Sonoma Pharmaceuticals (SNOA) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01We have a history of losses, we expect to continue to incur losses and we may never achieve profitability, and our March 31, 2025 audited consolidated financial statements included disclosure that casts substantial doubt regarding our ability to continue as a going concern
2. 02We depend on third party distributors and intend to continue to license or collaborate with third parties in various potential markets, and events involving these strategic partners or any future collaboration could delay or prevent us from developing or commercializing products
3. 03We rely on a number of key customers who may not consistently purchase our products in the future, and if we lose any one of these customers, our revenues may decline
4. 04A majority of our business is conducted outside of the United States, exposing us to additional risks that may not exist in the United States, which in turn could cause our business and operating results to suffer
5. 05If we fail to obtain, or experience significant delays in obtaining, additional regulatory clearances or approvals to market our current or future products, we may be unable to commercialize these products
6. 06If we fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the market
7. 07Our products are classified as medical devices in the European Union (EU). In order to sell medical device products within the European Union, we are required to comply with the requirements of the Medical Devices Regulation, and its national implementations, including affixing CE markings on products
8. 08If any of our third-party contractors fail to perform their responsibilities to comply with FDA rules and regulations, the manufacture, marketing and sales of our products could be delayed, which could decrease our revenues
9. 09If we fail to comply with the FDA’s rules and regulations and are subject to an FDA recall as part of an FDA enforcement action, the associated costs could have a material adverse effect on our business, financial position, results of operations and cash flows
10. 10If our products do not gain market acceptance, our business will suffer because we might not be able to fund future operations
11. 11If our competitors develop products with similar characteristics to our HOCl technology, we may need to modify or alter our business strategy, which may delay the achievement of our goals
12. 12Negative economic conditions increase the risk that we could suffer unrecoverable losses on our customers’ accounts receivable which would adversely affect our financial results
13. 13We may experience difficulties in manufacturing our products, which could prevent us from commercializing one or more of our products
14. 14Our competitive position depends on our ability to protect our intellectual property and our proprietary technologies
15. 15We may face intellectual property infringement claims that could be time-consuming, costly to defend and could result in our loss of significant rights and, in the case of patent infringement claims, the assessment of treble damages
16. 16We could be required to indemnify third parties for alleged intellectual property infringement, which could cause us to incur significant costs
17. 17We have significant international operations in Mexico and Europe, and we manufacture all of our products for export from Mexico. New or increased tariffs on goods imported into the United States, particularly tariffs on products manufactured in Mexico, could adversely affect our business
18. 18Our sales in international markets subject us to foreign currency exchange and other risks and costs which could harm our business
19. 19The markets in which we operate are highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are less expensive or more effective than any products that we may develop, our commercial opportunity may be reduced or eliminated
20. 20As a result, we may not be able to successfully commercialize any future products
21. 21If we are unable to comply with broad and complex federal and state fraud and abuse laws, including state and federal anti-kickback laws, we could face substantial penalties and our products could be excluded from government healthcare programs
22. 22We may not be able to maintain sufficient product liability insurance to cover claims against us
23. 23Our ability to generate revenue will be diminished if our partners are unable to obtain acceptable prices or an adequate level of reimbursement from third-party payors, or our partners may face pricing pressure from private third-party payers, including customers, from rebates and restrictive reimbursement practices
24. 24Our ability to generate revenue will be diminished if our partners are unable to manage customer product substitutions for our prescription products
25. 25Our information technology and infrastructure may be breached or attacked, which could expose us to liability, damage our reputation, compromise our confidential information or otherwise adversely affect our business
26. 26Our cash and cash equivalents may be exposed to failure of our banking institutions

Risks Related to Our Common Stock

1. 27The market price of our common stock may be volatile, and the value of your investment could decline significantly
2. 28Our operating results may fluctuate, which could cause our stock price to decrease
3. 29Anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law may make it more difficult for stockholders to change our management and may also make a takeover difficult
4. 30Our stockholders may experience substantial dilution in the value of their investment if we issue additional shares of our capital stock or other securities convertible into common stock
5. 31Shares issuable upon the exercise of outstanding options may substantially increase the number of shares available for sale in the public market and depress the price of our common stock
6. 32Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock