Good day, ladies and gentlemen, and welcome to the TOMI Environmental Solutions' First Quarter 2024 Financial Results Conference Call. Our host for today's call is John Nesbett of IMS Investor Relations. [Operator Instructions] I would now like to turn the call over to your host. Mr. Nesbett, you may begin.

[Audio Gap] Conference call. On today's call is TOMI's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane; TOMI's Chief Operating Officer, E.J. Shane; and TOMI's Chief Financial Officer, Nick Jennings. Dr. Shane will provide an overview of recent business highlights, E.J. will report on future plans, Nick will provide the financials and all will be available for Q&A. A telephonic replay of today's call will be available through May 29, 2024, the details of which are included in the company's press release dated May 15, 2024. A webcast replay will also be available at TOMI's website, www.steramist.com. Please note that information contained within this presentation is relevant only to the day of which it was recorded, May 15, 2024, 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 the operating performance, and 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 dated May 15, 2024. I will now turn the call over to TOMI's Chairman and Chief Executive Officer, Dr. Halden Shane. Please go ahead.

Thank you, John. Good afternoon, and thank you for joining the TOMI Environmental earnings call. Today, we will provide an update on operations and financials for the first quarter of 2024. This call will be relatively short for those that have joined in the past compared to our previous calls due to the fact that we just had a call 30 days ago, while also providing insight into key current endeavors of the company for the past month and immediate future. During the quarter, due to revenue recognition, we reported only $1.1 million in revenue. This was disappointing and below where we expect it to be. That said, our revenue remains susceptible to timing of large orders as we scale. So it's important to note that our backlog, which reflects firm orders, was $900,000, much of which was closed during the quarter. So our total sales activity for the quarter, combining sales and backlog, was approximately $2 million, which is about 27% increase in sales over the first quarter of 2023. Also, we are encouraged by our sales pipeline across multiple end markets given our expanded base of distribution partners. So the sales in the quarter does not fully capture the growing interest in our technology and the flow in sale inquiries and engagements over the past 30 days. It is our expectation that we will see sequential growth and reduced loss in quarter 2 and are currently laser-focused on driving the business to profitability as soon as third quarter of this year. We received news by a U.S.-based multinational pharmaceutical customer confirming that 2 of their CES systems that were installed in September of 2022 are qualified and scheduled to begin use in the fourth quarter of 2024. Once these systems are up and running, we expect annual solution…

Thank you, Dr. Shane, and good afternoon, everyone. I'll provide a brief overview of our financial results for the first quarter of 2024 compared to the same prior year period. For the 3 months ended March 31, 2024, compared to March 31, 2023, our consolidated net revenue was $1.114 million compared to $1.582 million. Consolidated gross profit was 60.2% compared to 59.5%. The increase in gross profit was due to our product mix of sales. The consolidated operating loss was $1.226 million compared to $1.188 million. Our consolidated net loss was $1.310 million or $0.07 per basic and diluted share compared to $1.187 million or $0.06 per basic share. Moving on to the balance sheet. As of March 31, 2024, our cash and cash equivalents were approximately $1.1 million. Working capital was $6.6 million and our shareholder equity was $7.1 million. As Dr. Shane mentioned, this is my last call with the company. And I just wanted to take a quick minute to thank Dr. Shane for giving me the opportunity to work here. It's been an honor and a pleasure. And I also wanted to thank the Board, employees and everyone involved with this company. I wish you all the absolute best moving forward, and I know we'll continue on our mission to make the world a safer place. Now I'm going to turn the call over to E.J. Shane to provide insight on the current company activities.

Thank you, Nick, and good afternoon, everyone. I would like to provide everyone with some context around our strategic progress. While quarter 1 revenue was lower than we expected, our pipeline is strong and healthy, and it includes companies across multiple end markets. We are very focused on executing against the key objectives that we laid out in the April call. These objectives include closing more CES sales and ensuring that current custom installations generate the anticipated BIT Solution revenue; driving traction for our SIS, or SteraMist Integrated Systems; fostering repeat business with OEMs of decontamination enclosures; growing iHP Corporate Service revenues; and expanding sales of our mobile equipment to both existing and new customers and to our worldwide distribution network. Let's please take each of these points separately. In February, we secured a new contract with a California-based life sciences company for the installation of the SteraMist iHP CES valued at approximately $600,000. This system is equipped with 6 applicators, is slated for integration into a clinical suite by the end of the third quarter in 2024, and the project remains as scheduled. Upon full functionality, we anticipate all current CES installations to collectively yield approximately $600,000 in BIT solution revenue. This is based on current customer schedules and assuming these production and manufacturing schedules do not change. In addition, we expect 2 additional CES contracts to close in the very near future for similar builds as the California company I just referenced with delivery schedules for quarter 4 of 2024 and quarter 2, 2025. We have implemented enhanced internal operational methods to monitor and support our customers with these installations as they require a different level of support than our mobile devices. Obviously, the faster they can get these larger systems installed, the sooner we can support these…

Thank you, E.J. and Nick. Very good. We continue to think out of the box and find new markets for our SteraMist iHP technology. And I encourage the company itself to think further out of the box because there's a lot of these opportunities available. So the biofuel industry is just one that has a high incentive to obtain better alternative biofuel. iHP is known to be the fastest and the second strongest oxidizer known to man, which may be able to be applied in the conversion of cellulose in biofuels. We're also in the early stages of marketing our SteraMist technology to be used in the decontamination process in server farm industry and data centers. One of the largest areas of the new infrastructure spend over the next 1 to 5 years is data centers. Major tech companies are pouring $1 trillion into data centers over the next 5 years. Third-party data center operators are one of the many beneficiaries of this AI boom. These data centers will need high-level disinfection to maintain levels of cleanliness that is needed to sustain their centers' equipment. We will keep our shareholders up to date in our endeavors to spread the application in as many verticals as possible. Thank you for your time today. Stay tuned. I'll open the call to questions and answers.

