Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     

TOMI ENVIRONMENTAL SOLUTIONS, INC.

(TOMZ)
  Report
Delayed Nasdaq  -  04:00 2022-09-30 pm EDT
0.7100 USD   +4.41%
09/27TOMI Environmental Receives Additional Orders for Custom Engineered Systems From Multinational Pharmaceutical Company
AQ
09/27TOMI Environmental Receives Additional Orders for Custom Engineered Systems from Multinational Pharmaceutical Company
CI
09/08Tomi CEO Dr. Halden Shane to Present at the H.C. Wainwright Global Investment Conference
AQ
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisionsFunds 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

TOMI ENVIRONMENTAL SOLUTIONS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

08/15/2022 | 04:21pm EDT
This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q")
contain forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties.
Forward-looking statements provide current expectations of future events based
on certain assumptions and include any statement that does not directly relate
to any historical or current fact. For example, statements in this Form 10-Q
regarding the potential future impact of the COVID-19 pandemic on the Company's
business and results of operations are forward-looking statements.
Forward-looking statements can also be identified by words such as "future,"
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"predicts," "will," "would," "could," "can," "may," and similar terms.
Forward-looking statements are not guaranteeing future performance and the
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such differences
include, but are not limited to, those discussed in Part I, Item 1A of the
Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the
"2021 Form 10-K") under the heading "Risk Factors." The Company assumes no
obligation to revise or update any forward-looking statements for any reason,
except as required by law.



Unless otherwise stated, all information presented herein is based on the
Company's fiscal calendar, and references to particular years, quarters, months
or periods refer to the Company's fiscal years ended in December and the
associated quarters, months and periods of those fiscal years. Each of the terms
the "Company" and "TOMI" as used herein refers collectively to TOMI
Environmental Solutions, Inc. unless otherwise stated.



The following discussion should be read in conjunction with the 2021 Form 10-K
filed with the U.S. Securities and Exchange Commission (the "SEC") and the
condensed consolidated financial statements and accompanying notes included in
Part I, Item 1 of this Form 10-Q. 0



Quarterly Highlights



Business Update


The first half of 2022 has delivered growth and improvement in our comparable year over year sales, customer sales order and improved financial operating results.

We grew revenue for the six months ended June 30, 2022 by 6% when compared to
the same prior year period due to increased demand for our SteraMist mobile
equipment. Our reportable quarter over quarter revenue for the three months
ended June 30, 2022 was flat with the same prior period. However, as discussed
below, we did secure several key sales orders for custom built in units in the
second quarter of 2022 which will be recognized into revenue in the next few
quarters (2022-2023), also contributing to our growing revenue pipeline.



We have experienced some pullback in spending in healthcare and our smaller clients; however, we continue to see increased spending from our life sciences which is our largest vertical.

Through June 30, 2022, we have received $5,600,000 in sales orders from key
global fortune 500 customers of which revenue recognition will be upon delivery
throughout 2022 and early 2023. This represents 35% growth when compared to the
first half of 2022. The increase in sales orders is largely attributable to
increased demand for our Custom Engineered Systems (CES) as well as iHP Service
engagements. A key driver to our longer-term growth is strengthening demand for
our Custom Engineered Systems (CES). Partnering with our domestic and
International manufacturing sales representatives, we are building awareness for
CES. We have secured several new orders for our iHP CES and more set to close
eminently, revenue recognition will be upon delivery throughout 2022 and early
2023. As we install CES units, we can expect to see the increase in solution
sales as these units are designed to be used at regular schedules that will
require the solution during the use. We believe based upon current orders,
recent additional booking and pending negotiations, that we will surpass our
original 2022 budget and analyst expectations.



 Our overall financial operating results for the three and six months ended June
30, 2022 showed improvement when compared to the prior year. We reduced
operating expenses by 16% and 21% for the three and six months ended June 30,
2022, respectively, when compared to the same prior year periods. We reduced our
loss from operations by 28% and 44% for the three and six months ended June 30,
2022 when compared to the same prior year periods.




         29

  Table of Contents




         Through June 30, 2022, we used approximately $451,000 in cash from
operations, an approximate $2,061,000 improvement over the cash used in
operations of $2,512,000 during the six months ended June 30, 2021. The improved
cash flow is primarily due to the lower reported loss and customer deposits we
received in the current year as well as inventory purchases in the prior quarter
as supplies were replenshined. The customer deposits primarily represent down
payments made by our customers for orders that will be recognized into revenue
as the projects are completed and delivered. Due to continued growth in CES
orders we expect receipt of additional deposits in the second half of 2022 which
will provide a benefit to our cash flows and sales pipeline.



As our customer base grows, we continue to address the need for timely responses
to inquiries, questions, orders and support. TOMI corporate's support focus
along with the launch of the SteraMist Support Portal available on desktop as
well as via a mobile app which provides ease of use for sales support, branding,
and assistance to our TOMI Service Network providers, sales representatives, and
international distributors and end users.



Studies remain a focus as TOMI continues to pursue a wide array of industries.
Studies focused on Botrytis cinerea and Mycotoxin, as well as furthering testing
on chemical and biological warfare agents will further enhance TOMI's ability to
further penetrate the market.



Our manufacturing capacity and capabilities were improved in the first half of
2022 with the addition of ARM Enertech Associates who can manufacture our CES in
their Pennsylvania facility. Furthermore, our existing manufacturer Planet
Innovation has expanded into California providing easier access to our internal
technology team and a lower cost in domestic shipment charges. We anticipate
these developments will reduce our overall costs and manufacturing lead times.



Product Development



As many industrial companies are reducing R&D and capital expenditures spending
due to the current economic conditions, TOMI is moving ahead with new products
in development. In 2022, we intend to increase capital expenditures (CapEx) and
operating expenditures (OpEx), including development of new products, services
and process technologies to sharpen our competitive advantage. In addition, we
intend to expand our commercial service location to meet the expanding needs of
our customers.


Our recent products developed and launched are as follows:

The second half of 2020 showed us that our customers prefer a disinfection
device with lower cost and more versatility. To respond, we developed the
Backpack (SteraPak) that includes our award winning 6-log and above kill
technology and speed. In addition, our solution and process are environmentally
friendly as the only by-product from our decontamination process is oxygen and
water in the form of humidity. Our solution is OMRI certified and organically
listed in the United States and Canada it is sustainably a green product with no
or very little carbon footprint. We have competitively priced our SteraPak and
expect to bring SteraMist to the largest cleaning market in the world, including
members of ISSA (International Sanitary Supply Association) and its divisions
IEHA (Integrated Environment and Health Assessment) and EMEA (Europe, Middle
East & Africa). These organizations have historically been price conscious and
were resistant early on to our SteraMist pricing of our professional
decontamination equipment (SteraMist Surface and Environment Unit). As planned,
we introduced our new innovative SteraPak domestically towards the end of the
third quarter 2021.



During the third quarter 2021, we established and expanded our production
capacity with the construction and purchase of the tooling and molds used in the
production of our SteraPak. Our tooling and molds will allow us to streamline
production and reduce manufacturing lead times and costs on the SteraPak.



Other updated products that have been incorporated into our product line include
the Select Plus, which is a hybrid product consisting of the Company's current
Surface Select and Environment systems. The unit will allow for enhanced
flexibility by using a single applicator to decontaminate full-room to
small-space volume while maintaining the size of the current Surface Select unit
with more robust process controls. The iHP SteraMist Transport System has been
designed for the transportation market, specifically ambulances. The iHP
SteraMist Transport System is a simple timer based fogging system that can be
installed semi-permanently or permanently and used for any transport and/or
cargo vehicle. It will be an easy-to-use turn-key integration system. The
implementation of this product and our patented non-corrosive iHP technology
will certainly replace the number one competitor in this marketplace, which
uses
an extremely harsh chemical.




