# EDGAR Filing Document

**Accession Number:** 0000314227
**File Stem:** 0001654954-25-013088
**Filing Date:** 2025-11
**Character Count:** 166581
**Document Hash:** 2f555aaee8b3c3696a6fc3c65fb557ee
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001654954-25-013088.hdr.sgml**: 20251114

**ACCESSION NUMBER**: 0001654954-25-013088

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 89

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251114

**DATE AS OF CHANGE**: 20251114

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** TOMI Environmental Solutions, Inc.
- **CENTRAL INDEX KEY:** 0000314227
- **STANDARD INDUSTRIAL CLASSIFICATION:** INDUSTRIAL ORGANIC CHEMICALS [2860]
- **ORGANIZATION NAME:** 08 Industrial Applications and Services
- **EIN:** 591947988
- **STATE OF INCORPORATION:** FL
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39574
- **FILM NUMBER:** 251487146

**BUSINESS ADDRESS:**
- **STREET 1:** 8430 SPIRES WAY
- **CITY:** FREDERICK
- **STATE:** MD
- **ZIP:** 21701
- **BUSINESS PHONE:** 8005251698

**MAIL ADDRESS:**
- **STREET 1:** 8430 SPIRES WAY
- **CITY:** FREDERICK
- **STATE:** MD
- **ZIP:** 21701

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Ozone Man, Inc.
- **DATE OF NAME CHANGE:** 20071130

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** RPS GROUP INC
- **DATE OF NAME CHANGE:** 19940818

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** DAUPHIN INC
- **DATE OF NAME CHANGE:** 19940818

?xml version='1.0' encoding='ASCII'? tomz_10q.htm

**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

(Mark One)

☒&nbsp;&nbsp;&nbsp;&nbsp; QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For the quarterly period ended September 30, 2025**

or

☐&nbsp;&nbsp;&nbsp;&nbsp; TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 000-09908

![tomz_10qimg2.jpg](tomz_10qimg2.jpg)

---

| |
|:---|
| **TOMI ENVIRONMENTAL SOLUTIONS, INC.** |
| (Exact name of registrant as specified in its charter) |

---

---

| | |
|:---|:---|
| **Florida** | **59-1947988** |
| (State or other jurisdiction of <br>incorporation or organization) | (I.R.S. Employer <br>Identification No.) |

---

<u>**8430 Spires Way, Frederick, Maryland 21701**</u>

(Address of principal executive offices) (Zip Code)

**<u>(800) 525-1698</u>**

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading**<br>**Symbol(s)** | **Name of each exchange on which registered** |
| Common stock, par value $0.01 per share | TOMZ | Nasdaq Capital Market |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer  | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
|  |  | Emerging growth company  | ☐ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 12, 2025, the registrant had 20,225,205 shares of common stock issued and outstanding.

**QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2025**

**TABLE OF CONTENTS** 

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
| **[CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](#statement)** | **[CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](#statement)** | 3 |
| **[PART I](#p1)** | **[FINANCIAL INFORMATION](#p1)** |  |
| [Item 1](#p1i1) | [Financial Statements.](#p1i1) | 4 |
| [Item 2](#p1i2) | [Management's Discussion and Analysis of Financial Condition and Results of Operations.](#p1i2) | 26 |
| [Item 3](#p1i3) | [Quantitative and Qualitative Disclosures About Market Risk.](#p1i3) | 39 |
| [Item 4](#p1i4) | [Controls and Procedures.](#p1i4) | 39 |
| **[PART II](#p2)** | **[OTHER INFORMATION](#p2)** |  |
| [Item 1](#p2i1) | [Legal Proceedings.](#p2i1) | 41 |
| [Item 1A](#p2i1a) | [Risk Factors.](#p2i1a) | 41 |
| [Item 2](#p2i2) | [Unregistered Sales of Equity Securities and Use of Proceeds.](#p2i2) | 41 |
| [Item 3](#p2i3) | [Defaults Upon Senior Securities.](#p2i3) | 41 |
| [Item 4](#p2i4) | [Mine Safety Disclosures.](#p2i4) | 41 |
| [Item 5](#p2i5) | [Other Information.](#p2i5) | 41 |
| [Item 6](#p2i6) | [Exhibits.](#p2i6) | 41 |
| [SIGNATURES](#sig) | [SIGNATURES](#sig) | 42 |
| [EXHIBIT INDEX](#ex) | [EXHIBIT INDEX](#ex) | 43 |

---

---

| |
|:---|
| 2 |
| *[**Table of Contents**](#toc)* |

---

**FORWARD-LOOKING STATEMENTS**

This Quarterly Report on Form 10-Q, or this Form 10-Q, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and we intend that such "forward looking statements" be subject to the safe harbors created thereby. For this purpose, any statements contained in this Form 10-Q, except for historical information, may be deemed "forward-looking statements". You can generally identify "forward-looking statements" as statements containing the words "will," "would," "believe," "expect," "estimate," "anticipate," "intend," "assume," "can," "could," "plan," "predict," "should" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our businesses, or other characterizations of future events or circumstances are "forward-looking statements".

"Forward-looking statements" involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any" forward-looking statement". The "forward-looking statements" included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately and many of which are beyond our control. As such, our actual results could differ materially and adversely from those expressed in any "forward-looking statements" as a result of various factors, some of which are listed under the section "Risk Factors" in our most recent annual report on Form 10-K previously filed with the Securities and Exchange Commission on April 14, 2025, as amended. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Except as required by law, we undertake no obligation to revise the "forward-looking statements" contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

---

| |
|:---|
| 3 |
| *[**Table of Contents**](#toc)* |

---

**PART I: FINANCIAL INFORMATION**

**Item 1. Financial Statements.**

**TOMI ENVIRONMENTAL SOLUTIONS, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
| **ASSETS** | **ASSETS** | **ASSETS** |
|  | **September 30,** |  |
|  | **2025** | **December 31,**  |
| Current Assets: | **(Unaudited)** | **2024** |
| Cash and Cash Equivalents | $490022 | $664879 |
| Accounts Receivable - net | 619965 | 1881138 |
| Inventories - net (Note 3) | 3364260 | 3578202 |
| Vendor Deposits (Note 4) | 222065 | 35895 |
| Prepaid Expenses | 333997 | 332999 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current Assets | 5030309 | 6493113 |
| Property and Equipment – net (Note 5) | 678528 | 875449 |
| Other Assets: |  |  |
| Intangible Assets – net (Note 6) | 1359205 | 1250574 |
| Operating Lease - Right of Use Asset (Note - 7) | 342229 | 399254 |
| Other Assets | 634920 | 675348 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Other Assets | 2336354 | 2325176 |
| Total Assets | $8045191 | $9693738 |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** | **LIABILITIES AND SHAREHOLDERS' EQUITY** | **LIABILITIES AND SHAREHOLDERS' EQUITY** |
| Current Liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts Payable | $1258483 | $1924379 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued Expenses and Other Current Liabilities (Notes 13 and 14) | 828723 | 455675 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred Revenue | 309752 | 211724 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current Portion of Long-Term Operating Lease (Note 7) | 139917 | 129132 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current Liabilities | 2536875 | 2720910 |
| Long-Term Liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-Term Operating Lease, Net of Current Portion (Note 7) | 407781 | 513395 |
| Convertible Notes Payable, net of discount of $240,947 and $239,506 at September 30, 2025 and December 31, 2024, respectively (Note 9) | 2894053 | 2360494 |
| Total Long-Term Liabilities | 3301834 | 2873889 |
| Total Liabilities | 5838709 | 5594799 |
| Commitments and Contingencies (Notes 7, 9 and 11) |  |  |
| Shareholders' Equity: |  |  |
| Cumulative Convertible Series A Preferred Stock; par value $0.01 per share, 1,000,000 shares authorized; 63,750 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | 638 | 638 |
| Cumulative Convertible Series B Preferred Stock; $1,000 stated value; 7.5% Cumulative dividend; 4,000 shares authorized; none issued and outstanding at September 30, 2025 and December 31, 2024, respectively |  |  |
| Common stock; par value $0.01 per share, 250,000,000 shares authorized; 20,075,205 and 20,015,205 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | 200752 | 200152 |
| Additional Paid-In Capital | 58251540 | 58201140 |
| Accumulated Deficit | (56246448) | (54302991) |
| Total Shareholders' Equity | 2206482 | 4098939 |
| Total Liabilities and Shareholders' Equity | $8045191 | $9693738 |

