10-K: TOMI Environmental Solutions Faces Going Concern Amid Revenue Dip

TOMI Environmental Solutions, Inc. reported a significant revenue decline and net loss in 2025, raising substantial doubt about its ability to continue as a going concern, despite strategic partnerships and product expansions.

Summary

• Net loss was $3.7 million for the year ended December 31, 2025, an improvement from $4.5 million in 2024.
• Revenue decreased 27% to $5.6 million in 2025 from $7.7 million in 2024, primarily due to the timing of large equipment purchases.
• Gross margin improved to 54.6% in 2025 from 46.0% in 2024, mainly driven by a reduction in the inventory reserve.
• Cash and cash equivalents stood at $88,000 as of December 31, 2025, a decrease from $665,000 in 2024.
• Working capital declined to $1.0 million in 2025 from $3.8 million in 2024.
• The accumulated deficit reached $58.1 million as of December 31, 2025.
• The company faces substantial doubt about its ability to continue as a going concern within one year.
• Nasdaq listing deficiencies were received for failing to meet the minimum $1.00 bid price and the $2.5 million minimum stockholders' equity requirements.
• A $20 million Equity Line of Credit (ELOC) was secured with Hudson Global Ventures, LLC, with the first draw of $94,130 occurring in February 2026.
• Material weaknesses in internal control over financial reporting were identified as of December 31, 2025, related to limited finance resources and ineffective policies/procedures.
• The commercial sales pipeline of management-tracked opportunities exceeded $18 million at year-end 2025, with $11 million in quoted opportunities.
• Sales backlog grew to approximately $1.8 million in 2025.
• The company recorded $534,912 in Employee Retention Credits (ERC) and $81,887 in related interest in 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a highly concerning report due to the explicit 'going concern' doubt, significant cash depletion, revenue decline, and Nasdaq delisting threats, despite some operational progress and new partnerships.

Positives

• Net loss improved to $3.7 million in 2025 from $4.5 million in 2024.
• Gross margin improved to 54.6% in 2025 from 46.0% in 2024, primarily due to a reduction in inventory reserve.
• Achieved significant commercial momentum, new market entries (aerospace, aquaculture, cell and gene therapy), and product validation across all four divisions in 2025.
• Deployed SteraMist iHP technology at NASA's Johnson Space Center and expanded into aquaculture with new partner Algafeed.
• Secured a contract for a SteraMist iHP Custom Engineered System (CES) at a leading university in Rhode Island, valued at approximately $450,000.
• Formed an OEM partnership with PBSC, integrating iHP into their passthrough hatches and chambers.
• Launched the new SteraMist Integration System Standalone (SIS-SA) with a leading CDMO.
• SteraMist demonstrated efficacy in combating Honeybee Colony Collapse, positioning the company to support global food security.
• Announced a major new customer in the eye health sector, comparable to Pfizer and Merck, implementing SteraMist iHP at two facilities.
• The FDA broadened the permitted use of hydrogen peroxide as a direct food additive in September 2025, significantly expanding SteraMist iHP's potential in the food safety market.
• Onboarded three major commercial service provider companies in Q3 2025, showing strong potential for expanded SteraMist iHP adoption through their franchise networks.
• T.A.C.T. franchises purchased $175,000 of SteraMist iHP equipment and BIT Solution in Q4 2025.
• A custom integration pipeline valued at approximately $3 million, with ten active projects across SIS and CES platforms, was announced.
• Secured a signed purchase order valued at approximately $500,000 from a global biopharmaceutical leader for iHP integration into passthrough fill boxes.
• SteraMist iHP was adopted by a leading Cell and Gene Therapy (CGT) manufacturer for a commercial-scale pharmaceutical facility.
• Completed a second 24-month stability study for 7.8% BIT Solution, meeting EPA requirements and confirming safe shipping and storage.
• The 0.35% hydrogen peroxide product received EPA registration for greenhouse and preand post-harvest applications.
• Received validation from the Department of Homeland Security's Plum Island Animal Disease Center for iHP's effectiveness against foot-and-mouth disease virus and African Swine Fever.
• Strategic OEM partnerships with ESCO, Steelco, PBSC, Nuaire, and Getinge are expanding the route to market for the SIS and CES platforms.
• Received $534,912 in Employee Retention Credits (ERC) and $81,887 in related interest in 2025.
• Appointed Mr. David Vanston as Chief Financial Officer in May 2025, bringing substantial financial accounting and reporting expertise.
• Appointed Francesco Fragasso to the Board in September 2025, strengthening corporate governance.
• Appointed Harold W. Paul to the Board in October 2025.
• Reduced total operating expenses by $731,000 (10%) in 2025.
• Implemented a customer deposit policy in 2025 to reduce working capital exposure and generate incremental operating cash flow benefits in 2026.

