Annual Report for Fiscal Year Ending 03-31, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to exercise its judgment. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements.

On an ongoing basis, we evaluate our estimates and judgments. Areas in which we exercise significant judgment include, but are not

necessarily limited to, our valuation of income taxes.

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

While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

For a summary of all accounting policies, please refer to Notes to Consolidated Financial Statements, Note 3.

Results of Continuing Operations

Comparison of the Year Ended March 31, 2026 and 2025

Revenue

The following table shows our consolidated total revenue and revenue by geographic region for the year ended March 31, 2026 and 2025:

		Year Ended March 31,
(In thousands, except for percentages)		2026				2025				$ Change				% Change
United States		$	5,674			$	2,611			$	3,063				117%
Europe			6,904				5,523				1,381				25%
Asia			2,900				2,317				583				25%
Latin America			2,373				2,962				(589	)			(20%	)
Rest of the World			1,678				875				803				92%
Total		$	19,529			$	14,288			$	5,241				37%

Revenues in the U.S. increased 117%, 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 25% as a result of increased demand for our products and favorable exchange rates.

Revenues in Asia increased 25% and Rest of World revenues increased 92% due to timing of customer orders and royalty revenue from our customer in India. 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 decreased 20%, primarily due to timing of customer orders for overflow manufacturing.

Cost of Revenue and Gross Profit

The cost of revenue and gross profit metrics for the year ended March 31, 2026 and 2025 are as follows:

		Year Ended March 31,
(In thousands, except for percentages)		2026				2025				$ Change				% Change
Cost of Revenues		$	12,114			$	8,823			$	3,291				37%
Cost of Revenue as a % of Revenues			62%				62%
Gross Profit		$	7,415			$	5,465			$	1,950				36%
Gross Profit as a % of Revenues			38%				38%

The gross profit margin of 38% for the year ended March 31, 2026 was consistent with the prior year.

Research and Development Expense

The research and development expense metrics for the year ended March 31, 2026 and 2025 are as follows:

		Year Ended March 31,
(In thousands, except for percentages)		2026				2025				$ Change				% Change
Research and Development Expense		$	2,271			$	1,814			$	457				25%
Research and Development Expense as a % of Revenues			12%				13%

Increase in research and development expenses for the year ended March 31, 2026 of 25% 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 years ended March 31, 2026 and 2025 are as follows:

		Year Ended March 31,
(In thousands, except for percentages)		2026				2025				Change				% Change
Selling, General and Administrative Expense		$	7,605			$	7,361			$	244				3%
Selling, General and Administrative Expense as a % of Revenues			39%				52%

The increase in selling, general and administrative expenses for the year ended March 31, 2026 of 3% was primarily due to inflation driven salary increases in Mexico.

Other (Expense) Income, net

Other (expense) income, net for the year ended March 31, 2026 was ($958,000) compared to $803,000 for the year ended March 31, 2026. Other (expense) income, net in the current period primarily relates to exchange rate fluctuations, offset by the recognition of income of approximately $374,000 related to employee retention credits. Other (expense) income, net in the prior period primarily relates to exchange rate fluctuations.

Income Tax Benefit (Expense)

Income tax benefit (expense) for the year ended March 31, 2026 and 2025 was $244,000 and ($550,000), respectively. The benefit for the current period was related to an expected tax loss in Mexico this fiscal year. The expense for the prior period is primarily related to the use of our Mexico deferred tax asset.

Net Loss

The following table provides the net loss for each period along with the computation of basic and diluted net loss per share:

		For the Year Ended March 31,
(In thousands, except per share data)		2026				2025
Net loss		$	(3,175	)		$	(3,457	)
Weighted-average shares outstanding: basic and diluted			1,684				1,241
Net loss per share: basic and diluted		$	(1.89	)		$	(2.79	)

Liquidity and Capital Resources

We reported a net loss of $3,175,000 and $3,457,000 for the years ended March 31, 2026 and 2025, respectively. At March 31, 2026 and 2025, our accumulated deficit amounted to $200,981,000 and $197,806,000, respectively. As of March 31, 2026 and 2025, we had cash and cash equivalents of $2,399,000 and $5,374,000, 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 April 1, 2025, substantially all of our operations have been financed through cash on hand and the following transactions:

	·	Proceeds of $427,000, net of offering expenses, from the sale of common stock at various dates; and
	·	Proceeds of $374,000 stemming from employee retention credits.

The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the years ended March 31, 2026 and 2025 as well as balances of cash and cash equivalents and working capital:

		Year ended March 31,
(In thousands)		2026				2025
Net cash (used in) provided by :
Operating activities		$	(3,933	)		$	(88	)
Investing activities			(192	)			(80	)
Financing activities			477				3,030
Effect of exchange rates on cash			673				(616	)
Net change in cash and cash equivalents			(2,975	)			2,246
Cash and cash equivalents, beginning of the period			5,374				3,128
Cash and cash equivalents, end of the period		$	2,399			$	5,374
Working capital (1), end of period		$	7,268			$	8,552

(1)

Defined as current assets minus current liabilities.

As of March 31, 2026 and 2025, we had cash and cash equivalents of $2,399,000 and $5,374,000, respectively.

Net cash used in operating activities during the year ended March 31, 2026 was $3,933,000, primarily due to our net loss of $3,175,000 offset by stock compensation of $255,000, a increase in accounts receivable of $122,000, an increase in prepaid expenses of $1,312,000 and a decrease in accounts payable of $871,000.

Net cash used in operating activities during the year ended March 31, 2025 was $88,000, primarily due to our net loss of $3,457,000 offset by stock compensation of $224,000, a decrease in accounts receivable of $434,000, a decrease in prepaid expenses of $1,086,000 and an increase in accounts payable of $416,000.

Net cash used in investing activities for the year ended March 31, 2026 was $192,000, primarily related to the purchase of capital property and equipment.

Net cash used in investing activities for the year ended March 31, 2025 was $80,000, primarily related to the purchase of capital property and equipment

Net cash provided by financing activities for the year ended March 31, 2026 was $477,000, primarily related to proceeds of $427,000 from the sale of common stock.

Net cash provided by financing activities for the year ended March 31, 2025 was $3,030,000, primarily related to proceeds of $3,079,000 from the sale of common stock.

We believe that our existing cash and operating plans are sufficient to fund our anticipated operations for the next twelve months. We also have access to additional 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, our ability to access additional capital could be negatively impacted. If we elect to pursue additional financing in the future, we may do so to support growth initiatives, extend our 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.

Capital Expenditures

We currently forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently anticipate spending $500,000 to purchase equipment to increase efficiency in operations for the year ended March 31, 2027. We expect to pay cash for those expenditures or to finance them through equipment leases.

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 consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates and assumptions include the valuation allowance relating to the Company's deferred tax assets. Periodically, the Company evaluates and adjusts estimates accordingly.

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.