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What changed in TOMI Environmental Solutions, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TOMI Environmental Solutions, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+357 added−335 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-16)

Top changes in TOMI Environmental Solutions, Inc.'s 2023 10-K

357 paragraphs added · 335 removed · 158 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

56 edited+90 added−71 removed7 unchanged
Biggest changeOur technology has multiple competitive advantages required for disinfection SteraMist is no wipe, no rinse, no residue, non-corrosive, high level efficacy (developed by DARPA for Anthrax spores), quick turnaround time, superior material compatibility (spray direct on sensitive equipment), and our submicron-small micron particles which moves like a gas allows the mist/fog to reach every area being treated regardless of what is in the space. 13 Table of Contents In summary, SteraMist ® offers the following competitive advantages: · Provides a 99.9999% or six-log kill and above kill (i.e., the statistical destruction of all microorganisms and their spores) on all challenged pathogens, on multiple surfaces including Bacillus atrophaeus spores, Bacillus subtilis spores and Geobacillus stearothermophilus , the spore that is considered a gold standard for validation of sterilization versus household/industrial cleaners that offer a 99.9% (sanitizing) or three-log kill to 99.99% (disinfection) or four-log kill. · Easy to use. · Does not require mixing of materials. · No Touch. · No Wipe, No Rinse. · Does not include silver ions or peracetic acid. · Leaves no residue. · Not affected by humidity or temperature. · Non-corrosive. · Does not damage medical or electronic equipment. · By-products converts to water (humidity) and oxygen.
Biggest changeSteraMist iHP Provides a 99.9999% or six-log kill and above kill (i.e., the statistical destruction of all microorganisms and their spores) on all challenged pathogens, on multiple surfaces including Bacillus atrophaeus spores, Bacillus subtilis spores and Geobacillus stearothermophilus spores naked or dressed the last spore is considered a gold standard for validation of sterilization versus household/industrial cleaners that offer a 99.9% (sanitizing) or three-log kill to 99.99% (disinfection) or four-log kill.
TOMI registers marks in eight (8) classes of specification of goods and services: Class 1 for Chemicals for Treating Hazardous Waste, Class 5 for Disinfectants, All-Purpose for Hard Surfaces and for Treating Mold, Class 7 for Handheld Power Operated Spraying Machines, Class 11 for Sterilizers for Medical Use and Air Purification, Class 35 for Business Consultation and Management Services, Class 37 for General Disinfecting Services, Class 40 for Chemical Decontamination and Manufacturing Services, and Class 41 for Providing Education Training and information related to biological and bacterial decontamination services.
TOMI registers marks in eight classes of specification of goods and services: Class 1 for Chemicals for Treating Hazardous Waste, Class 5 for Disinfectants, All-Purpose for Hard Surfaces and for Treating Mold, Class 7 for Handheld Power Operated Spraying Machines, Class 11 for Sterilizers for Medical Use and Air Purification, Class 35 for Business Consultation and Management Services, Class 37 for General Disinfecting Services, Class 40 for Chemical Decontamination and Manufacturing Services, and Class 41 for Providing Education Training and information related to biological and bacterial decontamination services.
We also rely upon trade secrets, technical know-how, and continuing technological innovation to develop and maintain our competitive position. As part of our intellectual property protection strategy, we have registered our BIT ™ solution with the EPA, all fifty (50) states in the United States, and multiple countries worldwide.
We also rely upon trade secrets, technical know-how, and continuing technological innovation to develop and maintain our competitive position. As part of our intellectual property protection strategy, we have registered our BIT™ solution with the EPA, all 50 states in the United States, and multiple countries worldwide.
We have filed and have been granted or have pending acceptance on thirty-two (32) separate design patents for our: Decontamination Chamber(s), Decontamination Applicator, Decontamination Cart, Applicator, and Surface Mounted Applicator 90-Degree Device. These patents are published around the world, including but not limited to United States, China, Hong Kong, Europe, United Kingdom, Singapore, Taiwan, Vietnam, Canada, South Korea, and Japan.
We have filed and have been granted or have pending acceptance on 32 separate design patents for our: Decontamination Chamber(s), Decontamination Applicator, Decontamination Cart, Applicator, and Surface Mounted Applicator 90-Degree Device. These patents are published around the world, including but not limited to United States, China, Hong Kong, Europe, United Kingdom, Singapore, Taiwan, Vietnam, Canada, South Korea, and Japan.
Our SteraMist ® equipment is manufactured by ISO9001 registered companies with multiple facilities in Pennsylvania, New York, New Jersey, North Carolina, California, and Australia. Our solution is blended by an EPA approved blender; our blend includes one (1) sole active ingredient, 7.8% Hydrogen Peroxide. TOMI maintains ownership of all the SteraMist ® product lines, including our BIT ™ Solution.
Our SteraMist ® equipment is manufactured by ISO9001 registered companies with multiple facilities in Pennsylvania, Delaware, New Jersey, North Carolina, California, and Australia. Our solution is blended by an EPA approved blender; our blend includes one sole active ingredient, 7.8% Hydrogen Peroxide. TOMI maintains ownership of all the SteraMist ® product lines, including our BIT ™ Solution.
We consider our brand names and trademarks to be valuable in the marketing of our products. As of today, we have over two hundred trademarks, (word and/or logo) registered or pending across the globe.
We consider our brand names and trademarks to be valuable in the marketing of our products. As of today, we have over two hundred trademarks or trademark applications, (word and/or logo) registered or pending across the globe.
Information contained on our website is not incorporated by reference unless specifically stated therein. In addition, the SEC maintains a website that contains reports, proxy statements, and other information about issuers, such as TOMI, who file electronically with the SEC. The address of the website is www.sec.gov.
Information contained on our website is not incorporated by reference unless specifically stated therein. 16 Table of Contents In addition, the SEC maintains a website that contains reports, proxy statements, and other information about issuers, such as TOMI, who file electronically with the SEC. The address of the website is www.sec.gov .
Commercial Our Commercial division includes but is not limited to use sites such as aviation, airports, police and fire, prisons, manufacturing companies, automobile, military, cruise ships, shipping ports, preschool education, primary and secondary schools, colleges including dormitories, all modes of public and private transportation, regulatory consulting agencies, retail, housing and recreation, and of course emergency preparedness for counties and cities to use SteraMist ® throughout their community.
Our Commercial division includes, but is not limited to, use sites such as aviation, airports, police and fire, prisons, manufacturing companies, automobile, gymnasiums, cruise ships, shipping ports, preschool education, primary and secondary schools, colleges including dormitories, all modes of public and private transportation, regulatory consulting agencies, retail, housing and recreation, and of course emergency preparedness for counties and cities use of SteraMist throughout such communities.
SteraMist ® is being used throughout the world and has been demonstrated to reduce certain resistant problem organisms, such as bacterial spores, Vancomycin-resistant Enterococcus (“VRE”), Clostridium difficile , Middle East Respiratory Syndrome (“MERS”), Ebola (“Ebola”) and SARS CoV-2 the virus that causes COVID.
Validated and proven effective, SteraMist is being used throughout the world and has been demonstrated to reduce certain resistant problem organisms, such as bacterial spores, Vancomycin-resistant Enterococcus (“VRE”), Clostridium difficile, Middle East Respiratory Syndrome (“MERS”), Ebola (“Ebola”) and SARS CoV-2 the virus that causes COVID-19.
We have obtained two related United States utility patents giving us protection of our technology until the year 2038. We have obtained utility patents for our technologies in diverse countries such as Brazil, Japan, Korea, Israel, Australia, Taiwan, Canada, Mexico, and, currently pending, in Europe and Singapore, and continue to pursue protections all over the world.
We have obtained three related United States utility patents, giving us protection of our technology until the year 2038. We have obtained utility patents for our technologies in diverse countries such as Brazil, Japan, Korea, Israel, Australia, Taiwan, Canada, Mexico, Europe, Singapore, New Zealand, and, currently pending, in the UK, and continue to pursue protections all over the world.
TOMI Service Network The TOMI Service Network, or TSN, is an expansive network consisting of professionals throughout North America who are exclusively licensed and trained to use the SteraMist ® products. With the purchase of SteraMist and joining TSN, TOMI trains and services a wide array of professional remediation companies in the use of SteraMist ® throughout the TSN division.
TOMI Service Network (“TSN”) TSN is an expansive network consisting of professionals who are exclusively licensed and trained to use the SteraMist products. With the purchase of SteraMist and joining TSN, TOMI trains and services a wide array of professional remediation companies in the use of SteraMist throughout the TSN division.
Our competitors include companies that market other hydrogen peroxide-based products, such as Steris Corporation (“Steris”), Bioquell, Inc. (“Bioquell”) currently owned by Ecolab, Inc. (“Ecolab”) and The Clorox Company (“Clorox”), various ultraviolet companies and quad ammonia-chemical companies.
Our comparable competitors include companies that market other hydrogen peroxide-based products, such as Steris Corporation (“Steris”), Bioquell, Inc. (“Bioquell”) currently owned by Ecolab, Inc. (“Ecolab”), and The Clorox Company (“Clorox”), miscellaneous hydrogen peroxide products various ultraviolet companies and hundreds of quad ammonia-chemical companies.
Employees As of March 7, 2023, we have thirty (30) full-time executive, operational and administrative employees working within the United States. Most of our sales are conducted by global exclusive distribution agreements or domestically by our internal sales team or independent manufacturing representatives.
Employees As of March 7, 2024, we have 26 full-time executive, operational and administrative employees working within the United States. Most of our sales are conducted by global exclusive distribution agreements or domestically by our internal sales team or independent manufacturing representatives.
With the global population explosion, severe worldwide avian flu pandemics resulting in the unnecessary culling of bird flocks, unusually high accidents resulting in the destruction of over 30 storages, packing and processing food plants, in the U.S. alone, we anticipate an increase in the demand for a mechanical way to disinfect our food supply.
With the global population explosion, severe worldwide avian flu pandemics resulting in the unnecessary culling of bird flocks, unusually high number of accidents resulting in the destruction of dozens of storages, packing and processing food plants, in the U.S. alone, we anticipate an increase in the demand for a mechanical way to sanitize the food supply.
We are also pursuing IP protection for further applications of our SteraMist BIT in diverse fields in multiple jurisdictions, such as food decontamination and, as the initial DARPA grant proved the application of iHP for the protection of buildings post outbreak or after a biological attack.
We are also pursuing IP protection for further applications of our SteraMist BIT in diverse fields in multiple jurisdictions, such as food decontamination and, in installed systems for the application of iHP for the protection of buildings post outbreak or after a biological attack.
Our low percentage of hydrogen peroxide serves as a competitive advantage with respect to transporting our product by air. Our major hydrogen peroxide competitors have to transport their chemicals by rail, road or sea as the Department of Transportation (DOT) will not allow a product that contains greater than 8% hydrogen peroxide to be transported by air.
Our major hydrogen peroxide competitors have to transport their chemicals by rail, road or sea as the Department of Transportation (DOT) will not allow a product that contains greater than 8% hydrogen peroxide to be transported by air.
ROS cause damage to pathogenic and resistant organisms, such as bacteria, bacteria spores, viruses, mold spores, other fungi and yeast, via oxidation of proteins carbohydrates, lipids and rendering the building blocks of nature’s amino acids, DNA and RNA inactive - leading to cellular death, disruption and/or dysfunction.