         30

  Table of Contents




Many of our customers have been waiting for the release and demonstration of
these new products, especially the SteraPak. All SteraMist systems will remain
important to the marketplace as they are designed for specific needs and
budgets. The Select Surface Unit perform most of the functionality that the Plus
offers and is priced at a lower cost, although Select Plus will provide
additional options that are appealing to certain customers, such as laboratory
and pharmaceutical companies. The SteraPak is a more cost-effective product and
designed for residential and commercial real estate including large buildings
and public space, any area that needs quick consistent disinfection. There are
many new and existing clients that are interested in the SteraPak due to the
cost and mobility.



In third quarter of 2021, we expanded our SteraMist® BIT™ solution product line
with a 32-ounce bottle for the SteraPak, and the introduction of a ten (10)
liter and five (5) gallon bottle. These three new additions bring the BIT
Solution product line to a total of five (5) options provided to our customers,
which should also benefit our razor razor-blade business model.



These new products and service introductions can significantly impact net sales,
cost of sales and operating expenses. The timing of product introductions can
also impact the Company's net sales to its indirect distribution channels as
these channels are filled with new inventory following a product launch, and
channel inventory of an older product often declines as the launch of a newer
product approaches. Net sales can also be affected when consumers and
distributors anticipate a product introduction domestically and internationally.



Overview



TOMI Environmental Solutions, Inc. ("TOMI", "we" and "our") is a global bacteria
decontamination and infectious disease control company, providing environmental
solutions for indoor surface decontamination through the manufacturing, sales,
service and licensing of our SteraMist® brand of products, including SteraMist®
BIT™, a low percentage (7.8%) hydrogen peroxide-based fog or mist that uses
Binary Ionization Technology (BIT™). Our solution and process are
environmentally friendly as the only by-product from our decontamination process
is oxygen and humidity. Our solution is organically listed in the United States
and Canada it is sustainably a green product with no carbon footprint. Most of
our competitors in the disinfection space leave significant by-products and are
corrosive. SteraMist is not corrosive, and it does not damage equipment or
facilities.



Our SteraMist® is a patented technology that produces ionized Hydrogen Peroxide
(iHP™) using cold plasma science created under a grant by the United States
Defense Advanced Research Projects Agency (DARPA). Our EPA registered BIT™
Solution is composed of a low concentration of hydrogen peroxide converted to
iHP™ after passing the trade secret blended solution including its sole active
ingredient of 7.8% hydrogen peroxide through an atmospheric cold plasma arc. The
newly formed iHP™ fog and mist consists of submicron's to 3-micron radical
particles that are carried throughout the treatment area in a fog or mist moving
with the same velocity and characteristics of a gas. This allows the ionized
hydrogen peroxide fog or mist to affect all surfaces and air space throughout
the targeted treatment area, over, above and beyond the ability of a manual
cleaning processes. iHP™ damages pathogenic organisms through the oxidation of
proteins, carbohydrates, and lipids. SteraMist® no-touch disinfection and or
decontamination treat areas mechanically, causing cellular disruptions and/or
dysfunctions resulting in a 6-log (99.9999%) and greater kill or inactivation of
all pathogens in the treatment area. This is a science that world needs to
follow.



Under the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), we are
required to register with the EPA and certain state regulatory authorities as a
seller of disinfectants. In June 2015, SteraMist® BIT™ was registered with the
EPA as a hospital-healthcare disinfectant and general broad-spectrum surface
disinfectant for use as a misting/fogging agent. SteraMist® BIT™ now holds EPA
registrations (# 90150-2) for mold control, and air and surface remediation (#
90150-1). In February 2016, we expanded our label with the EPA to include
Clostridium difficile Spores and MRSA, as well as the influenza (Avian) virus
h1n1, which we believe has better positioned us to penetrate all industries
including the biodefense and healthcare industry. In August 2017, our EPA label
was further expanded to include efficacy against Salmonella and Norovirus. As of
January 27, 2017, our technology is one of 53 of the EPA's "Registered
Antimicrobial Products Effective against Clostridium difficile Spores", as
published on the EPA's K List. Further, in December 2017, SteraMist® was
included in the EPA's list G (Norovirus), L (Ebola) and M (Avian Flu). In March
2020, our EPA label was further amended to include Emerging Viral Pathogens
claims, thus meeting the criteria against Enveloped viruses and Large
Non-enveloped viruses and included on List N (Emerging Viral Pathogens including
SARS-CoV-2). In 2021, the EPA granted SteraMist® BIT™ 0.35% hydrogen peroxide -
EPA registration number 90150-3.




         31

  Table of Contents



SteraMist® BIT™ brings to the world a mechanical and automated method of
cleaning using a game-changing technology and EPA registered Hospital-HealthCare
disinfectant providing an upgrade to existing disinfecting and cleaning
protocols while limiting liability in a facility when it comes to resistant
infectious pathogens. We maintain this registration in all fifty (50) states,
Washington DC, Canada, and approximately thirty-five (35) other countries.


Markets



Our SteraMist® products are designed to address a wide spectrum of industries
using iHP™. Our operations consist of five main divisions based on our current
target industries: Hospital-HealthCare, Life Sciences, TOMI Service Network
(TSN), Food Safety and Commercial.



We continue to offer our customers a wide range of innovative mobile products
designed to be easily incorporated into their existing disinfection and
decontamination procedures and protocols. Our newly released SteraPak, among
other product lines will allow us to progress further into market share,
specifically for our Life Science, Hospital-HealthCare, TSN, and Commercial
divisions. Additionally, we offer integrated facility equipment installations
known as Custom Engineered Systems (CES), routine & emergency iHP Corporate
Service, essential training packages, validations and qualifications, and onsite
performance maintenance requests.



Each of these are structured to address the unique disinfection and decontamination needs of our customers worldwide regardless of industry requiring or requesting SteraMist® disinfection decontamination.

A brief overview of the target industries is presented below:



Life Sciences



The SteraMist® Environment System, Custom Engineered Systems (CES), the
SteraMist® Select Surface Unit (Plus), SteraBox, 90 Degree Applicator and our
iHP™ Corporate Service Division, are designed to be tailored to provide a
complete solution to address the regulatory inspections of
disinfecting/decontaminating and Installation Qualification (IQ)-Operational
Qualification (OQ)-Performance Qualification (PQ) validation processes within
the life sciences industry.


Long term, ongoing projects and validations continue to be a focus and lead to
proposals and interest for our CES permanent decontamination room. As these are
longer lead-time sales that can take months to design, build and implement, we
expect installations to have impact to our results in 2022.



Further, we believe that post COVID pandemic has brought some attention to the
SteraMist product line, as our CES in Pfizer Missouri was recently showcased in
a New York Times article as they featured their COVID vaccine processes. In
addition, our iHP Corporate Service team treated one of four fill lines in a
North Carolina pharmaceutical company that manufactures one of the COVID
vaccines, with the remaining three lines set to be decontaminated in the future
with SteraMist.



     For 2022 and beyond, TOMI expects growth in SteraMist Custom Engineered
Systems (CES) bids and the manufacturing and implementation of these fully
automated decontamination systems. The installed CES will also result in
increased solution sales for Life Sciences as the CES's are used at regular
intervals. The first CES system was completed in 2016 for Dana Farber Cancer
Institute, as Dana Farber was designing a new vivarium and had the opportunity
to integrate several new technologies to advance overall efficiency, quality,
and design. One such technology was the use of our ionized Hydrogen Peroxide
(iHP) decontamination. TOMI's CES is an automated system that can be fully
integrated into any company's infrastructure, enabling decontamination, without
burdening manual use and with the collaboration of current premier customers and
partners, TOMI has further perfected the system. The CES eliminates issues such
as human error, guarantees accuracy that is unmatched by competitors, and
decreases a client's labor cost and downtime, and in a short time the CES may
make up a majority of TOMI's revenue. Since its launch, SteraMist's CES has
become a leading solution to growing customer demands.



