TOMI Environmental Solutions, Inc. (NASDAQ:TOMZ) Q2 2021 Results Conference Call August 16, 2021 4:30 PM ET Company Participants John Nesbett - IMS Investor Relations Dr. Halden Shane - Chairman and CEO Nick Jennings - CFO Operator 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 ...

or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 Commission File Number: 000-09908 TOMI ENVIRONMENTAL SOLUTIONS, INC. (Exact name of registrant as specified in its charter) (State or other juri ...

TOMI Environmental Solutions, Inc. (NASDAQ:TOMZ) Q1 2021 Results Conference Call May 17, 2021 4:30 PM ET Company Participants John Nesbett - IMS Investor Relations Dr. Halden Shane - Chairman and CEO Nick Jennings - CFO Operator Good day, ladies and gentlemen, and welcome to the TOMI Environmental Solutions Inc., First Quarter 2021 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the present ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 000-09908 TOMI ENVIRONMENTAL SOLUTIONS, INC. (Exact name of registrant as specified in its charter) Florida 59-1947988 ...

Financial Data and Key Metrics Changes - In 2020, the company achieved record revenues of $25 million, a significant increase of 297% compared to $6.3 million in 2019 [7][19] - Net profit for 2020 was $4.4 million, or $0.23 per diluted share, compared to a net loss of $2.3 million in the previous year [7][20] - Adjusted EBITDA for 2020 was $8.4 million, with an adjusted EBITDA margin of 33%, compared to an adjusted EBITDA loss of $1.2 million in 2019 [20] - For Q4 2020, total net revenue was $3.7 million, up 95% from $1.9 million in Q4 2019 [21] - Gross margins for 2020 were 60.1%, slightly down from 61.7% in 2019, attributed to product mix [20] Business Line Data and Key Metrics Changes - The healthcare division saw significant purchases, including multiple units by various healthcare systems, indicating strong demand for SteraMist products [26][30] - The life sciences division maintained strong performance, with SteraMist being implemented in pharmaceutical manufacturing and COVID-19 vaccine production [38] - The commercial division expanded its customer base, including emergency services and educational institutions, highlighting the versatility of SteraMist applications [51][56] Market Data and Key Metrics Changes - The COVID-19 pandemic has heightened the demand for disinfection solutions, leading to increased sales and brand recognition for SteraMist [12][66] - The company plans to expand its international presence, establishing service centers in Europe and Southeast Asia to capture global market opportunities [80] Company Strategy and Development Direction - The company is focused on long-term growth rather than short-term performance, aiming to establish SteraMist as the industry standard for disinfection [14][67] - Plans for 2021 include launching multiple new products and targeting a revenue growth of 40% to 45% compared to 2020 [15][68] - The company is investing in R&D to enhance its technology and expand its product offerings, including the development of the SteraBot and SteraPack [76][69] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of preparedness for future pandemics and the ongoing demand for effective disinfection solutions [63][64] - The company is optimistic about continued growth in market share and brand awareness, supported by a strong customer referral network [68][70] Other Important Information - The company has filed for new IP protections to secure its technology and is actively pursuing opportunities in the food safety industry [9][46] - SteraMist technology has been recognized for its effectiveness against various pathogens, including MRSA and COVID-19, positioning the company as a leader in the disinfection market [11][66] Q&A Session Summary Question: Insights on the razor, razor blade model and margins - Management indicated that margins from SteraMist BIT solution sales are stronger than those from equipment sales, with expectations for solution revenue to increase as more machines are deployed [72][73] Question: Future R&D spending - Management plans to increase R&D spending to develop new applications and products, including the CES and SteraPack [76] Question: Pricing of the SteraPack and international expansion plans - The SteraPack is expected to be competitively priced around $6,000, and the company is actively working on expanding its international presence through service centers and product registrations [79][80]

