TOMI Environmental Solutions, Inc. — Q1 2023 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited U.S. GAAP results; comparisons are with Q1 2022. TOMI sells and services SteraMist disinfection and decontamination products, including equipment, consumables, and services.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Net revenue | $1.582 million | $2.309 million; down 31% |
| Gross profit / margin | $941,000 / 59.5% | $1.421 million / 61.5% |
| Operating expenses | $2.129 million | $2.081 million |
| Operating loss | $1.188 million | $660,000 |
| Net loss / loss per share | $1.187 million / $0.06 | $659,000 / $0.03 |
| Operating cash flow | $(1.363) million | $27,000 provided |
| Investing cash flow | $(34,000) | $(14,000) |
| Cash and cash equivalents | $2.469 million at March 31 | $3.867 million at December 31, 2022 |
| Working capital | $7.870 million | $8.844 million at December 31, 2022 |
| Liabilities | $3.266 million total; includes $837,000 operating lease liabilities | No conventional borrowing balance is disclosed |
Product revenue was $1.276 million, down 32%; service and training revenue was $306,000, down 28%. U.S. revenue declined 40% to $1.128 million, while international revenue increased 6% to $454,000. Two customers represented 26% of Q1 revenue. One vendor represented approximately 45% of accounts payable at quarter-end.
Material changes and operating developments
- Revenue fell primarily due to lower mobile equipment sales and customer delivery restrictions affecting equipment and Custom Engineered Systems (CES) orders and revenue recognition. Service revenue also declined because of the timing of engagements.
- Gross margin narrowed by 2.0 percentage points, which management attributed to product mix. Operating expenses increased about $49,000; higher selling and R&D costs were partly offset by lower professional fees.
- Management reported approximately $1.547 million of customer sales backlog at March 31, alongside $1.582 million of recognized revenue. The company reported $618,000 of deposits/deferred revenue associated with future orders.
- The company added distributors and representatives, reported delivery of a CES system, and described new customer and channel opportunities. These are business developments, not reported revenue or guaranteed future sales.
Outlook, risks, and unusual items
- No specific quantified revenue or earnings guidance is provided. Management expects CES bids and installations, new products, expanded sales channels, and recurring solution sales to support growth in 2023 and beyond.
- Management says existing cash and expected operating cash flows should be sufficient for operations, working capital, and capital expenditures over the next 12 months. This assessment should be considered alongside the $1.363 million quarterly operating cash outflow, continuing losses, and lower cash balance.
- Management identifies fluctuating demand, sales-cycle and order timing, post-pandemic changes in disinfection spending, growth-related costs, and the availability and terms of future financing as risks. Additional equity financing could dilute shareholders.
- Deferred tax assets remain fully reserved; the Q1 income-tax provision was zero. The company reported no material litigation and no material change to previously disclosed risk factors.
- Stock-based compensation was $159,000, and 60,000 common shares were issued for director services. Approximately 3.4 million potential shares from options, warrants, and preferred stock were excluded from diluted loss per share as anti-dilutive.
Important facts for investors to verify
- Reconcile the common-share counts: the balance sheet lists 19,763,955 shares at March 31, while the equity statement lists 19,823,956; the cover page reports 19,823,955 shares outstanding as of May 8, 2023.
- Track backlog conversion, delivery restrictions, customer deposits, and the timing of revenue recognition, particularly for CES orders.
- Assess whether operating cash burn improves and whether management’s 12-month liquidity expectation remains supportable if losses or working-capital demands persist.
- Monitor customer and supplier concentration, the collectability of receivables, and the reported $1.678 million allowance for doubtful accounts.
- Evaluate execution of the CES pipeline and new distribution relationships against actual sales, margins, and recurring solution revenue.