Hospital-Healthcare



         The SteraMist® line of products, specifically the SteraMist® Surface
Unit and SteraMist® Total Disinfection Cart, are our main solutions to aid our
Hospital-HealthCare customers in providing high quality of safety to their
patients and personnel by disinfecting operating rooms, pharmacies, ambulances,
and emergency environments throughout a healthcare facility. TOMI's latest
product, the SteraPak, further assists healthcare communities with an
easy-to-use, cordless disinfection solution, creating a more mobile solution.
Our customers that have successfully adopted our technology in
Hospital-Healthcare facilities, have recurring revenue and reorder rates of our
BIT™ Solution. We plan to continue to expand our marketing, advertising and
educational campaigns targeted at the Hospital-Healthcare marketing in an effort
to grow our customer base and increase adoption of our SteraMist® line of
products.




         32

  Table of Contents




Our team of technicians and representatives train, maintain, and service capital
equipment throughout the world for our Hospital-HealthCare customers. As our
Training and Implementation department expands, we expect continued growth and
purchases in our Hospital-HealthCare division. TOMI provides protocol
development and implementation of SteraMist® as it is critical in the healthcare
setting, including pandemic preparedness.



UCLA recently completed a successful collection of critical data for the Shield
Study. The Shield Study is a multi-year study comparing SteraMist with manual
clean. The Study was conducted by multiple well-established hospitals. Initial
findings have been positive regarding ease of use, overall efficacy, and quick
turnaround time of patient rooms. TOMI looks forward to announcing the full
results as soon as they are available to make public.



TOMI anticipates this study will assist in the expansion of current HealthCare
customers to follow the model of Gila River Health Care. Gila River is one of
TOMI's largest Healthcare customers owning a total of fourteen (14) Surface
Units and Two (2) SteraPaks. The Gila River Indian Community (GRIC) is an Indian
reservation in Arizona that is made up of seven (7) districts and is home to the
Akimel O'oodham (Pima) and the Pee-Posh (Maricopa) tribes. Gila River Health
Care, a premier Native American healthcare system, provides high quality patient
care, delivering a wide variety of medical services such as general surgery,
dental, and emergency medicine, as well as associated health services such as
pharmacy and laboratory operations, skilled nursing and rehabilitation.



TOMI Service Network



The TOMI Service Network, or TSN, is an expansive network consisting of
professionals throughout North America who are exclusively licensed and trained
to use the SteraMist® products. With the purchase of SteraMist and joining TSN,
TOMI trains and services a wide array of professional remediation companies in
the use of SteraMist® throughout the TSN division. TSN allows for increased
accessibility and brand awareness of iHP® services to facilities in need of
local routine and emergency disinfection and decontamination.



The TOMI Service Network (TSN) division is addressing the cleaning protocols
that have changed permanently due to the COVID-19 pandemic, and our network is
expected to play a significant role in facilitating and maintaining these
protocols throughout the United States and Canada. The urgency for emergency
disinfection services is starting to pick up due to employees returning to work,
increasing number of contagious variants and the potential of monkeypox becoming
more of a world concern. Our education and support of such services that TOMI
personnel provide to our members creates an advantage by maintaining strong
business relationships while they service thousands of SteraMist customers, and
the world returns to the new normal which will always focus on emerging
pathogens.



Our SteraPak release is an important factor for this market that we will increase the new member onboarding. Current members are showing interest in purchasing the SteraPak to expand their current SteraMist offerings.



Food Safety



Food Safety presents an opportunity for growth with continued product research
and compliance testing. With the food safety industry in North America coming
under closer scrutiny with the implementation and enforcement of new and
established guidelines. This concentration has previously been approved by the
USDA and FDA for direct food and crop application and will allow SteraMist® to
expand use sites beyond food processing machinery, restaurants, and food contact
areas. This will assist compliance with the newly established Food Safety
Modernization Act guidelines set in place by the FDA, as well as the Safe Food
for Canadians Act and Safe Food for Canadians Regulations in Canada. Today's
Geopolitical aspects of farming and ranching has created an extra layer of
concern for the protection of our global limited food supply including food
transportation.



TOMI continues to work with premium companies in testing and validating
SteraMist® technology in the Food Safety and seed industries. In 2022, we look
to make further progress in enhancing brand awareness by promoting and marketing
this division. We are receiving an increase in inquiries within the Food Safety
division directly from these efforts.




         33

  Table of Contents




With the global population explosion, we anticipate an increase in the demand
for a mechanical way to disinfect our food supply. Every day there are news
articles around the world pertaining to the contamination of food supply. The
many published articles that the USDA in cooperation with TOMI have demonstrated
that our technology offers a consistent alternative to the decade's old chemical
disinfection process.


SteraMist will deliver more consistent and quicker results in all areas of our
food supply- From Farm to Market, Processing to packaging and Storage to
delivery. We plan on pursuing all these avenues. With the continued testing and
need for the market coupled with our new .35% label, should make pursuing these
opportunities successful. In addition, our solution and process are
environmentally friendly in that the by-product of SteraMist is only oxygen and
water in the form of humidity. We have our solution listed on OMRI and labeled
as organic. Most disinfectants leave residue on furniture, objects, and foods.
SteraMist does not leave any chemical residue on any surface. We have a very low
carbon footprint, if any.



Commercial



Our Commercial division includes but is not limited to use sites such as
aviation, airports, police and fire, prisons, manufacturing companies,
automobile, military, cruise ships, shipping ports, preschool education, primary
and secondary schools, colleges including dormitories, all modes of public and
private transportation, regulatory consulting agencies, retail, housing and
recreation, and of course emergency preparedness for counties and cities to use
SteraMist® throughout their community.



The SteraPak is a popular product for this division because customers are
looking for a more cost-effective solution compared to the current disinfectants
on the market. As quick and mobile disinfection solution is preferred in this
industry, we believe that SteraPak will generate customer interest and create
sales opportunities. Currently our customers are purchasing our SteraPak in all
of our divisions to provide quick disinfection throughout various sites in their
facilities. The recent increase in Monkey Pox is creating again more interest in
better disinfection like the needs of COVID in 2020-2021.



Business Highlights and Recent Events



Revenues:



Total revenue for the six months ended June 30, 2022 and 2021, was $3,767,000
and $3,539,000, respectively, representing an increase of $228,000, or 6%
compared to the same prior year period. The increase in revenue was attributable
to higher demand for our mobile equipment. SteraMist product-based revenues for
the six months ended June 30, 2022 and 2021, were $3,020,000 and $2,673,000,
representing an increase of $347,000 or 13% when compared to the same prior
year
period.


During the first six months of 2022 we have received $5,600,000 in orders, of
which we anticipate $2,300,000 will be recognized as revenue in our third and
fourth quarter accounting periods of 2022. This represents 35% growth in sales
orders received for the six months ended June 30, 2022 when compared to the same
prior year accounting period. The growth in our orders was due to increased
demand for our mobile equipment and Custom Engineered Systems (CES) from both
the life science and hospital sectors. We anticipate further growth in sales as
our sales pipeline for the remainder of 2022 is robust and we believe based upon
current orders and pending negotiations, that we will surpass our original 2022
budget and analyst expectations.



As of June 30, 2022, we maintain deposits for certain customers of approximately
$607,000 which represent down payments on future CES orders that are expected to
be recognized into revenue in future accounting periods. We anticipate our
customer deposits to continue to grow in the third quarter of 2022.



For the three months ended June 30, 2022 and 2021, our revenue was $1,458,000
and 1,466,000, respectively, essentially flat for the comparable periods.
However, during the second quarter of the current year, we were able to further
build out our sales pipeline and received approximately $900,000 in customer
orders that will be recognized into revenue in future periods.




