Sonoma Pharmaceuticals, Inc.

Sonoma Pharmaceuticals, Inc. is a global healthcare leader focused on developing and producing stabilized hypochlorous acid (HOCl) products for a wide range of applications, including wound care, eye care, dermatological conditions, podiatry, animal health care, and non-toxic disinfectants. The company sells its products either directly or via partners in over 55 countries worldwide. The company's core market differentiation is based on being the leading developer and producer of stabilized HOCl solutions, having been in business for over 20 years and having developed significant scientific knowledge of how best to develop and manufacture HOCl products backed by decades of studies and data collection along with manufacturing experience.

Sonoma competes globally across six main channels: dermatology, eye care, wound care, podiatry, animal health care, and surface disinfectants with its HOCl technology. The company believes its HOCl-based solutions are among the most stable therapeutics available, while some competitors' products may become unstable after a relatively short period of time or have large ranges of effectiveness. Some competitors in the dermatology, wound care, eye, podiatry, animal health care, and surface disinfectant markets enjoy competitive advantages including greater name recognition, established relationships with healthcare professionals, established distribution networks, additional product lines and the ability to offer rebates or bundle products, experience in research and development and manufacturing, and greater financial and human resources.

The company generates revenue through the sale of its HOCl-based products, which are all classified as medical devices and categorized as prescription, over-the-counter (OTC), and office dispense products. Sonoma sells its products into many markets both in the U.S. and internationally, with a core strategy of working with partners both in the United States and around the world to market and distribute its products, while in some cases marketing and selling its own products. The company relies on certain key customers for a significant portion of revenues; for the year ended March 31, 2026, customer C represented 15% of net revenues, and for the year ended March 31, 2025, customer B represented 21% and customer C represented 18% of net revenues.

In dermatology, Sonoma offers prescription strength products including Epicyn Facial Cleanser, Levicyn Dermal Spray, Levicyn Gel, Levicyn Spray Gel, and Celacyn Scar Management Gel, as well as OTC products including Lasercyn Dermal Spray, Lasercyn Gel, Regenacyn Advanced Scar Gel, Reliefacyn Advanced Itch-Burn-Rash-Pain Relief Hydrogel, and Lumacyn Clarifying Mist, and office dispense products Regenacyn Plus Scar Gel and Reliefacyn Plus Itch-Burn-Rash-Pain Relief Hydrogel. In wound care, the company offers Microcyn wound and skin care both as an OTC and prescription product, including Microcyn OTC Advanced Wound & Skin Cleanser, Microcyn Skin & Wound Spray, Skin & Wound Hydrogel, Wound Irrigation Solution, and Negative Pressure Wound Therapy Solution. In eye care, Sonoma offers prescription Acuicyn Eyelid & Eyelash Cleanser and OTC Ocucyn Eyelid and Eyelash Cleanser. In animal health care, the MicrocynAH line offers topical solutions for animals, and the MicrocynVS line is veterinarian-strength animal care. In surface disinfectants, through partner MicroSafe DMCC, Dubai, the company sells Nanocyn, a hospital-grade disinfectant. The company also manufactures HOCl-based products for consumer markets in the United States through established retail brands, including facial sprays, diaper rash and sunburn relief hydrogels, and first aid products.

During the fiscal year ended March 31, 2026, Sonoma announced several significant operational developments. In March 2026, the company announced the U.S. retail launch of its advanced HOCl-based burn relief hydrogel in CVS and Walmart stores in the United States. Also in March 2026, the company announced the launch of Aquanil AD, a hypochlorous acid based dermatology product line for sensitive skin, developed exclusively for Persōn & Covey, Inc. for distribution through its established over-the-counter dermatology channels in the United States. In October 2025, the company announced the registration of its manufacturing facility and listing of its Microcyn-based facial spray under the FDA's Modernization of Cosmetics Regulation Act of 2022 (MoCRA). In October 2025, the company announced the launch of a new HOCl wound cleanser for Medline Industries, LP, to be distributed into hospital systems, home healthcare and other healthcare channels across the United States. In August 2025, Reliefacyn Advanced Itch-Burn-Rash-Pain Relief Hydrogel earned the National Psoriasis Foundation (NPF) Seal of Recognition, and in November 2025, Reliefacyn earned the National Rosacea Society (NRS) Seal of Acceptance. In August 2025, the company announced the launch of its HOCl-based diaper rash products for infants and children into Walmart stores and other large retailers in the United States. In July 2025, the company expanded its partnership with a U.S.-based distributor for the sale of Microcyn technology-based products to large retailers in the United States to include additional consumer-focused products. In April 2025, the company launched the sale of its hypochlorous acid-based acne products in over 1,200 stores in the United Kingdom through a leading U.K. health and beauty retailer and pharmacy chain. In April 2025, the company received regulatory approval for the sale of its wound care products in Ukraine as a Class IIb medical device. On January 29, 2025, the company received an updated CE certificate under the new EU Medical Devices Regulation (MDR) covering all of its commercialized products in Europe.

For the fiscal year ended March 31, 2026, total revenues were $19,529,000 ¹, compared to $14,288,000 ² in the prior fiscal year, representing an increase of 37% ³. Net loss was $3,175,000 ⁴ for the current year, compared to a net loss of $3,457,000 ⁵ in the prior year. Basic and diluted net loss per share was ($1.89) ⁶ for the year ended March 31, 2026, compared to ($2.79) ⁷ for the year ended March 31, 2025. Gross profit was $7,415,000 ⁸ for the current year, compared to $5,465,000 ⁹ in the prior year, with gross profit margin remaining consistent at 38% ¹⁰ for both periods. Loss from operations was $2,461,000 ¹¹ for the current year, compared to $3,710,000 ¹² in the prior year.