---

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

---

| |
|:---|
| 4 |
| *[**Table of Contents**](#toc)* |

---

**TOMI ENVIRONMENTAL SOLUTIONS, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months ended** | **For the three months ended** | **For the nine months ended** | **For the nine months ended** |
|  | **September 30,** | **September 30,** | **September 30,** | **September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Sales, net | $2011556 | $2542251 | $4619229 | $6669730 |
| Cost of Sales | 779585 | 981124 | 1758389 | 2583419 |
| Gross Profit | 1231971 | 1561127 | 2860840 | 4086311 |
| Operating Expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Professional Fees | 185476 | 104941 | 588666 | 387267 |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and Amortization | 68588 | 69909 | 206368 | 224384 |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling Expenses | 143599 | 226593 | 630467 | 881927 |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and Development | 10694 | 56338 | 139380 | 185923 |
| &nbsp;&nbsp;&nbsp;&nbsp;Consulting Fees | 72623 | 44338 | 238487 | 181068 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and Administrative | 1072406 | 909906 | 3266041 | 3181304 |
| Total Operating Expenses | 1553386 | 1412025 | 5069409 | 5041873 |
| Income (loss) from Operations | $(321415) | $149102 | $(2208569) | $(955562) |
| Other Income (Expense): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other Income (Note 18) |  |  | 534912 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest Income | 1406 | 3480 | 85717 | 15231 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest Expense | (130339) | (93620) | (355517) | (280699) |
| Total Other Income (Expense) | (128933) | (90140) | 265112 | (265468) |
| Income (loss) before income taxes | (450348) | 58962 | (1943457) | (1221030) |
| Provision for Income Taxes (Note 15) | - | - | - | - |
| Net income (loss) | $(450348) | $58962 | $(1943457) | $(1221030) |
| Net income (loss) Per Common Share |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $(0.02) | $0.00 | $(0.10) | $(0.06) |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | $(0.02) | $0.00 | $(0.10) | $(0.06) |
| Basic Weighted Average Common Shares Outstanding | 20075205 | 20015205 | 20046195 | 19984179 |
| Diluted Weighted Average Common Shares Outstanding | 20075205 | 20096751 | 20046195 | 19984179 |

---

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

---

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|:---|
| 5 |
| *[**Table of Contents**](#toc)* |

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**TOMI ENVIRONMENTAL SOLUTIONS, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**

**(UNAUDITED)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | | **For the nine months ended**<br>**September 30, 2025** | **For the nine months ended**<br>**September 30, 2025** | **For the nine months ended**<br>**September 30, 2025** | **For the nine months ended**<br>**September 30, 2025** | |
|  | **Series A** | **Series A** |  |  | | | |
|  | **Preferred**  | **Preferred**  | **Common Stock**  | **Common Stock**  | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional** <br>**Paid** <br>**in Capital** | <br>**Accumulated**<br>**Deficit** | <br>**Total** <br>**Shareholders'**<br>**Equity**  |
| Balance at January 1, 2025 | 63750 | $638 | 20015205 | $200152 | $58201140 | $(54302991) | $4098939 |
| Common Stock Issued for Services Provided |  |  | 60000 | 600 | 50400 |  | 51000 |
| Net (Loss) for the nine months ended September 30, 2025 |  |  |  |  |  | (1943457) | (1943457) |
| Balance at September 30, 2025 | 63750 | $638 | 20075205 | $200752 | $58251540 | $(56246448) | $2206482 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **For the nine months ended**<br>**September 30, 2024** | **For the nine months ended**<br>**September 30, 2024** | **For the nine months ended**<br>**September 30, 2024** | **For the nine months ended**<br>**September 30, 2024** | |
|  | **Series A** | **Series A** |  |  | | | |
|  | **Preferred** | **Preferred** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional** <br> **Paid** <br>**in Capital** | <br>**Accumulated**<br>**Deficit** | <br>**Total** <br>**Shareholders'**<br>**Equity**  |
| Balance at January 1, 2024 | 63750 | $638 | 19923955 | $199240 | $57985245 | $(49826229) | $8358894 |
| Options Exercised |  |  | 31250 | 312 | 27188 |  | 27500 |
| Common Stock Issued for Services Provided |  |  | 60000 | 600 | 44400 |  | 45000 |
| Equity Compensation |  |  |  |  | 144307 |  | 144307 |
| Net (Loss) for the nine months ended September 30, 2024 |  |  |  |  |  | (1221030) | (1221030) |
| Balance at September 30, 2024 | 63750 | $638 | 20015205 | $200152 | $58201140 | $(51047259) | $7354671 |

---

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

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| 6 |
| *[**Table of Contents**](#toc)* |

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**TOMI ENVIRONMENTAL SOLUTIONS, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**

**(UNAUDITED)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **For the three months ended**<br>**September 30, 2025** | **For the three months ended**<br>**September 30, 2025** | **For the three months ended**<br>**September 30, 2025** | **For the three months ended**<br>**September 30, 2025** | |
|  | **Series A** | **Series A** |  |  | | | |
|  | **Preferred** | **Preferred** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional** <br>**Paid** <br>**in Capital** | <br>**Accumulated**<br>**Deficit** | <br>**Total** <br>**Shareholders'**<br>**Equity**  |
| Balance at July 1, 2025 | 63750 | $638 | 20075205 | $200752 | 58251540 | $(55796100) | $2656830 |
| Net (Loss) for the three months ended September 30, 2025 |  |  |  |  |  | (450348) | (450348) |
| Balance at September 30, 2025 | 63750 | $638 | 20075205 | $200752 | $58251540 | $(56246448) | $2206482 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **For the three months ended**<br>**September 30, 2024** | **For the three months ended**<br>**September 30, 2024** | **For the three months ended**<br>**September 30, 2024** | **For the three months ended**<br>**September 30, 2024** | |
|  | **Series A** | **Series A** |  |  | | | |
|  | **Preferred** | **Preferred** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional** <br> **Paid** <br>**in Capital** | <br>**Accumulated**<br>**Deficit** | <br>**Total** <br>**Shareholders'**<br>**Equity**  |
| Balance at July 1, 2024 | 63750 | $638 | 20015205 | $200152 | $58201140 | $(51106221) | $7295709 |
| Net Income for the three months ended September 30, 2024 |  |  |  |  |  | 58962 | 58962 |
| Balance at September 30, 2024 | 63750 | $638 | 20015205 | $200152 | $58201140 | $(51047259) | $7354671 |

---

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

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| *[**Table of Contents**](#toc)* |

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**TOMI ENVIRONMENTAL SOLUTIONS, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | **For the nine months ended** <br>**September 30,** | **For the nine months ended** <br>**September 30,** |
|  | **2025** | **2024** |
| Cash Flow From Operating Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (Loss) | $(1943457) | $(1221030) |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to Reconcile Net (Loss) to Net Cash (Used) In Operating Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and Amortization | 206368 | 224384 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of Right of Use Asset | 117986 | 117986 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of Deferred Financing Costs | 52617 | 46860 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity Compensation Expense |  | 144307 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Value of Equity Issued for Services | 51000 | 45000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Loss Expense | 197639 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory Reserve | (232275) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales Returns Allowance | (61828) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in Operating Assets and Liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (Increase) in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts Receivable | 1003569 | (716462) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 431820 | 46988 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid Expenses | 6578 | 25455 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vendor Deposits | (186170) | (68153) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Assets | 40428 | (121888) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase (Decrease) in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts Payable | (510970) | 285194 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued Expenses | 319934 | (137982) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Revenue | 56376 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease Liability | (126395) | (123521) |
| Net Cash (Used) in Operating Activities | (576780) | (1452862) |
| Cash Flow From Investing Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Capitalized Patent and Trademark Costs | (130412) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of Property and Equipment | (2665) | (104660) |
| Net Cash (Used) in Investing Activities | (133077) | (104660) |
| Cash Flow From Financing Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from Issuance of Convertible Notes | 535000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from Exercise of Options | - | 27500 |
| Net Cash Provided By Financing Activities | 535000 | 27500 |
| (Decrease) In Cash and Cash Equivalents | (174857) | (1530022) |
| Cash and Cash Equivalents - Beginning | 664879 | 2339059 |
| Cash and Cash Equivalents – Ending | $490022 | $809037 |
| Supplemental Cash Flow Information: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash Paid for Interest | $309314 | $222000 |
| Non-Cash Investing and Financing Activities: |  |  |
| Service equipment reclassified from inventory to fixed assets | $14397 | $- |

---

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

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**TOMI ENVIRONMENTAL SOLUTIONS, INC.**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1. DESCRIPTION OF BUSINESS**

TOMI Environmental Solutions, Inc., a Florida corporation ("TOMI", the "Company", "we", "our" and "us") is a global provider of disinfection and decontamination essentials through our premier Binary Ionization Technology® (BIT™) platform, under which we manufacture, license, service and sell our SteraMist® brand of products, including SteraMist® BIT™, a hydrogen peroxide-based mist and fog. Our solution and process are environmentally friendly as the only product from our decontamination process is oxygen and water in the form of humidity. Our solution is organically listed in the United States and Canada as a sustainably green product with no or very little carbon footprint. Our business is organized into four divisions: Life Sciences, Hospital Healthcare, Food Safety and Commercial.

Invented under a defense grant in association with the Defense Advanced Research Projects Agency ("DARPA") of the U.S. Department of Defense, BIT™ is registered with the U.S. Environmental Protection Agency (the "EPA") and uses a low percentage hydrogen peroxide as its only active ingredient to produce a fog composed mostly of a hydroxyl radical (**<sup>.</sup>**OH ion), known as ionized Hydrogen Peroxide (iHP™). Represented by the SteraMist® brand of products, iHP™ produces a germ-killing aerosol that works like a visual non-caustic gas.

