What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 171 added, 154 removed, 653 unchanged (33% of the section changed)

1 unchanged sentence

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2021

December 31, 2020

CONDENSED CONSOLIDATED BALANCE SHEETS

Current Assets:

September 30, 2021 (Unaudited)

December 31, 2020

Cash and Cash Equivalents

23 unchanged sentences

Total Liabilities

Commitments and Contingencies

Commitments and Contingencies (Note 11)

Shareholders’ Equity:

2 unchanged sentences

63,750 shares issued

and outstanding at June 30, 2021 and December 31, 2020

and outstanding at September 30, 2021 and December 31, 2020

Cumulative Convertible Series B Preferred Stock;

2 unchanged sentences

4,000 shares authorized;

and outstanding at June 30, 2021 and December 31, 2020

none issued and outstanding at September 30, 2021 and December 31, 2020

Common stock;

1 unchanged sentence

19,680,955 and 16,761,513 shares issued and outstanding

at June 30, 2021 and December 31, 2020, respectively.

at September 30, 2021 and December 31, 2020, respectively.

Additional Paid-In Capital

6 unchanged sentences

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For The Three Months Ended

For The Six Months Ended

For The Nine Months Ended

September 30,

Cost of Sales

10 unchanged sentences

( 3,190,199 )

( 2,703,562 )

Other Income (Expense):

16 unchanged sentences

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the six months ended June 30, 2021

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the nine months ended September 30, 2021

Series A Preferred

Shareholders’

Balance at December 31, 2020

Total Shareholders’

Balance at January 1, 2021

$ ( 39,108,078 )

Common Stock Issued for Services Provided

Net (Loss) for the six months ended June 30, 2021

Common Stock Issued in Private Placement

Net (Loss) for the nine months ended September 30, 2021

( 2,775,952 )

Balance at June 30, 2021

Balance at September 30, 2021

$ ( 41,884,030 )

For the six months ended June 30, 2020

For the nine months ended September 30, 2020

Series A Preferred

Shareholders’

Balance at December 31, 2019

Total Shareholders’

Balance at January 1, 2020

$ ( 43,499,244 )

3 unchanged sentences

Warrants and Options Exercised

Net Income for the six months ended June 30, 2020

Balance at June 30, 2020 (1)

Reverse stock split adjustment

Net Income for the nine months ended September 30, 2020

Balance at September 30, 2020

$ (36,203,766 )

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the three months ended June 30, 2021

For the three months ended September 30, 2021

Series A Preferred

Shareholders’

Balance at March 31, 2021

$ ( 40,619,018 )

Net (Loss) for the three months ended June 30, 2021

Total Shareholders’

Balance at June 30, 2021

$ ( 41,397,472 )

For the three months ended June 30, 2020

Common Stock Issued in Private Placement

Net (Loss) for the three months ended September 30, 2021

Balance at September 30, 2021

$ ( 41,884,030 )

For the three months ended September 30, 2020

Series A Preferred

Shareholders’

Balance at March 31, 2020

Total Shareholders’

Balance at June 30, 2020

$ ( 37,223,065 )

1 unchanged sentence

Warrants and Options Exercised

Net Income for the three months ended June 30, 2020

Balance at June 30, 2020 (1)

Reverse stock split adjustment

Net Income for the three months ended September 30, 2020

Balance at September 30, 2020

$ ( 36,203,765 )

(1) Share amounts with respect to the common stock and Convertible Series A Preferred Stock have been retroactively restated to reflect the reverse split thereof, which was effected as of the close of business on September 10, 2020.

(1) Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected September 10, 2020.

Refer to Note 10—Equity for further information.

