TOMZ 10-K & 10-Q changes, risk factors and insider trading
TOMI Environmental Solutions, Inc. · Nasdaq · Industrial Organic Chemicals · CIK 314227 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We are subject to risks associated with international conflicts, geopolitical instability, and related economic disruptions.”
New heading “Climate-related risks, evolving environmental regulations, and increased focus on environmental, social and governance matters could adversely affect our business, financial condition and results of operations.”
New heading “Our outstanding convertible notes impose financial obligations, carry risks of dilution upon conversion, and may adversely affect our ability to raise additional capital.”
Removed heading “Failure to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”), and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.”
Removed heading “Our operations are subject to environmental laws and regulations that may increase costs of operations and impact or limit our business plans.”
Removed heading “We are dependent on our key personnel, the loss of whom could adversely affect our operations, and if we fail to attract and retain the talent required for our business, we could be materially harmed.”
Removed heading “We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could harm our business, financial condition and operating results.”
Removed heading “The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.”
Largest changes
“In addition, SOX requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. Our testing, or the potential subsequent testing by our independent registered public accounting firm in future periods, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 of SOX may require that we incur substantial expense and expend significant management time on compliance-related issues. …”see in full comparison
“In addition, as a public company subject to SOX, the Exchange Act, and Dodd-Frank, we incur significant legal, accounting, and compliance costs. These requirements consume substantial management time, may make it more difficult to attract and retain qualified board members and executive officers, and could expose us to sanctions, regulatory investigations, or litigation if we fail to maintain effective controls. Our compliance with Section 404 of SOX requires ongoing investment as we work to complete the remediation of the identified material weaknesses.”see in full comparison
“The interest payments required under our convertible notes represent a recurring cash obligation that could strain our liquidity, particularly given our going concern conditions and our current cash position of approximately $88,000 as of December 31, 2025. Our failure to make required interest payments when due could constitute an event of default under the applicable securities purchase agreements, which could result in the acceleration of the outstanding principal balance and materially and adversely affect our financial condition and results of operations.”see in full comparison
“In late February 2022, Russia launched a large-scale military attack on Ukraine, amplifying already existing geopolitical tensions among Russia, Ukraine, Europe, NATO and the West, including the United States, and resulting in global sanctions against Russia by various countries, including the United States, the United Kingdom, and European Union. …”see in full comparison
“Climate-related risks, evolving environmental regulations, and increased focus on environmental, social and governance matters could adversely affect our business, financial condition and results of operations.”see in full comparison
“Failure to comply with the FCPA, and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences. We face significant risks if we fail to comply with the FCPA and other anti-corruption laws that prohibit improper payments or offers of payment to foreign governments and political parties for the purpose of obtaining or retaining business. …”see in full comparison
Full comparison: every changed paragraph (71)
We generated a net loss of approximately $4.5$3.7 million and $3.4$4.5 million for the years ended December 31, 20242025 and 2023,2024, respectively. We also had an accumulated deficit of $54.3$58.1 million as of December 31, 2024.2025. Prior to 2020, we haddid not generatedgenerate any profit from our business operations. While we experienced anThe increase ofin our revenue and net income induring 2020,2020 was primarily due to a significant increase ofin demand for our products as protective measures against the spread of the COVID-19 disease during the pandemic,pandemic. suchSuch demand subsided in 2021 as the pandemic gradually came under control, which caused us to incur a net loss in 2021 and such trend has continued, and there is no guarantee that any similar pandemic or global health crisis will emerge.continued. In addition, if we decrease our headcount and expenses, we may be unable to support our continued product development and planned growth, and we may not be able to achieve profitability.
Our agreements with restoration industry specialists are not exclusive, which may allow for our competitors to sell their products and services to such specialists.
Our BIT technology as a Hospital-Healthcare disinfectant ishas relativelybeen new,proven successful in reducing infections in hospital ICU, BIT having received full Hospital registration for Clostridium difficile spores from the EPA in mid-2017. Our sales are dependent upon broad market acceptance of our technology that replaces long-standing failing manual cleaning techniques such as quaternary ammonium compounds and bleach for disinfection, with our no-touch mechanical process. The failure to obtain broad market acceptance inevitably leads to substantially increased lead times for sales until our prospective customers, particularly in the Hospital-Healthcare market, are accustomed to the use of newer mechanical technology. The inability to timely meet our sales goals could adversely affect our financial condition and results of operations.
For the years ended December 31, 20242025 and 2023,2024, our net loss was approximately $4,477,000$3.7 million and $3,403,000,$4.5 million, respectively, and the cash used in operations was approximately $1,440,000$1.2 million and $3,599,000,$1.4 million, respectively. As of December 31, 2024,2025, we had approximately $665,000$88,000 of cash and cash equivalents and an accumulated deficit of $54.3$58.1 million. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. We intend to fund ongoing activities by utilizing our current cash on hand, the cash generated from operations, and by raising additional capital through equity or debt financings.financing. We continue to pursue various options to raise capital to enhance our cash position, including more recently by issuing convertible notes to accredited investors. However, there can be no assurance that we will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to us, as our ability to raise capital may be affected by various factors, including general market conditions, volatility of our stock price, investor interests and expectations, and our financial performance.
In November 2025, we entered into an ELOC, pursuant to which we have the right, but not the obligation, to sell up to $20,000,000 of shares of our common stock over a 24-month period subject to certain conditions. However, the availability of ELOC and our ability to sell stock depends substantially on the trading price and volume of our stock, which may materially limit our ability to utilize the ELOC to raise capital.
There can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us, as our ability to raise capital may be affected by various factors, including general market conditions, volatility of our stock price, investor interests and expectations, and our financial performance.
We maintainsell significantour internationalproducts operations,internationally includingthrough operationsexclusive and non-exclusive sales representatives and distributors in the U.S., Canada, Mexico, Europe, Asia Pacific and Latin America. As a result, we are subject to a number of risks and complications associated with international manufacturing, sales, services,sales and other operations. These include: risks associated with currency exchange rate fluctuations; requirements or preferences for domestic products or solutions, which could reduce demand for our products; difficulties in enforcing agreements and collecting receivables through some foreign legal systems; unexpected legal or regulatory changes; enhanced credit risks in certain countries and emerging market regions; significant variations in tax rates among the countries in which we do business, and tax withholding obligations in respect of our earnings; exchange controls or other trade restrictions including, constraints on our supply chain and the industries in which we operate; customs clearance and shipping delays; general economic and political conditions in countries where we operate or where end users of our products are situated; natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, travel, social distancing and quarantine policies, boycotts, curtailment of trade, and other business restrictions affecting our ability to manufacture or sell our products; difficulties associated with managing a large organization spread throughout various countries; difficulties in enforcing intellectual property rights or weaker intellectual property right protections in some countries; and difficulties associated with compliance with a variety of laws and regulations governing international trade. The recent imposition by the United States of tariffs, sanctions or other restrictions on goods exported from the United States or imported into the United States, or countermeasures imposed in response to such government actions, could increase the cost of goods for our products or reduce our ability to sell products globally, which may adversely affect our operating results and financial condition.
We are subject to risks associated with international conflicts, geopolitical instability, and related economic disruptions.
Our business and operations may be adversely affected by geopolitical events and international conflicts, including armed conflicts, wars, terrorism, and political instability in regions where we operate or where our customers, suppliers, or distributors are located. Such events can cause significant disruptions to global supply chains, energy markets, financial markets, and international trade, any of which could adversely affect our ability to source products, serve international customers, and operate our business.
Current and ongoing geopolitical tensions, including conflicts in the Middle East and Eastern Europe, the imposition of economic sanctions, trade restrictions, and countermeasures by affected nations, have contributed to elevated energy costs, supply chain disruptions, and financial market volatility. The duration, scope, and ultimate resolution of these conflicts and related diplomatic and economic measures cannot be predicted, and the consequences for global commerce, energy supply, and financial stability remain uncertain.
These and any related geopolitical events could have a material adverse effect on our business, results of operations, financial condition, and cash flows.
In late February 2022, Russia launched a large-scale military attack on Ukraine, amplifying already existing geopolitical tensions among Russia, Ukraine, Europe, NATO and the West, including the United States, and resulting in global sanctions against Russia by various countries, including the United States, the United Kingdom, and European Union. In addition, the Israel-Hamas War and wider Middle East geopolitical developments may negatively impact regional and global economic markets (including Europe and the United States), companies in other countries (particularly those that have done business with Russia, Ukraine, or Israel) and on various sectors, industries and markets for securities and commodities globally. Accordingly, the actions discussed above and the potential for a wider conflict could increase financial market volatility, cause severe negative effects on regional and global economic markets, industries, and companies and have a negative effect on the Company’s performance. The extent and duration of these military actions or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted. These and any related events could have a significant impact on the Company’s performance.
Our sales to foreign entities are subject to far reachingfar-reaching and complex export control laws and regulations in the United States and elsewhere.regulations. Violations of those laws and regulations could have material negative consequences for us including large fines, criminal sanctions, prohibitions on participating in certain transactions and government contracts, sanctions on other companies if they continue to do business with us and adverse publicity.
Climate-related risks, evolving environmental regulations, and increased focus on environmental, social and governance matters could adversely affect our business, financial condition and results of operations.
Our operations and those of our customers and suppliers may be subject to increased regulatory requirements related to climate change, greenhouse gas emissions, and environmental sustainability. Federal, state and foreign governmental authorities continue to consider and implement new or more stringent environmental regulations, including potential requirements relating to carbon emissions, energy consumption, chemical usage, and product lifecycle impacts. Compliance with any such new or expanded regulations could increase our operating costs, require modification of our manufacturing or distribution processes, or require changes to our product formulations, any of which could have a material adverse effect on our business, financial condition and results of operations.
Also, natural disasters, extreme weather events, floods, droughts and other disruptions — could adversely affect our operations, our suppliers' ability to deliver materials and components in a timely manner, and our customers' ability to operate their facilities. Such disruptions could reduce demand for our products, impair our supply chain, or require us to incur additional costs to maintain business continuity.
Separately, investors, customers, regulators and other stakeholders are increasingly focused on environmental, social and governance (“ESG”) matters. We may face pressure to adopt or report on ESG initiatives, set emissions reduction targets, or meet third-party sustainability standards. Failure to meet evolving ESG expectations, whether or not mandated by regulation, could harm our reputation, make it more difficult for us to attract or retain customers and employees, or adversely affect our access to capital. Responding to ESG demands may also require us to divert management attention and incur costs that could adversely affect our operating results. We cannot predict the ultimate scope or timing of future climate-related or ESG regulatory requirements, and our failure or inability to comply with applicable requirements or meet stakeholder expectations could have a material adverse effect on our business, financial condition and results of operations.
