Overview
TOMI Environmental Solutions, Inc.
(“TOMI”, “we” and “our”) is a
global bacteria decontamination and infectious disease control
company, providing environmental solutions for indoor surface
decontamination through the manufacturing, sales, service and
licensing of our SteraMist®
brand of products, including
SteraMist®
BIT™,
a low percentage (7.8%) hydrogen peroxide-based fog or mist that
uses Binary Ionization Technology (BIT™).
SteraMist®
is a patented technology that produces
ionized Hydrogen Peroxide (iHP™)
using cold plasma science created under a grant by
the United
States Defense Advanced Research Projects Agency
(DARPA). Our EPA registered
BIT™
Solution is composed of a low
concentration of hydrogen peroxide converted to
iHP™
after passing the trade secret blended
solution, including its sole active ingredient of 7.8% hydrogen
peroxide, through an atmospheric cold plasma arc. The newly formed
iHP™
fog and mist consists of submicron to
3-micron radical particles that are carried throughout the
treatment area in a fog or mist moving with the same velocity and
characteristics of a gas. This allows the ionized hydrogen peroxide
fog or mist to affect all surfaces and air space throughout the
targeted treatment area, over, above and beyond the ability of
manual cleaning processes. iHP™
damages pathogenic organisms through
the oxidation of proteins, carbohydrates, and
lipids. SteraMist®
no-touch disinfection and or
decontamination treat areas mechanically, causing cellular
disruptions and/or dysfunctions resulting in a 6-log (99.9999%) and
greater kill or inactivation of all pathogens in the treatment
area.
Under the Federal Insecticide, Fungicide, and
Rodenticide Act (“FIFRA”), we were required to
register with the EPA and certain state regulatory authorities as a
seller of disinfectants. In June 2015, SteraMist®
BIT™
was registered with the EPA as a
hospital-healthcare disinfectant and general broad-spectrum surface
disinfectant for use as a misting/fogging agent.
SteraMist®
BIT™
now holds EPA registrations (#
90150-2) for mold control, and air and surface remediation (#
90150-1). In February 2016, we expanded our label with the EPA to
include Clostridium difficile spores and MRSA, as well as the
influenza virus h1n1, which
we believe has better positioned us to
penetrate all industries including the biodefense and healthcare
industry. In August 2017, our EPA label was further expanded to
include efficacy against Salmonella and Norovirus. As of January
27, 2017, our technology is one of 53 of the EPA’s
“Registered Antimicrobial Products Effective against
Clostridium difficile Spores”, as published on the EPA’s K
List. Further, in December 2017, SteraMist®
was included in the EPA’s list G
(Norovirus), L (Ebola) and M (Avian Flu). In March 2020, our EPA
label was further amended to include Emerging Viral Pathogens
claims, thus meeting the criteria against Enveloped viruses and
Large Non-enveloped viruses and included on List N (Emerging Viral
Pathogens including SARS-CoV-2).
SteraMist®
Binary Ionization Technology®
allows a facility to have a mechanical method of cleaning using a
Hospital-HealthCare disinfectant which is an EPA registered tool
and solution to replace flawed manual cleaning technology, upgrade
existing protocols, and limit liability in a facility when it comes
to resistant infectious pathogens. SteraMist®
BIT™
is the first EPA registered solution
and system combination on the market. We maintain this
registration in 50 states, Canada, and approximately thirty-five
(35) other countries.
Our Technology
BIT™
was developed in response to
Amerithrax, the weaponized anthrax spore attacks that occurred in
Washington, D.C. shortly after the September 11, 2001 U.S.
terrorist attacks. BIT™
is a patented process that aerosolizes
and activates a low concentration hydrogen peroxide solution,
producing a fine aqueous mist (0.3-3 um in diameter) that contains
a high concentration of Reactive Oxidative Species
(“ROS”), mostly hydroxyl radicals (“OH”).
ROS cause damage to pathogenic and resistant organisms, such as
bacteria, bacteria spores, viruses, mold spores, other fungi and
yeast, via oxidation of proteins carbohydrates, lipids and
rendering the building blocks of nature’s amino acids, DNA
and RNA inactive - leading to cellular death, disruption and/or
dysfunction.
Testing detailed by the Defense Advanced Research
Projects Agency (DARPA) of the U.S. Department of Defense
demonstrated these hydroxyl radicals aggressively break the double
bonds and other bonds in bacterial spores, biological and chemical
warfare agents and neutralize their threat while producing nontoxic
by-products. The unique alteration of the chemistry of our solution
occurs after our EPA-registered solution passes through an
atmospheric cold plasma arc, which causes the breaking of the
double bond of a hydrogen peroxide molecule, the net result -
our
.OH hydroxyl radical. This
hydroxyl radical is known as iHP™.
This patented process allows these hydroxyl radicals to exist in
high concentrations without rapidly recombining and losing their
reactivity, while seeking to attach with any and all surfaces
within the proximity of TOMI’s
mist.
The sole active ingredient of
BIT™
is a low percentage (7.8%) Hydrogen
Peroxide and is represented by the TOMI™
SteraMist®
brand of products. Our technology
produces a germ-killing aerosol that moves throughout a space like
a gas. Our technology is able to efficiently and effectively kill
pathogenic and resistant organisms in the air and on the surfaces
without damaging delicate equipment or computers, and the only
by-product is oxygen and water in the form of
humidity.
Each and every SteraMist®
product utilizes the innovative and
easy-to-use power of Binary Ionization Technology which is
designed to be easily incorporated
into any industry’s current cleaning procedures. No wipe, no
rinse, no residue, non-corrosive, high level efficacy, quick
turnaround time, superior material compatibility (spray direct on
sensitive equipment), and a submicron particle allows the mist/fog
to reach every area being treated regardless of what is in the
space.
SteraMist®
is being used throughout the world and
has been demonstrated to reduce certain problem organisms, such as
bacterial spores, Vancomycin-resistant Enterococcus
(“VRE”), Clostridium difficile, Middle East Respiratory Syndrome
(“MERS”), Ebola (“Ebola”) and SARS CoV-2
the virus that causes COVID. In U.S. hospitals where
SteraMist®
is being used for terminal cleaning,
evidence has demonstrated a reduction of Clostridium
difficile
spore rates.
SteraMist®
has reduced outbreaks of nosocomial
MDRO’s (Klebsiella pneumoniae,
AB, pseudomonas aeruginosa) at large hospital to small clinics and has
contributed to the control of MERS, Ebola and COVID throughout the
world.
Although
a technology developed to combat the hardest to kill pathogens and
neutralize the most difficult chemical agents, TOMI’s
customer base fought at the front lines of combating the current
pandemic of Coronavirus or SARS CoV-2 in 2020.
Our technology passed a sanctioned test showing
six-log reduction against Geobacillus stearothermophilus.
Geobacillus stearothermophilus
is the laboratory testing gold
standard and is commonly used as a challenge organism for
sterilization validation studies and periodic check of
sterilization cycles. BIT™
has also been shown to effectively
decontaminate weaponized biological agents, including weaponized
anthrax, chemical agents such as VX (an extremely toxic
organophosphate) and sulfur mustard (otherwise known as mustard
gas) when applied using properly developed international
protocols.
All our SteraMist® products
are fully validated to comply with good manufacturing practice
standards, have received Conformité Européene
(“CE”) marks in the European Economic
Area (“EEA”) and
are approved by Underwriters Laboratory (“UL”). Our
solution is manufactured at an EPA-registered solution blender and
our product performance is supported by good laboratory practice
efficacy data for Staphylococcus aureus, Pseudomonas aeruginosa, Salmonella, Norovirus, SARS CoV-2, mold spores,
MRSA, h1n1, Geobacillus stearothermophilus
and Clostridium difficile spores.
Our Products and Services
SteraMist®
Surface
Unit
Our SteraMist®
Surface Unit is a fully portable,
handheld, point and spray disinfection/decontamination system
intended to provide quick turnover of any affected space. The
single applicator unit enables disinfection of all surfaces,
including high touch, sensitive equipment and electronics. An
application time of only five seconds per square foot with no wet
contact time allows for safe re-entering of the space within
minutes after application.
Our SteraMist®
Surface Unit is lightweight, easy to
transport and capable of achieving reliable
disinfection/decontamination results, as it is easily incorporated
into existing cleaning procedures and protocols. The
SteraMist®
Surface Unit does not require heating,
ventilation or air conditioning systems to be shut down. Further,
its touchless application (no wipe, no rinse) reduces risk of
cross-contamination between treated surfaces.
