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Item 9A. Controls and Procedures

2026-03-31 compared with 2025-04-14 · 260 added, 1031 removed, 279 unchanged (82% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K.

Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2024.

Our management has concluded that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.

Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

Our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2025.

Our disclosure controls and procedures are intended to ensure that information we are required to disclose in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2025, due to the material weaknesses described below.

Notwithstanding this conclusion, our management has determined that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S.

Management's Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act).

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, as amended from time to time.

Based on the assessment, our management concluded that our internal control over financial reporting was not effective as of December 31, 2024.

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements, and projections of any evaluation of effectiveness are subject to the risk that controls may become inadequate due to changes in conditions or deterioration in compliance.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, management concluded that our internal control over financial reporting was not effective as of December 31, 2025.

Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has concluded that, as of December 31, 2024, we did not maintain effective controls over the preparation, review, presentation and disclosure of our financial statements.

Specifically, we noted the following:

• There are limited resources within the finance and accounting departments with sufficient knowledge and experience in applying U.S.

GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintain proper segregation of duties;

• Policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions were either not designed and in place or not operating effectively.

As a result, a number of adjustments and disclosure corrections were identified and made during our current year audit;

These control deficiencies, if not remediated, could result in a misstatement to the annual or interim consolidated financial statements which would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified the following material weaknesses as of December 31, 2025:

Limited resources within the finance and accounting departments with sufficient knowledge and experience in applying U.S.

GAAP, including developing appropriate accounting estimates, reserves, and allowances in a timely manner and maintaining proper segregation of duties;

Policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions were either not fully designed and in place or not operating effectively.

These control deficiencies, if not fully remediated, could result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.

Accordingly, our management has determined that these control deficiencies constitute material weaknesses.

Remediation Plans

Our management, with oversight from our Audit Committee, is in the process of developing and implementing remediation plans in response to the identified material weaknesses described above, and such remediation plans include the following:

We plan to expand the resources within the finance and accounting departments with personnel who possess sufficient knowledge and experience in applying U.S.

GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintain proper segregation of duties;

We will design and implement additional policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions to improve the effectiveness of our internal controls and to ensure the timely reporting with the SEC in accordance with GAAP.

We will continue to recruit and train personnel with appropriate internal controls, accounting knowledge and experience commensurate with our accounting and reporting requirements, in addition to engaging and utilizing third party consultants and specialists.

Our management also continued to reallocate and align roles and responsibilities within the accounting team to optimize and leverage the skills and experience of various personnel.

We believe the measures described above will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting.

We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures.

Remediation - Progress and Actions Taken

Management, with oversight from our Audit Committee, has implemented the following specific remediation actions during fiscal year 2025:

Strengthened Finance Function.

In May 2025, we appointed a new Chief Financial Officer with substantial experience in financial accounting, U.S.

GAAP, and SEC reporting.

This appointment has supported improvement in the finance and accounting function's ability to address the identified deficiencies.

Written Accounting Policies and Procedures.

We have designed and implemented written accounting policies and procedures governing the review, supervision, and monitoring of our accounting and SEC reporting functions, appropriate for the size and nature of our operations.

Month-End Revenue Close Process.

We implemented a structured month-end close process for revenue recognition to provide more consistent review and earlier identification of required adjustments.

Monthly Physical Inventory Counts.

We implemented monthly physical inventory counts to strengthen inventory controls and reduce year-end adjustments.

Deferred Revenue Accounting Framework.

Effective with the quarter ended June 30, 2025, we implemented formal policies and procedures for the identification, measurement, and recognition of deferred revenue in accordance with ASC 606, integrated into our period-end close process.

13-Week Rolling Cash Flow Forecast.

We introduced a 13-week rolling cash flow forecasting process to improve liquidity management, forward planning, and management oversight of cash resources.

Daily Bank Reconciliations.

We implemented daily bank reconciliations to strengthen cash controls and provide timely visibility over cash balances.

Realignment of Roles and Responsibilities.

We have realigned roles and responsibilities within the accounting team to improve segregation of duties and to better utilize the skills and experience of existing personnel.

Continued Training and Third-Party Support.

We continue to recruit and train personnel with appropriate internal controls knowledge and accounting experience and engage third-party consultants and specialists where appropriate to supplement internal capabilities.

While the material weaknesses had not been fully remediated as of December 31, 2025, management believes the actions taken to date represent meaningful progress in addressing the identified control deficiencies.

We are committed to continuing this process and will continue to review and enhance our financial reporting controls and procedures.

Changes in Internal Control Over Financial Reporting

During our most recent fiscal quarter and except as disclosed above regarding the material weaknesses and related remediation plans, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

During the fiscal quarter ended December 31, 2025, we completed the rollout of our written accounting policies and procedures and operationalized enhanced financial statement review procedures, as described above.

The deferred revenue recognition framework was implemented in the quarter ended June 30, 2025, and continued to operate during the remainder of fiscal year 2025.

Except as described above, there have been no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

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Directors, Executive Officers and Corporate Governance

Our directors and executive officers and their ages and positions as of March 10, 2025 are presented below.

Our current directors and executive officers and their ages and positions as of March 31, 2026 are presented below.

Chief Executive Officer and Chairman of the Board

Chief Operating Officer and Director

Nick Jennings

Interim Chief Financial Officer

David Vanston

Chief Financial Officer

Francesco Fragasso

Shane has been our Chief Executive Officer and Chairman of the Board since October 15, 2007, when we commenced our current operations.

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He is Board Certified by the American Board of Podiatric Surgery, American Board of Orthopedics, and the American Board of Quality Assurance and Review.

Shane’s extensive expertise and business experience in the medical and finance industry, as well as his knowledge of our day-to-day operations and strategic initiatives provide our Board of Directors with valuable insights and in-depth understanding of our Company.

Shane’s extensive expertise and business experience in the medical and finance industry, as well as his knowledge of our day-to-day operations and strategic initiatives provide our Board with valuable insights and in-depth understanding of our Company.

Shane has been our Chief Operating Officer since January 2018.

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Previously, she served as our Chief Regulatory and Compliance Officer from September 2015 to December 2017 and as our Corporate Secretary in 2016.

From January 2014 to September 2015, Ms.

Shane received a B.A.

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Shane’s experience, expertise and knowledge of our day-to-day business operations will contribute significantly to the Board’s oversight functions of the Company.

Nick Jennings :

Jennings served as our Chief Financial Officer from October 2014 through May 2024.

In December 2024, Mr.

Jennings agreed to become our interim Chief Financial Officer.

From July 2014 until his employment by the Company, Mr.

Jennings was self-employed and provided consulting, accounting and tax compliance services to private-owned companies.

From November 2006 until June 2014, Mr.

Jennings was a senior manager at Richardson Kontogouris Emerson LLP, where he worked with various public and private companies providing services in a variety of business areas including tax compliance, tax consulting, general accounting, and business assurance.

He is a graduate of Loyola Marymount College with a degree in accounting and is a member of the American Institute of Certified Public Accountants.

Johnsen has been one of our directors since January 29, 2016.

Since January 1, 2007, Mr.

Johnsen has served as Chairman of the Board and Chief Executive Officer of Acme United Corporation, a leading worldwide supplier of innovative branded cutting, measuring and safety products in the school, home, office, hardware & industrial markets.

From November 30, 1995 to December 31, 2006, he held the titles of President and Chief Executive Officer at Acme United.

Johnsen previously served as Vice Chairman and a principal of Marshall Products, Inc., a medical supply distributor.

Johnsen holds a Bachelor of Science in Chemical Engineering and a Master of Science in Chemical Engineering from Cornell University, and a Master of Business Administration from Columbia University.

The Board concluded that Mr.

Johnsen’s business and operations experience allows him to serve as one of our directors.

Anderson has been one of our directors since January 29, 2016.

Anderson is the Chief Executive Officer of CXO Executive Solutions, LLC, a provider of executive services.

Between 2015 and July 2020, Ms.

Anderson served a partner in C Suite Financial Partners, a financial consulting services company dedicated to serving private, public, private equity, entrepreneurial, family office and government-owned firms in all industries.

Anderson is an inactive California CPA and a 1989 graduate of the College of Business and Economics at California State University, Fullerton.

The Board concluded that Ms.

Anderson’s experience in finance qualifies her to serve as one of our directors.

Lim Boh Soon :

David Vanston :

Vanston is an experienced financial executive with over 25 years of international finance and operational leadership across the life sciences, manufacturing, and technology sectors.

From November 2024 to February 2025, he served as Chief Financial Officer of Jon-Don LLC, a portfolio company of Incline Partners.

From October 2023 to November 2024, he was Vice President of Finance at Flexan LLC, a medical device manufacturer and subsidiary of ILC Dover, then a portfolio company of New Mountain Capital.

From April 2021 to October 2023, Mr.

Vanston served as Chief Financial Officer of Arcmed, a contract manufacturer in the life sciences sector and a portfolio company of Halma plc.

Prior to that, from April 2017 to February 2021, he was Chief Financial Officer of VolitionRx, a multinational epigenetics company listed on the NYSE focused on developing blood-based diagnostics for cancer and other NETosis-related diseases.

Vanston holds an MBA from Warwick University and is a Fellow of the Chartered Certified Accountants in the United Kingdom.

Lim Boh Soon :

Lim has served as a member of the Board since January 2018.

Lim has more than 28 years of experience in the banking and finance industry.

Lim has served as a member of the Board since January 2018 and has more than 28 years of experience in the banking and finance industry.

For more than the past five years, he has been a fellow of the Singapore Institute of Directors and is currently an independent non-executive director on the board of two publicly listed companies, one on the Singapore Stock Exchange and the other on Bursa Malaysia.

Lim has served in various directorship roles throughout the past including with CSE Global Limited until April 2017, Across Asia Limited (Cayman Islands) until August 2017, and OUE Commercial REIT Management Private Limited until September 2019.

Lim has served in various directorship roles throughout the past including V.S.

Industry Berhad until January 2026, Kairos Asia Outreach until June 2025, QQ Fintech Pte.

until August 2024, Jumbo Group Limited until January 2024, among others.

In addition to his role with Tomi Environmental Solutions Inc., Dr.

Lim holds current directorship positions with the following companies, Arise Asset Management Pte, Ltd., OUE Limited, VS Industry Berhad, TPT Corporation (Cayman Islands), Asri Asset Management Pte.

Lim holds current directorship positions with the following companies, Arise Asset Management Pte, Ltd., OUE Limited,TPT Corporation (Cayman Islands), ASR Asset Management Pte.

Ltd., EpicQuant Pte.

Ltd., QQ Fintech Pte.

Ltd., and Kairos Asia Outreach.

Ltd., Kaiyi Private Fund Management Co.

and Cap 1 Financial Pte.