1 unchanged sentence

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30,

Cash Flow From Operating Activities:

16 unchanged sentences

( 1,006,689 )

( 1,923,030 )

Prepaid Expenses

7 unchanged sentences

Lease Liability

Net Cash Provided (Used) in Operating Activities

Net Cash Provided by (Used in) Operating Activities

( 3,823,191 )

5 unchanged sentences

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS – CONTINUED

For the Six Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED

For the Nine Months Ended September 30,

Cash Flow From Financing Activities:

Proceeds from Issuance of Stock and Warrants

Proceeds from Exercise of Warrants and Options

2 unchanged sentences

Net Cash Provided by Financing Activities:

Increase (Decrease) In Cash and Cash Equivalents

( 2,710,429 )

Increase In Cash and Cash Equivalents

Cash and Cash Equivalents - Beginning

13 unchanged sentences

TOMI Environmental Solutions, Inc., a Florida corporation (“TOMI”, the “Company”, “we”, “our” and “us”) is a global provider of disinfection and decontamination essentials through our premier Binary Ionization Technology® (BIT™) platform, under which we manufacture, license, service and sell our SteraMist® brand of products, including SteraMist® BIT™, a hydrogen peroxide-based mist and fog.

Our solution and process are environmentally friendly as the only biproduct from our decontamination process is oxygen and humidity.

Our solution is organically listed in the United States and Canada it is sustainably a green product with no or very little carbon footprint.

Our business is organized into five divisions:

20 unchanged sentences

The accompanying condensed consolidated financial statements include the accounts of TOMI and its wholly owned subsidiary, TOMI Environmental Solutions, Inc., a Nevada corporation.

All significant intercompany accounts and transactions have been eliminated in consolidation.

All intercompany accounts and transactions have been eliminated in consolidation.

Reclassification of Accounts

16 unchanged sentences

Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities.

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses.

All these items were determined to be Level 1 fair value measurements.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments.

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash and cash equivalents includes cash on hand, held at financial institutions and other liquid investments with original maturities of three months or less.

Cash and cash equivalents includes cash on hand, held at financial institutions and other liquid investments with original maturities of three months or less.

At times, these deposits may be in excess of insured limits.

At September 30, 2021 and December 31, 2020 there were no cash equivalents (or cash equivalents consisted of money market, etc)

Accounts Receivable

4 unchanged sentences

Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Bad debt expense for the three and six months ended June 30, 2021 was approximately $ 303,000 and $ 418,000 , respectively.

Bad debt expense for the three and six months ended June 30, 2020 was approximately $ 48,000 and $ 73,000 , respectively.

At June 30, 2021 and December 31, 2020, the allowance for doubtful accounts was $ 750,000 and $ 390,000 , respectively.

Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method.

Inventories consist primarily of finished goods.

Bad debt expense for the three and nine months ended September 30, 2021 was approximately $ 93,000 and $ 511,000 , respectively.

Bad debt expense for the three and nine months ended September 30, 2020 was approximately $ 153,000 and $ 226,000 , respectively.

At September 30, 2021 and December 31, 2020, the allowance for doubtful accounts was $ 750,000 and $ 390,000 , respectively.

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method.

Inventories consist primarily of finished goods and raw materials.

We expense costs to maintain certification to cost of goods sold as incurred.

1 unchanged sentence

We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories may not be usable.

Our reserve for obsolete inventory was $ 0 as of June 30, 2021 and December 31, 2020, respectively.

Our reserve for obsolete inventory was $ 0 as of September 30, 2021 and December 31, 2020, respectively.

Property and Equipment

14 unchanged sentences

Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the standard to all comparative periods presented.

Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease liabilities are recorded as current portion of long-term operating lease, and within long-term liabilities as long-term operating lease, net of current portion on our condensed consolidated balance sheet as of June 30, 2021 and December 31, 2020.

We have elected not to present short-term leases on the condensed consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise.

4 unchanged sentences

The periodic expense for the amortization of capitalized software development costs will be included in cost of sales.

Amortization expense for the three and six months ended June 30, 2021 and 2020 was $ 10,475 and $ 20,950 , respectively.

Amortization expense for the three and nine months ended September 30, 2021 and 2020, was $ 10,475 and $ 31,425 , respectively.

