What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-05-05 · 135 added, 87 removed, 425 unchanged (34% of the section changed)

13 unchanged sentences

Business Update

The first four months of the 2022 fiscal year has been active with respect to our sales and business development.

We remain focused on growing our top line revenue, expanding our customer base, adding key employees, and making further innovations to our product line.

The first quarter of 2022 delivered improved revenue and operating results as we achieved a 11% growth in our first quarter sales and 24% reduction in our operating expenses when compared to the same period last year .

Our first quarter revenue also grew by 15% sequentially over what was reported in the fourth quarter of 2021.

The increase in sales was primarily due to higher demand for our mobile equipment and iHP corporate services.

In the first quarter of 2022, we report positive cash flow from operations for first time since the second quarter of 2020, and this improvement in cash flow was attributable to customer deposits we received in the first quarter in addition to lower operating expenses.

During the first quarter of 2022 we received approximately $3.5 million in orders from key fortune 500 customers, of which we anticipate about $3.2 million of which to be recognized as revenue in our current calendar year.

The first half of 2022 has delivered growth and improvement in our comparable year over year sales, customer sales order and improved financial operating results.

We grew revenue for the six months ended June 30, 2022 by 6% when compared to the same prior year period due to increased demand for our SteraMist mobile equipment.

Our reportable quarter over quarter revenue for the three months ended June 30, 2022 was flat with the same prior period.

However, as discussed below, we did secure several key sales orders for custom built in units in the second quarter of 2022 which will be recognized into revenue in the next few quarters (2022-2023), also contributing to our growing revenue pipeline.

We have experienced some pullback in spending in healthcare and our smaller clients;

however, we continue to see increased spending from our life sciences which is our largest vertical.

Through June 30, 2022, we have received $5,600,000 in sales orders from key global fortune 500 customers of which revenue recognition will be upon delivery throughout 2022 and early 2023.

This represents 35% growth when compared to the first half of 2022.

The increase in sales orders is largely attributable to increased demand for our Custom Engineered Systems (CES) as well as iHP Service engagements.

A key driver to our longer-term growth is strengthening demand for our Custom Engineered Systems (CES).

Partnering with our domestic and International manufacturing sales representatives, we are building awareness for CES.

We have secured several new orders for our iHP CES and more set to close eminently, revenue recognition will be upon delivery throughout 2022 and early 2023.

As the markets need for our automated disinfection CES continues to increase, TOMI has re-engaged with our manufacturing sales representatives and partners both domestically and internationally.

The renewed interest can be attributed to TOMI corporate’s support and the launch of the SteraMist Support Portal that is available on desktop.

We have also developed a mobile app which provides ease of use for sales support, branding, and assistance to our TOMI Service Network providers, sales representatives, and international distributors and end users.

As we install CES units, we can expect to see the increase in solution sales as these units are designed to be used at regular schedules that will require the solution during the use.

We believe based upon current orders, recent additional booking and pending negotiations, that we will surpass our original 2022 budget and analyst expectations.

Our overall financial operating results for the three and six months ended June 30, 2022 showed improvement when compared to the prior year.

We reduced operating expenses by 16% and 21% for the three and six months ended June 30, 2022, respectively, when compared to the same prior year periods.

We reduced our loss from operations by 28% and 44% for the three and six months ended June 30, 2022 when compared to the same prior year periods.

Through June 30, 2022, we used approximately $451,000 in cash from operations, an approximate $2,061,000 improvement over the cash used in operations of $2,512,000 during the six months ended June 30, 2021.

The improved cash flow is primarily due to the lower reported loss and customer deposits we received in the current year as well as inventory purchases in the prior quarter as supplies were replenshined.

The customer deposits primarily represent down payments made by our customers for orders that will be recognized into revenue as the projects are completed and delivered.

Due to continued growth in CES orders we expect receipt of additional deposits in the second half of 2022 which will provide a benefit to our cash flows and sales pipeline.

As our customer base grows, we continue to address the need for timely responses to inquiries, questions, orders and support.

TOMI corporate’s support focus along with the launch of the SteraMist Support Portal available on desktop as well as via a mobile app which provides ease of use for sales support, branding, and assistance to our TOMI Service Network providers, sales representatives, and international distributors and end users.

Studies remain a focus as TOMI continues to pursue a wide array of industries.

Studies focused on Botrytis cinerea and Mycotoxin, as well as furthering testing on chemical and biological warfare agents will further enhance TOMI’s ability to further penetrate the market.

