Executive Summary / Key Takeaways

• TOMI Environmental Solutions (NASDAQ: TOMZ) leverages its patented Binary Ionization Technology (BIT) and SteraMist brand to provide differentiated, environmentally friendly disinfection solutions across critical Life Sciences, Hospital-Healthcare, Food Safety, and Commercial sectors.
• The company's core 'razor/razor-blade' model, centered on high-margin BIT solution sales driven by an expanding installed base of equipment (mobile units, CES, SIS), is showing promising growth, with Q1 2025 product revenue up 35% year-over-year, fueled by increased solution and equipment demand.
• Recent strategic initiatives, including the launch of the SteraMist Integrated System (SIS), expansion of the iHP Corporate Service division, and growth in domestic and international distribution networks, are translating into a robust sales pipeline and backlog, totaling $2.80 million in Q1 2025.
• While the company achieved net income in Q1 2025 and positive cash flow in Q3 2024, driven by revenue growth and cost controls, it faces a going concern risk due to historical losses and requires additional capital to fund operations and capitalize on growth opportunities.
• Investors should monitor the conversion of the significant sales pipeline and backlog into recognized revenue, the successful integration and utilization of large CES/SIS installations driving recurring solution sales, and the company's ability to secure necessary financing to support its growth trajectory.

TOMI Environmental Solutions, Inc. is carving out a niche in the vital and growing market for disinfection and decontamination. At its core lies the Binary Ionization Technology (BIT), a patented platform born from a defense grant in association with DARPA. This innovative technology transforms a low-percentage hydrogen peroxide solution (specifically 7.8%) into ionized Hydrogen Peroxide (iHP) using a cold plasma arc. The result is a fine mist composed mostly of hydroxyl radicals (.OH), a potent germ-killing aerosol that behaves like a non-caustic gas, effectively treating surfaces and environments. A key differentiator is its environmentally friendly nature, with the only biproducts being oxygen and water vapor, earning it recognition as a sustainably green product. This technology boasts impressive efficacy, demonstrated by GLP data supporting a 6-log (99.9999%) or greater kill rate against a wide range of pathogens, including bacteria, spores, viruses, and mold. The technology's effectiveness against Emerging Viral Pathogens and its inclusion on EPA's List N and List Q underscore its relevance in combating current and future health threats.

This foundational technology positions TOMI uniquely against larger, more diversified competitors like Steris Corporation (STE), Ecolab Inc. (ECL), and Clorox Company (CLX), who often rely on traditional chemical disinfectants or vaporized hydrogen peroxide (VHP) systems. While competitors like STE have a dominant share in healthcare sterilization equipment and ECL excels in chemical disinfectants and broader commercial services, TOMI's BIT offers distinct advantages in portability, speed, and material compatibility. For instance, BIT technology can offer potentially faster processing speeds for room decontamination compared to some VHP systems, and its non-caustic nature is a significant benefit in sensitive environments like data centers or pharmaceutical cleanrooms where traditional chemicals or VHP might cause damage. However, TOMI operates at a significantly smaller scale than these industry giants, which can lead to higher per-unit operating costs and limit its global distribution reach compared to the extensive networks of ECL and CLX. TOMI's competitive moat is primarily built on its proprietary technology and specific EPA registrations, while larger competitors leverage scale, brand recognition, and broader product portfolios. The company is strategically addressing its distribution limitations by building a network of domestic and international partners, aiming to expand its footprint and counter the scale advantages of larger rivals.

TOMI's business is structured around four key divisions: Life Sciences, Hospital-Healthcare, Food Safety, and Commercial. This segmentation allows the company to tailor its SteraMist products and services to the specific regulatory requirements and operational needs of each market. The Life Sciences division, demanding rigorous decontamination and validation, has been an early adopter of TOMI's solutions, including Custom Engineered Systems (CES) and the newer SteraMist Integrated System (SIS). The Hospital-Healthcare division leverages SteraMist's EPA registration as a hospital disinfectant to address healthcare-associated infections. The Food Safety division focuses on sanitizing the food supply chain, an area where the environmentally friendly and effective nature of iHP is a significant advantage. The Commercial division encompasses a broad range of applications, emphasizing proactive disinfection across various public and private spaces.

