TOMI Environmental Solutions, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual filing, not a standalone fourth-quarter report. TOMI sells and services SteraMist disinfection and decontamination products using its Binary Ionization Technology platform. The company reports one business segment.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $8.34 million | $7.75 million |
| Gross profit / margin | $5.06 million / 60.6% | $4.59 million / 59.2% |
| Operating loss | $(2.88) million | $(4.92) million |
| Net loss | $(2.88) million; $(0.15) per share | $(4.44) million; $(0.25) per share |
| Cash used in operating activities | $(1.23) million | $(3.82) million |
| Cash and cash equivalents at year-end | $3.87 million | $5.32 million |
| Working capital | $8.84 million | $11.08 million |
| Shareholders’ equity | $11.45 million | $13.60 million |
- Fourth-quarter revenue was $2.81 million, up 40% year over year and 60% sequentially. Management described it as the strongest standalone quarter since 2020. The filing does not provide a clear fourth-quarter profit or cash-flow value in the supplied text.
- Annual product revenue rose 11% to $6.86 million; service and training revenue fell 6% to $1.47 million. U.S. revenue declined about 2% to $6.26 million, while international revenue increased 54% to $2.08 million.
- Operating expenses declined 16% to $7.94 million, mainly reflecting lower general and administrative, research and development, and consulting costs. The 2022 total includes $653,000 of equity compensation, versus none reported for 2021. Gross margin improved by 1.5 percentage points, which management attributed to sales mix.
- Year-end current assets were $12.13 million and current liabilities were $3.29 million. The company reported no conventional borrowing debt in the presented balance sheet; operating lease liabilities totaled approximately $861,000, including $100,000 current. The filing says expected operating cash generation should cover requirements over the next 12 months, but this depends on execution and collections.
- Accounts receivable, net, was $2.77 million. The $1.68 million doubtful-account allowance was 38% of gross receivables and was identified by the auditor as a critical audit matter. One customer represented 14% of gross receivables at year-end.
Material changes and unusual items
- Revenue increased 8%, while operating loss improved by about $2.04 million. Net loss narrowed by $1.56 million, although 2021 included a $415,000 gain from forgiveness of a Paycheck Protection Program loan.
- Operating cash use improved by about $2.59 million, partly because customer deposits increased deferred revenue by $694,000. Cash nevertheless declined by $1.45 million during 2022.
- Customer sales orders exceeded $10 million in 2022, up 22% from 2021; this is an order measure, not recognized revenue. Year-end backlog was approximately $2.02 million, with $700,000 in customer deposits. TOMI states backlog is not a reliable predictor of future sales and customer arrangements generally lack minimum-purchase commitments.
- In November 2022, TOMI extended the terms of the CEO’s warrants covering 593,750 shares by ten years, recording approximately $356,000 in incremental equity compensation expense. The company also reported 3.3 million potentially dilutive shares from options, warrants, and convertible preferred stock at year-end; these were excluded from diluted loss per share as anti-dilutive.
Outlook, commentary, and risks
- Management expects continued growth in customized engineered systems (CES), with several orders expected to be delivered and recognized as revenue in 2023. It said two systems under manufacture could generate approximately $250,000 in annual BIT solution revenue starting near year-end 2023. These are expectations, not guaranteed results.
- Management cited greater CES and mobile-equipment demand, especially in life sciences, commercial, and food safety, and plans to expand sales channels, product offerings, registrations, and international distribution. It also said COVID-related demand has subsided, contributing to lower demand in the broader disinfection market.
- Key risks include the company’s continued losses and accumulated deficit of $46.4 million; dependence on the SteraMist product family; lack of long-term customer contracts; competition; international, regulatory, and intellectual-property risks; reliance on third-party manufacturers and suppliers; and supply-chain delays. The filing says some supply delays and shortages could continue in 2023.
- Nasdaq notified TOMI in October 2022 that its share price had fallen below the $1 minimum bid-price requirement. The initial compliance deadline was April 5, 2023; failure to regain compliance could lead to delisting. The company’s March 7, 2023 reported share price was $0.64.
- Management stated disclosure controls were effective, but also stated internal control over financial reporting was not effective at year-end because of a material weakness, while later saying the previously disclosed weakness had been remediated by December 31, 2022. This is an apparent inconsistency in the filing. The independent auditor issued an unqualified opinion on the financial statements but did not attest to internal control effectiveness.
- No material legal proceedings were reported. The auditor highlighted the estimation of doubtful accounts and inventory obsolescence as critical audit matters.
Most important facts for investors to verify
- Whether the $2.02 million backlog converts to revenue and cash on the expected schedule, and whether customer deposits adequately fund CES production.
- Receivable aging, subsequent collections, and support for the $1.68 million allowance, given its size relative to gross receivables.
- Whether operating cash burn continues to narrow and liquidity remains adequate without new financing.
- The status of Nasdaq listing compliance and any resulting effects on liquidity or access to capital.
- Clarification of management’s conflicting statements about whether internal controls were effective at December 31, 2022.
- Potential dilution from outstanding equity awards and warrants, including the extended CEO warrants.