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SteraMist®
Environment
System
Our SteraMist®
Environment System is a transportable,
remotely controlled system that provides complete room
disinfection/decontamination of a sealed space up to 103.8
m3
(3,663 ft3)
in just under 45 minutes (application and dwell time).
Individually, each remote applicator can be used to treat a space
of approximately 34.6 m3
(1,221 ft3).
Injection times are based on individual room size and number of
applicators. Multiple systems can be used simultaneously to
accommodate larger or multiple spaces with fast application and
minimal down time. Our hybrid technology applicators can be used in
both manual and/or fogging modes.
Our SteraMist®
Environment System features additional
programmable and printable features in PDF format. Other key
features include lot # of BIT™
Solution, location identifier,
injection/dwell/aeration times, and error notifications. These
features are required for many Life Science
facilities.
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The
SteraMist®
Total
Disinfection Cart
The Total Disinfection Cart was designed by
request of multiple public healthcare facilities EVS (Environmental
Service) teams using our equipment for the SHIELD study that TOMI
is participating in. The cart houses our Surface Unit, a portable
H2O2
monitor, Carbon Air Scrubber,
Respiratory Protection System with positive pressure air flow,
storage hooks, and a sign notifying the room is being treated.
Included with the Cart is a custom ICU 55-minute terminal cleaning
protocol.
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SteraMist®
Select
Surface Unit
Our Select Unit was designed to meet the needs of
our customers who have smaller enclosures in need of
decontamination. This unit is lightweight and easy to transport
with the added ability to function between a lower flow operation
and standard operation, such as the SteraMist®
Surface Unit. The user can adjust air
flow, adjust pump fluid flow, set the programmable timer for
automatic runs, modify spray/dwell times and number of cycles, and
is equipped with start and stop buttons. It is ideal for the
decontamination of Laminar flow cabinets, Biosafety cabinets,
Isolators and other small and medium size laboratory and research
equipment.
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Stainless Steel 90 Degree Applicator
TOMI’s
standard applicator was converted to a 90 degree and manufactured
using 316 stainless steel, the ideal applicator to accompany the
Select Surface Unit, affording many 90-degree build-in
opportunities. This applicator is purchased with a flange for ease
of installation either permanently or
semi-permanently.
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iHP™
Plasma
Decontamination Chamber
Our patented cold plasma technology can be
integrated with a chamber or cage washer by leading manufacturers.
Current examples are Lynx, BetterBuilt and Allentown. Our custom
generator/chamber is built into a stainless-steel single door panel
and is permanently mounted next to the chamber or washer, while a
SteraMist®
Applicator or 90 Degree Applicator is
permanently or semi-permanently mounted in the enclosure. This
SteraMist®
product line includes but is not
limited to an internally mounted air compressor, regulator for air
pressure adjustment, E-stop button, lever power switch, data
logging functions, and multiple dry contract outputs determined by
the needs of the customer.
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SteraMist®
Custom
Engineered System (CES)
The SteraMist®
permanent installation is perfect for
any room that requires routine automated disinfection
decontamination. The CES is an automated system that is plumbed
utilizing the facilities’ existing HVAC system. This involves
permanently installing SteraMist®
applicators within the designated
space to achieve maximum results. The generator and Programmable
Logic Control (“PLC)” are housed in a National
Electrical Manufacturers Association (“NEMA)” enclosure in a central remote
location. The entire system can be developed for multiple rooms and
various specifications, controlled remotely through the NEMA
interface. The status of the decontamination cycle is monitored
with indicators and can be integrated into a Supervisory Control
and Data Acquisition (“SCADA)” monitoring board. The
system is now available with a scale to measure the use of BIT
Solution for a customer’s ease of reordering our consumable
and comes in a variety of drum sizes. In addition, this product
includes a new upgrade of 90-degree rotating applicators providing
even faster equal dispersion of the iHP™
fog.
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iHP™
Corporate
Service Decontamination
TOMI
offers full room, equipment, facility, and emergency disinfection
and decontamination services. Our goal is to give our customers
quality control by reducing bioburden and eliminate the potential
for costly microbial contamination in the Life Sciences and Food
Safety industries. Single and routine services are provided to TOMI
customers to coincide with maintenance, mandatory facility
shutdowns, or to control a specific threat.
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Industries & Market Segments
All
the above product offerings help our customers create a healthier
world by providing them a significant opportunity to help reduce
the spread of Community Associated Infections
(“CAI’s”) and Healthcare-Acquired Infections
(“HAI’s”) and the most lethal of pathogens
including our recent SARS CoV-2 pandemic and future
pandemics.
SteraMist®
and TOMI’s related service
platforms are currently being used in a broad spectrum of
industries and has the ability to fit into any cleaning protocol.
We have categorized these industries into five (5) divisions:
Hospital-HealthCare, Life Sciences, TOMI Service Network (TSN),
Food Safety, and our Commercial division.
Hospital-HealthCare.
Our SteraMist®
Surface Unit and
SteraMist®
Total Disinfection Cart are solutions
to aid our Hospital-HealthCare customers in providing the quality
of care and safety they provide to their patients by disinfecting
patient and operating rooms, pharmacies, ambulances, and emergency
environments in a hospital or healthcare facility. Our team of
technicians and representatives train, maintain, and troubleshoot
capital equipment throughout the world for our Hospital-HealthCare
customers.
We continue to penetrate the hospital-healthcare
market segment, and under the United States Patient Protection and
Affordable Care Act’s (also known as the Affordable Care Act
or ACA) Hospital Readmissions Reduction Program, hospitals that
have high rates of infections and HAIs are facing significant
financial penalties. Our SteraMist®
BIT™
technology has proven to reduce the
transference spread of infections leading to an overall reduction
in the number of patients being infected as a result of the
historic poor manual cleaning of these patient rooms, infectious
disease rooms and operatory suites, with a corresponding return on
investment to the hospital of up to 20-to-1 in the first
year.
Life
Sciences. Our
SteraMist®
line of products is a decontamination
solution to use sites in this industry, specifically pharmaceutical
(compounding and manufacturing), vivariums, research universities,
BSLs (biological safety labs) 1, 2, 3 and 4 level, BSC’s
(biological safety chambers), isolators, cage washers, and
cleanrooms. With proper implementation of
SteraMist®,
all facilities can reduce the risk of infectious as well as
potentially infectious agents and/or materials, which facilities
such as these handle on a routine basis.
There are many requirements and restrictions on
the type of decontamination agents our Life Sciences customers may
use to prevent these risks and remediate adverse incidents. In
light of these regulations, our rapid deployment of our effective
iHP™
aerosolized mist is the solution to
lower risks, reduce damage to expensive laboratory equipment and
furniture, eliminate other labor intense procedures, and perform
decontamination clean-up in these spaces quickly, less caustically,
requiring no wipe and with no residue. By using iHP technology
these most important facilities are able to perform more
experiments a year due to the effective quick treatment that iHP
offers.
Our team of technicians and representatives train,
maintain, and troubleshoot capital equipment globally for our Life
Sciences customers. Further, our iHP™
Corporate Service decontamination team
provides routine and emergency treatment. TOMI’s
iHP™
service team also does commissioning
and decommissioning of facilities equipment or full complete space
decontamination for new and existing customers.
The TOMI
Service Network. The TSN, has
allowed us to enhance our corporate service division by creating a
multi-nation-wide network composed of existing, full-service
specialists. Since the launch of TSN, we have added two hundred
(200) service partner companies across the United States and
Canada. These are professional first responders that specialize
within the mold remediation, hurricane and tornado response and
other mitigation fields, biohazard specialists including forensic
restoration specialists.
These professional servicing specialists (TSN partners) focus their
businesses in the commercial and residential space. Our team of
customer experience managers and our training department maintains
and troubleshoots capital equipment for these individuals with the
goal of implementing servicing procedures and protocols throughout
the United States and Canada for our TSN network partners. Members
are provided access to 24/7 support in marketing their iHP service
divisions and landing webpage connected to
tomimist.com.
Food Safety
Industry. SteraMist®
aerosolizing cold plasma technology is
an effective decontaminant in the food safety industry. According
to the CDC, 80 million people per year in the United States
contract, and 5,000 people die from, food poisoning or other
food-related illnesses. Current food safety cleaning techniques
involve time intensive processes, which can reduce food
manufacturers’ profit. Our iHP™
degrades into only harmless water
(humidity) and oxygen. We have applied for approval from the United
States Food and Drug Administration (the “FDA”) and the
United States Department of Agriculture (the “USDA”),
when approved we anticipate that our solution can be applied
directly to all foods. Currently we use
SteraMist®
on food packing, processing and
storage equipment as SteraMist®
is safe for use on electronics and
kitchenware, along with high touch surfaces where most pathogens
are found (such as phones, computers and kitchen
appliances). We believe that SteraMist®
could be useful for decontamination at
all phases of food production, from the
farm, slaughterhouse, packaging and canning facilities,
food storage locations to the transportation of food and to the
restaurants and grocery stores.