Lim has worked in various senior management positions for several regional and multi-national organizations, including UBS Capital Asia Pacific Limited, The NatSteel Group, Rothschild Ventures Asia Limited and The Singapore Technologies Group.

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Lim’s experience as a director of public companies and in the finance industry qualifies him to serve on the Board.

Francesco Fragasso :

Fragasso served as the Chief Financial Officer of Hamilton Thorne Ltd., a publicly traded company listed on the Toronto Stock Exchange (TSX:

HTL), since August 2022 to January 2025.

From 2018 to 2022, he served as Chief Financial Officer of Fluence Corporation Ltd.

(ASX:FLC), a global water infrastructure company listed on the Australian Securities Exchange.

Fragasso served as Vice President and Chief Financial Officer at Desalitech, Inc.

from 2015 to 2018, and served as Corporate CFO and Vice President of Operations at Novara Fuel Cells, Inc.

HESS) from 2001 to 2014.

He previously held senior finance and operations roles at MMN SpA and Deloitte SpA in Italy.

Fragasso is a European Chartered Public Accountant and holds an MBA from Boston University and a Bachelor and Master of Science in Business and Economics from Università Bocconi in Milan, Italy.

The Board believes that Mr.

Fragasso’s substantial experience and expertise in financial and accounting matters, including public company financial reporting process, qualifies him to serve on the Board.

Harold Paul :

Paul previously served as a member of the Board of the Company from June 2009 until July 2021, and as the Company’s Corporate Secretary from 2013 to 2021.

Paul has been engaged in the private practice of law for more than 40 years, primarily as a securities specialist, during which time he has served as outside legal counsel to public companies listed on national securities exchanges.

Paul has also served as a director for six public companies in a variety of industries, including technology and financial services.

He holds a Bachelor of Arts from the State University of New York at Stony Brook and a Juris Doctor from Brooklyn Law School, and is admitted to practice law in New York and Connecticut.

The Board believes that Mr.

Paul’s extensive experience in corporate governance, legal compliance and management of public companies qualifies him to serve on the Board.

Family Relationships

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Audit Committee

Our Audit Committee was established in June 2009 and currently is comprised of Ms.

Anderson, Mr.

Johnsen and Dr.

Anderson serves as chairperson of the Audit Committee.

The Board has determined that Ms.

Anderson qualifies as an audit committee financial expert within the meaning of SEC regulations and meets Nasdaq’s financial sophistication requirements.

In making this determination, the Board has considered Ms.

Anderson’s extensive financial experience and business background.

Our Audit Committee was established in June 2009 and currently is comprised of Mr.

Fragasso, Mr.

Fragasso serves as chairperson of the Audit Committee.

The Board has determined that Mr.

Fragasso qualifies as an audit committee financial expert within the meaning of SEC regulations and meets Nasdaq’s financial sophistication requirements.

In making this determination, the Board has considered Mr.

Fragasso’s extensive financial experience and business background.

Our Board has determined that Mr.

Fragasso is an “audit committee financial expert” as defined by the regulations promulgated by the SEC.

The Audit Committee operates under a written charter, which is available at http://investor.tomimist.com/corporate-governance/audit-committee-charter.

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The Audit Committee also reviews and approves all related-party transactions.

Our Board has determined that Ms.

Anderson is an “audit committee financial expert” as defined by the regulations promulgated by the SEC.

For this purpose, a related-party transaction means any transaction, arrangement or relationship in which the Company is a participant, the amount involved exceeds $120,000, and in which any director, executive officer, nominee for director, or beneficial owner of more than 5% of our common stock, or any immediate family member of any such person, has a direct or indirect material interest, consistent with Item 404 of Regulation S-K and ASC 850.

Code of Ethics

The Board adopted a Code of Ethics in 2008 that applies to, among other persons, Board members, officers (including our Chief Executive Officer), contractors, consultants and advisors.

Our Code of Ethics, which is available at http://investor.tomimist.com/TOMZ/code_of_ethics/2139, along with any future amendments thereto, sets forth written standards designed to deter wrongdoing and to promote:

honest and ethical conduct including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

full, fair, accurate, timely and understandable disclosure in reports and documents that we file with or submit to the SEC and in other public communications made by us;

compliance with applicable governmental laws, rules and regulations;

the prompt internal reporting of violations of the Code of Ethics to an appropriate person or persons identified in the Code of Ethics;

accountability for adherence to the Code of Ethics.

The Board adopted a Code of Ethics in 2008 that applies to, among other persons, Board members, officers (including our Chief Executive Officerand Chief Financial Officer), contractors, consultants and advisors.

Our Code of Ethics, is available on the Company’s website at http://investor.tomimist.com/TOMZ/code_of_ethics/2139.

The information on our website is not a part of or incorporated by reference into this Annual Report on Form 10-K.

If the Company makes any amendments to the Code of Ethics other than technical, administrative or other non-substantive amendments, or grants any waivers, including implicit waivers, from a provision of this code to the Company’s Chief Executive Officer or Chief Financial Officer, the Company will disclose the nature of the amendment or waiver, its effective date and to whom it applies by posting such information on the Company’s website.

Insider Trading Policy

The Board has adopted insider trading policies and procedures regarding securities transactions (the “Insider Trading Policy”) that applies to all officers, directors and employees of the Company and its subsidiaries, as well as the Company itself.

The Company believes that the Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and regulations with respect to the purchase, sale and/or other dispositions of the Company’s securities, as well as the applicable rules and regulations of Nasdaq.

A copy of the Insider Trading Policy is filed as Exhibit 19.1 to our Annual Report on Form 10-K.

Delinquent Section 16 Reports

Section 16(a) of the Exchange Act requires our directors, executive officers, and the holders of more than 10% of our common stock to file with the SEC initial reports of beneficial ownership of our common stock and other equity securities on a Form 3 with 10 calendar days of becoming a director, executive officer or holder of more than 10% of our common stock, and reports of changes in such ownership on a Form 4 within two business days of such changes or in certain cases a Form 5 within 45 days of our fiscal year end.

Based solely on the Company’s review of copies of such reports filed with the SEC and written representations from these reporting persons, the Company believes that all Section 16(a) filing requirements applicable to its directors, executive officers and greater-than-10% beneficial owners were complied with during the year ended December 31, 2025, except as described below.

On November 3, 2025, a Form 3 reporting the initial beneficial ownership of the Company’s common stock was filed late on behalf of Fragasso Francesco, Director of the Company.

No transactions were required to be reported.

Executive Compensation

Summary Compensation Table

The following table sets forth the total compensation paid to or earned by our named executive officers for the years ended December 31, 2024 and 2023, respectively:

The following table sets forth the total compensation earned by our named executive officers for the years ended December 31, 2025 and 2024, respectively, in accordance with SEC rules under Item 402(c) of Regulation S-K.

Amounts shown represent compensation earned during each fiscal year regardless of whether paid in cash during the year.

For the year ended December 31, 2025, a portion of the salary earned by Dr.

Shane and Ms.

Shane was not paid in cash and remains accrued as of December 31, 2025.

See footnote (2) below:

Name and Principal Position

Chairman and CEO

David Vanston (3)

Nick Jennings (4)

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See Note 2 of the notes to our audited consolidated financial statements contained in this Annual Report on Form 10-K for a discussion of valuation assumptions made in determining the grant date fair value of the awards.

During the year ended December 31, 2024, we issued an option to purchase 100,000 shares of common stock to our Chief Executive Officer at an exercise price of $0.75 per share pursuant to an employment agreement.

The option was valued at $64,136 and has a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the option received by our Chief Executive Officer with the following assumptions:

volatility, 125%;

expected dividend yield, 0%;

risk free interest rate, 4.35%;

and an expected life of 10 years.

The grant date fair value of each share of common stock underlying the option was $0.64.

Please refer to Item 11 Employment Agreements for additional details of Dr.

Shane’s annual compensation

During the year ended December 31, 2023, we issued an option to purchase 100,000 shares of common stock to our Chief Executive Officer at an exercise price of $0.85 per share pursuant to an employment agreement.

The option was valued at $76,635 and has a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the option received by our Chief Executive Officer with the following assumptions:

volatility, 139%;

expected dividend yield, 0%;

risk free interest rate, 3.59%;

and an expected life of 10 years.

The grant date fair value of each share of common stock underlying the option was $0.76.

Please refer to Item 11 Employment Agreements for additional details of Dr.

Shane’s annual compensation.

During the year ended December 31, 2024, we issued an option to purchase 50,000 shares of common stock to our Chief Operating Officer at an exercise price of $0.75 per share pursuant to an employment agreement.

The option was valued at $32,068 and has a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the option received by our Chief Operating Officer with the following assumptions:

volatility, 125%;

expected dividend yield, 0%;

risk free interest rate, 4.35%;

and an expected life of 10 years.

The grant date fair value of each share of common stock underlying the option was $0.64.

Please refer to Item 11 Employment Agreements for additional details of Ms.

Shane’s annual compensation.

During the year ended December 31, 2023, we issued an option to purchase 50,000 shares of common stock to our Chief Operating Officer at an exercise price of $0.85 per share pursuant to an employment agreement.

The option was valued at $37,817 and has a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the option received by our Chief Operating Officer with the following assumptions:

volatility, 139%;

expected dividend yield, 0%;

risk free interest rate, 3.59%;

and an expected life of 10 years.

The grant date fair value of each share of common stock underlying the option was $0.76.

The other compensation in the amount of $12,000 represents an auto allowance pursuant to Ms.

Shane’s employment agreement.

Please refer to Item 11 Employment Agreements for additional details of Ms.

Shane’s annual compensation.

During the year ended December 31, 2024, Mr.

Jennings served as our Chief Financial Officer until May 2024.

During the year ended December 31, 2023, we issued an option to purchase 25,000 shares of common stock to our Chief Financial Officer at an exercise price of $0.85 per share pursuant to an employment agreement.

The option was valued at $18,909 and has a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the option received by our Chief Financial Officer with the following assumptions:

volatility, 139%;

expected dividend yield, 0%;

risk free interest rate, 3.59%;

and an expected life of 10 years.

The grant date fair value of each share of common stock underlying the option was $0.76.

Please refer to Item 11 Employment Agreement for additional details of Mr.

Jennings’ annual compensation.

Rzpeka served as our Chief Financial Officer from May 2024 through December 2024.

For the year ended December 31, 2025, a portion of the salary amounts shown for Dr.

Shane, Chairman and Chief Executive Officer, and Ms.

Shane, Chief Operating Officer, was earned but not paid in cash during the fiscal year as a cash conservation measure adopted by the Company in light of its liquidity position.

The earned but unpaid amounts totaling approximately $476,000, have been fully accrued as compensation payable in accordance with ASC 710 and are included within the payroll and related costs balance in accrued expenses and other current liabilities on the Company's Consolidated Balance Sheet as of December 31, 2025.