The .OH damages pathogenic and resistant organisms (such as bacteria, bacteria spores, viruses, mold spores, other fungi, and yeast) via oxidation of proteins, carbohydrates, and lipids and rendering the building blocks of nature’s amino acids, DNA and RNA inactive – leading to complete cellular disruption.
TOMI’s iHP service department continues to grow with new and existing customers in several divisions. In the life science sector, TOMI’s iHP service department has kept its relationships with large pharmaceuticals (Pfizer/ThermoFisher) as well as adding several smaller life science companies (ForDoz/Lonza) to a regular decontamination schedule.
In the life science sector, TOMI’s iHP service department has kept its relationships with large pharmaceuticals, such as Pfizer and ThermoFisher, as well as adding several smaller life science companies, like ForDoz, Scripps, and Lonza, to a regular decontamination schedule.
The fact that iHP and our BIT platform can be incorporated in a new or existing buildings to create an “immune building” should assist in further lab applications of SteraMist in the biosecurity industry in the future Our products are sold around the world under various brand names and trademarks.
The fact that iHP and our BIT platform can be incorporated in new or existing buildings to create an “immune building” should assist in further lab applications of SteraMist in the biosecurity industry in the future.
BIT ™ is a patented process that aerosolizes and activates a low concentration hydrogen peroxide solution, producing a fine aqueous mist (0.3-3 um in diameter) that contains a high concentration of Reactive Oxidative Species (“ROS”), mostly hydroxyl radicals (“OH”).
BIT, a TOMI patented process aerosolizes and activates a low concentration hydrogen peroxide solution, producing a fine aqueous mist (0.3-3 um in diameter) that contains a high concentration of hydroxyl radicals (“.OH”).
We continue to perform decontamination services within cleanrooms, bio-safety labs including BSL-3 and BSL-4 labs, tissue and blood labs, pharmaceutical labs, vivariums and research universities and we continue to secure additional license agreements with major remediation, construction, forensic clean-up and bio-safety servicing companies.
We continue to perform decontamination services within cleanrooms, bio-safety labs including BSL-3 and BSL-4 labs, tissue and blood labs, pharmaceutical labs, vivariums and research universities and we continue to secure additional license agreements with major remediation, construction, forensic clean-up and bio-safety servicing companies. Both of these strategies assist in the brand awareness and use of our suite of products.
Our portfolio includes more than twenty (20) Utility Patent applications worldwide which expire at various dates through the year 2042 for both method and system claims on SteraMist® BIT™, either published or undergoing prosecution. We continue to pursue further claims to additional capabilities in on-going United States and worldwide patent applications.
Our portfolio includes more than 25 Utility or Design Patents worldwide which expire at various dates through the year 2038 for both method and system claims on SteraMist® BIT™, as well as design of devices. We continue to pursue further claims to additional capabilities in on-going United States and worldwide patent applications.
We have submitted utility patent applications in multiple countries, including Europe, China, Brazil, Korea and Australia for further additional applications of SteraMist BIT, and a related application has already been determined novel and inventive in Taiwan, Japan, and Singapore. We have been awarded a design patent on our surface-mounted applicator device in the United States, China, Japan, Taiwan, and Korea.
We have submitted utility patent applications in multiple countries, including Europe, China, Brazil, Korea and Australia for further additional applications of SteraMist BIT, and a related application has already been determined novel and inventive in Taiwan, Japan, Israel, New Zealand, Australia and Singapore.
Unsafe food containing harmful bacteria, viruses, parasites, or chemical substances causes more than 200 diseases, ranging from diarrhea to cancers. It also creates a vicious cycle of disease and malnutrition, particularly affecting infants, young children, elderly and the sick.
Food Safety Every day there are news articles around the world pertaining to the contamination of food supply. Unsafe food containing harmful bacteria, viruses, parasites, or chemical substances causes more than 200 diseases. It also creates a vicious cycle of disease and malnutrition, particularly affecting infants, young children, elderly and the sick.
The unique alteration of the chemistry of our solution occurs after our EPA-registered solution passes through an atmospheric cold plasma arc, which causes the breaking of the double bond of a hydrogen peroxide molecule, the net result - our . OH hydroxyl radical. This hydroxyl radical is known as iHP ™ .
The unique alteration of the chemistry occurs only once BIT solution passes through the atmospheric cold plasma arc, which causes the breaking of the double bond of a hydrogen peroxide molecule and results in an .OH hydroxyl radical known as iHP.
SteraMist ® Custom Engineered System (CES) The SteraMist ® permanent installation is perfect for any room that requires routine automated decontamination. The CES is an automated system that is installed and plumbed utilizing the facilities’ existing HVAC system. This involves permanently installing SteraMist ® applicators within the designated space to achieve maximum results.
SteraMist Custom Engineered System The SteraMist Customer Engineered System (“CES”) permanent installation is perfect for any room that requires routine automated decontamination. The CES is an automated system that is installed and plumbed utilizing the facilities’ existing HVAC system.
The all-in-one SteraPak ® places the SteraMist ® technology onto the technicians back, delivering premium disinfection utilizing a rechargeable battery and cordless operation. Comfortable to use, easy to operate, and has AC and DC power functionality ensuring compatibility in all countries. The SteraPak ® is sold with a case of BIT Solution of eight (8) 32-ounce bottles.
Our most affordable product line to date is comfortable to use, easy to operate, and has AC and DC power functionality ensuring compatibility in all countries. The SteraPak is sold with a case of BIT Solution of eight 32-ounce bottles.
Neither our manufacturer nor chemical blender may make modifications to the manufacturing or blending of our products without our request or consent in written format.
Neither our manufacturer nor chemical blender may make modifications to the manufacturing or blending of our products without our request or consent in written format. TOMI maintains all creative control throughout the design and manufacturing process, which includes research & development through final product fabrication.
The CES eliminates issues such as human error, guarantees accuracy that is unmatched by competitors, and decreases a client’s labor cost and downtime, and in a short time the CES may make up a majority of TOMI’s revenue.
The CES eliminates issues such as human error, guarantees accuracy that is unmatched by competitors, and decreases a client’s labor cost and downtime. Since its launch, SteraMist’s CES has emerged as a leading solution meeting the increasing demands of customers.
SteraMist ® Surface Unit Our SteraMist ® Surface Unit is a fully portable, handheld, point and spray disinfection/decontamination system intended to provide quick turnover of any affected space. The single applicator unit enables disinfection of all surfaces, including high touch, sensitive equipment and electronics.
SteraMist Surface Unit The SteraMist Surface Unit, the original all enclosed fully portable TOMI product is a handheld, point and spray disinfection decontamination unit intended to provide quick turnover of any affected space. The Surface Unit is sold with a case of BIT Solution of four-gallon bottles.
SteraMist technicians provide an efficient 4-step facility disinfection decontamination: site review, protocol generation, deployment and service, and post-treatment reporting. 8 Table of Contents Industries & Market Segments Our SteraMist ® products are designed to address a wide spectrum of industries using iHP ™ .
SteraMist technicians provide an efficient 4-step facility disinfection decontamination: site review, protocol generation, deployment and service, and post-treatment reporting. 13 Table of Contents TOMI’s iHP service department continues to grow with new and existing customers in several divisions.
Marketing and Distribution Through our brand awareness, marketing, social media presence and sales, our business growth objective is to be the global leader in disinfection and decontamination products sales, services, and manufacturing. We intend to continue to expand and support research and development on other decontamination and remediation solutions and to form more business alliances with strategic partners.
Recently, we have expanded our trademark protection into India. 15 Table of Contents Marketing and Distribution Through our brand awareness, marketing, social media presence and sales, our business growth objective is to be the global leader in disinfection and decontamination products sales, services, and manufacturing.
Government Regulation Our business is subject to various degrees of governmental regulation in the countries in which we operate. In the United States, the EPA, the FDA and other governmental authorities regulate the development, manufacture, sale, and distribution of our products and services.
In the United States, the EPA, the FDA and other governmental authorities regulate the development, manufacture, sale, and distribution of our products and services. Our international operations also are subject to a significant amount of government regulation, including country-specific rules and regulations and U.S. regulations applicable to our international operations.
Our solution is manufactured at an EPA-registered solution blender and our product performance is supported by good laboratory practice efficacy data for Staphylococcus aureus , Pseudomonas aeruginosa , Salmonella, Norovirus, SARS CoV-2, mold spores, MRSA, h1n1, Geobacillus stearothermophilus and Clostridium difficile spores. Our Products and Services SteraPak ® SteraPak ® is our most affordable and portable SteraMist system yet.
Today our EPA registered BIT solution is manufactured at an EPA-registered solution blender and our product performance is supported by Good Laboratory Practice (“GLP”) efficacy data which includes mold control and air/surface remediation with claims to combat Staphylococcus, Pseudomonas, MRSA, Salmonella, H1N1, Clostridium difficile spores, and Norovirus.
We protect our technology and products by, among other means, obtaining United States and foreign patents. There can be no assurance, however, that any patent will provide adequate protection for the technology, system, product, service or process it covers. In addition, the process of obtaining and protecting patents can be long and expensive.
Intellectual Property Our success depends in part upon our ability to obtain and maintain proprietary protection for our products and technologies. We protect our technology and products by, among other means, obtaining United States and foreign patents. In addition, the process of obtaining and protecting patents can be long and expensive.
TSN allows for increased accessibility and brand awareness of iHP ® services to facilities in need of local routine and emergency disinfection and decontamination.
TSN allows for increased accessibility and brand awareness of iHP services to facilities in need of local routine and emergency disinfection and decontamination. The TSN addressed many cleaning protocols that changed permanently due to the COVID-19 pandemic, and our network plays a significant role in facilitating and maintaining these protocols.
Individually, each remote applicator can be used to treat a space of approximately 34.6 m 3 (1,221 ft 3 ). Injection times are based on individual room size and number of applicators. Multiple systems can be used simultaneously to accommodate larger or multiple spaces with fast application and minimal down time.
Three SteraMist applicators achieve a thorough full room disinfection decontamination of a sealed space up to 103.8 m3 (3,663 ft3) in just under 45 minutes (application and dwell time). Individually, each remote applicator can be used to treat a space of approximately 34.6 m3 (1,221 ft3). Injection times are based on individual room size and number of applicators.
Our international operations also are subject to a significant amount of government regulation, including country-specific rules and regulations and U.S. regulations applicable to our international operations. Government regulations include detailed inspection of, and controls over, research and development, product approvals and manufacturing, marketing and promotion, sampling, distribution, record-keeping, storage, and disposal practices.
Government regulations include detailed inspection of, and controls over, research and development, product approvals and manufacturing, marketing and promotion, sampling, distribution, record-keeping, storage, and disposal practices. Our low percentage of hydrogen peroxide serves as a competitive advantage with respect to transporting our product by air.
Both of these strategies assist in the brand awareness and use of our suite of products. 12 Table of Contents We sell our products domestically through our internal sales force, as well as independent sales and manufacturing representatives. Internationally, our products are sold through exclusive and non-exclusive sales representatives and distributors.
We sell our products domestically and internationally through our internal sales force, as well as independent sales and manufacturing representatives. Internationally, our products are sold through exclusive and non-exclusive sales representatives and distributors. During 2023, we focused on expanding our network of distributors and sale representative and business development initiatives.
Long term, ongoing projects and validations continue to be a focus and lead to proposals and interest for our CES permanent decontamination room. As these are longer lead-time sales and manufactured upon order that can take months to design, procure, assemble, and implement, we expect installations to have material impact to our results in 2023 and 2024.