Commercial.
TOMI commercial division addresses the
viral pathogens threat to everyday operations. We bring powerful
disinfection and decontamination to a wide array of industries with
computability in endless use sites, from large-scale land, sea, and
air transportation to county and state emergency facilities to
retail and educational facilities. Our commercial customers have
the goal to keep employees and first responders healthy while
maintaining operations.
Homeland defense and border protection is a
subspecialty of our commercial division.
Countries around the world, including
the United States, need to protect their borders and cities against
a potential terrorist attack. Our SteraMist®
line of products will give
governmental bodies an added tool in their arsenal to mitigate the
risk of a weaponized biological and chemical attack. In addition,
SteraMist®
could assist in mitigating the spread
of emerging pandemic viruses, including strains of Ebola, MERS,
MLAV (filovirus), and influenza virus subtypes like h1n1, h5n1,
h7n9 and h10n8. Our SteraMist®
line of products may assist border
patrol agents in controlling the spread of infectious disease
introduced by foreign individuals by decontaminating interview
rooms, containment rooms, holding cells and quarantine areas after
a potential infected carrier’s condition either improves or
the carrier dies.
INFORMATION WITH RESPECT TO OUR BUSINESS IN GENERAL
Manufacturing
We outsource the manufacturing and blending of our
SteraMist®
line of equipment and
BIT™
Solution. Our
SteraMist®
equipment is manufactured by two (2)
ISO9001 registered companies with facilities in Pennsylvania, New
York, New Jersey, and Australia.
Our
solution is blended by an EPA approved blender; our blend includes
one (1) active ingredient, 7.8% Hydrogen Peroxide.
TOMI maintains sole source distribution of all the
SteraMist®
product lines, including our
BIT™
Solution. Neither our manufacturer or
chemical blender may make modifications to the manufacturing or
blending of our products without our request or consent in written
format. TOMI maintains all creative control throughout the design
and manufacturing process, which includes research &
development through final product fabrication.
Intellectual Property
Our
success depends in part upon our ability to obtain and maintain
proprietary protection for our products and technologies. We
protect our technology and products by, among other means,
obtaining United States and foreign patents. There can be no
assurance, however, that any patent will provide adequate
protection for the technology, system, product, service or process
it covers. In addition, the process of obtaining and protecting
patents can be long and expensive. We also rely upon trade secrets,
technical know-how, and continuing technological innovation to
develop and maintain our competitive position.
As part of our intellectual property protection
strategy, we have registered our BIT™
solution with the Environmental
Protection Agency (“EPA”), all fifty (50) states in the
United States, and multiple countries worldwide. We have received
Conformité Européene (“CE”) marks in the
European Economic Area (“EEA”) and are approved by
Underwriters Laboratory (“UL”).
Our
portfolio includes more than twenty (20) Utility
Patent applications worldwide for both method and
system claims on SteraMist® BIT™,
either published or undergoing prosecution. Most
recently, in November 2020, we were granted utility
patents in Australia and Israel for our
SteraMist® BIT™ technology. In
the recent past, we have obtained two related United States utility
patents giving us protection of our technology until the year 2038,
and we are pursuing further claims to additional capabilities in
on-going United States and worldwide patent applications. In
May 2020, we filed a PCT application for further additional
applications of SteraMist® BIT™ which
were determined to be novel and inventive by the international
search authority.
Further
in 2020, we submitted utility patents in multiple
countries which are all in the national stage for review under
the patent prosecution highway for claims found novel and inventive
by the international search authority. Once these are received, we
will hold international acceptance for the inherited patents and
our newly received patents. During 2020, we were awarded
a design patent on our surface-mounted applicator device in
the United States, China, Japan, Taiwan, and Korea. We have
filed and have been granted or have pending acceptance on
thirty-two (32) separate design patents for our: Decontamination
Chamber(s), Decontamination Applicator, Decontamination Cart,
Applicator, and Surface Mounted Applicator 90-Degree Device.
These patents are published around the world, including but not
limited to United States, China, Hong Kong, Europe, United Kingdom,
Singapore, Taiwan, Vietnam, Canada, South Korea, and
Japan.
Our
products are sold around the world under various brand names and
trademarks. We consider our brand names and trademarks to be
valuable in the marketing of our products. As of March 1,
2021, we held a total of one hundred seventy-eight
(178) trademarks (word and logo) registered or pending across
the globe. TOMI registers marks in seven (7) classes of
specification of goods and services: Class 1 for Chemicals for
Treating Hazardous Waste, Class 5 for Disinfectants, All-Purpose
for Hard Surfaces and for Treating Mold, Class 7 for Handheld Power
Operated Spraying Machines, Class 11 for Sterilizers for Medical
Use and Air Purification, Class 35 for Business Consultation and
Management Services, Class 37 for General Disinfecting Services,
and Class 40 for Chemical Decontamination and Manufacturing
Services.
Marketing and Distribution
Through
our brand awareness, marketing, social media presence and sales,
our business growth objective is to be the global leader in
disinfection and decontamination products sales, services, and
manufacturing. We intend to continue to expand and support research
and development on other decontamination and remediation solutions
and to form more business alliances with strategic
partners.
We
continue to perform decontamination services within cleanrooms,
bio-safety labs, tissue and blood labs, pharmaceutical labs,
vivariums and research universities and we continue to secure
additional license agreements with major remediation, construction,
forensic clean-up and bio-safety servicing companies. Both of these
strategies assist in the brand awareness and use of our suite of
products.
In the late first quarter of 2020, due to the
COVID outbreak, the customer base of TOMI
SteraMist®
products expanded quickly. As a result
of successfully training and implementing the SteraMist brand of
products and protocols into our customer base, we benefited from
referrals, testimonials, and an increase in media
presence.
We sell our products domestically through our
internal sales force, as well as independent sales and
manufacturing representatives. Internationally, our products are
sold through exclusive and non-exclusive sales representatives and
distributors. In late 2020 and during the first quarter 2021, TOMI
has onboarded three new vice presidents of sales for the promoting,
demonstrating, and selling of its SteraMist®
products in three of our sales
verticals, commercial, life sciences and food safety. Each of these
hires are expected to expand their divisions both with new
customers and expanding the direct inside sales
teams.
Competition
The
decontamination and environmental infectious disease control
industry is extremely competitive and highly regulated. Competition
is intense in all five (5) of our divisions and includes many large
and small competitors.
Our
competitors include companies that market other hydrogen
peroxide-based products, such as Steris Corporation
(“Steris”), Bioquell, Inc. (“Bioquell”)
currently owned by Ecolab, Inc. (“Ecolab”) and The
Clorox Company (“Clorox”), various ultraviolet
companies and quad ammonia-chemical companies. During 2020 due to
the COVID outbreak, new competitors that manufacture and sell
Electrostatic Sprayers and biostatic protectants, specifically to
the Commercial industry, entered the market.
We believe our SteraMist®
suite of products have a competitive
advantage to our competitor’s products in that they are
quicker and less caustic, provides a six log kill to a wide variety
of pathogens and leave no
residue or unpleasant odor. However, some of these competitors may
have longer operating histories, greater name recognition, larger
installed customer bases and substantially greater financial and
marketing resources than us.
We
believe that the principal factors affecting competition in our
markets include name recognition and the ability to receive
referrals based on client confidence in the service. There are no
significant barriers of entry that could keep potential competitors
from opening similar facilities. Our ability to compete
successfully in the industry will depend, in large part, upon our
ability to market and sell our indoor decontamination and
infectious disease control products and services. There can be no
assurance that we will be able to compete successfully in this
industry, or that future competition will not have a material
adverse effect on our business, operating results and financial
condition.
We
believe that our growth in these industries as a leading global
disinfection/decontamination company depends on our abilities to
discover, develop, market, and innovate, disruptive cost-effective
products and services.
Competitive Advantages
We believe the SteraMist®
technology has many advantages over
its competition. Our technology can turn over a space to an
end-user far faster than its competition. Our technology requires
limited preparation to an area compared to our competitors and does
not rely on fans or any outside force to move throughout a space.