See Note 13 to the consolidated financial statements for further information.

The Company intends to satisfy these obligations as operating cash flow permits.

The salary amounts shown in the table above represent the full contractual amounts earned during fiscal 2025 and are reported in accordance with Item 402(c) of Regulation S-K.

On October 6, 2025, the Company granted Mr.

Vanston 100,000 restricted stock units under the 2016 Equity Incentive Plan.

The grant date fair value of $99,830 was calculated based on the closing stock price of $0.9983 per share on the grant date, computed in accordance with FASB ASC Topic 718.

Please refer to Item 11 Employment Agreements for additional details regarding Mr.

Vanston's compensation arrangements, including the vesting schedule.

Jennings served as our Chief Financial Officer from September 2015 until May 2024 and as Interim Chief Financial Officer from December 2024 through May 2025.

During the year ended December 31, 2024, he was entitled to an annual salary of $211,750, of which he received $104,552 through May 2024.

During the year ended December 31, 2025, he received a monthly fee of $15,000 for five months, totaling $75,000.

Rzepka served as our Chief Financial Officer from May 2024 through December 2024.

During the year ended December 31, 2024, we issued an option to purchase 75,000 shares of common stock to Mr.

Rzpeka at an exercise price of $0.75 per share pursuant to an employment agreement.

Rzepka at an exercise price of $0.75 per share pursuant to an employment agreement.

The option was valued at $48,102 and has a contractual term of 10 years.

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Outstanding Equity Awards at 2025 Fiscal Year-End

The following table sets forth certain information with respect to outstanding options and warrants to purchase common stock previously awarded to our named executive officers as of December 31, 2024.

The following table sets forth certain information with respect to outstanding options, warrants and restricted stock units (RSU’s) to purchase common stock previously awarded to our named executive officers as of December 31, 2025.

Exercisable (1) (#)

Unexercisable

David Vanston

Nick Jennings

(1) Reflects the 1-for-8 reverse stock split of our Common Stock and Series A Preferred Stock effected on September 10, 2020.

Warrants vested on January 31, 2020 and have a term of five years.

Warrants April 24, 2020 and have a term of ten years.

(2) Warrants vested on April 24, 2020 and have a term of ten years.

(3) Warrants vested on October 1, 2020 and have a term of ten years.

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(6) Warrants vested on November 19, 2018 and were modified to expire on November 19, 2033.

Warrants vested on January 26, 2019 and where modified to expire on January 26, 2034.

(7) Warrants vested on January 26, 2019 and were modified to expire on January 26, 2034.

(8) Options vested on January 26, 2023 and have a term of ten years.

(9) Options vested on May 15, 2024 and have a term of ten years.

Options pursuant to the 2016 Plan vested on January 3, 2020 and have a term of five years.

Options pursuant to the 2016 Plan vested on January 15, 2020 and have a term of five years.

(10) Warrants vested on April 24, 2020 and have a term of ten years.

Options pursuant to the 2016 Plan vested on October 01, 2020 and have a term of five years.

(11) Options vested on January 18, 2022 and have a term of ten years.

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(13) Options vested on May 15, 2024 and have a term of ten years.

(14) Includes 100,000 restricted stock units granted to the Company's Chief Financial Officer, of which 66,666 remain unvested as of December 31, 2025.

Restricted stock units have no exercise price or expiration date.

(15) Warrants vested on April 24, 2020 and have a term of ten years.

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(17) Options vested on January 26, 2023 and have a term of ten years.

(18) Options vested on December 14, 2021 and have a term of five years.

(19) Options vested on January 20, 2023 and have a term of five years.

(20) Options vested on May 16, 2024 and have a term of ten years.

Employment Agreements, Termination of Employment and Change-in-Control Arrangements

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Shane, effective October 1, 2020.

The agreement provides for a base annual salary of $500,000.

The agreement provides for an initial base annual salary of $500,000.

Shane's annual base salary has been subsequently increased to $605,000 pursuant to annual reviews by the Compensation Committee.

The agreement also provides for a signing bonus of 375,000 warrants.

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The agreement also provides that we will reimburse Dr.

Shane for the expenses associated with the use of an automobile up to $750 a month.

Shane for the expenses associated with the use of an automobile up to $750 per month.

The initial term of his employment agreement is three years, which may be automatically extended for successive one-year terms, unless either party provides the other with 120 days' prior written notice of its intent to terminate the agreement.

In June 2024, for the purpose of implementing cost-saving measures to reduce cash requirements and achieve profitability objectives, Dr.

Shane’s annual salary was reduced to $423,500 from June 1, 2024 through December 31, 2024.

Shane's annual salary was reduced by 30% from $605,000 to $423,500 from June 1, 2024 through December 31, 2024.

Effective January 1, 2025, Dr.

Shane's annual base salary was restored to $605,000.

In the event Dr.

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Pursuant to her employment agreement, Ms.

Shane will receive an annual base salary of at least $270,000, subject to annual review and discretionary increase by the Compensation Committee of the Board.

Shane received an initial annual base salary of $270,000, subject to annual review and discretionary increase by the Compensation Committee of the Board.

Shane's annual base salary has been subsequently increased to $326,700 pursuant to annual reviews by the Compensation Committee.

Shane is eligible to receive an annual cash bonus and other annual incentive compensation.

The agreement originally provided for a grant of 93,750 warrants.

Additionally, in connection with the execution of her employment agreement, on October 1, 2020, we issued Ms.

Shane a warrant to purchase 93,750 shares of Common Stock at an exercise price of $6.17 per share.

These provisions were subsequently amended to provide for the issuance to Ms.

Shane of 31,250 options from the 2016 Equity Plan at the closing price of $7.06 on the date of grant in lieu of the warrant grant and the 93,750 warrants were cancelled.

Shane acknowledged that the 31,250 options were in full consideration of the amount she was entitled to under the agreement.

Her employment agreement also provides that we will reimburse Ms.

Shane for reasonable and necessary business and entertainment expenses that she incurs in performing her duties.

During the term of her employment, Ms.

Shane will also be entitled to up to four weeks of paid vacation time annually, which will accrue up to six weeks, and to participate in our benefit plans and programs, including but not limited to all group health, life, disability and retirement plans.

Shane is also entitled to the sum of $1,000 per month as a vehicle allowance.

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In June 2024, for the purpose of implementing cost-saving measures to reduce cash requirements and achieve profitability objectives, Ms.

Shane’s annual salary was reduced to $228,690 from June 1, 2024 through December 31, 2024.

Shane's annual salary was reduced by 30% from $326,700 to $228,690 from June 1, 2024 through December 31, 2024.

Effective January 1, 2025, Ms.

Shane's annual base salary was restored to $326,700.

In the event Ms.

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Shane will be entitled to a lump sum payment of one and a half years' salary at the time of such termination.

David Vanston

On May 30, 2025, the Board appointed Mr.

David Vanston as the Company's Chief Financial Officer.

In connection with his appointment, the Company entered into an offer letter with Mr.

Vanston providing for an annual base salary of $230,000 and eligibility to receive an annual discretionary bonus of up to 40% of his base salary, as determined by the Board or its Compensation Committee.

His agreement also provides for a vehicle allowance of $500 per month.

Vanston is also entitled to a one-time relocation assistance payment of $15,000, payable within 30 days following his relocation to within one hour of the Company's Frederick, Maryland headquarters.

On October 6, 2025, the Company granted Mr.

Vanston an initial grant of 100,000 restricted stock units under the 2016 Equity Incentive Plan.

The RSUs vest in three equal installments:

33,334 shares vested immediately upon the grant date of October 6, 2025;

33,333 shares vest on May 30, 2026;

and 33,333 shares vest on May 30, 2027.

On January 6, 2026, the Company issued 33,334 shares to Mr.

Vanston representing the first vesting installment.

Vanston is also entitled to receive an additional grant of 100,000 restricted stock units following one year of employment, subject to the same three-year vesting schedule.

In the event the Company terminates Mr.

Vanston's employment without cause, the Company shall provide Mr.

Vanston with 90 days' prior written notice of such termination, or payment in lieu thereof.

In the event of a change in control of the Company that results in Mr.

Vanston's involuntary termination, Mr.

Vanston will be entitled to a lump sum payment of one and one-half (1½) times his annual salary at the time of such termination.

Nick Jennings

On September 2, 2015, we entered into a new employment agreement with Mr.

Jennings, which superseded his prior agreement, pursuant to which he continues to serve as our Chief Financial Officer.

Jennings’ annual salary is $132,000, which is reviewed annually.

On January 26, 2016, we issued Mr.

Jennings a five-year warrant to purchase up to 12,500 shares of common stock at an exercise price of $4.40 per share.

The agreement also provided for the issuance of an additional five-year warrant to purchase 12,500 shares of common stock in 2016, however, this provision was modified to grant a salary increase in lieu of the options.

In October 2020, Mr.

Jennings’ annual salary was increased to $175,000 per year.

Jennings is also entitled to additional equity compensation based upon superior performance of his responsibilities, as determined by the Board in its sole discretion.

The agreement also provides that we will reimburse Mr.

Jennings for certain business and entertainment expenses.

In the event of a change in control of the Company that results in his termination, Mr.

Jennings will be entitled to a lump sum payment of one year’s salary and all equity awards will be accelerated and fully vested.

In the event his employment is terminated other than for cause, Mr.

Jennings will receive an amount equal to his annual salary as of such termination date after the second employment anniversary.

Effective as of May 14, 2024, Mr.

Nick Jennings due to family matters retired as the Chief Financial Officer of the Company

On December 16, 2024, the Board of Directors of the Company appointed Nick Jennings, former Chief Financial Officer of the Company, as Interim Chief Financial Officer.

The Company has entered into an offer letter with Mr.

Jennings, pursuant to which Mr.

Jennings will serve as the Interim Chief Financial Officer for a five-month period and will receive a fee of $15,000 per month.

On May 16, 2024, we entered into a new employment agreement with Mr.

Rzepka to which he served as our Chief Financial Officer.

Rzepka’ annual salary was $185,000, which was reviewed annually.

Jennings served as our Chief Financial Officer from September 2015 until May 2024 and as Interim Chief Financial Officer from December 2024 through May 2025.

During the year ended December 31, 2024, he was entitled to an annual salary of $211,750, of which he received $104,552 through May 2024.

During the year ended December 31, 2025, he received a monthly fee of $15,000 for five months, totaling $75,000.

On May 16, 2024, we entered into an employment agreement with Mr.

Rzepka, pursuant to which he served as our Chief Financial Officer.

Rzepka's annual salary was $185,000, which was reviewed annually.

