Good day, ladies and gentlemen and welcome to the TOMI Environmental Solutions, Inc. Fourth Quarter and Year-End 2021 Financial Earnings. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, John Nesbett from TOMI Environmental Solutions. Sir, the floor is yours..

Thank you for joining us today for the TOMI Environmental Solutions investor update conference call. On today's call, TOMI's CEO and Chairman of the Board, Dr. Halden Shane; and Nick Jennings, TOMI's Chief Financial Officer. Dr.

Shane will provide an overview of recent business highlights and discuss critical financial benchmarks for the most recent quarter before addressing any questions you may have. A telephone replay of today's call will be available through April 12, 2022, the details of which are included in the company's press release on March 24, 2022.

A webcast replay will also be available at TOMI's website, www.tomimist.com. Please note that information contained within this call is relevant only to the day which it was recorded, March 29, 2022 and you are therefore advised that time-sensitive information may no longer be accurate at the time of any replay.

Certain written or 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 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. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.

I will now turn the call over to TOMI's CEO and Chairman of the Board, Dr. Halden Shane. Please go ahead..

an experimental research arm of a large cancer center in the East Coast; a multinational pharmaceutical company, who locally has chosen SteraMist in two of their areas requiring superior decontamination; and a renowned institute that focuses on immunology and infectious disease.

These are all great wins for IHP and demonstrate the increasing acceptance and beneficial understanding of our IHP technology over the multibillion-dollar large global competitors. We are committed to being the driving force in providing enhanced superior disinfection and decontamination to a variety of industries in a variety of applications.

This system is an automatic hands-free disinfection system that enables instant ease of use with no manual requirements. Partnering with multiple manufacturers and programmers has created an economy of scale developing a profitable solution to the market.

TOMI, in conjunction with its new manufacturer onboarded in 2021, ARM, began production of the innovative transport CES and Select Plus units.

The transport CES is primarily designed for emergency service vehicles, including paramedics and ambulances and can provide consistent elite disinfection without the need to ever remove or reinstall the product from a space.

Due to the partnering with experts of Siemens Software, ARM can provide insight on producing intelligent SteraMist systems while maintaining cost-effective fabrication, enabling future success and innovative system design.

Although the CES and similar products have seen an increase in interest, SteraMist's newer product, the SteraPack, has been a popular choice for mobile system solutions. The SteraPack has a battery-operated option, making it the most affordable unit yet as it is not limited to the constraints of needing a wired connection.

SteraPack's increase in disinfection mobility and ability to work without a cord plugged in has been popular with many service providers and commercial clients. Because of this unique ability, many current TOMI Service Network, TSN providers have added the SteraPack to their disinfection toolbox.

TOMI recently launched a new TSN logo, a new member website and a membership portal to better support our partners. The portal or the app is available on both the Apple App Store and Google Play and is available to both our service network members and our domestic and international manufacturing sales representatives and distributors.

Portal allows access to materials, media, case studies, protocols, alerts, podcasts and ease of ordering products. Now I am going to turn the call over to our CFO, Nick Jennings, who will provide you some current financial highlights.

Nick?.

Thank you, Dr. Shane and good afternoon, everyone. To normalize the effect of the pandemic, we will provide a brief overview of our financial results for the full year 2021 and the fourth quarter of 2021 compared to 2019, our last calendar year pre pandemic.

The press release distributed earlier today will provide a breakdown of our financial results for the year ended December 31, 2021 and 2020 as well as the fourth quarter of 2021 compared to the same prior year period in 2020.

For the year ended December 31, 2021, compared to December 31, 2019, our consolidated net revenue was $7.8 million compared to $6.3 million, representing an increase of approximately $1.5 million or 24%. The increase in revenue was due to expansion of our user base as well as increased solution sales which Dr. Shane mentioned earlier in the call.

Consolidated gross profit was 59.2% compared to 61.6%. The decline in our gross profit was attributable to our product mix and sales. The consolidated operating loss was $4.9 million compared to $2.1 million. Higher G&A and R&D costs contributed to our larger reportable loss from operations in 2021.

The higher G&A costs are due to a larger employee head count and an increase for our allowance for doubtful accounts and the related bad debt expense in the current year period. During the pandemic, our goal was to get our equipment in the hands of as many qualified businesses as we could to combat the spread of COVID-19.