Failure to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”), and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.
Failure to comply with the FCPA, and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences. We face significant risks if we fail to comply with the FCPA and other anti-corruption laws that prohibit improper payments or offers of payment to foreign governments and political parties for the purpose of obtaining or retaining business. In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other applicable laws and regulations. Any violation of the FCPA or other applicable anti-corruption laws could result in severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracting, which could have a material and adverse effect on our reputation, businesses, financial conditions, operating results and cash flows.
Our operations are subject to environmental laws and regulations that may increase costs of operations and impact or limit our business plans.
We are subject to environmental laws and regulations affecting many aspects of our present and potential future operations, including a wide variety of EPA labeling and other state regulatory agency requirements. For example, under the Federal Insecticide, Fungicide, and Rodenticide Act, we are required to register with the EPA and certain state regulatory authorities as a seller of disinfectants, and we are subject to EPA labeling requirements for each use that SteraMist® is intended to address. Compliance with these laws and regulations may result in increased costs and delays as a result of administrative proceedings and certain reporting obligations. Public officials and entities may seek injunctive relief or other remedies to enforce applicable environmental laws and regulations. If we are found to not have complied with these laws and are unable to sell out products, our business and financial results will be negatively impacted.
Our reliance upon third-party contractors, suppliers and manufacturers for the manufacture of our products increases the risk that we will not have sufficient quantitiesenough of our products or such quantities at an acceptable costcost, and reduces our control over the manufacturing process.
We rely upon third parties to supply us with our products. We outsource the manufacturing of our SteraMist® line of equipment to a single manufacturing company and use contract manufacturers to build our BIT-based systems, as we do not maintain our own manufacturing facilities. Our dependence on a single manufacturer for our primary equipment line means that any disruption to that relationship, whether due to financial difficulties, operational failures, loss of key personnel, or disagreements over terms, could have an immediate and material impact on our ability to fulfill customer orders and generate revenue. If we fail to maintain our relationship with our current primary manufacturer, we may not be able to effectively commercialize and market our products due to risks including increased product costs, limited inventory, and the possible misappropriation of our proprietary information, such as our trade secrets and know-how.
Alternative production facilities may not be available in the event of a disruption. The number of third-party suppliers with the necessary manufacturing capability, regulatory expertise, and quality standards to produce our products is limited. Arranging for and qualifying an alternative supplier would be expensive and time-consuming, potentially requiring many months, during which period we could be unable to fulfill customer orders. This risk is amplified by the fact that a significant portion of our revenue is concentrated among a small number of customers; a supply disruption affecting our ability to deliver products could therefore have a disproportionate impact on our revenue and customer relationships. Additionally, supply chain disruptions, component shortages, and input cost inflation, including those attributable to U.S. tariff policy and countermeasures imposed by foreign governments, have previously impacted our suppliers' ability to deliver products to us in a timely manner and at acceptable costs, and may continue to do so.
We rely upon third parties to supply us with our products. We outsource the manufacturing of our SteraMist® line of equipment to two manufacturing companies and use contract manufacturers to build our BIT-based systems, as we do not maintain our own manufacturing facilities. If we fail to maintain relationships with our current suppliers, we may not be able to effectively commercialize and market our products, due to risks including increased product costs, limited inventory that is not capable of meeting demand and the possible misappropriation of our proprietary information, such as our trade secrets and know-how. Further, as we maintain a limited number of manufacturers for our SteraMist® line of equipment and blenders for our SteraMist® solutions, alternative production facilities may not be available in the event of a disruption, or if alternative production facilities are available, the number of third-party suppliers with the necessary manufacturing and regulatory expertise to produce our products at their current quality level is limited, and it could be expensive and take a significant amount of time to arrange for and qualify alternative suppliers, which could have a material adverse effect on our business. Additionally, supply chain disruptions and access to materials have impacted our suppliers’ ability to deliver products to us in a timely manner.
Because of our reliance upon third parties to supply us with our products, we do not have control over the manufacturing process of our third-party suppliers and are dependent on such third-party suppliers for compliance with theall regulations applicable to our products. This includes compliance with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and EPA registration requirements that govern the manufacture of SteraMist® and its active ingredients. Third-party suppliers may notfail, or be able, or fail,unable, to comply with applicable regulatory requirements, which could result in sanctions being imposed on us,us or our suppliers, including fines, injunctions, civil penalties, delays, suspension or withdrawal of regulatory approvals, seizures or recalls, and operating restrictions and criminal prosecutions,restrictions, any of which could significantly and adversely harm our business and results of operations. The loss of an EPA registration or a supplier's regulatory standing could require us to cease sales of affected products until the matter is resolved, which could take an extended period of time.
Our results of operations could be materially harmed ifIf we are unable to accurately forecast customer demand foror our products andeffectively manage our inventory.inventory, our results of operations could be materially harmed.
We rely on demand forecasts to place orders with our third-party suppliers. Accurately predicting demand is inherently uncertain and may be adversely affected by factors outside our control, including competitive product introductions, shifts in customer preferences and changes in general economic conditions.
If we overestimate demand, we may accumulate excess inventory, resulting in inventory write-downs, write-offs, or obsolescence charges that would reduce our gross margins and adversely affect our financial results. As of December 31, 2025, our reserve for obsolete inventory was $500,000, compared to $1.1 million as of December 31, 2024, resulting from write-offs of inventory identified as obsolete, damaged, or no longer saleable during the year. Future demand shortfalls or product changes could require additional reserves or write-downs.
If we underestimate demand, we may be unable to fulfill customer orders in a timely manner, which could be potentially damaging to our customer relationships. In periods of rapidly increasing demand, our third-party suppliers may lack the capacity necessary to scale production quickly, further limiting our ability to meet demand.
Either outcome could have a material adverse effect on our revenue, gross margins, and results of operations.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with suppliers based on our estimates of future demand for our products and services. Our limited historical experience in foreign markets and recent increase in demand in the United States may lead us to inadequately forecast such inventory needs. Further, our ability to accurately forecast demand for our products could be negatively affected by many factors, including our failure to adequately manage our expansion efforts, product introductions by competitors, an increase or decrease in customer demand for products of our competitors, our failure to accurately forecast customer acceptance of new product enhancements, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions. In addition, our demand may be affected by macro-economic factors beyond our control, which can cause sudden and substantial increase or decrease of demand on short notice, making it more difficult to us to obtain accurate forecasts of customer demand.
Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to be adversely affected and could impair the strength of our brand. Similarly, a portion of our inventory could become obsolete or expire, which could have a material and adverse effect on our earnings and cash flows due to the resulting costs associated with inventory impairment charges and costs required to replace obsolete inventory. Any of these occurrences could negatively impact our financial performance.
Conversely, if we underestimate customer demand, we may not be able to deliver sufficient products to meet our customers’ requirements, which could result in damage to our reputation and customer relationships. In addition, if we experience a significant increase in demand, additional supplies of raw materials or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and suppliers or our third-party manufacturers may not be able to allocate sufficient resources to meet our increased requirements, which could have an adverse effect on our ability to meet customer demand for our products and our results of operations.
Our commercial success depends, in part, on our ability to obtain, maintain, defend, file new or enforce our existing patents, trademarks, trade secrets and other intellectual property rights covering our technologies and products throughout the world. We may, however, be unable to adequately preserve such rights due to a number ofseveral reasons, including the following:
Although we devote resources to the establishment and protection of our patents and trademarks, the actions we have taken or will take in the future may not be adequate to prevent violation of our patents, trademarks and proprietary rights by others or prevent others from seeking to block sales of our products as an alleged violation of their patents, trademarks and proprietary rights. In the future, litigation may be necessary to enforce our trademarks or proprietary rightsrights, and we may be forced to defend ourselves against claimed infringement or the rights of others. Any such litigation could result in adverse determinations that could have a material adverse effect on our business, financial condition or results of operations.
In addition, we rely in part upon unpatented trade secrets, unpatented know-how, and continuing technological innovation which may not yet, or may never be, patented, to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees, third party manufacturers, and consultants. We also have agreements with our employees and consultants that obligateoblige them to assign their inventions to us. It is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. In addition, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Further, our trade secrets could otherwise become known or be independently discovered by our competitors, which would harm our business.
Our ability to protect our intellectual property rights internationally is also subject to significant uncertainty. As part of our growth strategy, we are continuing to expand our operations internationally. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. To the extent that we have obtained or are able to obtain patents, trademarks or other intellectual property rights in any foreign jurisdictions,jurisdiction, it may be difficult to stop the infringement of our patents, trademarks or the misappropriation of other intellectual property rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some countries limit the availability of certain types of patent rights and enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide only limited benefit or no benefit. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, efforts to protect our intellectual property rights in such countries may be inadequate. In addition, future changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and products and the enforcement of intellectual property rights.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, efforts to protect our intellectual property rights in such countries may be inadequate. In addition, future changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and products and the enforcement of intellectual property.
It is important to our business and our long-term growth that we continue to enhance and develop new products. We intend to continue to invest in research and development activities focused on improvements and enhancements to our existing intellectual property and product offerings. Our development goals include the development and commercialization of a variety of sanitizing robotic devices and backpack units. Despite our reasonable efforts, it may not be possible for us to innovate in a way to keep us competitive with other companies due to financial and time constraints which will negatively impact on our business.
Despite our current hiring efforts for non-management employees and redefining of job descriptions, we have a limited management team size. This limited management team may reduce our ability to effectively manage our business as it grows or respondresponds to significant demand from customers. As we expand, we expect to increase the size of our management team. However, our management team may not be able to adequately manage our business, and any failure to do so could lead to a general negative impact to our business.
We are dependent on our key personnel, the loss of whom could adversely affect our operations, and if we fail to attract and retain the talent required for our business, we could be materially harmed.
Our success is substantially dependent on the performance of our executive officers, including our Chairman and Chief Executive Officer, Dr. Halden S. Shane, the loss of whom would have a material adverse effect on our business.
We depend to a significant degree on our ability to attract, retain and motivate quality personnel. We further note that competition for highly skilled personnel is often intense. Moreover, our new sales representatives require a lengthy training process to achieve the requisite level of competency with our products. We may not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs, the failure of which would have a material adverse effect on our business.
We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could harm our business, financial condition and operating results.
From time to time, we may consider opportunities to acquire other companies, products or technologies that may enhance our product platform or technology, expand the breadth of our markets or customer base, or advance our business strategies. Potential acquisitions involve numerous risks, including: problems assimilating the acquired products or technologies; issues maintaining uniform standards, procedures, controls and policies; unanticipated costs associated with acquisitions; diversion of management’s attention from our existing business; risks associated with entering new markets in which we have limited or no experience; increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters; and unanticipated or undisclosed liabilities of any target.
