TOMI ENVIRONMENTAL SOLUTIONS, INC.
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(Exact
name of registrant as specified in its charter)
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Florida
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59-1947988
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(State
or other jurisdiction of incorporation or
organization)
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(IRS
Employer Identification No.)
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9454 Wilshire Blvd., Penthouse, Beverly Hills, CA
90212
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(Address
of principal executive offices) (Zip Code)
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(800) 525-1698
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(Registrant’s
telephone number, including area code)
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Not Applicable
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(Former
name, former address and former fiscal year, if changed since last
report)
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Large
accelerated filer ☐
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Accelerated
filer
☐
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Non-accelerated
filer ☐ (Do not check if a smaller reporting
company)
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Smaller
reporting company ☑
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Emerging
growth company ☐
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Page
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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2
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PART
I
FINANCIAL INFORMATION
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Item 1
Financial
Statements.
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3
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Item 2
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
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21
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Item 3
Quantitative and
Qualitative Disclosures About Market Risk.
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30
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Item 4
Controls and
Procedures.
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30
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PART
II
OTHER INFORMATION
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Item 1
Legal
Proceedings.
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32
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Item 1A
Risk
Factors.
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32
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Item 2
Unregistered Sales
of Equity Securities and Use of Proceeds.
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32
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Item 3
Defaults Upon
Senior Securities.
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32
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Item 4
Mine
Safety Disclosures.
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32
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Item 5
Other
Information.
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32
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Item 6
Exhibits.
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32
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SIGNATURES
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33
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EXHIBIT
INDEX
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34
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ASSETS
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Current
Assets:
|
|
|
|
March
31,
2018
|
December
31,
2017
|
|
(Unaudited)
|
|
Cash
and Cash Equivalents
|
$3,867,420
|
$4,550,003
|
Accounts
Receivable, net
|
2,230,402
|
1,835,949
|
Inventories
(Note 3)
|
3,273,613
|
3,518,884
|
Deposits
on Merchandise (Note 9)
|
15,714
|
-
|
Prepaid
Expenses
|
276,685
|
270,419
|
Total
Current Assets
|
9,663,834
|
10,175,255
|
|
|
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Property
and Equipment, net (Note 4)
|
642,461
|
712,822
|
|
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Other
Assets:
|
|
|
Intangible
Assets, net (Note 5)
|
1,456,155
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1,548,532
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Security
Deposits
|
4,700
|
4,700
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Total
Other Assets
|
1,460,855
|
1,553,232
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Total
Assets
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$11,767,150
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$12,441,309
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LIABILITIES
AND SHAREHOLDERS’ EQUITY
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|
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Current
Liabilities:
|
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Accounts
Payable
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$634,803
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$751,730
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Accrued
Expenses and Other Current Liabilities (Note 10)
|
287,861
|
267,136
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Accrued
Interest (Note 6)
|
16,000
|
80,000
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Customer
Deposits
|
1,578
|
3,062
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Deferred
Rent
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-
|
781
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Total
Current Liabilities
|
940,242
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1,102,709
|
|
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|
Convertible
Notes Payable, net of discount of $47,588 and 55,625
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|
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at
March 31, 2018 and December 31, 2017, respectively (Note
6)
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5,952,412
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5,944,375
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Total
Long-Term Liabilities
|
5,952,412
|
5,944,375
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Total
Liabilities
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6,892,654
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7,047,084
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Commitments
and Contingencies
|
-
|
-
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Shareholders’
Equity:
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Cumulative
Convertible Series A Preferred Stock;
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par
value $0.01 per share, 1,000,000 shares authorized; 510,000 shares
issued
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and
outstanding at March 31, 2018 and December 31, 2017
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5,100
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5,100
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Cumulative
Convertible Series B Preferred Stock; $1,000 stated
value;
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7.5%
cumulative dividend; 4,000 shares authorized; none
issued
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and
outstanding at March 31, 2018 and December 31, 2017
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-
|
-
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Common
Stock; par value $0.01 per share, 200,000,000 shares
authorized;
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|
|
122,349,958
and 122,049,958 shares issued and outstanding
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at
March 31, 2018 and December 31, 2017, respectively
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1,223,499
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1,220,499
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Additional
Paid-In Capital
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42,180,265
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42,139,675
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Accumulated
Deficit
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(38,534,368)
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(37,971,049)
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Total
Shareholders’ Equity
|
4,874,496
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5,394,225
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Total
Liabilities and Shareholders’ Equity
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$11,767,150
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$12,441,309
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For the Three
Months Ended
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|
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March
31,
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2018
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2017
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Sales,
net
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$1,312,466
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$1,098,883
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Cost
of Sales
|
491,659
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416,357
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Gross
Profit
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820,807
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682,526
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Operating
Expenses:
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Professional
Fees
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106,458
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272,011
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Depreciation
and Amortization
|
162,738
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159,151
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Selling
Expenses
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204,005
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179,384
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Research
and Development
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132,487
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30,647
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Equity
Compensation Expense (Note 7)
|
12,685
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11,553
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Consulting
Fees
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35,026
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31,052
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General
and Administrative
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663,887
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610,355
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Total Operating
Expenses
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1,317,287
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1,294,153
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Loss from
Operations
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(496,480)
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(611,627)
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Other Income
(Expense):
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Amortization
of Debt Discount
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(8,037)
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(137)
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Interest
Income
|
1,198
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-
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Interest
Expense
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(60,000)
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(14,133)
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Total Other Income
(Expense)
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(66,839)
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(14,270)
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Net
Loss
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$(563,319)
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$(625,897)
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Net Loss Per Common
Share
|
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Basic
and Diluted
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$(0.00)
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$(0.01)
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|
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Basic and Diluted
Weighted Average Common Shares Outstanding
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122,229,959
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120,825,134
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Series A
Preferred
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Common
Stock
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||
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Shares
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Amount
|
Shares
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Amount
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Additional
Paid
in
Capital
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Accumulated
Deficit
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Total
Shareholders’
Equity
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Balance at
December 31, 2017
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510,000
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$5,100
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122,049,958
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$1,220,499
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$42,139,675
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$(37,971,049)
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$5,394,225
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Equity Based
Compensation
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13,590
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13,590
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Common Stock
Issued for Services Provided
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300,000
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3,000
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27,000
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30,000
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Net Loss for
the Three Months Ended March 31, 2018
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(563,319)
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(563,319)
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Balance at
March 31, 2018
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510,000
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$5,100
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122,349,958
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$1,223,499
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$42,180,265
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$(38,534,368)
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$4,874,496
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Three Months Ended
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March 31,
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2018
|
2017
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Cash
Flow From Operating Activities:
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Net
Loss
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$(563,319)
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$(625,897)
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Adjustments
to Reconcile Net Loss to
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Net
Cash Used In Operating Activities:
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Depreciation
and Amortization
|
162,738
|
159,151
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Amortization
of Debt Discount
|
8,037
|
137
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Equity
Based Compensation
|
13,590
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11,553
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Value
of Equity Issued for Services
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30,000
|
-
|
Changes
in Operating Assets and Liabilities:
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|
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Decrease
(Increase) in:
|
|
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Accounts
Receivable
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(394,453)
|
110,250
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Inventory
|
245,271
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(453,144)
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Prepaid
Expenses
|
(6,266)
|
(18,951)
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Deposits
on Merchandise
|
(15,714)
|
67,890
|
Increase
(Decrease) in:
|
|
|
Accounts
Payable
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(116,927)
|
541,012
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Accrued
Expenses
|
20,725
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(49,024)
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Accrued
Interest
|
(64,000)
|
14,133
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Deferred
Rent
|
(781)
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(1,940)
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Customer
Deposits
|
(1,484)
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(2,695)
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Net
Cash Used in Operating Activities
|
(682,583)
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(247,525)
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|
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Cash
Flow From Investing Activities:
|
|
|
Purchase
of Property and Equipment
|
-
|
(4,768)
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Net
Cash Used in Investing Activities
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-
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(4,768)
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|
Three Months Ended
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|
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March 31,
|
|
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2018
|
2017
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Cash
Flow From Financing Activities:
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|
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Proceeds
from Convertible Notes
|
-
|
5,300,000
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Net
Cash Provided by Financing Activities
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-
|
5,300,000
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Increase
(Decrease) In Cash and Cash Equivalents
|
(682,583)
|
5,047,707
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Cash
and Cash Equivalents - Beginning
|
4,550,003
|
948,324
|
Cash
and Cash Equivalents – Ending
|
$3,867,420
|
$5,996,031
|
|
|
|
Supplemental
Cash Flow Information:
|
|
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Cash
Paid For Interest