Finally, our manufacturing capacity and capabilities were improved in the first quarter of 2022 with the addition of ARM Enertech Associates who can manufacture our CES in their Pennsylvania facility.

Our manufacturing capacity and capabilities were improved in the first half of 2022 with the addition of ARM Enertech Associates who can manufacture our CES in their Pennsylvania facility.

Furthermore, our existing manufacturer Planet Innovation has expanded into California providing easier access to our internal technology team and a lower cost in domestic shipment charges.

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Product Development

As many industrial companies are reducing R&D and capital expenditures spending due to the economic impact of the pandemic, we are moving ahead with many new products in development.

As many industrial companies are reducing R&D and capital expenditures spending due to the current economic conditions, TOMI is moving ahead with new products in development.

In 2022, we intend to increase capital expenditures (CapEx) and operating expenditures (OpEx), including development of new products, services and process technologies to sharpen our competitive advantage.

In addition, we intend to expand our commercial service location to meet the expanding needs of our customers.

Our recent products developed and launched are as follows:

The second half of 2020 showed us that our customers prefer a disinfection device with lower cost and more versatility.

To respond, we developed the Backpack (SteraPak) that includes our award winning 6-log and above kill technology and speed.

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

In addition, our solution and process are environmentally friendly as the only by-product from our decontamination process is oxygen and water in the form of humidity.

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

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Our tooling and molds will allow us to streamline production and reduce manufacturing lead times and costs on the SteraPak.

Other new products that have been incorporated into our product line include the Select Plus, which is a hybrid product consisting of the Company’s current Surface Select and Environment systems.

Other updated products that have been incorporated into our product line include the Select Plus, which is a hybrid product consisting of the Company’s current Surface Select and Environment systems.

The unit will allow for enhanced flexibility by using a single applicator to decontaminate full-room to small-space volume while maintaining the size of the current Surface Select unit with more robust process controls.

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It will be an easy-to-use turn-key integration system.

The implementation of this product and our patented non-corrosive iHP technology should replace the number one competitor in this marketplace, which uses an extremely harsh chemical.

The implementation of this product and our patented non-corrosive iHP technology will certainly replace the number one competitor in this marketplace, which uses an extremely harsh chemical.

Many of our customers have been waiting for the release and demonstration of these new products, especially the SteraPak.

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(“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 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.

Most of our competitors in the disinfection space leave significant byproducts and are corrosive.

Our solution and process are environmentally friendly as the only by-product 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 carbon footprint.

Most of our competitors in the disinfection space leave significant by-products and are corrosive.

SteraMist is not corrosive, and it does not damage equipment or facilities.

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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.

This is a science that world needs to follow.

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.

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For 2022 and beyond, TOMI expects growth in SteraMist Custom Engineered Systems (CES) bids and the manufacturing and implementation of these fully automated decontamination systems.

The first CES system was completed in 2016 for Dana Farber Cancer Institute, as Dana Farber was designing a new vivariumand had the opportunity to integrate several new technologies to advance overall efficiency, quality, and design.

The installed CES will also result in increased solution sales for Life Sciences as the CES’s are used at regular intervals.

The first CES system was completed in 2016 for Dana Farber Cancer Institute, as Dana Farber was designing a new vivarium and had the opportunity to integrate several new technologies to advance overall efficiency, quality, and design.

One such technology was the use of our ionized Hydrogen Peroxide (iHP) decontamination.

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As our Training and Implementation department expands, we expect continued growth and purchases in our Hospital-HealthCare division.

TOMI provides protocol development and implementation of SteraMist ® as it is critical in the healthcare setting.

During 2020 the use of our SteraMist ® in such campuses increased due to our comprehensive training for their day and night shift maintenance and housekeeping departments.

Annual comparison case studies from healthcare facilities are now available, which shows lower transmission infection rates in COVID, Clostridium difficile Spores and overall, HAI cases.

TOMI provides protocol development and implementation of SteraMist ® as it is critical in the healthcare setting, including pandemic preparedness.

UCLA recently completed a successful collection of critical data for the Shield Study.

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The TOMI Service Network (TSN) division is addressing the cleaning protocols that have changed permanently due to the COVID-19 pandemic, and our network is expected to play a significant role in facilitating and maintaining these protocols throughout the United States and Canada.