Our long-term focus remains on ongoing projects and validations, which often lead to proposals and interest in our CES permanent decontamination room. These projects involve longer lead times, as they are custom designed, procured, assembled, and installed upon order, a process that can take months to complete.
Our operations consist of five main divisions based on our current target industries: Hospital-HealthCare, Life Sciences, TOMI Service Network (“TSN”), Food Safety, and Commercial. We continue to offer our customers a wide range of innovative mobile products designed to be easily incorporated into their existing disinfection and decontamination procedures and protocols.
Industries & Market Segments SteraMist products are designed to address a wide spectrum of industries using iHP. Our operations consist of five main divisions based on our current target industries: Life Sciences, Hospital-HealthCare, TSN, Food Safety, and Commercial.
A brief overview of the target industries is presented below: Life Sciences The SteraMist ® Environment System, CES, the SteraMist ® Select Surface Unit (Plus), SteraBox, 90 Degree Applicator and our iHP ™ Corporate Service Division, are designed to be tailored to provide a complete solution to address the regulatory inspections of disinfecting/decontaminating and Installation Qualification (IQ)-Operational Qualification (OQ)–Performance Qualification (PQ) validation processes within the life sciences industry.
Launched in sequential order as listed to either strategically address the needs and/or ensure compliance with the specific regulations governing each industry segment. Life Sciences SteraMist iHP is designed to be tailored to provide a complete solution to address the regulatory inspections of disinfecting/decontaminating and Installation Qualification (IQ)-Operational Qualification (OQ)–Performance Qualification (PQ) validation processes within the life sciences industry.
This patented process allows these hydroxyl radicals to exist in high concentrations without rapidly recombining and losing their reactivity, while seeking to attach with any and all surfaces within the proximity of TOMI’s mist. The sole active ingredient of BIT ™ is a low percentage (7.8%) Hydrogen Peroxide and is represented by the TOMI ™ SteraMist ® brand of products.
This patented process allows these hydroxyl radicals to exist in high concentrations without rapidly recombining and losing reactivity, while seeking all surfaces within the proximity of the resulting mist or fog. TOMI has and continues to adapt this innovative technology into an everyday solution for use by multiple industries.
In March 2020, our EPA label was further amended to include Emerging Viral Pathogens claims, thus meeting the criteria against Enveloped viruses and Large Non-enveloped viruses and included on List N (Emerging Viral Pathogens including SARS-CoV-2). In 2021, the EPA granted SteraMist® BIT™ 0.35% hydrogen peroxide – EPA registration number 90150-3.
In March 2020, our EPA label was updated to include claims against Emerging Viral Pathogens, meeting criteria for both Enveloped and Large Non-enveloped viruses.
In addition, this product includes a new upgrade of 90-degree rotating applicators providing even faster equal dispersion of the iHP™ fog. iHP ™ Corporate Service Decontamination TOMI offers full room, equipment, facility, and emergency disinfection and decontamination services by certified SteraMist technicians.
This applicator is purchased with a flange for ease of installation either permanently or semi-permanently. iHP Corporate Service Decontamination TOMI offers full room, equipment, facility, and emergency disinfection and decontamination services by certified SteraMist technicians.
In June 2015, SteraMist® BIT™ was registered with the EPA as a hospital-healthcare disinfectant and general broad-spectrum surface disinfectant for use as a misting/fogging agent. SteraMist® BIT™ now holds EPA registrations (# 90150-2) for mold control, and air and surface remediation (# 90150-1).
Under the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), we are mandated to register our disinfectants with the Environmental Protection Agency (“EPA”) and specific state regulatory bodies. SteraMist BIT was EPA-registered (#90150-2) in June 2015 as a hospital-healthcare and broad-spectrum surface disinfectant for misting/fogging applications.
On June 2, 2022, SteraMist was included on the EPA’s List Q for the use of its BIT solution to help fight the spread of rare or novel viruses such as Monkeypox virus, SARS-CoV-2 and its variants that causes COVID-19.
In 2021, SteraMist BIT 0.35% hydrogen peroxide received its EPA registration (#90150-3), and on June 2, 2022, SteraMist was added to its seventh EPA’s List, List Q for combating rare or novel viruses like Monkeypox virus and SARS-CoV-2 variants causing COVID-19. TOMI continuous to build its portfolio of feasibility studies with renowned and trusted partners. In 2023, the U.S.
These features are required for many Life Science facilities. 6 Table of Contents The SteraMist ® Total Disinfection Cart The Total Disinfection Cart was designed with input of public healthcare facilities EVS (Environmental Service) teams using our equipment for the SHIELD study that TOMI was participating in.
The ENV is sold with a case of BIT Solution of four-gallon bottles. 11 Table of Contents The SteraMist Total Disinfection Cart The Total Disinfection Cart was designed with input of public healthcare facilities EVS (Environmental Service) teams.
Food Safety New challenges to food safety will continue to emerge, largely because of changes in our food production, food supply, storage complexities, transportation delays, including more imported foods. Changes in the environment leads to food contamination, new and emergent bacteria, toxins, and antimicrobial resistance.
New challenges to food safety will continue to emerge, largely due to changes in the environment, new and emergent bacteria, toxins, and antimicrobial resistance. Food Safety presents an opportunity for significant growth for TOMI with continued product research and compliance testing.
Research & Development Our research and development efforts focus on improving, extending and applying our proprietary technology in the field of mechanical cleaning and decontamination. Research and development expenses for the years ended December 31, 2022 and 2021, were approximately $352,000 and $573,000, respectively.
Research and development expenses for the years ended December 31, 2023 and 2022, were approximately $492,000 and $352,000, respectively. Government Regulation Our business is subject to various degrees of governmental regulation in the countries in which we operate.
Our hybrid technology applicators can be used in both manual and/or fogging modes. Our SteraMist ® Environment System features additional programmable and printable features in PDF format. Other key features include lot # of BIT ™ Solution, location identifier, injection/dwell/aeration times, and error notifications.
Additional features include downloadable and printable cycle data in PDF format (lot # of BIT Solution, location identifier, injection/dwell/aeration times, and error notifications) and audit reporting. These features are required for many Life Science facilities.
SteraMist is not corrosive, and it does not damage equipment or facilities. Our SteraMist® is a patented technology that produces ionized Hydrogen Peroxide (“iHP™”) using cold plasma science created under a grant by the United States Defense Advanced Research Projects Agency (“DARPA”).
Our flagship product, SteraMist, uses our patented and registered Binary Ionization Technology (“BIT”) to deliver a low-percentage (7.8%) hydrogen peroxide-based fog or mist to affect all indoor environments and surface areas. Developed under a grant from the United States Defense Advanced Research Projects Agency (“DARPA”), SteraMist generates ionized Hydrogen Peroxide (“iHP”) using cold plasma science.
In addition to these productions’ facilities, TOMI has treated four BSL-3 research laboratories in all parts of the country within the last two months (UNM/UNC/Bioqual/Scripps). The food safety department steadily gains traction as several plant/produce companies have expressed interest as new and emerging bacteria, toxins, and fungi hamper production.
The food safety department steadily gains traction as several plant/produce companies have expressed interest as new and emerging bacteria, toxins, and fungi hamper production. TOMI’s iHP Service stands out as a source of revenue that consistently demonstrates either stability or growth.
However, some of these competitors may have longer operating histories, greater name recognition, larger installed customer bases and substantially greater financial and marketing resources than us.
Some of these competitors may have longer operating histories, greater name recognition, larger installed customer bases and substantially greater financial and marketing resources than us. 9 Table of Contents Ultimately, against all competitors and their products, TOMI SteraMist prevails when the following is prioritized by a facility and user: Speed: SteraMist offers rapid turnaround times providing a near kill on contact to pathogens, resulting in faster re-entry and use to the treated area.
The generator and Programmable Logic Control (“PLC”) are housed in a National Electrical Manufacturers Association (“NEMA”) enclosure in a central remote location. The entire system can be developed for multiple rooms and various specifications, controlled remotely through the NEMA interface.
This involves permanently installing SteraMist applicators within the designated space to achieve maximum results and connecting the applicators to an enclosure in a central remote location within a facility. The entire system can be developed for multiple rooms and various specifications.
Currently our customers are purchasing our products in all of our divisions to provide quick disinfection throughout various sites in their facilities. INFORMATION WITH RESPECT TO OUR BUSINESS IN GENERAL Manufacturing We outsource the manufacturing and blending of our SteraMist ® line of equipment and BIT ™ Solution.
In the latter half of 2024, we plan to expand this department, offering IOQ/PQ services to both current and prospective customers, further solidifying our commitment to delivering comprehensive solutions and exceptional service. 14 Table of Contents INFORMATION WITH RESPECT TO OUR BUSINESS IN GENERAL Manufacturing We outsource the manufacturing and blending of our SteraMist ® line of equipment and BIT ™ Solution.
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Item 1. BUSINESS Overview TOMI Environmental Solutions, Inc.
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Item 1. BUSINESS Overview TOMI Environmental Solutions, Inc. (“TOMI,” “we,” “our,” or the “Company”) is a global leader in bacteria decontamination and infectious disease control, offering environmentally friendly solutions for indoor air and surface disinfection and decontamination.
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(“TOMI”, “we” and “our”) is a global bacteria decontamination and infectious disease control company, providing environmental solutions for indoor air and surface decontamination through the manufacturing, sales, service and licensing of our SteraMist® brand of products, including SteraMist® BIT™, a low percentage (7.8%) hydrogen peroxide-based fog or mist that uses Binary Ionization Technology (“BIT™”).
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BIT transforms a sole active ingredient hydrogen peroxide solution into iHP through a high voltage atmospheric cold plasma arc, producing submicron to 3-micron hydroxyl radical particles that effectively treat surfaces and environments with the same velocity and characteristics of a gas.
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Our solution and process are environmentally friendly as the only by-product from our decontamination process is oxygen and humidity. Our solution is organic and is listed in Canada as a sustainably a green product with no carbon footprint. Most of our competitors in the disinfection space leave significant by-products and are corrosive.
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Our innovative and novel process ensures eradication of pathogens with a 6-log (99.9999%) and greater kill rate, effectively leaving no harmful by-products lingering in the treated area.
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Our Environmental Protection Agency (“EPA”) registered BIT™ Solution is composed of a low concentration of hydrogen peroxide converted to iHP™ after passing the trade secret blended solution including its sole active ingredient of 7.8% hydrogen peroxide through an atmospheric cold plasma arc.
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SteraMist’s innovative methodology, inspired from atmospheric chemistry, not only guarantees effectiveness but also maintains a commitment to environmental sustainability by ensuring the only by-product from the process is oxygen and humidity, a complete package of benefits unmatched in its industry.
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The newly formed iHP™ fog and mist consists of submicron’s to 3-micron radical particles that are carried throughout the treatment area in a fog or mist moving with the same velocity and characteristics of a gas.
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We owe our success to the collaborative efforts of Titan Defense and DARPA who uncovered a superior technology that mimics nature’s cleansing mechanism, bringing this natural phenomenon indoors providing a competitive edge that exceeds the capabilities of our competition in the healthcare disinfection, life sciences decontamination, and food safety sanitization markets. 4 Table of Contents The Science Behind the Technology Introducing a revolutionary approach to disinfection and decontamination, our technology offers a streamlined and effective solution.
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This allows the ionized hydrogen peroxide fog or mist to affect all surfaces and air space throughout the targeted treatment area, over, above and beyond the ability of a manual cleaning processes. iHP™ damages pathogenic organisms through the oxidation of proteins, carbohydrates, and lipids.