The company's financial performance in the most recent quarter, Q1 2025, showed notable improvement compared to the prior year period. Total revenue increased by 42% to $1.58 million, up from $1.11 million in Q1 2024. This growth was broad-based, with product-based revenue increasing by 35% to $1.00 million and service-based revenue surging by 56% to $577,000. The increase in product revenue was attributed to higher demand for SteraMist BIT solution, mobile units, and CES, while service revenue benefited from increased demand for iHP services and expanded offerings. Domestic revenue saw particularly strong growth, rising 80% to $1.19 million. Gross profit margin remained relatively consistent at 60.4% in Q1 2025, reflecting a favorable product mix.

Operating expenses declined by 10% year-over-year, driven by reductions in selling and general and administrative costs. These factors contributed to a net income of $255,593 in Q1 2025, a significant improvement from the $1.31 million net loss in Q1 2024.

The Q1 2025 results also included $534,912 in Employee Retention Credits and related interest income, which contributed to the positive bottom line.

Operationally, TOMI is focused on expanding its installed base of equipment to drive recurring, high-margin BIT solution sales, which is central to its 'razor/razor-blade' business model. The launch of the SIS platform in late 2024, including the standalone SIS-SA, is a key strategic initiative aimed at offering more accessible automated decontamination solutions, particularly for enclosures and smaller spaces, complementing the larger CES projects. The company is actively developing partnerships with enclosure manufacturers to integrate iHP technology, with initial orders anticipated. The iHP Corporate Service division is also gaining traction, securing contracts extending through 2026 and maintaining a robust pipeline, providing both immediate revenue and opportunities for future equipment sales. Recent strategic wins, such as the $450,000 CES contract at a leading university and the deployment at NASA Johnson Space Center, highlight the technology's expanding applications and competitive wins against rivals. Studies demonstrating efficacy against FMDV and ASFV, and initiatives in the food safety sector (e.g., addressing Salmonella/Listeria on conveyor belts, exploring ethylene oxide replacement) and aquaculture, point to potential new market opportunities.

Looking ahead, TOMI's outlook is tied to converting its growing pipeline and backlog into recognized revenue. As of the end of Q1 2025, the total recognized revenue and sales backlog amounted to $2.80 million, with a sales backlog of approximately $1.23 million. Management has indicated a pipeline of CES and Hybrid projects, anticipating closing five deals in 2025 yielding around $1.4 million, with installations scheduled through Q2-Q4 2025. The SIS pipeline has also grown significantly, and contracts for three more SIS offerings totaling approximately $575,000 were secured in 2025. The iHP Corporate Service pipeline exceeds $1 million, with additional contracted revenue of $600,000 restarting in 2025. While specific full-year 2025 revenue guidance was not provided in the Q4 2024 call, management expressed optimism for continued growth and is "laser focused" on achieving sustainable profitability and positive cash flow. The goal is to scale the business to drive more sustained revenue growth and fully realize the potential of the high-margin BIT solution sales.

Despite the positive operational momentum and improved recent financial results, TOMI faces significant challenges. As of March 31, 2025, the company had cash and cash equivalents of approximately $674,000 and an accumulated deficit of $54.6 million. Cash used in operations for the three months ended March 31, 2025, was $276,000.

These factors raise substantial doubt about the company's ability to continue as a going concern within one year. The company's ability to fund ongoing activities and capitalize on growth opportunities is contingent on generating sufficient cash from operations or raising additional capital through equity or debt financings. There is no assurance that such financing will be available on acceptable terms, if at all.

Furthermore, the company identified a material weakness in internal control over financial reporting as of March 31, 2025, related to limited resources with sufficient GAAP knowledge and ineffective review/monitoring procedures. While remediation plans are underway, failure to effectively address this could impact financial reporting reliability. The historical lumpiness of revenue due to the timing of large orders also remains a factor that can affect quarter-to-quarter performance.

Conclusion

TOMI Environmental Solutions possesses a differentiated, patented technology with broad applicability across critical and growing markets. The recent financial performance in Q1 2025, marked by significant revenue growth and a return to net income, coupled with a robust sales pipeline and strategic initiatives in expanding product lines and distribution, suggests positive momentum. The core investment thesis hinges on the successful conversion of this pipeline into recurring revenue, particularly high-margin BIT solution sales from an expanding installed base of CES and SIS units. However, the company's financial health presents a material risk, requiring successful capital raising to support its growth ambitions and address the going concern doubt. Investors should weigh the significant market opportunities and technological advantages against the financial challenges and execution risks associated with scaling the business and achieving sustainable profitability and positive cash flow.