Our “.OH”
is the smallest submicron 0.3-3-micron particle that receives a
charge and can move around an area like a gas, going above, below,
and beyond the hardest to reach areas.
Another
key and critical advantage is the technology’s superior
material compatibility. The hydroxyl radical allowing to kill on
contact and leave no dangerous byproducts in the areas being
treated. It is important the world is educated and aware of
the harsh chemicals that exist on the market, and used with
Electrostatic Sprayers, as they will not ensure proper efficacy on
the surface being treated as even if the chemical is EPA
registered, it may not be compatible with the sprayer. For
example, the sprayer may not be spraying enough of the chemical to
kill the virus or the bacteria, in addition to a lot of these harsh
chemicals and sprayers are destroying materials and equipment over
time, ending to be a much more costly product.
It
is our position there is no other product on the market like
SteraMist. A technology that can treat almost 4,000 cubic feet in
45 minutes with a contact time of only 15 minutes or spray surfaces
5 seconds per square foot with no wet time. A technology
with all the competitive advantages required in disinfection, where
other disinfectants will have a select few. No wipe, no
rinse, no residue, non-corrosive, high level efficacy (developed by
DARPA for Anthrax spores), quick turnaround time, superior material
compatibility (spray direct on sensitive equipment), and our
submicron particles which moves like a gas allows the mist/fog to
reach every area being treated regardless of what is in the
space.
In summary, SteraMist®
offers the following competitive
advantages:
●
Provides a 99.9999% or six-log kill and above kill
(i.e., the statistical destruction of all microorganisms and their
spores) on all challenged pathogens, on multiple surfaces
including Bacillus atrophaeus
spores, Bacillus subtilis
spores and Geobacillus
stearothermophilus, the spore
that is considered a gold standard for validation of sterilization
versus household/industrial cleaners that offer a 99.9%
(sanitizing) or three-log kill to 99.99% (disinfection) or four-log
kill.
●
Does
not require mixing of materials.
●
Does
not include silver ions or peracetic acid.
●
Not
affected by humidity or temperature.
●
Does
not damage medical or electronic equipment.
●
By-products
converts to water (humidity) and oxygen.
Research & Development
We
are generating and supporting research on improving, extending and
applying our patents in the field of mechanical cleaning and
decontamination. Research and development expenses for the years
ended December 31, 2020 and 2019, were approximately $455,000 and
$341,000, respectively.
Government Regulation
Our
business is subject to various degrees of governmental regulation
in the countries in which we operate. In the United States, the
EPA, the FDA and other governmental authorities regulate the
development, manufacture, sale, and distribution of our products
and services. Our international operations also are subject to a
significant amount of government regulation, including
country-specific rules and regulations and U.S. regulations
applicable to our international operations. Government regulations
include detailed inspection of, and controls over, research and
development, product approvals and manufacturing, marketing and
promotion, sampling, distribution, record-keeping, storage, and
disposal practices. We believe that we are currently compliant in
all material respects with applicable regulatory requirements. To
date, every registration for our technology we have applied for has
been accepted.
Employees
As
of March 1, 2021, we have twenty-nine (29) full-time executive,
operational and administrative employees working within the United
States. Most of our sales are conducted by global exclusive
distribution agreements or domestically by our internal sales team
or independent manufacturing representatives.
Our business routinely
encounters and attempts to address risks, some of which will cause
our future results to differ, sometimes materially, from those
originally anticipated. Below, we have described our present view
of certain important risks. The risk factors set forth below are
not the only risks that we may face or that could adversely affect
us. If any of the risks discussed in this Annual Report on Form
10-K actually occur, our business, financial condition and results
of operations could be materially adversely affected. If this were
to occur, the trading price of our securities could decline
significantly. In assessing these risks,
investors should also refer to the other information contained or
incorporated by reference in our other filings with the
SEC.
Risk Related to Our Company and Business
Prior to 2020, we have historically experienced losses from our
operations, may not be able to sustain profitability and may need
to seek additional financing to sustain our
operations.
We
generated net income of approximately $4.4 million for the year
ended December 31, 2020, incurred a net loss of $2.3 million for
the year ended December 31, 2019 and had an accumulated deficit of
$39.1 million as of December 31, 2020. We have been increasing our
headcount and expenses to support our continued product development
and planned growth, and if demand for our products declines and we
are unable to sustain our recent increases in our net income, we
may not be able to sustain profitability.
Even
if we do sustain or increase profitability on a quarterly or annual
basis, we may still need to seek additional financing to facilitate
our continued growth. To finance our product development and grow
our business, we may seek funds through borrowings or through
private or public equity or debt offerings. We may be unable to
raise funds on commercially reasonable terms or at all. In
addition, the sale of additional equity or convertible debt
securities could result in additional dilution to our shareholders.
If we borrow additional funds or issue debt securities, these
securities could have rights superior to holders of our common
stock and could contain covenants that will restrict our
operations. If we do not obtain additional resources or achieve and
sustain profitability, our ability to capitalize on business
opportunities will be limited, the growth of our business will be
harmed, our business may fail, and investors may lose all of their
investment.
A pandemic, epidemic or outbreak of an infectious disease in the
United States or worldwide, including the outbreak of the novel
strain of coronavirus disease, COVID-19, could adversely affect our
business.
If
a pandemic, epidemic or outbreak of an infectious disease occurs in
the United States or worldwide, our business may be adversely
affected. In December 2019, a novel strain of coronavirus,
SARS-CoV-2, was identified in Wuhan, China. Since then, the
SARS-CoV-2 virus, and the resulting disease, COVID-19, has spread
to most countries, and has caused the worldwide COVID-19 Pandemic.
While the demand for our products generated from the COVID-19
Pandemic has positively impacted our financial position, it has
negatively impacted our operational condition in two divisions by
forcing us to implement various policies for the safety of our
employees, including “work from home” policies and
office social distancing policies, which may lead to lower
productivity of our employees and a decrease in the innovation and
advancement of our products. Beyond our own policies, numerous
state and local jurisdictions have previously imposed, and others
in the future may impose, “shelter-in-place” orders,
quarantines, executive orders and similar government orders and
restrictions for their residents to control the spread of COVID-19,
which negatively affects our operations and potentially the demand
for our products and services. However, these
“shelter-in-place” measures and challenges will likely
continue for the duration of the pandemic, which is uncertain, and
may continue to negatively impact our operations.
Significant
outbreaks of contagious diseases such as COVID-19, and other
adverse public health developments, could have a material impact on
our inventory position or inventory costs due to its impact of our
third-party suppliers. Further, our efforts to maintain an adequate
stock of all our product components may not be sufficient to avoid
a disruption to our production capacity due to the current COVID-19
Pandemic or similar events that may occur in the
future.
Other
disruptions or potential disruptions include restrictions on the
ability of our sales representatives and other personnel to travel
and access customers for training and case support; disruptions in
our production schedule and ability to manufacture and assemble
products; delays in actions of regulatory bodies; diversion of or
limitations on employee resources that would otherwise be focused
on the operations of our business, including because of sickness of
employees or their families or the desire of employees to avoid
contact with groups of people; business adjustments or disruptions
of certain third parties, including suppliers; increase in bad
debts due to an adverse impact of the pandemic on our
clients’ cash flows and resulting decrease in collectability
of our account receivables; and additional government requirements
or other incremental mitigation efforts that may further impact our
or our suppliers’ capacity to manufacture our
products.
While
the potential economic impact brought by, and the duration of any
pandemic, epidemic or outbreak of an infectious disease, including
COVID-19, may be difficult to assess or predict, the widespread
COVID-19 Pandemic could cause disruption of global financial
markets, reducing our ability to access capital, which could in the
future negatively affect our liquidity. In addition, a recession or
market correction resulting from the spread of an infectious
disease, including COVID-19, could materially affect our business
for the same reasons.
Our recent increase in our net income was largely caused by a spike
in demand for sanitation products and services created by the
COVID-19 Pandemic and may not be sustainable.
The
COVID-19 Pandemic has increased the global demand for sanitizing
products and services which help prevent the proliferation of
COVID-19. Our products and services are among those that have seen
an increase in demand due to the COVID-19 Pandemic, causing us to
realize an increase in revenues and making us profitable for the
first time. If these new customers as a result of COVID-19 do not
continue to use our products after the COVID-19 Pandemic has
subsided, our sales may be negatively impacted.
Continued rapid growth may strain our internal resources, which
would hamper our ability to manage our growth effectively, create
operating efficiencies or sustain profitability.
