TOMI Environmental Solutions, Inc. 10-K

Item 1. BUSINESS 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™). Our solution and process are environmentally friendly because the only by-product from our decontamination process is oxygen and humidity. Our solution is organically listed in the United States and Canada as a sustainable green product with no or very little carbon footprint. Most of our competitors in the disinfection space leave significant byproducts and are corrosive. SteraMist is noncorrosive and does not damage equipment or facilities. Our 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’s 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 and many other disinfection decontamination processes. Proprietary ingredients accelerate mist and fog dispersion by reducing evaporation time and treatment duration. 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. Our DARPA-originated technology kills on contact with no residue. Under the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), we are 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 (Avian) 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). In 2021, the EPA granted SteraMist® BIT™ 0.35% hydrogen peroxide – EPA registration number 90150-3. 4 Table of Contents SteraMist® BIT™ brings to the world a mechanical and automated method of cleaning using innovative technology and EPA registered Hospital-HealthCare disinfectant, which improves and upgrades existing disinfecting and cleaning protocols that mitigates the risk of liability in a facility with transmission of resistant infectious pathogens. We maintain this registration in all fifty (50) states, Washington DC, Canada, and registration and or importation rights in approximately thirty-five (35) other countries as of March 28,2022. Our Technology BIT ™ was initially 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 DARPA demonstrated these hydroxyl radicals aggressively break the double bonds and other bonds in bacteria, bacterial spores, fungi, fungus spores, viruses and certain 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 resistant 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 our technology was developed to combat the hardest to kill pathogens and neutralize the most difficult chemical agents, our products and services have been used by our customers who are fighting at the front lines of combating the COVID-19 pandemic, especially from early 2020 to 2021. As the COVID-19 pandemic gradually subsides, our customers continued to utilize our products as cleaning protocols have been changed due the impact of the COVID-19 pandemic. 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. 5 Table of Contents SteraMist ® products are fully validated or are in the final process of completion 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 SteraPak ® SteraPak is our most affordable and portable SteraMist system yet. The all-in-one SteraPak ® places the SteraMist ® technology onto the technicians back, delivering premium disinfection utilizing a rechargeable battery and cordless operation. Comfortable to use, easy to operate, and has AC and DC power functionality ensuring compatibility in all countries. The SteraPak ® is sold with a case of BIT Solution of eight (8) 32-ounce bottles. The single applicator Pak 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. 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. 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 m 3 (3,663 ft 3 ) in just under 45 minutes (application and dwell time). Individually, each remote applicator can be used to treat a space of approximately 34.6 m 3 (1,221 ft 3 ). 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. 6 The SteraMist ® Total Disinfection Cart The Total Disinfection Cart was designed with input of public healthcare facilities EVS (Environmental Service) teams using our equipment for the SHIELD study that TOMI was participating in. The cart houses our Surface Unit, a portable H 2 O 2 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. SteraMist ® Select Surface Unit Our Select Unit was designed to meet the needs of our customers who have smaller enclosures that require 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, pump fluid flow, set the programmable timer for automatic runs, modify spray/dwell times and the number of treatment cycles along with being equipped with start and stop buttons. It is ideal for the decontamination of Biosafety cabinets, Laminar flow cabinets, Isolators and other small and medium size laboratory and research equipment. 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. 6 Table of Contents iHP ™ Plasma Decontamination Chamber Our patented cold plasma technology can be integrated with a chamber or cage washer by leading manufacturers. Current examples are, BetterBuilt, Allentown and Coy Lab. 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. SteraMist ® Custom Engineered System (CES) The SteraMist ® permanent installation is perfect for any room that requires routine automated decontamination. The CES is an automated system that is installed and 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. iHP ™ Corporate Service Decontamination TOMI offers full room, equipment, facility, and emergency disinfection and decontamination services by certified SteraMist technicians. Our goal is to give our customers a fully tailored service that provides 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. SteraMist technicians provide an efficient 4-step facility disinfection decontamination: site review, protocol generation, deployment and service, and post-treatment reporting. Industries & Market Segments Our 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 have 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 Commercial. Hospital-HealthCare. SteraMist ® solutions 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, write treatment protocols, 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. 7 Table of Contents Life Sciences. Our SteraMist ® line of products is a decontamination solution 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 performs 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. 