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) TOMI Environmental Solutions, Inc. is a global company specializing in bacteria decontamination and infectious disease control, leveraging its patented SteraMist® Binary Ionization Technology (BIT™) for surface decontamination across five key divisions - The company's primary product is SteraMist®, a decontamination solution using patented Binary Ionization Technology (BIT™) with a **7.8% hydrogen peroxide base** to create an ionized Hydrogen Peroxide (iHP™) fog[14](index=14&type=chunk)[15](index=15&type=chunk) - SteraMist® holds multiple EPA registrations, including for hospital-healthcare use, mold control, and effectiveness against pathogens like C. difficile spores, MRSA, Norovirus, and SARS-CoV-2 (List N)[16](index=16&type=chunk) - The business is structured into five key market divisions: Hospital-HealthCare, Life Sciences, TOMI Service Network (TSN), Food Safety, and Commercial[38](index=38&type=chunk) - Manufacturing of SteraMist® equipment and blending of its BIT™ Solution are outsourced to ISO9001 and EPA-approved third-party companies, respectively, with TOMI retaining sole distribution and creative control[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) [Our Technology and Products](index=5&type=section&id=Our%20Technology%20and%20Products) TOMI's core Binary Ionization Technology (BIT™) activates hydrogen peroxide into an ionized fog (iHP™) for non-corrosive, residue-free pathogen kill, offered through various SteraMist® product units - BIT™ technology was developed with funding from DARPA to combat weaponized anthrax and works by creating hydroxyl radicals (.OH) from a **7.8% hydrogen peroxide solution** via a cold plasma arc[18](index=18&type=chunk)[19](index=19&type=chunk) - Key product offerings include the SteraMist® Surface Unit (handheld), SteraMist® Environment System (whole room), SteraMist® Select Surface Unit (smaller enclosures), and Custom Engineered Systems (permanent installations)[26](index=26&type=chunk)[28](index=28&type=chunk)[31](index=31&type=chunk)[34](index=34&type=chunk) - The technology achieves a **6-log (99.9999%) kill rate** against pathogens, including bacterial spores, viruses like MERS and SARS-CoV-2, and is validated against Geobacillus stearothermophilus, a sterilization gold standard[15](index=15&type=chunk)[22](index=22&type=chunk)[24](index=24&type=chunk) [Industries & Market Segments](index=9&type=section&id=Industries%20%26%20Market%20Segments) TOMI targets five key market segments: Hospital-HealthCare, Life Sciences, TOMI Service Network (TSN), Food Safety, and Commercial, providing high-level decontamination solutions - The TOMI Service Network (TSN) has grown to **200 partner companies** across the United States and Canada, specializing in remediation and biohazard services[44](index=44&type=chunk) - The Hospital-HealthCare division aims to reduce HAIs, leveraging the fact that SteraMist® can provide a return on investment of up to **20-to-1** in the first year by preventing costly infections[40](index=40&type=chunk) - The Life Sciences division provides decontamination solutions for highly regulated environments such as pharmaceutical manufacturing, vivariums, and biological safety labs (BSLs)[41](index=41&type=chunk)[42](index=42&type=chunk) - The company is seeking FDA and USDA approval to expand its Food Safety applications to include direct contact with food products[46](index=46&type=chunk) [Intellectual Property, Marketing, and Competition](index=10&type=section&id=Intellectual%20Property%2C%20Marketing%2C%20and%20Competition) TOMI protects its SteraMist® technology with a robust portfolio of patents and trademarks, markets through direct sales and distributors, and competes on speed, efficacy, and material compatibility - The company holds a strong IP portfolio with over **20 utility patent applications**, **32 design patents**, and **178 trademarks** registered or pending globally as of March 1, 2021[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Key competitors include Steris Corporation, Bioquell (Ecolab), The Clorox Company, and various ultraviolet and chemical-based decontamination companies[62](index=62&type=chunk) - SteraMist®'s competitive advantages are cited as speed (e.g., **5 seconds per square foot**), high efficacy (**6-log kill**), superior material compatibility (safe on electronics), and ease of use (no wipe, no rinse, no residue)[68](index=68&type=chunk)[69](index=69&type=chunk) - The company expanded its sales leadership in late 2020 and early 2021 by hiring new Vice Presidents of Sales for its commercial, life sciences, and food safety divisions[60](index=60&type=chunk) [Research & Development and Employees](index=14&type=section&id=Research%20%26%20Development%20and%20Employees) The company actively invests in research