We
are experiencing a rapid growth in the demand for our products and
services in connection with the COVID-19 Pandemic which may strain
our financial and operational resources that were established to
meet a lower level of demand. Due to our rapid growth, we may not
be able to effectively manage the expansion of our operations or
recruit and train additional qualified personnel at the pace needed
to meet the demand for our products and services. Further, the
expansion of our operations may lead to significant costs and may
divert our management and business development resources. Any
inability to manage our growth could delay the execution of our
development and strategic objectives or disrupt our operations. Any
operational disruptions may take the form of a decrease in the
quality of customer service, reporting problems and delays in
meeting important deadlines, all of which could result in a loss of
market share and other problems that could adversely affect our
reputation and financial performance.
Our
SteraMist®
family of products
currently accounts for the majority of our revenue, and our success
is almost completely dependent on the success of our
SteraMist®
brand.
Our SteraMist®
family of products is currently our
primary product offering, and we are completely dependent on its
success. Successfully commercializing products such as ours is a
complex and uncertain process. Our commercialization efforts will
depend on the efforts of our management and sales team, our
third-party manufacturers and suppliers and general economic
conditions, among other factors, including the
following:
●
the
effectiveness of our marketing and sales efforts in the United
States and internationally;
●
our
third-party manufacturers and suppliers’ ability to
manufacture and supply the components of our
SteraMist®
products in a timely manner, in
accordance with our specifications, and in compliance with
applicable regulatory requirements, and to remain in good standing
with regulatory agencies;
●
the availability, perceived advantages, relative
cost, relative safety, and relative efficacy of alternative and
competing disinfection products;
●
our ability to obtain, maintain, and enforce our
intellectual property rights in and to our
SteraMist®
products;
●
the emergence of competing technologies and other
adverse market developments, and our need to enhance our
SteraMist®
products and/or develop new products
to maintain market share in response to such competing technologies
or market developments;
●
our ability to raise additional capital on
acceptable terms, or at all, if needed to support the
commercialization of our SteraMist®
products; and
●
our ability to achieve and maintain compliance
with all regulatory requirements applicable to our
SteraMist®
products.
We
have hired and trained additional sales professionals to account
for the increased demand for our products. Despite this growth in
sales personnel, we expect that our additional sales force will
require lead time in the field to grow their network of accounts
and achieve the productivity levels we expect them to reach in any
individual territory. Furthermore, the use of our products will
often require or benefit from direct support from us. If our sales
representatives do not achieve the productivity levels, we expect
them to reach, our revenue will not grow at the rate we expect, and
our financial performance will suffer.
We have no long-term customer contracts, and our sales history or
backlog cannot be relied upon as an indicator of our future
sales.
We
do not have long-term contracts with any of our customers, and our
sales history or backlog cannot be relied upon as a future
indicator of our revenues. Our contracts and purchase commitments
with customers may be canceled under certain circumstances. As a
result, we are exposed to competitive price pressures on every
order, and our agreements with customers do not provide assurance
of future sales. Our customers are not required to make minimum
purchases and may cease purchasing our products at any time without
penalty. As such, our unfilled orders and previously completed
sales should not be relied on as a measure of anticipated demand or
future revenue.
Our agreements with restoration industry specialists are not
exclusive, which may allow for our competitors to sell their
products and services to such specialists.
Our
agreements with restoration industry specialists under our TOMI
Service Network program, which allows certain restoration
specialists to use and sell our products, are not exclusive. This
lack of exclusivity allows our competitors to sell products to the
same restoration specialists which could reduce our sales if our
competitors’ products are used in lieu of our products.
Additionally, the use of our and our competitors’ products by
a restoration specialist may create market confusion between our
products and the products of our competitors, which may adversely
affect our brand reputation and business.
Our success depends upon broad market acceptance of our technology
that has not yet been achieved.
Our BIT technology as a Hospital-Healthcare
disinfectant is relatively new, having received full Hospital
registration for Clostridium difficile spores from the EPA in mid-2017. Our sales are
dependent upon broad market acceptance of our technology that
replaces long-standing failing manual cleaning techniques such as
quaternary ammonium compounds and bleach for disinfection, with our
no-touch mechanical process. The failure to obtain broad market
acceptance inevitably leads to substantially increased lead times
for sales until our prospective customers, particularly in the
Hospital-Healthcare market, are accustomed to the use of newer
mechanical technology. The inability to timely meet our sales goals
could adversely affect our financial condition and results of
operations.
We are subject to a variety of risks associated with doing business
internationally.
We maintain, and have grown over the last year, significant
international operations, including operations in the U.S., Canada,
Mexico, Europe, Asia Pacific and Latin America. As a result, we are
subject to a number of risks and complications associated with
international manufacturing, sales, services, and other operations.
These include: risks associated with currency exchange rate
fluctuations; requirements or preferences for domestic products or
solutions, which could reduce demand for our products; difficulties
in enforcing agreements and collecting receivables through some
foreign legal systems; unexpected legal or regulatory changes;
enhanced credit risks in certain countries and emerging market
regions; significant variations in tax rates among the countries in
which we do business, and tax withholding obligations in respect of
our earnings; exchange controls or other trade restrictions
including, the impact of the COVID-19 Pandemic on our supply chain
and the industries in which we operate; customs clearance and
shipping delays; general economic and political conditions in
countries where we operate or where end users of our products are
situated, including the potential implications of the COVID-19
Pandemic; natural disasters, political and economic instability,
including wars, terrorism and political unrest, outbreak of
disease, travel, social distancing and quarantine policies,
boycotts, curtailment of trade, and other business restrictions
affecting our ability to manufacture or sell our products;
difficulties associated with managing a large organization spread
throughout various countries; difficulties in enforcing
intellectual property rights or weaker intellectual property right
protections in some countries; and difficulties associated with
compliance with a variety of laws and regulations governing
international trade.
If our procedures to ensure compliance with export control laws are
ineffective, our business could be harmed.
Our sales to foreign entities are subject to far reaching and
complex export control laws and regulations in the United States
and elsewhere. Violations of those laws and regulations could have
material negative consequences for us including large fines,
criminal sanctions, prohibitions on participating in certain
transactions and government contracts, sanctions on other companies
if they continue to do business with us and adverse
publicity.
Failure to comply with the U.S. Foreign Corrupt Practices Act
(“FCPA”), and similar laws associated with our
activities outside of the United States could subject us to
penalties and other adverse consequences.
Failure to comply with the FCPA, and similar laws associated with
our activities outside of the United States could subject us to
penalties and other adverse consequences. We face significant risks
if we fail to comply with the FCPA and other anti-corruption laws
that prohibit improper payments or offers of payment to foreign
governments and political parties for the purpose of obtaining or
retaining business. In many foreign countries, particularly in
countries with developing economies, it may be a local custom that
businesses operating in such countries engage in business practices
that are prohibited by the FCPA or other applicable laws and
regulations. Any violation of the FCPA or other applicable
anti-corruption laws could result in severe criminal or civil
sanctions and, in the case of the FCPA, suspension or debarment
from U.S. government contracting, which could have a material and
adverse effect on our reputation, businesses, financial conditions,
operating results and cash flows.
Our operations are subject to environmental laws and regulations
that may increase costs of operations and impact or limit our
business plans.
We are subject to
environmental laws and regulations affecting many aspects of our
present and potential future operations, including a wide variety
of EPA labeling and other state regulatory agency requirements. For
example, under the Federal Insecticide, Fungicide, and Rodenticide
Act, we are required to register with the EPA and certain state
regulatory authorities as a seller of disinfectants, and we are
subject to EPA labeling requirements for each use that
SteraMist®
is intended
to address. Compliance with these laws and regulations may result
in increased costs and delays as a result of administrative
proceedings and certain reporting obligations. Public officials and
entities may seek injunctive relief or other remedies to enforce
applicable environmental laws and regulations. If we are found to
not have complied with these laws and are unable to sell out
products, our business and financial results will be negatively
impacted.
Our reliance upon third-party contractors, suppliers and
manufacturers for the manufacture of our products increases the
risk that we will not have sufficient quantities of our products or
such quantities at an acceptable cost and reduces our control over
the manufacturing process.
We rely upon third parties to supply us with our
products. We outsource the manufacturing of our
SteraMist®
line of equipment to two manufacturing
companies and use contract manufacturers to build our BIT-based
systems, as we do not maintain our own manufacturing facilities. If
we fail to maintain relationships with our current suppliers, we
may not be able to effectively commercialize and market our
products, due to risks including increased product costs, limited
inventory that is not capable of meeting demand and the possible
misappropriation of our proprietary information, such as our trade
secrets and know-how. Further, as we maintain a limited number of
manufacturers for our SteraMist®
line of equipment and blenders for our
SteraMist®
solutions, alternative production
facilities may not be available in the event of a disruption, or if
alternative production facilities are available, the number of
third-party suppliers with the necessary manufacturing and
regulatory expertise to produce our products at their current
quality level is limited, and it could be expensive and take a
significant amount of time to arrange for and qualify alternative
suppliers, which could have a material adverse effect on our
business.
