TOMZ

Overall Financial Performance

• Total Q2 2026 revenue reached $2.25 million, representing 118% year-over-year growth and 36% sequential growth over Q1 2026. This marked three consecutive quarters of revenue growth.
• Gross profit more than doubled year-over-year to $1.39 million, with a strong gross margin of 61.7%, up from 50.3% in Q1 2026.
• Total operating expenses fell 10% year-over-year to $1.63 million, driven by disciplined overhead cost cutting. Operating loss improved 78% to $244,000, and net loss improved 69% to $382,000 (5 cents per diluted share).
• The sales backlog grew steadily from $1.6 million at end-2025 to $1.7 million at end-Q1 2026, $2.2 million at end-Q2 2026, and $2.6 million post-quarter. The total commercial sales pipeline stands at approximately $35 million, with $8.6 million in advanced opportunities expected to close in 2026.
• As of quarter-end, cash and cash equivalents totaled $322,000, working capital was $1.82 million, and $18.1 million in remaining capacity remained available under the company's equity line of credit.

Strategic and Operational Milestones

• Integration planning for the pending merger with Carbonian Corp (a producer of nuclear graphite and lithium) is progressing as planned. The merger requires a $10 million minimum concurrent financing prior to closing.
• Delivered the first fully custom-built Ceramist IHP Chamber for a Fortune 500 medical device manufacturer, enabling the company to advance its 510(k) submission to the FDA for medical device decontamination applications. The company is also collaborating with two partners on a next-generation fully autonomous IHP chamber to serve domestic and international markets across multiple high-value sectors.
• Secured a new strategic partnership with a major top-tier U.S. healthcare company, which is expected to become one of Tomi's top customers. Completed a system installation at a top private East Coast research university, which already placed a follow-on order for 2027.
• Expanded regulatory approvals: Agrimist received a new unconditional EPA registration expanding approved use to food safety applications including direct application to indoor-grown produce up to harvest. Tomi's disinfection products are now approved in 12 European countries, with additional approvals pending. The company supported a shift to performance-based standards for biosafety cabinet decontamination led by NSF, where its technology has a competitive advantage over legacy methods. Four new utility patent applications were submitted in Q2 to expand global IP protection.
• Expanded distribution and partnerships domestically (new emergency services distributors on both coasts, a new Puerto Rico-based partner for life sciences and food manufacturing) and internationally (new partners in Argentina, expanded partnerships across Europe, defense sector approvals in Korea and Canada, authorization to sell through the U.S. Defense Logistics Agency).
• Remediated the historic material weakness in financial reporting, adding dedicated CPA oversight, formalized closing and revenue recognition procedures, and new inventory and treasury controls. Post-quarter, the company amended convertible note terms to achieve compliance with NASDAQ's stockholder equity listing requirement.

Business Model Progress

• The 'razor-and-blade' recurring revenue model is gaining traction: applicator sales are up 1,100% year-to-date year-over-year, driving long-term recurring demand for high-margin BIT solution consumables.

• Management reaffirms full-year 2026 revenue guidance of at least $12 million, supported by strong order backlog and pipeline visibility.
• Management expects to reach operating break-even by Q4 2026, based on current revenue growth trajectory and sustained cost discipline.
• The pending Carbonian merger is expected to strengthen the combined company's balance sheet and accelerate growth, expanding the product portfolio into critical minerals and new biosecurity applications including autonomous disinfection via robotics and drones.

Tomi Environmental Solutions operates two core product and service segments. For the second quarter of 2026:

• Product Segment: Generated $1.86 million in revenue, a 185% year-over-year increase and a 42% sequential increase over Q1 2026. This segment accounted for 82.7% of total Q2 2026 revenue. Growth was driven by strong demand for capital equipment, custom engineered systems (CES), and expanding adoption of SteriMIST applicators. Applicator sales alone reached $355,000 in the quarter, up from just $13,000 in Q2 2025.
• Service Segment: Generated $389,000 in revenue, a 3% year-over-year increase and a 13% sequential increase over Q1 2026. This segment accounted for 17.3% of total Q2 2026 revenue. Service revenue includes decontamination services, qualifications, acceptance testing, and training programs.

Geographically, U.S. revenue was $1.91 million (84.9% of total revenue) with 132% year-over-year growth, while international revenue was $339,000 (15.1% of total revenue) with 62% year-over-year growth.

• Completion of the Carbonian merger remains contingent on securing $10 million in concurrent financing, retaining NASDAQ listing approval, and satisfying remaining closing conditions, with no guarantee these will be met on expected timelines.
• Achieving FDA 510(k) clearance for medical device applications, additional international regulatory approvals, and food safety clearances is required to unlock major new market opportunities, and regulatory timelines are uncertain.
• Carbonian is still in the product development and prototyping phase, with no guarantee of near-term revenue generation as currently projected.
• The company has limited resources to pursue all potential new market opportunities simultaneously, which could delay expansion into high-potential sectors.
• Actual revenue from the $35 million total pipeline depends on customer budget approvals, and not all advanced opportunities will close as expected.

Q: Will the newly registered Agrimist product add to Tomi's existing $35 million sales pipeline, and what are the next milestones for FDA 510(k) medical device clearance?

A: All existing pipeline figures do not include potential Agrimist revenue, so commercialization of Agrimist will add incremental new opportunity to the pipeline. For the 510(k) submission, all next steps involve completing clinical and performance studies with the first customer that received the new IHP chamber; management cannot yet give a firm timeline and expects to provide more clarity after one additional quarter.

Q: What is the current status of the Carbonian merger due diligence process, and what is Carbonian's current stage of operations?

A: Two key milestones remain to close the merger: securing NASDAQ approval for continued listing (which management believes it has satisfied via recent convertible note conversions that meet the shareholder equity requirement, plus sustained share price above $1) and raising $10 million in required concurrent financing, which remains under negotiation. Carbonian is still in the prototyping phase, with final contracts for projects with Oak Ridge Nuclear and the U.S. Department of Energy near completion; once those are finalized, the prototype will begin production and generate revenue. Management noted that Carbonian's CEO will be available to share more details with investors in a future event.

Q: What is the path and timeline for Tomi to reach operating break-even, and will elevated transaction-related professional fees remain at current levels?

A: Based on current revenue growth to the $12 million full-year target and ongoing cost discipline, management expects to comfortably hit operating break-even by Q4 2026. The elevated professional and consulting fees in Q2 2026 are almost entirely tied to the Carbonian merger transaction; once the merger closes, these fees will drop significantly.

Q: Can you explain the hybrid system product and its competitive advantage, and what regulatory coverage exists for Agrimist use on fresh produce?

A: The hybrid system is a flexible modular offering that mixes mobile fogger units and permanent applicators, allowing customers to mix and match components to fit their budget and facility needs, with only applicators and BIT solution consumables required as core purchases. The new all-in-one NV Plus cart is a separate standalone product designed specifically for healthcare facilities, with the first unit ordered and scheduled for Q3 delivery. For Agrimist, Tomi already has long-standing FDA clearance for its hydrogen peroxide formulation for food contact use, and the new EPA registration adds additional coverage, so the company is compliant for fresh produce use regardless of whether a facility is regulated by FDA or EPA.