TOMI Environmental Solutions, Inc.

Good day, everyone, and welcome to today's TOME Environmental Solutions, Inc. Second Quarter 2022 Financials Results Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your touch-tone phone. Please note that this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn today's conference over to John Nesbitt with IMS Investor Relations. Please go ahead.

Thank you for joining us today for the TOME Environmental Solutions Investor Update Conference Call. On today's call are TOME's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane, and Nick Jennings, TOME's Chief Financial Officer. Dr. Shane will provide an overview of recent business highlights and financial performance for the most recent quarter and six months, Both will be available to address any questions you may have. A telephone replay of today's call will be available through August 29, 2022, the details of which are included in the company's press release today. A webcast replay will also be available on Tomi's website, www.tomimist.com. Please note that information contained within this presentation is relevant only to the day of which it was recorded, August 15, 2022. and you are therefore advised that time-sensitive information may no longer be accurate at the time of any replay. Certain written and oral statements made by management of TOME may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements should be evaluated in light of important risk factors that could cause actual results to differ materially from our anticipated results. The information provided in this conference call is based upon the facts and circumstances known at this time. The company undertakes no obligation to update these forward-looking statements after the date of this call. In addition, Tomi will discuss certain non-GAAP financial measures during this call. The company uses non-GAAP measures because it believes they provide useful information about operating performance that should be considered by investors in conjunction with the GAAP measures. Reconciliation of these non-GAAP measures The comparable gap measures is included in the earnings release dated August 15, 2022. Okay, I want now to turn the call over to TOMI's Chairman and CEO, Dr. Halden Shane. Go ahead.

Thank you, John. Good afternoon, everyone, and thank you for joining the TOMI Environmental Earnings Call. Today, we'll provide operating and financial results for the second quarter of 2022 and and an update on our IHP Ceramus product lines and competitive advantages. Before we begin, I wanted to let everybody know that today's presentation will be accompanied by slides which are available on the webcast. Please refer to the press release dated August 11, 2022 for details of how to join today's meeting through the webcast feature. I'll be presenting, and both Nick Jennings, our CFO, and myself will be available for questions and answers after the update. This slide is a disclosure slide. Quarter and year-to-date highlights. In the second quarter, we continued to see increased demand for our custom engineered system and mobile equipment which have led to improved financial results, some of which are not measured in today's filing. Throughout 2022, a strong interest in our technology continues, and we received orders for delivery in 2022. We continue to win opportunities for these larger sales for our CES, as the product is one of our primary drivers for growth in our current pipeline. During the first six months of 2022, we closed $5,600,000 in orders, of which we anticipate 2.3 to be recognized in revenue in our third and fourth quarter for the year. This represents a 35% growth in sales orders received for the six months when compared to the same prior year accounting period. We anticipate further growth in sales and the continued build of our pipeline for the remainder of 2022. Interest in Surrey Mist IHP is robust. Based on our current orders, as well as the pipeline and strengths of our referral base in the life science sector, we are targeting over $12 million in revenue for 2022. Through June 30th of this year, revenue grew by 6%. The increase was attributable to higher demand for our mobile equipment where we saw a growth of 11% and 13% for the three and six months ended June 30th, 2022. While our quarter over quarter revenue was flat with last year, our sales pipeline continued to grow in the second quarter with the addition of 900,000 in orders that will be recognized later this year. We drove reduced operating expenses and losses for both periods. We reduced operating expenses by 16% and 21% for the three and six months ended June 30th, 2022, respectively, when compared to the same prior year period. We reduced our loss from operations by 28% and 44% for the three and six months ended June 30th, 2022 when compared to the same prior year period. We also improved liquidity with lower cash used in operations of 82% for the first six months of this year when compared to the same prior year period. Inclusion is still remiss on EPA's List Q. The rare or novel viruses such as monkeypox virus, SARS-CoV-2, and its variants that causes COVID-19 have been one of the many reasons the sales pipeline is strong. During the first half of the year, orders or bookings increased 35% when compared to the first half of 2021. 