Our products are designed to service a broad spectrum of commercial structures, including, but not limited to, hospitals and medical facilities, bio-safety labs, pharmaceutical facilities, meat and produce processing facilities, food security including storage and transportation, universities and research facilities, vivarium labs, other service industries including cruise ships, office buildings, hotel and motel rooms, schools, restaurants, military barracks, police and fire departments, prisons, and athletic facilities. Our products are also used in single-family homes and multi-unit residences. Additionally, our products have been listed on EPA's List N as products that help combat COVID-19 and are actively being used for this purpose.

**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 in the United States of America (GAAP), and stated in U.S. dollars, have been prepared by us, 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 we believe 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 our audited financial statements for the year ended December 31, 2024, and notes thereto which are included in the annual report on Form 10-K previously filed with the SEC on April 14, 2025, as amended (the "Annual Report"). We follow 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 intercompany accounts and transactions have been eliminated in consolidation.

***Reclassification of Accounts***

Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation. These reclassifications had no material effect on previously reported results of operations or financial position.

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***Use of Estimates***

The preparation of the condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to allowance for credit losses, inventory, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities.

***Fair Value Measurements***

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

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|:---|:---|
| Level 1: | Quoted prices in active markets for identical assets or liabilities.<br>|
| Level 2: | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data for substantially the full term of the assets or liabilities.<br>|
| Level 3: | Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities. |

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The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments.

***Cash and Cash Equivalents***

Cash and cash equivalents include 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 more than insured limits. At September 30, 2025, and December 31, 2024, there were no cash equivalents.

***Accounts Receivable***

Accounts receivables are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. Management assesses the collectability of outstanding customer invoices and maintains an allowance resulting from the expected non-collection of customer receivables. In estimating this reserve, management considers factors such as industry sector, historical collection experience, customer creditworthiness, specific customer risk, and current and expected general economic conditions. For those customers to whom we extend credit, in accordance with the Current Expected Credit Loss (CECL) model, we make a risk-based evaluation at the point of sale which is further reviewed on both an individual and collective (pool) basis during each reporting period based on ASC 326. We are required to estimate and report expected credit losses over the entire life of a financial asset, considering historical data, current conditions, and future forecasts, even if the risk of loss is remote.

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We have implemented a policy of reserving credit losses based on our best estimate of the amount of potential credit losses in existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be at risk. Our allowance for credit losses was as follows:

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| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025**<br> **(Unaudited)** | **December 31,** <br>**2024** |
| Allowance for credit losses | $2229977 | $1494347 |
| Credit loss expense | 197639 | 1050543 |
| Adjustment for uncollectible accounts | (1236069) | (314913) |
| Allowance for credit losses | $1191547 | $2229977 |

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***Inventories***

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods and raw materials. We expense certification costs to cost of goods sold as incurred.

We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence, and future customer demand. We record an allowance for estimated losses when the facts and circumstances indicate that inventories may not be usable or realized when comparing current inventory levels to anticipated demand for our product. Our reserve for obsolete inventory was $868,000 and $1,100,000 as of September 30, 2025, and December 31, 2024, respectively.

***Property and Equipment***

We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, generally three to five years. Depreciation commences for equipment, furniture and fixtures and vehicles, once placed in service for its intended use. Leasehold improvements are amortized using the straight-line method over the remaining lease term at the time the asset was placed into service or the service lives of the improvements, whichever is shorter.

***Leases***

We recognize a right-of-use ("ROU") asset and lease liability for all leases with terms of more than 12 months, in accordance with ASC 842. We utilize the short-term lease recognition exemption for all asset classes as part of our on-going accounting under ASC 842. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities. Recognition, measurement and presentation of expenses depend upon classification as a finance or operating lease.

As a lessee, we utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation. In determining the discount rate to use in calculating the present value of lease payments, we used our incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.

We have also elected the practical expedient not to separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of our lease components for balance sheet purposes. Furthermore, all variable payments included in lease agreements will be disclosed as variable lease expense when incurred. Generally, variable lease payments are based on usage and common area maintenance. These payments will be included as variable lease expense in the period in which they are incurred.

***Accounts Payable***

As of September 30, 2025, one vendor accounted for approximately 46% of accounts payable. As of December 31, 2024, one vendor accounted for approximately 60% of accounts payable.

For the three and nine months ended September 30, 2025, two vendors accounted for 59% and 50% of cost of sales, respectively. For the three and nine months ended September 30, 2024, two vendors accounted for 53% and 65% of cost of sales, 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 estimate the expected costs to be incurred during the warranty period and record the expense to the consolidated statement of operations at the date of sale. Our manufacturers assume the warranty against product defects from date of sale, which we extend to our customers upon sale of the product. We assume responsibility for product reliability and results. As of September 30, 2025, and December 31, 2024, our warranty reserve was $22,648 and $30,000, respectively. (See Note 14).

***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 FASB ASC Topic 740, Income Taxes guidance for income taxes. Net deferred tax assets have been fully reserved as of September 30, 2025, and December 31, 2024.

***Net Income (Loss) Per Share***

Basic net income or (loss) per share is computed by dividing our net income or (loss) by the weighted average number of shares of common stock outstanding during the period presented. Diluted income or (loss) per share is based on the effect from potential issuance of shares of common stock, such as shares issuable pursuant to the exercise of options and warrants and conversions of preferred stock or debentures. The computation of diluted EPS is similar to the computation of basic EPS except that the numerator may have to adjust for any dividends and income or loss associated with potentially dilutive securities that are assumed to have resulted in the issuance of shares of common stock and the denominator may have to adjust to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued during the period to reflect the potential dilution that could occur from shares of common stock issuable through a contingent shares issuance arrangement, stock options, warrants, or convertible preferred stock. For purposes of determining diluted earnings per common share, the treasury stock method is used for stock options, and warrants, and the if-converted method is used for convertible preferred stock and convertible debt as prescribed in FASB ASC Topic 260.

Potentially dilutive securities as of September 30, 2025, consisted of 2,508,000 shares of common stock from convertible debentures, 2,604,388 shares of common stock issuable upon exercise of outstanding warrants, 768,792 shares of common stock issuable upon outstanding stock options and 63,750 shares of common stock issuable upon conversion of outstanding shares of Convertible Series A Preferred stock.

Potentially dilutive securities as of September 30, 2024, consisted of 2,080,000 shares of common stock from convertible debentures, 2,765,846 shares of common stock issuable upon exercise of outstanding warrants, 805,042 shares of common stock issuable upon vesting of stock options and exercise and 63,750 shares of common stock issuable upon conversion of outstanding shares of Convertible Series A Preferred Stock.

Options, warrants, preferred stock and shares associated with the conversion of debt to purchase approximately 5.9 million and 5.7 million shares of common stock were outstanding on September 30, 2025, and 2024, respectively but were excluded from the computation of diluted net loss per share at September 30, 2025 and 2024 due to anti-dilutive effect on net loss per share.

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| | | |
|:---|:---|:---|
|  | **For the three months ended** | **For the three months ended** |
|  | **September 30,** | **September 30,** |
|  | **(Unaudited)** | **(Unaudited)** |
|  | **2025** | **2024** |
| Net Income (Loss) | $(450348) | $58962 |
| Adjustments for convertible debt - as converted: |  |  |
| Interest on convertible debt net of effective tax rate (28%) | - | - |
| Net income (loss) attributable to common shareholders | $(450348) | $58962 |
| Weighted average number of shares of common stock outstanding: |  |  |
| Basic  | 20075205 | 20015205 |
| Diluted | 20075205 | 20096751 |
| Net income (loss) attributable to common shareholders per share: |  |  |
| Basic  | $(0.02) | $0.00 |
| Diluted | $(0.02) | $0.00 |

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

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| | | |
|:---|:---|:---|
|  | **For the three months ended** | **For the three months ended** |
|  | **September 30,** | **September 30,** |
|  | **(Unaudited)** | **(Unaudited)** |
|  | **2025** | **2024** |
| Numerator: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net Income (Loss) | $(450348) | $58962 |
| Denominator: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic weighted-average shares | 20075205 | 20015205 |
| Effect of dilutive securities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Warrants |  | 5908 |
| &nbsp;&nbsp;&nbsp;&nbsp;Convertible Debt |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Options |  | 11888 |
| &nbsp;&nbsp;&nbsp;&nbsp;Preferred Stock | - | 63750 |
| Diluted Weighted Average Shares | 20075205 | 20096751 |
| Net income (loss) attributable to common shareholders per share: |  |  |
| Basic  | $(0.02) | $0.00 |
| Diluted | $(0.02) | $0.00 |

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The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per share because their effect was anti-dilutive:

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| | | |
|:---|:---|:---|
|  | **For the three months ended** | **For the three months ended** |
|  | **September 30,** | **September 30,** |
|  | **(Unaudited)** | **(Unaudited)** |
|  | **2025** | **2024** |
| Options | 768792 | 573000 |
| Warrants | 2604388 | 2734596 |
| Convertible Debt | 2508000 | 2080000 |
| Total anti-dilutive shares &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  | 5881180 | 5387596 |

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Note: Warrants, options, convertible debt and preferred stock for the nine months ending September 30, 2025 and 2024, are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

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***Revenue Recognition***

We recognize revenue in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligation(s). At contract inception, we assess the goods or services promised within each contract, assess whether each promised good or service is distinct and identify those that are performance obligations.