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 partners. Members are provided access to 24/7 support in marketing their iHP service divisions and landing webpage connected to our website. We are technically advancing and streamlining engagement for the TOMI Service Network (TSN) by providing a user-friendly membership portal – The SteraMist | TSN Portal. This membership portal will host all marketing and informational material, ability to share member information to easily collaborate with other members, forums to interact and discuss topics and further develop knowledge on disinfection, podcast link, news alerts about new products and promotions, and direct to an order link. This portal will be available for desktop as well as a mobile app located on Apple App Store and Google Play. This portal will also be available for SteraMist Representatives, domestic and international, with amended permissions for ease of access to all SteraMist sales materials. Our TSN network includes professional first responders that specialize within the mold remediation, hurricane and tornado response and other mitigation fields, biohazard and forensic specialists, and janitorial businesses. 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 and our latest product launch the SteraPak ® has received well recognized feedback in these markets. 8 Table of Contents Homeland defense and border protection is a subspecialty of our commercial division . 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 ® mitigates 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 assists 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 three (3) ISO9001 registered companies with multiple facilities in Pennsylvania, New York, New Jersey, North Carolina, California, and Australia. Our solution is blended by an EPA approved blender; our blend includes one (1) sole active ingredient, 7.8% Hydrogen Peroxide. TOMI maintains ownership of all the SteraMist ® product lines, including our BIT ™ Solution. Neither our manufacturer nor 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 or are in the process of receiving 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. In 2021, we were granted utility patents in Korea, Canada, Mexico, Taiwan, Israel, and Australia for our SteraMist BIT. 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. We have submitted utility patent applications in multiple countries, including Europe, China, Brazil, and Australia for further additional applications of SteraMist BIT, and a related application has already been determined novel and inventive in Taiwan. We have been 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. We are also pursuing IP protection for further applications of our SteraMist BIT in diverse fields at multiple jurisdictions, such as food decontamination. 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 today, we have over two hundred trademarks, (word and/or logo) registered or pending across the globe. TOMI registers marks in eight (8) 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, Class 40 for Chemical Decontamination and Manufacturing Services, and Class 41 for Providing Education Training and information related to biological and bacterial decontamination services. 9 Table of Contents 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. 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. At the end of September 2021, we on boarded yet another new international partner. Critical Scientific Solutions are specialists in Australia and New Zealand who offer products and solutions to the pharma, biotech, medical device and research sectors. The company was established in 2016 by an executive team who has 30 plus years’ experience for clean room products. The TOMI sales team is already working with Critical Scientific who within months has a large opportunity with the Australian Government agency responsible for scientific research. In December of 2021, TOMI launched the SteraMist Amazon Store. The digital storefront expands our sales channels, increases TOMI brand awareness and optimizes and streamlines the buying process for our customers. Competition The decontamination and environmental infectious disease control industry is intensely 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 2021 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, and our abilities to discover, develop, market, and innovate, disruptive cost-effective products and services. 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. 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 “iHP 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. 10 Table of Contents Another key and critical advantage is the technology’s superior material compatibility. iHP kills on contact and leaves 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, creating a more costly product in the long run. Our patented SteraMist technology 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 contact time. Our technology has multiple competitive advantages required for disinfection SteraMist is 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-small micron 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. · Easy to use. · Does not require mixing of materials. · No Touch. · No Wipe, No Rinse. · Does not include silver ions or peracetic acid. · Leaves no residue. · Not affected by humidity or temperature. · Non-corrosive. · Does not damage medical or electronic equipment. · By-products converts to water (humidity) and oxygen. Research & Development Our research and development efforts focus on improving, extending and applying our proprietary technology in the field of mechanical cleaning and decontamination. Research and development expenses for the years ended December 31, 2021 and 2020, were approximately $573,000 and $455,000, 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 14, 2022, we have twenty-four (24) 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. We consider our relationship with the employees to be good. 11 Table of Contents