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By harnessing the power of atmospheric chemistry, our process converts 7.8% hydrogen peroxide into a plasma-generated hydroxyl radical, achieving a 6-log and greater kill of pathogens leaving only oxygen and humidity as by-products. It’s a simple yet effective solution that sets a new standard for global cleaning disinfection decontamination practices.
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SteraMist® no-touch disinfection and or decontamination treat areas mechanically, causing cellular disruptions and/or dysfunctions resulting in a 6-log (99.9999%) and greater kill or inactivation of all pathogens in the treatment area. This is a science that the world needs to follow.
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BIT technology was initially developed in response to weaponized anthrax spore attacks, and detailed testing performed by DARPA demonstrated the success of the technology in neutralizing chemical warfare agents.
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This simple and effective process-takes 7.8 % hydrogen peroxide and under pressure pushes the liquid through a nozzle in which the stream is met by an atmospheric cold plasma arc which converts the hydrogen peroxide into a plasma created hydroxyl radical with 6-log and greater kill.
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We achieved a cutting-edge claim on the EPA label and was coined as the first equipment + solution combination hospital-healthcare disinfectant on the market and maintain the claim as the only EPA Registered Solution + Equipment combination that provides the unique technology of hydrogen peroxide ionization.
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This is a duplication of what occurs in atmospheric chemistry and the only by-product is oxygen and humidity.
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Department of Defense’s BSAT Biorisk Program Office and the Department of Homeland Security’s Science and Technology Directorate’s Plum Island Animal Disease Center published a report demonstrating that iHP is an effective tool for decontamination of biological toxoids and dangerous pathogens that may disrupt our world. We maintain registrations in all 50 states, Washington D.C., Canada, and approximately 40 other countries.
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The world needs to thank, Titan Defense, DARPA and of course nature for the science behind our technology! 4 Table of Contents Under the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), we are required to register with the EPA and certain state regulatory authorities as a seller of disinfectants.
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These endorsements signify our commitment to safeguarding our world against any potential threats. Our Customers We empower our customers to create a healthier and safer world by offering innovative products and services spanning life sciences, healthcare, food safety, and everyday visited facilities.
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In February 2016, we expanded our label with the EPA to include Clostridium difficile Spores and MRSA, as well as the influenza (Avian) virus h1n1, which we believe has better positioned us to penetrate all industries including the biodefense and healthcare industry. In August 2017, our EPA label was further expanded to include efficacy against Salmonella and Norovirus.
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Our comprehensive solutions encompass a range of capital equipment and services, from mobile sprayers and foggers to fully automated installed systems, alongside routine and emergency deployment, qualification, and validation procedures.
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As of January 27, 2017, our technology is one of 53 of the EPA’s “Registered Antimicrobial Products Effective against Clostridium difficile Spores”, as published on the EPA’s K List. Further, in December 2017, SteraMist® was included in the EPA’s list G (Norovirus), L (Ebola) and M (Avian Flu).
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We also operate across diverse sectors such as Life Sciences, Hospital-Healthcare, Food Safety, and everyday buildings visited by people, and provide the option for routine and emergency treatment through our service provider membership, the TOMI Service Network (“TSN”). Our revenue is derived from a variety of industry groups.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the outbreak of the novel strain of coronavirus disease, COVID-19, could adversely affect our business. If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.
Biggest changeIn the United States, COVID-19 has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition. In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease.
Accordingly, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. We have a substantial number of options, warrants and convertible preferred stock outstanding, which could give rise to additional issuances of our common stock and potential dilution of ownership to existing shareholders.
Accordingly, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. We have a substantial number of options, warrants, convertible notes and convertible preferred stock outstanding, which could give rise to additional issuances of our common stock and potential dilution of ownership to existing shareholders.
In addition, we have been increasing our headcount and expenses to support our continued product development and planned growth, and if demand for our products declines and we are unable to sustain our recent increases in our net income, we may not be able to sustain profitability.
In addition, we have been considering increasing our headcount and expenses to support our continued product development and planned growth, and if demand for our products declines and we are unable to sustain our recent increases in our net income, we may not be able to sustain profitability.
Misuse of our products may cause an increased risk of injury to customers, which could harm our reputation in the marketplace, as well as lead to potential product liability lawsuits. 21 Table of Contents 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.
Misuse of our products may cause an increased risk of injury to customers, which could harm our reputation in the marketplace, as well as lead to potential product liability lawsuits. 23 Table of Contents 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.
If we are unable to introduce new products on our anticipated timeframe or financial cost, our business, financial condition and results of operations may suffer due to failing to remain competitive in our market. 20 Table of Contents We have a limited management team size which may reduce our ability to effectively manage our business operations as it grows.
If we are unable to introduce new products on our anticipated timeframe or financial cost, our business, financial condition and results of operations may suffer due to failing to remain competitive in our market. 22 Table of Contents We have a limited management team size which may reduce our ability to effectively manage our business operations as it grows.
The inability to timely meet our sales goals could adversely affect our financial condition and results of operations. 16 Table of Contents We are subject to a variety of risks associated with doing business internationally. We maintain significant international operations, including operations in the U.S., Canada, Mexico, Europe, Asia Pacific and Latin America.
The inability to timely meet our sales goals could adversely affect our financial condition and results of operations. 18 Table of Contents We are subject to a variety of risks associated with doing business internationally. We maintain significant international operations, including operations in the U.S., Canada, Mexico, Europe, Asia Pacific and Latin America.
In these countries, patents may provide only limited benefit or no benefit. 19 Table of Contents 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 these countries, patents may provide only limited benefit or no benefit. 21 Table of Contents 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 the event that the price of our stock falls, we may become involved in securities class action litigation that could divert management’s attention and harm our business. 23 Table of Contents In the future, we may also issue our securities if we need to raise additional capital or in connection with acquisitions.
In the event that the price of our stock falls, we may become involved in securities class action litigation that could divert management’s attention and harm our business. 25 Table of Contents In the future, we may also issue our securities if we need to raise additional capital or in connection with acquisitions.
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, the impact of the COVID-19 Pandemic 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, including the potential implications of the COVID-19 Pandemic; 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.
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 extent and duration of the military action 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.
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 success depends on our ability to adequately protect our intellectual property. 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.
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.
While we experienced an increase of our revenue and net income in 2020, primarily due to a significant increase of demand for our products as protective measures against the spread of the COVID-19 disease during the pandemic, such demand subsided in 2021 as the pandemic gradually came under control, which caused us to incur a net loss in 2021.
While we experienced an increase of our revenue and net income in 2020, primarily due to a significant increase of demand for our products as protective measures against the spread of the COVID-19 disease during the pandemic, such 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.
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. 17 Table of Contents Failure to comply with the U.S.
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. Failure to comply with the U.S.
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 and consultants.
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.
Factors that may affect the volatility of our stock price include the following: 22 Table of Contents · anticipated or actual fluctuations in our quarterly or annual operating results; · our success, or lack of success, in developing and marketing our products and services; · changes in general economic, political and market conditions in or any of the regions in which we conduct our business, including as a result of the COVID-19 pandemic and related governmental responses; · changes in financial estimates by us or of securities or industry analysts; · the issuance of new or updated research reports by securities or industry analysts · the announcement of new products, services, or technological innovations by us or our competitors; · the announcement of new customers, partners or suppliers; · the ability to collect our outstanding accounts receivable; · changes in our executive leadership; · regulatory developments in our industry affecting us, our customers or our competitors; · competition; · actual or purported “short squeeze” trading activity; and · the sale or attempted sale of a large amount of common stock, including sales of common stock following exercises of outstanding warrants.
Factors that may affect the volatility of our stock price include the following: · anticipated or actual fluctuations in our quarterly or annual operating results; · our success, or lack of success, in developing and marketing our products and services; · changes in general economic, political and market conditions in or any of the regions in which we conduct our business; · changes in financial estimates by us or of securities or industry analysts; 24 Table of Contents · the issuance of new or updated research reports by securities or industry analysts; · the announcement of new products, services, or technological innovations by us or our competitors; · the announcement of new customers, partners or suppliers; · the ability to collect our outstanding accounts receivable; · changes in our executive leadership; · regulatory developments in our industry affecting us, our customers or our competitors; · competition; · actual or purported “short squeeze” trading activity; and · the sale or attempted sale of a large amount of common stock, including sales of common stock following exercises of outstanding warrants.
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.
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. 20 Table of Contents Our success depends on our ability to adequately protect our intellectual property.
Any failures to satisfy any continued listing requirements could lead to the receipt of a deficiency notice from the Nasdaq and ultimately to a delisting from trading of our common stock. 24 Table of Contents On October 7, 2022, we received a deficiency letter notifying us that we had not maintained a closing bid price for our common stock of at least $1.00 for a 30-day period.
Any failures to satisfy any continued listing requirements could lead to the receipt of a deficiency notice from the Nasdaq and ultimately to a delisting from trading of our common stock. 26 Table of Contents On February 4, 2024, we received a deficiency letter notifying us that we had not maintained a closing bid price for our common stock of at least $1.00 for a 30-day period.
We have hired and trained additional sales personnel to account for the increased demand for our products. Despite this growth in sales personnel, we expect that our additional sales force will require lead time in the field to grow their network of accounts and achieve the productivity levels we expect them to reach in any individual territory.
We have hired and trained additional sales personnel. Despite this growth in sales personnel, we expect that our additional sales force will require lead time in the field to grow their network of accounts and achieve the productivity levels we expect them to reach in any individual vertical and or territory.
Our executive officers, directors and owners of 5% or more of our outstanding common stock and their respective affiliates beneficially owned, in the aggregate approximately 22.6% of our outstanding common stock as of February 25, 2022. This percentage includes outstanding shares of common stock, convertible preferred stock, warrant and stock options that are vested and exercisable as of that date.
Our executive officers, directors and owners of 5% or more of our outstanding common stock and their respective affiliates beneficially owned, in the aggregate approximately 23.5% of our outstanding common stock as of March 7, 2024. This percentage includes outstanding shares of common stock, convertible preferred stock, warrant and stock options that are vested and exercisable as of that date.
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, it may be difficult to stop the infringement of our patents, trademarks or the misappropriation of other intellectual property rights.
To the extent that we have obtained or are able to obtain patents, trademarks or other intellectual property rights in any foreign jurisdictions, it may be difficult to stop the infringement of our patents, trademarks or the misappropriation of other intellectual property rights.
As of December 31, 2022, we had outstanding options, warrants and convertible preferred stock to purchase approximately an aggregate of 3.3 million shares of our common stock at exercise prices ranging from $0.80 to $8.40 per share.
As of December 31, 2023, we had outstanding convertible note, options, warrants and convertible preferred stock to purchase approximately an aggregate of 5.5 million shares of our common stock at exercise prices ranging from $0.80 to $6.95 per share.
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.
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.
In late February 2022, Russia launched a large-scale military attack on Ukraine. The invasion significantly amplified already existing geopolitical tensions among Russia, Ukraine, Europe, NATO and the West, including the United States. In response to the military action by Russia, various countries, including the United States, the United Kingdom, and European Union issued broad-ranging economic sanctions against Russia.
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.
Of these, approximately 413,000 represent shares underlying options with exercise prices ranging from $0.80 to $7.06 per share, approximately 2.8 million represent shares underlying warrants at exercise prices ranging from $0.80 to $8.40 per share and approximately 63,750 represent shares underlying our shares of convertible $0.01 preferred A stock.