We must use judgment to determine: a) the number of performance obligations based on the determination under step (ii) above and whether those performance obligations are distinct from other performance obligations in the contract; b) the transaction price under step (iii) above for each distinct performance obligation identified in step (ii) above; and c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above.

Title and risk of loss generally pass to our customers upon shipment. Our customers include end users as well as dealers and distributors who market and sell our products. Our revenue is not contingent upon resale by the dealer or distributor, and we have no further obligations related to resale of our products by dealers and distributors. Shipping and handling costs charged to customers are included in Product Revenues. The associated expenses are treated as fulfillment costs and are included in Cost of Revenues. Revenues are reported net of sales taxes collected from Customers.

*Disaggregation of Revenue*

The following table presents our approximate revenue disaggregated by revenue source.

*Product and Service Revenue*

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|:---|:---|:---|
|  | **For the three months ended** <br>**September 30,**<br>**(Unaudited)** | **For the three months ended** <br>**September 30,**<br>**(Unaudited)** |
|  | **2025** | **2024** |
| SteraMist Product | $1603000 | $1766000 |
| Service and Training | 409000 | 776000 |
| Total | $2012000 | $2542000 |

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*Revenue by Geographic Region*

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|:---|:---|:---|
|  | **For the three months ended** <br>**September 30,**<br>**(Unaudited)** | **For the three months ended** <br>**September 30,**<br>**(Unaudited)** |
|  | **2025** | **2024** |
| United States | $1280000 | $1886000 |
| International | 732000 | 656000 |
| Total | $2012000 | $2542000 |

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*Product and Service Revenue*

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|:---|:---|:---|
|  | **For the nine months ended** <br>**September 30,**<br>**(Unaudited)** | **For the nine months ended** <br>**September 30,**<br>**(Unaudited)** |
|  | **2025** | **2024** |
| SteraMist Product | $3255000 | $5247000 |
| Service and Training | 1364000 | 1423000 |
| Total | $4619000 | $6670000 |

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*Revenue by Geographic Region*

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|:---|:---|:---|
|  | **For the nine months ended** <br>**September 30,**<br>**(Unaudited)** | **For the nine months ended** <br>**September 30,**<br>**(Unaudited)** |
|  | **2025** | **2024** |
| United States | $3294000 | $5169000 |
| International | 1325000 | 1501000 |
| Total | $4619000 | $6670000 |

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Product revenue includes sales from our standard and customized equipment, solutions and accessories sold with our equipment. Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products.

Service and training revenue include sales from our high-level decontamination and service engagements, validation of our equipment and technology and customer training. Service revenue is recognized when the services agreed upon are rendered to our customers at an amount that reflects the consideration we expect to receive in exchange for those services.

Estimated allowances for sales returns are recorded as sales are recognized. We use a specific identification method based on subsequent product return activity and historical average calculations to estimate the allowance for sales returns. Our allowance for sales returns as of September 30, 2025, was $90,540 and $227,000 at December 31, 2024, respectively.

*Costs to Obtain a Contract with a Customer*

We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling expenses.

*Contract Balances*

As of September 30, 2025, and December 31, 2024, we had contract balances and unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed in the amounts of $309,752 and $211,724, respectively.

*Arrangements with Multiple Performance Obligations*

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

*Significant Judgments*

Our contracts with customers for products and services often dictate the terms and conditions of when the control of the promised products or services is transferred to the customer and the amount of consideration to be received in exchange for the products and services. We also record an estimated allowance for anticipated product returns.

***Equity Compensation Expense***

We account for equity compensation expense in accordance with FASB ASC 718, "Compensation-Stock Compensation." Under the provisions of FASB ASC 718, equity compensation expense is estimated at the grant date based on the award's fair value.

The valuation methodology used to determine the fair value of options and warrants issued as compensation during the period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The expected term of the Company's warrants has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" warrants. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock, par value $0.01 (the "Common Stock") and does not intend to pay dividends on its Common Stock in the foreseeable future.

On July 7, 2017, our shareholders approved the Company's Amended and Restated 2016 Equity Incentive Plan (the amended "2016 Plan"). The 2016 Plan authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance units/shares. Up to 2,000,000 shares of Common Stock are authorized for issuance under the 2016 Plan. Shares issued under the 2016 Plan may be either authorized but unissued shares, treasury shares, or any combination thereof. Provisions in the 2016 Plan permit the reuse or reissuance by the 2016 Plan of shares of Common Stock for numerous reasons, including, but not limited to, shares of Common Stock underlying canceled, expired, or forfeited awards of stock-based compensation and stock appreciation rights paid out in the form of cash. Equity compensation expense will typically be awarded in consideration for the future performance of services to us. All recipients of awards under the 2016 Plan are required to enter into award agreements with us at the time of the award, and awards under the 2016 Plan are expressly conditioned upon such agreements. During the nine months ended September 30, 2025, and 2024, we issued 60,000 and 60,000 shares of Common Stock, respectively, to members of our Board 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.

***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 and nine months ended September 30, 2025, and 2024.

***Advertising and Promotional Expenses***

Advertising and promotional costs are expensed in the period they are incurred. For the three and nine months ended September 30, 2025, advertising and promotional expenses included in selling expenses were approximately $24,000 and $88,000, respectively. For the same periods in 2024, these expenses were approximately $35,000 and $192,000, respectively.

***Research and Development Expenses***

Research and development expenses are expensed in the period they are incurred. For the three and nine months ended September 30, 2025, these expenses were approximately $11,000 and $139,000, respectively. For the same periods in 2024, research and development expenses were approximately $56,000 and $186,000, respectively.

***Business Segments***

We currently have one reportable business segment due to the fact that we derive our revenue primarily from one product in which 1) The business activities are homogenous in nature, 2) The entire operation faces similar market conditions and risks, 3) There is a high degree of integration in its operations, 4) Internal evaluations of financial results are conducted on a consolidated basis. A breakdown of revenue is presented in "Revenue Recognition" in Note 2 above. See Note 17, Segment Reporting for more details. We are required to apply the guidance in ASC 280 and identify significant segment expenses and other segment items for our single reportable segment.

**Going Concern**

For the nine months ended September 30, 2025, and 2024, our net loss was approximately $1,943,000 and $1,221,000, respectively, and the cash used in operations was approximately $577,000 and $1,453,000, respectively. As of September 30, 2025, we had approximately $490,000 cash and cash equivalents and an accumulated deficit of $56.2 million. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. The Company's consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business; no adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.

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The Company intends to fund ongoing activities by utilizing its current cash on hand, the cash generated from operations, and by raising additional capital through equity or debt financings. There can be no assurance that the Company will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to us, as our ability to raise capital may be affected by various factors, including general market conditions, volatility of our stock price, investor interests and expectations, and our financial performance.

***Recent Accounting Pronouncements***

*Recently issued accounting pronouncements not yet adopted*

In December 2023, FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will adopt ASU 2023-09 in its fourth quarter of 2025 using a prospective transition method.

In November 2024, FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). In January 2025, ASU No. 2025-01 was issued to clarify the effective date for all public business entities. The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements once adopted. We are currently evaluating the provisions of this ASU.

In July 2025, FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.

**NOTE 3. INVENTORIES**

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

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|:---|:---|:---|
|  | **September 30, 2025**<br> **(Unaudited)** | **December 31, 2024** |
| Finished Goods | $3332000 | $3800000 |
| Raw Materials | 900000 | 878000 |
| Inventory Reserve | (868000) | (1100000) |
| Total | $3364000 | $3578000 |

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Our inventory reserve decreased by $232,000 during the nine months ended September 30, 2025 due to higher than anticipated equipment sales during the current fiscal year.

**NOTE 4. VENDOR DEPOSITS**

At September 30, 2025, and December 31, 2024, we maintained vendor deposits of $222,065 and $35,895, respectively, for open purchase orders for inventory.

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**NOTE 5. PROPERTY AND EQUIPMENT**

Property and equipment consist of the following at:

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| | | |
|:---|:---|:---|
|  | **September 30, 2025**<br> **(Unaudited)** | **December 31, 2024** |
| Furniture and fixtures | $458652 | $458652 |
| Equipment | 2316200 | 2301803 |
| Vehicles | 66170 | 66170 |
| Computer and software | 318999 | 316334 |
| Leasehold improvements | 393381 | 393381 |
| Tenant Improvement Allowance | 405000 | 405000 |
| Total cost of Property and Equipment | 3958402 | 3941340 |
| Less: Accumulated Depreciation | 3279874 | 3065891 |
| Property and Equipment, net | $678528 | $875449 |

---

For the three and nine months ended September 30, 2025, depreciation was $60,822 and $184,587, respectively. For the three and nine months ended September 30, 2024, depreciation was $65,031 and $209,751, respectively.