Sonoma's growth strategy centers on expanding its distribution network and customer base, including increasing expansion into consumer markets, the introduction of new products into multiple markets around the world, as well as organic growth from existing customers and distributors. The company has focused on expanding and strengthening its regulatory reach by seeking new approvals and clearances, as evidenced by recent regulatory approvals including the registration of its manufacturing facility under MoCRA in October 2025, receipt of an updated CE certificate under the new EU MDR on January 29, 2025, and regulatory approval for the sale of wound care products in Ukraine as a Class IIb medical device in April 2025. The company has an active pipeline of products and intends to continue to seek new regulatory clearances to expand potential markets for its products.

The company continues to invest in research and development, both in the U.S. and internationally, for its core performance-stabilized hypochlorous acid technology. Research and development expenses were $2,271,000 ¹³ for the year ended March 31, 2026, compared to $1,814,000 ¹⁴ for the prior year, representing an increase of 25% ¹⁵ primarily due to increased product development to support new product releases. The gross profit margin remained consistent at 38% ¹⁶ for the year ended March 31, 2026 compared to the prior year.

Sonoma manufactures all of its products at its facility in Zapopan, Mexico. The company believes it owns or has access to sufficient factory space and equipment to produce an adequate amount of product to meet anticipated future requirements for at least the next two years. The company's facility has been approved by the Ministry of Health and is ISO 13485 certified. With expansion into new geographic markets, the company may establish additional manufacturing facilities to better serve those new markets. As of June 12, 2026, the company employed a total of 9 full-time employees in the United States, one full-time employee in the Netherlands, and approximately 250 employees in Mexico.

The company currently forecasts capital expenditures in order to execute on its business plan and maintain growth, and currently anticipates spending $500,000 ¹⁷ to purchase equipment to increase efficiency in operations for the year ended March 31, 2027. The company expects to pay cash for those expenditures or to finance them through equipment leases. Research and development expenses for the year ended March 31, 2026 were $2,271,000 ¹⁸. The company has never declared or paid any cash dividends on its common stock and does not currently intend to pay any cash dividends in the foreseeable future.

The company faces a substantial Mexico tax liability related to intercompany debt, unpaid technical assistance charges, and accrued interest. As of March 31, 2026, the Mexico subsidiary owes approximately $12.3 million ¹⁹ in principal, $10.4 million ²⁰ in technical assistance payments, and $32.2 million ²¹ in accrued interest. The intercompany loans mature in 2032 and were extended 5 years during the current fiscal year. Mexico's thin capitalization rules require taxpayers to maintain a debt-to-equity ratio of 3:1, and the company has not met that condition, preventing deduction of intercompany interest on Mexico tax returns since 2004. If the debt were forgiven or converted to equity, it would be subject to Mexico income tax at 30% ²², or approximately $16.5 million ²³, as well as Mexican withholding tax of 15% ²⁴. Interest owed on the intercompany technical assistance agreement and royalty withholding of 10% ²⁵ on the technical assistance agreement would amount to approximately $5.6 million ²⁶ in Mexico withholding tax at March 31, 2026 if all interest and technical assistance were to be repaid. The company is exposed to risk from foreign currency devaluation for both the Mexico Peso and the Euro versus the US dollar. Additionally, approximately 71% ²⁷ and 82% ²⁸ of total revenue for the years ended March 31, 2026 and 2025, respectively, were generated from sales outside of the United States, exposing the company to risks including local political or economic instability, changes in exchange rates, changes in governmental regulation, and changes in import/export duties or tariffs.

Sonoma faces material risks from its substantial Mexico tax liability, with intercompany debt of approximately $12.3 million ²⁹ in principal, $10.4 million ³⁰ in technical assistance payments, and $32.2 million ³¹ in accrued interest as of March 31, 2026, where debt forgiveness or conversion to equity would trigger Mexico income tax at 30% ³² (approximately $16.5 million ³³) and withholding tax of 15% ³⁴. The company relies on key customers, with customer C representing 15% ³⁵ of net revenues for the year ended March 31, 2026, and customer B representing 21% ³⁶ and customer C representing 18% ³⁷ of net revenues for the prior year, and the loss of any such customer could adversely affect revenues. Approximately 71% ³⁸ and 82% ³⁹ of total revenue for the years ended March 31, 2026 and 2025, respectively, were generated from sales outside the United States, exposing the company to foreign currency exchange risks, trade policy changes, and local political or economic instability. The company had cash and cash equivalents of only $2,399,000 ⁴⁰ at March 31, 2026, and reported a net loss of $3,175,000 ⁴¹ for the year, highlighting ongoing capital needs. The FDA issued a proposed rule on November 30, 2023 to classify certain wound dressings and liquid wound washes containing hypochlorous acid into Class II medical devices, which if finalized would require the company to submit new 510(k) applications and demonstrate compliance with special controls.

Management's message emphasizes a continued focus on increasing revenues and continuing progress towards profitability. During the most recent fiscal year, revenues grew as a result of continued expansion of the distribution network and customer base including increasing expansion into consumer markets, the introduction of new products into multiple markets around the world, as well as organic growth from existing customers and distributors. Management has also focused on expanding and strengthening the company's regulatory reach by seeking new approvals and clearances. The strategic priorities emphasized include expanding the distribution network and customer base, introducing new products into multiple markets globally, and continuing to invest in research and development for the core HOCl technology.