The urgency for emergency disinfection services may have declined, but the education and support of such services that TOMI personnel provide to our members creates an advantage by maintaining strong business relationships while they service thousands of SteraMist customers, and the world returns to the new normal.

The urgency for emergency disinfection services is starting to pick up due to employees returning to work, increasing number of contagious variants and the potential of monkeypox becoming more of a world concern.

Our education and support of such services that TOMI personnel provide to our members creates an advantage by maintaining strong business relationships while they service thousands of SteraMist customers, and the world returns to the new normal which will always focus on emerging pathogens.

Our SteraPak release is an important factor for this market that we will increase the new member onboarding.

Current members are showing interest in purchasing the SteraPak to expand their current SteraMist offerings.

Food Safety presents significant potential as an opportunity for substantial growth with continued product research and compliance testing.

Food Safety presents an opportunity for growth with continued product research and compliance testing.

With the food safety industry in North America coming under closer scrutiny with the implementation and enforcement of new and established guidelines.

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This will assist compliance with the newly established Food Safety Modernization Act guidelines set in place by the FDA, as well as the Safe Food for Canadians Act and Safe Food for Canadians Regulations in Canada.

Today’s Geopolitical aspects of farming and ranching has created an extra layer of concern for the protection of our global limited food supply including food transportation.

TOMI continues to work with premium companies in testing and validating SteraMist ® technology in the Food Safety and seed industries.

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With the continued testing and need for the market coupled with our new .35% label, should make pursuing these opportunities successful.

In addition, our solution and process is environmentally friendly in that the biproduct of SteraMist is only oxygen and humidity.

In addition, our solution and process are environmentally friendly in that the by-product of SteraMist is only oxygen and water in the form of humidity.

We have our solution listed on OMRI and labeled as organic.

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Our Commercial division includes but is not limited to use sites such as aviation, airports, police and fire, prisons, manufacturing companies, automobile, military, cruise ships, shipping ports, preschool education, primary and secondary schools, colleges including dormitories, all modes of public and private transportation, regulatory consulting agencies, retail, housing and recreation, and of course emergency preparedness for counties and cities to use SteraMist ® throughout their community.

Interest in SteraMist disinfection within the commercial division remains high.

The SteraPak is a popular product for this division because customers are looking for a more cost-effective solution compared to the current disinfectants on the market.

As quick and mobile disinfection solution is preferred in this industry, we believe that SteraPak will generate substantial customer interest and create sales opportunities.

As quick and mobile disinfection solution is preferred in this industry, we believe that SteraPak will generate customer interest and create sales opportunities.

Currently our customers are purchasing our SteraPak in all of our divisions to provide quick disinfection throughout various sites in their facilities.

The recent increase in Monkey Pox is creating again more interest in better disinfection like the needs of COVID in 2020-2021.

Business Highlights and Recent Events

Total revenue for the three months ended March 31, 2022 and 2021, was $2,309,000 and $2,073,000, respectively, representing an increase of $236,000, or 11% compared to the same prior year period.

The first quarter sales grew by 15% over what was reported in the fourth quarter of 2021.

The increase in revenue was attributable to higher demand for our mobile equipment and iHP Corporate service revenue.

SteraMist product-based revenues for the three months ended March 31, 2022 and 2021, were $1,886,000 and $1,661,000, representing an increase of $225,000 or 14% when compared to the same prior year period.

Our service-based revenue for the three months ended March 31, 2022 and 2021, was $423,000 and $412,000, respectively, representing a year over year increase of 3%.

Our domestic revenue for the three months ended March 31, 2022 and 2021 was $1,879,000 and $1,804,000, respectively, an increase of $75,000, or 4% when compared to the same prior year period.

Internationally, our revenue for the three months ended March 31, 2022 and 2021, was approximately $430,000 and $269,000, respectively, representing an increase of $161,000 or 60% when compared to the first quarter of 2021.

We continue to see positive signs in the marketplace with our customers and prospective customers which has contributed to our growth in our reportable revenue for the first quarter and bolstered our current sales pipeline.

During the first quarter we received approximately $3,500,000 in orders, of which we anticipate $3,200,000 will be recognized as revenue in our current calendar year.

As of March 31, 2022, we maintain deposits from customers of approximately $607,000 which down payments on future orders that are expected to be recognized into revenue in 2022.

Total revenue for the six months ended June 30, 2022 and 2021, was $3,767,000 and $3,539,000, respectively, representing an increase of $228,000, or 6% compared to the same prior year period.

