Good afternoon, and welcome to the Sonoma Fiscal Second Quarter 2019 Conference Call. My name is Justin, and I will be your coordinator for today's call. At this time all participants are in listen-only mode. At the end of the call, we will be holding a question-and-answer session with company management. As a reminder, this call is being recorded for replay purposes. I’d now like to turn the call over to Mr. Jim Schutz. Sir, please go ahead.

Good afternoon and thank you all for joining us today. With me on the call are Bob Miller, Sonoma's Chief Financial Officer; and our Chief Operating Officer; Marc Umscheid, will join us for the Q&A portion. Before we start, let me remind you that today's discussion contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause our actual results to differ materially from those discussed on today's call, including risks inherent in the development and commercialization of potential products; our ability to become profitable; the progress and timing of our development programs and regulatory approvals for our products; the benefits and effectiveness of our products; the ability of our products to meet existing or future regulatory standards; our expectations related to the use of our cash reserves; our future capital needs and our ability to obtain additional funding; and other risks detailed from time to time in our filings with the Securities and Exchange Commission, including our annual and quarterly reports. These forward-looking statements are identified by the use of words such as expect, to expand, would, anticipate amongst others. Identified product applications and/or uses are intended to highlight potential applications for the investment community and do not infer that the company is marketing for these indications. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Sonoma disclaims any obligation to update these statements except as required by law. For today's call, I’ll cover three areas. First, a review of our key financials from our quarter ending September 30, 2018. Second, we've been receiving many calls from shareholders regarding our S-1 filing and a recent letter made public from Montreux…

Thank you Jim. In August, Dr. Nestor, a world renowned clinical or dermatologist presented at a Dermatology Conference in Colorado. The results of not only his study of the effectiveness of HOCl on topical management of acne, but also to other studies, which also evaluated the impact of HOCl topical treatment on acne, a total of 127 patients. Dr. Nestor has conducted treatment of acne studies, not only using our HOCL products, but also using most of the products which are currently standard of care for the treatment acne. All three studies confirmed statistically significant reductions in the inflammatory acne lesions of 60%, plus and the non-inflammatory acne lesions of 40% percent plus over a 12-week period with p-values ranging from 0.1% to 0.02%. The results point zero two percent. The results of the largest study are shown on slide seven comparing our HOCL products to those of benzoyl peroxide and a placebo. Sonoma issued a more detailed press release on these studies on August 16, 2018 if you'd like to read more details. Dr. Nestor is an Associate Professor in Department of Dermatology and Surgery at the University of Miami, Miller School of Medicine. He's conducted over 150 clinical trials and authored over 100 articles and book chapters. In the press release that we issued, Dr. Nester stated “I can envision a time in the very near future when this, HOCL imprints will become a standard protocol in the treatment of acne vulgaris either alone or in combination with other treatments.” Moving on now over the next 15 minutes, I will discuss the financial results for the September 2018 quarter and the status of our business units. Looking first at the financials, I will cover the high level results for the key financial metrics including revenue, cash, operating expenses,…

Thank you. [Operator Instructions] Our first question comes from Bruce Jackson from Benchmark. Your line is now open.

Thanks for taking my question. If we could discuss the mail order pharmacy program a little bit. Last quarter I believe you said that about 20% of revenues went through this program. Was there any change in that number during the quarter?

Yes. It went – it is now for – September quarter unit volume is a little over 40%. So it's gone up.

Okay. And then just broadly, how do you feel about the rebate situation with some of the channel? So is it – are there any rebates hanging out through that? You're still expecting to recognize or has that stabilized?

That's generally stabilized with a lot of the mail order houses. We actually have a program that if somebody does not have cash – if somebody has to pay cash, that we will basically sell it to him for a lower price and a lower co-pay to get him go through mail order and that's $35 as a repay – as a co-pay. So that's been an unsuccessful program and it's basically, in fact, controlled our rebate cost, if you will, by doing it that way. So our rebates…

Okay.

We have not seen – it's been a similar rebate cost, but it's been controlled at this point.

Okay, great. And then last question about the growth potential for your new relationship in Brazil, the Latin American sales ticked up nicely this quarter. How much of that was due to the shipping of the new products? And then do you foresee any acceleration in the sales to Latin America over the next couple of quarters?

The shipment that we have actually mentioned was $248,000 is what we got; is what we in terms of dollars what we shipped to them at this point. They are in the process of launching. We expect – and that was only acne. And we expect them to be launching the scar products. So we expect to see a good volume growth continued out of that going to Brazil with the seven launches that we have at this point. They far exceeded what their contractual agreement was with us at this point already. So we expect to see good, strong growth out of that.

Okay, great. Well, thank you very much.

Thank you, Bruce.

Thank you, Bruce.

Thank you. [Operator Instructions] I'm showing no further questions.

Justin, we'll wrap up. Just a quick final note. Thank you all for joining today's call and for your continued support. As Bob said, in our September quarter, we think we made solid progress in putting our dermatology business back on track. With the growth of prescriptions filled; and bear with me here, March 2018 quarter we filled 13,667 prescriptions, in the June 2018 quarter it ticked up slightly to 14,726 prescriptions filled, and then September was our largest prescription quarter ever up to 17,410 units filled. We also think we diversified our channel distribution in U.S. dermatology to include now these mail order programs, which Bruce was just asking us about, which represented 42% of our unit sales in the September quarter. We think this diversification reduces the risk of inventory reductions in our patients. We've implemented a cost reduction program to reduce our operating expenses while growing the improved productivity of our derm sales group, the growth of current products and the launch of the new antimicrobial facial cleanser in the – as part of an acne management regimen. And finally, the launch of these approved acne products into the current large addressable markets. Our product launches are supported by strong clinical studies; a sales force of 33 people, a Brazilian sales force of 70 plus people, with the support of the largest pharmaceutical company in Brazil. And then finally, the combination of revenue growth and holding our operating expenses of the current level should continue to reduce our EBITDA loss. We look forward to sharing our progress on the next call as we build Sonoma to becoming a multi-technology dermatology company and achieving our purpose of relentless passion for healing. So Justin, that's it from us. Thank you all for joining.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.