As the pandemic dragged on, some of our customers' businesses slowed down which caused a delay in payment on the receivables in which we carried in our accounts receivable. As a result of the delay in payment, our allowance for doubtful account was increased accordingly in 2021 to reserve for certain customers who were delayed in paying us.

We still have every indication these customers will pay and management is confident these receivables are collectible. Our consolidated net loss was $4.4 million or $0.25 on a per share basic basis compared to a net loss of $2.3 million or $0.15 per basic share.

For the three months ended December 31, 2021, compared to December 31, 2019, our consolidated net revenue was $2 million, compared to $1.9 million, representing an increase of $100,000 or 5%. Consolidated gross profit was 54.4% compared to 56%. The decline in gross profit is attributable to our product mix and sales.

The consolidated operating loss was $1.7 million compared to $500,000. The increase in loss was attributable to the higher G&A costs which we discussed earlier. The net loss was $1.7 million or $0.08 on a per basic share basis, compared to a net loss of $0.5 million or $0.03 per basic share. Moving on to the balance sheet.

As of December 31, 2021, our cash and cash equivalents were approximately $5.3 million and working capital was $11.1 million. Our shareholder equity was $13.6 million at December 31, 2021. Now, I will turn the call back over to Dr. Shane..

disinfection, bacteriophages, supplying IHP for 20 minutes and achieving a maximum log reduction. The distribution testing used biological indicators with Staphylococcus aureus. They were placed in the hard-to-reach areas and all BIs were inactivated with a 6-log kill. The last test was conducted to determine the range of effective.

BIs were placed around a room with bacteria yeast, mycobacteria. And of course, all BIs were killed and activated with the maximum kill rate.

All these details may seem a little too scientific for the average person but the results that were attained in those European standard test was not granted to many of our competition, once again, demonstrating the superiority of IHP technology. Our intellectual property portfolio contains more than 20 utility patents.

We have filed and have been granted 32 design patents and have over 200 trademarks registered across eight classes of classification of goods and services. As our technology and education expands, new purchase orders, business partners and projects will expand with it, establishing TOMI as a premier disinfection brand.

TOMI continues to set a global precedence for disinfection and decontamination with its SteraMist brand of products. With your support, SteraMist is to become the global industry standard for disinfection and a recognized brand worldwide. Thank you for your continued support and commitment as we strive to create a healthy world for all.

Operator, right now, I'd like to open this up for questions..

Your first question is coming from Amit Dayal from H.C. Wainwright. Your line is live..

Thank you and good afternoon, everyone. Thanks for taking my questions.

With respect to some of the sales mix in the fourth quarter, could you give us a breakdown of maybe how much was from solution and how much was from hardware units sold?.

The breakdown probably was around, I would say, 15% of our revenue was attributable to solution sales and the difference would make up between service equipment and accessories..

Okay.

And then how should we think about revenue sort of the cadence of revenues in 2022 from a quarterly perspective?.

So we think that the first quarter looks terrific for us from our standpoint because we have over $3 million booked as of last week and our CES are improving which is the direction that we want to see the company go in because they're extremely profitable from the model because they use a lot of solutions, 5five gallon drums versus the 1-gallon containers to the 32-ounce containers.

So I mean, we're looking for a great year going forward. I think we'll equal and surpass what has been written about us by the analysts..

Okay. Understood, understood.

Doc, could you give us any color on what the Boeing opportunity looks like if it all comes to fruition?.

Which opportunity, Amit?.

With Boeing, the work you have going on with Boeing so far..

So there -- it's hard to do. They are -- they've been reviewing our technology along with other aviation companies for quite a while. They are -- it's a scientific group that's in Boeing. They own two pieces of our equipment. I keep waiting for them to send us a report. They say they're going to publish one.

It's not as easy as like just picking up a phone and calling somebody. They're never there. And waiting for them to call back. But from a material standpoint, the product is being used in aviation in the EU successfully. It's passed that test. One of the important aspects of that test was testing aerosol that I was talking about.

And material compatibility studies that we have and that we're getting back -- word of mouth from other aviation companies -- is superb. So I don't know if they're -- if Boeing is waiting because they're looking at using HEPA systems which they do use in a lot of their aircraft they have been using for years.