Accounts Payable

As of June 30, 2021, two vendors accounted for approximately 58 % of accounts payable.

As of September 30, 2021, one vendor accounted for approximately 25 % of accounts payable.

As of December 31, 2020, two vendors accounted for approximately 32 % of accounts payable.

For the three and six months ended June 30, 2021, two vendors accounted for 73 % and 68 % of cost of sales, respectively.

For the three and six months ended June 30, 2020, two vendors accounted for 78 % and 80 % of cost of sales, respectively.

For the three and nine months ended September 30, 2021, two vendors accounted for 55 % and 60 % of cost of sales, respectively.

For the three and nine months ended September 30, 2020, two vendors accounted for 66 % and 77 % of cost of sales, respectively.

Accrued Warranties

3 unchanged sentences

We assume responsibility for product reliability and results.

As of June 30, 2021, and December 31, 2020, our warranty reserve was $ 68,000 .

As of September 30, 2021, and December 31, 2020, our warranty reserve was $ 68,000 .

(See Note 14).

1 unchanged sentence

The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that are, on a more likely than not basis, not expected to be realized in accordance with Accounting Standards Codification (ASC) guidance for income taxes.

Net deferred tax benefits have been fully reserved at June 30, 2021 and December 31, 2020.

Net deferred tax benefits have been fully reserved at September 30, 2021 and December 31, 2020.

The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.

2 unchanged sentences

Diluted income or (loss) per share is based on the treasury stock method and includes the effect from potential issuance of shares of common stock, such as shares issuable pursuant to the exercise of options and warrants and conversions of preferred stock or debentures.

Potentially dilutive securities as of June 30, 2021 consisted of 1,849,133 shares of common stock issuable upon exercise of outstanding warrants, 132,500 shares of common stock issuable upon outstanding options and 63,750 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”).

Potentially dilutive securities as of June 30, 2020 consisted of 1,712,084 shares of common stock issuable upon exercise of outstanding warrants, 101,250 shares of common stock issuable upon outstanding options and 63,750 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”).

Potentially dilutive securities as of September 30, 2021 consisted of 3,424,771 shares of common stock issuable upon exercise of outstanding warrants, 132,500 shares of common stock issuable upon outstanding options and 63,750 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”).

Potentially dilutive securities as of September 30, 2020 consisted of 1,686,633 shares of common stock issuable upon exercise of outstanding warrants, 101,250 shares of common stock issuable upon outstanding options and 63,750 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”).

Diluted net income or (loss) per share is computed similarly to basic net income or (loss) per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if such additional shares were dilutive.

Options, warrants, and preferred stock of approximately 2.0 million and 2.2 million shares of common stock were outstanding at June 30, 2021 and December 31, 2020, respectively, but were excluded from the computation of diluted net loss per share at June 30, 2021 due to the anti-dilutive effect on net loss per share.

For the Three Months Ended June 30,

Options, warrants, and preferred stock of approximately 3.6 million and 2.2 million shares of common stock were outstanding at September 30, 2021 and December 31, 2020, respectively, but were excluded from the computation of diluted net loss per share at September 30, 2021 due to the anti-dilutive effect on net loss per share.

For the Three Months Ended September 30,

Net Income (Loss)

$ ( 486,558 )

Adjustments for convertible debt - as converted

Interest on convertible debt

Net income (loss) attributable to common shareholders

3 unchanged sentences

The following provides a reconciliation of the shares used in calculating the per share amounts for the periods presented:

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Net Income (Loss)

2 unchanged sentences

Effect of dilutive securities

Convertible Debt

Preferred Stock

1 unchanged sentence

Net Income (Loss) Per Common Share:

Warrants, options and preferred stock for the three months ended June 30, 2021 are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

Income (loss) from Operations Data:

Income (Loss) from Operations

$ ( 1,193,230 )

Basic and Diluted Weighted Average Shares:

Basic and Diluted Income (loss) Per Common Share:

For the Six Months Ended June 30,

Warrants, options and preferred stock for the three months ended September 30, 2021 are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

For the Nine Months Ended September 30,

Net Income (Loss)

7 unchanged sentences

The following provides a reconciliation of the shares used in calculating the per share amounts for the periods presented:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Net Income (Loss)

2 unchanged sentences

Effect of dilutive securities

Convertible Debt

Preferred Stock

1 unchanged sentence

Net Income (Loss) Per Common Share:

Warrants, options and preferred stock for the six months ended June 30, 2021 are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

Income (loss) from Operations Data:

Income (Loss) from Operations

$ ( 2,703,562 )

Basic and Diluted Weighted Average Shares

Basic and Diluted Income (loss) Per Common Share

Warrants, options and preferred stock for the nine months ended September 30, 2021 are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

Revenue Recognition

We recognize revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606).

We recognize revenue in accordance with Financial Accounting Standards Board (FASB) ASC 606, Revenue from Contracts with Customers.

We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

17 unchanged sentences

Disaggregation of Revenue

The following table presents our revenues disaggregated by revenue source.

The following table presents our approximate revenues disaggregated by revenue source.

Product and Service Revenue

For the three months ended June 30,

For the three months ended September 30,

SteraMist Product

1 unchanged sentence

Revenue by Geographic Region

For the three months ended June 30,

For the three months ended September 30,

United States

1 unchanged sentence

Product and Service Revenue

For the six months ended June 30,

For the nine months ended September 30,

SteraMist Product

1 unchanged sentence

Revenue by Geographic Region

For the six months ended June 30,

For the nine months ended September 30,

United States

9 unchanged sentences

Contract Balances

As of June 30, 2021, and December 31, 2020 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

As of September 30, 2021, and December 31, 2020 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Arrangements with Multiple Performance Obligations

5 unchanged sentences

We account for equity compensation expense in accordance with FASB ASC 718, “Compensation—Stock Compensation.” Under the provisions of FASB ASC 718, equity compensation expense is estimated at the grant date based on the award’s fair value.

The valuation methodology used to determine the fair value of options and warrants issued as compensation during the period is the Black-Scholes option-pricing model.

The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options.

Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term.

The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common Stock and does not intend to pay dividends on its Common Stock in the foreseeable future.

The expected forfeiture rate is estimated based on management’s best assessment.

On July 7, 2017, our shareholders approved the 2016 Equity Incentive Plan, or the 2016 Plan.

5 unchanged sentences

All recipients of awards under the 2016 Plan are required to enter into award agreements with us at the time of the award, and awards under the 2016 Plan are expressly conditioned upon such agreements.

For the six months ended June 30, 2021 and 2020, we issued 50,000 shares of fully vested common stock, respectively, pursuant to the 2016 Plan to our directors.

For the nine months ended September 30, 2021 and 2020, we issued 50,000 shares of fully vested common stock, respectively, pursuant to the 2016 Plan to our directors.

Concentrations of Credit Risk

11 unchanged sentences

We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations.

We had no long-lived asset impairment charges for the three and six months ended June 30, 2021 and 2020.

We had no long-lived asset impairment charges for the three and nine months ended September 30, 2021 and 2020.

Advertising and Promotional Expenses

We expense advertising costs in the period in which they are incurred.

Advertising and promotional expenses included in selling expenses for the three and six months ended June 30, 2021 were approximately $ 140,000 and $ 406,000 , respectively.

Advertising and promotional expenses included in selling expenses for the three and six months ended June 30, 2020 were approximately $ 53,000 and $ 99,000 , respectively.

Advertising and promotional expenses included in selling expenses for the three and nine months ended September 30, 2021 were approximately $ 145,000 and $ 552,000 , respectively.

Advertising and promotional expenses included in selling expenses for the three and nine months ended September 30, 2020 were approximately $ 56,000 and $ 156,000 , respectively.

Research and Development Expenses

We expense research and development expenses in the period in which they are incurred.