4.9 million of the overall orders is attributable to our Sturimus product revenues, which represent our mobile equipment, CES, and BIT solution. There are some substantial global market trends and drivers in the decontamination industry. Global disinfectant spray market size is expected to reach US$18.6 billion by 2030 and is expected to expand at a CAGR of 8.2% from 2022 to 2030. Sales of disinfectant sprays have risen drastically over the past few years with rising consumer awareness towards the benefits of disinfection. As hospitals are trying to decrease the rate of HAIs, disinfection held more than 65% revenue share in 2021, and demand for HAI-controlled products is predicted to rise in ambulatory surgical care centers at the highest CAGR in the upcoming years. As we continue to market our technology and its competitive advantages provided in our EPA-registered label and develop new products and applications, we are closer than ever before having these industry markets select our eco-friendly disinfection decontamination. Our patented atmospheric coal plasma arc, which is the DARPA technology that we inherited closes hydrogen peroxide in a way that's never been seen, converts the H2O2 compound into hydroxyl radicals. This is the most powerful natural oxidizing mechanism known. Competitively, we blow every competitor away. It destroys proteins and carbohydrates on contact. and it only leaves oxygen and water in the form of humidity. IHP reacts with chemical agents, breaking their double bond, producing hydrogen, oxygen, and water in the form of humidity. Truly an eco-friendly disinfectant. Tomi expects to have a prominent role in the food safety industry, a multi-billion dollar market. After attending their most recent annual food production meeting earlier this month, It was confirmed we are not only solving contamination problems in a more efficient way, but we are solving ongoing issues in the industry that have no been solved before. Of course, further trials and studies are being asked of us, but the industry is proving to show extreme interest in how our low 7.8% hydrogen peroxide bit solution is converted to hydroxyl radicals using our cold plasma science. Like the life science industries, the food industry is impressed with the dispersion of our submicron droplet, this very, very small droplet, and the way it disperses as a fog. Speed to the technology as it kills on contact by cellular oxidation bursts and the element of this no residue or harmful byproducts left behind. In addition, to the advantages just stated, we achieve a six log kill or higher. It's a very, very quick validation time on the most challenged of all pathogens. Most of the market, in fact, 400 plus disinfectants registered with the EPA only have a three to four log kill, which is 99.9 or 99.99. where we're able to kill all challenge pathogens at 6 log versus 6-9. In addition, validated time, and again, against these most challenging pathogens, we were able to receive many EPA registrations for various upcoming pathogens that the world made. All our products use the same superior technology. Each is designed and manufactured for certain application solutions. The Sturimus surface unit, the original five-second per square foot spray, perfect for high-touch, hard surface areas in almost any industry. The Sturimus environment system, our three applicator full-room fogger, the easiest sold unit in terms of its capabilities for complete air and surface decontamination, Price tag limits the device to pharmaceutical, government, research universities, and larger restoration and cleaning. The total disinfection cart was launched specific for the healthcare industry, making ceramics even easier and faster for the quick turnaround time needed on patient rooms. The only system that can complete a turnover in an ICU room in under 55 minutes, including changing the bed linens. Our Steripack, which was launched earlier in the year, is a sleek, battery-operated, high-touch, hard-surface spray developed for those who need an even quicker disinfection without the hassle of an AC power outlet. The Steribox, our decontamination chamber, is passed through depending on customer requirements and used a 90-degree stainless steel applicator, and the environment system provides a cycle time in just 40 minutes. Industries requiring smaller-sized sensitive or medical equipment tools, injectables, devices, may have these made to order. The custom environment developed for Sloan Kettering in New York and used in radioactive cells as a device like the standard full-room fogger, but in an enclosure made of stainless steel provided with modified applicators for permanency. Ceramus Custom Engineered System, we call CES, is a fully automatic product engineered and programmed to fit all facility specifications. Available features include remote start, HVAC utilization, downloadable data, security features, visual and audible alarms, and is multi-room scalable. Every new installation includes the latest software and hardware components. NOMI tech team has installed six of these systems by 2021. This year alone, we've completed one installation, five currently being designed or manufactured, three waiting on purchase orders, and an additional eight in the final stages of customer approval. With the trend of automated disinfection and decontamination continuing to rise, As we have seen, the interest in our CES line has risen. With the production of our Sturimus Transport and the Sturimus Select Plus, they will provide the solutions and answers needs that some markets face in their decontamination requirements, but until now have not been able to