Because
of our reliance upon third parties to supply us with our products,
we do not have control over the manufacturing process of our
third-party suppliers and are dependent on such third-party
suppliers for compliance with the regulations applicable to our
products. Third-party suppliers may not be able, or fail, to comply
with applicable regulatory requirements which could result in
sanctions being imposed on us, including fines, injunctions, civil
penalties, delays, suspension or withdrawal of approvals, seizures
or recalls, operating restrictions and criminal prosecutions, any
of which could significantly and adversely harm our business and
results of operations.
Our results of operations could be materially harmed if we are
unable to accurately forecast customer demand for our products and
manage our inventory.
To
ensure adequate inventory supply, we must forecast inventory needs
and place orders with suppliers based on our estimates of future
demand for our products and services. Our limited historical
experience in foreign markets and recent increase in demand in the
United States may lead us to inadequately forecast such inventory
needs. Further, our ability to accurately forecast demand for our
products could be negatively affected by many factors, including
our failure to adequately manage our expansion efforts, product
introductions by competitors, an increase or decrease in customer
demand for products of our competitors, our failure to accurately
forecast customer acceptance of new product enhancements,
unanticipated changes in general market conditions or regulatory
matters, and weakening of economic conditions or consumer
confidence in future economic conditions.
Inventory
levels in excess of customer demand may result in inventory
write-downs or write-offs, which would cause our gross margin to be
adversely affected and could impair the strength of our brand.
Similarly, a portion of our inventory could become obsolete or
expire, which could have a material and adverse effect on our
earnings and cash flows due to the resulting costs associated with
inventory impairment charges and costs required to replace obsolete
inventory. Any of these occurrences could negatively impact our
financial performance.
Conversely,
if we underestimate customer demand, we may not be able to deliver
sufficient products to meet our customers’ requirements,
which could result in damage to our reputation and customer
relationships. In addition, if we experience a significant increase
in demand, additional supplies of raw materials or additional
manufacturing capacity may not be available when required on terms
that are acceptable to us, or at all, and suppliers or our
third-party manufacturers may not be able to allocate sufficient
resources to meet our increased requirements, which could have an
adverse effect on our ability to meet customer demand for our
products and our results of operations.
Our success depends on our ability to adequately protect our
intellectual property.
Our
commercial success depends, in part, on our ability to obtain,
maintain, defend, file new or enforce our existing patents,
trademarks, trade secrets and other intellectual property rights
covering our technologies and products throughout the world. We
may, however, be unable to adequately preserve such rights due to a
number of reasons, including the following:
●
our
rights could be invalidated, circumvented, challenged, breached or
infringed upon;
●
we
may not have sufficient resources to adequately prosecute or
protect our intellectual property rights;
●
upon
expiration of our patents, certain of our key technology may become
widely available; or
●
third
parties may be able to develop or obtain patents for similar or
competing technology.
Although
we devote resources to the establishment and protection of our
patents and trademarks, the actions we have taken or will take in
the future may not be adequate to prevent violation of our patents,
trademarks and proprietary rights by others or prevent others from
seeking to block sales of our products as an alleged violation of
their patents, trademarks and proprietary rights. In the future,
litigation may be necessary to enforce our trademarks or
proprietary rights and we may be forced to defend ourselves against
claimed infringement or the rights of others. Any such litigation
could result in adverse determinations that could have a material
adverse effect on our business, financial condition or results of
operations.
In
addition, we rely in part upon unpatented trade secrets, unpatented
know-how, and continuing technological innovation which may not
yet, or may never be, patented, to develop and maintain our
competitive position, which we seek to protect, in part, by
confidentiality agreements with our employees and consultants. We
also have agreements with our employees and consultants that
obligate them to assign their inventions to us. It is possible that
technology relevant to our business will be independently developed
by a person that is not a party to such an agreement. In addition,
if the employees and consultants who are parties to these
agreements breach or violate the terms of these agreements, we may
not have adequate remedies for any such breach or violation, and we
could lose our trade secrets through such breaches or violations.
To the extent that our commercial partners, collaborators,
employees and consultants use intellectual property owned by others
in their work for us, disputes may arise as to the rights in
related or resulting know-how and inventions. Further, our trade
secrets could otherwise become known or be independently discovered
by our competitors, which would harm our business.
We may be unable to enforce our intellectual property rights
throughout the world.
As
part of our growth strategy, we are seeking to expand our
operations internationally. The laws of some foreign countries do
not protect intellectual property rights to the same extent as the
laws of the United States. Companies have encountered significant
problems in protecting and defending intellectual property rights
in certain foreign jurisdictions. To the extent that we have
obtained or are able to obtain patents, trademarks or other
intellectual property rights in any foreign jurisdictions, it may
be difficult to stop the infringement of our patents, trademarks or
the misappropriation of other intellectual property rights. For
example, some foreign countries have compulsory licensing laws
under which a patent owner must grant licenses to third parties. In
addition, some countries limit the availability of certain types of
patent rights and enforceability of patents against third parties,
including government agencies or government contractors. In these
countries, patents may provide only limited benefit or no
benefit.
Proceedings
to enforce our patent rights in foreign jurisdictions could result
in substantial costs and divert our efforts and attention from
other aspects of our business. Accordingly, efforts to protect our
intellectual property rights in such countries may be inadequate.
In addition, future changes in the law and legal decisions by
courts in the United States and foreign countries may affect our
ability to obtain adequate protection for our technology and
products and the enforcement of intellectual property.
We face significant competition in our industry, some of which have
longer operating histories, more established products or greater
resources than we do, which may prevent us from achieving increased
market penetration and improved operating results.
The
decontamination and environmental infectious disease control
industry is extremely competitive. The competition includes
remediators and disinfection/decontamination companies such as
Steris, Bioquell (Eco-lab) and Clorox, various ultraviolet
companies and quad ammonia-chemical companies. These competitors
may have longer operating histories, greater name recognition,
larger installed customer bases, a greater ability to provide
similar products and services at a lower cost and substantially
greater financial and marketing resources than us to develop new
products and commercialize existing products. We believe that the
principal factors affecting competition in our markets include name
recognition, customer familiarity with products, effective
marketing, competitive pricing strategies and the ability to
receive referrals based on client confidence in the service. There
are no significant barriers of entry that could keep potential
competitors from opening similar facilities. Our ability to compete
successfully in the industry will depend, in large part, upon our
ability to market and sell our indoor decontamination and
infectious disease control products and services. We may not be
able to compete successfully in the remediation industry. Further,
if one or more competitors successfully develops a decontamination
product that is more effective, better tolerated, results in a
better customer experience, is easier to use or otherwise more
attractive than our products, our ability to continue to
commercialize our products could be significantly and adversely
affected due to a lack of ability to compete, which would have a
material adverse effect on our business, financial condition and
results of operations.
If the quality of our products do not meet the expectations of our
customers, then our brand and reputation or our business could be
adversely affected.
In
the course of conducting our business, we must adequately address
quality issues that may arise with our products, including defects
in third-party components and inventory. We may not be able to
eliminate or mitigate occurrences of these issues and associated
liabilities. In addition, even in the absence of quality issues, we
may be subject to claims and liability if the performance of
products do not meet the expectations of our customers. If the
quality of our products does not meet the expectations of
customers, then our brand and reputation, and our ability to
receive referral customer business, could be adversely
affected.
Our long-term growth depends, in part, on our ability to enhance
and develop new products, and if we fail to do so we may be unable
to compete effectively.
It is important to our business and our long-term growth that we
continue to enhance and develop new products. We intend to continue
to invest in research and development activities focused on
improvements and enhancements to our existing intellectual property
and product offerings. Our development goals include the
development and commercialization of a variety of sanitizing
robotic devices and backpack units. Despite our reasonable efforts,
it may not be possible for us to innovate in a way to keep us
competitive with other companies due to financial and time
constraints which will negatively impact our
business.
The introduction of new products is often accompanied by design and
production delays, as well as significant cost, which could prevent
us from introducing new products to the market in a timely and
cost-effective manner.
