Sonoma Pharmaceuticals(SNOA) - 2026 Q2 - Quarterly Report

Revenue Performance - Total revenue for the three months ended September 30, 2025, was $5,604,000, representing a 57% increase from $3,579,000 in the same period of 2024[85] - Revenue from the United States increased by $774,000 (115%) due to higher sales of human health care and over-the-counter animal health care products[85] - European revenue rose by $645,000 (43%) driven by a general increase in demand for products[86] - Revenue from Asia increased by $281,000 (36%) primarily due to the timing of orders, with fluctuations expected from international distributors[86] - Latin America revenue grew by $67,000 (14%) attributed to the timing of customer orders for overflow manufacturing[87] - Rest of the World revenue surged by $258,000 (164%) also due to the timing of customer orders[87] - Total revenue for the six months ended September 30, 2025 was $9,619,000, an increase of $2,649,000 (38%) compared to $6,970,000 in 2024[96] - The United States revenue for the six months ended September 30, 2025 increased by $1,137,000 (86%) to $2,454,000, mainly due to human health care products[96] Profitability - For the three months ended September 30, 2025, gross profit increased by $759,000 (56%) to $2,120,000, driven by higher revenue and product mix[88] - Gross profit for the six months ended September 30, 2025 was $3,584,000, up by $917,000 (34%) from $2,667,000 in 2024[99] - The net loss for the three months ended September 30, 2025 was $534,000, an improvement from a net loss of $610,000 in the same period of 2024[94] - The company reported a net loss of $1,775,000 for the six months ended September 30, 2025, compared to a net loss of $1,753,000 in 2024[104] Expenses - Research and development expenses for the three months ended September 30, 2025 rose by $69,000 (14%) to $575,000, primarily due to increased product development[89] - Selling, general and administrative expenses increased by $177,000 (10%) to $1,882,000 for the three months ended September 30, 2025, reflecting efforts to boost revenues across regions[91] Cash Flow and Financial Position - Cash and cash equivalents at the end of the period were $3,035,000, down from $5,374,000 at the beginning of the period[108] - Net cash used in operating activities for the six months ended September 30, 2025 was $2,650,000, primarily due to the net loss and increases in accounts receivable and inventory[110] Risks and Liabilities - The company relies on a small number of key customers for a significant portion of its revenues, which may lead to revenue fluctuations in future periods[114] - The company is exposed to foreign currency devaluation risks, particularly with the Mexico Peso and Euro against the US dollar, which can be unpredictable[115] - A substantial Mexico tax liability, intercompany debt, and accrued interest are due in 2027, but management believes there are sufficient assets to cover these obligations[116] - The company is closely monitoring global economic conditions, including risks of economic downturns and changes in consumer sentiment that may impact financial results[117] Regulatory and Reporting Matters - The One Big Beautiful Bill Act ("OBBBA") enacted on July 4, 2025, is expected to have an insignificant impact on deferred tax assets and liabilities and income taxes payable[118] - The preparation of financial statements involves estimates and assumptions that could differ from actual results, particularly regarding deferred tax assets[119] - There are currently no off-balance sheet arrangements that materially affect the company's financial condition or results of operations[120] - As a smaller reporting company, the company is electing scaled disclosure reporting obligations and is not required to provide certain market risk information[121] Product Development and Agreements - The company has developed a new application of HOCl technology for intraoperative pulse lavage irrigation treatment, launched in the U.S. in November 2023[73] - A Master Supply Agreement was established with WellSpring Pharmaceutical Corporation for the sale of Microcyn technology-based products to large retailers in the U.S. for an initial term of two years[68] - The company relaunched several dermatology products in December 2024, including Epicyn Facial Cleanser and Levicyn Antimicrobial Dermal Spray[66] - The Microcyn Negative Pressure Wound Therapy Solution product line was expanded in April 2024 to include sizes of 250mL, 450mL, and 990mL[74]