Improved Air Purification Market Trends

US Government Announces “Clean The Air” and “Improving Indoor Air Quality” Initiatives and Guidelines

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 fourth quarter and full year 2021.

The Company is also providing key operational metrics on results of operations for the three and 12-month periods ended December 31, 2021.

Recent Business Highlights

• Expanded distribution capability of Airocide® with three-year distribution agreement with one of Europe’s largest Distributors, Plandent Division, a wholly owned unit of Planmeca Oy, initially targeting 21,000 dental providers in Scandinavia with the potential to expand into Europe
• Further penetrated high-growth cannabis market with large order from U.S. distributor
• Entered Prison and Correctional Facilities vertical market with initial and follow-on orders from Tennessee Department of Corrections
• Bolstered balance sheet with $19.3 million in net proceeds from public offerings in 2021
• Announced a common share repurchase program through September 2022 to repurchase up to one million shares in open market transactions
• Subsequent to the end of the first quarter 2022, completed the acquisition of Visionmark, expanding our product offering beyond fine mirrors to include furnishings allowing Munnworks to compete head-to-head in new construction and remodeling in the luxury hospitality market

Strategic Positioning and Market Strategy

• Improved margins due to air purification products being excluded from 25% China Tariff and improved product mix
• Backlog and pipeline building across multiple verticals including, Dental, Long-Term Care, Hospital, Wine and Schools (EANS II)
• Launching targeted sales and marketing initiatives in the second quarter of 2022 to coincide with recent Government “Clean The Air” initiatives aimed at cannabis, schools food preservation and transportation, schools, long-term care (CMS), hospitality and dental verticals. Programs will include digital, radio, a promotional dealer portal, new web, consolidated and targeted social media with the goal of driving sales in the U.S.
• Exploring joint venture and strategic partnerships offering product placement pilot programs with established companies in long term care, hospitality, logistics food preservation and transportation as well as floral verticals providing a first to market competitive advantage with market leaders (consumer & commercial)
• Strengthening of the Senior Executive Team with CEO announcement expected.

Max Munn, Applied UV's President and Interim Chief Executive Officer commented, "2021 was a year of strategic acquisitions that diversified our business and enabled us to quickly build a highly effective air and surface pathogen elimination platform backed by independent clinical research. We have made substantial progress in identifying ways to further leverage the portfolio of assets that we believe will enable us to address the growing global demand for solutions that safely and effectively stop the spread of contagious airborne diseases and are easy to implement. Key wins with high-profile customers that serve large venues such as the Palace of Versailles in France and Uruguayan School Systems, Armed Forces Research Institute, US Army Aberdeen Proving Grounds, which further validate both our strategy as well as provide referenceable installations for new business pursuits validating our air purification technology efficacy, effectiveness, and ease of use.”

Munn added, "Globally, scientists, governments and healthcare experts have been advocating for improving air quality to control the transmission of airborne pathogens. Now, Governments are mandating, and more importantly, funding and, driving, the implementation of solutions that are proven to improve air quality and protect its populations. There were four government initiatives announced in the first quarter of 2022 including CMS’ (Centers for Medicare and Medicaid) $3,000 reimbursement program for long-term care facilities, the $2.5B EANS II grants for non-public schools which provides funds for mobile and installed air purification technology, the EPA’s new Clean Air Guidelines and lastly, the White House’s Clean Air Initiative. Our go-to-market plans include the selective pursuit of opportunities that are benefiting from these market tailwinds. We have a solid balance sheet, a growing pipeline and are on strong footing from an operational perspective to execute our strategy and deliver value for our shareholders.”

