Good afternoon, welcome to the TOMI Environmental Solutions, Inc. Second Quarter 2025 Financial Results Conference Call. Please note, this conference is being recorded. I will now turn the conference over to your host, John Nesbett of IMS Investor Relations. John, the floor is yours.

Good afternoon. Thank you for joining us today for the TOMI Environmental Solutions Investor Update Call. On today's call is TOMI's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane; E. J. Shane; TOMI's Chief Operating Officer; and David Vanston, TOMI's Chief Financial Officer. A telephone replay of today's call will be available through August 28, and the details of which are included in the company's press release dated August 14, 2025. A webcast replay will also be available at TOMI's website, www.steramist.com. 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 our 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. I will now turn the call over to TOMI's Chief Executive Officer and Chairman of Board, Dr. Halden Shane. Please go ahead.

Thank you, John, and good afternoon, everyone, and thank you for joining the TOMI Environmental earnings call for the second quarter of 2025. We are making significant advances at TOMI and remain dedicated to achieving our goals for the year and beyond. With the second quarter behind us, we are encouraged by our recent momentum and believe it positions us well for the third quarter and the remainder of the year. At this time, we remain optimistic about maintaining this positive trajectory in the back half of 2025. During the second quarter, we completed several key projects that we believe will drive revenue growth. As of August 7, the combined total recognized revenue, deferred revenue and sales order backlog was approximately $4.6 million with active projects on schedule for delivery in 2025. In addition, we are negotiating approximately $2 million in new custom and integrated contracts with bids expected to close prior to year-end. As of the date of this report, our open opportunities for our three product offerings for the Custom Engineered System, or CES, the Hybrid Solutions and SteraMist SIS totaled approximately $15 million of which $7 million are designated as high priority. High priority opportunities are those with which we are actively engaged through ongoing discussions on specifications, submitted formal proposals or pursuits via established contractor relationships. All of this, which EJ, our COO, will talk in more detail shortly. In the second quarter of 2025, our total recognized and deferred revenue reached approximately $1.8 million. With recognized revenue for the quarter exceeding $1 million, our service revenue from both the iHP service deployments and validation support services grew by an impressive 33% compared to the same period last year and by 46% over the first six months. Our iHP corporate service revenue is primarily generated from our long-term customers for the second quarter, along with other clients that have now become regular contributors ordering from us almost quarterly. Additionally, we have a new customer with whom we have a pending contract following their upcoming job scheduled for this month, which will be their second order from us this year. Our select clients include many platinum clients. Most of these are ranked in the top 10 list of companies within their specific industry and market. As the CEO of this company, I am very impressed by this list of platinum customers. That is clearly why we won an award as being the best disinfection decontamination product in the world. To maintain our momentum in BIT Solutions sales, we are committed to expanding our customer outreach through targeted marketing strategies and strategic partnerships. We are also focused on educating the market about the critical importance of proactive disinfection through our SteraMist Pro Certified program and enhancing our training materials within our learning management system. Year-to-date, we have seen a 40% increase in this solution sales. And we anticipate this growth will continue, especially as we expect repeat orders from customers during the latter half of the year. Years ago, we developed this model, and it is starting to bear its fruits as the solution is our razor blade in relationship to our razor-razor blade model. Our solution is the key to our model and has the highest of margins. In the second quarter, we successfully validated the NASA project, which is now operational. We are collaborating with the Space Center on writing a publication, and early approval to do so is promising. We remain optimistic about the sales trends for the remainder of the year across our BIT Solution, SteraMist Integrated Systems, SIS platform and our offered services, both deployment and support along with our Custom Engineered System, or CES. The quarter began on a strong note, marked by a significant win for our SIS platform, totaling over $180,000 for a university with delivery scheduled for September. Our egg white manufacturing customer from the food industry continues to make device purchases as we welcome new opportunities from a servicing franchise that began purchasing our equipment in the first quarter and continued with additional orders in the second quarter. Notably, three of their servicing locations are now utilizing SteraPak, and we are in ongoing discussions to expand in other locations across the United States. Additionally, the USDA increased its usage of SteraMist in the second quarter, and we concluded the quarter with another SIS collaboration with a material handling equipment supplier in Illinois. The breadth of these orders demonstrates our success in developing strong and varied relationships across multiple industry verticals. And as of June 12, SteraMist was recognized as the Disinfection and Decontamination Products Company of the Year for 2025. I will now hand the call over to our new Chief Financial Officer, and please officially welcome David Vanston, who will provide a brief overview of our financial results for the second quarter of 2025 compared to the same period last year. David?