and development to enhance its patented technologies and employed 29 full-time staff as of March 1, 2021 Research & Development Expenses | Fiscal Year | R&D Expense | | :--- | :--- | | 2020 | $455,000 | | 2019 | $341,000 | - As of March 1, 2021, the company had **29 full-time employees** in the United States[73](index=73&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including a history of losses, uncertainty in sustaining COVID-19 driven profitability, heavy reliance on the SteraMist® brand, intense competition, and potential shareholder dilution - The company achieved profitability in 2020 with a **net income of $4.4 million**, but had a history of losses, including a **$2.3 million net loss in 2019**, and an accumulated deficit of **$39.1 million** as of December 31, 2020[75](index=75&type=chunk) - A significant risk is that the 2020 increase in net income was largely driven by a spike in demand from the COVID-19 pandemic, which may not be sustainable post-pandemic[82](index=82&type=chunk) - The business is almost completely dependent on the success of its SteraMist® family of products, making it vulnerable to market acceptance issues, competition, and manufacturing disruptions[84](index=84&type=chunk) - The company faces significant competition from larger, more established companies like Steris, Bioquell (Ecolab), and Clorox, which have greater financial and marketing resources[104](index=104&type=chunk) - As of December 31, 2020, there were outstanding options, warrants, and convertible preferred stock to purchase an aggregate of approximately **2.2 million shares of common stock**, posing a risk of dilution to existing shareholders[125](index=125&type=chunk) [Item 1B. Unresolved Staff Comments](index=24&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments [Item 2. Properties](index=24&type=section&id=Item%202.%20Properties) The company operates from a 9,000 square foot leased headquarters in Frederick, MD, and a smaller month-to-month office in Beverly Hills, CA - The main U.S. headquarters is a **9,000 sq. ft. facility** in Frederick, MD, under a 10-year lease with an annual rent of approximately **$147,000**[136](index=136&type=chunk) - A smaller **300 sq. ft. office** is leased month-to-month in Beverly Hills, CA, for an annual cost of **$29,000**[137](index=137&type=chunk) [Item 3. Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - As of the report date, the company is not involved in any legal proceedings that would have a material adverse effect on its financial condition or operations[138](index=138&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report Part II [Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is traded on the Nasdaq Capital Market under the symbol "TOMZ", with **227 record holders** and an estimated **6,000 total stockholders** as of March 29, 2021, and no anticipated cash dividends - The company's common stock is listed on the Nasdaq under the ticker symbol "**TOMZ**"[142](index=142&type=chunk) - As of March 29, 2021, there were **227 record holders** and approximately **6,000 beneficial stockholders**[142](index=142&type=chunk) - The company has a policy of retaining all earnings and does not anticipate paying cash dividends[143](index=143&type=chunk) [Item 6. Selected Financial Data](index=26&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not required for smaller reporting companies [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 2020 financial turnaround to the COVID-19 pandemic, driving a **294% revenue increase to $25.0 million** and a **net income of $4.4 million**, strengthening the balance sheet, and planning for post-pandemic growth with a **$40 million 2021 revenue budget** FY 2020 vs. FY 2019 Performance | Metric | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Revenue, Net** | $25,028,000 | $6,347,000 | $18,681,000 | 294% | | **Gross Profit** | $15,043,000 | $3,914,000 | $11,129,000 | 284% | | **Income (Loss) from Operations** | $4,509,000 | ($2,083,000) | $6,592,000 | N/M | | **Net Income (Loss)** | $4,391,000 | ($2,297,000) | $6,689,000 | N/M | - The company's 2021 budgeted revenue goal is approximately **$40 million**, driven by the return to work of clients and new product introductions[182](index=182&type=chunk) - A new, lower-cost SteraPack™ backpack unit is planned for a global launch in Q2 2021, with a sales budget of **2,000 units** for the year[186](index=186&type=chunk) - In March 2020, **$4.5 million of convertible notes** were converted into common stock, significantly deleveraging the balance sheet[248](index=248&type=chunk) [Business Highlights and Recent