TOMI Environmental Solutions, Inc.

Good afternoon and welcome to the TOME Environmental fourth quarter and year-end 2022 earnings conference call. At this time all participants have been placed on a listen-only mode and the floor will be open for your questions and comments after the prepared remarks. If you would like to enter the queue at any time you may press star 1 on your telephone keypad. Should you wish to remove yourself from queue you may press star 2. It is now my pleasure to turn the floor over to your host John Nesbitt from IMS Investor Relations. John, the floor is yours.

Good afternoon. Thank you for joining us today for the TOME Environmental Solutions Investor Update Conference Call. On today's call is TOME's CEO and Chairman of the Board, Dr. Halden Shane, TOME's Chief Operating Officer, E.J. Shane, and TOME's Chief Financial Officer, Nick Jennings. Dr. Shane will provide an overview of recent business highlights, EJ will report on the company's growth and latest trends, and Nick will review the financial performance for the most recent quarter before addressing any questions you may have. A telephone replay of today's call will be available through March 30th, 2023, the details of which are included in the company's press release dated March 13th, 2023. A webcast replay will also be available at Tomi's website, www.tomymiss.com. Please note that information contained within this presentation is relevant only to the day of which it was recorded, March 16, 2023, 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 TOMI 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 any 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 the operating performance that could be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release dated March 16, 2023. I will now turn the call over to TOMI's Chairman and Chief Executive Officer, Dr. Holden Shane. Please go ahead.

