10-Q: Tomi Environmental Solutions Reports Q2 2026 Results, Merger Progress

Tomi Environmental Solutions announced a significant revenue increase in Q2 2026, driven by product sales, while also detailing progress on its merger with Carbonium Core, Inc. and addressing ongoing financial challenges.

Summary

• Tomi Environmental Solutions reported a substantial increase in revenue for the second quarter of 2026, reaching $2.25 million, a 118% rise year-over-year and a 36% sequential increase.
• The company's net loss for the six months ended June 30, 2026, was $1.19 million, an improvement from $1.49 million in the prior year period.
• A significant development is the pending merger with Carbonium Core, Inc., aimed at diversifying the business and improving liquidity, with a target closing in Q3 2026.
• The company continues to face substantial doubt regarding its ability to continue as a going concern, citing net losses and a limited cash balance.
• Tomi is undergoing a Nasdaq delisting proceeding due to failing to meet bid price and minimum equity requirements, with a hearing decision pending.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as cautiously negative due to persistent net losses, a going concern warning, and ongoing Nasdaq delisting proceedings, despite revenue growth and strategic merger plans.

Positives

• Revenue for Q2 2026 increased by 118% to $2.25 million compared to Q2 2025.
• Revenue for the six months ended June 30, 2026, increased by 50% to $3.90 million compared to the prior year period.
• Gross margin improved to 61.7% in Q2 2026, though down from 65.7% in Q2 2025, with expectations of recovery through recurring sales.
• Operating expenses decreased by 10% ($180,000) in Q2 2026 compared to the prior year period, reflecting cost management.
• The company secured a $440,000 annual purchase order for decontamination services.
• The sales pipeline is robust, totaling approximately $35 million, with $8.6 million in advanced-stage opportunities.
• A new unconditional registration for AgriMist was granted by the EPA, expanding food safety applications.
• The company is pursuing strategic diversification through a merger with Carbonium Core, Inc., which is expected to improve liquidity.

Negatives

• The company reported a net loss of $382,299 for Q2 2026 and $1,192,945 for the six months ended June 30, 2026.
• Substantial doubt exists about the company's ability to continue as a going concern within one year.
• The company is subject to a Nasdaq delisting proceeding and is awaiting a decision from a Hearings Panel.
• Gross margin decreased to 61.7% in Q2 2026 from 65.7% in Q2 2025, attributed to strategic price discounts.
• The merger with Carbonium Core, Inc. is contingent on a $10 million financing transaction, which may not be completed.
• Customer concentration remains a risk, with two customers accounting for 29% of gross accounts receivable as of June 30, 2026.
• The company has a material weakness in internal control over financial reporting due to limited resources and expertise in its finance and accounting departments.

Risks

• Potential delisting from The Nasdaq Capital Market could materially impact liquidity and shareholder ability to trade shares.
• Failure to complete the merger with Carbonium Core, Inc. could adversely affect business, financial results, and stock price.
• The company's ability to continue as a going concern is uncertain, raising doubts about its long-term viability.
• Reliance on a limited number of vendors for critical components poses a risk to supply chain continuity.
• Customer concentration presents a risk, as the loss of or significant reduction in purchases from key customers could materially impact revenue.
• The company may not be able to secure necessary financing for the proposed merger, which is a condition to closing.
• Restrictions imposed by the merger agreement could prevent the company from taking advantageous business actions.
• The company's ability to regain compliance with Nasdaq listing standards, particularly the minimum bid price and equity requirements, is uncertain.

Future Outlook

The company reaffirmed its expectation to achieve revenue of at least $12 million for fiscal 2026 and reported a $35 million sales pipeline with approximately $8.6 million in advanced stages. The merger with Carbonium Core, Inc. is expected to materially improve liquidity and the ability to fund operations, with a target closing in the third quarter of 2026, subject to financing and shareholder approvals.

Management Comments

• The second quarter of 2026 delivered improved financial results, with revenue of approximately $2.25 million reflecting a 118% increase over the second quarter of 2025 and a 36% sequential increase over the first quarter of 2026.
• Growth was primarily driven by increased equipment, CES-related sales, and commercial service provider customers, partially offset by lower service revenue reflecting project completion timing.
• Gross margin increased to 61.7% during the three months ended June 30, 2026, compared to 50% in the prior quarter and 65.7% in Q2 2025.
• Operating expenses decreased $180,000 or 10%, to $1.63 million compared to $1.81 million in the second quarter of 2025, reflecting disciplined cost management across selling, professional, and general and administrative costs.
• If consummated, management believes the Merger, together with the associated Financing Transaction, would materially improve the Companys liquidity position and its ability to fund operations.

Industry Context

StockSavvy.ai notes that Tomi Environmental Solutions operates in the growing disinfection and decontamination market, which has seen increased demand due to heightened awareness of health and safety protocols. The company's focus on patented Binary Ionization Technology (BIT) and its expansion into new applications like medical device decontamination and advanced materials through the Carbonium merger reflect strategic moves to capture market share and diversify revenue streams.

Comparison to Industry Standards

• The company's revenue growth of 118% year-over-year in Q2 2026 is strong, but its gross margin of 61.7% is slightly below the 65.7% reported in Q2 2025, indicating potential pricing pressures or shifts in product mix compared to industry benchmarks.
• The persistent net losses and going concern warning are significant concerns when compared to more established players in the environmental solutions or advanced materials sectors, many of whom maintain consistent profitability.
• The company's efforts to secure new EPA registrations and international approvals for its AgriMist product align with industry trends of expanding product applications and market reach.
• The pending merger with Carbonium Core, Inc. suggests a strategic effort to diversify into the advanced materials sector, particularly nuclear-grade graphite, which is a distinct but potentially high-growth industry with different competitive dynamics and capital requirements than the disinfection sector.

Management Changes

Legal Proceedings

• The company is not currently a party to any legal proceedings that would have a material adverse effect on its financial condition, results of operations, or cash flows.

Stakeholder Impact

• Shareholders may face reduced liquidity and potential share price impact if the company is delisted from Nasdaq.
• The pending merger with Carbonium Core, Inc. could significantly alter the company's business focus and ownership structure.
• Creditors and noteholders face ongoing risk due to the company's going concern status and convertible debt obligations.
• Employees may experience uncertainty regarding job security and company stability due to the going concern issues and potential merger.

Next Steps

• Await decision from the Nasdaq Hearings Panel regarding the delisting appeal.
• Complete the merger with Carbonium Core, Inc., subject to financing and shareholder approvals.
• Continue to manage costs while focusing on revenue growth from the existing pipeline.
• Pursue further international regulatory approvals and certifications for SteraMist and AgriMist.
• Explore additional financing opportunities with the assistance of Bancroft Capital.
• Implement remediation actions for material weaknesses in internal controls over financial reporting.

Key Dates

Recommendation

The company exhibits significant financial distress, including persistent net losses, a going concern warning, and Nasdaq delisting proceedings. While revenue is growing and a strategic merger is planned, the immediate risks associated with financial instability and regulatory compliance outweigh the potential benefits of the merger in the short to medium term. The amendment to the convertible note conversion price to $1.50 (from $3.75) also indicates potential dilution and financial pressure. Therefore, a sell recommendation is warranted until these critical issues are resolved.

Keywords

disinfection solutions, decontamination, hydrogen peroxide, SteraMist, biosecurity, merger, going concern, Nasdaq delisting