Negatives

• Reported a net loss of $3.7 million in 2025 and an accumulated deficit of $58.1 million as of December 31, 2025.
• Revenue decreased $2.1 million (27%) to $5.6 million in 2025 compared to $7.7 million in 2024, primarily due to the timing of large equipment purchases.
• Cash and cash equivalents significantly decreased to $88,000 as of December 31, 2025, from $665,000 in 2024.
• Working capital declined $2.7 million to $1.0 million in 2025 from $3.8 million in 2024.
• The company explicitly states 'substantial doubt about our ability to continue as a going concern' within one year.
• Received a Nasdaq deficiency notice on November 17, 2025, for its closing bid price being below the minimum $1.00 per share requirement, with a compliance deadline of May 18, 2026.
• Received a Nasdaq deficiency letter on November 21, 2025, for stockholders' equity of $588,504 being below the $2.5 million minimum requirement, with a compliance deadline of May 20, 2026.
• Material weaknesses in internal control over financial reporting were identified as of December 31, 2025, due to limited finance resources and ineffective policies/procedures, which had not been fully remediated.
• Reliance on a single manufacturing company for SteraMist equipment and a limited number of third-party suppliers for BIT Solution creates supply chain concentration risk.
• A portion of executive officers' salaries (approximately $476,000 for Halden S. Shane and Elissa J. Shane) was earned but not paid in cash in 2025 due to cash conservation measures.
• Outstanding convertible notes with an aggregate principal amount of $3.1 million bear 12% interest, representing a recurring cash obligation of approximately $376,000 annually.
• The effectiveness of the $20 million Equity Line of Credit (ELOC) depends substantially on the trading price and volume of the stock, which is volatile, potentially limiting its utility.
• Failure to satisfy registration obligations for convertible notes could result in liquidated damages or other penalties.
• The stock price is volatile, and there is a limited market for shares.
• The company does not intend to pay dividends for the foreseeable future.
• Substantial future sales of common stock, or the perception of such sales, may depress the stock price.
• Anti-takeover provisions could prevent or delay a change in control.
• Concentration of common stock ownership with executive officers, directors, and affiliates (22.8%) limits other shareholders' ability to influence corporate matters.

Risks

• A history of losses and uncertainty of achieving future profitability, with an accumulated deficit of $58.1 million as of December 31, 2025.
• Lack of long-term customer contracts means sales history or backlog cannot be relied upon as an indicator of future sales, exposing the company to competitive price pressures.
• Non-exclusive agreements with restoration industry specialists may allow competitors to sell their products to the same specialists, potentially reducing sales and creating market confusion.
• Success depends on broad market acceptance of BIT technology in the Hospital-Healthcare market, which has not yet been achieved, leading to increased lead times for sales.
• Substantial doubt about the company's ability to continue as a going concern within one year due to recurring net losses, negative cash flows from operations, and a retained deficit.
• Exposure to a variety of risks associated with doing business internationally, including currency exchange rate fluctuations, regulatory changes, difficulties in enforcing agreements, and geopolitical instability.
• Potential harm to business if procedures to ensure compliance with export control laws are ineffective, leading to fines or sanctions.
• Climate-related risks, evolving environmental regulations, and increased focus on environmental, social, and governance (ESG) matters could increase operating costs or harm reputation.
• Reliance upon third-party contractors, suppliers, and a single manufacturer for SteraMist equipment increases the risk of supply disruptions, increased product costs, and reduced control over the manufacturing process.
• Inability to accurately forecast customer demand or effectively manage inventory could lead to excess inventory write-downs or inability to fulfill customer orders.
• Inability to adequately protect intellectual property (patents, trademarks, trade secrets) could lead to invalidation, infringement, or loss of competitive position.
• Risk of loss of the company's intellectual property, trade secrets, or disruption of operations due to cyber-incidents.
• Inability to enforce intellectual property rights throughout the world, particularly in foreign jurisdictions with weaker protections.
• Significant competition in the decontamination and environmental infectious disease control industry from companies with longer operating histories, more established products, or greater resources.
• If the quality of products does not meet customer expectations, the brand and reputation could be adversely affected.
• Inability to enhance, develop, market, and sell new products may prevent the company from remaining competitive.
• A limited management team size may reduce the ability to effectively manage business operations as it grows.
• Operations are subject to business continuity hazards and risks, including natural disasters, utility failures, and supply chain disruptions, which could interrupt production or operations.
• Products are subject to potential product liability claims, which, if successful, could have a material adverse effect on the business.
• Misuse of products may harm reputation, result in injuries, or lead to costly investigations, fines, or sanctions by regulatory bodies.
• Inability to develop and maintain an effective system of internal controls over financial reporting, or the requirements of being a public company straining resources, could lead to inaccurate financial reporting.
• The stock price is volatile, and there is a limited market for shares, making it susceptible to fluctuations from various factors.
• No intention to pay dividends for the foreseeable future, meaning investors' return depends solely on stock price appreciation.
• Substantial future sales of common stock, or the perception that these sales may occur, may depress the stock price.
• Outstanding convertible notes impose financial obligations, carry risks of dilution upon conversion, and may adversely affect the ability to raise additional capital.
• Inability to maintain compliance with Nasdaq's listing standards (minimum bid price and stockholders' equity) could lead to delisting, limiting shareholders' ability to trade common stock.
• Reduced reporting requirements as a smaller reporting company could make common stock less attractive to investors.
• Anti-takeover provisions in corporate documents and Florida law could prevent or delay a change in control, even if beneficial to shareholders.
• Concentration of common stock ownership with executive officers, directors, and affiliates (22.8%) limits other shareholders' ability to influence corporate matters.