Thank you, Dr. Shane. In the second quarter of 2025, our revenue was $1.031 million, a decline from $3 million in quarter 2 '24, representing a 66% decrease in sales. This was primarily driven by customers deferring capital expenditure product projects in our product sales, mainly due to the uncertain economic environment with the impact of announced and implemented tariffs on their supply chains and long-term planning. This is illustrated as this was not a factor in the second quarter of 2024, which had higher sales in mobile equipment of approximately $1 million and our Custom Engineered Systems, or CES, of approximately $0.5 million. As Dr. Shane referenced, the service-based revenue for the three months ended June 30, 2025, was $378,000, an increase of 33% over the same period last year. The service-based revenue for the six months was $955,000, representing an increase of $299,000 or 46% compared to the same period last year. This increase in service revenue was due to increased demand from our current and new life science customers, expansion of services in additional industries served by our products and more stringent related procedures, resulting in quotes of a 35% increase year-over-year, leading to expectations of continuing higher growth in the second half of the year. For the three months ended June 30, '25, our gross margin as a percentage of sales improved to 66%, up from 62% in the same quarter last year. The improved gross margins were attributable to our product mix in sales, including higher sales of solution and service offerings in the three months ended June '25, compared to the same period last year. For the three months ended June 30, '25, we experienced an operating loss of approximately $1.1 million compared to an operating income of $120,000 in the same period last year. Our net loss for the three months ended June 30, '25 was approximately $1.28 million or $0.06 per basic and diluted share compared to a net income of $30,000 or $0.00 per basic and diluted share in the same period last year. As of June 30, '25, our financial position includes cash and cash equivalents of approximately $569,000, working capital of $2.8 million and shareholders' equity of $2.7 million. I will now turn over the call to our Chief Operating Officer, EJ Shane, to discuss upcoming business highlights. EJ?