The
development and initial production and enhancement of the
decontamination systems we produce is often accompanied by design
and production delays and related costs. If we are unable to
introduce new products on our anticipated timeframe or financial
cost, our business, financial condition and results of operations
may suffer due to failing to remain competitive in our
market.
We have a limited management team size which may reduce our ability
to effectively manage our business operations as it
grows.
We
have a limited management team size, even though we keep hiring and
redefining job descriptions. This limited management team may
reduce our ability to effectively manage our business as it grows.
As we expand, we expect to increase the size of our management
team. However, our management team may not be able to adequately
manage our business, and any failure to do so could lead to a
general negative impact to our business.
We are dependent on our key personnel, the loss of whom could
adversely affect our operations, and if we fail to attract and
retain the talent required for our business, we could be materially
harmed.
Our
success is substantially dependent on the performance of our
executive officers, including our Chairman and Chief Executive
Officer, Dr. Halden S. Shane, the loss of whom would have a
material adverse effect on our business.
We
depend to a significant degree on our ability to attract, retain
and motivate quality personnel. We further note that competition
for highly skilled personnel is often intense. We may not be
successful in attracting, integrating or retaining qualified
personnel to fulfill our current or future needs, the failure of
which would have a material adverse effect on our
business.
Our operations, and those of our suppliers, are subject to a
variety of business continuity hazards and risks, any of which
could interrupt production or operations or otherwise adversely
affect our performance and results.
We
are subject to business continuity hazards and other risks,
including natural disasters, utility and other mechanical failures,
labor difficulties, inability to obtain necessary licenses, permits
or registrations, disruption of communications, data security and
preservation, disruption of supply or distribution, safety
regulation and labor difficulties. The occurrence of any of these
or other events might disrupt or shut down operations, or otherwise
adversely impact the production or profitability of a particular
facility, or our operations as a whole. We may also be subject to
certain liability claims in the event of an injury or loss of life,
or damage to property and equipment, resulting from such events.
Although we maintain property and casualty insurance, as well as
other forms of insurance that we believe are customary for our
industries, our insurance policies include limits and, as such, our
coverage may be insufficient to protect against all potential
hazards and risks incident to our business. Should any such hazards
or risks occur, or should our insurance coverage be inadequate or
unavailable, our business, prospects, financial condition and
results of operations might be adversely affected.
Our products are subject to potential product liability claims
which, if successful, could have a material adverse effect on our
business, financial condition and results of
operations.
We
are exposed to significant risks for product liability claims if
death, personal injury or property damage results from the use of
our products. While we currently maintain insurance against product
liability claims, we may experience material product liability
losses in the future. Our insurance coverage may not continue to be
available on terms that we accept, if at all, and our insurance
coverage also may not adequately cover liabilities that we incur. A
successful claim against us that exceeds our insurance coverage
level or that is not covered by insurance, or any product recall,
could have a material adverse effect on our business, financial
condition and results of operations. In addition, product liability
and other claims can divert the attention of management and other
personnel for significant periods of time, regardless of the
ultimate outcome. Further, claims of this nature may cause our
customers to lose confidence in our products and us. As a result,
an unsuccessful defense of a product liability or other claim could
have a material adverse effect on our financial condition, results
of operations and cash flows.
The misuse of our products may harm our reputation in the
marketplace, result in injuries that lead to product liability
suits or result in costly investigations, fines or sanctions by
regulatory bodies if we are deemed to have engaged in the promotion
of these uses, any of which could be costly to our
business.
Customers,
technicians, or service providers could use our products in a
manner that is inconsistent with the products’ intended use.
We train our marketing personnel and sales representatives to not
promote our products for uses outside of the intended use, however,
we cannot otherwise prevent all instances of misuse. Further, the
marketing and sales representatives that we have hired to help meet
the demand for our products may not have received proper training
or have the working knowledge needed to adequately advise our
customers how to safely use our products. Misuse of our products
may cause an increased risk of injury to customers, which could
harm our reputation in the marketplace, as well as lead to
potential product liability lawsuits.
We may seek to grow our business through acquisitions of
complementary products or technologies, and the failure to manage
acquisitions, or the failure to integrate them with our existing
business, could harm our business, financial condition and
operating results.
From
time to time, we may consider opportunities to acquire other
companies, products or technologies that may enhance our product
platform or technology, expand the breadth of our markets or
customer base, or advance our business strategies. Potential
acquisitions involve numerous risks, including: problems
assimilating the acquired products or technologies; issues
maintaining uniform standards, procedures, controls and policies;
unanticipated costs associated with acquisitions; diversion of
management’s attention from our existing business; risks
associated with entering new markets in which we have limited or no
experience; increased legal and accounting costs relating to the
acquisitions or compliance with regulatory matters; and
unanticipated or undisclosed liabilities of any
target.
We
have no current commitments with respect to any acquisition. We do
not know if we will be able to identify acquisitions, we deem
suitable, whether we will be able to successfully complete any such
acquisitions on favorable terms or at all, or whether we will be
able to successfully integrate any acquired products or
technologies. Our potential inability to integrate any acquired
products or technologies effectively may adversely affect our
business, operating results and financial condition.
Our employees, consultants, and other commercial partners may
engage in misconduct or other improper activities, including
non-compliance with regulatory standards and
requirements.
We
are exposed to the risk that our employees, consultants, and other
commercial partners and business associates may engage in
fraudulent or illegal activity. Misconduct by these parties could
include intentional, reckless or negligent conduct or other
unauthorized activities that violate the regulations of the EPA and
non-U.S. regulators, including those laws requiring the reporting
of true, complete and accurate information to such regulators,
manufacturing standards, healthcare fraud and abuse laws and
regulations in the United States and internationally or laws that
require the true, complete and accurate reporting of financial
information or data. Whether or not we are successful in defending
against any legal actions or investigations in connection with any
misconduct attributed to us, we could incur substantial costs,
including legal fees and reputational harm, and divert the
attention of management in defending ourselves against any of these
claims or investigations.
The requirements of being a public company may strain our
resources, divert management’s attention and affect our
ability to attract and retain executive management and qualified
board members.
We
have and likely will continue to incur significant legal,
accounting and other expenses as a public company subject to the
reporting requirements of the Securities Exchange Act of 1934, the
Sarbanes-Oxley Act of 2002 (“SOX”), the
Dodd–Frank Wall Street Reform and Consumer Protection Act and
other applicable rules and regulations. Our management and other
personnel devote a substantial amount of time to these compliance
initiatives. Moreover, these rules and regulations have increased
our legal and financial compliance costs and will make some
activities more time-consuming and costly. For example, applicable
rules and regulations could make it more difficult for us to
attract and retain qualified persons to serve on our board of
directors ( the “Board), or as executive
officers.
In
addition, SOX requires, among other things, that we maintain
effective internal control over financial reporting and disclosure
controls and procedures. Our testing, or the potential subsequent
testing by our independent registered public accounting firm in
future periods, may reveal deficiencies in our internal control
over financial reporting that are deemed to be material weaknesses.
Our compliance with Section 404 of SOX may require that we incur
substantial expense and expend significant management time on
compliance-related issues. Moreover, if our independent registered
public accounting firm identifies deficiencies in our internal
control over financial reporting that are deemed to be material
weaknesses, the market price of our stock could decline, and we
could be subject to sanctions or investigations by regulatory
authorities, which would require additional financial and
management resources.
When
we are no longer a “smaller reporting company,” we will
be subject to additional reporting requirements as a public
company. We expect that we will incur increased legal, accounting
and other costs as we continue to improve existing, and implement
new, operational and financial systems, procedures and controls to
prepare for and comply with these additional
requirements.
As
a result of disclosure of information, our business and financial
condition are more visible, which we believe may result in
threatened or actual litigation, including by competitors and other
third parties. If such claims are successful, our business and
operating results could be adversely affected. Even if the claims
do not result in litigation or are resolved in our favor, these
claims, and the time and resources necessary to resolve them, could
divert the resources of our management and adversely affect our
business and operating results.
Risk Related to Our Securities
Our stock price is volatile and there is a limited market for our
shares.
