Applied UV Reports Financial Results for Third Quarter 2022

MOUNT VERNON, N.Y.--(BUSINESS WIRE)--Applied UV, Inc. (NasdaqCM: AUVI) (“Applied UV” or the “Company”), a pathogen elimination technology company that applies the power of narrow-range ultraviolet light (“UVC”) for surface areas and catalytic bioconversion technology for air purification to destroy pathogens safely, thoroughly and automatically, announced its financial results for the third quarter 2022.

Recent Business Highlights

• Received approximately $10m in new purchase orders to provide premium furnishings for luxury hotels in several major cities
• Closed on an unsecured promissory note payable with net proceeds of $2.5 million
• Company fully vetted and approved for a $5.0 million bank line of credit that is expected to close the third week of November

John F. Andrews, Applied UV's Chief Executive Officer commented, “Strength in our Hospitality segment, which was driven by the fulfillment of lower-margin orders inherited from the VisionMark acquisition, drove a 65% increase in revenue in the third quarter. We continue to experience a shift in the timing of orders in our disinfection business as customers shift orders to later periods. The sales resources we added earlier this year to grow our disinfection business are gaining momentum. Our pipeline of new opportunities for this segment is now about 25% larger than it was 6 months ago, despite challenging market conditions that persist across the industry.”

“Inventories declined sequentially and cash used in operations for our Hospitality segment turned positive as we exited the third quarter,” continued Andrews. “We will have an additional $7.5 million available in debt financing this quarter to support the next phase of our growth. Looking ahead, we remain optimistic about the new business opportunities for our solutions and expect an acceleration in sales as we introduce new products and market conditions become more favorable for our customers.”

Summary of Financial Results

Segments

The Company has three reportable segments: the design, manufacture, assembly and distribution of disinfecting systems for use in healthcare, hospitality, food, wine, and commercial municipal and residential markets (Disinfection segment); the manufacture of fine mirrors and furniture specifically for the Hospitality industry (Hospitality segment); and the Corporate Segment, which includes expenses primarily related to corporate governance, such as board fees, legal expenses, audit fees, executive management, and listing costs.

Net Sales

Net sales of $5.9 million represented an increase of $2.3 million, or 65.4% for the three months ended September 30, 2022, as compared to net sales of $3.6 million for the three months ended September 30, 2021. This increase was attributable to the Hospitality segment, which increased $2.5 million primarily as a result of the fulfillment of orders that were delayed from Q2 plus the addition of the orders fulfilled from the VisionMark acquisition, offset by a decrease of $208,000 in the Disinfection segment, primarily due to the push-out of orders into the next two quarters.

Gross Profit

Gross profit decreased $213,000, or 20.2%, to $839,000 for the three months ended September 30, 2022, as compared to $1.1 million for the three months ended September 30, 2021, due to lower sales in the Disinfection segment, and the higher sales mix of the Hospitality segment at a lower gross profit. Gross profit as a percentage of sales decreased from 29.6% in Q3 of 2021 to 14.3% in Q3 of 2022, driven primarily by the shift in sales mix. As the Company continues to integrate our strategic acquisitions, the focus will be on realizing cost synergies from the consolidation and streamlining of the manufacturing and distribution operations.

Selling, General, and Administrative (SG&A) Expense

SG&A costs for the three months ended September 30, 2022, increased to $3.5 million as compared to $2.7 million for the three months ended September 30, 2021. This increase of approximately $822,000 was driven primarily by expansion of the Disinfection segment with the acquisition of KES and SciAir; expansion of the Hospitality segment with the addition of the VisionMark acquisition; and Corporate segment expenses due to increased consulting, legal, accounting and infrastructure costs related to the initial integration of the operations of the Company’s strategic acquisitions. SG&A costs decreased $526,000 from last quarter. The Company anticipates efficiency gains in the coming year as it fully integrates its acquisitions and leverages synergies where practical.

Other Income/Expense

Other income was $60,000 for the three months ended September 30, 2022, which includes $43,000 in interest expense, which was offset by $68,000 in other income related to an insurance recovery, and $35,000 in non-cash income related to the change in fair value of warrant liability. This compares to other income of $449,000 for the three months ended September 30, 2021, which includes a gain of $297,000 related to the forgiveness of a Payroll Protection Plan (“PPP”) loan.