         34

  Table of Contents




We believe that we possess the best technologies in the world in the
disinfection and decontamination space. The COVID-19 pandemic has provided us
with the opportunity and motivation to implement a clear strategy to develop and
manufacture additional products to add to our portfolio. In addition, we
continue to move our BIT technology as a standard in disinfection and
decontamination globally, which we believe will lead to increased market share,
profitability, and capability strength. Our products are an environmentally
friendly solution and process which address the concerns of sustainability.
Customers are requesting and discussing the positive results of our product and
the environmentally friendly results compared to the caustic results of other
disinfectants.



Dangerous pathogens still exist and will exist long after we recover from this
pandemic. While the United States and most of the world is moving from the
COVID-19 pandemic, there are many pathogens which are respiratory in nature that
are still a looming threat; these cases are occurring globally to this day. We
believe SteraMist can mitigate and reduce the impact of the next pandemic as it
has already proved during the outbreaks of Ebola, MERS and recently with SARS
CoV-2 pandemic. As the world faces uncertainty with an ongoing war, SteraMist is
prepared for a chemical and biological warfare with proven efficacy against many
agents, as well as inventory and support readily to deploy at a moment's notice.
The need for a speedy comprehensive mechanical disinfectant like SteraMist
cannot be stressed enough and should be included as the new norm of cleaning.



2022 Events:



As conferences and tradeshows are reopening in 2022 companies to exhibit live,
TOMI will be attending multiple shows across the country. It is critical for
TOMI to perform live demonstrations to showcase the difference between our
SteraMist iHP technology and our competitors. TOMI looks forward to making a
large impact with live demonstrations of SteraMist disinfection technology
throughout our multiple divisions.



On April 12, 2022, we announced the attendance of the RIA 2022 International
Restoration Convention & Industry Expo. This show provided insight on the future
of restoration businesses regarding mergers and acquisitions and meetings with
core entities to discuss SteraMist disinfection potential with large franchises.



On April 25, 2022, we released that TOMI was exhibiting at FDIC International,
which is the largest fire and rescue conference. As first-time exhibitors, we
gained knowledge on the EMS market and their need for disinfection. With
concerns of corrosion, vehicle turnover time, and residues left behind by older
technologies, SteraMist technology saw great interest as it does not corrode or
damage equipment, leave residue, and quickly disinfects. This market eagerly
awaits the release of the iHP SteraMist Transport System.



On May 19, 2022, we announced Dr. Halden Shane was to present at the H.C. Wainwright Investment Conference.




On May 20, 2022, we announced that TOMI was to attend the INTERPHEX 2022
Technical Conference and exhibited three of our SteraMist mobile units.
INTERPHEX is designed to host and connect state-of-the-art market leaders in the
pharmaceutical, biotechnology, and life sciences industries. TOMI thrives in
this marketplace due to SteraMist iHP technology offering quick, six-log kill
decontamination with impressive material compatibility that provides unique
advantages over competitors.



On June 3, 2022, we announced the inclusion of our SteraMist technology on the
List Q for the use of its BIT solution to help fight the spread of rare or novel
viruses such as Monkeypox virus, SARS-CoV-2 and its variants that causes
COVID-19. TOMI was notified of EPA's inclusion on June 2, 2022.



Research Studies and Publications:




The EPA has registered our 0.35% hydrogen peroxide product for the use in green
houses, pre harvests and post harvests. TOMI is conducting internal studies with
the 0.35% on common pathogens in the food safety market to enhance protocols.



We continue to pursue acceptance of the additional 1% hydrogen peroxide label
with the EPA for direct food application. Due to the pandemic, there have been
significant delays by U.S. regulatory agencies in approving new submissions,
including TOMI's new 1% registration.




         35

  Table of Contents




Partner Indoor Environmental Solutions and Consultants, or IESC, LLC completed
their Forensic Architectural & Engineering Investigation and Decontamination
Report with Kalera Indoor Farms. IESC is a state-of-the art indoor air and
surface decontamination company dedicated to food and health safety. In addition
to being a TSN service provider, IESC are distributor partners to iHP SteraMist
technology. Kalera, a global leader in vertical community farms for greens and
culinary herbs harvested on demand all year is highly motivated to have iHP
SteraMist be their cleaning decontamination solution. The recently received
report outlines decontamination protocols and calculated savings and estimated
service and purchasing options for Kalera.



TOMI has once again partnered with USDA Agricultural Research Service for
continued research on BIT solution and the modeling of cold plasma-activated
hydrogen peroxide process, evaluating concentration, treatment time, and dwell
time on the efficacy of the technology against bacteria on stem scar and smooth
surfaces of tomatoes. Although the final paper is with the reviewers to the
journal, the final draft of this latest publication was approved late March
of
this year.



Received great preliminary biotoxin iHP inactivation data against Ricin A Chain
by a U.S. government agency who will be expanding testing to Botulinum and SEB
toxoids. TOMI is working directly with the agency to find funding and supporting
efforts to validate their toxoid protocols against fully functional toxins. This
same agency is constructing a scalable, reusable, portable iHP decontamination
chamber for field remediation of biologically contaminated equipment.



Bio-Risk Decontamination and Restoration owner David Mark Quigley published the
book Mycotoxin Deactivation: A Successful Mycotoxin Treatment and Reduction Case
Study on the assessment, identification, treatment, and deactivation and
validation procedures of Mycotoxins highlighting SteraMist iHP as the treatment
for deactivating and render them inert. The book is available online at Amazon,
Apple Books, and Rakuten kobo.



As previously discussed, TOMI has engaged HYGCEN Germany GmbH to perform a
quantitative test of germ carriers for airborne room disinfection and testing of
the effectiveness of a method for disinfecting room air to meet the new EU norm
(standard) EN 17272. Certification that Binary Ionization Technology meets the
new standard will continue to position iHP as the premier
decontamination/disinfection technology available on the market today. On
September 16, 2021, we announced that our technology has passed the EN 17272
evaluation. The EN 17272 is the European standard for airborne room disinfection
in the form of gas, steam and/or aerosol.



We have participated in a large multi-year federal funded study, known as the
"SHIELD study" that compares hospital manual cleaning to a SteraMist® mechanical
cleaning. Preliminary results collected by the current hospitals in the study is
showing a decrease in the transference of pathogens resulting in HAIs and
Clostridium difficile infections in the rooms that used SteraMist® for their
terminal clean, as compared to the rooms that have been manually cleaned.
Sufficient data has been collected to complete the study in 2021, and we expect
that data to be provided to the examiners with a published paper to soon follow.



Registrations & Intellectual Property (IP):




Our portfolio includes more than twenty (20) Utility
Patent applications worldwide for both method and system claims on
SteraMist® BIT™, either published or undergoing prosecution. We continue to
pursue further claims to additional capabilities in on-going United States and
worldwide patent applications. We have obtained two related United States
utility patents giving us protection of our technology until the year 2038.



We have submitted utility patent applications in multiple countries, including
Europe, China, Brazil, and Australia for further additional applications of
SteraMist BIT, and a related application has already been determined novel and
inventive in Taiwan. We have been awarded a design patent on our surface-mounted
applicator device in the United States, China, Japan, Taiwan, and Korea. We have
filed and have been granted or have pending acceptance on thirty-two (32)
separate design patents for our: Decontamination Chamber(s), Decontamination
Applicator, Decontamination Cart, Applicator, and Surface Mounted Applicator
90-Degree Device. These patents are published around the world, including but
not limited to United States, China, Hong Kong, Europe, United Kingdom,
Singapore, Taiwan, Vietnam, Canada, South Korea, and Japan. We are also pursuing
IP protection for further applications of our SteraMist BIT in diverse fields at
multiple jurisdictions, such as food decontamination.