We have no current commitments with respect to any acquisition. We do not know if we will be able to identify acquisitions, we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.
If we are unable to develop and maintain an effective system of internal controls over financial reporting, or if the requirements of being a public company strain our resources, we may not be able to accurately report our financial results in a timely mannermanner.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. Our management also evaluates the effectiveness of our internal controls, and we disclose any changes and material weaknesses identified through such evaluation of our internal controls. A material weakness is a deficiency, or a combination of deficiencies, in the internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Any failure to maintain effective internal control over financial reportingcontrols could severely inhibit our ability to accurately report our financial condition, results of operationsoperations, or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports,reports and the market price of our securities could decline.
As disclosed in Item 9A of this Form 10-K ,10-K, we concluded that as of December 31, 2024,2025, material weaknesses existed because: (I) Therethere are limited resources within the finance and accounting departments with sufficient knowledge and experience in applying U.S. GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintainmaintaining proper segregation of duties; and (II) Policiespolicies and procedures with respect to the review, supervisionsupervision, and monitoring of our accounting and SEC reporting functions were either not fully designed and in place or not operating effectively,effectively. For a detailed description of suchthe material weaknesses,weaknesses and the remediation actions taken during fiscal year 2025, please see Item 9A9A, ControlControls and Procedures.
While we have taken a number of remediation actions during fiscal year 2025, the material weaknesses had not been fully remediated as of December 31, 2025, and there is no guarantee that our remediation efforts will be successfully completed or that new control deficiencies will not arise. Failure to remediate these material weaknesses, or the identification of additional deficiencies, could result in inaccurate financial reporting, regulatory sanctions, or a loss of investor confidence in our financial statements.
In addition, as a public company subject to SOX, the Exchange Act, and Dodd-Frank, we incur significant legal, accounting, and compliance costs. These requirements consume substantial management time, may make it more difficult to attract and retain qualified board members and executive officers, and could expose us to sanctions, regulatory investigations, or litigation if we fail to maintain effective controls. Our compliance with Section 404 of SOX requires ongoing investment as we work to complete the remediation of the identified material weaknesses.
In response to the material weaknesses, we are in the process of developing and implementing remediation plans, which include, among other things (i) We plan to expand the resources within the finance and accounting departments with personnel who possess sufficient knowledge and experience in applying U.S. GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintain proper segregation of duties. (ii) We will design and implement additional policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions to improve the effectiveness of our internal controls and to ensure the timely reporting with the SEC in accordance with GAAP. (iii) We will continue to recruit and train personnel with appropriate internal controls, accounting knowledge and experience commensurate with our accounting and reporting requirements, in addition to engaging and utilizing third party consultants and specialists. Our management also continued to reallocate and align roles and responsibilities within the accounting team to optimize and leverage the skills and experience of various personnel. See Item 9A Control and Procedures. While we believe these measures will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting, there is no guarantee that such remedial measures will be implemented successfully or completed in a timely manner, and failure to do so may adversely affect the Company.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.
We have and likely will continue to incur significant legal, accounting and other expenses as a public company subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd–Frank Wall Street Reform and Consumer Protection Act and other applicable rules and regulations. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, applicable rules and regulations could make it more difficult for us to attract and retain qualified persons to serve on our board of directors (the “Board), or as executive officers.
In addition, SOX requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. Our testing, or the potential subsequent testing by our independent registered public accounting firm in future periods, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 of SOX may require that we incur substantial expense and expend significant management time on compliance-related issues. Moreover, if our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, such as the material weaknesses described in “Item 9A Control and Procedures” in this Form 10-K, the market price of our stock could decline, and we could be subject to sanctions or investigations by regulatory authorities, which would require additional financial and management resources. For more information, please see risk factor above entitled “If we are unable to develop and maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results in a timely manner” As a result of disclosure of information, our business and financial condition are more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected. Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.
We have not paid dividends on our common stock since inception. The continued operation and expansion of our business will require substantial funding. Accordingly, we currently intend to retain earnings, if any, for use in the business and we do not anticipate that we will pay any cash dividends on shares of our common stock forat thethis foreseeable future.time. Any determination to pay dividends in the future will be at the discretion of our Board and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant. Investors seeking cash dividends should not purchase our common stock. Accordingly, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur.
As of December 31, 2025, we had outstanding convertible notes, options, warrants, convertible preferred stock and restricted stock units representing approximately 6.0 million potential shares of our common stock. Additionally, 66,666 RSUs remain unvested and will result in automatic share issuance upon vesting through May 2027, with no exercise price. To the extent any of these securities are exercised, converted or vest, existing shareholders will experience dilution.
Our outstanding convertible notes impose financial obligations, carry risks of dilution upon conversion, and may adversely affect our ability to raise additional capital.
As of December 31, 2025, we had outstanding convertible notes payable with an aggregate principal amount of approximately $3.1 million, net of amortized debt discount of approximately $222,000, resulting in a carrying value of approximately $2.9 million on our balance sheet. These notes bear interest at a rate of 12% per annum, payable in equal monthly installments, and are convertible into shares of our common stock at the option of the holder at a conversion price of $1.25 per share, subject to adjustment. The notes mature on the fifth anniversary of their respective issuance dates.
Management's Discussion & Analysis (MD&A)
New heading “Management’s Plan to Address Going Concern”
New heading “Shelf Registration Statement and Equity Line of Credit”
New heading “Capital Markets Access”
New heading “Convertible Note Management”
New heading “Pipeline Conversion to Revenue”
New heading “Sales Backlog and Revenue Visibility”
New heading “Cost Management”
New heading “Customer Deposit Policy”
New heading “Debt and Contractual Obligations”
New heading “Going Concern Assessment”
New heading “Long-Lived Assets Including Acquired Intangible Assets”
New heading “Convertible Notes and Debt Discount”
New heading “Stock-Based Compensation”
New heading “Income Taxes and Valuation Allowance”
Removed heading “Annual and Quarterly Highlights”
Removed heading “Business Update”
Removed heading “2025 Highlights:”
Removed heading “Research Studies:”
Removed heading “Product Development:”
Removed heading “Financial Operations Overview”
Removed heading “Results of Operations for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023”
Removed heading “Product and Service Revenue”
Removed heading “Revenue by Geographic Region”
Removed heading “Professional Fees”
Removed heading “Selling Expenses”
Removed heading “Research and Development”
Removed heading “Consulting Fees”
Removed heading “General and Administrative Expense”
Removed heading “Other Income and Expense”
Removed heading “Provision for Income Taxes”
Largest changes
“For the years ended December 31, 2024 and 2023, our net loss was approximately $4,477,000 and $3,403,000, respectively, and the cash used in operations was approximately $1,440,000 and $3,599,000, respectively. As of December 31, 2024, we had approximately $665,000 of cash and cash equivalents and an accumulated deficit of $54.3 million. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements in this Form 10-K are issued. …”see in full comparison
“For the year ended December 31, 2025, we recorded a net loss of approximately $3.7 million and used approximately $1.2 million of cash in operations. As of December 31, 2025, we had approximately $88,000 of cash and cash equivalents and an accumulated deficit of approximately $58.1 million. Based on these conditions, management concluded that substantial doubt exists about our ability to continue as a going concern within one year after the issuance of these financial statements. …”see in full comparison
“We noted no long-lived asset impairment charges for the years ended December 31, 2025 and 2024. Management's impairment analysis considered the going concern conditions described above and concluded that projected undiscounted cash flows, based on our current operating plan and capital raising assumptions, continue to support the carrying values of our long-lived assets. Changes in our revenue outlook, discount rates or other key assumptions could result in impairment charges in future periods.”see in full comparison
“As of December 31, 2025, we had ten active SIS and CES integration projects with a combined contract value of approximately $3 million, including a $500,000 signed purchase order from a global biopharmaceutical leader received in December 2025. Our broader commercial sales pipeline of management-tracked opportunities exceeded $18 million at year-end, with quoted opportunities of approximately $11 million in progress. These figures represent potential future revenue and are not committed orders or guarantees of future performance. …”see in full comparison
Full comparison: every changed paragraph (204)
Annual and Quarterly Highlights
Business Update
For the year ended December 31, 2024, we increased our year-over-year annual revenue by 5%, continued to expand our customer base, diversify our product line, and secured significant agreements and new partnerships which will enhance our ability to distribute the SteraMist brand of products and services on a global scale, aiding in the utilization of iHP technology across all divisions worldwide.
In 2024, we expanded many existing relationships and established new key contacts. Formally, we contracted with six different partners across various regions, including Malaysia, India, Canada, Korea, and the United Kingdom. These collaborations span focused industries such as pharmaceuticals, vivarium, emergency services, and general disinfection and cleaning. We are committed to nurturing these partnerships alongside our other 30 partners to further develop and strengthen the SteraMist brand in the global market.
In 2024, the service decontamination sector in the Life Sciences witnessed significant shifts among key competitors domestically, creating numerous opportunities for our Company. On March 7, 2024, we announced the expansion of SteraMist iHP Corporate Service, with customers securing contracts for routine business through 2026. This growth accelerated through the second and third quarters of 2024, culminating in a record-breaking revenue performance in quarter 3 2024. Our commitment to supporting our clientele, including Pfizer, Inc. and Thermo Fisher Scientific facilities, remains strong, while we successfully onboarding new customers, including multiple smaller engagements within the Food Safety sector. These new relationships are expected to drive future sales across both capital equipment and routine service contracts. This positive trend is already evident in 2025, with Quarter 1 showing a 41% increase in iHP Corporate Service revenue compared to Quarter 1 2024. The addition of these customers further solidifies iHP’s position as a market leader in advanced decontamination solutions, serving corporate clients across life sciences and adjacent industries.
To enhance our market presence in the western United States, we formed a strategic partnership with EMAQ in the second quarter of 2024. EMAQ has made a significant investment exceeding $1,000,000 in SteraMist iHP equipment and will act as our regional partner to expand iHP services in this area. This collaboration is expected to drive substantial growth in solution sales, leveraging our razor-and-blade business model—where SteraMist delivery systems represent the razor, and our proprietary BIT Solution serves as the razor blade that is designed to generate ongoing revenue. The partnership is progressing well, with both companies effectively combining strengths and resources to build business and expand opportunities.