meet. The transportation industry will utilize the Sturimus Transport. This permanently-mounted, ready-to-use, non-corrosive technology and solution, which you see on the left, will provide a quick remote-controlled disinfection fog for vehicles and industries, such as emergency response, healthcare, education, and public transportation. The Sterimus Select Plus provides healthcare facilities, smaller clean rooms, and research labs, classrooms, and many others an easy-to-use product that delivers all desired applications using our superior IHP Sturimus technology at a reasonable cost, and that you see on the right. The Select Plus is a one applicator remote start, full room stainless steel fogging device. It sits on an open stand with wheels and adjustable height setting, making it versatile enough for a space with high ceilings. This system is projected to be one of our highest sellers, and it will not only meet facility requirements, providing the necessary reporting features that have met many of their budgets, thus outperforming the current available competition that is in this market. There is a demand for every Sturimus product line in the life sciences, from the utilization of Tomi's mobile Sturipack to the intelligent, permanently mounted custom engineered system, to having our IHP corporate service deployed to their facility. Our recent focus is mainly in life science areas, which is a marketplace that tends to be less volatile in the times of a recession due to the constant need to continue the research, make statistical products, and meet mandatory FDA documentation and decontamination standards. To date, our IHP corporate service team has delivered approximately $850,000 this year in revenue for service. IHP technology adheres to the pharmaceutical FDA requirements for decontamination. Cerimus has been validated and verified and will continue to be the game changer in the industry with its innovative and versatile products, applications, and services. It's important to understand how our product performs against the competition. We are simply the best and better than all the rest. Whether you compare us to other hydrogen peroxide solutions who rely on the chemicals for their efficacy, manual wiping, which leaves a residue, requires mixing and still has a risk of cross-contamination, or UV light, which is just as a low-efficacy kill rate as impeded by obstructions. And finally, the much less expensive electrostatic sprayers, which produces large particles and utilizes extremely harsh chemicals At the end of the day, Sturimus outperforms the competition. Konomi's IHP technology is the only perfect pen, with the market trends provided at the beginning of the call to the applications of our original current and upcoming devices we'll offer. Serumis customers, representatives, and partners continue to grow throughout the world, currently now in 38 countries. And our portfolio of customers, just to list a few, continues to be some of the most profitable and successful companies in the world, many of which have become huge supporters of the technology, and promote not only our technology and equipment, but also our support team to their associates. With all that has happened in the world over the last few years, I would also like to take some time on today's call to look at some of the key areas of our business that compare where we are at today in 2022 versus where we were pre-COVID in 2019. We have grown substantially over the last three years as we've expanded our customer base and total cumulative machines sold. In 2022, we have approximately 709 customers compared to 308 in 2019. Through June of 2022, our cumulative machine sold is now at 1,548 compared to 582 in 2019. Since 2019, we've added over 10 new Sterimus products and expanded our IP portfolio with 28 new patents and 115 trademarks. providing protection of the superior game-changing technology to Tomi until the year 2038. From a revenue generation and growth profit margin perspective, our orders of bookings have grown 94% over the level pre-pandemic for 2019, and our gross profit margins have improved by 2.21% to 62.2% compared to 59.99% through June 2019. We have strengthened our balance sheets since 2019 as our cash working capital and inventory has improved over the last three years as follows. Our cash balance as of June 30th, 2022 was 4.8 million compared to 1.6 million as of June 30th, 2019. Our current working capital as of June 30th, 2022 was 9.9 million compared to a $775,000 deficit on June 30th, 2019. We feel our company is in a far better position now than compared to 2019 and before COVID-19. Also, our inventory has was 4.8 million compared to 2.5 million in June of 2019. From a balance sheet perspective, our cash used in operations during the first half of 2022 has declined by 2,061,000 when compared to the same prior year, primarily due to lower reported loss and the customer deposits of 607,000 received on sales generated in 2010.2. Slide 20, profiles, the income statement. I'll now go through this line by line. But what is important to point out is that revenue were up slightly in the first half of the year, and we have a robust backlog. We have kept a keen eye on expenses and saw reduced losses for each period. Looking forward, we're able to drive revenue, manage expenses, and drive the razor razor blade model with continued increases in solution sales This should bode well for future profitability. Operator, let's open the call to questions.