For the three and nine months ended September 30, 2025, and 2024, amortization of tenant improvement allowance was $9,798 and $29,395, respectively and was recorded as lease expense and included within general and administrative expense on the consolidated statement of operations.

**NOTE 6. 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. Trademarks have an indefinite life. Amortization expenses were $7,766 and $21,781 for the three and nine months ended September 30, 2025, respectively. Amortization expenses were $4,878 and $14,633 for the three and nine months ended September 30, 2024, respectively.

Definite life intangible assets consist of the following:

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| | | |
|:---|:---|:---|
|  | **September 30, 2025**<br>**(Unaudited)** | **December 31,**<br>**2024** |
| Intellectual Property and Patents | $3449482 | $3350031 |
| Less: Accumulated Amortization | 2952102 | 2930321 |
| Patents, net | $497380 | $419710 |

---

Indefinite life intangible assets consist of the following:

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| | | |
|:---|:---|:---|
| Trademarks | $861825 | $830864 |
| Total Intangible Assets, net | $1359205 | $1250574 |

---

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

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| | |
|:---|:---|
| **Year Ended:** |  |
| October 1 - December 31, 2025 | $7000 |
| December 31, 2026 | 28000 |
| December 31, 2027 | 28000 |
| December 31, 2028 | 28000 |
| December 31, 2029 | 28000 |
| Thereafter  | 378000 |
| Total | $497000 |

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**NOTE 7. LEASES** 

In April 2018, we entered into a 10-year lease agreement for a new 9,000-square-foot facility that contains office, warehouse, lab and research and development space in Frederick, Maryland. The lease agreement commenced in December 2018 when the property was ready for occupancy. The agreement provided for annual rent of $143,460, an escalation clause that increases the rent 3% year over year, a landlord tenant improvement allowance of $405,000 and additional landlord work as discussed in the lease agreement. We took occupancy of the property on December 17, 2018, and the lease was amended in June 2019 to provide for a 4-month rent holiday and a commencement date of April 1, 2019. A 7% discount rate was determined using our incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

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

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| | | |
|:---|:---|:---|
| <br>**Operating leases:** | **September 30, 2025** <br>**(Unaudited)** | **December 31,** <br>**2024** |
| **Assets:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease right-of-use asset | $342229 | $399254 |
| **Liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current Portion of Long-Term Operating Lease | $139917 | $129132 |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-Term Operating Lease, net of current portion | 407781 | 513395 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Right of Use Liability | $547698 | $642527 |

---

The components of lease expense are as follows and are included within general and administrative expense on our condensed consolidated statement of operations.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months ended** | **For the three months ended** | **For the nine months ended** | **For the nine months ended** |
|  | **September 30, (Unaudited)** | **September 30, (Unaudited)** | **September 30, (Unaudited)** | **September 30, (Unaudited)** |
|  | **2025** | **2024** | **2025** | **2024** |
| Operating Lease Expense | $39329 | $39329 | $117986 | $117986 |

---

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

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| | | |
|:---|:---|:---|
|  | **September 30, 2025** <br>**(Unaudited)** | **December 31,** <br>**2024** |
| Weighted-average remaining lease term: |  |  |
| Operating leases | 3.25 years | 4.00 years |
| Discount rate: |  |  |
| Operating leases | 7.00% | 7.00% |

---

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

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months ended** | **For the three months ended** | **For the nine months ended** | **For the nine months ended** |
|  | **September 30, (Unaudited)** | **September 30, (Unaudited)** | **September 30, (Unaudited)** | **September 30, (Unaudited)** |
|  | **2025** | **2024** | **2025** | **2024** |
| Cash Paid for amounts included in |  |  |  |  |
| the measurement of lease liabilities | $42825 | $41577 | $126395 | $123521 |

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As of September 30, 2025, the maturities of our operating lease liability are as follows:

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| | |
|:---|:---|
| **Year Ended:** | **Operating**<br>**Lease** |
| October 1 - December 31, 2025 | $42825 |
| December 31, 2026 | 175153 |
| December 31, 2027 | 180408 |
| December 31, 2028 | 185820 |
| December 31, 2029 | 34840 |
| Total Minimum Lease Payments | 619046 |
| Less: Interest | 71348 |
| Imputed value of lease obligations | 547698 |
| Less: Current portion | 139917 |
| Long-term portion of lease obligations | $407781 |

---

**NOTE 8. CLOUD COMPUTING SERVICE CONTRACT**

In May 2020, we entered into a cloud computing service contract with a vendor which provided for annual payments in the amount of $30,409 and expired in May 2025. The annual contract payments were capitalized as a prepaid expense and amortized over a twelve-month period.

We incurred implementation costs of $66,857 in connection with the cloud computing service contract which were capitalized in prepaid expenses and other assets as of December 31, 2024. In accordance with ASU No. 2018-15, such implementation costs were amortized over the remaining contract terms beginning January 1, 2021, which was when the cloud-based service contract was placed in service. Amortization expense for the three and nine months ended September 30, 2025, were $0 and $7,436, respectively. Amortization expense for the three and nine months ended September 30, 2024, were $3,766 and $11,297, respectively.

**NOTE 9. CONVERTIBLE DEBT**

In October and November 2023, we entered into a Securities Purchase Agreement (the "SPA") with certain accredited investors (collectively, the "Investors") pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the "Private Placement") in one or more closings up to an aggregate principal amount of $5,000,000 of Convertible Notes (the "Notes"). In October and November 2023, we sold and issued an aggregate of $2,600,000 of Notes that are convertible into 2,080,000 shares of common stock at a conversion price of $1.25 per share.

The Notes mature and are due on the fifth anniversary of the issuance date in October and November of 2028. The Notes bear simple interest at a rate of 12% per annum, payable in equal monthly installments. The Notes are convertible into shares of our Common Stock, at the option of the holder, at an initial conversion price of $1.25 per share, which shall not exceed $1.55 per share. In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a "fundamental change" occurs (as defined in the Securities Purchase Agreement). The Notes are unsecured and senior to other indebtedness subject to certain exceptions. During the three and nine months ended September 30, 2025, interest expense related to these Notes was recorded on a straight-line basis which totaled $78,000 and $234,000, respectively. During the three and nine months ended September 30, 2024, interest expense related to these Notes was recorded on a straight-line basis which totaled $78,000 and $234,000, respectively.

During the nine months ended September 30, 2025, we entered into Securities Purchase Agreements (the "SPA") with certain accredited investors (collectively, the "Investors") pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the "Private Placement") in one or more closings up to an aggregate principal amount of $3,000,000 (the "Notes"). Pursuant to the SPA and as of September 30, 2025, we sold and issued convertible promissory notes (the "Notes") to purchase an aggregate of 428,000 shares of common stock at the conversion price of $1.25 per share in exchange for aggregate gross proceeds of $535,000.

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The Notes mature and are due on the fifth anniversary of the issuance date in 2030. The Notes bear simple interest at a rate of 12% per annum, payable in equal monthly installments. The Notes are convertible into shares of our Common Stock, at the option of the holder, at a conversion price of $1.25 per share, which shall not exceed $1.55 per share. In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a "fundamental change" occurs (as defined in the Securities Purchase Agreement). The Notes are unsecured and senior to other indebtedness subject to certain exceptions. Interest expense related to these Notes for the three and nine months ended September 30, 2025, was $15,550 and $28,625, respectively.

Amortization of deferred financing costs were $18,323 and $52,617 for the three and nine months ended September 30, 2025, respectively which has been included with interest expense on the statement of operations. Amortization of deferred financing costs were $15,620 and $46,860 for the three and nine months ended September 30, 2024, respectively which has been included with interest expense on the statement of operations. Additions to deferred financing costs totaled $54,058 during the nine months ended September 30, 2025, and are being amortized on a straight-line basis over the life of the notes.

Convertible notes consist of the following at:

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| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025**<br> **(Unaudited)** |<br>**December 31,** <br>**2024** |
| Convertible Notes | $3135000 | $2600000 |
| Less: Debt issuance costs | (366456) | (312398) |
| Accumulated amortization | 125509 | 72892 |
| Convertible Notes, net | $2894053 | $2360494 |

---

**NOTE 10. SHAREHOLDERS' EQUITY**

Our Board of Directors (the "Board") may, without further action by our shareholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series. The holders of such preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding up by us before any payment is made to the holders of our Common Stock. Furthermore, the Board could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of our Common Stock.

***Convertible Series A Preferred Stock***

Our authorized Convertible Series A Preferred Stock, $0.01 par value, consists of 1,000,000 shares. At September 30, 2025, and December 31, 2024, there were 63,750 shares issued and outstanding. The Convertible Series A Preferred Stock is convertible at the rate of one share of common stock for one share of Convertible Series A Preferred Stock.