|
$124,000
|
$-
|
Cash
Paid for Income Taxes
|
$800
|
$800
|
Non-Cash
Investing and Financing Activities :
|
|
|
Establishment
of Discount on Convertible Debt
|
$-
|
$57,106
|
|
Three Months Ended March 31,
|
|
|
2018
(Unaudited)
|
2017
|
|
|
|
Net
loss
|
$(563,319)
|
$(625,897)
|
Adjustments
for convertible debt - as converted
|
|
|
Interest
on convertible debt
|
60,000
|
14,133
|
Amortization
of debt discount on convertible debt
|
8,037
|
137
|
Net
loss attributable to common shareholders
|
$(495,282)
|
$(611,627)
|
Weighted
average number of common shares outstanding:
|
|
|
Basic
and diluted
|
122,229,959
|
120,825,134
|
Net
loss attributable to common shareholders per share:
|
|
|
Basic
and diluted
|
$(0.00)
|
$(0.01)
|
|
|
|
|
Three Months Ended March 31,
(Unaudited)
|
|
|
2018
|
2017
|
SteraMist
Product
|
$1,092,000
|
$821,000
|
Service and
Training
|
220,000
|
278,000
|
Total
|
$1,312,000
|
$1,099,000
|
|
Three Months Ended March 31,
(Unaudited)
|
|
|
2018
|
2017
|
United
States
|
$945,000
|
$848,000
|
International
|
367,000
|
251,000
|
Total
|
$1,312,000
|
$1,099,000
|
|
March
31,
|
|
|
2018
(Unaudited)
|
December
31,
2017
|
Raw
materials
|
$-
|
$-
|
Finished
goods
|
3,273,613
|
3,518,884
|
|
$3,273,613
|
$3,518,884
|
|
March
31,
|
|
|
2018
(Unaudited)
|
December
31,
2017
|
Furniture and
fixtures
|
$91,216
|
$91,216
|
Equipment
|
1,192,293
|
1,192,293
|
Vehicles
|
56,410
|
56,410
|
Computer and
Software
|
113,319
|
113,319
|
Leasehold
Improvements
|
15,554
|
15,554
|
|
1,468,792
|
1,468,792
|
Less: Accumulated
depreciation
|
826,331
|
755,969
|
|
$642,461
|
$712,822
|
|
March
31,
2018
(Unaudited)
|
December
31,
2017
|
|
|
|
Intellectual
Property and Patents
|
$2,848,300
|
$2,848,300
|
Less: Accumulated
Amortization
|
1,832,145
|
1,739,768
|
Intangible Assets,
net
|
$1,016,155
|
$1,108,532
|
Trademarks
|
$440,000
|
$440,000
|
|
|
|
Total
Intangible Assets, net
|
$1,456,155
|
$1,548,532
|
Twelve Month Period Ending March 31,
|
Amount
|
|
|
2019
|
$370,000
|
2020
|
370,000
|
2021
|
276,000
|
2022
|
-
|
2023
|
-
|
|
$1,016,000
|
|
March
31,
|
|
|
2018
|
December
31,
|
|
(Unaudited)
|
2017
|
Convertible
notes
|
$6,000,000
|
$6,000,000
|
Initial
discount
|
(61,904)
|
(61,904)
|
Accumulated
amortization
|
14,316
|
6,279
|
Convertible
notes, net
|
$5,952,412
|
$5,944,375
|
|
March 31, 2018 (Unaudited)
|
December 31, 2017
|
||
|
Number of Options
|
Weighted Average Exercise Price
|
Number of Options
|
Weighted Average Exercise Price
|
Outstanding,
beginning of period
|
200,000
|
$0.76
|
200,000
|
$0.76
|
Granted
|
120,000
|
$0.12
|
—
|
—
|
Exercised
|
—
|
—
|
—
|
—
|
Outstanding,
end of period
|
320,000
|
$0.52
|
200,000
|
$0.76
|
Outstanding
Options
|
Average
Weighted
|
Exercisable
Options
|
||
Range
|
Number
|
Remaining
Contractual
Life in
Years
|
Number
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
$0.05
|
20,000
|
2.78
|
20,000
|
$0.05
|
$0.10
|
20,000
|
9.83
|
20,000
|
$0.10
|
$0.12
|
100,000
|
4.77
|
100,000
|
$0.12
|
$0.27
|
40,000
|
6.76
|
40,000
|
$0.27
|
$0.55
|
100,000
|
7.85
|
100,000
|
$0.55
|
$2.10
|
40,000
|
1.76
|
40,000
|
$2.10
|
|
320,000
|
5.80
|
320,000
|
$0.52
|
|
March 31, 2018 (Unaudited)
|
December 31, 2017
|
||
|
Number of Warrants
|
Weighted Average Exercise Price
|
Number of Warrants
|
Weighted Average Exercise Price
|
Outstanding,
beginning of period
|
35,501,411
|
$0.33
|
37,076,413
|
$0.31
|
Granted
|
-
|
-
|
4,774,998
|
0.24
|
Exercised
|
-
|
-
|
(975,000)
|
0.05
|
Expired
|
(250,000)
|
(0.15)
|
(5,375,000)
|
0.13
|
Outstanding,
end of period
|
35,251,411
|
$0.33
|
35,501,411
|
$0.33
|
Outstanding Warrants
|
|
Exercisable Warrants
|
||
Exercise Price
|
Number
|
Average
Weighted
Remaining
Contractual
Life in Years
|
Number
|
Weighted
Average
Exercise Price
|
$0.10
|
265,000
|
4.29
|
265,000
|
$0.10
|
$0.12
|
7,500,000
|
3.03
|
7,500,000
|
$0.12
|
$0.17
|
10,000
|
4.57
|
10,000
|
$0.17
|
$0.26
|
100,000
|
0.24
|
100,000
|
$0.26
|
$0.27
|
250,000
|
3.75
|
250,000
|
$0.27
|
$0.29
|
10,125,613
|
2.55
|
10,125,613
|
$0.29
|
$0.30
|
11,925,800
|
0.50
|
11,925,800
|
$0.30
|
$0.32
|
250,000
|
3.50
|
250,000
|
$0.32
|
$0.33
|
75,000
|
0.50
|
75,000
|
$0.33
|
$0.42
|
250,000
|
3.25
|
250,000
|
$0.42
|
$0.50
|
325,000
|
2.32
|
325,000
|
$0.50
|
$0.55
|
100,000
|
2.83
|
100,000
|
$0.55
|
$0.62
|
75,000
|
0.30
|
75,000
|
$0.62
|
$0.69
|
999,998
|
1.96
|
999,998
|
$0.69
|
$1.00
|
3,000,000
|
2.09
|
3,000,000
|
$1.00
|
|
35,251,411
|
1.99
|
35,251,411
|
$0.33
|
|
March 31,
2018
(Unaudited)
|
December 31,
2017
|
Commissions
|
$109,770
|
$115,506
|
Payroll
and related costs
|
62,484
|
43,484
|
Director
fees
|
55,250
|
27,750
|
Accrued warranty
|
5,000
|
5,000
|
Other
accrued expenses
|
55,356
|
75,396
|
Total
|
$287,861
|
$267,136
|
|
March 31,
2018
(Unaudited)
|
December 31,
2017
|
Beginning
accrued warranty costs
|
$5,000
|
$-
|
Cost of warranty
claims
|
1,644
|
5,731
|
Settlement of
warranty claims
|
(1,644)
|
(5,731)
|
Provision for
product warranty costs
|
-
|
5,000
|
Ending
accrued warranty costs
|
$5,000
|
$5,000
|
|
March
31,
2018
(Unaudited)
|
December
31,
2017
|
|
|
|
Total
shareholders’ equity
|
$4,874,000
|
$5,394,000
|
Cash and cash
equivalents
|
$3,867,000
|
$4,550,000
|
Accounts
receivable, net
|
$2,230,000
|
$1,836,000
|
Inventories
|
$3,274,000
|
$3,519,000
|
Deposits on
merchandise
|
$16,000
|
$-
|
Current
liabilities
|
$940,000
|
$1,103,000
|
Long-term
liabilities
|
$5,952,000
|
$5,944,000
|
Working
capital
|
$8,724,000
|
$9,073,000
|
|
Three
Months
|
|
|
Ended March
31,
(Unaudited)
|
|
|
2018
|
2017
|
Revenues,
Net
|
$1,312,000
|
$1,099,000
|
Gross
Profit
|
$821,000
|
$682,000
|
Total Operating
Expenses(1)
|
$1,317,000
|
$1,294,000
|
Loss from
Operations
|
$(496,000)
|
$(612,000)
|
Total Other Income
(Expense)
|
$(67,000)
|
$(14,000)
|
Net
Loss
|
$(563,000)
|
$(626,000)
|
Basic Net Loss per
Share
|
$(0.00)
|
$(0.01)
|
Diluted Net Loss
per Share
|
$(0.00)
|
$(0.01)
|
|
Three Months Ended March 31,
(Unaudited)
|
|
|
2018
|
2017
|
SteraMist
Product
|
$1,092,000
|
$821,000
|
Service and
Training
|
220,000
|
278,000
|
Total
|
$1,312,000
|
$1,099,000
|
|
Three Months Ended March 31,
(Unaudited)
|
|
|
2018
|
2017
|
United
States
|
$945,000
|
$848,000
|
International
|
367,000
|
251,000
|
Total
|
$1,312,000
|
$1,099,000
|
|
TOMI
ENVIRONMENTAL SOLUTIONS, INC.
|
|
|
|
|
|
|
Date: May 15,
2018
|
By:
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/s/
Halden
S. Shane
|
|
|
|
Halden S. Shane |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
Date: May 15,
2018
|
By:
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/s/
Nick
Jennings
|
|
|
|
Nick Jennings |
|
|
|
Chief
Financial Officer
|
|
|
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
Exhibit
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|
|
Incorporated by Reference
|
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||||||
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
10.1+
|
|
Employment Agreement, entered into as of January 5, 2018, by and
between the Company and Elissa J. Shane, effective as of January 1,
2018.
|
|
8-K
|
|
000-09908
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|
10.1
|
|
1/8/2018
|
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|
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|
|
Certification of Halden S. Shane, Chief Executive Officer, pursuant
to Rule 13a-14(a)/15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
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X
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|||||
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|
|
|
|
|
|
|
|
Certification of Nick Jennings, Chief Financial Officer, pursuant
to Rule 13a-14(a)/15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
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X
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|||||
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32.1#
|
|
Certification of Halden S. Shane, Chief Executive Officer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
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|
X
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||||
|
|
|
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|
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|
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32.2#
|
|
Certification of Nick Jennings, Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
X
|
||||
|
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|
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|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
|
|
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|
X
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
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|
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|
|
|
X
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
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X
|
||
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|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
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|
|
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|
X
|
||
|
|
|
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|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
|
|
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|
|
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|
X
|
||
|
|
|
|
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|
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101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
Document.
|
|
|
|
|
|
|
|
X
|
/s/
HALDEN S.
SHANE
|
Halden
S. Shane
Chief
Executive Officer
(Principal
Executive Officer)
|
/s/ NICK
JENNINGS
|
Nick
Jennings,
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
|
/s/ HALDEN
S.