Rzepka was also entitled to additional equity compensation based upon superior performance of his responsibilities, as determined by the Board in its sole discretion.

The agreement also provided that we will reimburse Mr.

Rzepka for certain business and entertainment expenses.

The agreement also provided for reimbursement of certain business and entertainment expenses.

In June 2024, for the purpose of implementing cost-saving measures to reduce cash requirements and achieve profitability objectives, Mr.

Rzepka’s annual salary was reduced to $166,500 from June 1, 2024 through December 31, 2024.

Rzepka's annual salary was reduced by 10% from $185,000 to $166,500 from June 1, 2024 through the date of his resignation.

On December 11, 2024, Mr.

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Fees Earned or

Option awards

Other Compensation

Paid in Cash ($)

Compensation ($)

Walter Johnsen (1)

1 unchanged sentence

Lim Boh Soon (3)

Francesco Fragasso (4)

Johnsen was elected to the Board on January 29, 2016.

The term of his agreement as director commenced on February 1, 2016 for up to two years and until a successor is elected, or resignation or removal.

Johnsen was re-elected to the board for a 3-year term at our 2019 annual meeting.

Our agreement with Mr.

Johnsen provides for an annual fee in the amount of $48,000 paid on a quarterly basis and an annual grant of shares of common stock.

In June 2024, we issued Mr.

His director agreement provided for an annual fee in the amount of $48,000 paid on a quarterly basis and an annual grant of shares of common stock.

In May 2025, we issued Mr.

Johnsen 20,000 shares of common stock that were valued at $17,000.

Anderson was elected to the Board on January 29, 2016 and serves as the chairperson of our Audit Committee.

The term of her agreement as director commenced on February 1, 2016 for up to two years and until a successor is elected, or resignation or removal.

Anderson was re-elected to the board for a 3-year term at our 2019 annual meeting.

Our agreement with Ms.

Anderson provides for an annual fee in the amount of $54,600 paid on a quarterly basis and an annual grant of shares of common stock.

In June 2024, we issued Ms.

On September 11, 2025, Mr.

Johnsen notified the Company of his resignation as a director of the Board, effective September 11, 2025.

Cash fees of $32,000 reflect fees paid for two full quarters and two full months through August 31, 2025, the last fully completed month prior to his resignation on September 11, 2025.

Anderson was elected to the Board on January 29, 2016 and served as the chairperson of our Audit Committee.

Her director agreement provided for an annual fee of $54,600 paid on a quarterly basis and an annual grant of shares of common stock.

In May 2025, we issued Ms.

Anderson 20,000 shares of common stock that were valued at $17,000.

Lim was elected to the Board on January 29, 2018.

The term of his agreement as director commenced on February 1, 2018 for up to three years unless re-elected or until a successor is elected, or resignation or removal.

Lim was re-elected to the board for a 3-year term at our 2021 annual meeting.

Our agreement with Mr.

Lim provides for an annual fee in the amount of $48,000 paid on a quarterly basis and an annual grant of shares of common stock.

In June 2024, we issued Mr.

On September 26, 2025, Ms.

Anderson notified the Company that she resigned as a director of the Company effective September 30, 2025.

Cash fees of $40,950 reflect three quarters of her annual fee prorated through September 30, 2025.

Lim has served on the Board since January 29, 2018.

Lim was reelected as a Class I director to the Board at the Company’s 2024 annual meeting of stockholders to serve a three-year term expiring at the 2027 Annual Meeting.

His director agreement provides for an annual fee in the amount of $48,000 paid on a quarterly basis and an annual grant of shares of common stock.

In May 2025, we issued Dr.

Lim 20,000 shares of common stock that were valued at $17,000.

During the fourth quarter of 2025, director agreements were modified to reduce the cash fees to $5,000 per quarter and increase the annual equity grant to 40,000 restricted stock units per year.

Cash fees of $41,000 reflect $36,000 paid at the prior rate for the first three quarters of 2025 and $5,000 paid at the revised rate for the fourth quarter of 2025.

Fragasso was appointed to the Board on September 11, 2025.

Fragasso serves on the Audit Committee, Compensation Committee and Nominating and Governance Committee.

His director agreement provides for a cash fee of $5,000 per quarter and an annual grant of shares of common stock.

During the fourth quarter of 2025, we issued Mr.

Fragasso 10,000 shares of common stock that were valued at $8,000.

Fragasso was subsequently elected by shareholders as a Class II Director at the Company's 2025 annual meeting of stockholders, to serve a three-year term expiring at the 2028 Annual Meeting.

Paul was appointed to the Board on September 25, 2025.

Paul previously served as a member of the Board from 2009 to 2021, including as Corporate Secretary from 2013 to 2021.

Paul serves on the Audit Committee, Compensation Committee and as Chairman of the Nominating and Corporate Governance Committee.

His director agreement provides for a cash fee of $5,000 per quarter and an annual grant of shares of common stock.

During the fourth quarter of 2025, we issued Mr.

Paul 10,000 shares of common stock that were valued at $8,000.

Paul was subsequently elected by shareholders as a Class II Director at the Company's annual meeting in November 2025, to serve a three-year term expiring at the 2028 Annual Meeting.

Policies and Practices Related to the Grant of Certain Equity Awards Close In Time to the Release of Material Nonpublic Information

The Company does not currently grant new awards of stock options, stock appreciation rights, or similar option-like instruments.

Accordingly, the Company has no specific policy or practice on the timing of awards of such options in relation to the disclosure of material nonpublic information by the Company.

In the event the Company determines to grant new awards of such options, the Board and the Compensation Committee will evaluate the appropriate steps to take in relation to the foregoing.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

7 unchanged sentences

On December 30, 2020, we received shareholder approval to amend and restate the 2016 Plan to increase the maximum number of shares of common stock authorized from issuance by 1,375,000, from 625,000 shares to 2,000,000.

As of December 31, 2025 the available plan balance is 1,399,000.

The following table provides information as of December 31, 2025 with respect to compensation plans under which our equity securities are authorized for issuance.

5 unchanged sentences

Equity compensation plans not approved by security holders

1,158,958 (3)

Reflects the 1-for-8 reverse stock split of our Common Stock and Series A Preferred Stock effected on September 10, 2020.

3 unchanged sentences

Includes 100,000 restricted stock units granted to the Company's Chief Financial Officer under the 2016 Plan, of which 66,666 remain unvested as of December 31, 2025.

Restricted stock units have no exercise price and are excluded from the weighted average exercise price calculation.

Security Ownership of Certain Beneficial Owners and Management

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Named Executive Officers and Directors:

Nick Jennings (6)

Walter Johnsen (7)

Kelly Anderson (8)

David Vanston (6)

Francesco Fragasso (7)

Harold Paul (8)

Lim Boh Soon (9)

3 unchanged sentences

The holders of Common Stock and Series A Preferred Stock are each entitled to one vote per share.

Based on Form 3 filed with the SEC by Lau Sok Huy on January 24, 2018.

Based on a Schedule 13G/A filed with the SEC by John F.

Nelson on October 11, 2024.

Based on a Schedule 13D filed with the SEC by Lau Sok Huy on August 1, 2017, as amended.

The address of the shareholder is 96 Robinson Road #11-04, SIF Building, Singapore 068899.

Based on a Schedule 13G filed with the SEC by John F.

Nelson on July 23, 2025.

The address of the shareholder is 3610 Deerpath Road, Middleton, WI 53562.

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Shane that are exercisable or will become exercisable within 60 days of March 11, 2026.

(i) 26,519 shares of Common Stock held of record by Mr.

and (ii) 71,250 shares of Common Stock issuable upon the exercise of warrants and options to purchase Common Stock held by Mr.

Jennings that are exercisable or will become exercisable within 60 days of March 10, 2025.

(i) 108,750 shares of Common Stock held of record by Mr.

and (ii) 3,125 shares of Common Stock issuable upon exercise of stock options that are exercisable or will become exercisable within 60 days of March 10, 2025.

(i) 108,750 shares of Common Stock held of record by Ms.

and (ii) 3,125 shares of Common Stock issuable upon exercise of stock options that are exercisable or will become exercisable within 60 days of March 10, 2025.

33,334 shares of Common Stock held of record by Mr.

20,000 shares of Common Stock held of record by Mr.

81,300 shares of Common Stock held of record by Mr.

Consists of 198,524 shares of Common Stock held of record by Dr.

4 unchanged sentences

Transactions with Related Persons

For the year ended December 31, 2025, there were no transactions, arrangements or relationships in which we were a participant, the amount involved exceeded $120,000, and in which any director, executive officer, nominee for director, beneficial owner of more than 5% of our common stock, or any immediate family member of any such person had a direct or indirect material interest, as defined under Item 404 of Regulation S-K.

Independence of the Board

Based upon information submitted by Mr.

Anderson, and Dr.

Fragasso, Mr.

Paul, and Dr.

Lim, the Board has determined that each of them is “independent” under Nasdaq corporate governance rules.

Shane and Ms.

Elissa Shane are not independent directors as they are employees of the Company.

Elissa Shane are notindependent directors as they are employees of the Company.

No director will be considered “independent” unless the Board affirmatively determines that the director has no direct or indirect material relationship with the Company.

As of the date of this Annual Report on Form 10-K, the Board's independent directors are Mr.

Fragasso, Mr.

Our Board has three separate standing committees:

4 unchanged sentences

The following table presents the aggregate fees billed for audit and other services provided by our independent registered public accounting firm, Rosenberg Rich Baker Berman, P.A., during the 2025 and 2024 fiscal years:

For the Fiscal Years

Ended December 31,

For the years ended December 31,

Audit Fees (1)

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Audit fees represent the professional services rendered for the audit of our annual financial statements and the review of our financial statements included in quarterly reports, along with services normally provided by the accounting firm in connection with statutory and regulatory filings or engagements.

Audit fees do not include fees for comfort letters or consents related to registration statements, which are reported separately under “All Other Fees."

Audit-Related Fees :

3 unchanged sentences

All Other Fees :

All other fees represent fees billed for products and services provided by Rosenberg Rich Baker Berman, P.A other than the services reported for the other categories.

For the year ended December 31, 2025, all other fees of $10,000 represent fees billed by Rosenberg Rich Baker Berman, P.A.

for the issuance of comfort letters and consents in connection with the Company's registration statement on Form S-3 (File No.

333-291563) declared effective December 8, 2025, and the related prospectus supplement filed pursuant to Rule 424(b)(5) in connection with the Company's ELOC.

Pre-Approval Policies and Procedures of the Audit Committee

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We do not otherwise rely on pre-approval policies and procedures.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report:

Financial Statements.

See Index to Financial Statements and Schedule on page F-1.

Exhibits Schedules

Documents filed as part of this report:

Schedules to Financial Statements.

