TOMI Environmental Solutions, Inc. 2026 Q2 Earnings Call

Thank you for joining us today for TOMI Environmental Solutions Investor Update Conference Call. On today's call is TOMI's Chief Executive Officer and Chairman, Dr. Halden Shane, Chief Operating Officer, Elissa J. Shane, and Interim Chief Financial Officer, Niro Srirathan. A telephone replay of today's call will be available through August 21st, 2026, the details of which are included in the company's press release. 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 actual results to differ materially from our anticipated results. The information provided on this conference call is based upon the facts and circumstances known at this time.

Please refer to our filings with the Securities and Exchange Commission for a discussion of these risk factors. 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 the Board, Dr. Halden Shane.

Please go ahead. Thank you, John, and thank you all for joining us today.

Since signing our definitive agreement with Carbon-Ion Corp at the end of June, we have stayed closely engaged with their company. The integration of these two complementary technologies, each delivering exceptional performance in its respective markets, continue to advance as planned. First, let me start with this. TOMI SteraMist decontamination business has now delivered growth for three consecutive quarters. Our second quarter 2026 results reflect another healthy quarter for TOMI, with continued positive momentum for the strategic initiatives we have implemented. As always, we remain committed to keeping shareholders informed as these efforts progress. In the second quarter of this year, we saw growth across four key metrics compared to both the first quarter of this year and the second quarter of last year.

Those four areas were BIT solution sales, mobile equipment, single applicators, which is where TOMI's patented iHP intellectual property resides, and support services, including qualifications, acceptance testing, and training programs. The increase in applicator sales and support services stem directly from initiatives introduced in late 2024 and early 2025, further validating our strategic focus. We continue to pursue new opportunities and additional growth strategies throughout 2026 without interruption. Our second quarter results demonstrated a revenue increase of 118% year-over-year and 36% sequentially from the first quarter of 2026. BIT solution sales exceeded $700,000 for the first half of the year and continue to trend upward, which we believe positions us to finish the year with higher sales than in each of the prior two years, reaffirming our full year revenue guidance.

On the cost and cash front, our disciplined overhead management drove a 10% year-over-year reduction in quarterly operating expenses to $1.63 million, led by significant savings across general and administrative costs. This cost discipline, combined with $1.92 million in net proceeds raised through our equity line of credit, strengthened our balance sheet, expanding our working capital to $1.82 million and increasing cash and cash equivalents to $322,000 at quarter end. Additionally, we continue to make substantial operational progress towards remediating our historic material weakness. During the quarter, we strengthened our finance leadership with dedicated CPA oversight, formalized close and revenue recognition procedures, and instituted rigorous inventory and treasury controls. These proactive actions reflect our strong commitment to full remediation, operational discipline, and robust financial reporting. The ongoing health of the company continues to be reflected in a growing sales backlog.

At the end of last year, TOMI reported a backlog of $1.6 million. That grew to $1.7 million by year end of this year's first quarter, then $2.2 million by the end of the second quarter, and currently stands at $2.6 million. This steady expansion in our sales backlog reflects the strength of our automated Integrated System and the expanded service offerings we have implemented. The backlog continues to grow even as we fulfill existing orders, demonstrating both sustained demand and strong execution across our sales efforts. We are pleased to report the delivery of SteraMist iHP chambers to a Fortune 500 medical device manufacturer, making an important milestone. This represents our first fully designed, manufactured, and assembled chamber engineered specifically for integration with our SteraMist standalone system, part of our integrated SIS platform. This is different from the pass-through system announced last year.

This chamber is a distinct advancement in our technology platform and enables us to formally advance our 510(k) submission process with the FDA. Achieving 510(k) clearance would authorize the marketing of our technology for specific medical device applications in the U.S., significantly expanding our addressable market, enhancing regulatory credibility, and opening new commercial opportunities in the healthcare and life science sector. In parallel, we've been actively collaborating with two additional partners to develop a next generation, all-in-one, fully autonomous iHP chamber. This system is designed for the decontamination of medical devices, electronics recycling, pharmaceutical components, laboratory equipment, biotech materials, food packaging, aerospace components, and other high-value items requiring reliable enclosed decontamination. This new chamber is more intelligent than our original SteraBox and operates without the need for a separate mobile equipment attachment, offering a streamlined, fully integrated solution.