And this is not an urgent requirement from their end. But I know going forward we're going to have a great success in the aviation industry, more from a standpoint of doing their terminal cleans. I'm not quite sure any product is going to be used between flights because they've limited the amount of flights they have. There's a shortage of pilots.

There's big issues with timing and leaving on time, et cetera and getting penalized. So, I think we're going after that market. And in the material maxi cleans that they do in all aircraft in different parts of the world, our product far excels anything that they have..

Okay. I appreciate it. And just maybe one last one for me. You mentioned a new version of the product coming out for the food safety and the agricultural market.

Is this third quarter, fourth quarter type time line? Or when can we expect this to be launched?.

So it's currently out. We've gotten EPA approval on it and we're printing the label. Our manufacturer is making the product in different quantities. And it's going to be probably at the beginning a slow acceleration into the food safety industry but we have a tremendous amount of companies.

I can't really discuss one right now but one global, it's very interested. So we're working with them and we're hoping that we can deliver the product at the price that they wanted to go ahead and get this out to everybody; so we're excited about it. That's a really good question. Thank you..

All right. I’ll take my other questions offline. Thank you. That’s all I had..

Thank you..

Your next question is coming from John Nelson. Your line is live..

Thank you.

Hi, I have several questions and the first one is, why do you think the Shield Study by UCLA is taking so long to be published or released?.

Thanks, John, for the question. So the Shield Study was a five year study. It was sanctioned as a grant from the people, the medical quality assurance, Medicare and they -- three years was for data, one year and six months was at the beginning to get things up and running. Another six months was for data collection by independent statisticians.

And the last part is the writing of the paper. So everything has been done. We're through with data. The statisticians are finished and there are two very well-known, world-renowned authors writing this paper. But they also have other jobs in relationship to infectious disease control.

In fact, one is the head of a public health -- second largest public health department in the United States. And when they got hit with Omicron because they're all out in the West Coast, basically, it took them away from what they do is the right research reports. So that has delayed it even though we're not behind schedule from the five year grant..

Okay, all right.

And then the transport CES, is that product -- has that been installed or sold to any particular -- I mean any customers yet? Or is that coming in current or future quarters?.

So it's a good question also. It is coming in future quarters. We went into that division because we had interest from a large partner of ours, a current health care customer that has 55 ambulances and would like to install it in their ambulances. And we do have a prototype. We are in the process of manufacturing them.

And we believe sometime this year, I can't -- I'm not going to -- I don't know myself, so I can't tell you when. We will have a purchase order for a significant number of them..

Okay. Then for -- you had mentioned earlier in the call the -- some delays coming out of the Australian production facility for the backpack.

And my question is, are there -- is there just one production facility for the backpack or several? And if so, where are they located?.

So currently, there's one that was located in Australia. We have another one coming online in the U.S.

And what happened was, because you try to do the best in ordering long lead item parts as one can and as a company, we did and we were successful but someone didn't get a certain plastic trigger which delayed the launch which we anticipated for the fourth quarter, early October, November.

And then we started to see them be manufactured but we were in the middle of December and there was a huge outbreak in Australia and the flights were limited.

And there was no way we could really get the product -- we got some of it here but we couldn't get the product and take advantage of that time of the year that we wanted to because of the Omicron breakout that we had globally.

And we are now taking advantage of it on the countries that are still in this outbreak which was Hong Kong recently and some other countries. So that's what happened. And now we have plenty of them in stock. We have plenty of interest and we're going forward and selling them.

We held back on marketing and we just recently waited until we were able to touch the units. And now we're starting our marketing campaign, including on Amazon and in a lot of these trade shows..

Yes. And I noticed on the Amazon store, the pricing is significantly more than the units for other sterilizers. Has that been a factor at all in limiting the success or the potential, do you think, for the Amazon store? That is -- I guess what I'm getting at is the razor/razorblades.

You think it would -- there would be any advantage to making the price differential smaller for the backpack in order to sell more solutions?.

That's a good question. So our concept of going into Amazon was to go into their health care end, it's an enterprise that they have and not publicly sell it because it is expensive. We have sold some of them but the advertising and the marketing of it is what we're really after with that.

When it comes to controlling our solution, it becomes a little problematic with Amazon because you would want to buy the solution but we don't want to sell it unless you own our technology. In fact, we can't because the EPA -- this technology and solution is the first ever EPA-registered product.

