TOMI Environmental Solutions(TOMZ) - 2022 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2022, including balance sheets, statements of operations, shareholders' equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $13.87 million | $12.89 million | | Total Assets | $17.19 million | $16.27 million | | Total Current Liabilities | $3.07 million | $1.82 million | | Total Liabilities | $3.91 million | $2.68 million | | Total Shareholders' Equity | $13.29 million | $13.60 million | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--- | :--- | :--- | | Sales, net | $2.31 million | $2.07 million | | Gross Profit | $1.42 million | $1.24 million | | Loss from Operations | ($0.66 million) | ($1.51 million) | | Net loss | ($0.66 million) | ($1.51 million) | | Net loss Per Common Share (Basic & Diluted) | ($0.03) | ($0.09) | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $27 thousand | ($1.22 million) | | Net Cash (Used in) Investing Activities | ($14 thousand) | ($28 thousand) | | Net Cash From Financing Activities | $0 | $0 | | Increase (Decrease) In Cash | $13 thousand | ($1.25 million) | - The company is a global provider of disinfection and decontamination solutions through its SteraMist® brand of products, utilizing Binary Ionization Technology® (BIT™), organized into five divisions: Healthcare, Life Sciences, TOMI Service Network, Food Safety, and Commercial[24] - For the three months ended March 31, 2022, three customers accounted for 41% of net revenue and one customer accounted for 14% of accounts receivable as of March 31, 2022[126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 performance, highlighting 11% revenue growth, 24% operating expense reduction, positive operating cash flow, and reduced net loss, covering business updates, product development, and liquidity 2.1 Business Update and Product Development Q1 2022 saw 11% sales growth, 24% operating expense reduction, positive operating cash flow, $3.5 million in new orders, and new product development for broader market penetration - Q1 2022 revenue grew 11% year-over-year and 15% sequentially over Q4 2021, with a 24% reduction in operating expenses[132] - The company reported positive cash flow from operations in Q1 2022, the first since Q2 2020, aided by customer deposits and lower operating expenses[133] - Approximately $3.5 million in orders were received in Q1 2022, with $3.2 million expected to be recognized as revenue within the calendar year, driven by demand for Custom Engineered Systems (CES)[134] - New product development focuses on the lower-cost SteraPak backpack system, the hybrid Select Plus unit, and the iHP SteraMist Transport System for vehicles like ambulances[141][143] 2.2 Results of Operations Q1 2022 revenue increased 11% to $2.31 million, driven by product and international sales, with gross profit up 15% and operating expenses down 24%, significantly narrowing net loss Q1 2022 vs Q1 2021 Performance | Metric | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue, Net | $2.31 million | $2.07 million | $236 thousand | 11% | | Gross Profit | $1.42 million | $1.24 million | $186 thousand | 15% | | Total Operating Expenses | $2.08 million | $2.75 million | ($664 thousand) | -24% | | Net Loss | ($660 thousand) | ($1.51 million) | $851 thousand | -56% | Revenue by Source (Q1 2022 vs Q1 2021) | Revenue Source | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | SteraMist Product | $1.89 million | $1.66 million | $225 thousand | 14% | | Service and Training | $423 thousand | $412 thousand | $11 thousand | 3% | Revenue by Geographic Region (Q1 2022 vs Q1 2021) | Region | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States | $1.88 million | $1.80 million | $75 thousand | 4% | | International | $430 thousand | $269 thousand | $161 thousand | 60% | - Operating expenses decreased across several categories year-over-year: Selling Expenses (-28%), Research and Development (-81%), Consulting Fees (-41%), and General and Administrative (-20%)[214][215][216][217] 2.3 Liquidity and Capital Resources As of March 31, 2022, the company held $5.33 million in cash and $10.80 million in working capital, generating $27 thousand in operating cash flow for Q1 2022, sufficient for the next twelve months Key Liquidity Metrics | Metric | March 31, 2022 | | :--- | :--- | | Cash and cash equivalents | $5.33 million | | Working Capital | $10.80 million | - Cash provided by operating activities was $27 thousand for the three months ended March 31, 2022, compared to cash used in operations of $1.23 million for the same period in 2021[222][224] - Management believes that the existing cash balance and cash generated from operations will be sufficient to meet working capital and capital expenditure requirements for the next twelve months[228] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is listed in the table of contents but contains no substantive information, typical for smaller reporting companies - The report does not contain substantive information for this item, despite its listing in the table of contents[7] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in bad debt reserve accounting, specifically review processes and segregation of duties, with a remediation plan underway - Management identified a material weakness in internal control over financial reporting related to the preparation, review, and disclosure of bad debt reserves[269] - The control deficiencies included an ineffective review process for bad debt assessment and a lack of segregation of duties for its authorization and accounting[270] - A remediation plan is underway to revise the bad debt reserve policy and improve review, approval, and segregation of duties[271] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that would materially impact its financial condition or operations - As of the report date, the company is not involved in any material litigation[276] Item 1A. Risk Factors A new material risk involves non-compliance with Nasdaq's minimum bid price, with a deficiency notice received April 14, 2022, requiring compliance by October 11, 2022, to avoid delisting - On April 14, 2022, the company received a deficiency letter from Nasdaq for failing to maintain a minimum closing bid price of $1.00 for its common stock[279] - The company has until October 11, 2022, to regain compliance with the minimum bid price requirement, or it may face delisting from the Nasdaq Capital Market[280] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[282] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None[283] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[284] Item 5. Other Information No other information is reported for the period - None[285] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including executive agreements, CEO/CFO certifications, and XBRL data files - The exhibits filed with this report are listed, including management certifications and XBRL documents[286][290]