In 2024, we made the decision to declassify the TOMI Service Network (TSN) to incorporate other industries outside of remediation; however, we remain committed to supporting all our service providers that joined as TSN members. Our focus extends not only to our current partners but also to onboarding additional providers who can offer their customers the fast, harsh chemical free SteraMist iHP disinfection decontamination technology. A notable example of this is our collaboration with Triumvirate Environmental, a respected leader in Environmental, Health, and Safety (EHS) services since 1988, specializing in the life science, healthcare, higher education, and advanced manufacturing industries. We are excited about the opportunity to work with Triumvirate Environmental and anticipate forming a robust partnership in the eastern United States as they become familiar with our innovative technology and many applications.
In November 2024, Bonneville Joint School District No. 93, located in Bonneville County, Idaho integrated SteraMist technology into its cleaning protocols. This adoption underscores the district’s commitment to prioritizing the health and safety of its students and staff through advanced disinfection measures and demonstrates the versatility of our SteraMist technology and products to serve educational institutions.
Many industries within our four key divisions prioritize ease of use and automation, seeking repeatable, validated, and thoroughly tested disinfection and decontamination solutions. TOMI dedicated significant resources to developing a variety of options tailored to meet diverse budgetary requirements in response to this market demand. Among our offerings, the Custom Engineered System (CES) remains a favored choice, bolstered by a strong pipeline. However, for customers with budget constraints, our Hybrid solutions and the newly introduced SteraMist Integrated System (SIS) have become preferred alternatives.
It is important to clarify that the revenue recognition and timing of completion do not directly correlate with the progress of our projects. In 2024, we actively worked on and supported in some fashion seven (7) different custom projects, many of which have been previously reported on. We have secured our first 2025 CES deal. Collectively, these eight (8) deals are valued at approximately $3.7 million. Additionally, we are pleased to announce that we have secured contracts for three (3) more SIS offerings this year, totaling approximately $575,000 in sales.. As these customers complete their internal evaluations and activate these iHP automated systems, we expect a significant boost in our BIT Solution sales, further enhancing our razor-and-blade business model.
With the successful completion of each project, our iHP technology is rapidly gaining popularity as the preferred decontamination solution for pharmaceutical and biotech companies. Further, as we continue to install our technology to these projects, the product line evolves into a comprehensive turnkey solution.
To enhance our turnkey solutions, the end of 2024 and the beginning of 2025 marked a significant shift in our relationships with Original Equipment Manufacturers (OEMs). By officially partnering with PBSC and collaborating with other industry players, TOMI is now equipped to offer a comprehensive range of iHP solutions tailored for customers requiring enclosures for controlled environments. This development not only expands our SIS offerings but also creates an additional revenue stream for TOMI. We are eager to see how these partnerships evolve throughout 2025.
TOMI will soon begin a project with a major conglomerate focused on the decontamination of heart monitoring devices. This initiative exemplifies our strengthened relationships with OEMs and highlights the capabilities of our SIS product offerings. Additionally, this project aligns with our goals to advancing healthcare initiatives.
We would also like to emphasize that we are fully aware of the numerous challenges currently impacting the food market. In response, we have proactively engaged with key industry players to offer our solutions and support.
We are steadily increasing our presence in the food safety marketplace primarily from tradeshows we attended in the past. As stated, we must demonstrate that we are a viable solution for this industry, and we are currently conducting numerous feasibility studies with both small and large companies. In 2024 we entered the coffee industry with Mayorga Coffee and Organea Terra SRL, the desserts and ice cream industry with Lakeview Farms and Crank and Boom, egg white food manufacturing, pet food production and packaging, and a few agribusinesses have joined in adding iHP SteraMist to their sanitization standard operating procedures.
To further highlight the effectiveness of SteraMist iHP technology in the food industry, TOMI announced several collaborative efforts with prominent organizations on new studies exploring expanded applications and benefits of SteraMist iHP. These partnerships have also opened doors to additional opportunities through introductions to their suppliers. One of these collaborations involves a leading producer of health, hygiene, and nutrition products, where we are developing a specialized application for spraying conveyor belts to streamline the decontamination process for packaged goods, targeting pathogens such as Salmonella and Listeria. This initiative represents a significant addition to our client portfolio, aligning with market trends driven by growing health awareness and increasing demand for sustainable, premium products.
We maintain an active focus on digital marketing initiatives and business development plans with existing customers. In an effort to optimize our budget, we reduced our participation in tradeshows and redirected resources towards more effective lead generation strategies such as referrals and references. While tradeshows offer valuable networking opportunities, we have found that for the short-term TOMI SteraMist’s strong reputation generates sufficient interest through other channels. These alternative approaches have proven to be more cost-effective and efficient in driving new business and expanding our customer base.
St. Jude Hospital, a valued customer since 2021, exemplifies our success in referral and expansion, having added three additional SteraMist Surface Units to their facility in 2024. Another notable example comes from the growing food industry, where an egg manufacturer purchased their first SteraPak in 2024 and has recently ordered three more units, with expectations for additional orders later in the year.
Our handheld devices illustrate the demand in various sectors, and throughout 2024, we remained committed to delivering all applications to our diverse customer base, showcasing the breadth of our offerings and the high level of satisfaction among our clients.
Another significant development in 2024 was the introduction of our SteraMist Pro Certified (SPC) program. It is important to note that this initiative should not be confused with the discontinued TOMI Service Network (TSN); rather, it is a program available to all customers across various divisions, including notable names such as Merck and ServiceMaster.
We anticipate that by the end of 2025, this program will greatly enhance our referral database, promote the utilization of SteraMist products, facilitate expansion with current customers, and educate all clientele on the proactive needs for effective disinfection and decontamination and many uses of SteraMist iHP.
Fiscal year 2025 was a year of meaningful commercial progress for TOMI Environmental Solutions, Inc. Despite a revenue[DV1] decline driven primarily by the timing of large equipment purchases that occurred in the prior year, the Company advanced its strategic platform across multiple fronts: launching new product lines, securing landmark customers, establishing OEM partnerships with global manufacturers, and entering new markets including aerospace, aquaculture, cell and gene therapy. Our SteraMist® iHP™ technology is now protected by more than 30 utility and design patents through 2038 and is deployed in over 40 countries across our four divisions: Life Sciences, Hospital-Healthcare, Food Safety, and Commercial.
In a significant expansion of our technology platform into the medical device sector, the heart monitoring device project is nearing completion and is scheduled for Factory Acceptance Testing ("FAT") in the near term. This initiative — developed collaboratively with a strategic partner utilizing our SIS iHP product platform — reflects our ability to design and deploy iHP technology within highly regulated medical device environments and underscores our commitment to advancing healthcare through innovation. Upon successful FAT completion, we intend to submit our iHP device for U.S. market clearance through the 510(k) premarket notification pathway, a well-established regulatory route for medical devices of this classification. We view this milestone as a meaningful step in positioning iHP as a platform technology across the broader medical device industry, and we look forward to progressing this opportunity alongside our core decontamination business.
The SteraMist Integration System ("SIS"), launched in the second half of 2024, achieved its first commercial installation in Q2 2025 at a leading CDMO and has since been adopted across pharmaceutical isolators, biosafety cabinets, and OEM-integrated enclosures,reflecting the growing adoption of iHP as the preferred decontamination solution in advanced life sciences manufacturing environments. This momentum is underpinned by a powerful macro tailwind: announced U.S. onshoring investments in pharmaceutical manufacturing now exceed $370 billion in aggregate commitments from major drugmakers, driving sustained demand for validated decontamination systems that integrate seamlessly with new facility construction. By year-end, we had 10 active integration projects with a combined pipeline valued at approximately $3 million. In December 2025, we secured a signed purchase order of approximately $500,000 from a global biopharmaceutical leader for iHP integration into sterile manufacturing passthrough fill boxes, and a leading Cell and Gene Therapy manufacturer adopted SteraMist iHP as a commercial-scale pharmaceutical facility. We note that the conversion of certain CES projects to recognized revenue has been subject to timing delays, as pharmaceutical facility construction and capital deployment decisions in the United States were affected during 2025 by uncertainty surrounding tariff policy and its downstream impact on equipment costs, materials procurement, and supply chain planning. Management views this as a timing issue reflecting broader macroeconomic conditions rather than a change in underlying customer demand, and industry forecasters project that pharmaceutical manufacturing construction activity will recover and accelerate through 2026–2027 as policy clarity improves.
Our OEM partnership strategy gained significant momentum during 2025. Partnerships with PBSC (formalized March 2025), ESCO, Steelco, Nuaire, and Getinge are embedding iHP directly into cleanroom enclosures, passthrough hatches, and biosafety cabinets at the point of manufacture, opening a scalable distribution channel that extends our reach without proportional increases in direct sales cost. In the Commercial division, T.A.C.T. franchises purchased $175,000 of SteraMist equipment and BIT Solution in Q4 2025, and our expanding relationships with franchise networks Steri-Clean (approximately 60 locations) are building a recurring BIT Solution revenue stream consistent with our razor-blade revenue model.
Regulatory developments during 2025 further validated and broadened our platform across multiple new verticals. In September 2025, the FDA expanded the permitted use of hydrogen peroxide as a direct food additive, significantly extending the application of SteraMist iHP to food contact surfaces and ready-to-eat food processing, a market where we have demonstrated efficacy against foot-and-mouth disease virus, African Swine Fever, and mycotoxins. In Q1, we deployed iHP at NASA's Johnson Space Center, marking our entry into aerospace, and in August we announced a new major customer in the eye health sector implementing iHP across two facilities. SteraMist was recognized as the 2025 "Disinfection and Decontamination Products Company of the Year" by Medtech Outlook, affirming the competitive differentiation of our technology across an expanding range of industries and applications.
Notwithstanding this commercial progress, the Company recorded a net loss of approximately $3.7 million for fiscal year 2025, compared to $4.5 million in 2024. Management continues to pursue additional financing through equity and convertible debt instruments, including the $20 million ELOC entered into with Hudson Global Ventures in November 2025, and remains focused on converting its strong commercial pipeline into recognized revenue in 2026. The financial results of operations are discussed in detail in the sections that follow.
The following overview summarizes key factors affecting the Company’s financial performance for the year ended December 31, 2025 compared to the prior year and should be read in conjunction with the selected financial metrics presented below.
The following table summarizes selected financial metrics for the years ended December 31, 2025 and 2024 and provides a high-level overview of the Company’s operating performance.
The following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following table presents our results of operations for the years ended December 31, 2025, and 2024, together with the changes between the periods. The discussion below addresses the significant factors contributing to the changes in our results of operations.
Revenue decreased $2.1 million, or 27%, to $5.6 million for the year ended December 31, 2025 compared to $7.7 million in the prior year. The decrease was primarily attributable to the timing of certain customer equipment purchases that occurred in the prior year period. Service revenue remained relatively consistent, reflecting ongoing demand for the Company’s decontamination and service solutions. The Company continues to engage with existing and new customers regarding installations and service engagements across its target markets.
Domestic revenue declined primarily due to lower equipment sales, while international revenue remained relatively stable year over year, including sales of our product into various countries, including Canada, the UK and Europe.
Gross margin improved to 54.6% in 2025 from 46.0% in 2024, despite a 27% decline in revenue. The improvement was primarily driven by the Company recording an allowance for inventory reserve of approximately $1.1 million in 2024. Further details of the reserve movement are set out in Note 3. Excluding reserve movements, underlying gross margin was relatively stable year over year, with a modest decline reflecting reduced fixed cost absorption on lower overall sales volume.
Total operating expenses decreased $0.7 million, or 10%, to $6.9 million in 2025 from $7.7 million in the prior year. Selling expenses decreased $353,000 (31%) to $775,000, driven by lower sales commissions, and less spend advertising and trade shows, consistent with the 34% decline in product sales volume during the year. General and administrative expenses decreased $588,000 (11%) to $4.5 million, primarily due to a significant reduction in credit loss expense to $267,000 in 2025 from $1.1 million in 2024, reflecting improved collections and accounts receivable management. Professional fees increased $146,000 (24%) and consulting fees increased $92,000 (41%), reflecting higher legal and advisory costs associated with public company compliance, Nasdaq deficiency proceedings, and strategic initiatives during the year. Research and development and depreciation and amortization were essentially flat year over year.
Revenues:
Total revenue for the year ended December 31, 2024, and 2023, was $7,739,000 and $7,355,000, respectively, representing an increase of $384,000, or 5% compared to the same prior year period. The increase in revenue was attributable to the timing and fulfillment of customer orders. This growth was driven by higher sales of SteraMist products and mobile equipment.
We believe that we possess the best technologies in the world in the disinfection and decontamination space. The COVID-19 pandemic along with the needs of the pharmaceutical and vivarium space has provided us with the opportunity and experience 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. This should lead to increased market share, profitability, and capability strength.
Our products are an environmentally friendly solution, and our processes 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 and environmentally unfriendly results of many other disinfectants.
SteraMist has established a successful track record in fighting pandemics and outbreaks and implementing SteraMist for emergency preparedness is vital. The COVID-19 pandemic took the world by surprise, and history has shown that other pandemics and viruses are likely to follow. Using a proven and trusted disinfectant for emergency outbreaks and daily for preventative maintenance, such as SteraMist, can alleviate the threat of infections from spreading and could stop a possible outbreak.
2024 Events:
On April 15, 2024, we announced our attendance at Interphex 2024 showcasing our new innovations. Interphex 2024 provides an opportunity for a wide range of biotechnology industry leaders to discover SteraMist’s groundbreaking iHP technology which was held in New York City on April 16-18, 2024.
One June 6, 2024, we announced comprehensive cost reduction initiatives to align the Company’s cost structure with targeted profitability objectives. The Company’s operational cash savings initiatives include a modification of compensation arrangement for our executive officers, pursuant to which executives will reduce their compensation by 30% of their current cash compensation for the remainder of 2024, and an optimization of our consulting arrangement, under which we terminated select external consulting agreements, with remaining consultants agreeing to reduce their consultant fees.
On June 13, 2024, we announced two recent sales in the Life Sciences sector, underscoring the Company’s successful strategic expansion in the sector and growth potential. The first purchase agreement, signed with one of the largest private pharmaceutical companies in the world, includes the acquisition of a SteraMist Environment System and TOMI validation services for the client’s vivarium facility in Mexico. The second purchase agreement arises from the Company’s collaboration with a trusted partner with decades of experience in big pharma. This partnership facilitated the sale of the first Hybrid System to Indigo Pharmaceutical, Inc. as announced in September 2023. Continuing this momentum, the partner has now successfully sold another SteraMist Hybrid System to BeSpoke Pharmaceuticals, a Nevada-based manufacturer targeting 503B products.
On July 24, 2024, we announced that EMAQ Group, Inc. purchased twenty (20) SteraMist Environment Systems, generating $1,180,280 in revenue which was recognized in the second quarter of 2024. This strategic partnership aims to enhance the market penetration of SteraMist iHP decontamination solutions within the pharmaceutical industry and is expected to grant SteraMist iHP technology the significant traction it deserves, delivering decontamination solutions that meet the stringent demands of the pharmaceutical sector.
On August 22, 2024, we announced the expansion of our partnership with a global leader in laboratory testing and diagnostics services with multiple mobile equipment purchases and a Custom Engineered System (CES) to support the expansion of their Wisconsin facility.
On October 24, 2024, we announced that we secured a contract with the National Institute of Forensic Medicine (IPFN) in Malaysia. The agreement represents strategic progress as we continue to expand our global footprint in critical environments and capitalize on growing global demand.
On November 26, 2024, we announced that Bonneville Joint School District No. 93, located in Bonneville County, Idaho, has integrated SteraMist technology into its cleaning protocols. This adoption underscores the district’s commitment to prioritizing the health and safety of its students and staff through advanced disinfection measures and demonstrates the versatility of our SteraMist technology and products to serve educational institutions.
On December 17, 2024, we announced the expansion of our partnership with Betatek, Inc. ("Betatek"), transitioning the long-term Canadian partner from an independent manufacturing representative to an official SteraMist distributor. This strategic move comes in response to the increasing demand for SteraMist in the Canadian market.
On December 26, 2024, we announced another installation of the Custom Engineered Solution (CES) at a renowned pharmaceutical facility in the United Kingdom.
2025 Highlights:
On January 10, 2025, we announced that we are supporting partners and clients preparing for emerging public health threats as concerns grow over Respiratory Syncytial Virus (RSV), Human Metapneumovirus (HMPV), and the highly pathogenic Avian Influenza (H5N1). TOMI is leveraging its SteraMist technology to provide innovative infection prevention strategies essential to safeguard the health of government agencies, commercial clients, and school districts nationwide.
On January 30, 2025, we announced positive momentum in early revenue trends for the Company with year-over-year growth in its BIT Solution sales and iHP Corporate Service.
On February 4, 2025, we announced the deployment of our SteraMist iHP technology to support recovery efforts in California communities impacted by recent wildfires.
On February 27, 2025, we announced we achieved compliance, recognition and validation by a third vendor management and compliance management platform, Avetta, reflecting the Company’s commitment to health, safety, and environmental (HSE) excellence for its customers. In April of 2024, we received the Gold Safety Award from Highwire. Affiliations with Avetta, Highwire, and ISNetworld platforms opens new avenues for TOMI to engage with a broader network of industry leaders and stakeholders. The collaboration fosters a culture of continuous improvement, enabling TOMI to enhance its service and integration offerings and stay ahead of evolving industry standards.
On March 6, 2025, we announced that Dr. Halden Shane, Chairman of the Board and Chief Executive Officer of TOMI, will be participating in the Q1 Investor Summit Event, which was held virtually on March 11, 2025.
On March 20, 2025, we announced the deployment of SteraMist iHP technology at the NASA Johnson Space Center, marking the Company’s expansion into the aerospace sector.
On March 24, 2025, we announced a contract to install a SteraMist iHP CES at a leading university in Rhode Island, valued at approximately $450,000.
On March 25, 2025, we announced an OEM partnership with PBSC, a premier manufacturer specializing in high containment, material decontamination, and cleanroom solution.
Research Studies:
TOMI continues to be active in the global market, using registrations to expand sales opportunities.
What changed in the latest 10-Q
Risk Factors
New heading “We may not complete the proposed Merger within the time frame we anticipate or at all, which could have an adverse effect on our business, financial results and/or operations.”
Removed heading “The Proposed Transaction with Carbonium Core may not be completed and may not achieve the anticipated benefits.”
Removed heading “Nasdaq may not approve any listing application for the combined company and, if the parties waive the Nasdaq closing condition and proceed with the Proposed Transaction, we may be subject to delisting.”
Largest changes
“Nasdaq may not approve any listing application for the combined company and, if the parties waive the Nasdaq closing condition and proceed with the Proposed Transaction, we may be subject to delisting.”see in full comparison
“In connection with the Proposed Transaction, which would constitute a “change of control” under Nasdaq Listing Rule 5110(a), we will be required, pursuant to Nasdaq’s “reverse merger” rules, to use our reasonable best efforts to file an initial listing application for our common stock on Nasdaq (the “Nasdaq Listing Application”). The Nasdaq Listing Application must be conditionally approved prior to the date of our stockholder meeting to approve the Company matters related to the Proposed Transaction. …”see in full comparison
“In the event that we are unsuccessful in demonstrating compliance with Nasdaq Listing Rule 5550(b)(1) by the deadline of May 18, 2026 or to evidence compliance with such rule in our Quarterly Report for the quarter ended March 31, 2026, or we are unable to regain compliance with Nasdaq Listing Rule 5550(a)(2) by the end of the 180-day period on May 18, 2026 and either fail to qualify for the second 180-day compliance period or fail to regain compliance during the second 180-day period, and we are unsuccessful in appealing a resulting delisting determination to a Hearings Panel, we will be …”see in full comparison
“On May 19, 2026, the Company received a letter from the Staff notifying the Company that, because it failed to regain compliance with each of the Bid Price Requirement and Minimum Equity Requirement, the Common Stock will be delisted from Nasdaq. The Company appealed the Staff’s delisting determination to a Nasdaq Hearings Panel, which stayed any further delisting action through the hearing and any extension the Hearings Panel may grant. On June 30, 2026, a hearing was held before the Nasdaq Hearings Panel and the Company is currently awaiting the Nasdaq Hearings Panel’s decision.”see in full comparison
“We may not complete the proposed Merger within the time frame we anticipate or at all, which could have an adverse effect on our business, financial results and/or operations.”see in full comparison
“In the event that we are unsuccessful in the Staff’s delisting determination to the Nasdaq Hearings Panel, or we fail to satisfy any conditions or requirements imposed by the Nasdaq Hearings Panel in connection with any extension that may be granted, we will be delisted from Nasdaq, and the value of your shares may be materially adversely affected, which would impair your ability to sell or purchase your shares when you wish to do so.”see in full comparison
Full comparison: every changed paragraph (17)
Except as set forth below, there have been no material changes to the risk factors previously disclosed inunder Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026, filed with the SEC on May 15, 2026, and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 31, 2026.
The Proposed Transaction with Carbonium Core may not be completed and may not achieve the anticipated benefits.
We generated a net loss of approximately $3.7 million and $4.5 million for the years ended December 31, 2025 and 2024, respectively. We also had an accumulated deficit of $58.1 million as of December 31, 2025. Prior to 2020, we did not generate any profit from our business operations.