Financial Results

Segments

The Company has three reportable segments: the design, manufacture, assembly and distribution of disinfecting systems for use in healthcare, hospitality, and commercial municipal and residential markets (Disinfection segment); the manufacture of fine mirrors 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 $11,667,579 represented an increase of $5,934,845, or 103.5% for the year ended December 31, 2021 as compared to net sales of $5,732,734 for the year ended December 31, 2020. This increase was primarily attributable to the addition of the Disinfection segment in 2021 as a result of the strategic acquisitions of Akida, KES, and Scientific Air. The 2021 net sales for Disinfection of $5,723,915 includes close to 11 months of Akida-related sales (acquisition closed February 8, 2021), one quarter of KES-related sales (acquisition closed September 28, 2021), and just over 2 months of Scientific Air-related sales (acquisition closed October 13, 2021). The Hospitality segment began to rebound from the slowdown caused by the pandemic and finished the year ended December 31, 2021 with net sales of $5,943,664, which represented an increase of $210,930, or 3.7% as compared to the year ended December 31, 2020.

Gross Profit

Gross profit increased $3,089,050, or 306%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020, driven by both volume growth and the higher margin contribution from the Disinfection segment. The Disinfection segment’s gross profit for the year ended December 31, 2021 was $2,643,374, or 46.2% as a percentage of net sales. The Hospitality segment’s gross margin for the year ended December 31, 2021 was $1,455,012, or 24.4% as a percentage of net sales, as compared to $1,009,336, or 17.6% as a percentage of net sales for the year ended December 31, 2020. The Hospitality segment’s gross profit was impacted last year by the sales slowdown caused by the pandemic, as well as higher overhead cost absorption as the company kept many of their direct labor employees in compliance with the payroll protection program forgiveness requirements. The company is focused on realizing cost synergies from consolidation and streamlining of manufacturing operations to help offset increases in material and logistics costs.

Operating Expenses

Selling, General, and Administrative – SG&A costs, excluding stock compensation expense of $1,549,787 for the year ended December 31, 2021 and $687,505 for the year ended December 31, 2020, were $9,791,925 for the year ended December 31, 2021, which represented an increase of $6,467,874 as compared to the year ended December 31, 2020. This increase was driven primarily by the expansion of the Disinfection segment. The infrastructure to support this segment was initially implemented in the fourth quarter of 2020, and additional investments were made during 2021 to support the three strategic acquisitions of Akida, KES, and Scientific Air. Payroll costs increased $2.4 million year over year as headcount increased from 33 at December 31, 2020 to 61 at December 31, 2021. Consulting costs increased $0.7 million and legal expense increased $0.4 million, mainly due to acquisition-related expenses. Amortization expense, mostly related to the intangible assets associated with the acquisitions, increased $1.0 million, and depreciation expense increased $0.1 million. Additional increases were due to advertising $0.3 million, product certification and testing $0.3 million, insurance $0.2 million, and rent $0.1 million. We anticipate efficiency gains in the coming year as we fully integrate all 3 acquisitions and leverage synergies where practical. The Corporate segment includes expenses primarily related to corporate governance, such as board fees, legal expenses, audit fees, executive management, and listing costs, allowing for a better reflection of operational measurement of each of the two operating segments.

Net Loss

We recorded a net loss of $7,390,355 for the year ended December 31, 2021, compared to a net loss of $3,368,810 for the year ended December 31, 2020. The increase of $3,807,244 in the net loss was mainly due to the investments made to grow the Disinfection segment and loss on contingent consideration, offset by the increased revenue and gross margin from that segment, as discussed above, plus an increase in corporate governance costs.

The Company had approximately $7.9 million of unrestricted cash available on its consolidated balance sheet as of December 31, 2021.

Conference Call/Webcast Information

Applied UV's management team will host an investor conference call and live webcast on April 7, 2022, at 9 am ET. Investors can access the live webcast via a link on Applied UV’s web site at AUVI Events and Presentations. For those planning to participate on the call, please dial +1-877-545-0523 (for domestic calls), or +1-973-528-0016 (for international calls), passcode 651204. 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 +1-877-481-4010 (for domestic calls) or +1-919-882-2331 (for international calls), replay passcode 44897.

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/; https://sterilumen.com/; https://www.airocide.com https://kesscience.com; https://scientificairmanagement.com and, https://munnworks.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.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

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