For the three and six months ended June 30, 2021, research and development expenses were approximately $206,000 and $401,000, respectively.

For the three and six months ended June 30, 2020, research and development expenses were approximately $141,000 and $201,000, respectively.

For the three and nine months ended September 30, 2021, research and development expenses were approximately $ 93,000 and $ 495,000 , respectively.

For the three and nine months ended September 30, 2020, research and development expenses were approximately $ 45,000 and $ 245,000 , respectively.

Business Segments

9 unchanged sentences

Inventories consist of the following at:

September 30, 2021

December 31, 2020

Finished goods

1 unchanged sentence

VENDOR DEPOSITS

At June 30, 2021 and December 31, 2020, we maintained vendor deposits of $ 24,224 and $ 388,712 , respectively, for open purchase orders for inventory.

At September 30, 2021 and December 31, 2020, we maintained vendor deposits of $ 426,818 and $ 388,712 , respectively, for open purchase orders for inventory.

PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

September 30, 2021

December 31, 2020

Furniture and fixtures

4 unchanged sentences

Accumulated depreciation

For the three and six months ended June 30, 2021, depreciation was $ 69,990 and $ 151,016 , respectively.

For the three and six months ended June 30, 2020, depreciation was $ 78,950 and $ 157,513 , respectively.

For the three and six months ended June 30, 2021 and 2020, amortization of tenant improvement allowance was $ 9,798 and $ 19,597 , respectively and was recorded as lease expense and included within general and administrative expense on the consolidated statement of operations.

As of June 30, 2021, we had capitalized costs in progress not yet placed into service in connection with tooling and molds pursuant to ASC 340-10.

For the three and nine months ended September 30, 2021, depreciation was $ 67,383 and $ 218,398 , respectively.

For the three and nine months ended September 30, 2020, depreciation was $ 83,932 and $ 241,445 , respectively.

For the three and nine months ended September 30, 2021 and 2020, amortization of tenant improvement allowance was $ 9,798 and $ 19,597 , respectively and was recorded as lease expense and included within general and administrative expense on the consolidated statement of operations.

As of September 30, 2021, we had capitalized costs in progress not yet placed into service in connection with tooling and molds pursuant to ASC 340-10.

INTANGIBLE ASSETS

2 unchanged sentences

The trademarks have an indefinite life.

Amortization expense was $ 2,422 and $ 4,845 for the three and six months ended June 30, 2021, respectively.

Amortization expense was $ 93,347 and $ 186,694 for the three and six months ended June 30, 2020, respectively.

Amortization expense was $ 2,422 and $ 7,268 for the three and nine months ended September 30, 2021, respectively.

Amortization expense was $ 93,347 and $ 280,041 for the three and nine months ended September 30, 2020.

Definite life intangible assets consist of the following:

September 30, 2021

December 31, 2020

Intellectual Property and Patents

3 unchanged sentences

Approximate future amortization is as follows:

July 1 – December 31, 2021

October 1 – December 31, 2021

December 31, 2022

9 unchanged sentences

Operating leases:

June 30, 2021

September 30, 2021 (Unaudited)

December 31, 2020

Operating lease right-of-use asset

2 unchanged sentences

The components of lease expense are as follows and are included within general and administrative expense on our condensed consolidated statement of operations:

For the Three Months Ended June 30, 2021

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Operating lease expense

For the Six Months Ended June 30, 2021

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2021

For the Nine Months Ended September 30, 2020

Operating lease expense

Other information related to leases where we are the lessee is as follows:

June 30, 2021

September 30, 2021 (Unaudited)

December 31, 2020

4 unchanged sentences

Supplemental cash flow information related to leases where we are the lessee is as follows:

For the Three Months Ended June 30, 2021

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:

For the Six Months Ended June 30, 2021

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2021

For the Nine Months Ended September 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:

As of June 30, 2021, the maturities of our operating lease liability are as follows:

As of September 30, 2021, the maturities of our operating lease liability are as follows:

Operating Lease

July 1 – December 31, 2021

October 1 – December 31, 2021

December 31, 2022

9 unchanged sentences

Capitalized software development costs consist of the following at:

June 30, 2021

September 30, 2021

December 31, 2020

1 unchanged sentence

Accumulated Amortization

Amortization expense for the three and six months ended June 30, 2021 was $ 10,475 and $ 20,950 , respectively.