Of these, approximately 2,100,000 represent shares underlying convertible notes with an exercise price of $1.25, approximately 618,000 represent shares underlying options with exercise prices ranging from $0.80 to $7.06 per share, approximately 2.8 million represent shares underlying warrants at exercise prices ranging from $0.64 to $6.95 per share and approximately 63,750 represent shares underlying our shares of convertible $0.01 Series A preferred stock.
In addition, our demand may be affected by macro-economic factors beyond our control, including the COVID-19 pandemic, 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. 18 Table of Contents 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.
In addition, our demand may be affected by macro-economic factors beyond our control, including the COVID-19 pandemic, 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.
If we do not regain compliance with the bid price requirement by April 5, 2023 and are not eligible for an additional compliance period at that time, our common stock will be subject to delisting from the Nasdaq Capital Market.
If we do not regain compliance with the bid price requirement by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period, otherwise our common stock will be subject to delisting from the Nasdaq Capital Market.
We face significant competition in our industry, some of which have longer operating histories, more established products or greater resources than we have currently. The decontamination and environmental infectious disease control industry is extremely competitive. The competition includes remediators and disinfection/decontamination companies such as Steris, Bioquell (Eco-lab) and Clorox, various ultraviolet companies and quad ammonia-chemical companies.
We face significant competition in our industry, some of which have longer operating histories, more established products or greater resources than we have currently. The decontamination and environmental infectious disease control industry is extremely competitive.
Our reliance upon third-party contractors, suppliers and manufacturers for the manufacture of our products increases the risk that we will not have sufficient quantities of our products or such quantities at an acceptable cost and reduces our control over the manufacturing process. We rely upon third parties to supply us with our products.
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. 19 Table of Contents Our reliance upon third-party contractors, suppliers and manufacturers for the manufacture of our products increases the risk that we will not have sufficient quantities of our products or such quantities at an acceptable cost and reduces our control over the manufacturing process.
In accordance with Nasdaq rules, we have been provided an initial period of 180 calendar days, or until April 5, 2023 (the “Compliance Date”), to regain compliance with the bid price requirement. If we do not regain compliance with the bid price requirement by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period.
In accordance with Nasdaq rules, we have been provided an initial period of 180 calendar days, or until August 15, 2024 (the “Compliance Date”), to regain compliance with the bid price requirement.
The stock markets generally have experienced, and will probably continue to experience, extreme price and volume fluctuations that have affected the market price of the shares of many small-cap companies. These fluctuations have often been unrelated to the operating results of such companies and in recent times have been exasperated by investors’ concerns stemming from the COVID-19 pandemic.
The stock markets generally have experienced, and will probably continue to experience, extreme price and volume fluctuations that have affected the market price of the shares of many small-cap companies.
Additionally, supply chain disruptions and access to materials have impacted our suppliers’ ability to deliver products to us in a timely manner. In 2021, we saw significant disruptions to key supply chains that caused a delay in the delivery of batteries and molds from China.
Additionally, supply chain disruptions and access to materials have impacted our suppliers’ ability to deliver products to us in a timely manner.
We generated a net loss of approximately $2.9 and $4.4 million for the years ended December 31, 2022 and 2021, respectively. We also had an accumulated deficit of $46.4 million as of December 31, 2022. Prior to 2020, we had not generated any profit from our business operations.
Risk Related to Our Company and Business We have a history of losses and may not be able to achieve profitability in the future. We generated a net loss of approximately $3.4 and $2.9 million for the years ended December 31, 2023 and 2022, respectively. We also had an accumulated deficit of $49.8 million as of December 31, 2023.
The ramifications of the hostilities and sanctions, however, may not be limited to Russia and Russian companies but may spill over to and negatively impact other regional and global economic markets (including Europe and the United States), companies in other countries (particularly those that have done business with Russia) and on various sectors, industries and markets for securities and commodities globally, such as oil and natural gas.
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.
If this were to occur, the trading price of our securities could decline significantly.
If this were to occur, the trading price of our securities could decline significantly. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in our other filings with the SEC.
We may be unable to enforce our intellectual property rights throughout the world. As part of our growth strategy, we are seeking 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.
Despite these efforts, such events could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. We may be unable to enforce our intellectual property rights throughout the world. As part of our growth strategy, we are continuing to expand our operations internationally.
Any operational disruptions may take the form of a decrease in the quality of customer service, reporting problems and delays in meeting important deadlines, all of which could result in a loss of market share and other problems that could adversely affect our reputation and financial performance. 15 Table of Contents Our SteraMist ® family of products currently accounts for the majority of our revenue, and our success is almost completely dependent on the success of our SteraMist ® brand.
As a result, our customers may terminate or amend their agreements for the purchase of our products and services due to bankruptcy, lack of liquidity, lack of funding, operational failures or other reasons. 17 Table of Contents Our SteraMist ® family of products currently accounts for the majority of our revenue, and our success is almost completely dependent on the success of our SteraMist ® brand.
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In assessing these risks, investors should also refer to the other information contained or incorporated by reference in our other filings with the SEC. 14 Table of Contents Risk Related to Our Company and Business We have a history of losses and may not be able to achieve profitability in the future.
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Prior to 2020, we had not generated any profit from our business operations.
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In December 2019, a novel strain of coronavirus, SARS-CoV-2, was identified in Wuhan, China. Since then, the SARS-CoV-2 virus, and the resulting disease, COVID-19, has spread to most countries, and had caused the worldwide COVID-19 Pandemic.
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COVID-19 has adversely affected, and any resurgence of COVID-19 pandemic or another global health epidemic may in the future, directly or indirectly, adversely affect our business, results of operations and financial condition. COVID-19 has had a significant impact globally, prompting governments and businesses to take unprecedented measures in response.
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While the demand for our products generated from the COVID-19 Pandemic has positively impacted our financial position in 2020, it has negatively impacted our operational condition in two divisions by forcing us to implement various policies for the safety of our employees, including “work from home” policies and office social distancing policies, which may lead to lower productivity of our employees and a decrease in the innovation and advancement of our products.
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If national, state and local governments in affected regions implement safety precautions, similar to those implemented in response to COVID-19, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures, such precautions could, and for COVID-19 did, disrupt normal business operations both in and outside of affected areas and could have significant negative impacts on businesses and financial markets worldwide.
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Beyond our own policies, numerous state and local jurisdictions have previously imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19, which negatively affects our operations and potentially the demand for our products and services.
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The impact of COVID-19 has had, and any resurgence of the COVID-19 pandemic or another pandemic or public health crisis, could in the future have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions.
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However, these challenges will likely continue for the duration of the pandemic, which is uncertain, and may continue to negatively impact our operations.
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The outbreak of COVID-19 in many countries adversely impacted regional, national and global economic activity and has continued to contribute to significant volatility and negative pressure in financial markets.
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Other disruptions or potential disruptions include restrictions on the ability of our sales representatives and other personnel to travel and access customers for training and case support; disruptions in our production schedule and ability to manufacture and assemble products; delays in actions of regulatory bodies; diversion of or limitations on employee resources that would otherwise be focused on the operations of our business, including because of sickness of employees or their families or the desire of employees to avoid contact with groups of people; business adjustments or disruptions of certain third parties, including suppliers; increase in bad debts due to an adverse impact of the pandemic on our clients’ cash flows and resulting decrease in collectability of our account receivables; and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our products.
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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.
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While the potential economic impact brought by, and the duration of any pandemic, epidemic or outbreak of an infectious disease, including COVID-19, may be difficult to assess or predict, the widespread COVID-19 pandemic could further disrupt the global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
Added
The risk of loss of the Company’s intellectual property, trade secrets or other sensitive business information or disruption of operations could negatively impact the Company’s financial results. The Company has sensitive information, including intellectual property, trade secrets, and other sensitive, business critical information as well as on-premises and cloud-based business applications critical to conducting business.
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In addition, a recession or market correction resulting from the spread of an infectious disease, including COVID-19, could materially affect our business for the same reasons. Rapid growth may strain our internal resources, which would hamper our ability to manage our growth effectively, create operating efficiencies or sustain profitability.
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In addition, our research and development facility uses modern computer systems.
Removed
We previously experienced rapid growth in the demand for our products and services in connection with the COVID-19 Pandemic and we may experience such rapid growth in the future, which may strain our financial and operational resources that were established to meet a lower level of demand.
Added
Cyber-incidents affecting the Company, its supply chain or customers could compromise confidential, business critical information, cause a disruption in the Company’s operations, harm the Company’s reputation, or endanger the environment if the Company, its suppliers or customers do not effectively prevent, detect and recover from these or other security breaches.
Removed
Due to such rapid growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel at the pace needed to meet the demand for our products and services. Further, the expansion of our operations may lead to significant costs and may divert our management and business development resources.
Added
While the Company has not encountered cyber security challenges that have materially impaired our operations or financial condition it may be the target of cyber security related incidents.
Removed
Any inability to manage our growth could delay the execution of our development and strategic objectives or disrupt our operations.
Added
Although management believes the Company has not experienced any cyber security related incident or losses to date related to these cyber security incidents, there can be no assurance that such losses will not be suffered in the future.
Removed
Such sanctions included, among other things, a prohibition on doing business with certain Russian companies, large financial institutions, officials and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications (“SWIFT”), the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions.
Added
The Company seeks to actively manage the risks within its control that could lead to business disruptions and cyber security incidents through a comprehensive cyber security program. As cyber security threats present themselves, the Company may be required to expend significant resources to enhance its control environment, processes, practices, and other protective measures.
Removed
Additional sanctions may be imposed in the future.
Added
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.
Removed
Such sanctions (and any future sanctions) and other actions against Russia may adversely impact, among other things, the Russian economy and various sectors of the economy; result in a decline in the value and liquidity of Russian securities; result in boycotts, tariffs, and purchasing and financing restrictions on Russia’s government, companies and certain individuals; weaken the value of the ruble; downgrade the country’s credit rating; freeze Russian securities and/or funds invested in prohibited assets and impair the ability to trade in Russian securities and/or other assets; and have other adverse consequences on the Russian government, economy, companies and region.
Added
The competition includes remediators and disinfection/decontamination companies such as Steris, Bioquell (Eco-lab) and Clorox, various miscellaneous hydrogen peroxide companies, ultraviolet companies and hundreds of quad ammonia-chemical companies.
Removed
Further, several large corporations and U.S. states have announced plans to divest interests or otherwise curtail business dealings with certain Russian businesses.
Removed
In addition, Russia may take retaliatory actions and other countermeasures, including cyberattacks and espionage against other countries and companies around the world, which may negatively impact such countries.
Removed
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.
Removed
In addition, there was a shortage in the supply of bottles domestically that we use to carry our solutions. We expect such delays and shortages to continue in 2023. If these issues persist, they may further delay our ability to deliver our products and to recognize revenue.
Removed
Any delay or impediment to our ability to recognize revenue for any given period could materially adversely affect our results of operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs the company keeps up with the demand for SteraMist ® , there is a dedicated quality control room to allow our service engineers to work on machines for quick and efficient service to our customers. The lease for our U.S. headquarters has a 10-year term and provides for annual rent of approximately $157,000.