Future Outlook

Management anticipates the remaining $1.4 million of the $3 million integration pipeline to be awarded in the first half of 2026. The company is actively pursuing additional EPA labels, including a food safety label submitted in mid-2025, and preparing to file for a fifth label based on Plum Island studies. Management views delays in CES project conversions as a temporary, tariff-driven slowdown in U.S. pharmaceutical facility capital decisions, expecting recovery and acceleration through 2026-2027. The company intends to fund ongoing activities by utilizing current cash, cash from operations, and raising additional capital through equity or debt financing, including the ELOC. Management believes the ELOC provides meaningful near-term liquidity, with capacity for up to approximately $4 million in the short term, subject to market conditions. Conversion of the $18 million commercial sales pipeline is a primary driver of the 2026 liquidity plan.

Management Comments

• "While 2025 presented revenue headwinds, the year was marked by significant commercial momentum, new market entries, product validation across all four divisions, and a strong exit pipeline."
• "Management views this [CES project conversion delays] as a timing issue reflecting broader macroeconomic conditions rather than a change in underlying customer demand, and industry forecasters project that pharmaceutical manufacturing construction activity will recover and accelerate through 2026-2027 as policy clarity improves."
• "Management believes this facility [ELOC] provides meaningful near-term liquidity, with capacity to provide up to approximately $4 million in the short term, subject to market conditions."
• "While management believes the actions described above provide a reasonable basis to address the going concern conditions, there can be no assurance that we will successfully execute this plan, that our pipeline will convert to revenue on the anticipated timeline, or that additional capital will be available on terms acceptable to us."

Industry Context

StockSavvy.ai notes that TOMI Environmental Solutions operates in a highly competitive disinfection and decontamination industry, facing established players like Steris, Bioquell (Ecolab), and Clorox. The company's strategic focus on OEM partnerships and expansion into specialized verticals like aerospace, aquaculture, and cell and gene therapy aligns with broader industry trends towards integrated and validated decontamination solutions. The FDA's expanded use of hydrogen peroxide as a direct food additive presents a significant regulatory tailwind for TOMI's SteraMist iHP technology in the food safety market, potentially differentiating it from competitors. The observed slowdown in U.S. pharmaceutical facility construction due to tariff policy uncertainty reflects a broader macroeconomic impact on capital expenditure in the life sciences sector, which could affect other industry players as well.