Amortization expense for the three and six months ended June 30, 2020 was $ 10,475 and $ 20,950 , respectively.

Capitalized Software Development Costs - net

Amortization expense for the three and nine months ended September 30, 2021 was $ 10,475 and $ 31,425 , respectively.

Amortization expense for the three and nine months ended September 30, 2020 was $ 10,475 and $ 31,425 , respectively.

CLOUD COMPUTING SERVICE CONTRACT

2 unchanged sentences

The annual contract payments are capitalized as a prepaid expense and amortized over a twelve-month period.

We have incurred implementation costs of $ 62,677 in connection with the cloud computing service contract which have been capitalized in prepaid expenses and other assets as of June 30, 2021.

We have incurred implementation costs of $ 62,677 in connection with the cloud computing service contract which have been capitalized in prepaid expenses and other assets as of September 30, 2021.

In accordance with ASU No.

2018-15, such implementation costs are being amortized over the remaining contract terms beginning January 1, 2021, which was when the cloud-based service contract was placed in service.

Amortization expense for the three and six months ended June 30, 2021 was $ 3,482 and $ 6,964 , respectively.

Amortization expense for the three and six months ended June 30, 2020 was $0.

Amortization expense for the three and nine months ended September 30, 2021 was $ 3,482 and $ 10,446 , respectively.

Amortization expense for the three and nine months ended September 30, 2020 was $ 0 .

SHAREHOLDERS’ EQUITY

8 unchanged sentences

Our authorized Convertible Series A Preferred Stock, $0.01 par value, consists of 1,000,000 shares.

At June 30, 2021 and December 31, 2020, there were 63,750 shares issued and outstanding.

At September 30, 2021 and December 31, 2020, there were 63,750 shares issued and outstanding.

The Convertible Series A Preferred Stock is convertible at the rate of one share of common stock for one share of Convertible Series A Preferred Stock.

1 unchanged sentence

Our authorized Convertible Series B Preferred Stock, $1,000 stated value, 7.5% cumulative dividend, consists of 4,000 shares.

At June 30, 2021 and December 31, 2020, there were no shares issued and outstanding, respectively.

At September 30, 2021 and December 31, 2020, there were no shares issued and outstanding, respectively.

Each share of Convertible Series B Preferred Stock may be converted (at the holder’s election) into two hundred shares of our common stock.

4 unchanged sentences

In June 2020, 26,940 shares of common stock were issued in connection with the exercise of warrants for which we received proceeds of $ 62,500 .

In July 2020, 26,940 shares of common stock were issued in connection with the exercise of warrants for which we received proceeds of $62,500

In January 2021, we issued 50,000 shares of common stock valued at $ 228,000 to members of our Board (see Note 12).

In September 2021, we sold 2,869,442 shares of common stock through a registered direct offering and issued 1,434,721 warrants in a concurrent private placement.

We received net proceeds from the transaction of $ 4,581,651 , after deducting the placement agent’s fees and other estimated offering expenses.

The Warrants are exercisable at an exercise price of $ 1.68 per share, are exercisable immediately upon issuance and have a term of exercise equal to five years from the date of issuance.

In addition, we issued 172,167 warrants to the placement agent which have a term of five years and an exercise price of $2.18.

Stock Options

There were no options granted for the six months ended June 30, 2021.

In January 2020 we issued two options to purchase an aggregate of 31,250 shares of common stock to our Chief Operating Officer at an exercise price of $0.80 and $0.96 per share pursuant to her employment agreement with us.