Net Loss

The Company recorded a net loss of $2.7 million for the three months ended September 30, 2022, compared to a net loss of $1.1 million for the three months ended September 30, 2021. The increase in net loss of $1.6 million was mainly due to lower gross profit and the increase in SG&A costs incurred in support of the business acquisitions and expansion of both the Disinfection and Hospitality segments.

The Company had approximately $1.1 million of unrestricted cash available on its consolidated balance sheet as of September 30, 2022, not including the above referenced loan and line of credit.

Conference Call/Webcast Information

Applied UV's management team will host an investor conference call and live webcast at 9 a.m. ET on November 15, 2022.

Investors can access the live webcast at https://www.webcaster4.com/Webcast/Page/2626/47024.

For those planning to participate on the call, please dial [phone] (for domestic calls), or [phone] (for international calls), passcode 583604.

A replay of the conference call will be available online on the Applied UV web site, and a dial-in replay will be available for one week following the call at [phone] (for domestic calls) or [phone] (for international calls), replay passcode 47024.

About Applied UV

Applied UV is focused on the development and acquisition of technology that address infection control in the healthcare, hospitality, commercial and municipal markets. The Company has two wholly owned subsidiaries – SteriLumen, Inc. (“SteriLumen”) and Munn Works, LLC (“Munn Works”). SteriLumen’s connected platform for Data Driven Disinfection™ applies the power of ultraviolet light (UVC) to destroy pathogens safely, thoroughly, and automatically, addressing the challenge of healthcare-acquired infections (“HAIs”). Targeted for use in facilities that have high customer turnover such as hospitals, hotels, commercial facilities, and other public spaces, the Company’s Lumicide™ platform uses UVC LEDs in several patented designs for infection control in and around high-traffic areas, including sinks and restrooms, killing bacteria, viruses, and other pathogens residing on hard surfaces within devices’ proximity. The Company’s patented in-drain disinfection device, Lumicide Drain, is the only product on the market that addresses this critical pathogen intensive location. SteriLumen’s Airocide® air purification devices are research backed, clinically proven and developed for NASA with assistance from the University of Wisconsin. Airocide® is listed as an FDA Class II Medical device, utilizes a proprietary photo-catalytic (PCO) bioconversion technology that draws air into a reaction chamber that converts damaging molds, microorganisms, dangerous airborne pathogens, destructive VOCs, allergens, odors and biological gasses into harmless water vapor and green carbon dioxide without producing ozone or other harmful byproducts. Airocide® applications include healthcare, hospitality, grocery chains, wine making facilities, commercial real estate, schools, dental offices, post-harvest, grocery, cannabis facilities and homes.

For more information about Applied UV, Inc., and its subsidiaries, please visit the following websites: https://www.applieduvinc.com/.

Forward-Looking Statements

The information contained herein may contain “forward‐looking statements.” Forward‐looking statements reflect the current view about future events. When used in this press release, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward‐looking statements. Such statements include, but are not limited to, statements contained in this press release relating to the view of management of Applied UV concerning its business strategy, future operating results and liquidity and capital resources outlook. Forward‐looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The Company’s actual results may differ materially from those contemplated by the forward‐looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward‐looking statements. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward‐looking statements to conform these statements to actual results.