One partnership is focused on serving our international customers, while the other targets the domestic market, allowing us to grow both sectors in tandem. April began on a strong note with a significant win at INTERPHEX, where we secured a new partnership with a top-tier American health company renowned for its innovative, pre-mixed, ready-to-use medication formulations. We have since joined forces with this organization on a range of projects and collaborations, closing the quarter with additional sales. The customer purchased equipment at the show, and they've continued to expand its requirements throughout the implementation of the project as it moved forward. While we are unable to share further details at this time, we anticipate this company will become one of our top customers. In addition, one of their senior technical leaders has joined TOMI in an advisory capacity, lending their expertise on the scientific and engineering front.

We look forward to leveraging this individual's expertise across multiple integration projects for similar customers seeking to implement SteraMist iHP technology within their proprietary mechanical systems. Also in April, we completed the installation of a SteraMist Hybrid system at a highly respected private research university on the East Coast. The customer has already placed a second order scheduled for next year. In May, one of our newly associated government agencies purchased significant amount of accessories in preparation for the deployment of their environment system. Also during that same month, we onboarded several new food safety customers using the SteraPak. Moving to June, it continued this positive momentum with additional government orders from the Department of Health, expanded iHP adoption among existing food safety customers, and the installation of another fully automated Custom Engineered System in the U.K., the second pharmaceutical company in the region to implement our CES product line.

We expect our U.K. partner, Total Clean Air, to drive further adoption in the near term across markets. Also in June, we expanded our domestic distribution network by adding new partners with established relationships and familiarity with our technology. This includes a distributor specialized in emergency services, contacts on the East Coast, and on the West Coast, our iHP Corporate Service partner secured a meaningful opportunity in healthcare sector and expanded its arsenal of iHP equipment and BIT Solution. In the healthcare sector, we have seen growing adoption of iHP technology by special pathogen units throughout the first half of this year, with additional opportunities developing for the second half of the year. These special pathogen units manage high-consequence infectious diseases and require rapid, validated, and comprehensive decontamination of rooms, equipment, and personal protective equipment.

They require a solution that delivers broad-spectrum efficacy against resilient pathogens and reduces manual intervention while maintaining the highest safety standards, capabilities that align directly with the strengths of our SteraMist iHP platform. We also secured a purchase from a healthcare facility for our first SteraMist NV+ all-in-one stainless steel cart, featuring a rotating applicator, integrated lights, and full automation, which is scheduled for delivery by the end of the third quarter. It continues to be an active period on the registration and regulatory front. TOMI's innovative disinfection product is now approved for use in Austria, Italy, the Netherlands, Belgium, Denmark, Germany, Hungary, Spain, Great Britain, Northern Ireland, and Ireland. We have also added Switzerland through an amendment, and we expect additional approvals for France, Poland, Portugal, and Romania. NSF is rewriting the rules on biosafety cabinet decontamination.

TOMI played a key role in advancing this decision at the NSF meeting in June. The industry is shifting away from listing legacy known methods and brands such as paraformaldehyde and moving towards strict performance-based criteria focused on efficacy, validation, and material compatibility, areas where SteraMist iHP technology excels. We continue to strengthen our intellectual property portfolio, submitting four new utility patent applications in the second quarter, giving us additional worldwide protection for our technology. This month, the EPA has granted a new unconditional registration for AgriMist, TOMI's fourth EPA label. This expanded label significantly broadens our approved use sites to include a wide range of food safety applications. The registration authorizes direct application of iHP to indoor-grown plants and fruits such as avocados for the prevention, control, and suppression of common plant pathogens.