There were no options granted for the nine months ended September 30, 2021.

In January 2020 we issued two options to purchase an aggregate of 31,250 shares of common stock to our Chief Operating Officer at an exercise price of $0.80 and $ 0.96 per share in satisfaction of accrued compensation.

The options were valued at a total of $ 23,595 and have a term of 5 years.

6 unchanged sentences

The value of the stock option was included in accrued expenses at December 31, 2019.

The following table summarizes stock options outstanding as of June 30, 2021 and December 31, 2020:

June 30, 2021

The following table summarizes stock options outstanding as of September 30, 2021 and December 31, 2020:

September 30, 2021

December 31, 2020

Number of Options

Weighted Average Exercise Price

Number of Options

Weighted Average Exercise Price

1 unchanged sentence

Outstanding, end of period

Options outstanding and exercisable by price range as of June 30, 2021 were as follows:

Options outstanding and exercisable by price range as of September 30, 2021 were as follows:

Outstanding Options

Average Weighted Remaining Contractual

Exercisable Options

Life in Years

Exercise Price

Weighted Average Exercise Price

Stock Warrants

7 unchanged sentences

The grant date fair value of each share of common stock underlying the warrant was $ 1.04 .

In January 2020 we issued a warrant to purchase 5,208 shares of common stock to an employee at an exercise price of $ 0.96 per share.

In January 2020 we issued a warrant to purchase 5,208 shares of common stock to an employee at an exercise price of $ 0.96 per share in satisfaction of accrued compensation.

The warrant was valued at $ 3,594 and has a term of 5 years.

52 unchanged sentences

On the same date, the Warrant Amendment and the Repurchase was considered, approved and adopted by a disinterested majority of TOMI’s board of directors.

The $ 314,500 charge in connection with the warrant amendment has been included in General and Administrative expenses for the six months ended June 30, 2021.

The following table summarizes the outstanding common stock warrants as of June 30, 2021 and December 31, 2020:

June 30, 2021

The $ 314,500 charge in connection with the warrant amendment has been included in General and Administrative expenses for the nine months ended September 30, 2021.

In September 2021, we issued 1,434,721 warrants in a private placement in connection with the sale common stock through a registered direct offering.

The Warrants are exercisable at an exercise price of $ 1.68 per share, are exercisable immediately upon issuance and have a term of exercise equal to five years from the date of issuance.

In addition, we issued 172,167 warrants to the placement agent which have a term of five years and an exercise price of $ 2.18 .

The following table summarizes the outstanding common stock warrants as of September 30, 2021 and December 31, 2020:

September 30, 2021

December 31, 2020

5 unchanged sentences

Outstanding, end of period

Warrants outstanding and exercisable by price range as of June 30, 2021 were as follows:

Warrants outstanding and exercisable by price range as of September 30, 2021 were as follows:

Outstanding Warrants

Exercisable Warrants

Exercise Price

Average Weighted

Remaining Contractual

Life in Years

Weighted Average

Exercisable Warrants

Exercise Price

There were no unvested warrants outstanding as of June 30, 2021.

Number Life in Years

Number Weighted Average Exercise Price

31,250 2.15 31,250 $ 0.64

There were no unvested warrants outstanding as of September 30, 2021.

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

Product Liability

As of June 30, 2021 and December 31, 2020, there were no claims against us for product liability.

As of September 30, 2021 and December 31, 2020, there were no claims against us for product liability.

COVID-19 Pandemic

2 unchanged sentences

The Company experienced a substantial increase in demand for our products and services in 2020 due to the pandemic.

During the first half of 2021, the Company experienced a reduction of demand due to various factors, including the closure of our major customers’ business operations due to the pandemic, which resulted in the suspension of many of its ongoing long-term projects.

Throughout 2021, the Company experienced a reduction of demand due to various factors, including the closure of our major customers’ business operations due to the pandemic, which resulted in the suspension of many of its ongoing long-term projects.