The increase in revenue was attributable to higher demand for our mobile equipment.

SteraMist product-based revenues for the six months ended June 30, 2022 and 2021, were $3,020,000 and $2,673,000, representing an increase of $347,000 or 13% when compared to the same prior year period.

During the first six months of 2022 we have received $5,600,000 in orders, of which we anticipate $2,300,000 will be recognized as revenue in our third and fourth quarter accounting periods of 2022.

This represents 35% growth in sales orders received for the six months ended June 30, 2022 when compared to the same prior year accounting period.

The growth in our orders was due to increased demand for our mobile equipment and Custom Engineered Systems (CES) from both the life science and hospital sectors.

We anticipate further growth in sales as our sales pipeline for the remainder of 2022 is robust and we believe based upon current orders and pending negotiations, that we will surpass our original 2022 budget and analyst expectations.

As of June 30, 2022, we maintain deposits for certain customers of approximately $607,000 which represent down payments on future CES orders that are expected to be recognized into revenue in future accounting periods.

We anticipate our customer deposits to continue to grow in the third quarter of 2022.

For the three months ended June 30, 2022 and 2021, our revenue was $1,458,000 and 1,466,000, respectively, essentially flat for the comparable periods.

However, during the second quarter of the current year, we were able to further build out our sales pipeline and received approximately $900,000 in customer orders that will be recognized into revenue in future periods.

We believe that we possess the best technologies in the world in the disinfection and decontamination space.

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Dangerous pathogens still exist and will exist long after we recover from this pandemic.

While the United States and most of the world is currently recovering from the COVID-19 pandemic, there are many pathogens which are respiratory in nature that are still a looming threat;

While the United States and most of the world is moving from the COVID-19 pandemic, there are many pathogens which are respiratory in nature that are still a looming threat;

these cases are occurring globally to this day.

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The need for a speedy comprehensive mechanical disinfectant like SteraMist cannot be stressed enough and should be included as the new norm of cleaning.

On January 12, 2022, we assisted the decontamination efforts of On Demand Pharmaceuticals, an innovative technology company transforming how medicines are made, by providing its SteraMist Environmental Systems for use at On Demand Pharmaceutical’s modular cleanroom.

On February 10, 2022, we announced that we received approximately $1.3 million of orders for its Custom Engineered Systems (CES) and have set installation dates for these systems.

Two of the orders are from a Fortune 500 pharmaceuticals company and the other is from a leading research facility focused on immunology and infectious disease.

These additional CES orders are timed nicely after the final commissioning of the CES reported in October 2021 and installed months later after announcement for Fresenius Kabi’s Portuguese affiliate Labesfal S.A.

located in the heart of Portugal.

On March 8, 2022, we partnered with ARM EnerTech Associates, LLC, a U.S.-based engineering services & custom control panel manufacturer, to further develop its SteraMist brand of products.

On March 10, 2022 we announced that we fulfilled an urgent shipment of multiple SteraPak units to its local distributor in Hong Kong, TOMIMIST Hong Kong.

The units were deployed by a well-known real-estate conglomerate in Hong Kong for use in shopping malls, commercial and residential buildings, and numerous other business premises to effectively combat the massive outbreak of COVID-19 Omicron variant infections in the city.

As conferences and tradeshows are reopening in 2022 companies to exhibit live, TOMI will be attending multiple shows across the country.

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This market eagerly awaits the release of the iHP SteraMist Transport System.

On May 19, 2022, we announced Dr.

Halden Shane was to present at the H.C.

Wainwright Investment Conference.

On May 20, 2022, we announced that TOMI was to attend the INTERPHEX 2022 Technical Conference and exhibited three of our SteraMist mobile units.

INTERPHEX is designed to host and connect state-of-the-art market leaders in the pharmaceutical, biotechnology, and life sciences industries.

TOMI thrives in this marketplace due to SteraMist iHP technology offering quick, six-log kill decontamination with impressive material compatibility that provides unique advantages over competitors.

On June 3, 2022, we announced the inclusion of our SteraMist technology on the List Q for the use of its BIT solution to help fight the spread of rare or novel viruses such as Monkeypox virus, SARS-CoV-2 and its variants that causes COVID-19.

TOMI was notified of EPA’s inclusion on June 2, 2022.

Research Studies and Publications:

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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 continue to pursue further claims to additional capabilities in on-going United States and worldwide patent applications.

