Good day, ladies and gentlemen, and welcome to the TOMI Environmental Solutions Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode and we will open up floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, John Nesbett of IMS Investor Relations. Sir, the floor is yours.

Thank you for joining us today for the TOMI Environmental Solutions investor update conference call. On today's call is 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 August 23, 2021, the details of which are included in the company's quarterly press release. A webcast replay will also be available at TOMI's website at www.tomimist.com. I'll remind that during this conference call, we will make some forward-looking statement including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risk and uncertainties that could cause the actual results to differ materially from such expectations. For a more details descriptions of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligation to update the information provided in today's call. In addition, in this conference call, we will discuss certain non-GAAP financial measures. We use non-GAAP measures, because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide. The reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. I will now give the call over to TOMI's CEO and Chairman of the Board, Dr. Halden Shane. Go ahead, doctor.

Thank you. And welcome to TOMI Environmental Solutions second quarter 2021 earnings call. We appreciate you taking time away from your schedule to join us this summer afternoon. Second quarter of 2021 revenue was disappointing. There's no doubt about it. This was due to the hospital healthcare, TOMI service network and our commercial industries seeing less demand for disinfection equipment, and cleaning protocols as COVID vaccine was deployed. Obviously, it was very difficult comparison against last year's record second quarter, but we expected second quarter revenues to come in a bit higher than they did. That said, we knew second quarter would be a transition quarter as the company focused on longer term objectives, large opportunities and also getting ready to launch many new products that would positively impact sales in the back half of the year and into 2022 and beyond. These initiatives have seen tremendous progress over the past few months. So we are very confident about our ability to drive what could very well be substantial growth in the back half of the year. While the surge and recent contraction in our revenue has been frustrating, the pandemic has had a dramatically positive impact on our business, which we believe will enable us to deliver stronger financial performance in the long run. First, it's significantly expanded our customer base with our razor, razor blade model. Those not familiar with that term, the razor being our technology and razor blade, our BIT solution. More customers in the field now have an understand the quality of our razor, and overtime will presumably order more blades or BIT solution, which is the higher margin portion of our business. Our customer count went from around 350 pre-COVID to over 800 today within our CRM. Hundreds more directly through our distributors worldwide…

Good afternoon, and thanks for joining us. I'll be providing a brief overview of our financial results for the second quarter of 2021, compared to the prior year period. Total net revenue was $1.5 million compared to $10 million. Gross margin was 64.3% compared to 55.5%. The increase in gross margin is attributable to product mix. Operating loss was $1.2 million compared to operating income of $3.7 million. Net loss was 800,000 or $0.05 per basic and diluted share compared to net income of $3.7 million or $0.22 per basic share. EBITDA was a loss of 700,000, compared to EBITDA of $3.8 million. Adjusted EBITDA was a loss of 700,000 compared to adjusted EBITDA of $3.9 million. Looking at a few key balance sheet items, cash and cash equivalents were approximately $2.5 million compared to $5.2 million at December 31, 2020, a decrease of $2.7 million. Working capital of $8.8 million at June 30, 2021. Shareholders' equity was 11.1 million compared to 13.2 million at December 31 2020. Now, I'll turn the call back over to Dr. Shane.

Thanks a lot, Nick. The SteraMist products and iHB technology has broad appeal in a variety of settings, and we remain focused on growing our brand recognition as the gold standard in disinfection and decontamination. We all know the world has changed. And during much of the pandemic, we were not able to generate leads and sale opportunities through attendance of trade shows, which has been a critical component of our market strategies. Many of the shows TOMI was prepared to attend have been cancelled, delayed or switched to many unfortunate remote platforms that I'm sure we're all fed up with. TOMI quickly refocused the strategy of lead generation by other means for its sales team. As part of our marketing and sales strategy for our product portfolio, especially our new backpack, we are utilizing professionals that work in the digital selling space such as B2B and B2C verticals. We believe this strategy provide us with greater global exposure and quicker sales cycles in all our verticals. World statistics is another lead generator. COVID-19 infections are still arising in 93 countries. Of every 100 infections last reported around the world, more than 55 were reported from countries in Asia, Southeast Asia and the Middle East. The region's reporting a million new infections about every four days and has reported more than 66,168,000 since the pandemic began. The number of positive COVID cases in the United States topped in August of 2020, but the potential of new waves of infection with many of them being vaccine resistant remains. Candida Auris is an emerging fungus that presents a serious global health threat. CDC is concerned because it is often multi drug resistant. It is difficult to identify and it spreads throughout healthcare settings. SteraMist kills the fungus. Let's not forget the seasonal…

Your first question is coming from .

Thanks for taking my question. So obviously, this has been a frustrating quarter. But just trying to recalibrate and get a sense of where you can see this business a few years out? What do you think is going to be the, going to drive the long-term scale of the business?

So long-term, I think we're going to be driven by the fact that number one, is our razor, razor blade model which is selling more solution for the existing razors or technology that we produce that are out there. We have got amazing customer base, from Pfizer to Merck to Catalent, to many hospitals, hundreds of TSN members throughout the country in Canada, and a growing commercial division covering first responders, aviation, restaurants et cetera. So, the market has changed new product innovation is going to be a focus of this company. And also I think that's going to help drive us for years to come.

Your next question is coming from from Comstock Partners.

Thanks for the update and I appreciate the long-term view. I was curious that you provided the target of sequential growth for Q3 versus Q2 and I'm just -- if you could give us a little more color on what makes you so confident about that growth?

So, thanks. That's a difficult question. But we're sitting halfway through the quarter already. And we're in an excellent position to deliver based on the orders that we have received, and the orders that we're currently waiting for in our pipeline. Everything we have right now, the majority of it is off our core business. It doesn't include the backpack. I believe the backpack's going to be out there that are the one we're making is going to be the standard backpack that one's going to want to use, its cost competitive to the ones that have been out there that are Chinese made. There's been a big recall, as you read in February, by the consumer advocates about explosion in batteries and other problems and issues with damaging to furniture, fabrics, paintings, et cetera, where our backpack doesn't have any of those issues. So I think that our growth, and I'm confident about this, is going to be carried into the fourth quarter and throughout the year and give us a good start to 2022, which unfortunately believe it or not, seems right around the corner.

You mentioned the fourth quarter. So if I could just ask a quick follow-up? Could you give us a little, again, just a little bit more detail around some of the building blocks to what I think you said, would be a double-digit revenue target for that quarter?

So we have many customers out there right now that have ordered and are ordering committed some purchases. They're waiting for the capital allocations, these will come before the end of the year. We're going to receive our first shipment in the backpack. We're going to start receiving them at the last week of August and throughout the beginning of September, throughout September, that's going to be our initial order of 500. We're anticipating additional orders of thousands -- two thousand before the end of the year, and that will be shipped in the fourth quarter, which when I look at the backpacks that were sold that don't have the effectiveness of our products, and the fact that we don't damage materials, they sold hundreds of thousands. So I think that conservatively we're in a good position to drive the fourth quarter. And we have already interested in 100 of these backpacks without any marketing. Once we're out there and able to market this on the B2B and B2C platforms that we plan on marketing it along with good placed ads, I think that's the reason that I'm telling that's expecting double-digit growth in this fourth quarter of 2021.

There are no further questions in the queue. I will now hand the conference back to management for closing remarks. Please go ahead.

All right. Thanks everybody for joining today. Hope you all have a safe and wonderful summer.