |
| 4.7 | Warrant Agency Agreement (Pre-Funded Warrants), dated April 28, 2026, by and among the Company, Computershare, Inc. and Computershare Trust Company, N.A. (included as exhibit 4.6 of the Company’s Current Report on Form 8-K filed April 30, 2026, and incorporated herein by reference). | |
| 10.1 | Form of Indemnification Agreement between Oculus Innovative Sciences, Inc. and its officers and directors (included as exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). | |
| 10.2 | Office Lease Agreement, dated May 18, 2006, between Oculus Technologies of Mexico, S.A. de C.V. and Antonio Sergio Arturo Fernandez Valenzuela (translated from Spanish) (included as exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). | |
| 10.3 | Office Lease Agreement, dated July 2003, between Oculus Innovative Sciences, B.V. and Artikona Holding B.V. (translated from Dutch) (included as exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). | |
| 10.4 | Form of Director Agreement (included as exhibit 10.20 to the Company’s Registration Statement on Form S-1 (File No. 333-135584), as amended, declared effective on January 24, 2007, and incorporated herein by reference). | |
| 10.5 | Amendment to Office Lease Agreement, effective February 15, 2008, by and between Oculus Innovative Sciences Netherlands B.V. and Artikona Holding B.V. (translated from Dutch) (included as exhibit 10.32 to the Company’s Annual Report on Form 10-K filed June 13, 2008, and incorporated herein by reference). | |
| 10.6† | Exclusive Sales and Distribution Agreement, dated November 6, 2015, by and between Oculus Innovative Sciences, Inc. and Manna Pro Products, LLC (included as exhibit 10.1 to the Company’s 8-K filed March 23, 2016 and incorporated herein by reference). | |
| 10.7† | Asset Purchase Agreement dated October 27, 2016, between Oculus Innovative Sciences, Inc. and Invekra, S.A.P.I de C.V. (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 31, 2016, and incorporated herein by reference). | |
| 10.8† | Amendment Agreement to Acquisition Option dated October 27, 2016, by and between More Pharma Corporation S. de R.L. de C.V. and Oculus Technologies of Mexico, S.A. de C.V. (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 31, 2016, and incorporated herein by reference). | |
| 10.9 | 2016 Equity Incentive Plan (included as exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A filed July 29, 2016, and incorporated herein by reference). | |
| 10.10⸸+ | Asset Purchase Agreement dated May 14, 2019, between Sonoma Pharmaceuticals, Inc. and Petagon, Ltd. (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 22, 2019, and incorporated herein by reference). | |
| 10.11⸸+ | Asset Purchase Agreement dated February 21, 2020, between Sonoma Pharmaceuticals, Inc. and MicroSafe Group, DMCC (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 27, 2020, and incorporated herein by reference.) | |
| 10.12⸸+ | License, Distribution and Supply Agreement by and between Sonoma Pharmaceuticals, Inc. and Brill International, S.L. dated May 19, 2020 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 26, 2020, and incorporated herein by reference.) | |
| 10.13 | 2021 Equity Incentive Plan (included as appendix on the Company’s Definitive Proxy Statement on Schedule 14A filed July 29, 2021 and incorporated herein by reference). | |
| 10.14 | 2024 Equity Incentive Plan (included as appendix on the Company’s Definitive Proxy Statement on Schedule 14A filed July 1, 2024 and incorporated herein by reference). | |
| 10.15+⸸ | Exclusive License and Distribution Agreement between the Company and Dyamed Biotech Pte Ltd., dated November 4, 2021 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 9, 2021, and incorporated herein by reference). | |
| 10.16 | Sonoma Pharmaceuticals, Inc. Non-Employee Director Compensation Program and Stock Ownership Guidelines, revised by the Board of Directors on January 28, 2026 (included as exhibit 10.2 to the Company’s Current Report on Form 8-K filed January 28, 2026, and incorporated herein by reference). | |
| 10.17 | First Amendment to the Lease between the Company and Westland Development Services, Inc., dated June 21, 2023 (included as exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q filed November 13, 2023, and incorporated herein by reference). | |
| 10.18 | Second Amendment to the Lease between the Company and Westland Development Services, Inc., dated November 5, 2025 (included as exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q filed February 10, 2026, and incorporated herein by reference). |
| 26 |