Biggest changeAs the company keeps up with the demand for SteraMist ® , there is a dedicated quality control room to allow our service engineers to work on machines for quick and efficient service to our customers. The lease for our U.S. headquarters has a 10-year term and provides for annual rent of approximately $160,000. 27 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is currently listed on Nasdaq Capital Market under the symbol “TOMZ.” Shareholders As of March 7, 2023, there were 216 record holders of our common stock; however, we believe we have approximately 5,500 stockholders, including those held in street name.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is currently listed on Nasdaq Capital Market under the symbol “TOMZ.” Shareholders As of March 13, 2024, there were 214 record holders of our common stock; however, we believe we have approximately 5,000 stockholders, including those held in street name.
On March 7, 2023, the last reported sale price of our common stock on the Nasdaq was $0.64 per share. Dividends We have not paid and do not currently intend to pay cash dividends on our common stock in the foreseeable future.
On March 18, 2024, the last reported sale price of our common stock on the Nasdaq was $0.71 per share. Dividends We have not paid and do not currently intend to pay cash dividends on our common stock in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+95 added−87 removed28 unchanged
Biggest changeFinancial Operations Overview Our financial position as of December 31, 2022 and 2021, respectively, was as follows: December 31, 2022 December 31, 2021 Total shareholders’ equity $ 11,448,000 $ 13,595,000 Cash and cash equivalents $ 3,867,000 $ 5,317,000 Deferred Revenue $ 700,000 $ 6,000 Accounts receivable, net $ 2,772,000 $ 1,965,000 Inventories $ 4,496,000 $ 4,743,000 Prepaid expenses $ 338,000 $ 344,000 Vendor Deposits $ 447,000 $ 289,000 Other Receivables $ 164,000 $ 236,000 Current liabilities – Excluding Deferred Revenue $ 2,591,000 $ 1,810,000 Long-term liabilities $ 761,000 $ 861,000 Working Capital $ 8,844,000 $ 11,077,000 During the year ended December 31, 2022, our debt and liquidity positions were affected by the following: · Net cash used in operations of approximately $1,234,000. · Net cash used in investing activities $241,000. 31 Table of Contents Results of Operations for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 For The Years Ended December 31, Change 2022 2021 $ Revenue, Net $ 8,338,000 $ 7,754,000 $ 584,000 Gross Profit 5,060,000 4,587,000 473,000 Total Operating Expenses (1) 7,942,000 9,511,000 (1,569,000 ) Income (Loss) from Operations (2,882,000 ) (4,924,000 ) 2,042,000 Total Other Income (Expense) 2,000 414,000 (412,000 ) Provision for (benefit from) Income Taxes - 74,000 (74,000 ) Net Income (Loss) $ (2,880,000 ) $ (4,435,000 ) 1,555,000 Basic Net Income (Loss) per share $ (0.15 ) $ (0.25 ) $ 0.10 Diluted Net Income (Loss) per share $ (0.15 ) $ (0.25 ) $ 0.10 (1) Includes $653,000 and $0 in non-cash equity compensation expense for the years ended December 31, 2022 and 2021, respectively.
Biggest changeFurther, TOMI has multiple suppliers, outsourced engineers, and software programmers to turn to for the manufacturing and installation of its SteraMist products to reduce the risks associated with the current supply chain environment. 35 Table of Contents Financial Operations Overview Our financial position as of December 31, 2023 and 2022, respectively, was as follows: December 31, 2023 December 31, 2022 Total shareholders’ equity $ 8,359,000 $ 11,448,000 Cash and cash equivalents $ 2,339,000 $ 3,867,000 Deferred Revenue $ - $ 700,000 Accounts receivable – Current, net $ 2,430,000 $ 2,772,000 Inventories $ 4,627,000 $ 4,496,000 Prepaid expenses $ 371,000 $ 338,000 Vendor Deposits $ 29,000 $ 447,000 Other Receivables $ 164,000 $ 164,000 Accounts receivable – Long Term, net $ 206,000 Current liabilities – Excluding Deferred Revenue $ 2,058,000 $ 2,591,000 Long-term liabilities – Convertible Notes $ 2,298,000 $ - Long-term liabilities – Other $ 643,000 $ 761,000 Working Capital $ 7,903,000 $ 8,844,000 During the year ended December 31, 2023, our debt and liquidity positions were affected by the following: · Net cash used in operations of approximately $3,599,000. · Net cash used in investing activities $217,000. · Net cash provided from financing activities $2,288,000.
The Select Surface Unit performs most of the functionality that the Plus offers and is priced at a lower cost, although Select Plus will provide additional options that are appealing to certain customers, such as laboratory and pharmaceutical companies.
The Select Surface Unit performs most of the functionality that the Select Plus offers and is priced at a lower cost, although Select Plus will provide additional options that are appealing to certain customers, such as laboratory and pharmaceutical companies.
We enter into contracts that can include various combinations of products and services, which are primarily distinct and accounted for as separate performance obligations. 37 Table of Contents Significant Judgments Our contracts with customers for products and services often dictate the terms and conditions of when the control of the promised products or services is transferred to the customer and the amount of consideration to be received in exchange for the products and services.
We enter into contracts that can include various combinations of products and services, which are primarily distinct and accounted for as separate performance obligations. 42 Table of Contents Significant Judgments Our contracts with customers for products and services often dictate the terms and conditions of when the control of the promised products or services is transferred to the customer and the amount of consideration to be received in exchange for the products and services.
Contract Balances As of December 31, 2022, and December 31, 2021 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Contract Balances As of December 31, 2023, and December 31, 2022 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We had no long-lived asset impairment charges for the years ended December 31, 2022 and 2021.
We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We had no long-lived asset impairment charges for the years ended December 31, 2023 and 2022.
Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. 38 Table of Contents Inventories Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods.
Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Inventories Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods.
We believe our sales for our CES will continue to grow and improve our financial results from a liquidity perspective as well as improve our operating margins due to the higher recurring solution sales we see for our CES system.
We believe our sales for our CES will continue to grow in 2024 and improve our financial results from a liquidity perspective as well as improve our operating margins due to the higher recurring solution sales we see for our CES system.
TOMI is in the annual process of self-audit, where all SOPs are reviewed and updated as needed, and all compliments and complains and requests for changes/new equipment are evaluated. 29 Table of Contents TOMI has successfully completed a second 24-month storage stability, this one to meet US EPA requirements (first one was for EU BPR submission and had different methods/requirements).
TOMI is in the annual process of self-audit, where all SOPs are reviewed and updated as needed, and all compliments and complains and requests for changes/new equipment are evaluated. TOMI has successfully completed a second 24-month storage stability, this one to meet EPA requirements (first one was for EU BPR submission and had different methods/requirements).
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations relates to the years ended December 31, 2022 and 2021.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations relates to the years ended December 31, 2023 and 2022.
Actual results could differ materially from our estimates. The SEC defines critical accounting estimates as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and most demanding of our judgment.
Actual results could differ materially from our estimates. 41 Table of Contents The SEC defines critical accounting estimates as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and most demanding of our judgment.
The decrease is due to the timing of certain projects that occurred in the prior year that did not occur in the same current year period.
The increase is due to the timing of certain projects that occurred in the current year that did not occur in the same prior year period.
In addition, the unit will have eight (8) outputs where four (4) are dedicated to our regular process of Injection, Dwell, and Aeration along with a light beacon status bar and four (4) are programmable to meet the customer needs for any external equipment they may desire to work with the system.
In addition, the unit will have eight outputs where four are dedicated to our regular process of constant or pulse Injection, Dwell, and Aeration along with a light beacon status bar and four are programmable to meet the customer needs for any external equipment they may desire to work with the system.
Service revenue is recognized as the agreed upon services are rendered to our customers in an amount that reflects the consideration we expect to receive in exchange for those services.
Service revenue is recognized as the agreed upon services are rendered to our customers in an amount that reflects the consideration we expect to receive in exchange for those services. Estimated allowances for sales returns are recorded as sales are recognized.
Professional Fees For The Years Ended December 31, Change 2022 2021 $ Professional Fees $ 536,000 $ 538,000 $ (2,000 ) Professional fees are comprised mainly of legal, accounting, and financial consulting fees. Professional fees were $536,000 and $538,000 for the years ended December 31, 2022 and 2021, respectively, representing an increase of approximately $2,000 in the current year period.
Professional Fees For The Year Ended December 31, Change 2023 2022 $ Professional Fees $ 576,000 $ 536,000 $ 40,000 Professional fees are comprised mainly of legal, accounting, and financial consulting fees. Professional fees were $576,000 and $536,000 for the years ended December 31, 2023 and 2022, respectively, representing an increase of approximately $40,000 in the current year period.
Cash used in operations for the year ended December 31, 2022 and 2021, was ($1,234,000) and ($3,824,000), respectively.
Cash used in operations for the year ended December 31, 2023 and 2022, was ($3,599,000) and ($1,234,000), respectively.
Liquidity Our revenues can fluctuate due to the following factors, among others: · ramp up and expansion of our internal sales force and manufacturer’s representatives; · length of our sales cycle; · global response to the outbreak of COVID-19 Pandemic and or other outbreaks; · expansion into new territories and markets; and · timing of orders from distributors.
Liquidity Our revenues can fluctuate due to the following factors, among others: · ramp up and expansion of our internal sales force and manufacturer’s representatives; · length of our sales cycle; · global and regional response to the outbreak of infectious diseases; · expansion into new territories and markets; and · timing of orders from distributors.
The SteraPak is a more cost-effective product and designed for residential and commercial real estate including large buildings and public space, any area that needs quick consistent disinfection. There are many new and existing clients that are interested in the SteraPak due to the cost and mobility.
The SteraPak is a more cost-effective product and designed for residential and commercial real estate including large buildings and public space, any area that needs quick consistent disinfection. We believe there are many new and existing clients that are interested in the SteraPak due to the cost and mobility. TOMI recently launched its fourth generation SteraMist ENV.
Management has taken and will endeavor to continue to take a number of actions in order to improve our results of operations and the related cash flows generated from operations in order to strengthen our financial position, including the following items: · expanding our label with the EPA to further our product registration internationally; · continued expansion of our internal sales force and manufacturer representatives in an effort to drive global revenue in all verticals; · continue research and development and add new products to our “Stera” product line; · source alternative lower-cost suppliers; · expansion of international distributors; and · continued growth in all of our verticals.
Management has taken and will endeavor to continue to take a number of actions in order to improve our results of operations and the related cash flows generated from operations in order to strengthen our financial position, including the following items: · expanding our label with the EPA to further our product registration internationally; · continued expansion of our internal sales force and manufacturer representatives in an effort to drive global revenue in all verticals; · continue research and development and add new products to our “Stera” product line; · source alternative lower-cost suppliers; · expansion of international distributors; and · continued growth in all of our verticals. 40 Table of Contents During 2022 and 2023, we experienced increased demand for our CES where we collect deposits upon the execution of the contract.
We expect that the cash we generate from our core operations will generally be sufficient to cover our future capital expenditures and to pay down our near-term debt obligations, although we may choose to seek alternative financing sources.
We expect that the cash we generate from our core operations will generally be sufficient to cover our future capital expenditures and to pay down our near-term debt obligations.
Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of approximately $3,867,000 and working capital of $8,844,000. Our principal capital requirements are to fund operations, invest in research and development and capital equipment, and the continued costs of compliance with public company reporting requirements.
Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of approximately $2,339,000 and working capital of $7,903,000. Our principal capital requirements are to fund operations, invest in research and development and capital equipment, and the continued costs of compliance with public company reporting requirements.
These three new additions bring the BIT Solution product line to a total of five (5) options provided to our customers, which should also benefit our razor/razor-blade business model. We expect these new products and service introductions will positively impact our net sales, cost of sales and operating expenses.