So when Amazon, somebody goes ahead and tries to buy the solution, it became a problem, so we had to recalculate and refigure how we're going to go ahead and sell the product and we're just doing that now. But for the average person, it is expensive because it's the quality, it's the most highly professional efficacious process in the world.

It's as quick as it is. And you have to -- I mean, for a person that has an office or a large office or medical practice, hospitals for various parts of the facility, it's a natural for it. And police and fire have shown a tremendous interest, along with prisons and schools we're going after which is highly political.

But we think that we will be able to get through all these verticals at an appropriate time..

Yes. I mean, from everything I've read, it makes so much sense to use a system like yours. Last question. You mentioned -- or I should say, I think, it was mentioned in the third quarter report doing continued research on a 1% solution with the ag department.

What would be the significance of successful or successful stamp of approval on a 1% solution? That is, what do you hope to accomplish with that 1% versus the 0.35%?.

That's absolutely huge. So we're partnered with the USDA. They've written a number of papers that they published independently and they've been doing some research on residual of our product on various vegetables. The 0.35, the new EPA label, is good for plants, for mold.

Many, many types -- different types of molds that's hard to kill in the agricultural industry. The 1% would be to apply it directly to food, so we would be able to spray lettuces and tomatoes and peppers. So it would be huge because, first, we need to show that there's no residual. And second, we need to show we kill.

And this is what the USDA is working on. So that's an absolutely huge worldwide market once we are able to accomplish that..

Would there be -- do you have any sense for a time line window on that, on the USDA's evaluation of that product?.

Well, the USDA is probably going to publish a paper very soon on further research on the product. The EPA needs to approve the product. And every time we go to them, they have a PRIA date which is a date -- a window that they take the product and then they approve it by that window.

They have been postponing that date because of not having live meetings or meetings that you can meet the whole committee. So it's delayed but it's eventually going to happen. I don't know what the excuses could be now. And to tell you the truth, I don't have a total update at the moment. But I think we will get it.

And hopefully, it's going to be this year.

And I know it will have an impact on the agricultural and the food safety and food storage and food transportation and especially -- I mean we're missing it all because of COVID, nobody is talking about food-related illnesses, nobody is talking about infections and foods that are being recalled and it's not a highlight..

Yes, excellent. Wishing you much continued success. Thank you very much..

Thanks so much for your interest in the company, John..

Thank you. Your next question is coming from Frank Jones from Mayflower Capital. Your line is live..

Thanks for taking my questions.

So my first question is, with all the chaos in the world and economic uncertainty going on in a lot of your verticals, what's your opinion on the future of the company's growth going forward?.

Great question. So this company has multiple verticals that it can turn to. As you know, in 2020, even though we were successful at it, it probably hurt us because we had a rapid increase in our revenue because we were able to help with the pandemic. We supply decontamination equipment really to a lot of the world during that time.

I think our most profitable vertical is the pharmaceutical and research of the variant space. And these people were working from home during the pandemic, unless they were working on vaccines. So the industry that we are most profitable with is all back to work.

No matter what there is in the world and the uncertainty that's going on, people are going to need to have drugs and people are going to need to manufacture cosmetics for the body, whether it's to make you look prettier or lotions to put on to diseases. So all of these products eventually will be used -- hopefully, will be using our technology.

And this is why I think we can adapt to world conditions..

Okay, great. That's helpful. And then I noticed there was a material weakness on your K.

I understand a lot of companies have this notice but are there any details that you can share at this time?.

We have a new group of auditors. We have a couple of large accounts that have paid us $4.5 million over the last six years. And they're basically because of COVID, their operations shut down four times, five times in the countries that they're in.

And their balances became past due to a point where they were significantly past due and the new auditing firm felt there should be a reserve on them. So they made a large adjustment and that adjustment related -- transferred to a material weakness. We have created a remediation plan and we'll be successful with it..

Great. Okay, that’s helpful. Thank you. Yes, that’s all my questions. Thanks a lot. And good luck going forward..

Thank you, all..

Thank you. That concludes our Q&A session. I will now hand the conference back to management for closing remarks. Please go ahead..

Again, I want to thank everybody for joining this afternoon and for your excellent questions. And I look forward to speaking to you all after we report our first quarter earnings which seems like it's right around the block. So everybody have a wonderful afternoon, depending on where you're at. Thank you..

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation..