Good day, everyone, and welcome to today's TOMI Environmental Solutions, Inc. Second Quarter 2022 Financial Results Conference Call. . It is now my pleasure to turn today's conference over to John Nesbett with IMS Investor Relations. Please go ahead.

Thank you for joining us today for the TOMI Environmental Solutions Investor Update Conference Call. On today's call are TOMI's Chief Executive Officer 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 financial performance for the most recent quarter and 6 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 today 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 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 and should be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures, the comparable GAAP measures is included in the earnings release dated August 15, 2022. Okay. I will now like 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 will provide operating and financial results for the second quarter of 2022 and an update on our iHP SteraMist 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 . 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 has 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 6 months of 2022, we closed $5.6 million in orders, of which we anticipate $2.3 million 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 6 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 2020. Interest in SteraMist iHP is robust. Based on our current orders as well as the pipeline and strength of our referral base in the life science sector, we are targeting over $12 million in revenue for…

. We'll take our first question from Sameer Joshi with H.C. Wainwright.

So the first question is actually -- so good to see that your annual outlook remains $12 million. What gives you the confidence in terms of achieving that? Do you have visibility in the pipeline where there are pending orders, which you can announce within the next few months? Can you just give us some insight into that?

Yes, I believe I went over that a little bit. We have -- we're waiting for POs on 3, and we have 8 others that we're just waiting for approval on. So I think that the unfortunate part is these are such high-profile clients that they usually don't let us do any type of press release. We try our best so we can announce it to the public, but as I showed you in our tombstones, these are very, very large companies.

Yes, yes. No. It's really impressive. In terms of delivering against these -- the 3 purchase orders and the 8 that are in final stages, those time lines are within the next 2 quarters? Or is it a longer-term outlook for those?

No. We're hoping that -- I mean, the majority of them are in the next 2 quarters. Delivery on some of the larger ones that we have in our pipeline, again, depending upon product availability, which I think we've improved on may be in the first quarter, but we're still anticipating meeting and beating this $12 million by the end of the year because of our other products, the SteraPak Surface Unit, Environment Unit and all these other pieces of equipment that we've been spending all this time on developing, which has been proven to be very fruitful for the company going forward.

Yes. Yes. Actually, that was going to be my next question. When you mentioned CES and mobile equipment, are you -- the mobile equipment refers to the SteraPak? Or some other products as well?

It's all of it. The Surface Unit, SteraPak, they're all mobile equipment versus the fixed, which is the CES equipment and the Transport will be fixed in vehicles, things like that.

Got it. Understood. And then moving on to expenses. Nice to see expenses lower. Should we expect this trend for the next 6 months? Or do you expect to have additional resources to meet the top line growth that you're expecting?

Well, we're trying our best. Our team is working very hard, and we're very small. We're going to have to -- we're expanding. Again, we're looking for employees, I think, like most companies are that are really good and qualified and dedicated. So it could increase. But again, the direction we're taking and making these employees work is in the customer service end and helping assist with bringing in revenue. So we think one will outweigh the other tremendously.

Yes, yes. No, I understand. So as sales increase, there could be some additional expenses, but it will -- the leverage will be just -- the outweigh as you just said. Okay. Just a curious question on the orders that you are getting and pending. Is it from -- are these repeat customers who are ordering additional equipment for different locations? Or are these new customers altogether?

Many of them are customers, repeat large Fortune 500 or the top 10 pharmaceutical companies that are ordering for various other facilities. And because of the word and the standardization that we're creating, they're new pharmaceutical life science customers, universities that are hearing about our product and are ordering also. So it's a blend, but we're most impressed with the repeat business from these large pharmaceutical customers.

Yes. No, that's good to know. It's a blend of both sources. So just one last one. You mentioned the competitive landscape and your superiority in various respects. But when you are looking at the bids that are out there and your conversion rate from bids to orders in terms of some of the competitors taking some business away from you, can you just give us some insight into that?

Yes, we don't really -- I don't really see the competitors winning any projects. That's why we have such a huge pipeline in some of these POs that are coming in and ones that are just waiting for approval from their various departments. As you know, it's a complicated process. But we see us winning these bids, and we see this technology moving in the direction that I've always anticipated it should and would in relationship to becoming a standard in these markets. And with the new added types of equipment and new products that we've introduced, we're covering everything from laboratory equipment to complete whole rooms to large facility decontamination. So we have the broad market covered going forward.

I just said it was going to be my last question, but I have one more. You mentioned food safety. Have you already made any inroads into that? Are you making the outreach into that sector? If you could give us some high level insight into that.

Sure. We've just presented at a food safety conference, and they were very excited. And of course, whenever you -- same thing that happened with Corteva and Dow and DuPont at the beginning, they always wanted more testing and to go ahead and do their independent testing. And we are assisting and moving forward with that. We're also going forward with the EPA as far as the registration, we received the 0.35% registration. Now we're going forward with the 1% registration for direct food application. These things, unfortunately frustrating to me and I'm sure the team -- takes time, but we'll get there. And the interest is high. We used to have maybe 2 food safety clients. And now we have somewhere between 8 or 9, and we have another half dozen that are -- we're working proposals to introduce it into their facilities. So we are slowly and frustratingly advancing in that market.