         36

  Table of Contents




Our products are sold around the world under various brand names and trademarks.
We consider our brand names and trademarks to be valuable in the marketing of
our products. As of today, we have over two hundred trademarks, (word and/or
logo) registered or pending across the globe. TOMI registers marks in eight (8)
classes of specification of goods and services: Class 1 for Chemicals for
Treating Hazardous Waste, Class 5 for Disinfectants, All-Purpose for Hard
Surfaces and for Treating Mold, Class 7 for Handheld Power Operated Spraying
Machines, Class 11 for Sterilizers for Medical Use and Air Purification, Class
35 for Business Consultation and Management Services, Class 37 for General
Disinfecting Services, Class 40 for Chemical Decontamination and Manufacturing
Services, and Class 41 for Providing Education Training and information related
to biological and bacterial decontamination services.



Financial Operations Overview


Our financial position as of June 30, 2022 and December 31, 2022, respectively, was as follows:




                              June 30, 2022
                                Unaudited         December 31, 2021
Total shareholders' equity   $    12,425,000     $        13,595,000
Cash and cash equivalents    $     4,800,000     $         5,317,000
Accounts receivable, net     $     1,936,000     $         1,965,000
Inventories                  $     4,785,000     $         4,743,000
Prepaid expenses             $       353,000     $           344,000
Vendor Deposits              $       320,000     $           289,000
Other Receivables            $       164,000     $           236,000
Current liabilities          $     2,433,000     $         1,816,000
Long-term liabilities        $       811,000     $           861,000
Working Capital              $     9,925,000     $        11,077,000



During the six months ended June 30, 2022, our debt and liquidity positions were affected by the following:



  · Net cash used in operations of approximately $451,000.
  · Customer deposits received of approximately $607,000.



Results of Operations for the Three and Six Months Ended June 30, 2022 Compared to the Three and Six Months Ended June 30, 2021




                For The Three Months Ended                          For The 

Six Months Ended

                         June 30,                   Change                  June 30,                   Change
                  2022               2021              $              2022             2021              $

Revenue,

Net          $    1,458,000      $  1,466,000     $   (8,000 )   $   3,767,000     $  3,539,000     $    228,000
Gross
Profit       $      921,000           942,000        (21,000 )       2,342,000        2,177,000          165,000
Total
Operating
Expenses     $    1,784,000         2,135,000       (351,000 )       3,865,000        4,881,000       (1,016,000 )
Income
(Loss)
from
Operations         (863,000 )      (1,193,000 )      330,000        (1,523,000 )     (2,703,000 )      1,180,000
Total
Other
Income
(Expense)             1,000            (1,000 )        2,000             1,000          414,000         (413,000 )
Provision
for Income
Taxes                     -                 -              -                 -                -                -
Net Income
(Loss)       $     (862,000 )    $ (1,194,000 )      332,000     $  (1,522,000 )   $ (2,289,000 )        767,000
Basic Net
Income
(Loss) per
share        $        (0.04 )    $      (0.05 )   $     0.01     $       (0.08 )   $      (0.14 )   $       0.06
Diluted
Net Income
(Loss) per
share        $        (0.04 )    $      (0.05 )   $     0.01     $       (0.08 )   $      (0.14 )   $       0.06






Sales and Revenue



Total revenue for the three months ended June 30, 2022 and 2021, was $1,458,000
and $1,466,000, respectively, representing a decrease of $8,000, or 1% compared
to the same prior year period. For the six months ended June 30, 2022 and 2021,
our total revenue was $3,767,000 and $3,539,000, respectively, representing an
increase of $228,000, or 6% compared to the same prior year period.




         37

  Table of Contents




As customers mature through the product and adoption cycle and our sales
pipeline converts to revenue, we expect to generate more predictable sales
quarter over quarter. Further, as the COVID-19 pandemic subsides, we expect that
the demand for our products and services will continue as we are building a team
to address the post COVID-19 pandemic market opportunities.



Net Revenue



                For The Three Months Ended                        For The
Six Months Ended
                         June 30,                  Change                 June 30,                 Change
                  2022               2021            $              2022             2021            $

Sales, net $ 1,458,000 $ 1,466,000 $ (8,000 ) $ 3,767,000 $ 3,539,000 $ 228,000

Product and Service Revenue




               For The Three Months Ended                          For The 

Six Months Ended

                        June 30,                   Change                  June 30,                  Change
                 2022               2021             $               2022             2021             $
SteraMist
Product     $     1,134,000      $ 1,026,000     $  108,000     $    3,020,000     $ 2,673,000     $  347,000
Service
and
Training            324,000          440,000       (116,000 )          747,000         866,000       (119,000 )
Total       $     1,458,000      $ 1,466,000     $   (8,000 )   $    3,767,000     $ 3,539,000     $  228,000




SteraMist product-based revenues for the three months ended June 30, 2022 and
2021, were $1,134,000 and $1,026,000, representing an increase of $108,000 or
11% when compared to the same prior year period. Product based revenues for the
six months ended June 30, 2022 and 2021, were $3,020,000 and $2,673,000,
representing an increase of $347,000 or 13% when compared to the same prior year
period. The increase in product based revenue was attributable to higher mobile
equipment sales.



Our service-based revenue for the three months ended June 30, 2022 and 2021, was
$324,000 and $440,000, respectively, representing a decrease of 26%. For the six
months ended June 30, 2022 and 2021, our service-based revenue was $747,000 and
$866,000, representing a decrease of $119,000 or 14% when compared to the same
prior period in 2021 The decline in service and training revenue was due to the
timing of certain iHP service that occurred in the prior year period.



Revenue by Geographic Region




                   For The Three Months Ended                         For 

The Six Months Ended

                            June 30,                  Change                  June 30,                  Change
                     2022               2021             $              2022             2021             $

United States $ 1,206,000 $ 1,184,000 $ 22,000 $ 2,703,000 $ 2,989,000 $ (286,000 ) International

           252,000          282,000       (30,000 )        1,064,000         550,000        514,000
Total           $     1,458,000      $ 1,466,000     $  (8,000 )   $    3,767,000     $ 3,539,000     $  228,000



Our domestic revenue for the three months ended June 30, 2022 and 2021 was
$1,206,000 and $1,184,000, respectively, an increase of $22,000, or 2% when
compared to the same prior year period. Internationally, our revenue for the
three months ended June 30, 2022 and 2021, was approximately $252,000 and
$282,000, respectively, representing a decrease of $30,000 or 11% when compared
to the same prior year period.




         38

  Table of Contents




Cost of Sales



             For The Three Months Ended                         For The Six Months Ended
                     June 30,                    Change                 June 30,                 Change
             2022                 2021             $              2022             2021            $
Cost
of

Sales $ 537,000 $ 524,000 13,000 $ 1,425,000

    $ 1,362,000       63,000



Cost of sales was $537,000 and $524,000 for the three months ended June 30, 2022
and 2021, respectively, an increase of $13,000, or 2%, compared to the prior
year. Our gross profit as a percentage of sales for the three months ended June
30, 2022 was 63.1% compared to 64.2% in the same prior period, respectively. The
lower gross profit is attributable to the product mix in sales.



Cost of sales was $1,425,000 and $1,362,000 for the six months ended June 30,
2022 and 2021, respectively, an increase of $63,000, or 5%, compared to the
prior year. The primary reason for the increase in cost of sales is attributable
to higher revenue in the current period. Our gross profit as a percentage of
sales for the six months ended June 30, 2022 was 62.2% compared to 61.5% in the
same prior period, respectively. The higher gross profit is attributable to
the
product mix in sales.



Professional Fees



                         For The Three Months Ended                        
 For The Six Months Ended
                                 June 30,                    Change                  June 30,                Change
                        2022                 2021               $              2022              2021           $

Professional Fees $ 95,000 $ 107,000 $ (12,000 ) $

    285,000       $  280,000     $ 5,000



Professional fees are comprised mainly of legal, accounting, and financial consulting fees.




         Professional fees were $95,000 and $107,000 for the three months ended
June 30, 2022 and 2021, respectively, a decrease of approximately $12,000, or
11%, in the current year period.



         Professional fees were $285,000 and $280,000 for the six months ended
June 30, 2022 and 2021, respectively, an increase of approximately $5,000, or
2%, in the current year period.