On April 30, 2026, the Company executed a non-binding LOI to negotiate a reverse triangular merger with Carbonium Core, a U.S.-based producer of nuclear-grade graphite for advanced reactor technologies. Under the terms of the LOI, TOMI would provide all-stock consideration consisting of newly issued shares of Common Stock equal to 19.99% of the Company’s outstanding shares immediately prior to the proposed merger transaction, and shares of a newly created Series B Convertible Preferred Stock convertible into TOMI Common Stock upon stockholder approval, together implying an enterprise valuation of Carbonium Core of $120 million. The proposed merger transaction is subject to execution of definitive agreements and customary closing conditions, including stockholder approval under Nasdaq rules, and if approved, Carbonium Core would become a wholly owned subsidiary of TOMI. Following the consummation of the Proposed Transaction and stockholder approval, the combined company would be controlled by the equity holders of Carbonium Core, and Carbonium Core’s management would assume a significant, and potentially controlling, role in the operation of the combined business. There can be no assurance that the Proposed Transaction will be completed.
If we are unable to consummate the Proposed Transaction, we may not realize the anticipated strategic, operational, and financial benefits of the transaction, which could materially and adversely affect our business, financial condition, and results of operations. In such event, we would remain solely responsible for executing our existing business plan, which has historically resulted in recurring losses and negative cash flows, and we may be required to seek alternative sources of capital or strategic transactions, which may not be available on favorable terms, if at all.
Even if the Proposed Transaction is completed, the combined company may not achieve the expected benefits of the transaction or perform as expected. The change of control resulting from the Proposed Transaction could result in disruptions to our business, which could materially and adversely affect the combined company’s business, financial condition, and results of operations.
Nasdaq may not approve any listing application for the combined company and, if the parties waive the Nasdaq closing condition and proceed with the Proposed Transaction, we may be subject to delisting.
In connection with the Proposed Transaction, which would constitute a “change of control” under Nasdaq Listing Rule 5110(a), we will be required, pursuant to Nasdaq’s “reverse merger” rules, to use our reasonable best efforts to file an initial listing application for our common stock on Nasdaq (the “Nasdaq Listing Application”). The Nasdaq Listing Application must be conditionally approved prior to the date of our stockholder meeting to approve the Company matters related to the Proposed Transaction. In the event the application is not accepted by Nasdaq and the parties waive the Nasdaq closing condition and proceed with the Proposed Transaction, the combined company will be subject to delisting proceedings and could be delisted. If our common stock loses their status on The Nasdaq Capital Market, we believe that our shares would likely be eligible to be quoted on the inter-dealer electronic quotation and trading system operated by OTC Markets Group Inc., such as the OTC Pink marketplace and now known as the OTCQB market. These markets are generally considered not to be as efficient as, and not as broad as, The Nasdaq Capital Market. If our common stock is delisted, this would, among other things, substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us. Additionally, the value of your shares may be materially adversely affected, and holders of our common stock would find it more difficult to buy and sell such shares.
We are currently subject to a Nasdaq delisting proceeding relating to two concurrent Nasdaq deficiency proceedings.deficiencies. On November 17, 2025, we received a deficiency notice that our closing bid price had been below the minimum $1.00 per share requirement (under Nasdaq Listing Rule 5550(a)(2)) for 30 consecutive business days.days (the “Bid Price Requirement”). We havehad until May 18, 2026, to regain compliance, whichbut maydid includenot aregain potentialcompliance reverseby stockthat split subject to shareholder approval.date.
Additionally, as of MarchJune 31,30, 2026, the Company's total stockholders' equity ofwas $550$1,428,436, iswhich was below the $2,500,000 minimum required under Nasdaq Listing Rule 5550(b)(1) (the “Minimum Equity Requirement”). On November 21, 2025, the Company received a deficiency letter from the Listing Qualifications Department (the "Staff") of the Nasdaq Stock Market notifying the Company that, based on its Form 10-Q for the period ended September 30, 2025, which reported stockholders'stockholders’ equity of $2,206,482, the Company no longer compliescomplied with the minimumMinimum stockholders'Equity equity requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1),Requirement, and that the Company doesdid not meet the alternatives of market value of listed securities or net income from continuing operations. We submitted a compliance plan within the required 45-day period; ifhowever, accepted,we Nasdaqdid maynot grantregain ancompliance extensionwith ofthe upMinimum toEquity 180Requirement daysby fromMay November18, 21, 2025.2026.
On May 19, 2026, the Company received a letter from the Staff notifying the Company that, because it failed to regain compliance with each of the Bid Price Requirement and Minimum Equity Requirement, the Common Stock will be delisted from Nasdaq. The Company appealed the Staff’s delisting determination to a Nasdaq Hearings Panel, which stayed any further delisting action through the hearing and any extension the Hearings Panel may grant. On June 30, 2026, a hearing was held before the Nasdaq Hearings Panel and the Company is currently awaiting the Nasdaq Hearings Panel’s decision.
In the event that we are unsuccessful in the Staff’s delisting determination to the Nasdaq Hearings Panel, or we fail to satisfy any conditions or requirements imposed by the Nasdaq Hearings Panel in connection with any extension that may be granted, we will be delisted from Nasdaq, and the value of your shares may be materially adversely affected, which would impair your ability to sell or purchase your shares when you wish to do so.
We may not complete the proposed Merger within the time frame we anticipate or at all, which could have an adverse effect on our business, financial results and/or operations.
The proposed Merger may not be completed within the expected timeframe, or at all, as a result of various factors and conditions, some of which may be beyond our control. The Closing is expected to take place during the third quarter of 2026, subject to the satisfaction or waiver of the closing conditions under the Merger Agreement. There can be no assurance that the Merger will be completed. If the Merger is not completed for any reason, our ongoing business may be materially adversely affected, and we would be subject to a number of risks, including the following:
If the Merger is not consummated, the risks described above may materialize, and they may have a material adverse effect on our business operations, financial results and stock price, particularly to the extent that the current market price of our Common Stock reflects an assumption that the Merger will be completed.
If the Company does not qualify for the second compliance period or fails to regain compliance during the second 180-day period, then Nasdaq will notify the Company of its determination to delist the Common Stock, and the Common Stock will be subject to delisting. At that time, the Company will have an opportunity to appeal the delisting determination to a Hearings Panel.
In the event that we are unsuccessful in demonstrating compliance with Nasdaq Listing Rule 5550(b)(1) by the deadline of May 18, 2026 or to evidence compliance with such rule in our Quarterly Report for the quarter ended March 31, 2026, or we are unable to regain compliance with Nasdaq Listing Rule 5550(a)(2) by the end of the 180-day period on May 18, 2026 and either fail to qualify for the second 180-day compliance period or fail to regain compliance during the second 180-day period, and we are unsuccessful in appealing a resulting delisting determination to a Hearings Panel, we will be delisted from Nasdaq, and the value of your shares may be materially adversely affected, which would impair your ability to sell or purchase your shares when you wish to do so.
Management's Discussion & Analysis (MD&A)
New heading “Agreement and Plan of Merger with Carbonium Core, Inc.”
Largest changes
“Our intellectual property portfolio is a key strategic asset supporting our global market position. We hold or have pending over 45 utility or design patents worldwide, protecting both the methods and systems underlying our SteraMist® BIT™ platform, with U.S. patents extending through 2038. …”see in full comparison
“As of June 30, 2026 and December 31, 2025, our recorded reserve for obsolete inventory was $500,000 and $500,000, respectively. The carrying reserve of $500,000 as of June 30, 2026 reflects historical accounting treatment and estimation methodologies established in prior fiscal periods under ASC 330 and SEC Staff Accounting Bulletin (SAB) Topic 5.BB. Under SAB Topic 5.BB, an inventory write-down establishes a new cost basis that cannot subsequently be written back up, regardless of subsequent operational improvements or changes in forward demand expectations. …”see in full comparison
“As of March 31, 2026 and December 31, 2025, our reserve for obsolete inventory was $500,000. Inventories, net of reserves, remained relatively flat at approximately $2.9 million as of March 31, 2026 and December 31, 2025, reflecting disciplined inventory management. If actual demand for our products differs materially from our forecasts, or if changes in our product offerings render existing inventory obsolete, additional write-downs may be required.”see in full comparison
“We hold more than 30 design patents for decontamination devices, covering applicators, chambers, carts, and surface-mounted systems, across major global markets including the United States, China, Japan, Korea, and the United Kingdom. In addition, we maintain over 200 trademarks registered or pending in multiple classes across the globe, covering chemical formulations, sterilization equipment, services, and training.”see in full comparison
“In addition, TOMI has authorized a local representative to distribute for the Defense Logistics Agency (DLA), which manages the global defense supply chain for the U.S. military services and allied partners. This partnership, established in the second quarter, is expected to streamline and accelerate government procurement of SteraMist iHP technology.”see in full comparison
Full comparison: every changed paragraph (55)
The firstsecond quarter of 2026 delivered improved financial results, with revenue of approximately $1.65$2.25 million reflecting a 5%118% increase over the second quarter of 2025 and a 36% sequential increase over the first quarter of 2025 and a 67% sequential increase over the fourth quarter of 2025.2026. Growth was primarily driven by increased equipment andequipment, CES-related salessales, toand commercial service provider customers, partially offset by lower service revenue reflecting project completion timing. Total revenue and sales order backlog was $3.4$2.2 million as of MarchJune 31,30, 2026,2026 (and has since expanded to $2.6 million), providing strong visibility into near-term revenue conversion.
Our intellectual property portfolio is a key strategic asset supporting our global market position. We hold or have pending over 45 utility or design patents worldwide, protecting both the methods and systems underlying our SteraMist® BIT™ platform, with U.S. patents extending through 2038. Recent additions include patents for backpack decontamination units, mobile carts, and enhanced applicator technology in the United States, alongside protections in diverse other countries including Singapore, Korea, Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Romania, Slovenia, Sweden, Brazil, Mexico, United Kingdom, Israel, Japan and Australia. We continue to advance protections for further inventive enhancements to our technologies, including computer-automated biosecurity systems for decontamination of buildings in the United States, Japan and Europe; enhanced applicator technologies in the United States, Europe, China, Australia, and Korea; and food decontamination technology in the United States. In particular, we have recently obtained a Japanese patent protecting our inventive computer-automated biosecurity systems; and we have also obtained allowances for patents protecting our enhanced applicator technologies and systems in the United States. We are continuing to file new applications this year both in the United States and internationally for inventive technologies that lead in the biosecurity and decontamination fields.