Events](index=29&type=section&id=Business%20Highlights%20and%20Recent%20Events) In 2020, TOMI executed a **1-for-8 reverse stock split**, uplisted to Nasdaq, saw a **363% increase in new customers** due to COVID-19, expanded internationally, and is developing new products like the SteraPack™ and SteraBot™ - The company effected a **1-for-8 reverse stock split** on September 10, 2020, and began trading on the Nasdaq on October 1, 2020[169](index=169&type=chunk) - Added approximately **250 new customers** in 2020, a **363% increase** over 2019, driven by the COVID-19 pandemic[174](index=174&type=chunk) - Received official registration with the China CDC and saw significant deployment of SteraMist® internationally to combat COVID-19 in countries like the UK, Singapore, South Korea, and Israel[196](index=196&type=chunk)[197](index=197&type=chunk) - New products in development for 2021 launch include the SteraBot™ (autonomous disinfection robot), SteraPack™ (portable backpack unit), and SteraBox (decontamination chamber)[215](index=215&type=chunk)[217](index=217&type=chunk)[220](index=220&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) For the year ended December 31, 2020, net revenue surged **294% to $25.0 million**, driven by pandemic-related demand, with gross profit rising **284% to $15.0 million**, despite a **76% increase in operating expenses** due to higher equity compensation Revenue by Source (2020 vs. 2019) | Revenue Source | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | SteraMist Product | $22,971,000 | $4,999,000 | $17,972,000 | 360% | | Service and Training | $2,057,000 | $1,348,000 | $709,000 | 53% | | **Total** | **$25,028,000** | **$6,347,000** | **$18,681,000** | **294%** | Revenue by Geographic Region (2020 vs. 2019) | Region | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States | $18,367,000 | $5,002,000 | $13,365,000 | 267% | | International | $6,661,000 | $1,345,000 | $5,316,000 | 395% | | **Total** | **$25,028,000** | **$6,347,000** | **$18,681,000** | **294%** | - Gross profit margin was **60.1% in 2020**, a slight decrease from **61.7% in 2019**, attributed to a change in product sales mix[231](index=231&type=chunk) - Equity compensation expense increased dramatically to **$3,131,000 in 2020** from **$114,000 in 2019**, primarily due to the timing of warrant grants to executives[239](index=239&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity significantly improved in 2020, with cash and cash equivalents reaching **$5.2 million** and working capital increasing to **$11.5 million**, driven by **$4.6 million in cash from operations** and debt-to-equity conversion Key Balance Sheet and Liquidity Metrics | Metric | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,199,000 | $897,000 | | Working Capital | $11,503,000 | ($1,266,000) | | Total shareholders' equity | $13,203,000 | $890,000 | Cash Flow Summary (FY 2020 vs. FY 2019) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $4,578,000 | ($814,000) | | Net Cash Used in Investing Activities | ($401,000) | ($293,000) | | Net Cash from Financing Activities | $124,000 | $0 | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required for smaller reporting companies [Item 8. Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the full financial statements and supplementary data, which are included in Part IV, Item 15 of the report, beginning on page F-1 [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=46&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure [Item 9A. Controls and Procedures](index=46&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of the end of the fiscal year, with no material changes during the most recent quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year[295](index=295&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of the end of the fiscal year[299](index=299&type=chunk) [Item 9B. Other Information](index=47&type=section&id=Item%209B.%20Other%20Information) The company reports no other information Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=48&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's executive team is led by Chairman and CEO Dr. Halden S. Shane, COO Elissa J. Shane, and CFO Nick Jennings, with a five-member Board of Directors and an Audit Committee chaired by Kelly J. Anderson Executive Officers and Directors | Name | Age | Position | | :--- | :--- | :--- | | Halden S. Shane | 76 | Chief Executive Officer and Chairman of the Board | | Elissa J. Shane | 41 | Chief Operating Officer | | Nick Jennings | 43 | Chief Financial Officer | | Harold W. Paul | 72 | Director, Secretary | | Walter C. Johnsen | 70 | Director | | Kelly J. Anderson | 53 | Director | | Lim Boh Soon | 65 | Director | - A family relationship exists within the executive team: COO Elissa J. Shane is the daughter of CEO Dr. Halden S. Shane[312](index=312&type=chunk) [Item 11. Executive Compensation](index=50&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for 2020 was heavily weighted towards equity awards, with CEO Halden S. Shane receiving approximately **$3.24 million** in total compensation, including **$2.84 million from warrant awards** 2020 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option/Warrant Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Halden S. Shane, Chairman and CEO | 2020 | 400,833 | — | 2,835,090 | 3,235,923 | | Elissa J. Shane, COO | 2020 | 226,083 | 40,000 | 226,950 | 506,533 | | Nick Jennings, CFO | 2020 | 165,225 | 50,000 | 24,846 | 240,071 | - CEO Halden S. Shane's employment agreement, effective October 1, 2020, provides for a base salary of **$500,000** and a signing bonus of **375,000 warrants**[326](index=326&type=chunk) - Non-employee directors receive an annual cash fee of **$40,000** (**$45,000** for the Audit Committee chair) and an annual stock award[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=56&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 5, 2021, executive officers and directors as a group beneficially own approximately **26.7%** of common stock, with CEO Halden S. Shane controlling **21.9% of total voting power**, and the 2016 Equity Incentive Plan was amended to authorize **2,000,000 shares** for issuance - As of March 5, 2021, executive officers and directors as a group beneficially owned approximately **26.7%** of the outstanding common stock[341](index=341&type=chunk) - CEO Halden S. Shane beneficially owned **21.6%** of the common stock and **100%** of the Series A Preferred Stock, controlling **21.9%** of the total voting power[341](index=341&type=chunk) - The 2016 Equity Incentive Plan was amended to authorize a total of **2,000,000 shares** of common stock for issuance[337](index=337&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=58&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company reported no transactions with related persons, and the Board has determined that four of its five members are independent directors - The company reported no related person transactions[343](index=343&type=chunk) - The Board has determined that four of its five members are independent[344](index=344&type=chunk) [Item 14. Principal Accounting Fees and Services](index=58&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The company's independent registered public accounting firm, Wolinetz, Lafazan & Company, P.C., billed aggregate fees for services rendered in fiscal years 2020 and 2019, all pre-approved by the Audit Committee Accountant Fees | Fee Type | 2020 | 2019 | | :--- | :--- | :--- | | Audit Fees | $138,000 | $122,000 | | Audit-Related Fees | — | — | | Tax Fees | — | — | | All Other Fees | — | — | | **Total** | **$138,000** | **$122,000** | Part IV [Item 15. Exhibits and Financial Statement Schedules](index=59&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K, including the financial statements, which begin on page F-1, and an index of all exhibits filed with the report [Financial Statements](index=63&type=section&id=Financial%20Statements) The audited consolidated financial statements for 2020 and 2019 show a significant improvement in financial health, with **net income of $4.4 million** in 2020 compared to a **net loss of $2.3 million** in 2019, driven by asset growth and liability reduction Consolidated Balance Sheet Summary | Metric | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Assets | $16,769,885 | $8,225,467 | | Total Liabilities | $3,567,311 | $7,335,924 | | Total Shareholders' Equity | $13,202,574 | $889,543 | Consolidated Statement of Operations Summary | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Sales, net | $25,027,637 | $6,347,160 | | Gross Profit | $15,042,591 | $3,913,917 | | Net Income (loss) | $4,391,166 | ($2,297,733) | - The auditor's report from Wolinetz, Lafazan & Company, P.C. identified Revenue Recognition as a Critical Audit Matter due to the significant management judgment involved in identifying performance obligations in customer contracts[371](index=371&type=chunk)[373](index=373&type=chunk)

TOMI Environmental Solutions, Inc. (NASDAQ:TOMZ) Q3 2020 Earnings Conference Call November 12, 2020 4:30 PM ET Company Participants Halden Shane - Chairman and CEO Nick Jennings - CFO Conference Call Participants Operator 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 CFO. Dr. Shane will provide an overview of recent business highlights and discuss critic ...