SHANE
|
Halden
S. Shane
Chief
Executive Officer
(Principal
Executive Officer)
|
/s/ NICK
JENNINGS
|
Nick
Jennings
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 07, 2018 |
|
Document And Entity Information | ||
Entity Registrant Name | TOMI Environmental Solutions, Inc. | |
Entity Central Index Key | 0000314227 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 122,412,458 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2018 |
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Condensed Consolidated Statement Of Operations | ||
Sales, net | $ 1,312,466 | $ 1,098,883 |
Cost of Sales | 491,659 | 416,357 |
Gross Profit | 820,807 | 682,526 |
Operating Expenses: | ||
Professional Fees | 106,458 | 272,011 |
Depreciation and Amortization | 162,738 | 159,151 |
Selling Expenses | 204,005 | 179,384 |
Research and Development | 132,487 | 30,647 |
Equity Compensation Expense (Note 7) | 12,685 | 11,553 |
Consulting fees | 35,026 | 31,052 |
General and Administrative | 663,887 | 610,355 |
Total Operating Expenses | 1,317,287 | 1,294,153 |
Loss from Operations | (496,480) | (611,627) |
Other Income (Expense): | ||
Amortization of Debt Discounts | (8,037) | (137) |
Interest Income | 1,198 | 0 |
Interest Expense | (60,000) | (14,133) |
Total Other Income (Expense) | (66,839) | (14,270) |
Net Loss | $ (563,319) | $ (625,897) |
Net Loss Per Common Share | ||
Basic and Diluted | $ (0.00) | $ (0.01) |
Basic and Diluted Weighted Average Common Shares Outstanding | 122,229,959 | 120,825,134 |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) - 3 months ended Mar. 31, 2018 - USD ($) |
Series A Preferred |
Common Stock |
Additional Paid in Capital |
Accumulated Deficit |
Total |
---|---|---|---|---|---|
Beginning Balance, Shares at Dec. 31, 2017 | 510,000 | 122,049,958 | |||
Beginning Balance, Amount at Dec. 31, 2017 | $ 5,100 | $ 1,220,499 | $ 42,139,675 | $ (37,971,049) | $ 5,394,225 |
Equity based compensation, Amount | 13,590 | 13,590 | |||
Common stock issued for services provided, Shares | 300,000 | ||||
Common stock issued for services provided, Amount | $ 3,000 | 27,000 | 30,000 | ||
Net Loss | (563,319) | (563,319) | |||
Ending Balance, Shares at Mar. 31, 2018 | 510,000 | 122,349,958 | |||
Ending Balance, Amount at Mar. 31, 2018 | $ 5,100 | $ 1,223,499 | $ 42,180,265 | $ (38,534,368) | $ 4,874,496 |
1. DESCRIPTION OF BUSINESS |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Business Combination, Description [Abstract] | |
NOTE 1. DESCRIPTION OF BUSINESS | TOMITM Environmental Solutions, Inc. (“TOMI”, the “Company”, “we”, “our” and “us”) is a global decontamination and infection prevention company, providing environmental solutions for indoor surface and air disinfection through manufacturing, sales and licensing of its premier Binary Ionization Technology® (BIT™) platform. 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 (“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, universities and research facilities, vivarium labs, all service industries including cruise ships, office buildings, hotel and motel rooms, schools, restaurants, meat and produce processing facilities, military barracks, police and fire departments, and athletic facilities. TOMI products are also used in single-family homes and multi-unit residences.
Our mission is to help its customers create a healthier world through its product line in our divisions (Healthcare, Life Sciences, TSN or TOMI Service Network and Food Safety) our motto is “innovating for a safer world” for healthcare and life. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation
The interim unaudited condensed consolidated financial statements included herein, presented in accordance with generally accepted accounting principles utilized in the United States of America (“GAAP”), and stated in U.S. dollars, have been prepared by the Company, without an audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2017 and notes thereto which are included in the Annual Report on Form 10-K previously filed with the SEC on March 29, 2018. The Company follows the same accounting policies in the preparation of interim reports. The results of operations for the interim periods covered by this Form 10-Q may not necessarily be indicative of results of operations for the full fiscal year or any other interim period.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of TOMI and its wholly-owned subsidiary, TOMI Environmental Solutions, Inc., a Nevada corporation. All significant intercompany accounts and transactions have been eliminated in consolidation.
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 effect on previously reported results of operations or financial position.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying condensed 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 accounts receivable, inventory, fair values of financial instruments, 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:
Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and convertible debt. All these items were determined to be Level 1 fair value measurements.
The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments. The recorded value of convertible debt approximates its fair value as the terms and rates approximate market rates (See Note 6).
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash and cash equivalents includes cash on hand held at financial institutions and other liquid investments with original maturities of three months or less. At times, these deposits may be in excess of insured limits.
Accounts Receivable
Our accounts receivable are typically from credit worthy customers or, for certain international customers, are supported by pre-payments. For those customers to whom we extend credit, we perform periodic evaluations of them and maintain allowances for potential credit losses as deemed necessary. We have a policy of reserving for doubtful accounts 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 in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Bad debt expense for the three months ended March 31, 2018 and 2017 was $0.
At March 31, 2018 and December 31, 2017, the allowance for doubtful accounts was $500,000.
Three customers accounted for 33% of net revenue for the three months ended March 31, 2018 and three customers accounted for 43% of net revenue for the three months ended March 31, 2017.
At March 31, 2018 and December 31, 2017, two customers accounted for 25% and 24% of accounts receivable, respectively.
Inventories
Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods. At March 31, 2018 and December 31, 2017, we did not have a reserve for slow-moving or obsolete inventory.
Deposits on Merchandise
Deposits on merchandise primarily consist of amounts paid in advance of the receipt of inventory (see Note 9).
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.
Accounts Payable
As of March 31, 2018 and December 31, 2017, one vendor accounted for approximately 35% and 45% of total accounts payable, respectively.
For the three months ended March 31, 2018 and 2017, one vendor accounted for 70% and 67% of cost of goods sold, respectively.
Accrued Warranties
Accrued warranties represent the estimated costs, if any, that will be incurred during the warranty period of our products. We make an estimate of expected costs that will be incurred by us during the warranty period and charge that expense to the consolidated statement of operations at the date of sale. Our manufacturer assumes the warranty against product defects for one year 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 March 31, 2018 and December 31, 2017, our warranty reserve was $5,000.
Income Taxes
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 Accounting Standards Codification (“ASC”) guidance for income taxes. Net deferred tax benefits have been fully reserved at March 31, 2018 and December 31, 2017. 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 Loss Per Share
Basic net loss per share is computed by dividing the Company’s net loss by the weighted average number of shares of common stock outstanding during the period presented. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of shares of common stock, such as shares issuable pursuant to the exercise of options and warrants and conversions of preferred stock or debentures.
Potentially dilutive securities as of March 31, 2018 consisted of 11,111,100 shares of common stock from convertible debentures, 35,251,411 shares of common stock issuable upon exercise of outstanding warrants, 320,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”). Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive.
Potentially dilutive securities as of March 31, 2017 consisted of 9,814,805 shares of common stock from convertible debentures, 37,959,745 shares of common stock issuable upon exercise of outstanding warrants, 200,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Convertible Series A Preferred Stock. Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive.
Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if such additional shares were dilutive. Options, warrants, preferred stock and shares associated with the conversion of debt to purchase approximately 47.2 million and 48.5 shares of common stock were outstanding at March 31, 2018 and 2017, respectively, but were excluded from the computation of diluted net loss per share due to the anti-dilutive effect on net loss per share.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue Recognition,” when there is persuasive evidence that an arrangement exists, title and risk of loss have passed, delivery has occurred, or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment.
Disaggregation of Revenue
The following table presents our revenues disaggregated by revenue source.
Net Revenue
Product and Service Revenue
Revenue by Geographic Region
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 or services.
Service and training revenue includes 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.
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 sales and marketing expenses. These costs include our internal sales force compensation program and certain partner sales incentive programs as we have determined annual compensation is commensurate with annual sales activities.
Contract Balances
As of March 31, 2018 and December 31, 2017 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Arrangements with Multiple Performance Obligations
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.
Stock-Based Compensation
We account for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 718, “Compensation—Stock Compensation.” Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period.