Thank you, David. We have several active projects on schedule for delivery by the end of the year, and we are currently negotiating an additional $2 million in our custom and integrated contracts with bids expected to close before the year-end. In March this year, we announced our first formal OEM partnership with PBSC, a leading manufacturer specializing in high-containment, material decontamination and clean room solutions. This collaboration has proven to enhance our SteraMist Integrated System, or SIS product offerings. Further, in our last call, I provided an in-depth explanation between the Custom Engineered Systems, or CES, and the SteraMist Integrated System, or SIS. In summary, both offerings consist of custom and integrated solutions that are increasingly becoming more turnkey with each new success. As we continue to collaborate with our established manufacturing partners such as PBSC for the many types of enclosures in this industry, I anticipate a smoother and faster delivery process in the years ahead. We recently announced a new win for our SIS platform with a university located in Miami. This contract is not with PBSC; instead, it represents a second engagement with a different manufacturing partner that previously collaborated with us on a delivery to a university in Virginia earlier this year. This progression demonstrates our expanding partner network and continuing momentum across academic deployments with this strategy. Regarding our pipeline for these two product offerings and the hybrid, we continue to see growth. As of June 30, 2025, bids range from approximately $105,000 to $1.8 million, an increase from the previous call at $800,000, with a total of $7 million in active opportunities for our hybrid, the SIS, and CES. We have seen an increase in our service pipeline with the number of quotes for services up approximately 35% year-over-year across both the Life Sciences and Food Safety divisions. This surge in demand will play a crucial role in supporting our future revenue growth. An example, we renewed a collaboration with the United States Army Medical Research Institute of Infectious Diseases, a premier DoD biomedical research and biodefense facility. This quarter, we have secured a pipeline of four weeks' worth of decontamination service engagements. Facing capital equipment constraints, we are jointly developing a scalable solution to fully replace their current archaic methods. The U.S. Army operates BSL-3 and BSL-4 facilities and collaborates with military and civilian agencies. Their objective is to implement SteraMist in newer spaces, expanding our addressable market and validating our technology in high-containment environments. Furthermore, we have observed a shift in the clients held within our service provider network seeking to partner with us. These new partners are strategic and come with growth plans. The SteraMist Pro Certified program and our referral database have significantly contributed to this transformation in our client base. We expect to be onboarding a group with a strong remediation and government background that has already secured a bid in the health care sector. We are excited to provide support for the substantial project, which will require multiple systems and is set for September of this year. We are also experiencing a surge in opportunities from our distributors, including ARES Distribution on the East Coast, Advanced Wear Sciences in the United States and various players in the agricultural sector, all of whom are acquiring new clients that could significantly influence the industry that may have a positive impact on our business operations and sales. Additionally, our long-term international partners in Germany, the Netherlands and Italy have developed strong pipelines, pending our final EU and U.K. registration approvals over the past few months; the agencies in Europe have taken a more active approach in their reviewing of our submissions, so we have some confidence about the approvals being received very shortly. Our Food Safety division is expanding significantly in service jobs, and we are currently in discussions with recommendations from our solely organics customer to a new client in the leafy green sector. This new customer is interested in installing similar equipment and ideally our latest SteraMist Integrated System or the SIS-SA, as the solely project with one implementation that led to the development of the program behind this new system. Additionally, we see an upcoming opportunity with a multinational food and drink processing empire that has previously made smaller purchases of SteraPak. They are now interested in expanding their order with an additional 25 units, and we will keep you updated on this progress. We're also in talks with an avocado produce wholesaler that expressed interest in partnering with us a few years ago, but regulatory hurdles held us back. We're now collaborating with them and the FDA to secure a food contact notification or FCN, which may assist us in the food safety industry to utilize SteraMist iHP. Once approved, we will be able to market our products for food contact applications to facilities that comply with this FDA regulation. Our existing customers are highly satisfied and actively using our equipment, and we're seeing increasing feedback and willingness to share their positive results. This supports future sales across multiple industries, and we are adopting a more assertive approach within the current framework. Each new customer adds value. One of our key distributor opportunities for this year is a highly regarded company whose parent organization utilizes our iHP corporate service team. They offer a selection of supplies for laboratories, life sciences, safety and facility management, including chemicals, consumables, equipment, instruments, diagnostics and more. Mobile equipment remains our most challenging segment to forecast. That said, we just secured the second order from a globally recognized leader in eye health this quarter for our SteraMist surface units, as I projected and noted on our last call. We also expect the universities to finalize deals this quarter due to year-end capital spending with several opportunities still in the pipeline for our handheld spray delivery systems. I thank you all, and we'll return the call over to Dr. Shane.

Thank you, EJ. So as we continue to focus on strengthening our infrastructure by enhancing personnel in our C-suite, management and division leaders, sales and technical expertise alongside expanding our network of global distributors. While the second quarter presented its challenges for TOMI, we are fully committed to driving growth and innovation with our dedicated team. We are focused on expanding all our divisions with many product and service offerings we now offer, and we are optimistic about the opportunities ahead. Our sales backlog is significant and encouraging, and the new sales strategy we implemented at the end of last year is demonstrating promising results. We are excited about the strategic partnerships and the increasing interest from our clients looking to enhance their operations with our solution. As we continue to navigate the regulatory landscape, we remain hopeful that upcoming registrations will make a significant impact on our growth path. We thank our new CFO, David Vanston, for his role in helping us manage personnel constraints and laying the groundwork for further support. With our emphasis on building infrastructure, enhancing our technical expertise and strengthening sales, we are confident that we are on the path to a successful second half of the year. We are constantly adding new interested investors to our company, and I want to take a moment to welcome them all, and I want to thank them for joining our mission of making the world a safer place. Our IR firm is always available for any investor to send questions, and they will forward them off to management. My takeaways from this quarter are that the solution model is starting to work. Recognized revenue was a bit disappointing, but management is energized to make the second half of the year and beat our budget. The product has been accepted by the largest companies in the world, and we are thrilled about that. Operator, let's open the call to questions.