Okay. Good to hear that. And good to see the comparison between pre-COVID and now. That is helpful.

We will take our next question from with Carter Management.

One of the more interesting aspects of your business is the ability to sell higher-margin solution across your installed base. I see solution sales were up a bit in the quarter. But could you provide any additional color as to how we should think about the revenue composition going forward?

Sure. I mean from a percentage standpoint, if we want to use the 2019 to today, we're probably up somewhere between 40% to 50% in solution uses. Going forward, the more pieces of equipment we get out there, especially these larger CES units that use 55-gallon drums of solution will create a consistent use of our solution on a daily, weekly, bimonthly basis. In the past, we've always depended on it being used in health care or being used in service or service providers, which is still being used, and in many of them, the only tool box -- the only tool they have in their toolbox. So as pandemics come and go and the extreme paranoia the country has or the world has in relationship to them, of course, solution sales will increase in those verticals. But the key is to get more pieces of equipment out there and for our customer service to be on top of them and reordering, which we are seeing. And we're hoping that you'll see more data pertaining to the solution usage going forward.

. We'll take our next question from .

Halden, I have several questions. First, any comments you can make on timetable to potential profitability?

Well, if things go the way they're supposed to, it's going to happen this year.

Okay. That would be terrific.

3 or 4 months.

And any update that you can provide us with on the SHIELD study? And maybe you should maybe make a brief comment on what the SHIELD study is and what the potential is if it turns out favorably.

The SHIELD study was a study that was a government-branded study comparing manual cleaning to using our technology or mechanical cleaning and we were the only technology. It was a 5-year study, and we completed the 3 years of the data development. Then there is another year of various researchers, independents that went over the data. And the paper has been written or is being written. I'm waiting to get updates. But unfortunately, these authors are directors of a lot of the public health venues in L.A. County, and they've been quite busy with the variants and pandemic and now with Monkeypox. So I don't want to push them, but I'm sure that it should come out relatively soon, I'm hoping and I've been asking.

You had mentioned, I think, and also on the slides, there was an identification of one of your customers being a ServiceMaster. And has that ServiceMaster relationship expanded over the last quarter to include more -- I believe, ServiceMaster is a franchise operation -- to more sites? Any color on that?

That, I would have to personally get back to you on. I know that there are a number of these large service providers that are all merging and among our 208 service providers, a lot of them have sold or merged with these types of operations like ServiceMaster represents. So we're finding that we're trying to work with them to -- there would be no reason in my mind why they wouldn't utilize our technology as the only tool in their toolbox. They certainly would be throwing out a lot of other items and saving a lot of money long term and delivering the best to their clients. But give me some time to research the numbers, and I'll try to include that in my next call.

Okay. And last -- I believe last call, you mentioned -- and it was -- it might have even been in the press release about one of the health care organization's orders for ambulance installs. And I -- my question is, is there -- has there been any additional orders from any other customers on ambulance installs?

So we've just recently developed. In fact, I want to say I just got the first video of the first install of this SteraMist Transport device. And it was made and developed with them in mind, and I know they budgeted next year for this. It could be a very big order for the company. Once we get this validated and in their hands and tested, I think at that point, we'll start marketing it. We haven't really marketed it outside of working development for this 1 large order.

Okay. And then just kind of a general comment. The superiority of your product has always struck me as being so powerful that the -- what kind of plans do you have to get the word out even more than you have in the past? Because, at least in my opinion, the product use would be so compelling for so many different kinds of organizations, and I think the lack of knowledge about your product to a lot of potential customers is kind of a limiting factor.

Go ahead, John. That's fine.

Go ahead. So how do we -- how do you get the word out even more than you've been doing? Or should we just assume that -- I mean I know you've made significant efforts to do so. But is there anything else in the game plan to get the word out that this product exists and how powerful and compelling it is for using it?

So the answer is yes, there are plans in the game plan, and I've been telling other executives within the company that we must start bringing on a lot more customer service, a lot more salespeople. And we are negotiating with large companies to take the product on, but it's a time-consuming process. Being as small as we are with the funds that we have with developing new products, with going ahead with all the patents and everything, we're really stretched. And we see what's happening in the pipeline and how large these orders are. So that's why I'm comfortable with talking about what we could anticipate for the year and beating. However, the knowledge and creating a standard when companies have to throw out their old standard is a very frustrating, time-consuming process. And fortunately, we're on the bright side of it being over where we can see the future and they're learning. And we're hoping, as they learn we'll pick up very knowledgeable salespeople that understand the technology in the various industries and be able to make it applied to those verticals. And this will be one really huge happy family that goes forward with the process and good earnings and et cetera. Well, thank you for the call. Operator, there any other calls or questions?

It appears that we have no further questions at this time. I will now turn the program back over to management for any additional or closing remarks.

Well, thank you all that joined us and for listening. Stay tuned. We will speak next quarter. Have a good evening or day, wherever you might be. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.