On July 7, 2017, our shareholders approved the 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 5,000,000 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. Stock-based compensation 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 the Company at the time of the award; awards under the 2016 Plan are expressly conditioned upon such agreements. For the year ended December 31, 2017, the Company issued 200,000 shares of common stock out of the 2016 Plan. In addition, for the three months ended March 31, 2018, we issued 300,000 shares of common stock 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 three months ended March 31, 2018 and 2017.
Advertising and Promotional Expenses
We expense advertising costs in the period in which they are incurred. Advertising and promotional expenses for the three months ended March 31, 2018 and 2017 were approximately $54,000 and $9,000, respectively.
Research and Development Expenses
We expense research and development expenses in the period in which they are incurred. For the three months ended March 31, 2018 and 2017, research and development expenses were approximately $132,000 and $31,000, respectively.
Shipping and Handling Costs
We include shipping and handling costs relating to the delivery of products directly from vendors to the Company in cost of sales. Other shipping and handling costs, including third-party delivery costs relating to the delivery of products to customers, are classified as a general and administrative expense. Shipping and handling costs included in general and administrative expense were approximately $51,000 and $21,000 for the three months ended March 31, 2018 and 2017, respectively.
Business Segments
We currently have one reportable business segment due to the fact that we derive our revenue primarily from one product. A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, to replace the existing revenue recognition criteria for contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Deferral of the Effective Date, to defer the effective date of ASU No. 2014-09 to interim and annual periods beginning after December 15, 2017. We adopted ASUs No. 2014-09 and 2015-14 on January 1, 2018 on a modified retrospective basis, which did not impact our beginning accumulated deficit and additional paid-in capital.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. ASU No. 2016-02 also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. ASU No. 2016-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. We currently expect to adopt ASU No. 2016-02 on January 1, 2019. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. We intend to elect the available practical expedients upon adoption. Upon adoption, we expect the consolidated balance sheet to include a right of use asset and liability related to substantially all of our lease arrangements. We are continuing to assess the impact of adopting ASU No. 2016-02 on our financial position, results of operations and related disclosures and have not yet concluded whether the effect on our consolidated financial statements will be material.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, to simplify the accounting for the income tax effects from share-based compensation, the accounting for forfeitures and the accounting for statutory income tax withholding, among others. In particular, ASU No. 2016-09 requires all income tax effects from share-based compensation to be recognized in the consolidated statement of operations when the awards vest or are settled, permits accounting for forfeitures as they occur, and permits a higher level of statutory income tax withholding without triggering liability accounting. Adoption of ASU No. 2016-09 is modified retrospective, retrospective and prospective, depending on the specific provision being adopted. We adopted ASU No. 2016-09 on January 1, 2017, which did not impact our beginning accumulated deficit and additional paid-in capital.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, to simplify the test for goodwill impairment by removing Step 2. An entity will, therefore, perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to the reporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Adoption of ASU No. 2017-04 is prospective. We have not yet selected an adoption date, and ASU No. 2017-04 will have a currently undetermined impact on our consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, to provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU No. 2017-09 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adoption of ASU No. 2017-09 is prospective. We adopted ASU No. 2017-09 on January 1, 2018, which did not impact our consolidated financial statements upon adoption.
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3. INVENTORIES |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
NOTE 3. INVENTORIES | Inventories consist of the following:
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4. PROPERTY AND EQUIPMENT |
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NOTE 4. PROPERTY AND EQUIPMENT | Property and equipment consists of the following at:
For the three months ended March 31, 2018 and 2017, depreciation was $70,361 and $66,775, respectively.
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5. INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 5. 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 $92,377 and $92,377 for the three months ended March 31, 2018 and 2017, respectively.
Definite life intangible assets consist of the following:
Indefinite life intangible assets consist of the following:
Approximate amortization over the next five years is as follows:
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6. CONVERTIBLE DEBT |
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Convertible Debt [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 6. CONVERTIBLE DEBT | In March and May 2017, the Company closed a private placement transaction in which it issued to certain accredited investors unregistered senior callable convertible promissory notes (the “Notes”) and three-year warrants to purchase an aggregate of 999,998 shares of common stock at an exercise price of $0.69 per share in exchange for aggregate gross proceeds of $6,000,000. The Notes bear interest at a rate of 4% per annum. $5,300,000 in principal was originally scheduled to mature on August 31, 2018 and $700,000 in principal was originally scheduled to mature on November 8, 2018, unless earlier redeemed, repurchased or converted. The Notes are convertible at the option of the holder into common stock at a conversion price of $0.54 per share. Subsequent to September 1, 2017, we may redeem the Notes that are scheduled to mature on August 31, 2018 at any time prior to maturity at a price equal to 100% of the outstanding principal amount of the Notes to be redeemed, plus accrued and unpaid interest as of the redemption date. Prior to November 8, 2018, we may redeem the Notes that are scheduled to mature on such date at any time prior to maturity at a price equal to 100% of the outstanding principal amount of the Notes to be redeemed, plus accrued and unpaid interest as of the redemption date. Interest on the Notes is payable semi-annually in cash on February 28 and August 31 of each year, beginning on August 31, 2017. Interest expense related to the Notes for the three months ended March 31, 2018 and 2017 was $60,000 and $14,133, respectively.
The warrants were valued at $62,559 using the Black-Scholes pricing model with the following assumptions: expected volatility: 104.06% –111.54%; expected dividend: $0; expected term: 3 years; and risk-free rate: 1.49%–1.59%. The Company recorded the warrants’ relative fair value of $61,904 as an increase to additional paid-in capital and a discount against the related Notes.
The debt discount is being amortized over the life of the Notes using the effective interest method. Amortization expense for the three months ended March 31, 2018 and 2017 was $8,037 and $137, respectively.
In February and March 2018, we extended the maturity date of the Notes—we extended the maturity dates for $5,300,000 of principal on the Notes to April 1, 2019 and $700,000 in principal of the Notes to June 8, 2019. No additional consideration was paid or accrued by the Company. The stated rate of the Notes was unchanged and the estimated fair value of the new debt approximates its carrying amount (principal plus accrued interest at the date of the modification). We determined that the modification of these Notes is not a substantial modification in accordance with ASC 470-50, “Modifications and Extinguishments”.
Convertible notes consist of the following at:
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7. STOCKHOLDERS' EQUITY |
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Statement of Stockholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 7. STOCKHOLDERS' EQUITY | Our board of directors 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 of the Company before any payment is made to the holders of our common stock. Furthermore, the board of directors 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 March 31, 2018 and December 31, 2017, there were 510,000 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 March 31, 2018 and December 31, 2017, 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.
Common Stock
During the three months ended March 31, 2017, we did not issue any shares of common stock.
During the three months ended March 31, 2018, we issued 300,000 shares of common stock valued at $30,000 to members of our board of directors (see Note 9).
Stock Options
In January 2018, we issued options to purchase an aggregate of 100,000 shares of common stock to our Chief Operating Officer, valued at $11,780. The options have an exercise price of $0.12 per share and expire in January 2023. The options were valued using the Black-Scholes model using the following assumptions: volatility: 146%; dividend yield: 0%; zero coupon rate: 2.27%; and a life of 5 years.