[Operator Instructions] Your first question comes from [indiscernible].

Regarding the $2 million allocation from the Department of Homeland Security for the purchase of the 16 systems. Can you clarify the expected timeline for revenue recognition from the contract?

Sure. So they're going to decontaminate Plum Island. And I believe, it has to be performed in the first or the latter end of the first or second quarter of '25. So I would have to think that the budget itself and the purchase order would come in somewhere in our fourth quarter of this year.

Got it. Got it. And then just one more. Can you provide a bit more color on the growth in the CES business and how that impacts the razor-razorblade model? Is it true that kind of the CES customers are more dependable on the users of the high margin -- dependable on the uses of the high-margin BIT Solution?

Yes. So once we're in this marketplace where we are building these devices for lots of money for major players in the life sciences, pharmaceutical variance base. And even though the usage of solution in this space isn't as great as, for example, if you're out spraying it every day in a hospital, it's consistent, and we can start going ahead and putting together reports onto what we anticipate our solution orders to be going forward. So I think that's a breakthrough for the company. And we have a tremendous pipeline and interested life science professionals companies, the variance universities in these areas that we're very happy about.

[Operator Instructions] Your next question comes from John Nelson, shareholder.

I'm the -- it's incredible that such a small company has so many opportunities in front of it, in my opinion. But the cash position looks low. Is the cash position -- current cash position of the company enough to get you to profitability in your opinion?

It might get us to profitability, but we're going to be looking for some cash as we need to make this company larger. And in order to take the opportunities that we have and turn them into revenue, we're going to have to build on the company. So I think that's the best way to answer it. So it's definitely a possibility.

Okay. Are you investigating a bank line of credit or you already have one locked up?

No, we don't. We're investigating a lot of sources. We do have the note holders that we initially dealt with in November -- September really of last year that are interested in furthering the line of credit in that.

Okay. You mentioned the 2 CES systems that were delivered in 2022 that are cleared now at a start-up and should start up at the -- in the fourth quarter of this year. Can you explain why it took so long? Or is it going to take so long to get those systems started up?

Yes, John. I mean, this is the frustrating part of the business. So these large companies spend hundreds of thousands of dollars, and they put these systems into play, then they have to go through qualifications and validations. And many times, they buy the unit and they don't even move into their facilities for a year. And sometimes they can't even validate them for 2 years. So it's good news that this very, very large pharmaceutical facility is now qualifying their 2 units and shortly, we'll be receiving revenue from their solution usage.

Okay. Let's see. The -- one of the things that -- from the year-end call that you had mentioned were investigating fentanyl testing?

That is correct.

Any comments on that?

Not yet. We have a couple of sources that are investigating it. I think we'll definitely be able to neutralize it. The ones that are, one is going to take a little longer because it's involved in the military, and nothing happens quickly. And the other one is within our service end. So we might have some data relatively soon.

Okay. Also, what kind of -- do you have any ideas on what kind of role SteraMist could play in PFAS and PFOS treatment?

Again, if we were a much larger company, we could focus on that. I know it's a big, big industry, and it's a big problem in the world. I think a lot has to do with soil and plants and of course, water and air contaminants. They're finding these traces everywhere in humans and everything. So it's a big issue, and we're -- again, we're wearing a lot of hats within the size of our company and doing as much as we can. But we're still looking into it.

Okay. And at the -- also from the year-end call, you mentioned the U.S. Department of Biological Select Agents and Toxins Biorisk Program Office completed a study, which demonstrated SteraMist as an effective technology for decontaminating biological toxoid. And my question is, might this possibly lead to -- down the road to government stockpiling of SteraMist dispensers and solution for emergency purposes?

It sure could, if they thought like you and I are thinking now. We just -- when did we say that we said that at the last -- the end of last year?

Yes. It was in the call last year from the Q4 call.

So this is May. We just finally and thank goodness to them, received the final signed off paper and certification that happened this week.

Okay.

Like I said, patience is a virtue.

Any updates on SteraMist's use for food produce, hospital cleaning or you've mentioned the data centers. Also semiconductor plants?

Not anything other than what I just mentioned. So we are still -- we renewed an agreement with USDA to continue their research in some specific targeted areas that we're interested in. And they are -- and they always come up with some really good papers, which you can pick up on the web, and any listeners can go ahead and review on food safety and pathogen killed. We're also going to be working with them further on residuals and applications in other areas of the food supply. We're getting a lot of interest in food safety, as I think we should. I'm just -- I read a paper today that Bill Gates is spending $26 million to control farts and burps from cows. So I think that we could hook them all up with SteraPak and figure out that...

Okay.

[indiscernible].

Have you had any inquiries from any companies about treating animals with the -- or I should say, animals or their environments to prevent bird flu?

We are getting some interest, and we are marketing that because I believe that we can help with the control of avian flu and possibly prevent the culling of millions and millions of birds if they follow a protocol using our product. And my whole stance has been about these avian flus, which have been going on for years, especially this H5N1, has been that if they're going to cull all these animals, why don't they try something that may help them survive? And I think that's -- eventually, somebody will come up and say, yes, let's go ahead and do a program and experiment in this area.

At this time, I would like to turn the call back to management for any further remarks.

I just want to thank everybody for joining today and thank Nick for his support and everything he's done for the company. With that, I say good night.

This concludes today's TOMI Environmental Solutions First Quarter 2024 Financial Results Conference Call. Thank you for attending. Have a wonderful rest of your day.