***Convertible Series B Preferred Stock***

Our authorized Convertible Series B Preferred Stock, $1,000 stated value, 7.5% cumulative dividend, consists of 4,000 shares. At September 30, 2025, and December 31, 2024, there were no shares issued and outstanding. 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***

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

In May 2025, we issued 60,000 shares of Common Stock valued at approximately $51,000 to members of our Board pursuant to our equity plan (see Note 12).

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***Stock Options***

In May 2024, we issued options to purchase 225,000 shares of Common Stock to Officers at an exercise price of $0.75 per share pursuant to an employment agreement. The options were valued at $144,308 and have a contractual term of 10 years. We utilized the Black-Scholes model to fair value the options received by Officers with the following assumptions: volatility, 125%; expected dividend yield, 0%; risk free interest rate, 4.35%; and a contractual term of 10 years. The grant date fair value of each share of Common Stock underlying the options was $0.64.

The following table summarizes stock options outstanding as of September 30, 2025, and December 31, 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **September 30, 2025**<br>**(Unaudited)** | **September 30, 2025**<br>**(Unaudited)** | **December 31, 2024** | **December 31, 2024** |
|  | **Number of Options** | **Weighted Average Exercise Price** | **Number of Options** | **Weighted Average Exercise Price** |
| Outstanding, beginning of period | 805042 | $1.23 | 617542 | $1.38 |
| Granted  |  |  | 225000 | 0.75 |
| Exercised |  |  | (31250) | 0.88 |
| Expired  | (36250) | (1.04) | (6250) | 0.80 |
| Outstanding, end of period | 768792 | $1.24 | 805042 | $1.23 |

---

Options outstanding and exercisable by price range as of September 30, 2025, were as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Outstanding Options** | **Outstanding Options** | | **Exercisable Options** | **Exercisable Options** |
| <br>**Range** |<br>**Number** | **Average**<br>**Weighted**<br>**Remaining Contractual**<br>**Life in Years** |<br>**Number** | **Weighted Average**<br>**Exercise Price** |
| $0.71 | 7042 | 2.31 | 7042 | $0.71 |
| $0.75 | 225000 | 8.63 | 225000 | $0.75 |
| $0.80 | 2500 | 2.32 | 2500 | $0.80 |
| $0.85 | 210000 | 7.33 | 210000 | $0.85 |
| $1.12 | 270000 | 6.30 | 270000 | $1.12 |
| $1.93 | 10500 | 1.21 | 10500 | $1.93 |
| $4.40 | 12500 | 0.34 | 12500 | $4.40 |
| $7.06 | 31250 | 0.01 | 31250 | $7.06 |
|  | 768792 | 6.81 | 768792 | $1.24 |

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***Stock Warrants***

The following table summarizes the outstanding common stock warrants as of September 30, 2025 and December 31, 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **September 30, 2025** <br>**(Unaudited)** | **September 30, 2025** <br>**(Unaudited)** | **December 31, 2024** | **December 31, 2024** |
|  | **Number of Warrants** | **Weighted Average Exercise Price** | **Number of Warrants** | **Weighted Average Exercise Price** |
| Outstanding, beginning of period | 2765846 | $2.26 | 2772096 | $2.25 |
| Granted  |  |  |  |  |
| Exercised  |  |  |  |  |
| Expired  | (161458) | (1.19) | (6250) | (1.12) |
| Outstanding, end of period | 2604388 | $2.32 | 2765846 | $2.26 |

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Warrants outstanding and exercisable by price range as of September 30, 2025, were as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Outstanding Warrants** | **Outstanding Warrants** | | **Exercisable Warrants** | **Exercisable Warrants** |
| **Exercise Price** | **Number** | **Average Weighted**<br>**Remaining Contractual**<br>**Life in Years** | **Number** | **Weighted Average**<br>**Exercise Price** |
| $0.64 | 31250 | 8.14 | 31250 | $0.64 |
| $0.80 | 125000 | 8.33 | 125000 | $0.80 |
| $0.96 | 437500 | 7.23 | 437500 | $0.96 |
| $1.68 | 1434721 | 0.99 | 1434721 | $1.68 |
| $2.18 | 172167 | 0.99 | 172167 | $2.18 |
| $4.00 | 28750 | 4.57 | 28750 | $4.00 |
| $6.95 | 375000 | 5.01 | 375000 | $6.95 |
|  | 2604388 | 3.10 | 2604388 | $2.32 |

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There were no unvested warrants outstanding as of September 30, 2025.

**NOTE 11. COMMITMENTS AND CONTINGENCIES**

***Legal Contingencies***

We may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operations or cash flows. In addition, from time to time, we may have to file claims against parties that infringe on our intellectual property.

***Product Liability***

As of September 30, 2025, and December 31, 2024, there were no claims against us for product liability.

**NOTE 12. CONTRACTS AND AGREEMENTS**

***Employment Agreement – Chief Financial Officer***

On May 30, 2025, the Board of Directors of the Company appointed Mr. David Vanston as the Company's Chief Financial Officer, effective immediately. The appointment was made following the expiration of Mr. Nick Jennings's offer letter to serve as the Interim Chief Financial Officer, as previously disclosed by the Company.

In connection with his appointment, the Company entered into an offer letter with Mr. Vanston providing for an annual base salary of $230,000 and eligibility to receive an annual discretionary bonus of up to 40% of his base salary. Mr. Vanston is also entitled to receive an initial grant of 100,000 restricted stock units and an additional grant of 100,000 restricted stock units following one year of employment, each subject to a three-year vesting schedule.

***Director Compensation***

The annual fee to the non-employees of our Board was $48,000, to be paid in cash on a quarterly basis, with the exception of the audit committee chairperson, whose annual fee was $54,600, also to be paid in cash on a quarterly basis. Non-employee Director compensation also includes the annual issuance of our Common Stock.

During October 2025, the Company revised its director compensation (Refer to Note 19 – Subsequent events).

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**NOTE 13. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES** 

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

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| | | |
|:---|:---|:---|
|  | **September 30, 2025**<br>**(Unaudited)** | **December 31, 2024** |
| Commissions | $178932 | $187151 |
| Payroll and related costs  | 488968 | 125773 |
| Director fees  | 37650 | 37650 |
| Sales Tax Payable  | 2575 | 3864 |
| Accrued warranty (Note 14) | 22648 | 30000 |
| Other accrued expenses and current liabilities | 97950 | 71237 |
| Total  | $828723 | $455675 |

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**NOTE 14. ACCRUED WARRANTY**

Our manufacturers assume the warranty against product defects from date of sale, which we extend to our customers upon sale of the product. We assume responsibility for product reliability and results. The warranty is generally limited to a refund of the original purchase price of the product or a replacement part. We estimate warranty costs based on historical warranty claim experience.

The following table presents warranty reserve activities at:

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| | | |
|:---|:---|:---|
|  | **September 30, 2025**<br> **(Unaudited)** | **December 31, 2024** |
| Beginning accrued warranty costs | $30000 | $30000 |
| Provision for warranty expense | 15637 | 9707 |
| Settlement of warranty claims | (22989) | (9707) |
| Ending accrued warranty costs | $22648 | $30000 |

---

**NOTE 15. INCOME TAXES**

For the three and nine months ended September 30, 2025, and 2024, our provision for income tax was $0. 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, which are, on a more likely than not basis, not expected to be realized in accordance with FASB ASC Topic 740, Income Taxes. As of September 30, 2025, and December 31, 2024, we recorded a valuation allowance of $9,223,000 and $8,678,000, respectively for the portion of the deferred tax assets that we do not expect to be realized. Management believes that based on the available information, it is more likely than not that the remaining U.S. deferred tax assets will not be realized, such that a 100% valuation allowance is required against U.S. deferred tax assets.

**NOTE 16. CUSTOMER CONCENTRATION**

The Company had certain customers whose accounts receivable balances individually represented 10% or more of the Company's accounts receivable, and whose sales for the three and nine months represented 10% or more of the Company's revenue.

One customer accounted for 23% of net revenue for the three months ended September 30, 2025. Two customers accounted for 12% of net revenue for the three months ended September 30, 2024.

One customer accounted for 12% of net revenue for the nine months ended September 30, 2025. One customer accounted for 18% of net revenue for the nine months ended September 30, 2024.

As of September 30, 2025, two customers accounted for 40% of our gross accounts receivable. As of December 31, 2024, two customers accounted for 25% of our gross accounts receivable.

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**NOTE 17. SEGMENT REPORTING**

Our Chief Executive Officer, as the CODM, organizes our Company, manages resource allocations and measures performance among one operating and reportable segment due to the fact that we derive our revenue primarily from one product (equipment and service revenue based on our patented BIT technology). A breakdown of revenue is presented in "Revenue Recognition" in Note 2 above. We evaluated the aggregation criteria in ASC 280-10-50-11 which states that aggregation can be considered if segments are similar in certain areas, including the nature of products and services, production processes, type of class of customer, and future economic performance.

Our CODM is regularly provided with more detailed expense information than what is included in our consolidated income statement. The CODM considers monthly budgets and cash flow projections, gross margins for each project, and our consolidated net income (loss) as reported on the income statement when allocating resources and assessing our performance. We are required to apply the guidance in ASC 280 and identify significant segment expenses and other segment items for our single reportable segment.

**NOTE 18. EMPLOYEE RETENTION CREDITS**

During the nine months ended September 30, 2025, the Company recorded refunds as a result of Employee Retention Credits (ERC), which are refundable tax credits against certain employment taxes initially made available under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES" Act). In accordance with the Company's accounting policy, the ERC payments have been recognized as Other Income as the Company determined that all relevant criteria for recognition had been met. The ERC represents a one-time benefit and does not constitute recurring operational revenue.

For the nine months ended September 30, 2025, we recorded $534,912 in employee retention credits and $81,887 related interest within other income and interest income, respectively, in our consolidated statement of operations. This consists of refund claims filed on amended Forms 941-X for the second, third and fourth quarters of 2020, and the first two quarters of 2021.

**NOTE 19. SUBSEQUENT EVENTS**

During October 2025, the Compensation Committee approved a change to our director compensation whereby each non-employee director of the Board will be granted 40,000 RSUs effective as of the date of the 2025 Annual Meeting of Stockholders (the "RSU grant"); the non-employee directors are entitled to receive one share of Common Stock for each RSU upon vesting; and the RSU grant will vest in full upon the earlier of (i) the first anniversary of the date of grant and (ii) immediately prior to the annual meeting of shareholders that occurs following the date of grant, subject to the non-employee director's continued service to the Company through such vesting date. In addition, director fees are now reduced to $5,000 per quarter, commencing in the fourth quarter of fiscal year 2025.

During October 2025, the Committee also approved the grant to our CFO of an award of 100,000 RSUs under the Plan, with such RSUs to vest over the next 3 years, subject to his continued service with the Company through each applicable vesting date.

On November 5, 2025, we entered into an Equity Purchase Agreement (the "Purchase Agreement") with Hudson Global Ventures, LLC ("Hudson"), pursuant to which and upon the terms and subject to the conditions set forth therein, the Company has the right, but not the obligation, to sell to Hudson up to $20,000,000 of shares of its common stock, par value $0.01 per share (the "Common Stock"), from time to time over a 24-month period (the "Commitment Period"). Concurrently with entering into the Purchase Agreement, the Company also entered into a Registration Rights Agreement (the "Registration Rights Agreement") with Hudson, pursuant to which the Company agreed to register the issuances and sales of shares of Common Stock under the Purchase Agreement, the Registrable Securities (as defined in the Registration Rights Agreement), pursuant to a registration statement to be filed under the Securities Act of 1933, as amended.

At any time and from time to time during the Commitment Period, on any business day selected by the Company, the Company may direct Hudson to purchase shares of its Common Stock by delivering a written notice (a "Put Notice"). The purchase price per share for each purchase of shares subject to a Put Notice will be equal to the lesser of (i) 92% of the average of the three lowest trading prices of the Common Stock on the Nasdaq Capital Market during the ten trading days immediately preceding the Put Date and (ii) 92% of the lowest closing price of the Common Stock during the Valuation Period as defined in the Purchase Agreement.

Under applicable Nasdaq rules, the Company may not issue or sell to Hudson under the Purchase Agreement shares of Common Stock in excess of 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the "Exchange Cap") without first obtaining stockholder approval as required by Nasdaq Rule 5635(d). The Company is not obligated to sell any shares to Hudson under the Purchase Agreement, and Hudson is not obligated to purchase any shares that would exceed the Exchange Cap. Pursuant to the Purchase Agreement, the Company agrees to issue 52,000 shares of Common Stock to Hudson as Commitment Shares in consideration for Hudson's commitment to enter into the transaction.

The Purchase Agreement contains customary representations, warranties, covenants, and closing conditions. The Company may terminate the Purchase Agreement at any time by written notice to Hudson, subject to certain limitations.

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**2. Management's Discussion and Analysis of Financial Condition and Results of Operations.**

*This Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A") and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "will," "would," "could," "can," "may," and similar terms. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Forward-looking statements are not guaranteeing future performance and the TOMI Environmental Solutions, Inc. (the "Company," "TOMI," "we," and "our") actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company's annual report on Form 10-K for the year ended December 31, 2024, filed with the U.S. Securities and Exchange Commission (the "SEC") on April 14, 2025, as amended (the "Annual Report") under the heading "Risk Factors." The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.*

*Unless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to years, quarters, months or periods refer to the Company's fiscal years ended in December and the associated quarters, months and periods of those fiscal years. Each of the terms the "Company" and "TOMI" as used herein refers collectively to TOMI Environmental Solutions, Inc. unless otherwise stated.*

*The following MD&A should be read in conjunction with the Annual Report filed with the SEC and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.*

**Quarterly Highlights**

*Business and Financial Update*

The third quarter of 2025 delivered improved financial results as we achieved 95% growth in revenue over the second quarter of 2025, and we continue to see positive trends in the market with demand for our product lines and recurring sales. The growth in the third quarter revenue was primarily attributable to increased purchases of mobile equipment by our commercial service provider customers and our enhanced integration capabilities, while maintaining our custom engineered solutions. We believe that maintaining and expanding the use of our technology for our service providers, coupled with continued growth quarter over quarter in submissions of bids for integration and custom installations, and the building of our sales and technical teams, will drive increased adoption of our SteraMist iHP technology across all our registered industries and geographies.

As of September 30, 2025, our sales order backlog totaled approximately $0.9 million, which further increased to $1.3 million as of October 31, 2025. We are actively negotiating an additional $2 - $3 million in potential new contracts expected to close prior to year-end, reinforcing the strength of our business pipeline.

Revenue for the three months ended September 30, 2025, was $2,012,000, down 21% from $2,542,000 in the three months ended September 30, 2024. This was primarily driven by a timing reduction in iHP service sales from FY 2024 as a key customer restructured one of their sites during the prior year. This impact is temporary, and the customers' operations and related service activity are expected to resume on a normal schedule. Importantly, year-to-date service demand remains robust, with quote activity and pipeline volume up approximately 35% year-over-year, particularly in Life Sciences and Food Safety. This trend supports our expectation for continued growth in the fourth quarter and beyond.

Gross profit margins remained strong at 61 % as a percentage of sales for the three months ended September 30, 2025, and for the same period last year. The consistency of the gross profit margins underscores the resilience of our product mix and disciplined cost management.

During the third quarter of 2025, our operating expenses increased by $141,000, or 10%, compared to the third quarter of 2024. The increase was primarily due to higher professional fees being offset by reduced selling expenses when compared to the same prior period.

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Our iHP technology continues to gain market recognition as the preferred decontamination solution for pharmaceutical, biotech and now aerospace applications. We successfully completed multiple high-profile installations this year; including but not limited to NASA's Johnson Space Center, Virigina Commonwealth University (VCU), and University of Miami. These projects demonstrate the adaptability of our technology in high-containment environments. Underscoring TOMI's competitive advantage, having successfully outperformed key hydrogen peroxide and harsh chemical gaseous competitors.

Automated, repeatable, and validated decontamination rooms and chambers continue to be in high demand as the pharmaceutical industry evolves. We believe our iHP technology is emerging as a benchmark for sterile environments, as evidenced by its adoption this year at companies such as AbbVie, Bausch & Lomb and others. As of the third quarter, the onshoring of pharmaceutical production positions us favorably in Virginia for the next few years, particularly with major commitments from Merck, Eli Lilly, and AstraZeneca who are establishing new production sites. Additionally, there is a strong industry push toward continuous bioprocessing, flexible and modular facilities, and AI-enabled manufacturing, all of which require decontamination systems that integrate seamlessly with automation and minimize downtime—such as our SteraMist Integrated Systems (SIS), Hybrid, and Custom Engineered System (CES).

Our OEM partnership with Pharma Biotech System Components LLC/Pharma Biotech System Components Ltd (PBSC), further strengthens our product mix and route to market, enabling us to integrate our SteraMist Integrated System (SIS) product into advanced high containment, material decontamination, and cleanroom solutions. We expect to commence our first collaboration installation in the fourth quarter of 2025.

We are continuing to see revenue growth amongst our distributors, and international partners, particularly in Europe, positioning us for continued growth and expansion, as we work towards finalizing our pending regulatory approvals in the EU and UK.

In evaluating sales related performance, management analyzes our revenue recognized for GAAP purposes which is presented in our quarterly and annual statement of operations as well as our sales orders we receive from customers during those same accounting periods. We define a "sales order" as a document we generate for our internal use in processing a customer order. Our sales orders essentially translate the format of the customer purchase orders we receive from our customers into the format used by us. We also evaluate our "customer sales backlog" which is defined as pending sales orders where revenue has not yet been recognized. Management believes analyzing the sales order and backlog metrics are useful in measuring our overall sales and business development performance as it gauges the overall volume of sales and business development activities. We also disclosed the expected amount of potential sales under contract or in current negotiation with customers, and such amount may be subject to risks and uncertainties as negotiation may not result in any order or enforceable contract.