Applied UV, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
As of September 30, 2022 and December 31, 2021
	2022			2021
Assets
Current Assets
Cash and cash equivalents	$	1,056,233		$	7,922,906
Restricted cash		—			845,250
Accounts receivable, net of allowance for doubtful accounts		1,631,432			986,253
Costs and estimated earnings in excess of billings		416,021			—
Inventory, net		4,435,594			1,646,238
Vendor deposits		294,484			992,042
Prepaid expense and other current assets		900,340			419,710
Total Current Assets		8,734,104			12,812,399
Property and equipment, net of accumulated depreciation		1,183,791			196,611
Goodwill		3,722,077			4,809,811
Other intangible assets, net of accumulated amortization		17,651,286			18,976,556
Right of use asset		2,276,384			1,730,615
Total Assets	$	33,567,642		$	38,525,992
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses	$	2,224,405		$	1,642,108
Contingent consideration		—			1,460,000
Billings in excess of costs and earnings on uncompleted contracts		134,342			—
Deferred revenue		1,940,272			788,776
Due to landlord (Note 2)		214,766			—
Warrant liability		21,742			68,263
Financing lease obligations		2,402			7,671
Operating lease liability		1,265,505			389,486
Note payable		277,103			—
Loan payable		97,500			97,500
Total Current Liabilities		6,178,037			4,453,804
Long-term Liabilities
Due to landlord-less current portion (Note 2)		456,062			—
Loan payable- less current portion		60,000			60,000
Operating lease liability-less current portion		1,031,239			1,346,428
Total Long-Term Liabilities		1,547,301			1,406,428
Total Liabilities		7,725,338			5,860,232
Stockholders' Equity
Preferred stock, Series A Cumulative Perpetual, $0.0001 par value, 19,990,000 shares authorized, 552,000 shares issued and outstanding as of both September 30, 2022 and December 31, 2021		55			55
Preferred stock, Series X, $0.0001 par value, 10,000 shares authorized, 10,000 shares issued and outstanding as of September 30, 2022, and 2,000 shares issued and outstanding as of December 31, 2021		1			1
Common stock $.0001 par value, 150,000,000 shares authorized; 12,930,674 shares issued and 12,817,189 outstanding as of September 30, 2022, and 12,775,674 shares issued and outstanding as of December 31, 2021		1,294			1,278
Treasury stock at cost, 113,485 shares as of September 30, 2022, and 0 shares as of December 31, 2021, respectively		(149,686	)		—
Additional paid-in capital		44,529,586			42,877,622
Accumulated deficit		(18,538,946	)		(10,213,196	)
Total Stockholders' Equity		25,842,304			32,665,760
Total Liabilities and Stockholders' Equity	$	33,567,642		$	38,525,992

Applied UV, Inc. and Subsidiaries
Unaudited Condensed Interim Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2022 and 2021
	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net Sales	$	5,875,611		$	3,551,564		$	15,139,347		$	7,748,499
Cost of Goods Sold		5,036,997			2,500,163			11,847,842			5,231,155
Gross Profit		838,614			1,051,401			3,291,505			2,517,344
Operating Expenses
Research and development		93,522			—			234,885			53,408
Selling general and administrative expenses		3,505,097			2,683,025			10,637,538			6,991,472
Loss on impairment of goodwill		—			—			1,138,203			—
Total Operating Expenses		3,598,619			2,683,025			12,010,626			7,044,880
Operating Loss		(2,760,005	)		(1,631,624	)		(8,719,121	)		(4,527,536	)
Other Income (Expense)
Change in Fair Market Value of Warrant Liability		34,804			151,570			46,521			(148,882	)
Interest expense		(43,037	)		—			(96,113	)		—
Loss on change in Fair Market Value of Contingent Consideration		—			—			(240,000	)		—
Gain on Settlement of Contingent Consideration (Note 2)		—			—			1,700,000			—
Other Income		67,765			1,068			69,713			26,250
Forgiveness of paycheck protection program loan		—			296,827			—			296,827
Total Other Income (Expense)		59,532			449,465			1,480,121			174,195
Loss Before Provision for Income Taxes		(2,700,473	)		(1,182,159	)		(7,239,000	)		(4,353,341	)
Benefit from Income Taxes		—			(101,354	)		—			(101,354	)
Net Loss	$	(2,700,473	)	$	(1,080,805	)	$	(7,239,000	)	$	(4,251,987	)
Net Loss attributable to common stockholders:
Dividends to preferred shareholders		(362,250	)		(241,500	)		(1,086,750	)		(241,500	)
Net Loss attributable to common stockholders		(3,062,723	)		(1,322,305	)		(8,325,750	)		(4,493,487	)
Basic and Diluted Loss Per Common Share	$	(0.24	)	$	(0.14	)	$	(0.65	)	$	(0.48	)
Weighted Average Shares Outstanding - basic and diluted		12,656,093			9,421,908			12,751,360			9,282,675