It is difficult to predict how COVID-19 pandemic will affect the Company’s financial performance in the remainder of 2021, as the global economy gradually reopens, customers adjust and change their operations, and the Company implements new marketing and sales strategies in response.

45 unchanged sentences

Director compensation also includes the annual issuance of our common stock.

For the six months ended June 30, 2020, we issued an aggregate of 50,000 shares of common stock that were valued at $ 48,000 to members of our Board.

For the six months ended June 30, 2021, we issued an aggregate of 50,000 shares of common stock that were valued at $ 228,000 to members of our Board.

For the nine months ended September 30, 2020, we issued an aggregate of 50,000 shares of common stock that were valued at $ 48,000 to members of our Board.

For the nine months ended September 30, 2021, we issued an aggregate of 50,000 shares of common stock that were valued at $ 228,000 to members of our Board.

Manufacturing Agreement

6 unchanged sentences

Approximate minimum future payments under the contract are as follows:

July 1 - December 31, 2021

October 1 - December 31, 2021

December 31, 2022

7 unchanged sentences

As part of these agreements, we are obligated to provide to the PSPs various training, ongoing support and facilitate a referral network call center.

As of June 30, 2021, we have 201 network companies in TSN.

As of September 30, 2021, we have 203 network companies in TSN.

The nature and terms of our TSN agreements may represent multiple deliverable arrangements.

3 unchanged sentences

Accrued expenses and other current liabilities consisted of the following at:

June 30, 2021

September 30, 2021

December 31, 2020

11 unchanged sentences

The following table presents warranty reserve activities at:

June 30, 2021

September 30, 2021

December 31, 2020

8 unchanged sentences

The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note.

In May of 2021, the loan principal and related interest was forgiven and we recognized a gain upon debt extinguishment in our statement of operations in the amount of $414,583 for the six months ended June 30, 2021.

For the three and six months ended June 30, 2021 and 2020, our provision for income tax was $ 0 .

For the three and nine months ended September 30, 2021 and 2020, our provision for income tax was $ 0 .

Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse.

The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits, which are, on a more likely than not basis, not expected to be realized in accordance with ASC guidance for income taxes.

As of June 30, 2021 and December 31, 2020, we recorded a valuation allowance of $ 4,170,000 and $ 3,530,000 , respectively for the portion of the deferred tax assets that we do not expect to be realized.

As of September 30, 2021 and December 31, 2020, we recorded a valuation allowance of $ 4,307,000 and $ 3,530,000 , respectively for the portion of the deferred tax assets that we do not expect to be realized.

Management believes that based on the available information, it is more likely than not that the remaining U.S.

3 unchanged sentences

CUSTOMER CONCENTRATION

Two customers accounted for 29 % of our revenue for the three months ended June 30, 2021.

We had no customers/distributor whose revenue individually represented 10% or more of our total revenue for the six months ended June 30, 2021.

One customer/distributor accounted for 13 % of net revenue for the six months ended June 30, 2020.

We had three customers/distributors that accounted for 42 % of accounts receivable as of June 30, 2021.

Two customers accounted for 29 % of net revenue for the three months ended September 30, 2021.

We had no customers/distributor whose revenue individually represented 10% or more of our total revenue for the nine months ended September 30, 2021.

For the nine months ended September 20, 2020, one customer accounted for 11 % of net revenue

We had two customers/distributors that accounted for 25 % of accounts receivable as of September 30, 2021.

Three customers/distributors accounted for 36 % of accounts receivable as of December 31, 2020.

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were issued and up to the time of filing of the financial statements with the SEC.

There were no reportable subsequent events.

On October 26, 2021, we filed a Form S-3 Registration Statement which registered 1,606,888 shares of common stock issuable upon the exercise of outstanding common stock purchase warrants acquired in connection with registered direct offering on September 26, 2021 and due the placement agents.

The registration statement was declared effective by the SEC on November 8, 2021.

See note 10 (common stock) for additional details.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements