10-Q: TOMI Environmental Solutions Reports 42% Revenue Increase in Q1 2025, Driven by Strong Demand for SteraMist Products and Services

TOMI Environmental Solutions saw a 42% increase in revenue for Q1 2025, fueled by rising demand for its SteraMist solutions and related services.

Summary

• TOMI Environmental Solutions reported a 42% increase in revenue for the three months ended March 31, 2025, reaching $1,577,000 compared to $1,114,000 in the same period last year.
• The revenue growth was attributed to increased demand for SteraMist BIT solution, mobile, handheld point and spray product lines, the SteraMist Integrated System (SIS) product offering, scope adjustments to align with client needs and project dynamics on currently installed Custom Engineered Systems (CESs) among deliverables to new projects, and diversified iHP service sales.
• Product-based revenue increased by 35% due to improved recurring SteraMist BIT solution sales and increased demand for mobile and CES equipment.
• Service-based revenue increased by 56% to $577,000 due to increased demand for iHP services and expanded service offerings.
• Domestic revenue increased by 80% to $1,192,000 due to higher demand for solution, mobile equipment, CES and iHP service sales.
• Gross profit margin remained consistent at 60.4% compared to 60.2% in the prior year.
• Operating expenses decreased by 10% due to lower selling and general and administrative expenses.
• The company's net loss was $(255,593) compared to $(1,310,190) for the same period last year.
• Basic and diluted net loss per share was $(0.01) compared to $(0.07) for the same period last year.
• The company's total recognized revenue and backlog for the three months ended March 31, 2025 amounted to $2,802,000, consisting of approximately $1,577,000 in recognized revenue and a sales backlog of approximately $1,225,000 at the end of March 2025.

Sentiment

Score: 7

Explanation: The document presents a mixed sentiment. While there's significant revenue growth and improved financial performance compared to the previous year, the company still faces challenges such as a net loss, accumulated deficit, and a material weakness in internal control. The positive developments are tempered by the ongoing need for financial stability and improved internal controls.

Positives

• Revenue increased by 42% in Q1 2025, indicating strong demand for the company's products and services.
• Gross profit margin remained consistent at 60.4%, demonstrating efficient cost management.
• Operating expenses decreased by 10%, contributing to improved financial performance.
• The company secured new contracts and partnerships, expanding its market reach and product offerings.
• The company's expansion into the aerospace sector with NASA and aquaculture with Algafeed demonstrates the versatility of its technology.
• The company received $534,912 in employee retention credits and $81,887 related interest, boosting other income and interest income, respectively.

Negatives

• The company reported a net loss of $(255,593) for the quarter, although this is a significant improvement compared to the previous year.
• The company has an accumulated deficit of $54.6 million.
• The company's auditors identified a material weakness in internal control over financial reporting.
• The company's international revenue decreased by 15% due to the timing of orders placed by international customers.

Risks

• The company's ability to continue as a going concern is subject to substantial doubt.
• The company's revenues can fluctuate due to various factors, including the length of the sales cycle and the timing of orders from distributors.
• The company's success depends on its ability to expand its sales force, develop new products, and source lower-cost suppliers.
• The company's operations could be affected by additional factors that are not presently known or by factors that are currently considered immaterial.
• The company's auditors identified a material weakness in internal control over financial reporting.

Future Outlook

The company expects to generate more predictable sales quarter over quarter as customers mature through the product and adoption cycle and the sales pipeline converts to revenue. The company also expects its business opportunities and customer base to continue to expand and grow, which may provide additional liquidity to fund operations.

Management Comments

• The first quarter 2025 delivered improved financial results as we grew quarter-over-quarter revenue by 42% and continue to see positive trends in the market with demand for our product lines and recurring solution sales.

Industry Context

The report highlights TOMI's efforts to address the growing demand for disinfection and decontamination solutions in various industries, including life sciences, food safety, and healthcare. The company's focus on environmentally friendly solutions aligns with increasing customer awareness and regulatory emphasis on sustainability.

Comparison to Industry Standards

• The report does not provide specific comparisons to industry standards or competitors.
• However, it mentions that TOMI's SteraMist technology outperformed key hydrogen peroxide competitors in securing a contract with a leading university in Rhode Island.
• The company's OEM partnership with PBSC, a premier manufacturer specializing in high containment and cleanroom solutions, suggests a focus on integrating its technology with industry-leading equipment.

Management Changes

Legal Proceedings

• The company may become a party to litigation in the normal course of business.
• In the opinion of management, there are no legal matters involving the company that would have a material adverse effect upon its financial condition, results of operations or cash flows.

Stakeholder Impact

• Shareholders: The increased revenue and improved financial performance are positive signs, but the net loss and material weakness in internal control remain concerns.
• Employees: A healthy and safe work environment promotes employee well-being and productivity.
• Customers: Providing a clean and hygienic environment is essential for delivering a positive customer experience.
• Creditors: The company's ability to repay its debts depends on its ability to generate revenue and manage its expenses.

Next Steps

• The company plans to expand the resources within the finance and accounting departments with personnel who possess sufficient knowledge and experience in applying U.S. GAAP.
• The company will design and implement additional policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions.
• The company will continue to recruit and train personnel with appropriate internal controls, accounting knowledge and experience commensurate with our accounting and reporting requirements, in addition to engaging and utilizing third party consultants and specialists.

Key Dates

Keywords

SteraMist, decontamination, disinfection, revenue, iHP, BIT, CES, SIS, EPA, NASA, PBSC, aerospace, aquaculture, financial results, Q1 2025