| 10.19 | At Market Issuance Sales Agreement, by and between the Company and Ladenburg Thalmann & Co. Inc., dated September 26, 2025 (included as exhibit 1.1 to the Company’s Current Report on Form 8-K filed September 26, 2025, and incorporated herein by reference). | |
| 10.20 | Offer letter to Jerome Dvonch dated February 7, 2024 (included as exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q filed February 8, 2024, and incorporated herein by reference). | |
| 10.21 | Offer letter to John Dal Poggetto dated February 7, 2024 (included as exhibit 10.42 to the Company’s Quarterly Report on Form 10-Q filed February 8, 2024 and incorporated herein by reference). | |
| 10.22⸸+ | Distribution Agreement, dated August 19, 2024, by and between Sonoma Pharmaceuticals, Inc. and Medline Industries, LP (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 21, 2024, and incorporated herein by reference). | |
| 10.23+ | Amendment No. 1 to Distribution Agreement, dated October 17, 2024, by and between Sonoma Pharmaceuticals, Inc. and Medline Industries, LP (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 22, 2024, and incorporated herein by reference). | |
| 10.24⸸+ | Master Supply Agreement, dated January 29, 2025, by and between Sonoma Pharmaceuticals, Inc. and WellSpring Pharmaceutical Corporation (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 30, 2025, and incorporated herein by reference). | |
| 10.25⸸+ | Amendment No. 1 to Master Supply Agreement, dated March 21, 2025, by and between Sonoma Pharmaceuticals, Inc. and WellSpring Pharmaceutical Corporation (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 25, 2025, and incorporated herein by reference). | |
| 10.26⸸+ | Amendment No. 2 to Master Supply Agreement, dated June 2, 2025, by and between Sonoma Pharmaceuticals, Inc. and WellSpring Pharmaceutical Corporation (included as exhibit 10.30 to the Company’s Annual Report on Form 10-K filed June 17, 2025, and incorporated herein by reference). | |
| 10.27⸸+ | Amendment No. 3 to Master Supply Agreement, dated July 23, 2025, by and between Sonoma Pharmaceuticals, Inc. and WellSpring Pharmaceutical Corporation (included as exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q filed August 7, 2025, and incorporated herein by reference) | |
| 10.28⸸+ | Distribution and Supply Agreement, effective March 28, 2025, by and between Sonoma Pharmaceuticals, Inc. and Phase One Health, LLC (included as exhibit 10.31 to the Company’s Annual Report on Form 10-K filed June 17, 2025, and incorporated herein by reference). | |
| 10.29 | Amended and Restated Employment Agreement by and between the Company and Amy Trombly, dated October 3, 2025 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 9, 2025, and incorporated herein by reference). | |
| 10.30 | Consulting Agreement by and between the Company and Dr. Jay Birnbaum, dated January 28, 2026 (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 28, 2026, and incorporated herein by reference). | |
| 10.31 | Manufacturing and Supply Agreement, effective October 24, 2025, by and between Sonoma Pharmaceuticals, Inc. and Kenvue Brands LLC (included as exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 9, 2026). | |
| 14.1 | Code of Business Conduct, as revised and adopted on November 5, 2024 (included as exhibit 14.1 to the Company’s Quarterly Report on Form 10-Q filed November 7, 2024, and incorporated herein by reference). | |
| 21.1 | List of Subsidiaries (included as exhibit 21.1 to the Company’s Annual Report on Form 10-K filed June 28, 2017, and incorporated herein by reference). | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (formatted in inline XBRL, and included in exhibit 101). |
| * | Filed herewith. |
| † | Confidential treatment has been granted with respect to certain portions of this agreement. |
| ⸸ | Certain portions of the exhibit have been omitted to preserve the confidentiality of such information. The Company will furnish copies of any such information to the SEC upon request. |
| + | The schedules to the exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules to the SEC upon request. |
Copies of above exhibits not contained herein are available to any stockholder, upon payment of a reasonable per page fee, upon written request to: Chief Financial Officer, Sonoma Pharmaceuticals, Inc., 5445 Conestoga Court, Suite 150, Boulder, Colorado 80301.
| 27 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: August 6, 2026 | By: | /s/ Amy Trombly | |
|
Amy Trombly President and Chief Executive Officer, (Principal Executive Officer) |
|||
| Date: August 6, 2026 | By: | /s/ Jerome Dvonch | |
| Jerome Dvonch | |||
| Chief Financial Officer | |||
|
(Principal Financial and Principal Accounting Officer) |
| 28 |