In January 2018, we issued options to purchase an aggregate of 20,000 shares of common stock to our scientific advisory board members, valued at $1,810 in total. The options have an exercise price of $0.10 per share and expire in January 2028. The options were valued using the Black-Scholes model using the following assumptions: volatility: 147%; dividend yield: 0%; zero coupon rate: 2.41%; and a life of 10 years.
The following table summarizes stock options outstanding as of March 31, 2018 and December 31, 2017:
Options outstanding and exercisable by price range as of March 31, 2018 were as follows:
Stock Warrants
For the three months ended March 31, 2017, we recognized approximately $12,000 in equity compensation expense for the accrued but unvested portion of certain warrants issued to a former employee pursuant to his agreement with the Company.
In March and May 2017, in connection with the issuance of the Notes, we issued three-year warrants to purchase up to an aggregate of 999,998 shares of common stock at an exercise price of $0.69 per share (see Note 6).
We did not issue any warrants during the three months ended March 31, 2018.
The following table summarizes the outstanding common stock warrants as of March 31, 2018 and December 31, 2017:
Warrants outstanding and exercisable by price range as of March 31, 2018 were as follows:
There were no unvested warrants outstanding as of March 31, 2018.
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8. COMMITMENTS AND CONTINGENCIES |
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Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 8. COMMITMENTS AND CONTINGENCIES | Lease Commitments
In September 2014, we entered into a lease agreement for office and warehouse space in Frederick, Maryland. As part of the lease agreement, we received a rent holiday in the first 5 months of the lease. The lease also provided for an escalation clause pursuant to which the Company was subject to an annual rent increase of 3%, year over year. The term of the lease expired on January 31, 2018 and has been extended on a month-to-month basis. We account for the lease using the straight line method and recorded $12,927 and $11,427 in rent expense for the three months ended March 31, 2018 and 2017, respectively
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 March 31, 2018, and December 31, 2017, there were no claims against us for product liability.
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9. CONTRACTS AND AGREEMENTS |
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Mar. 31, 2018 | |
Contracts And Agreements | |
NOTE 9. CONTRACTS AND AGREEMENTS | Manufacturing Agreement
In November 2016, we entered into a manufacturing and development agreement with RG Group Inc. The agreement does not provide for any minimum purchase commitments and is for a term of two years with provisions to extend. The agreement also provides for a warranty against product defects for one year.
As of March 31, 2018 and December 31, 2017, balances due to RG Group, Inc. accounted for approximately 35% and 45% of total accounts payable, respectively. At March 31, 2018 and December 31, 2017, we maintained required deposits with RG Group, Inc. in the amounts of $15,714 and $0, respectively. For the three months ended March 31, 2018 and 2017, RG Group, Inc. accounted for 70% and 67% of cost of goods sold, respectively.
Agreements with Directors
In December 2017, we increased the annual board fee to directors to $40,000, to be paid in cash on a quarterly basis, with the exception of the audit committee chairperson, whose annual fee we increased to $45,000, also to be paid in cash on a quarterly basis. The board fee also includes the issuance of 75,000 shares of common stock on an annual basis. For the three months ended March 31, 2018, we issued an aggregate of 300,000 shares of common stock that were valued at $30,000 to members of our board of directors.
Other Agreements
In June 2015, we launched the TOMI Service Network (“TSN”). The TSN is a national service network composed of existing full service restoration industry specialists that have entered into licensing agreements with us to become Primary Service Providers (“PSP’s”). The licensing agreements grant protected territories to PSP’s to perform services using our SteraMist™ platform of products and also provide for potential job referrals to PSP’s whereby we are entitled to referral fees. Additionally, the agreement provides for commissions due to PSP’s for equipment and solution sales they facilitate to other service providers in their respective territories. As part of these agreements, we are obligated to provide to the PSP’s various training, ongoing support and facilitate a referral network call center. As of March 31, 2018, we had entered into 71 licensing agreements in connection with the launch of the TSN. The licensing agreements contain fixed price minimum equipment and solution orders based on the population of the territories granted pursuant to the licensing agreements. The nature and terms of our TSN agreements may represent multiple deliverable arrangements. Each of the deliverables in these arrangements typically represent a separate unit of accounting.
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10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (USD $) |
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NOTE 10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | Accrued expenses and other current liabilities consisted of the following at:
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11. ACCRUED WARRANTY |
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NOTE 11. ACCRUED WARRANTY | Our manufacturer assumes warranty against product defects for one year from the sale to customers, 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:
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12. CUSTOMER CONCENTRATION |
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Mar. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
NOTE 12. CUSTOMER CONCENTRATION | The Company had certain customers whose revenue individually represented 10% of more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% of more of the Company’s accounts receivable.
Three customers accounted for 33% of net revenue for the three months ended March 31, 2018 and three customers accounted for 43% of net revenue for the three months ended March 31, 2017.
At March 31, 2018 and December 31, 2017, two customers accounted for 25% and 24% of accounts receivable, respectively.
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13. SUBSEQUENT EVENTS |
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Mar. 31, 2018 | |
Notes to Financial Statements | |
NOTE 13. SUBSEQUENT EVENTS | The Company has evaluated subsequent events through the date the financial statements were issued and up to the time of filing of the financial statements with the SEC.
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 commences on December 1, 2018 and provides for annual rent of $143,460, contains an escalation clause that increases the rent 3%, year over year and a landlord tenant improvement allowance of $405,000.
In May 2018, one of the noteholders with a principal balance of $700,000 agreed to convert its Note into shares of common stock at a reduced conversion price of $0.46 per share.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Basis of Presentation | The interim unaudited condensed consolidated financial statements included herein, presented in accordance with generally accepted accounting principles utilized in the United States of America (“GAAP”), and stated in U.S. dollars, have been prepared by the Company, without an audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2017 and notes thereto which are included in the Annual Report on Form 10-K previously filed with the SEC on March 29, 2018. The Company follows the same accounting policies in the preparation of interim reports. The results of operations for the interim periods covered by this Form 10-Q may not necessarily be indicative of results of operations for the full fiscal year or any other interim period. |
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Principles of Consolidation | The accompanying condensed consolidated financial statements include the accounts of TOMI and its wholly-owned subsidiary, TOMI Environmental Solutions, Inc., a Nevada corporation. All significant intercompany accounts and transactions have been eliminated in consolidation. |
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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 effect on previously reported results of operations or financial position.
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Use of Estimates | The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying condensed 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 accounts receivable, inventory, fair values of financial instruments, 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. |
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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:
Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and convertible debt. All these items were determined to be Level 1 fair value measurements.
The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments. The recorded value of convertible debt approximates its fair value as the terms and rates approximate market rates (See Note 6). |
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Cash and Cash Equivalents | For purposes of the statement of cash flows, cash and cash equivalents includes cash on hand held at financial institutions and other liquid investments with original maturities of three months or less. At times, these deposits may be in excess of insured limits. |
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Accounts Receivable | Our accounts receivable are typically from credit worthy customers or, for certain international customers, are supported by pre-payments. For those customers to whom we extend credit, we perform periodic evaluations of them and maintain allowances for potential credit losses as deemed necessary. We have a policy of reserving for doubtful accounts 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 in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Bad debt expense for the three months ended March 31, 2018 and 2017 was $0.