[PART I FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the period ended September 30, 2020, reflect significant growth, with total assets doubling and a shift from net loss to net income Condensed Consolidated Balance Sheet Highlights | Balance Sheet Items | September 30, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $14,631,624 | $5,035,811 | | **Total Assets** | $17,576,549 | $8,225,467 | | **Total Current Liabilities** | $2,940,142 | $6,301,511 | | **Total Liabilities** | $4,325,153 | $7,335,924 | | **Total Shareholders' Equity** | $13,251,396 | $889,543 | Condensed Consolidated Statement of Operations Highlights | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Sales, net** | $4,291,589 | $1,600,387 | $21,373,504 | $4,491,719 | | **Gross Profit** | $2,836,021 | $1,140,379 | $12,888,924 | $2,875,039 | | **Income (loss) from Operations** | $1,096,328 | $(187,586) | $7,412,397 | $(1,590,948) | | **Net Income (loss)** | $1,019,300 | $(236,813) | $7,295,478 | $(1,756,050) | | **Diluted EPS** | $0.05 | $(0.02) | $0.40 | $(0.11) | Condensed Consolidated Statement of Cash Flows Highlights (Nine Months Ended) | Cash Flow Activity | September 30, 2020 | September 30, 2019 | | :--- | :--- | :--- | | **Net Cash Provided by (Used in) Operating Activities** | $4,944,535 | $(572,533) | | **Net Cash Used in Investing Activities** | $(50,574) | $(288,331) | | **Net Cash Provided by Financing Activities** | $94,200 | $0 | | **Increase (Decrease) In Cash and Cash Equivalents** | $4,988,160 | $(860,864) | - In March 2020, convertible notes with a principal balance of **$4,500,000** were converted into **1,041,667 shares** of common stock, and the remaining **$500,000** was repaid in cash[108](index=108&type=chunk) - On September 10, 2020, the company effected a **1-for-8 reverse stock split** of its common and Series A Preferred Stock, with all share and per-share amounts retroactively restated[112](index=112&type=chunk) - Subsequent to the quarter end, on October 1, 2020, the company's stock commenced trading on the **NASDAQ Capital Market**[158](index=158&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes significant revenue growth to increased global demand for SteraMist® products, driven by the COVID-19 pandemic, leading to improved financial position [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Total revenue surged by 376% to $21.4 million for the nine months ended September 30, 2020, driven by product sales, leading to a significant turnaround in operating income Revenue Performance (Nine Months Ended Sep 30) | Revenue Category | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **SteraMist Product** | $19,557,000 | $3,461,000 | $16,096,000 | 465% | | **Service and Training** | $1,817,000 | $1,031,000 | $786,000 | 76% | | **Total Revenue** | **$21,374,000** | **$4,492,000** | **$16,882,000** | **376%** | Geographic Revenue (Nine Months Ended Sep 30) | Region | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **United States** | $15,437,000 | $3,852,000 | $11,585,000 | 301% | | **International** | $5,937,000 | $640,000 | $5,297,000 | 828% | | **Total** | **$21,374,000** | **$4,492,000** | **$16,882,000** | **376%** | - Gross profit margin for the nine months ended September 30, 2020, was **60.3%**, down from **64.0%** in the prior year period, attributed to product mix in sales[212](index=212&type=chunk) - Selling expenses for the nine months decreased by **23%** to **$980,000**, primarily due to a revision of the sales department and reduced tradeshow costs from the COVID-19 pandemic[219](index=219&type=chunk)[220](index=220&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2020, the company's liquidity significantly improved, with cash and working capital increasing, driven by operational cash flow and debt conversion Working Capital Comparison | Metric | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $5,885,000 | $897,000 | | **Working Capital** | $11,691,000 | $(1,266,000) | - For the nine months ended September 30, 2020, the company generated **$4.9 million** in cash from