21 unchanged sentences

Offer Letter, dated January 15, 2016, by and between the Registrant and Dr.

Offer Letter, dated September 2, 2015, by and between the Registrant and Nick Jennings

Form of Appointment to the Board of Directors as Independent Director of the Registrant

Restated Manufacturing and Development Agreement, dated November 10, 2016, by and between the Registrant and RG Group

Employment Agreement, entered into as of January 5, 2018, by and between the Registrant and Elissa J.

Shane, effective as of January 1, 2018

Amendment to Executive Employment Agreement

Form of Securities Purchase Agreement dated as of September 26, 2021, between the Registrant and the purchasers named therein

3 unchanged sentences

and the purchasers named therein

Offer Letter, dated May 29, 2025, by and between the Registrant and David Vanston

Equity Purchase Agreement dated November 5, 2025 by and between the Registrant and Hudson Global Ventures, LLC

Registration Rights Agreement dated November 5, 2025 by and between the Registrant and Hudson Global Ventures, LLC

Code of Ethics

Insider Trading Policy

Subsidiaries of the Registrant

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Compensation Recoupment Policy

XBRL Instance Document

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The information in Exhibit 32.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act (including this report), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

Certain personally identifiable information has been omitted from this exhibit pursuant to Item 601(a) (6) of Regulation S-K

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

April 14, 2025

March 31, 2026

TOMI ENVIRONMENTAL SOLUTIONS, INC.

6 unchanged sentences

constitute and appoint Halden S.

Shane and Nick Jennings, or either of them, as their true and lawful attorney and agent with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto;

Shane and David Vanston, or either of them, as their true and lawful attorney and agent with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto;

and we do hereby ratify and confirm all that said attorney and agent shall do or cause to be done by virtue hereof.

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Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

April 14, 2025

/s/ NICK JENNINGS

March 31, 2026

/s/ DAVID VANSTON

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

April 14, 2025

Nick Jennings

March 31, 2026

David Vanston

/s/ ELISSA J.

April 14, 2025

/s/ WALTER C.

April 14, 2025

March 31, 2026

/s/ FRANCESCO FRAGASSO

March 31, 2026

Francesco Fragasso

/s/ HAROLD W.

March 31, 2026

/s/ LIM BOH SOON

April 14, 2025

TOMI ENVIRONMENTAL SOLUTIONS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm [PCAOB No.

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of TOMI Environmental Solutions, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of TOMI Environmental Solutions, Inc.

(the Company) as of years ended December 31, 2024 and 2023, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

To the Board of Directors and

Stockholders of TOMI Environmental Solutions, Inc.

Allowance for credit losses

As described further in Note 2 to the consolidated financial statements, the Company maintains an allowance for credit losses against its accounts receivable balances based on the future estimated credit losses.

As of December 31, 2024, the allowance for credit losses was $2.23 million, or 51.4% of total accounts receivable.

This estimate is determined based on internally developed qualitative and quantitative factors derived from the aging of receivables, the Company’s past collection history with customers, forward looking information and economic trends and conditions.

We identified the estimates used to determine the allowance for credit losses as a critical audit matter.

We have identified the evaluation of the Company’s estimation of allowance for credit losses as a critical audit matter.

There is an established policy for determining overall allowance for credit losses with specific judgement in place for certain account balances that require additional evaluation and assessment which are used in estimating losses related to customer receivables.

There is also a high degree of subjectivity in management's assessment of the completeness and accuracy of the allowance for credit losses, specifically the portion of the receivable expected to be collected, which requires a heightened level of auditor judgement in auditing the estimate.

Our audit procedures related to the allowance for doubtful accounts included:

Evaluating the design and implementation of controls over the calculation of the allowance for credit losses.

Testing the mathematical accuracy of management’s allowance for credit losses calculation as of December 31, 2024 by recalculating and independently applying the credit loss methodology promulgated by generally accepted accounting principles to each risk pool, as well as recalculating the aging of receivables based on underlying source documentation.

Recomputing current and historical collection rates for customer receivable balances and comparing the historical loss rates against the current period estimated loss rates within the respective risk pools and performing a retrospective analysis of the subsequent collections on customer receivables with certain risk characteristics.

Taking into consideration future economic factors applicable to the Company’s industry and their effect over the allowance for current expected credit loss.

Evaluating the reasonableness of management’s qualitative adjustments against the allowance for credit losses by obtaining corroborating evidence which supports the adjustments and assumptions made by management in determining the allowance.

Inventory – Valuation associated with excess and obsolete (E&O) inventory

As further described in Note 2 to the consolidated financial statements, inventory is stated at the lower of cost or net realizable value.

At the balance sheet date, the Company evaluated inventories for excess quantities and obsolescence (E&O) and included an inventory reserve against its inventory balances.

As of December 31, 2024, the inventory reserve was $1.1 million, or approximately 24% of total inventory.

To estimate the amount of inventory that may be in excess or obsolete, the Company reviews inventory quantities on hand as well as historical and projected sales volumes.

The Company’s model assumes that inventory will be distributed on a first-in-first-out basis.

Due to the nature of the inventory and the levels of inventory purchased in prior years, as well as recent sales trends, estimating the amount of inventory that is in excess or potentially obsolete involves significant judgments and estimates.

Given the significant judgments associated with evaluating the valuation of E&O inventory, auditing the reasonableness of management’s estimates and assumptions involved especially subjective judgment and an increased extent of effort, therefore we identified the estimates used to determine the valuation of the E&O inventory as a critical audit matter.

To the Board of Directors and

Stockholders of TOMI Environmental Solutions, Inc.

Our audit procedures related to the Company’s valuation of E&O inventory included the following:

Evaluating the design and implementation of controls over the E&O inventory valuation.

Obtaining the Company’s E&O calculation and testing the mathematical accuracy.

Inquiring of the Company’s employees outside of the accounting department and evaluating other areas of the audit to identify business, product, or industry changes that may impact the inputs in the inventory E&O calculation.

Evaluating management’s future projections by comparing to current and historical sales trends.

Assessing the reasonableness of the assumptions used in the E&O calculation by developing an independent expectation and comparing our independent expectation to the results of the Company’s calculation.

Going Concern

As described in Note 2 to the consolidated financial statements, the Company has recurring losses from operations, negative cash flows from operations, a retained deficit, and as of December 31, 2024, has approximately $665,000 of cash.

The ability of the Company to continue as a going concern is dependent on its ability to generate sufficient cash to fund operations and meet its obligations as they become due.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We identified the Company’s ability to continue as a going concern as a critical audit matter.

Assessing the Company’s assertion on its ability to continue as a going concern is complex and involves a high degree of subjectivity and judgment as it relates to the reasonableness of the assumptions used and judgements made in the determination.

Our audit procedures related to the substantial doubt about the Company’s ability to continue as a going concern included:

Inquiring of executive officers, key members of management, and the Audit Committee of the Board of Directors, regarding factors that would have an impact on the Company’s ability to continue as a going concern.

Evaluating management’s plan for addressing the adverse effects of the conditions identified, including assessing the reasonableness of forecasted information and underlying assumptions by comparing to actual results of prior periods and actual results achieved to date, and utilizing our knowledge of the entity, its business and management in considering liquidity needs and the Company’s ability to generate sufficient cash flows.

Assessing the availability of additional capital raises.

Evaluating the completeness and accuracy of disclosures in the consolidated financial statements.

/s/ Rosenberg Rich Baker Berman P.A.

We have served as the Company’s auditor since 2021.

Somerset, New Jersey

April 14, 2025

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

Current Assets:

Cash and Cash Equivalents

Accounts Receivable - net

Other Receivables

Inventories, net (Note 3)

Vendor Deposits (Note 4)

Prepaid Expenses

Total Current Assets

Property and Equipment – net (Note 5)

Other Assets:

Intangible Assets – net (Note 6)

Operating Lease - Right of Use Asset (Note - 7)

Long Term Accounts Receivable - net

Total Other Assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts Payable

Accrued Expenses and Other Current Liabilities (Note 13)

Deferred Revenue

Current Portion of Long-Term Operating Lease

Total Current Liabilities

Long-Term Liabilities:

Long-Term Operating Lease, Net of Current Portion (Note 7)

Convertible Notes Payable, net of unamortized debt discount of $ 239,506 and $ 301,985 at December 31, 2024 and December 31, 2023, respectively (Note 9)

Total Long-Term Liabilities

Total Liabilities

Commitments and Contingencies (Notes 7 and 11)

Shareholders’ Equity:

Cumulative Convertible Series A Preferred Stock;

par value $ 0.01 per share, 1,000,000 shares authorized;

63,750 shares issued

and outstanding at December 31, 2024 and December 31, 2023, respectively

Cumulative Convertible Series B Preferred Stock;

$ 1,000 stated value;

7.5 % Cumulative dividend;

4,000 shares authorized;

and outstanding at December 31, 2024 and December 31, 2023, respectively

Common stock;

par value $ 0.01 per share, 250,000,000 shares authorized;

20,015,205 and 19,923,955 shares issued and outstanding

at December 31, 2024 and December 31, 2023, respectively

Additional Paid-In Capital

Accumulated Deficit

( 54,302,991 )

( 49,826,229 )

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

The accompanying notes are an integral part of the consolidated financial statements.

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For The Years Ended

Cost of Sales

Operating Expenses:

Professional Fees

Depreciation and Amortization

Selling Expenses

Research and Development

Consulting Fees

General and Administrative

Total Operating Expenses

Income (loss) from Operations

( 4,104,760 )

( 3,349,277 )

Other Income (Expense):

Interest Income

Interest Expense

Total Other Income (Expense)

Income (loss) before income taxes

( 4,476,762 )

( 3,402,592 )

Provision for Income Taxes (Note 15)

Net Income (loss)

$ ( 4,476,762 )

$ ( 3,402,592 )

Net income (loss) Per Common Share

Basic Weighted Average Common Shares Outstanding

Diluted Weighted Average Common Shares Outstanding

The accompanying notes are an integral part of the consolidated financial statements.

TOMI ENVIRONMENTAL SOLUTIONS, INC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Series A Preferred

Additional Paid

Total Shareholders’

Balance at January 1, 2023

$ ( 46,423,637 )

Equity Compensation

Common Stock Issued for Services Provided

Net (Loss) for the year ended December 31, 2023

( 3,402,592 )

Balance at December 31, 2023

$ ( 49,826,229 )

Options Exercised

Common Stock Issued for Services Provided

Equity Compensation

Net (Loss) for the year ended December 31, 2024

( 4,476,762 )

Balance at December 31, 2024

$ ( 54,302,991 )

The accompanying notes are an integral part of the consolidated financial statements.

