Sonoma Pharmaceuticals Reports Second Quarter 2023 Financial Results

• International sales increased by 18% in the six months ended September 30, 2022 compared to the same period prior year
• Gross profit percentage continues to trend upwards with the quarter ended September 30, 2022, coming in at 40% compared to 33% same period prior year
• Operating loss for the quarter ended September 30, 2022 improved 24% or $233,000 compared to same period prior year

BOULDER, CO / ACCESSWIRE / November 14, 2022 / Sonoma Pharmaceuticals, Inc. (Nasdaq:SNOA),a global healthcare leader developing and producing stabilized hypochlorous acid (HOCl) products for a wide range of applications, including wound care, eye care, nasal care, oral care and dermatological conditions, today announced financial results for its second fiscal quarter and six months ended September 30, 2022.

"We are pleased that our second quarter results show continued progress toward profitability and the successful expansion of our business," said Amy Trombly, CEO of Sonoma. "While our U.S. revenues are still impacted by the conversion of our prescription dermatology business to a now profitable distribution model, we are confident that this transition will generate a positive impact on our future results and allow us to focus on higher margin revenue streams. Increased sales in both Europe and Asia reflect the success of our robust international business, and we continue to launch new products, add distribution partners in the U.S. and internationally, and grow and diversify our existing distributor relationships."

Business Highlights

Sonoma continued to expand its business by launching new products, building new partnerships and adding to its global regulatory clearances.

• On October 27, 2022, Sonoma launched two new dermatological products for over-the-counter use in the United States. Reliefacyn® Advanced Itch-Burn-Rash-Pain Relief Hydrogel is a new direct to consumer version of a product previously only available by prescription to alleviate symptoms such as red bumps, rashes, shallow skin fissures, peeling, and symptoms of eczema/atopic dermatitis. Rejuvacyn® Advanced Skin Repair Cooling Mist is intended for over-the-counter management of minor skin irritations following cosmetic procedures as well as daily skin health and hydration. Both products are available for distribution and can be purchased directly on our webite at https://sonomapharma.com/shop-now/.
• We continued to expand our U.S. distributor network by granting Loma Lux Laboratories a non-exclusive right to distribute our products for pain and itch relief under a private label. Information about Loma Lux Laboratories can be found at lomalux.com. In addition, we expanded our online presence by partnering with Beauty Bridge, a curated beauty and wellness marketplace, which began selling our Regenacyn® Advanced Scar Gel and Ocucyn® Eyelid & Eyelash Cleanser products on its website. Additional information about Beauty Bridge can be found at www.beautybridge.com.
• In September 2022, our partner Te Arai BioFarma received regulatory approval to market and sell our Microdacyn and Microdacyn Hydrogel products in Taiwan, increasing the regulatory portfolio of our Microcyn® Technology.

Results for the Quarter Ended September 30, 2022

Revenues for the quarter ended September 30, 2022 of $3.3 million decreased by $0.4 million, or 11%, as compared to $3.7 million for the same period last year. Increased sales in Europe reflected an increase in demand for our wound care products as well as the introduction of several new products. Decreased revenues in the United States were primarily the result of the conversion of our prescription dermatology business into a distribution relationship and a decline in sales of our over-the-counter animal health care products that were partially offset by an increase in wound care and prescription animal health care product sales. Latin America revenue decreased due to a decline in manufacturing for one of our customers. Sonoma's revenues tend to be choppy when viewed on a quarterly basis due to customers placing larger but less frequent orders to benefit from quantity discounts and reduced shipping costs.

For the quarter ended September 30, 2022, Sonoma reported revenues of $3.3 million and cost of revenues of $2.0 million, resulting in gross profit of $1.3 million, or 40% of revenue, compared to a gross profit of $1.2 million, or 33% of revenue, for the same period last year. Gross margins increased by 7% for the quarter ended September 30, 2022 when compared to the same period last year as a result of increased production in our Mexico manufacturing facility, partially offset by a decline in margins in the Netherlands as a result of product mix and shipping costs to Europe.

Total operating expenses during the second quarter of fiscal year 2023 were $2.1 million, down $0.1 million, or 5%, when compared to $2.2 million during the same period in the prior year. We continue to tightly manage expenses across all of our operations.

Net loss before income tax for the quarter was $0.9 million, compared to a net loss of $0.1 million for the same period last year due primarily to the one-time event last year of forgiveness of our PPP loan of $723,000. EBITDAS loss for the quarter ended September 30, 2022 of $0.6 million decreased $0.3 million, compared to an EBITDAS loss of $0.9 million for the same period last year.

Results for the Six Months Ended September 30, 2022

Revenue of $7.3 million for the six months ended September 30, 2022 decreased by $0.1 million, or 2%, from $7.4 million for the same period last year. Revenues increased in Latin America, Europe and Asia. Decreased sales in the United States were due to the conversion of our prescription dermatology business into a distribution relationship and a decline in sales of our over-the-counter animal health care products that were partially offset by an increase in wound care and prescription animal health care product sales. The decrease in Rest of World revenue was due to decreased disinfectant sales in the Middle East that was partially offset by increased sales in New Zealand.