Depreciation and Amortization



                     For The Three Months Ended                         For The Six Months Ended
                             June 30,                    Change                 June 30,                Change
                     2022                 2021              $             2022              2021           $
 Depreciation
and

Amortization $ 83,000 $ 72,000 $ 11,000 $ 165,000 $ 156,000 $ 9,000

Depreciation and amortization were approximately $83,000 and $72,000 for the three months ended June 30, 2022 and 2021, respectively, representing an increase of $11,000, or 15%.




         39

  Table of Contents



Depreciation and amortization were approximately $165,000 and $156,000 for the
six months ended June 30, 2022 and 2021, respectively, representing an increase
of $9,000, or 6%.



Selling Expenses



                For The Three Months Ended                          For The Six Months Ended
                        June 30,                    Change                  June 30,                 Change
                2022                 2021              $              2022              2021           $
Selling
Expenses   $      566,000       $      335,000     $ 231,000     $     907,000       $  810,000     $ 97,000




Selling expenses for the three months ended June 30, 2022 were approximately
$566,000, as compared to $335,000 for the quarter ended June 30, 2021,
representing an increase of approximately $231,000 or 69%. The increase in
selling expenses is attributable to higher sales commissions and our increased
tradeshow presence the current year period.



Selling expenses for the six months ended June 30, 2022 were approximately $907,000, as compared to $810,000 for the period ended June 30, 2021, representing an increase of approximately $97,000 or 12%. The increase in selling expenses is attributable to higher sales commissions and our increased tradeshow presence the current year period.



Research and Development



                   For The Three Months Ended                           For The Six Months Ended
                           June 30,                     Change                  June 30,                  Change
                  2022                 2021                $             2022               2021            $
Research
and
Development   $      99,000       $       206,000     $ (107,000 )   $     136,000       $  401,000     $ (265,000 )



Research and development expenses for the three months ended June 30, 2022 were
approximately $99,000, as compared to $206,000 for the quarter ended June 30,
2021, representing a decrease of approximately $107,000, or 52%.



Research and development expenses for the six months ended June 30, 2022 were
approximately $136,000, as compared to $401,000 for the period ended June 30,
2021, representing a decrease of approximately $265,000, or 66%.



The research and development expenses is attributable to product development charges we incurred on the prior year period which did not reoccur in the current year period.



Consulting Fees



                       For The Three Months Ended                         
For The Six Months Ended
                               June 30,                    Change                  June 30,                 Change
                       2022                 2021              $             2022               2021            $

Consulting Fees $ 40,000 $ 96,000 $ (56,000 ) $

  103,000       $  202,000     $ (99,000 )




Consulting fees were $40,000 and $96,000 for the three months ended June 30,
2022 and 2021, respectively, representing a decrease of $56,000, or 58%, in
the
current quarter period.



Consulting fees were $103,000 and $202,000 for the six months ended June 30,
2022 and 2021, respectively, representing a decrease of $99,000, or 49%, in
the
current quarter period.


The decrease is due to the timing of certain projects that occurred in the prior year that did not occur in the same current year period.




         40

  Table of Contents



General and Administrative Expense




                    For The Three Months Ended                          For The Six Months Ended
                             June 30,                   Change                  June 30,                  Change
                     2021                2022              $              2021             2022             $

General and Administrative $ 902,000 $ 1,319,000 $ (417,000 ) $ 2,268,000 $ 3,032,000 $ (764,000 )





General and administrative expense includes salaries and payroll taxes, rent,
insurance expense, utilities, office expense, product registration costs, equity
compensation and bad debt expense.



General and administrative expense was $902,000 and $1,319,000 for the three
months ended June 30, 2022 and 2021, respectively, a decrease of $417,000 in the
current period. The decline in general and administrative expense is primarily
attributable to lower payroll costs, insurance and bad debt expense in the
current year period.



General and administrative expense was $2,268,000 and $3,032,000 for the six
months ended June 30, 2022 and 2021, respectively, a decrease of $764,000 in the
current period. The decline in general and administrative expense is primarily
attributable to lower payroll costs, insurance and bad debt expense in the
current year period.



Other Income and Expense



                  For The Three Months Ended                       For The 

Six Months Ended

                           June 30,                Change                  June 30,                   Change
                   2022              2021            $             2022               2021              $
Gain Upon Debt
Extinguishment          -             415,000                            -              415,000       (415,000 )
Interest
Income                  -                   -                        1,000                1,000              -
Interest
Expense                 -                   -            -               -               (1,000 )        1,000
Other Income
(Expense)        $      -         $   415,000     $      -     $     1,000       $      415,000     $ (414,000 )



Gain upon debt extinguishment of $415,000 in connection with the forgiveness of a loan payable.

Interest income was approximately $1,000 for the six months ended June 30, 2022 and 2021.

Interest expense was $0 and $1,000 for the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

         As of June 30, 2022, we had cash and cash equivalents of $4,800,000 and
working capital of $9,925,000. Our principal capital requirements are to fund
operations, invest in research and development and capital equipment, and the
continued costs of public company reporting requirements. We have historically
funded our operations through funds generated through operations and debt and
equity financings. The sale of additional equity securities could result in
dilution to our stockholders. The incurrence of indebtedness would result in
increased debt service obligations and may include operating and financial
covenants that would restrict our operations. We cannot be certain that any
financing will be available in the amounts we need or on terms acceptable to us,
if at all.



In September 2021, we sold 2,869,442 shares of common stock through a registered
direct offering to certain institutional investors and issued 1,434,721 warrants
in a concurrent private placement. We received net proceeds from the transaction
of $4,581,651, after deducting the placement agent's fees and other estimated
offering expenses. The Warrants have an exercise price of $1.68 per share, are
exercisable immediately upon issuance and have a term of exercise equal to five
years from the date of issuance.




         41

  Table of Contents



For the six months ended June 30, 2022 and 2021, we incurred a loss from operations of ($1,523,000) and ($2,704,000), respectively. Cash used in operations for the six months ended June 30, 2022 and 2021, was $451,000 and $2,512,000, respectively.

A breakdown of our statement of cash flows for the six months ended June 30, 2022 and 2021 is provided below:



                                                    For the six months ended June 30,
                                                        2022                 2021
Net Cash Provided By (Used) in Operating
Activities                                        $       (451,000 )     $  (2,512,000 )
Net Cash Used in Investing Activities             $        (66,000 )     $    (198,000 )
Net Cash Provided by Financing Activities:        $              -       $ 
         -




Operating Activities



Cash used in operating activities for the six months ended June 30, 2022 and
2021 was $451,000 and $2,512,000, respectively. The decline was attributable to
a lower current year loss and customer deposits as well as increased purchases
of inventory in the prior year to replenish our levels.



Investing Activities


Cash used in investing activities for the six months ended June 30, 2022 and 2021 was $66,000 and 198,000, respectively.



Financing Activities


Cash provided by financing activities for six months ended June 30 2022 and 2021 was $0.




Liquidity



         Our revenues can fluctuate due to the following factors, among others:


· ramp up and expansion of our internal sales force and manufacturers'

           representatives;
       ·   length of our sales cycle;
       ·   length of installation of our CES;
       ·   global response to the outbreak of COVID-19 Pandemic and or new
           Pandemics or diseases of concern;
       ·   customer budget cycles and allocations;
       ·   expansion into new territories and markets; and
       ·   timing of orders from distributors.




We could incur operating losses and an increase of costs related to the
continuation of product and technology development, sales expense as we continue
to grow our sales teams, inventory as we continue to ensure we have products
needed and geographic presence, tooling capital expenditures as we ramp up and
streamline our production and administrative activities including compliance
with the Sarbanes-Oxley Act of 2002 Section 404.



Management has taken and will endeavor to continue to take a number of actions in order to improve our results of operations and the related cash flows generated from operations in order to strengthen our financial position, including the following items:

· expanding our label with the EPA to further our product registration

           internationally;

· continued expansion of our internal sales force and manufacturer

           representatives in an effort to drive global revenue in all 

verticals;

· continue research and development and add new products to our "Stera"

           product line;
       ·   source alternative lower-cost suppliers;
       ·   expansion of international distributors; and
       ·   continued growth in all of our verticals.





         42

  Table of Contents



We expect that the cash we generate from our core operations will generally be
sufficient to cover our future capital expenditures and to pay down our
near-term debt obligations, although we may choose to seek alternative financing
sources.



We believe that our existing balance of cash and cash equivalents and amounts
expected to be provided by operations will provide us with sufficient financial
resources to meet our cash requirements for operations, working capital and
capital expenditures over the next twelve months.



Critical Accounting Policies and Estimates




Our discussion and analysis of our financial condition and results of operations
is based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. The estimation process requires assumptions to be made about future
events and conditions, and as such, is inherently subjective and uncertain.
Actual results could differ materially from our estimates.



The SEC defines critical accounting policies as those that are, in management's
view, most important to the portrayal of our financial condition and results of
operations and most demanding of our judgment. We consider the following
policies to be critical to an understanding of our condensed consolidated
financial statements and the uncertainties associated with the complex judgments
made by us that could impact our results of operations, financial position
and
cash flows.



Revenue Recognition



We recognize revenue in accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts
with Customers (Topic 606). We recognize revenue when we transfer promised goods
or services to customers in an amount that reflects the consideration to which
we expect to be entitled in exchange for those goods or services. To determine
revenue recognition for contracts with customers we perform the following five
steps: (i) identify the contract(s) with a customer; (ii) identify the
performance obligation(s) in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligation(s) in
the contract; and (v) recognize revenue when (or as) we satisfy the performance
obligation(s). At contract inception, we assess the goods or services promised
within each contract, assess whether each promised good or service is distinct
and identify those that are performance obligations.



We must use judgment to determine: a) the number of performance obligations
based on the determination under step (ii) above and whether those performance
obligations are distinct from other performance obligations in the contract; b)
the transaction price under step (iii) above; and c) the stand-alone selling
price for each performance obligation identified in the contract for the
allocation of transaction price in step (iv) above.



Title and risk of loss generally pass to our customers upon shipment. Our
Customers include end users as well as dealers and distributors who market and
sell our products. Our revenue is not contingent upon resale by the dealer or
distributor, and we have no further obligations related to bringing about
resale. Shipping and handling costs charged to customers are included in Product
Revenues. The associated expenses are treated as fulfillment costs and are
included in Cost of Revenues. Revenues are reported net of sales taxes collected
from Customers.


Product revenue includes sales from our standard and customized equipment, solution and accessories sold with our equipment. Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products.

Service and training revenue include sales from our high-level decontamination and service engagements, validation of our equipment and technology and customer training. Service revenue is recognized as the agreed upon services are rendered to our customers in an amount that reflects the consideration we expect to receive in exchange for those services.




         43

  Table of Contents



Costs to Obtain a Contract with a Customer




We apply a practical expedient to expense costs as incurred for costs to obtain
a contract with a customer when the amortization period would have been one year
or less. We generally expense sales commissions when incurred because the
amortization period would have been one year or less. These costs are recorded
within selling expenses.



Contract Balances


As of June 30, 2022, and December 31, 2021 we did not have any unsatisfied
performance obligations for (i) contracts with an original expected length of
one year or less and (ii) contracts for which we recognize revenue at the amount
to which we have the right to invoice for services performed.



Arrangements with Multiple Performance Obligations

Our contracts with customers may include multiple performance obligations. We
enter into contracts that can include various combinations of products and
services, which are primarily distinct and accounted for as separate performance
obligations.



Significant Judgments



         Our contracts with customers for products and services often dictate
the terms and conditions of when the control of the promised products or
services is transferred to the customer and the amount of consideration to be
received in exchange for the products and services.



Use of Estimates



The preparation of condensed consolidated financial statements in conformity
with U.S. GAAP requires us to make estimates and assumptions that affect the
amounts reported and disclosed in the accompanying condensed consolidated
financial statements and the accompanying notes. Actual results could differ
materially from these estimates. On an ongoing basis, we evaluate our estimates,
including those related to accounts receivable, inventory, fair values of
financial instruments, intangible assets, useful lives of intangible assets and
property and equipment, fair values of stock-based awards, income taxes, and
contingent liabilities, among others. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable,
the results of which form the basis for making judgments about the carrying
values of our assets and liabilities.



Fair Value Measurements



The authoritative guidance for fair value measurements defines fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or the most advantageous market for
the asset or liability in an orderly transaction between market participants on
the measurement date. Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgeable, (iii) able to
transact, and (iv) willing to transact. The guidance describes a fair value
hierarchy based on the levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to measure fair value,
which are the following:


Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or

             indirectly, such as quoted prices for similar assets or 

liabilities;

             quoted prices in markets that are not active; or other inputs that
             are observable or corroborated by observable market data for
             substantially the full term of the assets or liabilities.

    Level 3: Unobservable inputs that are supported by little or no market
             activity and that are significant to the value of the assets or
             liabilities.





         44

  Table of Contents




Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. All these items were determined to be Level 1 fair value measurements.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments.



Cash and Cash Equivalents



For purposes of the statement of cash flows, cash and cash equivalents includes
cash on hand, held at financial institutions and other liquid investments with
original maturities of three months or less. At times, these deposits may be in
excess of insured limits.



Accounts Receivable


Our accounts receivable are typically from credit worthy customers or, for
certain international customers, are supported by pre-payments. For those
customers to whom we extend credit, we perform periodic evaluations of them and
maintain allowances for potential credit losses as deemed necessary. We have a
policy of reserving for doubtful accounts based on our best estimate of the
amount of potential credit losses in existing accounts receivable. We
periodically review our accounts receivable to determine whether an allowance is
necessary based on an analysis of past due accounts and other factors that may
indicate that the realization of an account may be in doubt. Account balances
deemed to be uncollectible are charged to the allowance after all means of
collection have been exhausted and the potential for recovery is considered
remote.



Inventories



Inventories are valued at the lower of cost or net realizable value using the
first-in, first-out (FIFO) method. Inventories consist primarily of finished
goods.


We expense costs to maintain certification to cost of goods sold as incurred.

We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence. We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories may not be usable.




Property and Equipment



We account for property and equipment at cost less accumulated depreciation. We
compute depreciation using the straight-line method over the estimated useful
lives of the assets, generally three to five years. Depreciation for equipment,
furniture and fixtures and vehicles commences once placed in service for its
intended use. Leasehold improvements are amortized using the straight-line
method over the lives of the respective leases or service lives of the
improvements, whichever is shorter.



Leases



We recognize a right-of-use ("ROU") asset and lease liability for all leases
with terms of more than 12 months, in accordance with ASC 842. We utilize the
short-term lease recognition exemption for all asset classes as part of our
on-going accounting under ASC 842. This means, for those leases that qualify, we
will not recognize ROU assets or lease liabilities. Recognition, measurement and
presentation of expenses depends on classification as a finance or operating
lease.



As a lessee, we utilize the reasonably certain threshold criteria in determining
which options we will exercise. Furthermore, our lease payments are based on
index rates with minimum annual increases. These represent fixed payments and
are captured in the future minimum lease payments calculation. In determining
the discount rate to use in calculating the present value of lease payments, we
used our incremental borrowing rate based on the information available at
adoption date in determining the present value of lease payments.




         45

  Table of Contents




We have also elected the practical expedient to not separate lease and non-lease
components for all asset classes, meaning all consideration that is fixed, or
in-substance fixed, will be captured as part of our lease components for balance
sheet purposes. Furthermore, all variable payments included in lease agreements
will be disclosed as variable lease expense when incurred. Generally, variable
lease payments are based on usage and common area maintenance. These payments
will be included as variable lease expense when recognized.