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,

Cash Flow From Operating Activities:

$ ( 4,476,762 )

$ ( 3,402,592 )

Adjustments to Reconcile Net (Loss) to Net Cash (Used) In Operating Activities:

Depreciation and Amortization

Amortization of Right of Use Asset

Amortization of Deferred Financing Costs

Equity Compensation Expense

Value of Equity Issued for Services

Credit Loss Expense

Inventory Reserve

Sales Returns Allowance

Changes in Operating Assets and Liabilities:

Decrease (Increase) in:

Accounts Receivable

Prepaid Expenses

Vendor Deposits

Long Term Accounts Receivable

Increase (Decrease) in:

Accounts Payable

Accrued Expenses

Deferred Revenue

Lease Liability

Net Cash (Used) in Operating Activities

( 1,440,153 )

( 3,598,585 )

Cash Flow From Investing Activities:

Capitalized Patent and Trademark Costs

Purchase of Property and Equipment

Net Cash (Used) in Investing Activities

The accompanying notes are an integral part of the consolidated financial statements.

TOMI ENVIRONMENTAL SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED

For the Years Ended December 31,

Cash Flow From Financing Activities:

Proceeds from Issuance of Convertible Notes

Proceeds from Exercise of Options

Net Cash Provided By Financing Activities:

(Decrease) In Cash and Cash Equivalents

( 1,674,180 )

( 1,527,674 )

Cash and Cash Equivalents - Beginning

Cash and Cash Equivalents – Ending

Supplemental Cash Flow Information:

Cash Paid for Interest

Cash Paid (Refunded) for Income Taxes

The accompanying notes are an integral part of the consolidated financial statements.

TOMI ENVIRONMENTAL SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS

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 by-product from our decontamination process is oxygen and water in the form of humidity.

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

Our business is organized into four divisions:

Life Sciences, Healthcare, Food Safety and Commercial.

Invented under a defense grant in association with the Defense Advanced Research Projects Agency (“DARPA”) of the U.S.

Department of Defense, BIT™ is registered with the U.S.

Environmental Protection Agency (the “EPA”) and uses a low percentage hydrogen peroxide as its only active ingredient to produce a fog composed mostly of a hydroxyl radical (.OH ion), known as ionized Hydrogen Peroxide (iHP™).

Represented by the SteraMist® brand of products, iHP™ produces a germ-killing aerosol that works like a visual non-caustic gas.

Our products are designed to service a broad spectrum of commercial structures, including, but not limited to, hospitals and medical facilities, bio-safety labs, pharmaceutical facilities, meat and produce processing facilities, universities and research facilities, vivarium labs, other service industries including cruise ships, office buildings, hotel and motel rooms, schools, restaurants, military barracks, police and fire departments, prisons, and athletic facilities.

Our products are also used in single-family homes and multi-unit residences.

Additionally, our products have been listed on the EPA’s List N as products that help combat COVID-19 and are actively being used for this purpose.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

All intercompany accounts and transactions have been eliminated in consolidation.

Reclassification of Accounts

Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation.

These reclassifications had no material effect on previously reported results of operations or financial position.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying consolidated financial statements and the accompanying notes.

Actual results could differ materially from these estimates.

On an ongoing basis, we evaluate our estimates, including those related to, allowance for credit losses, inventory, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities.

Fair Value Measurements

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.

The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Quoted prices in active markets for identical assets or liabilities.

Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or corroborated by observable market data for substantially the full term of the assets or liabilities.

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

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

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 December 31, 2024 and December 31, 2023, there were no cash equivalents.

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding balances.

The Company generally does not require collateral to support customer receivables.

Management assesses the collectability of outstanding customer invoices, and maintains an allowance resulting from the expected non-collection of customer receivables.

In estimating this reserve, management considers factors such as historical collection experience, customer creditworthiness, specific customer risk, and current and expected general economic conditions.

For those customers to whom we extend credit, in accordance with the Current Expected Credit Loss (CECL) model, we make a risk-based evaluation at the point of sale which is further reviewed on both an individual and collective (pool) basis during each reporting period based on ASC 326.

These accounting standards represent a significant departure from previous GAAP.

We are now required to estimate and report expected credit losses over the entire life of a financial asset, considering historical data, current conditions, and future forecasts, even if the risk of loss is remote.

We have a policy of reserving for credit losses based on our best estimate of the amount of potential credit losses in existing accounts receivable.

We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be at risk.

Our allowance for credit losses was as follows for the years ended December 31, 2024 and 2023:

Allowance for credit losses

Credit Loss Expense

Adjustment to allowance

Allowance for credit losses

Long-term trade accounts receivable, are principally amounts arising from the sale of goods and services with a contractual maturity date or realization period of greater than one year and are recognized as "Long-Term Accounts Receivable" in our Consolidated Balance Sheet.

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.

We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence, and future customer demand.

We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories may not be usable or realized when comparing current inventory levels to anticipated demand for our product.

Our reserve for obsolete inventory was $ 1,100,000 and $ 95,000 as of December 31, 2024 and December 31, 2023, respectively.

Property and Equipment

We account for property and equipment at cost less accumulated depreciation.

We compute depreciation using the straight-line method over the estimated useful lives of the assets, generally three to five years.

Depreciation for equipment, furniture and fixtures and vehicles commences once placed in service for its intended use.

Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or service lives of the improvements, whichever is shorter.

We recognize a right-of-use (“ROU”) asset and lease liability for all leases with terms of more than 12 months, in accordance with ASC 842.

We utilize the short-term lease recognition exemption for all asset classes as part of our on-going accounting under ASC 842.

This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities.

Recognition, measurement and presentation of expenses depends on classification as a finance or operating lease.

As a lessee, we utilize the reasonably certain threshold criteria in determining which options we will exercise.

Furthermore, our lease payments are based on index rates with minimum annual increases.

These represent fixed payments and are captured in the future minimum lease payments calculation.

In determining the discount rate to use in calculating the present value of lease payments, we used our incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.

We have also elected the practical expedient to not separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of our lease components for balance sheet purposes.

Furthermore, all variable payments included in lease agreements will be disclosed as variable lease expense when incurred.

Generally, variable lease payments are based on usage and common area maintenance.

These payments will be included as variable lease expense in the period in which they are incurred.

Accounts Payable

As of December 31, 2024, one vendor accounted for approximately 60 % of accounts payable.

As of December 31, 2023, two vendors accounted for approximately 59 % of accounts payable.

For the year ended December 31, 2024, two vendors accounted for 67 % of cost of sales.

For the year ended December 31, 2023, two vendors accounted for 70 % of cost of sales.

Accrued Warranties

Accrued warranties represent the estimated costs, if any, that will be incurred during the warranty period of our products.

We estimate the expected costs to be incurred during the warranty period and record the expense to the consolidated statement of operations at the date of sale.

Our manufacturers assume the warranty against product defects from date of sale, which we extend to our customers upon sale of the product.

We assume responsibility for product reliability and results.

As of December 31, 2024, and December 31, 2023, our warranty reserve was $ 30,000 and $ 30,000 , respectively.

(See Note 14).

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 that are, on a more likely than not basis, not expected to be realized in accordance with FASB ASC Topic 740, Income Taxes guidance for income taxes.

Net deferred tax benefits have been fully reserved at December 31, 2024 and December 31, 2023.

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.

Net Income (Loss) Per Share

Basic net income or (loss) per share is computed by dividing our net income or (loss) by the weighted average number of shares of common stock outstanding during the period presented.

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.

The computation of diluted EPS is similar to the computation of basic EPS except that the numerator may have to adjust for any dividends and income or loss associated with potentially dilutive securities that are assumed to have resulted in the issuance of shares of common stock and the denominator may have to adjust to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued during the period to reflect the potential dilution that could occur from shares of common stock issuable through a contingent shares issuance arrangement, stock options, warrants, or convertible preferred stock.

For purposes of determining diluted earnings per common share, the treasury stock method is used for stock options, and warrants, and the if-converted method is used for convertible preferred stock as prescribed in FASB ASC Topic 260.

Because of the net loss for the year ended December 31, 2024 and 2023, the impact of including these in our computation of diluted EPS was anti-dilutive.

Potentially dilutive securities as of December 31, 2024 consisted of 2,080,000 shares of common stock from convertible debentures, 2,765,846 shares of common stock issuable upon exercise of outstanding warrants, 805,042 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 December 31, 2023 consisted of 2,080,000 shares of common stock from convertible debentures, 2,772,096 shares of common stock issuable upon exercise of outstanding warrants, 617,542 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”).

Options, warrants, preferred stock and shares associated with the conversion of debt to purchase approximately 5.7 million and 5.5 million shares of common stock were outstanding at December 31, 2024 and 2023, respectively, but were excluded from the computation of diluted net loss per share at December 31, 2024 and 2023 due to the anti-dilutive effect on net loss per share.

For the Year Ended December 31,

$ ( 4,476,762 )

$ ( 3,402,592 )

Net loss attributable to common shareholders

$ ( 4,476,762 )

$ ( 3,402,592 )

Weighted average number of shares of common stock outstanding:

Net loss attributable to common shareholders per share:

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

For the Years Ended December 31,

$ ( 4,476,762 )

$ ( 3,402,592 )

Basic weighted-average shares

Effect of dilutive securities

Convertible Debt

Preferred Stock

Diluted Weighted Average Shares

Net Loss Per Common Share:

Revenue Recognition

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

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.

To determine revenue recognition for contracts with customers we perform the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligation(s) in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligation(s) in the contract;

and (v) recognize revenue when (or as) we satisfy the performance obligation(s).

At contract inception, we assess the goods or services promised within each contract, assess whether each promised good or service is distinct and identify those that are performance obligations.

We must use judgment to determine:

a) the number of performance obligations based on the determination under step (ii) above and whether those performance obligations are distinct from other performance obligations in the contract;

b) the transaction price under step (iii) above for each distinct performance obligation identified in step (ii) above;

and c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above.

Title and risk of loss generally pass to our customers upon shipment.

Our customers include end users as well as dealers and distributors who market and sell our products.

Our revenue is not contingent upon resale by the dealer or distributor, and we have no further obligations related to bringing about resale.

Shipping and handling costs charged to customers are included in Product Revenues.

The associated expenses are treated as fulfillment costs and are included in Cost of Revenues.

Revenues are reported net of sales taxes collected from Customers.

Disaggregation of Revenue

The following table presents our revenues disaggregated by revenue source (rounded to nearest thousandth).

Product and Service Revenue

For The Years Ended

SteraMist Product

Service and Training

Revenue by Geographic Region

For The Years Ended

United States

International

Product revenue includes sales from our standard and customized equipment, solution and accessories sold with our equipment.

Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products.

Service and training revenue include sales from our high-level decontamination and service engagements, validation of our equipment and technology and customer training.

Service revenue is recognized as the agreed upon services are rendered to our customers in an amount that reflects the consideration we expect to receive in exchange for those services.

Estimated allowances for sales returns are recorded as sales are recognized.

We use a specific identification method based on subsequent product return activity and historical average calculations to estimate the allowance for sales returns.

For the years ended December 31, 2024 and 2023, we recorded an allowance of $ 227,000 and $ 128,390 , respectively.

Costs to Obtain a Contract with a Customer

We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less.

We generally expense sales commissions when incurred because the amortization period would have been one year or less.

These costs are recorded within selling expenses.

Contract Balances

As of December 31, 2024, and December 31, 2023 we had contract balances and 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 in the amounts of $ 211,724 and $0, respectively.

Arrangements with Multiple Performance Obligations

Our contracts with customers may include multiple performance obligations.

We enter into contracts that can include various combinations of products and services, which are primarily distinct and accounted for as separate performance obligations.

Significant Judgments

Our contracts with customers for products and services often dictate the terms and conditions of when the control of the promised products or services is transferred to the customer and the amount of consideration to be received in exchange for the products and services.

We also record an estimated allowance for anticipated product returns.

Equity Compensation Expense

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 expected term of the Company’s warrants has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” warrants.

The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock, par value $0.01 (the “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 Company’s Amended and Restated 2016 Equity Incentive Plan (the “2016 Plan”).

The 2016 Plan authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance units/shares.

Up to 2,000,000 shares of Common Stock are authorized for issuance under the 2016 Plan.

Shares issued under the 2016 Plan may be either authorized but unissued shares, treasury shares, or any combination thereof.

Provisions in the 2016 Plan permit the reuse or reissuance by the 2016 Plan of shares of Common Stock for numerous reasons, including, but not limited to, shares of Common Stock underlying canceled, expired, or forfeited awards of stock-based compensation and stock appreciation rights paid out in the form of cash.

Equity compensation expense will typically be awarded in consideration for the future performance of services to us.

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 year ended December 31, 2024 and 2023, we issued 60,000 and 60,000 shares of common stock, respectively, out of the 2016 Plan.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents.

We maintain cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation limit of $ 250,000 at times during the year.

Long-Lived Assets Including Acquired Intangible Assets

We assess long-lived assets for potential impairments at the end of each year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset.

In evaluating long-lived assets for impairment, we measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate.

If our long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.

We base the calculations of the estimated fair value of our long-lived assets on the income approach.

For the income approach, we use an internally developed discounted cash flow model that includes, among others, the following assumptions:

projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends;

expected future investments to grow new units;

and estimated discount rates.

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 years ended December 31, 2024 and 2023.

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 years ended December 31, 2024 and 2023 were approximately $ 221,000 and $ 498,000 , respectively.

Research and Development Expenses

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

For the years ended December 31, 2024 and 2023, research and development expenses were approximately $ 291,000 and $ 492,000 , respectively.

Business Segments

We currently have one reportable business segment due to the fact that we derive our revenue primarily from one product in which 1) The business activities are homogenous in nature, 2) The entire operation faces similar market conditions and risks, 3) There is a high degree of integration in its operations, 4) Internal evaluations of financial results are conducted on a consolidated basis.

A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above.

See Note 17, Segment Reporting for more details.

We are required to apply the guidance in ASC 280 and identify significant segment expenses and other segment items for our single reportable segment.

Going Concern

For the years ended December 31, 2024 and 2023, our net loss was approximately $ 4,477,000 and $ 3,403,000 , respectively, and the cash used in operations was approximately $ 1,440,000 and $ 3,599,000 , respectively.

As of December 31, 2024, we had approximately $ 665,000 of cash and cash equivalents and an accumulated deficit of $ 54.3 million.

These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business;

no adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.

The Company intends to fund ongoing activities by utilizing its current cash on hand, the cash generated from operations, and by raising additional capital through equity or debt financings.

There can be no assurance that the Company will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to us, as our ability to raise capital may be affected by various factors, including general market conditions, volatility of our stock price, investor interests and expectations, and our financial performance.

On March 28, 2025, we received a deficiency letter from the Listing Qualifications Department (the "Staff") of the Nasdaq Stock Market ("Nasdaq") notifying us that, for the preceding 30 consecutive business days, the closing bid price for the Company's common stock, par value $0.01 per share (the "Common Stock") was below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Requirement").

The notification received has no immediate effect on the Company's Nasdaq listing.

In accordance with Nasdaq rules, the Company has been provided an initial period of 180 calendar days, or until September 24, 2025 (the "Compliance Date"), to regain compliance with the Bid Price Requirement.

There is no guarantee that we will be able to regain compliance with the Bid Price Requirement by the Compliance Date, and failure to do so may subject us to delisting proceedings of NASDAQ.

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In December 2023, the FASB issued ASU No.

2023-09, Improvements to Income Tax Disclosures (Topic 740).

The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid.

The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024.

Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance.

This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

In November 2024, the FASB issued ASU No.

2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40).

In January 2025, ASU No.

2025-01 was issued to clarify the effective date for all public business entities.

The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions.

This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses.

The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements.

Early adoption is also permitted.

This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted.

We are currently evaluating the provisions of this ASU.

Recently adopted accounting pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-07, Improvements to Reportable Segment Disclosures (Topic 280).

This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is also permitted.

This ASU was adopted retrospectively on December 31, 2024 and resulted in us including the additional required disclosures.

.Refer to Note 17, Segment Reporting about the areas for the inclusion of the new required disclosures.

Inventories consist of the following at (rounded to the nearest thousandth):

Finished goods

Raw Materials

Inventory Reserve

( 1,100,000 )

Inventory, net

Our inventory reserve was adjusted upwards by $ 1,005,000 during the fiscal year ended December 31, 2024, to account for additional slow-moving items in our year-end inventory records compared to anticipated demand for certain units.

VENDOR DEPOSITS

On December 31, 2024 and December 31, 2023, we maintained vendor deposits of $ 35,895 and $ 29,335 , respectively, for open purchase orders for inventory.

PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

Furniture and fixtures

Computer and software

Leasehold improvements

Tenant Improvement Allowance

Total Property and Equipment

Accumulated depreciation

Property and Equipment, net

For the years ended December 31, 2024 and 2023, depreciation was $ 270,228 and $ 345,556 , respectively.

For the years ended December 31, 2024 and 2023, amortization of tenant improvement allowance was $ 39,194 and was recorded as lease expense and included within general and administrative expense on the consolidated statement of operations.

INTANGIBLE ASSETS

Intangible assets consist of patents and trademarks related to our Binary Ionization Technology.

We amortize the patents over the estimated remaining lives of the related patents.

The trademarks have an indefinite life.

Amortization expense was $ 26,308 and $ 21,121 for the years ended December 31, 2024 and 2023, respectively.

Definite life intangible assets consist of the following:

Intellectual Property and Patents

Accumulated Amortization

Indefinite life intangible assets consist of the following:

Total Intangible Assets, net

Approximate future amortization is as follows (rounded to nearest thousandth):

December 31, 2025

December 31, 2026

December 31, 2027

December 31, 2028

December 31, 2029

In April 2018, we entered into a 10 -year lease agreement for a new 9,000 -square-foot facility that contains office, warehouse, lab and research and development space in Frederick, Maryland.

The lease agreement commenced in December 2018 when the property was ready for occupancy.

The agreement provided for annual rent of $ 143,460 , an escalation clause that increases the rent 3 % year over year, a landlord tenant improvement allowance of $ 405,000 and additional landlord work as discussed in the lease agreement.

We took occupancy of the property on December 17, 2018 and the lease was amended in March 2019 to provide for a 4-month rent holiday and a commencement date of April 1, 2019.

A 7 % discount rate was determined using our incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

The balances for our operating lease where we are the lessee are presented as follows within our consolidated balance sheet:

Operating leases:

Operating lease right-of-use asset

Current Portion of Long-Term Operating Lease

Long-Term Operating Lease, Net of Current Portion

The components of lease expense are as follows within our consolidated statement of operations:

For the Year Ended December 31,

Operating lease expense

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

Weighted-average remaining lease term:

Operating leases

Discount rate:

Operating leases

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

For the Year Ended December 31,

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

As of December 31, 2024, the maturities of our operating lease liability are as follows:

Operating Lease

December 31, 2025

December 31, 2026

December 31, 2027

December 31, 2028

December 31, 2029

Total minimum lease payments

Present value of lease obligations

Current portion

Long-term portion of lease obligations

CLOUD COMPUTING SERVICE CONTRACT

In May 2020 we entered into a cloud computing service contract with a vendor.

The contract provides for annual payments in the amount of $ 30,409 and has a term of 5 years.

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

We have incurred implementation costs of $ 66,857 in connection with the cloud computing service contract which have been capitalized in prepaid expenses and other assets as of December 31, 2024.

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 years ended December 31, 2024 and 2023 were $ 15,063 and $ 15,063 , respectively.

CONVERTIBLE DEBT

On October and November 2023, we entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors (collectively, the “Investors”) pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the “Private Placement”) in one or more closings up to an aggregate principal amount of $ 5,000,000 of Convertible Notes (the “Notes”).

As of December 31, 2024, we issued and sold an aggregate of $ 2,600,000 of Notes to certain Investors pursuant to the SPA.

In October and November 2023, we sold and issued pursuant to the SPA convertible promissory notes (the “Notes”) to purchase an aggregate of 2,080,000 shares of common stock at an exercise price of $ 1.25 per share in exchange for aggregate gross proceeds of $ 2,600,000 .

The Notes mature and are due on the fifth anniversary of the issuance date in October and November of 2028.

The Notes bear simple interest at a rate of 12 % per annum, payable in equal monthly installments.

The Notes are convertible into shares of our Common Stock, at the option of the holder, at a conversion price of $1.25 per share, which shall not exceed $1.55 per share.

In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a “fundamental change” occurs (as defined in the Securities Purchase Agreement) .

The Notes are unsecured and senior to other indebtedness subject to certain exceptions.

Interest expense related to the Notes for the years ended December 31, 2024 and 2023 was $ 312,000 and $ 54,892 , respectively.

Amortization of deferred financing costs were $ 62,480 and $ 10,413 for the years ended December 31, 2024 and 2023, respectively, which has been included with interest expense on the statement of operations.

Convertible notes consist of the following at:

Convertible notes

Debt issuance costs

Accumulated amortization

Convertible notes, net

SHAREHOLDERS’ EQUITY

Our Board of Directors (the “Board”) may, without further action by our shareholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series.

The holders of such preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up by us before any payment is made to the holders of our common stock.

Furthermore, the Board could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of our common stock.

Convertible Series A Preferred Stock

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

At December 31, 2024 and 2023, 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.

Convertible Series B Preferred Stock

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

At December 31, 2024 and 2023, 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.