At March 31, 2018 and December 31, 2017, the allowance for doubtful accounts was $500,000.
Three customers accounted for 33% of net revenue for the three months ended March 31, 2018 and three customers accounted for 43% of net revenue for the three months ended March 31, 2017.
At March 31, 2018 and December 31, 2017, two customers accounted for 25% and 24% of accounts receivable, respectively.
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Inventories | Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods. At March 31, 2018 and December 31, 2017, we did not have a reserve for slow-moving or obsolete inventory.
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Deposits on Merchandise | Deposits on merchandise primarily consist of amounts paid in advance of the receipt of inventory (see Note 9). |
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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.
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Accounts Payable | As of March 31, 2018 and December 31, 2017, one vendor accounted for approximately 35% and 45% of total accounts payable, respectively.
For the three months ended March 31, 2018 and 2017, one vendor accounted for 70% and 67% of cost of goods sold, respectively.
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Accrued Warranties | Accrued warranties represent the estimated costs, if any, that will be incurred during the warranty period of our products. We make an estimate of expected costs that will be incurred by us during the warranty period and charge that expense to the consolidated statement of operations at the date of sale. Our manufacturer assumes the warranty against product defects for one year 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 March 31, 2018 and December 31, 2017, our warranty reserve was $5,000.
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Income taxes | 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 Accounting Standards Codification (“ASC”) guidance for income taxes. Net deferred tax benefits have been fully reserved at March 31, 2018 and December 31, 2017. 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.
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Net Loss Per Share |
Basic net loss per share is computed by dividing the Company’s net loss by the weighted average number of shares of common stock outstanding during the period presented. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of shares of common stock, such as shares issuable pursuant to the exercise of options and warrants and conversions of preferred stock or debentures.
Potentially dilutive securities as of March 31, 2018 consisted of 11,111,100 shares of common stock from convertible debentures, 35,251,411 shares of common stock issuable upon exercise of outstanding warrants, 320,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”). Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive.
Potentially dilutive securities as of March 31, 2017 consisted of 9,814,805 shares of common stock from convertible debentures, 37,959,745 shares of common stock issuable upon exercise of outstanding warrants, 200,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Convertible Series A Preferred Stock. Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive.
Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if such additional shares were dilutive. Options, warrants, preferred stock and shares associated with the conversion of debt to purchase approximately 47.2 million and 48.5 shares of common stock were outstanding at March 31, 2018 and 2017, respectively, but were excluded from the computation of diluted net loss per share due to the anti-dilutive effect on net loss per share.
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Revenue Recognition | We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue Recognition,” when there is persuasive evidence that an arrangement exists, title and risk of loss have passed, delivery has occurred, or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment.
Disaggregation of Revenue
The following table presents our revenues disaggregated by revenue source.
Net Revenue
Product and Service Revenue
Revenue by Geographic Region
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 or services.
Service and training revenue includes 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.
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 sales and marketing expenses. These costs include our internal sales force compensation program and certain partner sales incentive programs as we have determined annual compensation is commensurate with annual sales activities.
Contract Balances
As of March 31, 2018 and December 31, 2017 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Arrangements with Multiple Performance Obligations
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.
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Stock-Based Compensation | We account for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 718, “Compensation—Stock Compensation.” Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period.
On July 7, 2017, our shareholders approved the 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 5,000,000 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. Stock-based compensation 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 the Company at the time of the award; awards under the 2016 Plan are expressly conditioned upon such agreements. For the year ended December 31, 2017, the Company issued 200,000 shares of common stock out of the 2016 Plan. In addition, for the three months ended March 31, 2018, we issued 300,000 shares of common stock out of the 2016 Plan.
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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. |
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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 three months ended March 31, 2018 and 2017. |
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Advertising and Promotional Expenses | We expense advertising costs in the period in which they are incurred. Advertising and promotional expenses for the three months ended March 31, 2018 and 2017 were approximately $54,000 and $9,000, respectively. |
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Research and Development Expenses | We expense research and development expenses in the period in which they are incurred. For the three months ended March 31, 2018 and 2017, research and development expenses were approximately $132,000 and $31,000, respectively. |
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Shipping and Handling Costs | We include shipping and handling costs relating to the delivery of products directly from vendors to the Company in cost of sales. Other shipping and handling costs, including third-party delivery costs relating to the delivery of products to customers, are classified as a general and administrative expense. Shipping and handling costs included in general and administrative expense were approximately $51,000 and $21,000 for the three months ended March 31, 2018 and 2017, respectively.
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Business Segments | We currently have one reportable business segment due to the fact that we derive our revenue primarily from one product. A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above.
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Recent Accounting Pronouncements | In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, to replace the existing revenue recognition criteria for contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Deferral of the Effective Date, to defer the effective date of ASU No. 2014-09 to interim and annual periods beginning after December 15, 2017. We adopted ASUs No. 2014-09 and 2015-14 on January 1, 2018 on a modified retrospective basis, which did not impact our beginning accumulated deficit and additional paid-in capital.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. ASU No. 2016-02 also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. ASU No. 2016-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. We currently expect to adopt ASU No. 2016-02 on January 1, 2019. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. We intend to elect the available practical expedients upon adoption. Upon adoption, we expect the consolidated balance sheet to include a right of use asset and liability related to substantially all of our lease arrangements. We are continuing to assess the impact of adopting ASU No. 2016-02 on our financial position, results of operations and related disclosures and have not yet concluded whether the effect on our consolidated financial statements will be material.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, to simplify the accounting for the income tax effects from share-based compensation, the accounting for forfeitures and the accounting for statutory income tax withholding, among others. In particular, ASU No. 2016-09 requires all income tax effects from share-based compensation to be recognized in the consolidated statement of operations when the awards vest or are settled, permits accounting for forfeitures as they occur, and permits a higher level of statutory income tax withholding without triggering liability accounting. Adoption of ASU No. 2016-09 is modified retrospective, retrospective and prospective, depending on the specific provision being adopted. We adopted ASU No. 2016-09 on January 1, 2017, which did not impact our beginning accumulated deficit and additional paid-in capital.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, to simplify the test for goodwill impairment by removing Step 2. An entity will, therefore, perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to the reporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Adoption of ASU No. 2017-04 is prospective. We have not yet selected an adoption date, and ASU No. 2017-04 will have a currently undetermined impact on our consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, to provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU No. 2017-09 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adoption of ASU No. 2017-09 is prospective. We adopted ASU No. 2017-09 on January 1, 2018, which did not impact our consolidated financial statements upon adoption.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Share |
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Reportable business segment | Product and Service Revenue
Revenue by Geographic Region
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3. INVENTORIES (Tables) |
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INVENTORIES |
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4. PROPERTY AND EQUIPMENT (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT |
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5. INTANGIBLE ASSETS (Tables) |
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Approximate amortization over the next five years |
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6. CONVERTIBLE DEBT (Tables) |
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Convertible Debt [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Notes potential future financing and fundamental transactions |
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7. STOCKHOLDERS' EQUITY (Tables) |
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Summary of stock options outstanding |
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Options outstanding and exercisable by price range |
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Summary of stock warrants outstanding |
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Warrants outstanding and exercisable by price range |
|
10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses And Other Current Liabilities Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Accrued expenses and other current liabilities |
|
11. ACCRUED WARRANTY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Warranty Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty reserve activity |
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Summary Of Significant Accounting Policies Details | ||
Net loss | $ (563,319) | $ (625,897) |
Interest on convertible debt | 60,000 | 14,133 |
Amortization of debt discount on convertible debt | 8,037 | 137 |
Net loss attributable to common shareholders | $ (495,282) | $ (611,627) |
Weighted average number of common shares outstanding: | ||
Basic and diluted | 122,229,959 | 120,825,134 |
Net loss attributable to common shareholders per share: | ||
Basic and diluted | $ (0.00) | $ (0.01) |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Net Revenue | $ 1,312,000 | $ 1,099,000 |
SteraMist Product [Member] | ||
Net Revenue | 1,092,000 | 821,000 |
Service & Training [Member] | ||
Net Revenue | 220,000 | 278,000 |
United States [Member] | ||
Net Revenue | 945,000 | 848,000 |
International [Member] | ||
Net Revenue | $ 367,000 | $ 251,000 |
3. INVENTORIES (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 0 | $ 0 |
Finished goods | 3,273,613 | 3,518,884 |
Inventory, end of period | $ 3,273,613 | $ 3,518,884 |
4. PROPERTY AND EQUIPMENT (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Furniture and fixtures | $ 91,216 | $ 91,216 |
Equipment | 1,192,293 | 1,192,293 |
Vehicles | 56,410 | 56,410 |
Software | 113,319 | 113,319 |
Leasehold Improvements | 15,554 | 15,554 |
Property and Equipment Gross | 1,468,792 | 1,468,792 |
Less: Accumulated depreciation | 826,331 | 755,969 |
Property and Equipment Net | $ 642,461 | $ 712,822 |
4. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Property and Equipment | ||
Depreciation | $ 70,361 | $ 66,775 |
5. INTANGIBLE ASSETS (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intellectual Property and Patents | $ 2,848,300 | $ 2,848,300 |
Less: Accumulated Amortization | 1,832,145 | 1,739,768 |
Intangible Assets, net | $ 1,016,155 | $ 1,108,532 |
5. INTANGIBLE ASSETS (Details 1) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Trademarks | $ 440,000 | $ 440,000 |
Total Intangible Assets, net | $ 1,456,155 | $ 1,548,532 |
5. INTANGIBLE ASSETS (Details 2) |
Mar. 31, 2018
USD ($)
|
---|---|
Amortization | |
2019 | $ 370,000 |
2020 | 370,000 |
2021 | 276,000 |
2022 | 0 |
2023 | 0 |
Total | $ 1,016,000 |
5. INTANGIBLE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 92,377 | $ 92,377 |
6. CONVERTIBLE DEBT (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Convertible Debt Details | ||
Convertible notes | $ 6,000,000 | $ 6,000,000 |
Initial discount | (61,904) | (61,904) |
Accumulated Amortization | 14,316 | 6,279 |
Convertible notes, net | $ 5,952,412 | $ 5,944,375 |
6. CONVERTIBLE DEBT (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Remaining term (years) | 3 years | |
Expected dividend yield | 0.00% | |
Amortization expense | $ 8,037 | $ 137 |
Interest expense | $ 60,000 | $ 14,133 |
Minimum | ||
Expected volatility | 104.06% | |
Risk-free rate | 1.49% | |
Maximum | ||
Expected volatility | 111.54% | |
Risk-free rate | 1.59% |
7. STOCKHOLDERS' EQUITY (Details) - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Number of Options | ||
Outstanding option, Beginning balance | 200,000 | 200,000 |
Granted, Options | 120,000 | 0 |
Exercised, Options | 0 | 0 |
Outstanding option, Ending balance | 320,000 | 200,000 |
Weighted Average Exercise Price | ||
Outstanding Weighted Average Exercise Price, Beginning balance | $ 0.76 | $ 0.76 |
Granted, Weighted Average Exercise Price | 0.12 | 0.00 |
Exercised, Weighted Average Exercise Price | 0.00 | 0.00 |
Outstanding Weighted Average Exercise Price, Ending balance | $ 0.52 | $ 0.76 |
7. STOCKHOLDERS' EQUITY (Details 2) - Warrant [Member] - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Outstanding Warrants, Beginning Balance | 35,501,411 | 37,076,413 |
Granted, Warrants | 0 | 4,774,998 |
Exercised, Warrants | 0 | (975,000) |
Expired, Warrants | (250,000) | (5,375,000) |
Outstanding Warrants, Ending Balance | 35,251,411 | 35,501,411 |
Outstanding Weighted Average Exercise Price, Beginning balance | $ 0.33 | $ 0.31 |
Granted, Weighted Average Exercise Price | 0.00 | 0.24 |
Exercised, Weighted Average Exercise Price | 0.00 | 0.05 |
Expired, Weighted Average Exercise Price | (0.15) | 0.13 |
Outstanding Weighted Average Exercise Price, Ending balance | $ 0.33 | $ 0.33 |
7. STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Preferred Stock Authorized | 1,000,000 | 1,000,000 | |
Preferred Stock Issued | 510,000 | 510,000 | |
Preferred Stock Outstanding | 510,000 | 510,000 | |
Preferred Stock par value | $ 0.01 | $ 0.01 | |
Cumulative Convertible Preferred Stock Series B Cumulative dividend | 7.50% | 7.50% | |
Common Stock issued for professional services, shares, Shares | 300,000 | ||
Common Stock issued for professional services, Amount, Amount | $ 30,000 | ||
Equity based compensation | $ 12,685 | $ 11,553 |
8. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 12,927 | $ 11,427 |
9. CONTRACTS AND AGREEMENTS (Details Narrative) - RG Group - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Accounts payable | 35.00% | 45.00% | |
Deposits | $ 15,714 | $ 0 | |
Cost of goods sold | 70.00% | 67.00% |
10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accrued Expenses And Other Current Liabilities Details | ||
Commissions | $ 109,770 | $ 115,506 |
Payroll and related costs | 62,484 | 43,484 |
Director fees | 55,250 | 27,750 |
Acrrued warranty | 5,000 | 5,000 |
Other accrued expenses | 55,356 | 75,396 |
Total | $ 287,861 | $ 267,136 |
11. ACCRUED WARRANTY (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Accrued Warranty Details | ||
Beginning accrued warranty costs | $ 5,000 | $ 0 |
Cost of warranty claims | 1,644 | 5,731 |
Settlement of warranty claims | (1,644) | (5,731) |
Provision for product warranty costs | 0 | 5,000 |
Ending accrued warranty costs | $ 5,000 | $ 5,000 |
12. CUSTOMER CONCENTRATION (Details Narrative) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Revenue, Net [Member] | Three customers [Member] | |||
Concentration risk percentage1 | 33.00% | 43.00% | |
Accounts Receivable [Member] | Two Customers [Member] | |||
Concentration risk percentage1 | 25.00% | 24.00% |
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