We have obtained two related United States utility patents giving us protection of our technology until the year 2038.

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.

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Financial Operations Overview

Our financial position as of March 31, 2022 and December 31, 2022, respectively, was as follows:

March 31, 2022

Our financial position as of June 30, 2022 and December 31, 2022, respectively, was as follows:

June 30, 2022

December 31, 2021

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Working Capital

During the three months ended March 31, 2022, our debt and liquidity positions were affected by the following:

Net cash provided from operations of approximately $27,000.

During the six months ended June 30, 2022, our debt and liquidity positions were affected by the following:

Net cash used in operations of approximately $451,000.

Customer deposits received of approximately $607,000.

Results of Operations for the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Results of Operations for the Three and Six Months Ended June 30, 2022 Compared to the Three and Six Months Ended June 30, 2021

For The Three Months Ended

For The Six Months Ended

Total Operating Expenses

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$ (1,194,000 )

$ (1,522,000 )

$ (2,289,000 )

Basic Net Income (Loss) per share

Diluted Net Income (Loss) per share

Includes $352,000 and $228,000 in non-cash equity compensation expense for the three months ended March 31, 2022 and 2021, respectively.

NM – Not Meaningful

Sales and Revenue

Total revenue for the three months ended March 31, 2022 and 2021, was $2,309,000 and $2,073,000, respectively, representing an increase of $236,000, or 11% compared to the same prior year period.

The increase in revenue was attributable to higher mobile equipment sales and iHP service revenue.

Total revenue for the three months ended June 30, 2022 and 2021, was $1,458,000 and $1,466,000, respectively, representing a decrease of $8,000, or 1% compared to the same prior year period.

For the six months ended June 30, 2022 and 2021, our total revenue was $3,767,000 and $3,539,000, respectively, representing an increase of $228,000, or 6% compared to the same prior year period.

As customers mature through the product and adoption cycle and our sales pipeline converts to revenue, we expect to generate more predictable sales quarter over quarter.

Further, as the COVID-19 pandemic subsides, we expect that the demand for our products and services will continue as we are building a team to address the post COVID-19 pandemic market opportunities.

For The Three Months Ended

For The Six Months Ended

Product and Service Revenue

For The Three Months Ended

For The Six Months Ended

SteraMist Product

Service and Training

Our service-based revenue for the three months ended March 31, 2022 and 2021, was $423,000 and $412,000, respectively, representing a year over year increase of 3%.

SteraMist product-based revenues for the three months ended June 30, 2022 and 2021, were $1,134,000 and $1,026,000, representing an increase of $108,000 or 11% when compared to the same prior year period.

Product based revenues for the six months ended June 30, 2022 and 2021, were $3,020,000 and $2,673,000, representing an increase of $347,000 or 13% when compared to the same prior year period.

The increase in product based revenue was attributable to higher mobile equipment sales.

Our service-based revenue for the three months ended June 30, 2022 and 2021, was $324,000 and $440,000, respectively, representing a decrease of 26%.

For the six months ended June 30, 2022 and 2021, our service-based revenue was $747,000 and $866,000, representing a decrease of $119,000 or 14% when compared to the same prior period in 2021 The decline in service and training revenue was due to the timing of certain iHP service that occurred in the prior year period.

Revenue by Geographic Region

For The Three Months Ended

For The Six Months Ended

United States

International

Our domestic revenue for the three months ended March 31, 2022 and 2021 was $1,879,000 and $1,804,000, respectively, an increase of $75,000), or 4% when compared to the same prior year period.

Our domestic revenue for the three months ended June 30, 2022 and 2021 was $1,206,000 and $1,184,000, respectively, an increase of $22,000, or 2% when compared to the same prior year period.

Internationally, our revenue for the three months ended June 30, 2022 and 2021, was approximately $252,000 and $282,000, respectively, representing a decrease of $30,000 or 11% when compared to the same prior year period.

Cost of Sales

For The Three Months Ended

For The Six Months Ended

Cost of Sales

Cost of sales was $888,000 and $838,000 for the three months ended March 31, 2022 and 2021, respectively, an increase of $50,000, or 6%, compared to the prior year.

The primary reason for the increase in cost of sales is attributable to higher revenue in the current quarter.

Our gross profit as a percentage of sales for the three months ended March 31, 2022 was 61.5% compared to 59.6% in the same prior period, respectively.