Capitalized Software Development Costs




In accordance with ASC 985-20 regarding the development of software to be sold,
leased, or marketed we expense such costs as they are incurred until
technological feasibility has been established, at and after which time those
costs are capitalized until the product is available for general release to
customers. The periodic expense for the amortization of capitalized software
development costs will be included in cost of sales.



Accrued Warranties



Accrued warranties represent the estimated costs, if any, that will be incurred
during the warranty period of our products. We estimate the expected costs to be
incurred during the warranty period and record the expense to the condensed
consolidated statement of operations at the date of sale. Our manufacturers
assume the warranty against product defects which we extend to our customers
upon sale of the product. We assume responsibility for product reliability
and
results.



Income Taxes



Deferred income tax assets and liabilities are determined based on differences
between the financial statement reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws in effect when
the differences are expected to reverse. The measurement of deferred income tax
assets is reduced, if necessary, by a valuation allowance for any tax benefits
that are, on a more likely than not basis, not expected to be realized in
accordance with Accounting Standards Codification (ASC) guidance for income
taxes.



Net Income (Loss) Per Share


Basic net income or (loss) per share is computed by dividing our net income or
(loss) by the weighted average number of shares of common stock outstanding
during the period presented. Diluted income or (loss) per share is based on the
treasury stock method and includes the effect from potential issuance of shares
of common stock, such as shares issuable pursuant to the exercise of options and
warrants and conversions of preferred stock or debentures.



Equity Compensation Expense


We account for equity compensation expense in accordance with FASB ASC 718,
"Compensation-Stock Compensation." Under the provisions of FASB ASC 718, equity
compensation expense is estimated at the grant date based on the award's fair
value and is recognized as expense over the requisite service period.



On July 7, 2017, our shareholders approved the 2016 Equity Incentive Plan, or
the 2016 Plan. The 2016 Plan authorizes the grant of stock options, stock
appreciation rights, restricted stock, restricted stock units and performance
units/shares. Up to 625,000 shares of common stock are authorized for issuance
under the 2016 Plan. Shares issued under the 2016 Plan may be either authorized
but unissued shares, treasury shares, or any combination thereof. Provisions in
the 2016 Plan permit the reuse or reissuance by the 2016 Plan of shares of
common stock for numerous reasons, including, but not limited to, shares of
common stock underlying canceled, expired, or forfeited awards of stock-based
compensation and stock appreciation rights paid out in the form of cash. Equity
compensation expense will typically be awarded in consideration for the future
performance of services to us. All recipients of awards under the 2016 Plan are
required to enter into award agreements with us at the time of the award; awards
under the 2016 Plan are expressly conditioned upon such agreements.



On December 30, 2020, we received shareholder approval to amend and restate the
2016 Equity Incentive Plan to increase the maximum number of shares of common
stock authorized from issuance by 1,375,000, from 625,000 shares to 2,000,000.




         46

  Table of Contents



Concentrations of Credit Risk




         Financial instruments that potentially subject us to significant
concentrations of credit risk consist principally of cash and cash equivalents.
We maintain cash balances at financial institutions which exceed the current
Federal Deposit Insurance Corporation limit of $250,000 at times during the
year.



Long-Lived Assets Including Acquired Intangible Assets




         We assess long-lived assets for potential impairments at the end of
each year, or during the year if an event or other circumstance indicates that
we may not be able to recover the carrying amount of the asset. In evaluating
long-lived assets for impairment, we measure recoverability of these assets by
comparing the carrying amounts to the future undiscounted cash flows the assets
are expected to generate. If our long-lived assets are considered to be
impaired, the impairment to be recognized equals the amount by which the
carrying value of the asset exceeds its fair market value. We base the
calculations of the estimated fair value of our long-lived assets on the income
approach. For the income approach, we use an internally developed discounted
cash flow model that includes, among others, the following assumptions:
projections of revenues and expenses and related cash flows based on assumed
long-term growth rates and demand trends; expected future investments to grow
new units; and estimated discount rates. We base these assumptions on our
historical data and experience, industry projections, micro and macro general
economic condition projections, and our expectations. We had no long-lived asset
impairment charges for the three months ended June 30, 2022 and 2021.



Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted


In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers (Topic 805). This ASU
requires an acquirer in a business combination to recognize and measure contract
assets and contract liabilities (deferred revenue) from acquired contracts using
the revenue recognition guidance in Topic 606. At the acquisition date, the
acquirer applies the revenue model as if it had originated the acquired
contracts. The ASU is effective for annual periods beginning after December 15,
2022, including interim periods within those fiscal years. Adoption of the ASU
should be applied prospectively. Early adoption is also permitted, including
adoption in an interim period. If early adopted, the amendments are applied
retrospectively to all business combinations for which the acquisition date
occurred during the fiscal year of adoption. This ASU is currently not expected
to have a material impact on our condensed consolidated financial statements.



Recently adopted accounting pronouncements




In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic
832). This ASU requires business entities to disclose information about
government assistance they receive if the transactions were accounted for by
analogy to either a grant or a contribution accounting model. The disclosure
requirements include the nature of the transaction and the related accounting
policy used, the line items on the balance sheets and statements of operations
that are affected and the amounts applicable to each financial statement line
item and the significant terms and conditions of the transactions. The ASU is
effective for annual periods beginning after December 15, 2021. We adopted ASU
2021-10 starting in 2022, which did not have a material impact on our condensed
consolidated financial statements.

© Edgar Online, source Glimpses

All news about TOMI ENVIRONMENTAL SOLUTIONS, INC.
09/27TOMI Environmental Receives Additional Orders for Custom Engineered Systems From Multin..
AQ
09/27TOMI Environmental Receives Additional Orders for Custom Engineered Systems from Multin..
CI
09/08Tomi CEO Dr. Halden Shane to Present at the H.C. Wainwright Global Investment Conferenc..
AQ
08/17Tomi Environmental Solutions, Inc. : Other Events, Financial Statements and Exhibits (form..
AQ
08/15TOMI Environmental Solutions Q2 Loss Narrows, Revenue Flat YoY
MT
08/15Tomi Environmental : REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS - Form 8-K
PU
08/15TOMI Environmental Solutions, Inc., Q2 2022 Earnings Call, Aug 15, 2022
CI
08/15TOMI ENVIRONMENTAL SOLUTIONS, INC. Management's Discussion and Analysis of Financial C..
AQ
08/15Earnings Flash (TOMZ) TOMI ENVIRONMENTAL SOLUTIONS Reports Q2 Revenue $1.5M, vs. Street..
MT
08/15TOMI Environmental Solutions, Inc. Reports Earnings Results for the Second Quarter and ..
CI
More news
Analyst Recommendations on TOMI ENVIRONMENTAL SOLUTIONS, INC.
More recommendations
Financials (USD)
Sales 2022 11,6 M - -
Net income 2022 - - -
Net Debt 2022 - - -
P/E ratio 2022 -
Yield 2022 -
Capitalization 14,0 M 14,0 M -
Capi. / Sales 2022 1,20x
Capi. / Sales 2023 0,76x
Nbr of Employees 24
Free-Float 72,4%
Chart TOMI ENVIRONMENTAL SOLUTIONS, INC.
Duration : Period :
TOMI Environmental Solutions, Inc. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends TOMI ENVIRONMENTAL SOLUTIONS, INC.
Short TermMid-TermLong Term
TrendsBearishNeutralBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 1
Last Close Price 0,71 $
Average target price 3,50 $
Spread / Average Target 393%
Managers and Directors
Halden Stuart Shane Chairman & Chief Executive Officer
Nick Jennings CFO & Chief Accounting Officer
Elissa J. Shane Chief Operating Officer & Director
Walter C. Johnsen Independent Director
Kelly J. Anderson Independent Director
Sector and Competitors