This brings the BIT Solution product line to a total of five options provided to our customers, which will benefit our razor/razor-blade business model. We expect these new products and service introductions will positively impact our net sales, cost of sales and operating expenses during this fiscal year.
In the fourth quarter of 2022, TOMI launched its fourth generation SteraMist Environment System. The system will now be 24 volt, allowing for universal outlet usage and convert even more of the hydrogen peroxide BIT Solution to hydroxyl radicals thus lowering H 2 O 2 PPM levels allowing for faster turnaround time.
The system will now be 24 volts, allowing for universal outlet usage and convert even more of the hydrogen peroxide BIT Solution to hydroxyl radicals thus lowering H 2 O 2 PPM levels allowing for faster turnaround time.
Our service-based revenue for the years ended December 31, 2022 and 2021, was $1,474,000 and $1,575,000, respectively, representing a year over year decrease of $101,000.
Our service-based revenue for the years ended December 31, 2023 and 2022, was $1,660,000 and $1,474,000, respectively, representing a year over year increase of $186,000.
A breakdown of our statement of cash flows for the year ended December 31, 2022 and 2021 is provided below: For the Year Ended December 31, 2022 2021 Net Cash Used in Operating Activities $ (1,234,000 ) $ (3,824,000 ) Net Cash Used in Investing Activities $ (241,000 ) $ (639,000 ) Net Cash Provided By Financing Activities: $ 25,000 $ 4,582,000 35 Table of Contents Operating Activities Cash used in operating activities for the year ended December 31, 2022 and 2021 was $1,234,000 and $3,824,000, respectively.
A breakdown of our statement of cash flows for the year ended December 31, 2023 and 2022 is provided below: For the Year Ended December 31, 2023 2022 Net Cash Provided By (Used) in Operating Activities $ (3,599,000 ) $ (1,234,000 ) Net Cash Used in Investing Activities $ (217,000 ) $ (241,000 ) Net Cash Provided By Financing Activities: $ 2,288,000 $ 25,000 Operating Activities Cash used in operating activities for the year ended December 31, 2023 and 2022 was $3,599,000 and $1,234,000, respectively.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. Accounts Receivable Our accounts receivable are typically from credit worthy customers or, for certain international customers, are supported by pre-payments.
Recent SteraMist food safety customers and partners are conducting further studies to prove SteraMist in the industry. Soli Organic Inc., one of the nation’s largest commercial indoor organic growing companies, obtained multiple SteraMist systems to protect their controlled indoor growing food process from costly fungus, Botrytis.
Soli Organic Inc., one of the nation’s largest commercial indoor organic growing companies, obtained multiple SteraMist systems to protect their controlled indoor growing food process from costly fungus, Botrytis.
Provision for Income Taxes For The Years Ended December 31, Change 2022 2021 $ Provision for Income Tax Expense (Benefit) $ - $ (74,000 ) $ 74,000 Income tax benefit was $74,000 for the year ended December 31, 2021.
Provision for Income Taxes For The Years Ended December 31, Change 2023 2022 $ Provision for Income Tax Expense (Benefit) $ - $ - $ - Provision for income tax was $0 for the years ended December 31, 2023 and 2022.
This ASU is currently not expected to have a material impact on our consolidated financial statements. 40 Table of Contents In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).
We adopted the ASU prospectively on January 1, 2023. This ASU did not have a material impact on our consolidated financial statements. In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).
The combination of all SteraMist systems purchased will be used daily, on a continuous cycle, to disinfect everything from seed trays that the soil and plants sit in, and the plants themselves. Additional studies have been conducted with Kalera that demonstrated the efficacy of SteraMist in a large-scale CEA vertical farm.
The combination of all SteraMist systems purchased will be used daily, on a continuous cycle, to disinfect everything from seed trays that the soil and plants sit in, and the plants themselves.
Revenue by Geographic Region For The Years Ended December 31, Change 2022 2021 $ United States $ 6,261,000 $ 6,403,000 $ (142,000 ) International 2,077,000 1,351,000 726,000 Total $ 8,338,000 $ 7,754,000 $ 584,000 32 Table of Contents Our domestic revenue for the years ended December 31, 2022 and 2021, was $6,261,000 and $6,403,000, respectively, a decrease of $142,000 when compared to the same prior year period.
Revenue by Geographic Region For The Year Ended December 31, Change 2023 2022 $ United States $ 6,125,000 $ 6,261,000 $ (136,000 ) International 1,230,000 2,077,000 (847,000 ) Total $ 7,355,000 $ 8,338,000 $ (983,000 ) Our domestic revenue for the years ended December 31, 2023 and 2022, was $6,125,000 and $6,261,000, respectively, a decrease of $136,000 when compared to the same prior year period Internationally, our revenue for the years ended December 31, 2023 and 2022, was approximately $1,230,000 and $2,077,000, respectively, representing a decrease of $847,000.
Cost of Sales For The Years Ended December 31, Change 2022 2021 $ Cost of Sales $ 3,278,000 $ 3,167,000 $ 111,000 Cost of sales was $3,278,000 and $3,167,000 for the years ended December 31, 2022 and 2021, respectively, an increase of $110,000, compared to the prior year.
Cost of Sales For The Year Ended December 31, Change 2023 2022 $ Cost of Sales $ 3,065,000 $ 3,278,000 $ (213,000 ) Cost of sales was $3,065,000 and $3,278,000 for the years ended December 31, 2023 and 2022, respectively, a decrease of $213,000, compared to the prior year.
This should lead to increased market share, profitability, and capability strength. Our products are an environmentally friendly solution and process which address the concerns of sustainability. Customers are requesting and discussing the positive results of our product and the environmentally friendly results compared to the caustic results of other disinfectants.
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.
General and administrative expense was $4,643,000 and $6,104,000 for the years ended December 31, 2022 and 2021, respectively, a decrease of 1,461,000 in the current year period. The decrease in general and administrative expense is primarily attributable to lower payroll costs, insurance and bad debt expense.
General and administrative expense was $4,571,000 and $4,643,000 for the years ended December 31, 2023 and 2022, respectively, a decrease of $72,000 in the current year period. The decrease in general and administrative expense is primarily attributable to lower equity-based compensation in the current year period.
We believe that we possess the best technologies in the world in the disinfection and decontamination space. This pandemic has provided us with the confidence to develop 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.
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.
During 2022 we experienced increased demand for our CES where we collect deposits upon the execution of the contract. The deposits we receive fund the production for the CES and improve our overall liquidity through the duration of the project.
The deposits we receive fund the production for the CES and improve our overall liquidity through the duration of the project.
Research and Development For The Years Ended December 31, Change 2022 2021 $ Research and Development $ 352,000 $ 573,000 $ (221,000 ) Research and development expenses for the year ended December 31, 2022 were approximately $352,000, as compared to $573,000 for the year ended December 31, 2021, representing a decrease of approximately $221,000, or 39%.
Research and Development For The Year Ended December 31, Change 2023 2022 $ Research and Development $ 492,000 $ 352,000 $ 140,000 Research and development expenses for the year ended December 31, 2023 were approximately $492,000, as compared to $352,000 for the year ended December 31, 2022, representing an increase of approximately $140,000, or 40%.
Net sales can also be affected when consumers and distributors anticipate a product introduction domestically and internationally. Supply Chain: We have orders for supplies and materials that are required in our equipment and are prepared to continue the manufacturing of all our products.
Supply Chain: We have orders for supplies and materials that are required in our equipment and are prepared to continue the manufacturing of all our products.
The implementation of this product and our patented non-corrosive iHP technology will certainly replace the number one competitor in this marketplace, which uses an extremely harsh chemical.
We expect the implementation of this product and our patented non-corrosive iHP technology to replace the number one competitor in this marketplace, which uses an extremely harsh chemical. All SteraMist systems will remain important to the marketplace as they are designed for specific needs and budgets.
The primary reason for the increase in cost of sales is attributable to higher sales and revenue in the current year. Our gross profit as a percentage of sales for the years ended December 31, 2022 was 60.6% compared to 59.2% in the same prior period, respectively. The higher gross profit is attributable to the product mix in sales.
The decrease in cost of sales was primarily due to the lower sales. Our gross profit as a percentage of sales for the year ended December 31, 2023 was 58.3% compared to 60.7% in the same prior period, respectively. The lower gross profit is attributable to the product mix in sales.
We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all. We have no plans of incurring any debt or equity financing.
We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all. We have no plans of incurring any debt or equity financing. 39 Table of Contents For the year ended December 31, 2023 and 2022, we incurred losses from operations of ($3,349,000) and ($2,882,000), respectively.
Both markets offer excellent potential due to interest in the TOMI suite of decontamination/disinfection solutions.
Currently, TOMI is in the registration process for India, and renewal to meet new requirements in the Philippines. Both markets offer excellent potential due to interest in the TOMI suite of decontamination/disinfection solutions.
Selling Expenses For The Years Ended December 31, Change 2022 2021 $ Selling Expenses $ 1,867,000 $ 1,674,000 $ 193,000 33 Table of Contents Selling expenses for the year ended December 31, 2022 were approximately $1,867,000, as compared to $1,674,000 for the year ended December 31, 2021, representing an increase of approximately $193,000, or 12%.
Selling Expenses For The Year Ended December 31, Change 2023 2022 $ Selling Expenses $ 1,351,000 $ 1,867,000 $ (516,000 ) Selling expenses for the year ended December 31, 2023 were approximately $1,351,000, as compared to $1,867,000 for the year ended December 31, 2022, representing a decrease of approximately $516,000, or 28%.
We have a policy of reserving for doubtful accounts based on our best estimate of the amount of potential credit losses in existing accounts receivable.
For those customers to whom we extend credit, we perform periodic evaluations of them and maintain allowances for potential credit losses as deemed necessary. We have a policy of reserving for credit losses based on our best estimate of the amount of potential credit losses in existing accounts receivable.
Consulting Fees For The Years Ended December 31, Change 2022 2021 $ Consulting Fees $ 215,000 $ 327,000 $ (112,000 ) Consulting fees were $215,000 and $327,000 for the years ended December 31, 2022 and 2021, respectively, representing a decrease of $112,00, or 34%.
Consulting Fees For The Year Ended December 31, Change 2023 2022 $ Consulting Fees $ 283,000 $ 215,000 $ 68,000 Consulting fees were $283,000 and $215,000 for the years ended December 31, 2023 and 2022, respectively, representing an increase of $68,000, or 32%.
Analysis concluded dramatic reduction in fungal growth, mold spores, and yield loss from environmental bio-loads, with notable efficacy against Alternaria, a species causing 20% yield loss in all annual vegetable production. Levels went from high/ medium to non-existent/nondetectable with the following spores: Alternaria (Ulocladium), Aspergillus/Penicillium, Acremonium++, and Botrytis. SteraMist is also working with a few partners in the cannabis industry.
Analysis concluded dramatic reduction in fungal growth, mold spores, and yield loss from environmental bio-loads, with notable efficacy against Alternaria, a species causing 20% yield loss in all annual vegetable production.
The decrease is attributable to fixed assets purchased in the prior year and capitalized patent and trademark costs. Financing Activities Cash provided by financing activities for the years ended December 31, 2022 and 2021 was $25,000 and $4,582,000 respectively.
The increase was attributable to a higher current year loss, lower deferred revenue and accounts payable. Investing Activities Cash used in investing activities for the years ended December 31, 2023 and 2022 was $217,000 and $241,000, respectively. The decrease is attributable to fixed assets purchased in the prior year and capitalized patent and trademark costs.