For the six months ended September 30, 2022, Sonoma reported revenues of $7.3 million and cost of revenues of $4.5 million, resulting in gross profit of $2.8 million, or 38% of revenues, compared to a gross profit of $2.7 million or 36% or revenues in the same period last year. The increase in gross profit margin for the six months ended September 30, 2022 was primarily due to the sale of machinery to a customer in Latin America, which management expects to be a one-time event.

Total operating expenses during the six months ended September 30, 2022 of $4.4 million decreased by $0.2 million, or 4%, compared to $4.6 million during the same period last year.

Net loss before taxes for the six months ended September 30, 2022 was $1.9 million, compared to a net loss before taxes of $1.2 million for the same period in prior year, due primarily to the one-time event last year of forgiveness of our PPP loan of $723,000. EBITDAS loss for the six months ended September 30, 2022 of $1.2 million decreased $0.5 million, compared to an EBITDAS loss of $1.7 million for the same period last year.

About Sonoma Pharmaceuticals, Inc.

Sonoma Pharmaceuticals is a global healthcare leader for developing and producing stabilized hypochlorous acid (HOCl) products for a wide range of applications, including wound care, animal health care, eye care, nasal care, oral care, and dermatological conditions. The company's products reduce infections, itch, pain, scarring and harmful inflammatory responses in a safe and effective manner. In-vitro and clinical studies of hypochlorous acid (HOCl) show it to have impressive antipruritic, antimicrobial, antiviral and anti-inflammatory properties. Sonoma's stabilized HOCl immediately relieves itch and pain, kills pathogens and breaks down biofilm, does not sting or irritate skin and oxygenates the cells in the area treated assisting the body in its natural healing process. The company's products are sold either directly or via partners in 55 countries worldwide and the company actively seeks new distribution partners. The company's principal office is in Boulder, Colorado, with manufacturing operations in Latin America. European marketing and sales are headquartered in Roermond, Netherlands. More information can be found at www.sonomapharma.com. For partnership opportunities, please contact

businessdevelopment@sonomapharma.com.

Forward-Looking Statements

Except for historical information herein, matters set forth in this press release are forward looking within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including statements about the commercial and technology progress and future financial performance of Sonoma Pharmaceuticals, Inc. and its subsidiaries (the "company"). These forward-looking statements are identified by the use of words such as "expect," "continue," "believe" and "expand," among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the company's business that could cause actual results to vary, including such risks that regulatory clinical and guideline developments may change, scientific data may not be sufficient to meet regulatory standards or receipt of required regulatory clearances or approvals, clinical results may not be replicated in actual patient settings, protection offered by the company's patents and patent applications may be challenged, invalidated or circumvented by its competitors, the available market for the company's products will not be as large as expected, the company's products will not be able to penetrate one or more targeted markets, revenues will not be sufficient to meet the company's cash needs, fund further development, as well as uncertainties relative to the Covid pandemic and economic development, varying product formulations and a multitude of diverse regulatory and marketing requirements in different countries and municipalities, and other risks detailed from time to time in the company's filings with the Securities and Exchange Commission. The company disclaims any obligation to update these forward-looking statements, except as required by law. Sonoma Pharmaceuticals™ and Microcyn® are trademarks or registered trademarks of Sonoma Pharmaceuticals, Inc. All other trademarks and service marks are the property of their respective owners.

Media and Investor Contact:

Sonoma Pharmaceuticals, Inc.
ir@sonomapharma.com

SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)

SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share amounts)
(Unaudited)

SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands)
(Unaudited)

1. Income (loss) from continuing operations minus non-cash expenses (EBITDAS) is a non-GAAP financial measure. The company defines operating income (loss) minus non-cash expenses as GAAP reported operating income (loss) minus operating depreciation and amortization, and operating stock-based compensation. The company uses this measure for the purpose of modifying the operating loss to reflect direct cash related transactions during the measurement period.
2. Net income (loss) minus non-cash and one time expenses is a non-GAAP financial measure. The company defines net income (loss) minus non-cash expenses as GAAP reported net income (loss) minus depreciation and amortization, stock-based compensation, forgiveness of PPP loan and non-cash foreign exchange transaction losses. The company uses this measure for the purpose of modifying the net loss to reflect only those expenses to reflect direct cash transactions during the measurement period.
3. Operating expenses minus non-cash expenses is a non-GAAP financial measure. The company defines operating expenses minus non-cash expenses as GAAP reported operating expenses minus operating depreciation and amortization, and operating stock-based compensation. The company uses this measure for the purpose of identifying total operating expenses involving cash transactions during the measurement period.

SONOMA PHARMACEUTICALS, INC. AND SUBSIDIARIES
PRODUCT RELATED REVENUE SCHEDULES
(In thousands)
(Unaudited)

The following table presents the company's disaggregated product revenues by geographic region:

SOURCE: Sonoma Pharmaceuticals, Inc.