The
stock markets generally have experienced, and will probably
continue to experience, extreme price and volume fluctuations that
have affected the market price of the shares of many small-cap
companies. These fluctuations have often been unrelated to the
operating results of such companies and in recent times have been
exasperated by investors’ concerns stemming from the COVID-19
Pandemic. Factors that may affect the volatility of our stock price
include the following:
●
anticipated
or actual fluctuations in our quarterly or annual operating
results;
●
our
success, or lack of success, in developing and marketing our
products and services;
●
changes
in general economic, political and market conditions in or any of
the regions in which we conduct our business, including as a result
of the current COVID-19 outbreak and related governmental
responses;
●
our
ability to raise the required capital to fund our
business;
●
changes
in financial estimates by us or of securities or industry
analysts;
●
the
issuance of new or updated research reports by securities or
industry analysts
●
the
announcement of new products, services, or technological
innovations by us or our competitors;
●
changes
in our executive leadership;
●
regulatory
developments in our industry affecting us, our customers or our
competitors;
●
actual
or purported “short squeeze” trading activity;
and
●
the
sale or attempted sale of a large amount of common
stock.
We do not intend to pay dividends for the foreseeable
future.
We
have not paid dividends on our common stock since inception. The
continued operation and expansion of our business will require
substantial funding. Accordingly, we currently intend to retain
earnings, if any, for use in the business and we do not anticipate
that we will pay any cash dividends on shares of our common stock
for the foreseeable future. Any determination to pay dividends in
the future will be at the discretion of our Board and will depend
upon results of operations, financial condition, contractual
restrictions, restrictions imposed by applicable law and other
factors our Board deems relevant. Investors seeking cash dividends
should not purchase our common stock. Accordingly, realization of a
gain on your investment will depend on the appreciation of the
price of our common stock, which may never occur.
We have a substantial number of options, warrants and convertible
preferred stock outstanding, which could give rise to additional
issuances of our common stock and potential dilution of ownership
to existing shareholders.
As
of December 31, 2020, we had outstanding options, warrants and
convertible preferred stock to purchase approximately an aggregate
of 2.2 million shares of our common stock at exercise prices
ranging from $0.80 to $8.40 per share. Of these, approximately
132,500 represent shares underlying options with exercise prices
ranging from $0.80 to $7.06 per share, approximately 2.0 million
represent shares underlying warrants at exercise prices ranging
from $0.64 to $8.40 per share and approximately 63,750 represent
shares underlying our shares of convertible $0.01 preferred A
stock. To the extent any holders of options, warrants or
convertible preferred stock exercise the same, the issuance of
shares of our common stock upon such exercise will result in
dilution of ownership to existing shareholders.
If securities or industry analysts do not publish research or
publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The
trading market for our common stock will rely in part on the
research and reports that securities or industry analysts publish
about us and our business. If one or more of the analysts who cover
us downgrades our common stock or issues other unfavorable
commentary or research the price of our common stock may decline.
If one or more analysts ceases coverage of our company or fails to
publish reports on us regularly, demand for our stock could
decrease, which in turn could cause the trading price or trading
volume of our common stock to decline and could result in the loss
of all or part of your investment in us.
Substantial future sales of our common stock, or the perception in
the public markets that these sales may occur, may depress our
stock price.
Our
common stock is traded on the NASDAQ Capital Market
(“Nasdaq”) and, despite certain increases of trading
volume from time to time, there have been periods when our common
stock could be considered thinly traded, meaning that the number of
persons interested in purchasing our common stock at or near bid
prices at any given time may be relatively small. Equity or
equity-related financing transactions that result in a large amount
of newly issued shares that become readily tradable, or sales of
significant numbers of shares by current shareholders, have placed,
and in the future could place, downward pressure on the trading
price of our stock. In addition, during times of lower trading
volume, a shareholder who desires to sell a large number of shares
of common stock may need to sell the shares in increments over time
to mitigate any adverse impact of the sales on the market price of
our stock.
If
our shareholders sell, or the market perceives that our
shareholders intend to sell, substantial amounts of our common
stock in the public market, the market price of our common stock
could fall. Sales of a substantial number of shares of our common
stock may make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we
deem reasonable or appropriate. In the event that the price of our
stock falls, we may become involved in securities class action
litigation that could divert management’s attention and harm
our business.
In
the future, we may also issue our securities if we need to raise
additional capital or in connection with acquisitions. The number
of shares of our common stock issued in connection with a financing
or acquisition could constitute a material portion of our
then-outstanding shares of our common stock.
We have recently listed on the Nasdaq and may not be able to
maintain compliance with NASDAQ’s standards to maintain
listing on the exchange, which could limit shareholders’
ability to trade our common stock.
As
a listed company on the Nasdaq, we are required to meet certain
financial, public float, bid price and liquidity standards on an
ongoing basis in order to continue the listing of our common stock.
If we fail to meet these continued listing requirements, our common
stock may be subject to delisting, which could materially impact
the liquidity of our common stock making it more challenging to buy
and sell shares of our common stock.
We are a “smaller reporting company” under the U.S.
federal securities laws, and the reduced reporting requirements
applicable to smaller reporting companies could make our common
stock less attractive to investors.
We
are a “smaller reporting company” under U.S. federal
securities laws. For as long as we continue to be a smaller
reporting company, we may take advantage of exemptions from various
reporting requirements that are applicable to other public
companies that are not smaller reporting companies. Investors may
not find our common stock attractive because we may rely on these
exemptions. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our
common stock and our stock price may be more volatile.
Our anti-takeover provisions could prevent or delay a change in
control of our company, even if such change in control would be
beneficial to our shareholders.
Provisions
of our articles of incorporation, as amended, and amended bylaws as
well as provisions of Florida law could discourage, delay or
prevent a merger, acquisition or other change in control of our
company, even if such change in control would be beneficial to our
shareholders. These include: maintaining authorized but unissued
shares of our capital stock that could be issued by our Board to
increase the number of outstanding shares and thwart a takeover
attempt; no provision for the use of cumulative voting for the
election of directors; maintaining a staggered board, limiting the
speed at which our shareholders may replace our entire Board, and
limiting the ability of our shareholders to call special
meetings.
In
addition, Florida Business Corporation Act, or FBCA, §
607.0902 generally provides that shares acquired in excess of
certain specified thresholds, without first obtaining the approval
of our Board, will not possess any voting rights unless such voting
rights are approved by a majority of our disinterested
shareholders. Additionally, FBCA § 607.0901 requires that,
subject to certain exceptions, any affiliated transaction with a
shareholder that owns more than 15% of the voting shares of the
corporation, referred to as an “interested
shareholder,” receive the approval of either the
corporation’s disinterested directors or a supermajority vote
of disinterested shareholders, or, absent either such approval,
that a statutory “fair price” be paid to the
shareholders in the transaction. The shareholder vote requirement
is in addition to any shareholder vote required under any other
section of the FBCA or our articles of incorporation, as
amended.
The concentration of our common stock ownership with our executive
officers, directors and affiliates will limit your ability to
influence corporate matters.
Our
executive officers, directors and owners of 5% or more of our
outstanding common stock and their respective affiliates
beneficially owned, in the aggregate approximately 26.7% of our
outstanding common stock as of March 5, 2021. This percentage
includes outstanding shares of common stock, convertible preferred
stock, warrant and stock options that are vested and exercisable as
of that date. These shareholders will therefore have significant
influence over management and affairs and over all matters
requiring shareholder approval, including the election of directors
and significant corporate transactions, such as a merger or other
sale of our company or our assets, for the foreseeable future. This
concentrated control will limit our shareholders’ ability to
influence corporate matters and, as a result, we may take actions
that our shareholders do not view as beneficial. This ownership
could negatively affect the value of our common stock.
Item 1B.
UNRESOLVED STAFF COMMENTS
Not
applicable.
Our U.S. headquarters, a 9,000 square foot office
space, is located at 8430 Spires Way, Frederick, MD
21701. The innovative facility includes a warehouse,
training room, quality control room, qualification laboratory, with
its own drive-in custom iHP ™SteraMist®
Complete Room System. The new
warehouse is significantly larger than our previous headquarters,
allowing TOMI to store its new product lines and stock a greater
variety of inventory - quickly delivering a customer purchase. The
training room is integrated with the newest technology to be able
to present SteraMist®
virtually around the world. As the
company keeps up with the demand for SteraMist®,
there is a dedicated quality control room to allow our service
engineers to work on machines for quick and efficient service to
our customers. The lease for our U.S. headquarters has a 10-year
term and provides for annual rent of approximately
$147,000.
We
lease a 300 square foot office and conference space located at 9454
Wilshire Blvd., Penthouse, Beverly Hills, CA 90212. We lease this
space for $29,000 annually on a month-to-month tenancy in a
professional office building. The property is used for meetings,
sales demonstrations and various other business
functions.
We
currently are not a party to any legal proceedings, the adverse
outcome of which, in management’s opinion, individually or in
the aggregate, would have a material adverse effect on our results
of operations, financial position or cash flows.
Not
applicable.