TOMI Environmental Solutions, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with the three months ended March 31, 2020 unless otherwise noted. TOMI sells and services SteraMist disinfection and decontamination products using its ionized hydrogen peroxide technology.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Net revenue | $2.07 million | $7.05 million; down 71% |
| Product revenue | $1.66 million | $6.64 million; down 75% |
| Service and training revenue | $412,000 | $415,000; down 1% |
| Gross profit / margin | $1.24 million / 59.6% | $4.49 million / 63.6% |
| Operating expenses | $2.75 million | $1.83 million; up 50% |
| Operating income (loss) | $(1.51) million | $2.66 million |
| Net income (loss) | $(1.51) million; $(0.09) per share | $2.62 million; $0.17 basic EPS |
| Operating cash flow | $(1.22) million | $3.32 million provided |
Revenue fell across both geographies: U.S. revenue was $1.80 million, down 49%; international revenue was $269,000, down 92%. Management attributed the decline primarily to the unusually high COVID-related demand in early 2020, customer closures and suspended projects, reduced opportunities for demonstrations, and sales-team transition.
Cash and cash equivalents were $3.95 million at March 31, down from $5.20 million at year-end 2020. Working capital was $10.13 million, versus $11.50 million at year-end. Current assets were $12.92 million and current liabilities $2.79 million. Total liabilities were $4.13 million, including a $410,700 PPP loan and $1.02 million of operating lease liabilities. The PPP forgiveness application had been filed and was pending approval at quarter-end. The company reported no cash from financing activities during the quarter.
Material changes and unusual items
- Operating expenses rose by $916,000. General and administrative expense increased 109% to $1.71 million, including a $314,500 charge for repurchasing the CEO’s warrant. Selling expense increased 25% to $474,000, and research and development increased 232% to $196,000.
- The company issued 50,000 shares to directors for services, valued at $228,000. At March 31, 16.81 million common shares were outstanding; approximately 2.1 million potential shares from warrants, options and preferred stock were excluded from diluted loss per share as anti-dilutive.
- Inventory rose to $4.77 million from $3.78 million at December 31, while cash declined. One vendor represented approximately 60% of accounts payable; two vendors represented 64% of quarterly cost of sales.
Outlook, commentary and risks
Management said it expected demand to improve as established customers reopened, with a more positive impact from sales-team expansion anticipated in the second half of 2021. It stated that TOMI currently expected to meet its targeted 2021 annual revenue goals, but did not provide a numerical target. Management anticipated introducing the SteraPak in the second or early third quarter and reported pre-orders and customer interest. It also described development of SteraBox and SteraBot products. These expectations are forward-looking and are not assured.
Management identified COVID-19’s uncertain effects, customer reopening patterns, international travel restrictions, sales-cycle length, new-product adoption, competition from lower-cost alternatives, and execution of the expanded sales effort as risks. The filing also notes that regulatory delays have delayed a proposed 1% hydrogen-peroxide label expansion for food and agricultural uses. Management said existing cash and expected operating resources should cover requirements for the next 12 months, while noting it could seek alternative financing. No material litigation or product-liability claims were reported; management concluded disclosure controls were effective.
Investor verification priorities
- Track whether the stated 2021 revenue goal is achieved and whether the expected second-half recovery materializes, particularly in international and product sales.
- Verify SteraPak launch timing, pre-order conversion, and whether new products generate recurring sales rather than interest alone.
- Monitor operating cash burn, working capital, inventory growth, and cash available to fund planned sales, R&D and capital spending.
- Confirm the outcome and timing of the PPP loan-forgiveness application and assess remaining debt and lease obligations.
- Review the warrant-repurchase charge, related-party governance, director stock compensation, and potential dilution from outstanding securities.
- Assess supplier concentration and receivable exposure, alongside the impact of regulatory delays and changing post-pandemic disinfection demand.