Comparison to Industry Standards

• SteraMist iHP achieves a 6-log (99.9999%) or greater kill rate, which is superior to the 99.9% (sanitizing) or 99.99% (disinfection) achieved by most household and industrial disinfectants.
• The company's BIT technology as a Hospital-Healthcare disinfectant has been proven successful in reducing infections in hospital ICUs, having received full Hospital registration for Clostridium difficile spores from the EPA in mid-2017, positioning it against traditional manual cleaning techniques.
• SteraMist's 7.8% hydrogen peroxide concentration falls below the DOT threshold prohibiting air shipment of products containing greater than 8% hydrogen peroxide, offering a logistical advantage over competitors relying on higher-concentration formulations that must ship by rail, road, or sea.
• The company's OEM partnerships with ESCO, Steelco, PBSC, Nuaire, and Getinge for integrating iHP into cleanroom enclosures, passthrough hatches, and biosafety cabinets are comparable to industry leaders offering integrated solutions for advanced manufacturing environments.

Management Changes

Corporate Governance

Legal Proceedings

• No legal matters currently involving the company that would have a material adverse effect on financial condition, results of operations, or cash flows.

Related Party Transactions

• For the year ended December 31, 2025, there were no transactions, arrangements, or relationships in which the company was a participant, the amount involved exceeded $120,000, and in which any director, executive officer, nominee for director, or beneficial owner of more than 5% of common stock, or any immediate family member, had a direct or indirect material interest.

Stakeholder Impact

• Shareholders: Face significant dilution risk from convertible notes, warrants, and the ELOC. Experience limited influence due to concentrated ownership. Risk of delisting from Nasdaq could severely impact stock liquidity and value. No dividends expected.
• Employees: The company operates with a lean, cross-functional team, with individual contributors carrying significant responsibility. Management changes, particularly the new CFO, aim to strengthen the finance function. Accrued but unpaid compensation for executive officers indicates cash conservation measures impacting management.
• Customers: Benefit from new product lines (SIS-SA), OEM partnerships, and expanded applications (aerospace, aquaculture, food safety). Delays in CES project conversions could impact customer timelines for large pharmaceutical facilities.
• Suppliers/Creditors: The company's reliance on a limited number of third-party manufacturers and suppliers creates concentration risk. The 'going concern' doubt and low cash position pose risks to creditors, although the company is pursuing capital raises. The sale of future receipts agreement with Agile Capital Funding is secured by accounts receivable.

Next Steps

• Regain compliance with Nasdaq's minimum bid price requirement ($1.00) by May 18, 2026, potentially through a reverse stock split.
• Regain compliance with Nasdaq's minimum stockholders' equity requirement ($2.5 million) by May 20, 2026.
• Convert the commercial sales pipeline (exceeding $18 million) into recognized revenue in 2026 to improve liquidity.
• Award the remaining $1.4 million of the $3 million integration pipeline in the first half of 2026.
• Pursue additional EPA labels, including the food safety label submitted in mid-2025, and prepare to file for a fifth label.
• Advance the heart monitoring device project towards Factory Acceptance Testing (FAT) and subsequent 510(k) premarket notification pathway submission for U.S. market clearance.
• Continue to recruit and train personnel with appropriate internal controls knowledge and accounting experience.
• Engage third-party consultants and specialists to supplement internal capabilities for internal controls.
• Evaluate options to reduce outstanding convertible note obligations, including potential conversion into equity or repayment.
• Fulfill registration obligations for shares issuable upon conversion of convertible notes.
• Continue to actively manage controllable costs.
• Satisfy accrued but unpaid executive compensation obligations as operating cash flow permits.
• Continue to evaluate the impact of OBBBA tax provisions on 2026 and subsequent financial statements.

Key Dates

Recommendation

The company faces severe financial distress, explicitly stating 'substantial doubt about its ability to continue as a going concern.' This is compounded by significant cash depletion, a 27% revenue decline, and two concurrent Nasdaq delisting threats for minimum bid price and stockholders' equity. While there are some positive operational developments and a capital raise facility, the fundamental financial health and immediate liquidity challenges are overwhelming. The material weaknesses in internal controls further underscore operational instability. A seasoned investor would view these factors as indicative of extremely high risk and a strong likelihood of further share price depreciation or even delisting.

Keywords

Disinfection, Decontamination, SteraMist, Binary Ionization Technology, iHP, Hydrogen Peroxide, Life Sciences, Hospital-Healthcare, Food Safety, Commercial Disinfection, SEC Filing, 10-K, Financial Results, Going Concern, Nasdaq Delisting, Biosecurity, EPA Registration, OEM Partnerships, Capital Raise, Internal Controls