Good afternoon, everyone. Thank you for joining the TOMI Environmental Earning Call. Today we will provide operating and financial results for Q4 and full year 2022, along with a favorable update on a few key current focuses for the company. This was a good corner for us, capping off a very important year for Tomei Environmental. GAAP revenue grew 40% for the quarter and 8% for the year. Efficiencies in the business and in the fourth quarter significantly reduced our losses and reported a very small adjusted EBITDA loss of only 268,000. As we continue to make substantial progress to achieve a break-even in our financial results, let me provide a snapshot of a few key takeaways of why I think this quarter is very exciting. First, our business has improved, with more revenue coming from large custom systems, which we refer to as CES. These are larger, longer-term orders, which give us improved visibility to our growth. Also, growth in our CES customer base, and to an extent, our new mobility customers, accelerates the growth of our higher-margin BIT solution sales. As we continue to see positive signs in the marketplace as our fourth quarter solution sales grew by 31 percent compared to our prior year fourth quarter, facilities that install custom permanent units generally don't make such large investments unless they plan to use the system as required. Second, as our initial CES was installed a while ago, Interest in our fully automated decontamination system is the request of many today. We are just really starting to lift off. As they say, there's no substitute for hard work, and there's no such thing as an overnight success. We are at the point where the bigger life science companies know us and trust us and our referral customers are some of the top 25 companies in the life science world. We have worked extremely hard to get accepted by these companies. On today's call, I have asked E.J., Tomi's COO, to join and explain in detail the process the team undergoes to win these accounts and excitement that surrounds them for the company's future growth. Third, in the fourth quarter, you can see the strength of the economic engine we are creating. You can begin to see how we are on the cusp of sustained profitability. Why? Well, we have better long-term visibility, better than we have ever had. Two, gross margins are ticking up a bit, given revenue mix. Three, our SGA came down substantially, even with increase in hiring. We have really focused on cutting expenses and ensure efficiencies. For example, we have utilized more engineering in-house rather than using outside firms. We believe our SG&A will grow much slower than revenue. Finally, our adjusted EBITDA was just below break-even. and it won't take much to move to sustained EBITDA and net income profitability. We are truly on the cusp of assuming this active pipeline stays robust. The CES product line is a long sales cycle and becomes more of a partnership with the end user company. The company's growth has now expanded to the management of not only current mobile unit sales, but a backlog of orders and the management of this business aspects allows revenue to be recognized in future quarters. Our customer orders or contracts for mobile equipment, CES systems, and IHP services are subject to the delivery timelines demanded by our customers, which in turn affect the timing of the related revenue recognition. Our recognized revenue, when combined with our sales, orders backlog for the year ended December 31st, 2022 together was approximately 10.4 million, which represents one of the best years we have had to date. The 10.4 million was comprised of recognized revenue of 8,338,000 and our customer sales backlog of 2,024,000 as of December 31st, 2022. During our 2022 calendar year, we received over 10 million in customer sales orders, some of which were received from key global Fortune 500 customers. This represents 22% growth when compared to our calendar 2021. The increase in sales orders is largely attributable to increased demand for our CES and mobile equipment orders, primarily from our life sciences, commercial, and food safety sectors. Our 2022 fourth quarter revenue was $2,812,000, up 40% compared to our reported fourth quarter sales in 2021. Our revenue for the fourth quarter of 2022 grew 60% sequentially over what we reported in the third quarter of 2022. From a sales volume perspective, This was the best standalone quarter resulting that we have achieved since 2020. The increase in sales is largely attributable to increased demand from our CES systems and our internal tech team's ability to execute and deliver the systems in the fourth quarter of 2022. In 2022, we also saw growth in our sales results of our mobile equipment orders due to our expanded product line. Last quarter we installed two systems and the applicator portion of the other CES order recognizing revenue and maintaining timeline as reported. The building contractors are delayed on their end for two of the three systems referenced, thus the full amount of bid solution previously reported to be projected for the year has been delayed by a quarter due to reasons outside of TOMI's control and commissioning to the systems are now slightly delayed. Winning additional bids for the CESs remains high priority, and we will soon announce these wins as they come in throughout the years. Approximately 400,000 in bookings were received at the end of last year for an ongoing project that automates the entire cell therapy manufacturing process from start to finish. This integration of IHP will automate decontamination throughout all stages of the cell therapy process, ensuring a full coverage six log kill. We are on schedule for delivery this summer with multiple prototype systems and hope to soon publicly announce the partnership as the sole decontamination method for this cell therapy system. In addition, we are streamlining our superior product for life science industry. by providing a simplified solution for decontamination chambers, cage washes, and modular clean rooms in which we will be in production shortly. Sterilized disinfection decontamination is needed for laboratories to adhere to strict regulations and guidelines within the industry. As we have learned from COVID-19 pandemic, our product can reduce and eliminate the spread of infectious diseases. Our TOMI service network providers continue to combat outbreaks in their local areas against this latest pandemic, as well as bird flu, neurovirus, monkeypox, E. coli, and listeria. TOMI was alerted that one of its TSN providers were providing support for the Ohio train derailment, using Sturimus to disinfect local residential homes and surrounding commercial buildings. Yet another TSN member provided service at a large hospital system, providing them routine disinfection services combating COVID in 2020. And today, this servicing contract remains in effect, combating other pathogens daily. As we look to the future, we are advancing business development strategies with the start of a new growth strategy in domestic distributions. Many agreements are in process. and close to being executed, and announced expanding across multiple divisions. NOMI is establishing partners with well-known distributors in the animal science, life sciences, and further the commercial divisions entering into distribution agreements with aligned Sturimist equipment. This domestic distribution strategy will penetrate the domestic market and further Sturimist's mobile equipment sales. The international market, although a long sales cycle, is expanding and progressing nicely. National Health Services, or NHS, in Wales was a great win for the company last quarter as they routinely promote us publicly. In addition, our novel partners in Australia and Germany have made a footprint in their country as well as the surrounding countries. Ongoing studies remain a focus as we continue to grow internationally and domestically. In Germany, we are undergoing studies to further showcase our efficacy on materials that adhere to strict life science regulations and guidelines. In the United States, we are working with government and contractors to prove effective against ricin and fentanyl, which is critically needed in this country. Other studies include direct spray on cannabis flowers to combat common mold, and fungi proving no effects on the oil and plant itself. At this moment, Sturimus is reporting successful results, and we hope to finalize these studies and soon share publicly. Food safety. use has grown over 653% when comparing 2022 to 2021. New challenges to food safety will continue to emerge, largely because of changes in our food production, food supply, storage complexities, transportation delays, including more imported foods. Changes in environment leads to food contamination, new and emergent bacteria, toxins, and antimicrobial resistance. Food safety presents an opportunity for significant growth for TOMI with continued product research and compliance testing. The food safety industry in North America is under close scrutiny with the implementation and enforcement of new and established guidelines. Sterimist aerosolizing coal plasma technology is an effective decontaminant in the food safety industry. Cerimus can assist in compliance with the newly established Food Safety Modernization Act guidelines set in place by the FDA, as well as the Safe Food for Canadian Act and Safe Food for Canadian Regulation in Canada. Today's geopolitical aspects of farming and ranching has created an extra layer of concern for the protection of our global limited food supply, including food transportation. TOME continues to work with premium companies in testing and validating stimulus technology in the food safety and seed industry. In 2022, we made progress in enhancing brand awareness in food safety industry by promoting and marketing this division. We are receiving an increase in inquiries within the food safety division directly from these efforts. Every day, there are news articles around the world pertaining to the contamination of the food supply. With the global population explosion, severe worldwide avian flu pandemics resulting in unnecessary culling of bird flocks, unusually high accidents resulting in the destruction of over 30 storage facilities, packing and processing plants, and that's in the U.S. alone, we anticipate an increase in demand for a mechanical way to disinfect our food supply. TOMI has, in cooperation with the USDA, demonstrated that our technology offers a consistent, quick, and effective alternative to the traditional decades-old chemical disinfection process. Cerimus will deliver more consistent and quicker results in all areas of our food supply, from farm to market, processing to packaging, and storage to delivery. We are currently pursuing all these avenues. Continued testing and market demand coupled with our new BIT 0.35% hydrogen peroxide label will make pursuing these opportunities successful. In addition, our solution and processing are environmentally friendly in that the byproduct of Sturimus is only oxygen and water in the form of humidity. We have our solution listed on OMRI and labeled as organic. Most disinfectants leave residues on equipment, furniture, objects, and food. Sturimus does not leave any chemical residue on any surface. They have a very low carbon footprint, if any, just oxygen and humidity. Sturimus is the perfect product for the global current issues in food safety. We are told we consume too much food, we produce too little food, and our farming screws up the environment. SteriMist is ready to assist in the defense of our food industry from wherever their needs are. I am then turning the call over to Tomi's COO to give additional overview on the CES sales and installation process and Tomi's pipeline. EJ?