operating activities, a significant reversal from the **$573,000** used in operations during the same period in 2019[238](index=238&type=chunk)[240](index=240&type=chunk) - Financing activities provided **$94,000** in cash, resulting from a **$411,000** PPP loan and **$184,000** from warrant/option exercises, offset by a **$500,000** repayment of a convertible note[242](index=242&type=chunk) - Management believes that existing cash balances and cash generated from operations will be sufficient to cover capital expenditures and operational needs for the next twelve months[246](index=246&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a **smaller reporting company**, TOMI Environmental Solutions, Inc. is exempt from the requirement to disclose quantitative and qualitative information about market risk[283](index=283&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2020, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were **effective**[284](index=284&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[286](index=286&type=chunk) [PART II OTHER INFORMATION](index=56&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings that would adversely affect its financial condition - As of the filing date, the company is **not involved in any material legal proceedings**[290](index=290&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) The company faces multiple risks including sustainability of recent profitability, product dependence, supply chain issues, and intense competition - The company has a **history of net losses**, and its recent profitability, largely due to increased demand from the COVID-19 pandemic, may **not be sustainable**[291](index=291&type=chunk)[298](index=298&type=chunk) - The business is almost **completely dependent** on the success of its **SteraMist® family of products**[301](index=301&type=chunk) - The company relies on a **few key customers** for a significant portion of its revenue; one customer accounted for **11% of net revenue** for the nine months ended September 30, 2020[303](index=303&type=chunk) - Reliance on **third-party contractors** for manufacturing increases risks related to supply, cost, and quality control[311](index=311&type=chunk) - The company faces **significant competition** from larger, more established companies in the disinfection and decontamination industry, such as Steris, Bioquell (Ecolab), and Clorox[321](index=321&type=chunk) [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) The company entered new three-year employment agreements with its CEO and COO, effective October 1, 2020, including base salaries and warrant bonuses - A new three-year employment agreement with CEO Halden S. Shane, effective October 1, 2020, provides an annual base salary of **$500,000** and a signing bonus of **375,000 warrants** exercisable at **$6.17 per share**[359](index=359&type=chunk) - A new three-year employment agreement with COO Elissa J. Shane, effective October 1, 2020, provides an annual base salary of **$270,000** and a signing bonus of **93,750 warrants** exercisable at **$6.17 per share**[360](index=360&type=chunk) [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including employment agreements for the CEO and COO, and required certifications - The exhibits filed with this report include **new employment agreements** for the CEO and COO, along with required **SOX 302 and 906 certifications**[362](index=362&type=chunk)[368](index=368&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 TOMI ENVIRONMENTAL SOLUTIONS, INC. FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 000-09908 (Exact name of registrant as specified in its charter) (State or other juri ...

TOMI Environmental Solutions, Inc. (NASDAQ:TOMZ) Q2 2020 Results Earnings Conference Call August 13, 2020 4:30 PM ET Company Participants Dr. Halden Shane - Chairman and CEO Nick Jennings - Chief Financial Officer Conference Call Participants Operator 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, who will provide an overview of recent business highlights for the most recent quart ...