Company: TOMZ
Filing Date: 2025-04-14
Form Type: 10-K
Source: 0001654954-25-004233
Chunk: 488

Company: TOMI Environmental Solutions, Inc.
Filing Date: 2025-04-14
Form: 10-K
Item: Item 1A
Chunk 488
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 require additional evaluation and assessment which are used in estimating losses related to customer receivables. There is also a high degree of subjectivity in management's assessment of the completeness and accuracy of the allowance for credit losses, specifically the portion of the receivable expected to be collected, which requires a heightened level of auditor judgement in auditing the estimate.

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

 ·Evaluating the design and implementation of controls over the calculation of the allowance for credit losses.    ·Testing the mathematical accuracy of management’s allowance for credit losses calculation as of December 31, 2024 by recalculating and independently applying the credit loss methodology promulgated by generally accepted accounting principles to each risk pool, as well as recalculating the aging of receivables based on underlying source documentation.    ·Recomputing current and historical collection rates for customer receivable balances and comparing the historical loss rates against the current period estimated loss rates within the respective risk pools and performing a retrospective analysis of the subsequent collections on customer receivables with certain risk characteristics.    ·Taking into consideration future economic factors applicable to the Company’s industry and their effect over the allowance for current expected credit loss.    ·Evaluating the reasonableness of management’s qualitative adjustments against the allowance for credit losses by obtaining corroborating evidence which supports the adjustments and assumptions made by management in determining the allowance.

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

As further described in Note 2 to the consolidated financial statements, inventory is stated at the lower of cost or net realizable value. At the balance sheet date, the Company evaluated inventories for excess quantities and obsolescence (E&O) and included an inventory reserve against its inventory balances. As of December 31, 2024, the inventory reserve was $1.1 million, or approximately 24% of total inventory. To estimate the amount of inventory that may be in excess or obsolete, the Company reviews inventory quantities on hand as well as historical and projected sales volumes. The Company’s model assumes that inventory will be distributed on a first-in-first-out basis. Due to the nature of the inventory and the levels of inventory purchased in prior years, as well as recent sales trends, estimating the amount of inventory that is in excess or potentially obsolete involves significant judgments and estimates.

Given the significant judgments associated with evaluating the valuation of E&O inventory, auditing the reasonableness of management’s estimates and assumptions involved especially subjective judgment