Our first question is from Zach Thompson of Liberty Management.

So I see that solution sales increased 4% in the first half. Could you give us even at a high level, the margins that you realized in solution sales compared to the rest of the business?

Thank you, Zach. We were very excited about our solution sales, and we are extremely excited about it going forward from what we can see. That's our model and more equipment that we get out there; obviously, solution sales go up. It has high margins, solution sales. And we're very happy about that, and it has shown by increasing our gross margins to 66% this quarter in light of everything else. But thank you so much for that question.

Our next question is coming from John Nelson, who's a private investor.

The Trump strategy in bringing back pharma manufacturing to the United States. Can you talk a little bit about what that kind of opportunity might be for your company?

That's a great question, John. It's amazing to tell you the truth. First of all, the regulatory standards are very high, and we need them all. And with the new plants that they're building, the ones that have been closed that they're taking over and with all the new opportunities for business in America, I think that it's going to open up a whole bunch of opportunities for us going forward. Many of these large companies are aware of our product. And I think that over the next couple of years, we should be getting tremendous orders from them. We're hoping that we're going to be able to get into the ground floor of a lot of these new facilities that they're starting to build and break ground on. And that's not the only industry. There are many others. I mean the whole server industry and the microchip industry and so much more that's going to need a successful decontamination process that's quick and doesn't create a lot of caustic problems with their equipment and doesn't have to be wiped, et cetera, is just opening up a whole avenue of places for us.

Okay. And second question is, are any of the specific customers that had deferred CapEx projects in the second quarter come back and notified you that they're moving ahead with any of these projects?

I believe so. Let me refer that to either David or EJ and let them answer it.

I'll help you with that, John. If you examine our customer deposits, you'll notice a significant increase. As Dr. Shane indicated, our deferred revenue stands at $700,000, while customer deposits are around $400,000. We have at least two customers expected to return in the first quarter of 2026. Now, I'll pass it over to EJ for more details.

I think that's covered, David. But yes, I mean, some of them were also just one-off of them based on terms and delivery were already delivered this quarter in the first month. And yes, we do have the one project that we did a PR on with the university in Boston, which is a custom build-in will be delivered in the quarter two of next year. But that's the only large-scale project. The rest are due to set for either this quarter or the beginning of Q4.

Okay. Great. EJ, could you provide more detail about how SteraMist would be utilized if you receive the FDA approvals you've been seeking?

Sure, John. There are two FDA approvals I'm working with. One is still the 510(k) for medical devices. So that was a big part of last quarter's script, and that's still an ongoing project with the decon chambers we're developing, that are set for delivery in the beginning of Q4. So once we do that and process the data, the 510(k) should be an easier line for receipt. The reference on today's call for the FCN is primarily based for an easier entry to the many opportunities we're seeing in food safety alone. So primarily avocados, seeds, items that aren't necessarily a direct spray on food to eating, right? It's more still items that are protected by some barrier where we would be able to have approval from the facility to spray direct on. So in the avocado industry, specifically, there's a mold issue and of course, we have Salmonella and Listeria in food areas, which we know we have the efficacy on. So all we need is a stamp from the FDA to also approve that based on the studies we already have. So I'm looking for that to help in those opportunities.

Okay. Good. And then any new uses that you've come across or developed for SteraMist?

Yes. I mean we're always doing internal tests, and we have consultants and an individual that focuses on application of new processes. One is spray on flowers to increase the length of time that florists can deliver, and we're seeing promising results there. But after we do our internal test, there are always many other hurdles to overcome to make sure we can enter into those industries. But we do always look for additional applications.

I'm not seeing anyone else in the queue at the moment. So I will hand back to the management team for closing comments.

Well, again, I just want to thank everybody for listening to the earnings call and for supporting the company like always. I hope everybody has a splendid day or splendid evening. And operator, you can disconnect. Thank you.

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.