In January 2023, we issued 60,000 shares of Common Stock valued at approximately $ 51,000 to members of our Board pursuant to our equity plan (see Note 12).

In May 2024, we issued 60,000 shares of Common Stock valued at approximately $ 45,000 to members of our Board pursuant to our equity plan (see Note 12).

Stock Options

In January 2023, we issued options to purchase 175,000 shares of Common Stock to Officers at an exercise price of $ 0.85 per share pursuant to an employment agreement.

The options were valued at $ 132,361 and have a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the options received by Officers with the following assumptions:

volatility, 139 %;

expected dividend yield, 0 %;

risk free interest rate, 3.59 %;

and an expected life of 5 years.

The grant date fair value of each share of Common Stock underlying the options was $ 0.76 .

In January 2023, we issued options to purchase 42,042 shares of Common Stock to employees at an exercise prices of $ 0.71 - $ 0.85 per share pursuant to an employment agreement.

The options were valued at $ 30,925 , in aggregate and have a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the options received by our employees with the following assumptions:

volatility, 139 %;

expected dividend yield, 0 %;

risk free interest rate, 3.59 %;

and an expected life of 5 years.

The grant date fair value of each share of Common Stock underlying the options was $ 0.76 .

In May 2024, we issued options to purchase 225,000 shares of Common Stock to officers at an exercise price of $ 0.75 per share pursuant to an employment agreement.

The options were valued at $ 144,307 and have a contractual term of 10 years.

We utilized the Black-Scholes model to fair value the options received by Officers with the following assumptions:

volatility, 125 %;

expected dividend yield, 0 %;

risk free interest rate, 4.35 %;

and a contractual term of 10 years.

The grant date fair value of each share of Common Stock underlying the options was $ 0.64 .

The total stock based compensation for the years ended December 31, 2024 and 2023, was $ 144,307 and $ 163,286 , respectively which has been in included within General and Administration expense in our statement of operations.

The following table summarizes stock options outstanding as of December 31, 2024 and 2023:

December 31, 2024

December 31, 2023

Number of Options

Weighted Average Exercise Price

Number of Options

Weighted Average Exercise Price

Outstanding, beginning of period

Outstanding, end of period

Options outstanding and exercisable by price range as of December 31, 2024 were as follows:

Outstanding Options

Exercisable Options

Life in Years

Exercise Price

Stock Warrants

The following table summarizes the outstanding common stock warrants as of December 31, 2024 and 2023:

December 31, 2024

December 31, 2023

Number of Warrants

Weighted Average Exercise Price

Number of Warrants

Weighted Average Exercise Price

Outstanding, beginning of period

Outstanding, end of period

Warrants outstanding and exercisable by price range as of December 31, 2024 were as follows:

Outstanding Warrants

Exercisable Warrants

Exercise Price

Average Weighted

Remaining Contractual

Life in Years

Weighted Average

Exercise Price

There were no unvested warrants outstanding as of December 31, 2024.

COMMITMENTS AND CONTINGENCIES

Legal Contingencies

We may become a party to litigation in the normal course of business.

In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operations or cash flows.

In addition, from time to time, we may have to file claims against parties that infringe on our intellectual property.

Product Liability

As of December 31, 2024 and 2023, there were no claims against us for product liability.

CONTRACTS AND AGREEMENTS

Consulting Agreement

On December 16, 2024, the Board of Directors of the Company appointed Nick Jennings, former Chief Financial Officer of the Company, as Interim Chief Financial Officer.

The Company has entered into an offer letter with Mr.

Jennings, pursuant to which Mr.

Jennings will serve as the Interim Chief Financial Officer for a five-month period and will receive a fee of $ 15,000 per month.

Director Compensation

In January 2023, we increased the annual fee to the non-employee members of our Board to $ 48,000 , to be paid in cash on a quarterly basis, with the exception of the audit committee chairperson, whose annual fee was increased to $ 54,600 , also to be paid in cash on a quarterly basis.

Non-employee Director compensation also includes the annual issuance of our Common Stock.

For the year ended December 31, 2023, we issued an aggregate of 60,000 shares of Common Stock that were valued at approximately $ 51,000 to members of our Board.

For the year ended December 31, 2024, we issued an aggregate of 60,000 shares of Common Stock that were valued at approximately $ 45,000 to members of our Board.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

Payroll and related costs

Director fees

Sales Tax Payable

Accrued warranty (Note 14)

Other accrued expenses and current liabilities

ACCRUED WARRANTY

Our manufacturers assume the warranty against product defects from date of sale, which we extend to our customers upon sale of the product.

We assume responsibility for product reliability and results.

The warranty is generally limited to a refund of the original purchase price of the product or a replacement part.

We estimate warranty costs based on historical warranty claim experience.

The following table presents warranty reserve activities at:

Beginning accrued warranty costs

Provision for warranty expense

Settlement of warranty claims

Ending accrued warranty costs

The Company’s income tax expense (benefit) consisted of:

For the Year Ended

The Company’s net income (loss) before income tax consisted of:

For the Year Ended

United States

$ ( 4,476,762 )

$ ( 3,402,592 )

$ ( 4,476,762 )

$ ( 3,402,592 )

Our income tax expense differed from the amounts computed by applying the United States statutory corporate income tax rate for the following reasons:

On December 22, 2017, the 2017 Tax Cuts and Jobs Act (“Tax Act”) was enacted into law making significant changes to the Internal Revenue Code.

Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017 , the transition of U.S.

international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of foreign earnings.

We are required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring our U.S.

deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities.

The Tax Act did not give rise to any material impact on the consolidated balance sheets and consolidated statements of operations due to our historical loss position and the full valuation allowance on our net U.S.

deferred tax assets.

The reconciliation of taxes at the federal and state statutory rate to our provision for income taxes for the years ended December 31, 2024 and 2023 was as follows:

For the Year Ended

Income (Loss) before income tax

$ ( 4,476,762 )

$ ( 3,402,592 )

US statutory corporate income tax rate

Income tax expense computed at US statutory corporate income tax rate

( 1,253,493 )

Reconciling items:

Change in valuation allowance on deferred tax assets

Provision to prior year tax return

( 1,188,884 )

Meals and Entertainment

Income tax expense (benefit)

Components of our deferred income tax assets (liabilities) are as follows:

Deferred tax assets:

Reserve for Credit Loss

Inventory Reserve

Accrued Vacation

Warranty Reserve

Intangible Assets

Allowance for Sales Returns

Capitalized R&D

Stock-Based Compensation

Operating lease right-of-use liabilities

Net operating losses

Valuation Allowance

( 8,678,000 )

( 7,539,000 )

Deferred Tax Assets

Deferred tax liabilities:

Operating lease right-of-use assets

Property and Equipment

Net Deferred Tax Assets and Liabilities

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-740 guidance for income taxes.

As of December 31, 2024, we recorded a valuation allowance of $ 8,678,000 for the portion of the deferred tax assets that we do not expect to be realized.

The valuation allowance on our net deferred taxes increased by $ 1,139,000 during the year ended December 31, 2024, primarily due to U.S.

deferred tax assets incurred in the current year that cannot be realized.

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.

For income tax purposes in the United States, we had available federal net operating loss carryforwards (“NOL”) as of December 31, 2024 and 2023 of approximately $ 22,434,000 and $ 20,234,000 respectively to reduce future federal taxable income.

For income tax purposes in the United States, we had available state NOL carryforwards as of December 31, 2024 and 2023 of approximately $ 20,045,000 and $ 17,433,000 respectively to reduce future state taxable income.

If any of the NOL’s generated prior to 2018 are not utilized, they will expire at various dates through 2037.

NOL’s generated after 2017 carry forward indefinitely.

There may be certain limitations as to the future annual use of the NOLs due to certain changes in our ownership.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

As of December 31, 2024, and 2023, the management of the Company determined there were no reportable uncertain tax positions.

CUSTOMER CONCENTRATION

The Company had certain customers whose accounts receivable balances individually represented 10 % or more of the Company’s accounts receivable, or whose sales for the fiscal year represented 10% or more of the Company’s revenue.

As of December 31, 2024, two customers accounted for 25 % of our gross accounts receivable.

As of December 31, 2023, two customers accounted for 27 % of our gross accounts receivable.

For the year ended December 31, 2024, we had one customer who represented 15 % of revenue.

For the year ended December 31, 2023, we had two customers who represented 20 % of revenue.

SEGMENT REPORTING

Our Chief Executive Officer, as the CODM, organizes our company, manages resource allocations and measures performance among one operating and reportable segment due to the fact that we derive our revenue primarily from one product (equipment and service revenue based on our patented BIT technology).

A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above.

We evaluated the aggregation criteria in ASC 280-10-50-11 which states that aggregation can be considered if segments are similar in certain areas, including the nature of products and services, production processes, type of class of customer, and future economic performance.

Our CODM is regularly provided with more detailed expense information than what is included on our consolidated income statement.

The CODM considers monthly budgets and cash flow projections, gross margins for each project, and our consolidated net income as reported on the income statement when allocating resources and assessing our performance.

We are required to apply the guidance in ASC 280 and identify significant segment expenses and other segment items for our single reportable segment.

SUBSEQUENT EVENTS

In March 2025, we entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors (collectively, the “Investors”) pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the “Private Placement”) in one or more closings up to an aggregate principal amount of $3,000,000 (the “Notes”).

In March and April 2025, we sold and issued pursuant to an SPA convertible promissory note (the “Notes”) to purchase an aggregate of 308,000 shares of common stock at an exercise price of $ 1.25 per share in exchange for aggregate gross proceeds of $ 385,000 .

The Notes mature and are due on the fifth anniversary of the issuance date in March of 2030.

The Notes bear simple interest at a rate of 12 % per annum, payable in equal monthly installments.

The Notes are convertible into shares of our Common Stock, at the option of the holder, at a conversion price of $ 1.25 per share, which shall not exceed $1.55 per share.

In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $ 1.55 per share or higher on any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a “fundamental change” occurs (as defined in the Securities Purchase Agreement).

The Notes are unsecured and senior to other indebtedness subject to certain exceptions.

On March 28, 2025, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for the preceding 30 consecutive business days, the closing bid price for the Company’s common stock, par value $0.01 per share (the “Common Stock”) was below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”).

The notification received has no immediate effect on the Company’s Nasdaq listing.

In accordance with Nasdaq rules, the Company has been provided an initial period of 180 calendar days, or until September 24, 2025 (the “Compliance Date”), to regain compliance with the Bid Price Requirement.

There is no guarantee that we will be able to regain compliance with the Bid Price Requirement by the Compliance Date, and failure to do so may subject us to delisting proceedings of NASDAQ.

March 31, 2026

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-K

Item 9A. Controls and Procedures