Cost of sales was $537,000 and $524,000 for the three months ended June 30, 2022 and 2021, respectively, an increase of $13,000, or 2%, compared to the prior year.

Our gross profit as a percentage of sales for the three months ended June 30, 2022 was 63.1% compared to 64.2% in the same prior period, respectively.

The lower gross profit is attributable to the product mix in sales.

Cost of sales was $1,425,000 and $1,362,000 for the six months ended June 30, 2022 and 2021, respectively, an increase of $63,000, or 5%, compared to the prior year.

The primary reason for the increase in cost of sales is attributable to higher revenue in the current period.

Our gross profit as a percentage of sales for the six months ended June 30, 2022 was 62.2% compared to 61.5% in the same prior period, respectively.

The higher gross profit is attributable to the product mix in sales.

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For The Three Months Ended

For The Six Months Ended

Professional Fees

Professional fees are comprised mainly of legal, accounting, and financial consulting fees.

Professional fees were $191,000 and $173,000 for the three months ended March 31, 2022 and 2021, respectively, an increase of approximately $18,000, or 10%, in the current year period.

Professional fees were $95,000 and $107,000 for the three months ended June 30, 2022 and 2021, respectively, a decrease of approximately $12,000, or 11%, in the current year period.

Professional fees were $285,000 and $280,000 for the six months ended June 30, 2022 and 2021, respectively, an increase of approximately $5,000, or 2%, in the current year period.

Depreciation and Amortization

For The Three Months Ended

For The Six Months Ended

Depreciation and Amortization

Depreciation and amortization were approximately $82,000 and $83,000 for the three months ended March 31, 2022 and 2021, respectively, representing a decrease of $1,000, or 1%.

Depreciation and amortization were approximately $83,000 and $72,000 for the three months ended June 30, 2022 and 2021, respectively, representing an increase of $11,000, or 15%.

Depreciation and amortization were approximately $165,000 and $156,000 for the six months ended June 30, 2022 and 2021, respectively, representing an increase of $9,000, or 6%.

Selling Expenses

For The Three Months Ended

For The Six Months Ended

Selling Expenses

Selling expenses for the three months ended March 31, 2022 were approximately $341,000, as compared to $474,000 for the quarter ended March 31, 2021, representing a decrease of approximately $133,000 or 28%.

The decrease in selling expense is attributable to a lower employee headcount and sales commissions in the current year period.

Selling expenses for the three months ended June 30, 2022 were approximately $566,000, as compared to $335,000 for the quarter ended June 30, 2021, representing an increase of approximately $231,000 or 69%.

The increase in selling expenses is attributable to higher sales commissions and our increased tradeshow presence the current year period.

Selling expenses for the six months ended June 30, 2022 were approximately $907,000, as compared to $810,000 for the period ended June 30, 2021, representing an increase of approximately $97,000 or 12%.

The increase in selling expenses is attributable to higher sales commissions and our increased tradeshow presence the current year period.

Research and Development

For The Three Months Ended

For The Six Months Ended

Research and Development

Research and development expenses for the three months ended March 31, 2022 were approximately $37,000, as compared to $196,000 for the quarter ended March 31, 2021, representing a decrease of approximately $159,000, or 81%.

The decline in research and development expenses is attributable to product development charges we incurred on the prior year period which did not reoccur in the current year period.

Research and development expenses for the three months ended June 30, 2022 were approximately $99,000, as compared to $206,000 for the quarter ended June 30, 2021, representing a decrease of approximately $107,000, or 52%.

Research and development expenses for the six months ended June 30, 2022 were approximately $136,000, as compared to $401,000 for the period ended June 30, 2021, representing a decrease of approximately $265,000, or 66%.

The research and development expenses is attributable to product development charges we incurred on the prior year period which did not reoccur in the current year period.

Consulting Fees

For The Three Months Ended

For The Six Months Ended

Consulting Fees

Consulting fees were $63,000 and $106,000 for the three months ended March 31, 2022 and 2021, respectively, representing a decrease of $43,000, or 41%, in the current quarter period.

Consulting fees were $40,000 and $96,000 for the three months ended June 30, 2022 and 2021, respectively, representing a decrease of $56,000, or 58%, in the current quarter period.

Consulting fees were $103,000 and $202,000 for the six months ended June 30, 2022 and 2021, respectively, representing a decrease of $99,000, or 49%, in the current quarter period.

The decrease is due to the timing of certain projects that occurred in the prior year that did not occur in the same current year period.