TOMI is conducting internal studies with the 0.35% on common pathogens in the food safety market to enhance protocols. We continue to pursue acceptance of the additional 1% hydrogen peroxide label with the EPA for direct food application. Due to the pandemic, there have been significant delays by U.S. regulatory agencies in approving new submissions, including TOMI's new 1% registration.
TOMI is conducting internal studies with the 0.35% on common pathogens in the food safety market to enhance protocols. We continue to pursue acceptance of the additional 1% hydrogen peroxide label with the EPA for direct food application. Recent SteraMist food safety customers and partners are conducting further studies to prove SteraMist in the industry.
This ASU also enhances the disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, the ASU amends the guidance on vintage disclosures to require entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20.
In addition, the ASU amends the guidance on vintage disclosures to require entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.
Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which we adopted on January 1, 2020.
This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which we adopted on January 1, 2020. This ASU also enhances the disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.
Depreciation and Amortization For The Years Ended December 31, Change 2022 2021 $ Depreciation and Amortization $ 329,000 $ 295,000 $ 34,000 Depreciation and amortization were approximately $329,000 and $295,000 for the years ended December 31, 2022 and 2021, respectively, representing an increase of $34,000, or 12%.
The increase is attributable to higher accounting and legal fees in the current year period. 37 Table of Contents Depreciation and Amortization For The Year Ended December 31, Change 2023 2022 $ Depreciation and Amortization $ 367,000 $ 329,000 $ 38,000 Depreciation and amortization were approximately $367,000 and $329,000 for the years ended December 31, 2023 and 2022, respectively, representing an increase of $38,000, or 12%.
We believe that our existing balance of cash and cash equivalents and amounts expected to be provided by operations will provide us with sufficient financial resources to meet our cash requirements for operations, working capital and capital expenditures over the next twelve months. 36 Table of Contents Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
We believe that our existing balance of cash and cash equivalents and amounts expected to be provided by operations will provide us with sufficient financial resources to meet our cash requirements for operations, working capital and capital expenditures over the next twelve months. We may consider financing transactions to fund our operations if opportunities arise.
This discussion and analysis should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this report. Annual and Quarterly Highlights Business Update Our 2022 calendar year delivered continued growth in revenue and sales pipeline as well as improved year over financial operating results.
This discussion and analysis should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K.
The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU should be applied prospectively. Early adoption is also permitted, including adoption in an interim period.
The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted.
Sales During the years ended December 31, 2022 and 2021, we had net revenue of approximately $8,338,000 and $7,754,000, respectively, representing an increase in revenue of approximately $584,000 or 8%. As customers mature through the product and adoption cycle and our sales pipeline converts to revenue, we expect to generate more predictable sales quarter over quarter.
As customers mature through the product and adoption cycle and our sales pipeline converts to revenue, we expect to generate more predictable sales quarter over quarter.
Interest income was approximately $2,000 and $1,000 for the years ended December 31, 2022 and 2021, respectively. Interest expense was $0 and $1,000 for the years ended December 31, 2022 and 2021, respectively.
Other Income and Expense For The Year Ended December 31, Change 2023 2022 $ Interest Income 12,000 2,000 10,000 Interest Expense (65,000 ) - (65,000 ) Other Income (Expense) $ (53,000 ) $ 2,000 $ (55,000 ) Amortization of deferred financing costs was approximately $10,000 and $0 for the year ended December 31, 2023 and 2022, respectively.
The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU would be applied prospectively. Early adoption is also permitted, including adoption in an interim period.
For nonpublic entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption was permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. ASU 2020-06 must be adopted as of the beginning of a company’s annual fiscal year.
General and Administrative Expense For The Years Ended December 31, Change 2022 2021 General and Administrative $ 4,643,000 $ 6,104,000 $ (1,461,000 ) General and administrative expense includes salaries and payroll taxes, rent, insurance expense, utilities, office expense, product registration costs and bad debt expense.
The increase in consulting fees is due to the additional business development related consulting projects which occurred in the current year period that did not occur in the prior year period. 38 Table of Contents General and Administrative Expense For The Year Ended December 31, Change 2023 2022 $ General and Administrative $ 4,571,000 $ 4,643,000 $ (72,000 ) General and administrative expense includes salaries and payroll taxes, rent, insurance expense, utilities, office expense, product registration costs and bad debt expense.
Net Revenue For The Years Ended December 31, Change 2022 2021 $ Sales, net $ 8,338,000 $ 7,754,000 $ 584,000 Product and Service Revenue For The Years Ended December 31, Change 2022 2021 $ SteraMist Product $ 6,864,000 $ 6,179,000 $ 685,000 Service and Training 1,474,000 1,575,000 (101,000 ) Total $ 8,338,000 $ 7,754,000 $ 584,000 SteraMist product-based revenues for the years ended December 31, 2022 and 2021, were $6,864,000 and $6,179,000, representing an increase of $685,000 when compared to the same prior year period.
Further, as the COVID-19 pandemic has subsided, we expect that the demand for our products and services will continue as we are building a team to address the post COVID-19 pandemic market opportunities. 36 Table of Contents Product and Service Revenue For The Year Ended December 31, Change 2023 2022 $ SteraMist Product $ 5,695,000 $ 6,864,000 $ (1,169,000 ) Service and Training 1,660,000 1,474,000 186,000 Total $ 7,355,000 $ 8,338,000 $ (983,000 ) SteraMist product-based revenues for the years ended December 31, 2023 and 2022, were $5,695,000 and $6,864,000, representing a decrease of $1,169,000 when compared to the same prior year period.
SteraMist has a long past with fighting pandemics and outbreaks and implementing SteraMist for emergency preparedness is vital. As coronavirus has taken the world by surprise, history has shown that other pandemics and viruses are deemed to follow.
The COVID-19 pandemic took the world by surprise, and history has shown that other pandemics and viruses are likely to follow.
We adopted ASU 2021-10 starting in 2022, which did not have a material impact on our consolidated financial statements.
The Company adopted ASU 2016-13 on January 1, 2023. The adoption did not have an impact on our consolidated financial statements.
Internationally, our revenue for the years ended December 31, 2022 and 2021, was approximately $2,077,000 and $1,351,000, respectively, representing an of $726,000.
In 2023, we saw a continued increase in demand for our SteraMist iHP service. For the year ended December 31, 2023 and 2022, our iHP service revenue was $1,660,000 and $1,474,000, respectively, representing a 13% increase.
Using a proven and trusted disinfectant, SteraMist, for emergency outbreaks and daily for preventative maintenance will alleviate the threat of infections from spreading and stop a possible outbreak. 2022 Events: On January 12, 2022, we assisted the decontamination efforts of On Demand Pharmaceuticals, an innovative technology company transforming how medicines are made, by providing its SteraMist Environmental Systems for use at On Demand Pharmaceutical’s modular cleanroom.
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. 2023 Events and Highlights: On January 17, 2023, we announced National Health Services (NHS) Wales purchased SteraMist ionized Hydrogen Peroxide (iHP) technology further expanding our presence in Great Britain.
In third quarter of 2021, we expanded our SteraMist ® BIT ™ solution product line with a 32-ounce bottle for the SteraPak, and the introduction of a ten (10) liter and five (5) gallon bottle.
This system is currently on the market, has been implemented by customers, and is receiving praise for its further developments. Our SteraMist® BIT™ solution product line is currently made up of a 32-ounce bottle for the SteraPak, a ten liter, five gallon, 55-gallon drum for our custom built-ins and our traditional one gallon bottle.
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We ended our 2022 calendar year on a strong note as our fourth quarter sales represent our best standalone quarter we have reported since 2020.
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Annual and Quarterly Highlights Business Update During our 2023 calendar year, we continued to build out our sales infrastructure through the expansion of our distribution network, diversified our product line to support our expanding customer base and the related utilization of our SteraMist technology and delivered multiple custom engineered systems to key customers.
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Our recognized revenue and customer sales backlog for the year ended December 31, 2022, together, was approximately $10,362,000 which was comprised of recognized revenue of $8,338,000 and a customer sales backlog as of December 31, 2022, of approximately $2,024,000.
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Our year-over-year revenue declined due to the timing of customer orders. In October and November of 2023, we agreed to sell and issue 12% convertible notes in a private placement in one or more closings up to an aggregate principal amount of $5,000,000.
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For the year ended December 31, 2022, we received over $10,000,000 in sales orders from including key global fortune 500 customers which represents 22% growth when compared to our calendar 2021 year. The increase in sales orders is largely attributable to increased demand for our CES and mobile equipment orders primarily from our life science, commercial and food safety sectors.
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As of November 7, 2023, we sold and issued an aggregate of $2,600,000 to certain investors pursuant to a Securities Purchase Agreement, dated November 7, 2023. We are using the net proceeds from this offering for working capital and other general corporate purposes.
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A key driver to our longer-term growth is the solid demand for our CES by referrals to the product line by hosting tours of current installed systems, continuing brand awareness via our domestic independent manufacturing sales representatives and growing the network of international partners. 26 Table of Contents Revenue for the three months ended December 31, 2022 and 2021 was $2,812,000 and $2,010,000, respectively, representing an increase of $802,000, or 40% compared to the same prior year period.
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Management continues to focus on expanding our sales channels through the addition of distributors, outside sale representatives, internal sales staff, and external consultants. 29 Table of Contents During 2023, we focused on expanding our network of distributors and sale representative and business development initiatives.
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Our revenue for the fourth quarter of 2022, grew 60% sequentially over what we reported in the third quarter of 2022. The increase in sales was largely attributable to increased demand for our CES systems and our internal tech team ability execute and deliver the systems in the fourth quarter of 2022.
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We brought on and onboarded 9 distributors and 11 sales representatives, which has expanded our presence domestically and on an international basis. We anticipate the increased bandwidth of our internal and external sales channels will have a positive impact on our revenue in 2024 and beyond.
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In 2022, we also saw growth in our sales results our mobile equipment orders due to our expanded product line. With the current years increase in demand for our CES, we have seen our current sales orders and revenue pipeline increase when compared to the same period last year.
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In addition, we entered into a contract with Vizient, Inc. increasing our presence in the U.S. healthcare system. Vizient is the largest GPO in the healthcare industry supplying around $100 billion in annual member purchasing volume.
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The increase in customer sales orders has resulted in a customer sales backlog of approximately $2,024,000 as of December 31, 2022. Our customer orders or contracts for mobile equipment, CES systems and iHP services are subject to the delivery timelines requested by our customers which affect the timing of the related revenue recognition.
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Vizient serves approximately 97% of the nation’s Academic Medical Centers, more than 50% of the nation’s acute care health system, and serves more than 20% of the nation’s ambulatory market. This contract enables us to supply SteraMist systems to a wide range of healthcare providers, including academic medical centers, pediatric facilities, and community health providers, through Vizient’s nationwide network.
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We have secured several new orders for our iHP CES for which revenue will be recognized upon delivery for the remainder of 2023 and believe our sales pipeline will continue to grow. As we install CES units, we can expect to see the increase in solution sales as these units are contracted to be used at set regular schedules.
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Most recently in November 2023, we announced the addition of Sterile Grow, a United States based distributor and consultation company in the food and cannabis market. Sterile Grow, led by Burrell Williamson III and Tri Nguyen, has demonstrated noteworthy achievements in the cannabis and food markets.
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For example, two of the installs currently being manufactured are expected to generate $250,000 in BIT Solution revenue annually starting at the end of 2023.

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