Note 4 – Distribution Agreement with Smith+Nephew

On March 31, 2025, we entered into a Distribution Agreement with Smith & Nephew, Inc. (“Smith+Nephew”), a U.S. subsidiary of Smith & Nephew PLC, a global medical technology company.  Under the agreement, we will supply to Smith+Nephew its own private label of our Aurix product.  Although Smith+Nephew will be the sole and exclusive distributor in the United States of its own private label Aurix product, we have the right and will continue to market, sell, and distribute our branded Aurix product.  During the year ended December 31, 2025, we recognized $225,000 in distribution fee revenue under the agreement.

Under the agreement, Smith+Nephew will purchase private label product from us, from time to time at agreed upon transfer pricing and we will manufacture, package, and ship the product to Smith+Nephew’s customers in accordance with purchase orders and the agreement.  Commencing in October 2025 through the remainder of the initial term of the agreement, minimum annual purchase commitments of an average of approximately $500,000 will apply for Smith+Nephew to maintain exclusive distribution rights.

Effective January 1, 2026, we entered into an amendment to the agreement to add certain expansion kits in connection with the Private Label product for which we received an upfront fee of $50,000. In August 2026, we received a $250,000 reimbursement fee milestone based on the establishment of reimbursement coverage in an additional place of service category. As consideration for entering into the original agreement, we received an upfront fee of $1.5 million, and we are eligible for an additional $500,000 milestone fee based on our establishment and maintenance of reimbursement coverage for an additional wound etiology. Such fees will be refundable to Smith+Nephew on a pro rata basis for the unexpired initial term of the agreement if we do not comply with certain terms and conditions. The original distribution fee, January 2026 fee under the amendment, and reimbursement fee milestone are being recognized on a pro rata basis over the applicable initial term of the agreement, and the unearned distribution fees are treated as deferred revenue.  During the three and nine months ending September 30, 2026, we recognized $86,562 and $242,444 of revenue under the amended agreement.

The agreement is for an initial term of five years and is renewable for additional two-year terms subject to earlier termination in accordance with the terms and conditions of the agreement. Although the agreement is exclusive to Smith+Nephew in the United States, we are entitled to maintain our existing distributors and sales agents for the Aurix product. The agreement also contains other standard and negotiated terms and conditions including non-solicitation of each party’s customers based on identified customer lists, and certain liability and indemnity clauses.