We hold more than 30 design patents for decontamination devices, covering applicators, chambers, carts, and surface-mounted systems, across major global markets including the United States, China, Japan, Korea, and the United Kingdom. In addition, we maintain over 200 trademarks registered or pending in multiple classes across the globe, covering chemical formulations, sterilization equipment, services, and training.
In the second quarter of 2026, four key metrics delivered sustainable growth trends: BIT Solution sales, mobile equipment, single applicators—where TOMI’s patented iHP intellectual property resides—and support services, including qualification, acceptance testing, and training programs. The increases in applicator sales and support services stem directly from initiatives introduced in late 2024 and early 2025, further validating the Company’s strategic focus.
This growth clearly demonstrates that customers are expanding their deployment of our patented cold plasma technology. The applicator is a critical component that enables iHP to be utilized—whether paired with a mobile delivery system or installed in a permanent or semi-permanent configuration.
We only began emphasizing this strategy less than two years ago, and it builds on our consumable-driven model. In many ways, the applicator functions as a second “razor” in a razor-and-blade framework: it carries a longer replacement cycle than pure consumables such as BIT Solution, yet it has a significantly shorter sales cycle than full capital equipment when integrated accordingly. This allows TOMI to capture meaningful revenue and margin today while simultaneously locking in long-term, recurring BIT Solution demand.
Gross margin increased to 61.7% during the three months ended June 30, 2026, compared to 50% in the prior quarter and 65.7% in Q2 2025. Growth in recurring high-margin BIT Solution consumable and applicator sales continues to support long-term margin strength. Operating expenses decreased $180,000 or 10%, to $1.63 million compared to $1.81 million in the second quarter of 2025, reflecting disciplined cost management across selling, professional, and general and administrative costs.
During the second quarter of 2026, we delivered first set of iHP decontamination chambers for use on medical devices marking an important milestone for the Company. This chamber integration is an advancement in our technology platform and enables us to formally advance for our 510(k)-submission process with the U.S. Food and Drug Administration.
During the quarter, we further strengthened our registration portfolio increasing approvals to eleven countries between the European Union and United Kingdom, and continued progress toward NSF certification for Biosafety Cabinet decontamination. The Company delivered and installed another fully automated custom system in the United Kingdom – the second pharmaceutical company in the region to implement our CES product line. We expect our UK partner announced earlier in the year, Total Clean Air or TCA, to drive further adoption in the near term across markets.
In the healthcare sector, we have seen growing adoption of iHP technology by Special Pathogen Units throughout the first half of 2026, with additional opportunities developing for the second half of the year. These units, which manage high-consequence infectious diseases, require rapid, validated, and comprehensive decontamination of rooms, equipment, and personal protective equipment.
In the Food Safety market, we have been granted a new unconditional registration for AgriMist, TOMI’s fourth Environmental Protection Association (EPA) label registration. This expanded label significantly broadens our approved use sites to include a wide range of food safety applications.
TOMI continues to expand its presence in the defense sector, having recently received approvals from defense contractors in Korea and defense agencies in Canada. While confidentiality agreements limit the disclosure of specific details, these relationships represent multi-year efforts with significant long-term potential with a very detailed strategic plan and specific to these two accounts we have been in contact with for years.
In addition, TOMI has authorized a local representative to distribute for the Defense Logistics Agency (DLA), which manages the global defense supply chain for the U.S. military services and allied partners. This partnership, established in the second quarter, is expected to streamline and accelerate government procurement of SteraMist iHP technology.
SteraMist was named Disinfection and Decontamination Products Company of the Year for 2026 by Medical Tech Outlook, representing a back-to-back global award for the brand.
Agreement and Plan of Merger with Carbonium Core, Inc.
On June 28, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Carbonium Core, Inc., a Delaware corporation (“Carbonium”), and TOMZ Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which Merger Sub will merge with and into Carbonium (the “Merger”), with Carbonium continuing as the surviving corporation and becoming a wholly owned subsidiary of the Company.
Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), Carbonium stockholders will receive (i) shares of the Company’s common stock equal to 19.99% of the Company’s outstanding common stock immediately prior to the Closing and (ii) shares of a newly designated Series C Preferred Stock, in each case allocated pro rata based on their respective ownership of Carbonium. Upon conversion of the Series C Preferred Stock, the former Carbonium stockholders will hold no less than 90% of the Company’s capital stock on a fully converted basis. Following the Closing, the Company will seek any shareholder approval required under Nasdaq Listing Rule 5635 for the conversion of the Series C Preferred Stock into common stock, as well as shareholder approval for a change of the Company’s name to “Carbonium Core, Inc.” The Series C Preferred Stock may not be converted into common stock in excess of the limitations imposed by Nasdaq Listing Rule 5635 unless and until the required shareholder approval has been obtained.
The Merger Agreement also contemplates a financing transaction to be completed prior to the Closing that will result in gross proceeds to the Company of not less than $10.0 million, and completion of such financing is a condition to the Closing. Following the Closing, the Company is required to seek shareholder approval for the conversion of the Series C Preferred Stock into shares of the Company’s common stock to the extent required under Nasdaq Listing Rule 5635, as well as approval of a change in the Company’s name to “Carbonium Core, Inc.” The Closing is expected to occur during the third quarter of 2026 and remains subject to the completion of the financing transaction, the receipt of required approvals and the satisfaction or waiver of the other conditions set forth in the Merger Agreement. For more information regarding the Merger Agreement and the transactions contemplated thereby, refer to the Company’s Current Report on Form 8-K filed with the SEC on June 29, 2026.
Our integrated project pipeline, encompassing SIS, Hybrid, and CES projects awaiting approval or unsigned contract, grew to approximately $4.3 million across 13 customers, an increase from the November 2025 $3 million integration sales pipeline. Notably, we secured a $440,000 annual purchase order for recurring decontamination services with a leading global medical technology company, reflecting the growing contribution of our high-margin iHP Corporate Service business.
Since 2024, BIT solution sales have shown steady annual growth of 21% from 2024 to 2025. This momentum has been maintained into the current quarter. Management expects BIT Solution sales to exceed 2025 levels, which management believes could support progress toward the Company's future profitability. Applicator sales in the current quarter exceeded total full-year 2025 applicator sales, representing a 139% year-over-year increase, reflecting growing adoption of our razor/blade consumable model.
Our iHP technology continued to gain market recognition across pharmaceutical, biotech, food safety, and international markets during the quarter. Key first quarter 2026 developments included regulatory authorization in Great Britain and Northern Ireland from the UK Health and Safety Executive, our first EU member state product authorization from the Dutch regulatory authority, a strategic partnership with Total Clean Air as our Preferred European Partner across the UK and EU, expanded Canadian operations through our distribution partner, and a new food safety case study demonstrating up to 95% reduction in sanitation testing costs.
Gross margin decreased from 60% in the three months ended March 31, 2025 to 50% in the current quarter, reflecting strategic price discounts to drive equipment adoption and an unfavorable product mix shift toward lower-margin equipment sales. Management views these factors as temporary, as growth in recurring high-margin BIT Solution consumable sales is expected to support margin recovery.
Operating expenses decreased $248,000, or 15%, to $1.5 million, reflecting disciplined cost management across professional fees, selling expenses, and general and administrative costs.
The following overview summarizes key factors affecting the Company’s financial performance for the quarterthree and six months ended MarchJune 31,30, 2026 compared to the Company’s Consolidated Balance Sheet as of December 31, 2025 and should be read in conjunction with the selected financial metrics presented below.
The following tabletables summarizessummarize selected financial metrics based on the Company’s Consolidated Statement of Operations for the three and six months ended MarchJune 31,30, 2026 compared to MarchJune 31,30, 2025 and provides a high-level overview of the Company’s operating performance.
The following discussion should be read in conjunction with our consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The following table presents our results of operations for the three and six months ended MarchJune 31,30, 2026, and 2025, together with the changes between the periods. The discussion below addresses the significant factors contributing to the changes in our results of operations.
Other income (expense) decreased $683,000 compared to three months ended March 31, 2025, reflecting the absence of the one-time Employee Retention Credit benefit of $535,000 and related interest of $83,000 recognized in the prior year period, with no comparable activity in the current quarter. Interest expense increased $65,000 reflecting higher outstanding debt balances on our convertible notes and the Agile Capital sale of future receipts agreement.
Revenue increased $77,000, or 5%, to $1.65 million forFor the three months ended MarchJune 31,30, 20262026, revenue was $2,247,000 compared to $1.58 million$1,031,000 in the prior yearperiod, period.an increase of $1,216,000, or 118%. For the six months ended June 30, 2026, revenue was $3,901,000 compared to $2,608,000 in the prior period, an increase of $1,293,000, or 50%. Product revenue increased $311,000$1,516,000 (31%92%), driven by higher equipment and CES-related sales. Service revenue decreased $234,000$223,000 (41%23%), reflecting the timing of decontamination project completions and service engagements in the period.
Gross margin decreased from 60%65.7% into 61.6% and from 62.5% to 56.8% for the three and six months ended MarchJune 31,30, 20252026, respectively, compared to 50% in the currentprior quarter.period. ThisThe decrease reflects strategic price discounts to drive equipment adoption and an unfavorable product mix shift, as equipment and CES-related sales comprised a higher proportion of total revenue compared to the prior year period.adoption. Management views these factors as temporary, as growth in recurring high-margin BIT Solution consumable sales is expected to support margin recovery in future periods.
Total operating expenses decreased $248,000$180,000 toand $1.5$428,000 million in the current quarter from $1.7 million infor the three and six months ended MarchJune 31,30, 2025.2026 compared to the prior year period. The decrease was primarily driven by lower general and administrative expenses of $136,000,$375,000 and $519,000, respectively, reflecting reduced credit loss expense, andoffset lowerby sellingan expensesincrease ofin $49,000,professional fees due to reducedvarious salestransactions commissionsundertaken in the current period, including our recent plan of merger, stock split and advertisingSchedule spend,14C and lower professional and consulting fees of $59,000 combined, reflecting tighter controls over legal and advisory costs.filings. While management continues to actively manage costs, revenue growth remains the primary driver of the Company'sCompany’s path to profitability.
As of MarchJune 31,30, 2026, we had cash and cash equivalents of $280,000approximately $322,000 and working capital of approximately $394,000,$1.8 million, compared to cash and cash equivalents of approximately $88,000 and working capital of approximately $1.0 million at December 31, 2025. For the threesix months ended MarchJune 31,30, 2026, we incurred a net loss of approximately $810,000.$1,193,000. Our accumulated deficit as of MarchJune 31,30, 2026 iswas $58.9approximately $59.2 million.
These conditions raise substantial doubt about our ability to continue as a going concern within the next twelve months after the date these financial statements are issued. The condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty. See Note 2 to our condensed consolidated financial statements for further discussion of the going concern assessment.