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For The Three Months Ended

For The Six Months Ended

General and Administrative

General and administrative expense includes salaries and payroll taxes, rent, insurance expense, utilities, office expense, product registration costs, equity compensation and bad debt expense.

General and administrative expense was $1,367,000 and $1,712,000 for the three months ended March 31, 2022 and 2021, respectively, a decrease of $345,000 in the current period.

The decline in general and administrative expense is primarily attributable to lower payroll costs in the current year period.

General and administrative expense was $902,000 and $1,319,000 for the three months ended June 30, 2022 and 2021, respectively, a decrease of $417,000 in the current period.

The decline in general and administrative expense is primarily attributable to lower payroll costs, insurance and bad debt expense in the current year period.

General and administrative expense was $2,268,000 and $3,032,000 for the six months ended June 30, 2022 and 2021, respectively, a decrease of $764,000 in the current period.

The decline in general and administrative expense is primarily attributable to lower payroll costs, insurance and bad debt expense in the current year period.

Other Income and Expense

For The Three Months Ended

For The Six Months Ended

Gain Upon Debt Extinguishment

Interest Income

Interest Expense

Other Income (Expense)

Interest expense was $0 and $1,000 for the three months ended March 31, 2022 and 2021, respectively.

Gain upon debt extinguishment of $415,000 in connection with the forgiveness of a loan payable.

Interest income was approximately $1,000 for the six months ended June 30, 2022 and 2021.

Interest expense was $0 and $1,000 for the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

As of March 31, 2022, we had cash and cash equivalents of $5,330,000 and working capital of $10,797,000.

As of June 30, 2022, we had cash and cash equivalents of $4,800,000 and working capital of $9,925,000.

Our principal capital requirements are to fund operations, invest in research and development and capital equipment, and the continued costs of public company reporting requirements.

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The Warrants have 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.

For the three months ended March 31, 2022 and 2021, we incurred a loss from operations of ($660,000) and ($1,510,000), respectively.

Cash provided from operations for the three months ended March 31, 2022, was $27,000.

Cash used in operations was $1,225,000 for the three months ended March 31, 2021.

A breakdown of our statement of cash flows for the three months ended March 31, 2022 and 2021 is provided below:

For the three months ended March 31,

For the six months ended June 30, 2022 and 2021, we incurred a loss from operations of ($1,523,000) and ($2,704,000), respectively.

Cash used in operations for the six months ended June 30, 2022 and 2021, was $451,000 and $2,512,000, respectively.

A breakdown of our statement of cash flows for the six months ended June 30, 2022 and 2021 is provided below:

For the six months ended June 30,

Net Cash Provided By (Used) in Operating Activities

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Operating Activities

Cash provided by operating activities for the three months ended March 31, 2022 was 27,000, compared to cash used in operations for the three months ended March 31, 2022 of $1,225,000.

Our cash provided by operations improved in the current year period as a result of increase sales, gross profit, customer deposits and lower operating expenses.

Cash used in operating activities for the six months ended June 30, 2022 and 2021 was $451,000 and $2,512,000, respectively.

The decline was attributable to a lower current year loss and customer deposits as well as increased purchases of inventory in the prior year to replenish our levels.

Investing Activities

Cash used in investing activities for the three months ended March 31, 2022 and 2021 was $14,000 and $28,000, respectively.

Cash used in investing activities for the six months ended June 30, 2022 and 2021 was $66,000 and 198,000, respectively.

Financing Activities

Cash provided by financing activities for three months ended March 31, 2022 and 2021 was $0

Cash provided by financing activities for six months ended June 30 2022 and 2021 was $0.

Our revenues can fluctuate due to the following factors, among others:

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length of our sales cycle;

global response to the outbreak of COVID-19 Pandemic;

length of installation of our CES;

global response to the outbreak of COVID-19 Pandemic and or new Pandemics or diseases of concern;

customer budget cycles and allocations;

expansion into new territories and markets;

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Contract Balances

As of March 31, 2022, and December 31, 2021 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 June 30, 2022, and December 31, 2021 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

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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 months ended March 31, 2022 and 2021.

We had no long-lived asset impairment charges for the three months ended June 30, 2022 and 2021.

Recent Accounting Pronouncements

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We adopted ASU 2021-10 starting in 2022, which did not have a material impact on our condensed consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable

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 2. Management’s Discussion and Analysis