The approximately $0.8 million increase in working capital during the six months ended June 30, 2026 was primarily attributable to net proceeds of approximately $1.9 million received under the Company’s Equity Line of Credit, partially offset by the net loss incurred during the period and cash used in operating activities of approximately $1.3 million. Accounts receivable increased by approximately $1.2 million, primarily reflecting increased sales activity during the second quarter of 2026. Cash and cash equivalents increased by approximately $234,000 and inventories decreased by approximately $114,000. Accounts payable and accrued expenses increased by approximately $788,000, primarily reflecting higher business activity levels, increased accrued payroll and purchases, and professional fees associated with the Company’s strategic and financing initiatives.
The $630,000 decline in working capital from $1.0 million to $394,000 reflects the net loss incurred during the period and the Company's ongoing capital requirements. On the asset side, accounts receivable increased $73,000 on higher revenue, cash increased $192,000, and inventories remained relatively flat. On the liability side, accounts payable and accrued expenses increased $993,000, and deferred revenue increased $177,000 reflecting our deposit policy on customer orders.
During the threesix months ended MarchJune 31,30, 2026, pursuant to the ELOC, we issued 336,1471,345,642 shares of Common Stock inand exchange forreceived aggregate grossnet proceeds of $149,413. We recorded a receivable of $48,034 for proceeds not yet received as of quarter end related to shares issued under the ELOC, which was included within prepaid expenses on our condensed consolidated balance sheet.$1,919,744. The shares were issued pursuant to the Form S-3 registration statement (File No. 333-291563) and the prospectus supplement dated December 11, 2025. The Company intends to use the proceeds for working capital and general corporate purposes.
For a full discussion of management'smanagement’s plan to address the going concern conditions, including the ELOC, shelf registration, stock split, merger, convertible note management, pipeline conversion and cost management initiatives, refer to Note 2 to our condensed consolidated financial statements.
Our outstanding debt consists of $3,135,000 in convertible notes at 12% per annum, maturing 2028–2030, and a $175,725 remaining balance under the Agile Capital sale of future receipts agreement.2030. Full terms are disclosed in Note 8 to our condensed consolidated financial statements.
A breakdown of our statement of cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025 is provided below:
Net cash provided by (used in) operating activities was $296,000($1,299,000) for the threesix months ended MarchJune 31,30, 2026, ancompared improvementto of $572,000, from $(276,000$463,000) in the prior year period, primarily driven by an increase in accounts payable and accrued expenses, partially offset by the net loss of approximately $810,000.$1,193,000.
Net cash (used in) investing activities was ($19,000) for the six months ended June 30, 2026, consisting of equipment purchases and a new patent granted in Japan. Net cash (used in) investing activities was ($67,000) for the six months ended June 30, 2025, consisting of equipment purchases and various international patents and trademarks.
Net cash (used in) investing activities was $5,000 for the three months ended March 31, 2026, consisting of equipment purchases.
Net cash (usedprovided in)by financing activities was $98,000$1,552,000 for the threesix months ended MarchJune 31,30, 2026, compared to net cash provided of $285,000$435,000 in the prior year period.period In the prior year period, $285,000which was raised through convertible note issuances. For the threesix months ended MarchJune 31,30, 2026, net financing activities reflected ELOC proceeds of $1,919,744 net of issuance costs offset by repayments of $192,000$367,000 on the sale of future receipts agreement with Agile,Agile partially offset by $94,000 in net ELOC proceeds, consisting of gross ELOC proceeds of $149,413, less $48,034 not yet received at quarter end and $7,250 in clearing costs expensed in operating activities.Capital.
The assessment of our ability to continue as a going concern is the most significant judgment reflected in our financial statements for the threesix months ended MarchJune 31,30, 2026. Under ASC 205-40, management is required to evaluate whether there is substantial doubt about the Company'sCompany’s ability to continue as a going concern within one year after the date the financial statements are issued. This evaluation requires management to consider all available information about the future, including the Company'sCompany’s projected cash flows, planned capital raising activities, anticipated operating improvements, and the probability and timing of successfully executing those plans.
For the threesix months ended MarchJune 31,30, 2026, we recorded a net loss of approximately $810,000.$1,193,000. As of MarchJune 31,30, 2026, we had approximately $280,000$322,000 of cash and cash equivalents and an accumulated deficit of approximately $58.9$59.2 million. Based on these conditions, management concluded that substantial doubt exists about our ability to continue as a going concern within one year after the issuance of these financial statements. Management'sManagement’s conclusion is based on projected cash flows that assume successful execution of our capital raising plans, including continued drawdowns under our convertible note facilities and the potential utilization of the $20 million ELOC with Hudson Global Ventures, LLC entered into in November 2025, as well as anticipated revenue growth from our active commercial pipeline. If our assumptions regarding capital availability, revenue timing or operating costs prove incorrect, the Company'sCompany’s liquidity position could deteriorate more rapidly than projected, and there can be no assurance that the going concern doubt will be resolved within the anticipated timeframe. See Note 2 to the consolidated financial statements for further discussion.
We also record estimated allowances for sales returns, determined by using a specific identification method based on subsequent return activity and historical averages. As of MarchJune 31,30, 2026 and December 31, 2025, we recorded allowances of $76,064$76,621 and $47,844, respectively.
As of MarchJune 31,30, 2026 and December 31, 2025, deferred revenue totaled approximately $601,000$431,000 and $424,000, respectively, representing contracted amounts for which performance obligations had not yet been satisfied. The increase in deferred revenue reflects growth in our SIS and CES project pipeline and the timing of project milestones. Changes in assumptions regarding the timing of project completion or customer acceptance could affect the amount and timing of revenue recognized in future periods.
As of MarchJune 31,30, 2026, net accounts receivable totaled $761,789$1,890,105 compared to $689,153 as of December 31, 2025. The increase reflects higher revenue levels in the current period. Management exercises judgment in determining the appropriate allowance for credit losses, and changes in the creditworthiness of our customers, deterioration in economic conditions, or the loss of a significant customer relationship could result in allowance adjustments that materially affect our results of operations in a given period.
As of June 30, 2026 and December 31, 2025, our recorded reserve for obsolete inventory was $500,000 and $500,000, respectively. The carrying reserve of $500,000 as of June 30, 2026 reflects historical accounting treatment and estimation methodologies established in prior fiscal periods under ASC 330 and SEC Staff Accounting Bulletin (SAB) Topic 5.BB. Under SAB Topic 5.BB, an inventory write-down establishes a new cost basis that cannot subsequently be written back up, regardless of subsequent operational improvements or changes in forward demand expectations. While the recorded allowance of $500,000 is maintained on the Condensed Consolidated Balance Sheet to satisfy GAAP accounting requirements regarding prior cost-basis adjustments, management continuously evaluates the underlying economic exposure of its inventory population. Based on recent operational developments—including year-to-date unit depletion, internal conversion of equipment to active customer configurations, and expanding commercial pipeline conversion—The Company will derecognize the associated carrying reserves as underlying inventory units are sold, consumed, or otherwise disposed of in the ordinary course of business. If actual demand for our products differs materially from our forecasts, or if future changes in our product offerings render existing inventory obsolete, additional write-downs may be required.
As of March 31, 2026 and December 31, 2025, our reserve for obsolete inventory was $500,000. Inventories, net of reserves, remained relatively flat at approximately $2.9 million as of March 31, 2026 and December 31, 2025, reflecting disciplined inventory management. If actual demand for our products differs materially from our forecasts, or if changes in our product offerings render existing inventory obsolete, additional write-downs may be required.
We noted no long-lived asset impairment charges for the three and six months ended MarchJune 31,30, 2026 and 2025. Management'sManagement’s impairment analysis considered the going concern conditions described above and concluded that projected undiscounted cash flows, based on our current operating plan and capital raising assumptions, continue to support the carrying values of our long-lived assets. Changes in our revenue outlook, discount rates or other key assumptions could result in impairment charges in future periods.
As of MarchJune 31,30, 2026, we had outstanding convertible notes with an aggregate principal balance of approximately $3.1 million, net of amortized debt discount and issuance costs of approximately $200,000,$186,000, resulting in a carrying value of approximately $2.9 million. Our convertible notes were issued under two separate securities purchase agreements — the 2023 SPA, under which $2.6 million of notes were issued, and the 2025 SPA, under which up to $3.0 million of additional notes may be issued, of which $535,000 had been issued as of MarchJune 31,30, 2026. The notes bear interest at 12% per annum, are convertible at the option of the holder at $1.25$3.75 per share and mature on the fifth anniversary of their respective issuance dates.
The conversion features embedded in the 2023 Notes and 2025 Notes are considered clearly and closely related to the host debt instruments and do not require bifurcation under ASC 815. No modifications to the terms of the existing notes occurred during the three and six months ended MarchJune 31,30, 2026 and 2025.
During the threesix months ended MarchJune 31,30, 2026, we recognized approximately $73,000$90,000 of stock-based compensation expense, including shares issued to directors and equity compensation expense. Changes in the assumptions used in the Black-Scholes model, or modifications to existing awards, could result in materially different fair value estimates and compensation expense amounts.
We recorded no income tax expense or benefit for the three and six months ended MarchJune 31,30, 2026 and 2025 due to our net operating losses and the maintenance of a full valuation allowance against our net deferred tax assets. As of MarchJune 31,30, 2026, our total valuation allowance was approximately $9,946,000,$10,053,000, an increase of approximately $227,000$334,000 from $9,719,000 as of December 31, 2025, primarily reflecting additional deferred tax assets arising from current-period losses. As of December 31, 2025, we had available federal net operating loss carryforwards of approximately $28,310,000 and state net operating loss carryforwards of approximately $25,784,000. Net operating losses generated after December 31, 2017 carry forward indefinitely; those generated prior to 2018 expire at various dates through 2037. NOLs generated after 2017 carry forward indefinitely but are limited to offset 80% of taxable income in any given year.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU provides a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current-classified accounts receivable and contract assets. The ASU is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2025-05 in the first quarter of 2026 on a prospective basis and did not elect the practical expedient. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or on the allowance for credit losses as of MarchJune 31,30, 2026.
TOMZ insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-04-22 | Lim Boh Soon |
Grant/award | 10,000 | $0.55 | $5.5K |
| 2026-04-22 | Fragasso Francesco |
Grant/award | 10,000 | $0.55 | $5.5K |
| 2026-04-22 | Paul Harold |
Grant/award | 10,000 | $0.55 | $5.5K |
Well-known investors holding TOMZ (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 108,751 | $89.5K | 0.0% | New position |