***Business Highlights and Recent Events***

**Positive Impact of New FDA Rule on our Food Safety Market**

The FDA's final rule broadening the permitted use of hydrogen peroxide (H₂O₂) as a direct food additive, including its recent expansion as a secondary direct food additive, is expected to positively impact our positioning in the food safety market. This regulatory change opens the door for using our iHP technology directly on food contact surfaces and the food products themselves, particularly in the ready-to-eat (RTE) segment, which represents a key focus area for SteraMist. We have observed significant momentum in the food industry, with customers expressing interest in applying our technology across various aspects of processing. Additionally, we have received interest from several universities in conducting studies on the direct treatment of food to reduce microbial loads or allergen residues. We believe this interest may continue to grow in the future, driven by industry trends toward 'natural' food additives and colorings.

**Hudson Global Ventures Equity Purchase Agreement**

On November 5, 2025, we entered into the Purchase Agreement with Hudson pursuant to which and upon the terms and subject to the conditions set forth therein, the Company has the right, but not the obligation, to sell to Hudson up to $20,000,000 of shares of its Common Stock, over the Commitment Period. Concurrently with entering into the Purchase Agreement, the Company also entered into a Registration Rights Agreement with Hudson, pursuant to which the Company agreed to register the issuances and sales of shares of Common Stock under the Purchase Agreement, the Registrable Securities (as defined in the Registration Rights Agreement), pursuant to a registration statement to be filed under the Securities Act of 1933, as amended.

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At any time and from time to time during the Commitment Period, on any business day selected by the Company, the Company may direct Hudson to purchase shares of its Common Stock by delivering a Put Notice. The purchase price per share for each purchase of shares subject to a Put Notice will be equal to the lesser of (i) 92% of the average of the three lowest trading prices of the Common Stock on the Nasdaq Capital Market during the ten trading days immediately preceding the Put Date and (ii) 92% of the lowest closing price of the Common Stock during the Valuation Period as defined in the Purchase Agreement.

Under applicable Nasdaq rules, the Company may not issue or sell to Hudson under the Purchase Agreement shares of Common Stock in excess of 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the "Exchange Cap") without first obtaining stockholder approval as required by Nasdaq Rule 5635(d). The Company is not obligated to sell any shares to Hudson under the Purchase Agreement, and Hudson is not obligated to purchase any shares that would exceed the Exchange Cap. Pursuant to the Purchase Agreement, the Company agrees to issue 52,000 shares of Common Stock to Hudson as Commitment Shares in consideration for Hudson's commitment to enter into the transaction.

The Purchase Agreement contains customary representations, warranties, covenants, and closing conditions. The Company may terminate the Purchase Agreement at any time by written notice to Hudson, subject to certain limitations.

***2025 Events:***

On January 10, 2025, we announced that we are supporting partners and clients preparing for emerging public health threats as concerns grow over Respiratory Syncytial Virus (RSV), Human Metapneumovirus (HMPV), and the highly pathogenic Avian Influenza (H5N1). TOMI is leveraging its SteraMist technology to provide innovative infection prevention strategies essential to safeguard the health of government agencies, commercial clients, and school districts nationwide.

On January 30, 2025, we announced positive momentum in early revenue trends for the Company with year-over-year growth in its BIT Solution sales and iHP Corporate Service.

On February 4, 2025, we announced the deployment of our SteraMist iHP technology to support recovery efforts in California communities impacted by recent wildfires.

On February 27, 2025, we announced we achieved compliance, recognition and validation by a third vendor management and compliance management platform, Avetta, reflecting the Company's commitment to health, safety, and environmental (HSE) excellence for its customers. In April of 2024, we received the Gold Safety Award from Highwire. Affiliations with Avetta, Highwire, and ISNetworld platforms opens new avenues for TOMI to engage with a broader network of industry leaders and stakeholders. The collaboration fosters a culture of continuous improvement, enabling TOMI to enhance its service and integration offerings and stay ahead of evolving industry standards.

On March 6, 2025, we announced that Dr. Halden Shane, Chairman of the Board and Chief Executive Officer of TOMI, will be participating in the Q1 Investor Summit Event, which was held virtually on March 11, 2025.

On March 20, 2025, we announced the deployment of SteraMist iHP technology at the NASA Johnson Space Center, marking the Company's expansion into the aerospace sector.

On March 21, 2025, we announced the expansion into Aquaculture with new partner, Algafeed.

On March 24, 2025, we announced a contract to install a SteraMist iHP CES at a leading university in Rhode Island, valued at approximately $450,000.

On March 25, 2025, we announced an OEM partnership with PBSC, a premier manufacturer specializing in high containment, material decontamination, and cleanroom solutions.

On June 12, 2025, we announced that SteraMist was honored with the prestigious 2025 "Disinfection and Decontamination Products Company of the Year" award.

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On June 16, 2025, we announced the advancement of our new product line, the SteraMist Integration System with the Standalone or SIS-SA making its debut as the first system installed with a leading CDMO.

On June 23, 2025, we announced the demonstration of SteraMist efficacy in combating Honeybee Colony collapse. Honeybees are essential pollinators, contributing $20–30 billion annually to the U.S. agricultural economy and $387 billion globally. The USDA and industry stakeholders continue to search for scalable, effective tools to mitigate this crisis. With SteraMist, TOMI is now positioned to play a key role in protecting global food security through environmental biosecurity in years to come.

On July 16, 2025, we announced the successful first installation of our new SteraMist Integration System – Standalone (SIS-SA) in the life sciences sector, beginning with pharmaceutical isolator market. Since this announcement, we have successfully integrated SteraMist iHP in two additional enclosures and anticipate a strong pipeline for further installations with both current and new manufacturing partners.

On August 11, 2025, we announced an additional win by our East Coast distributor, Ares Scientific, with a new university client and our SIS platform offerings. These developments further strengthen our pipeline in the academic vertical and acceptance to our SIS line.

On August 12, 2025, we announced a major new customer for the year. A key highlight from the announcement was the addition of a major company—comparable to Pfizer and Merck in the eye health industry—to our platform adopters. This client not only implemented SteraMist iHP technology at two site facilities in less than four months but has also placed open BIT Solution orders for 2026, which we expect to support ongoing revenue growth in this important sector in need of sterility.

On September 4, 2025, we announced our presence at the H.C. Wainwright Annual Global Investment Conference.

On September 16, 2025, we announced participation in the iAccess Alpha Virtual Best Ideas Fall Investment Conference 2025.

On September 16, 2025, we announced the appointment of Francesco Fragasso to our Board of Directors.

On September 18, 2025, we announced FDA broadens permitted use of Hydrogen Peroxide; Ruling significantly expands potential application of SteraMist iHP.

On September 24, 2025, we announced a specialized service provider for Healthcare and Mold Remediation. This was the first of three major service provider companies we onboarded in Quarter 3, all of which have shown strong potential for expanded use of SteraMist iHP technology in their franchises. Our SteraMist Pro Certified program continues to be well received, supporting our efforts to finally build a robust network of certified partners.

***Intellectual Property***

Our intellectual property (IP) portfolio represents a key strategic asset, supporting our global leadership in disinfection and decontamination technologies. We currently hold or have pending over 25 utility or design patents worldwide, providing protection for both the methods and systems underlying our SteraMist® BIT™ platform. Our U.S. patents extend protection through 2038.

Recent additions to our portfolio include patents for backpack decontamination units, mobile carts, and applicator technology in the United States, along with new protection in Singapore, Korea, and other jurisdictions. We continue to pursue additional filings to broaden our coverage across Europe, China, and Australia.

We also hold more than 30 design patents for our decontamination devices; covering applicators, chambers, carts, and surface-mounted systems; across major global markets including the United States, China, Japan, Korea, and the United Kingdom.

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In addition, we maintain a robust trademark portfolio with over 200 trademarks registered or pending in multiple classes and countries. These marks cover the full range of our activities; from chemical formulations and sterilization equipment to services and training; reinforcing TOMI's global brand presence.

Together, these patents and trademarks provide a comprehensive intellectual property framework that protects our core technology, supports market expansion, and strengthens our competitive position in critical sectors such as life sciences, aerospace, and biosecurity.

*Financial Operations Overview*

Our financial position as of September 30, 2025 and December 31, 2024, respectively, was as follows:

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| | | |
|:---|:---|:---|
|  | **September 30, 2025**<br> **(Unaudited)** | **December 31,** <br>**2024** |
| Total shareholders' equity | $2206000 | $4099000 |
| Cash and Cash Equivalents | $490000 | $665000 |
| Deferred Revenue | $310000 | $212000 |
| Accounts Receivable, net | $620000 | $1881000 |
| Inventories, net | $3364000 | $3578000 |
| Prepaid Expenses | $334000 | $333000 |
| Vendor Deposits | $222000 | $36000 |
| Current Liabilities - Excluding Deferred Revenue | $2227000 | $2509000 |
| Long-term Liabilities - Convertible Notes, net | $2894000 | $2361000 |
| Long-term Liabilities - Other | $408000 | $513000 |
| Working Capital | $2493000 | $3772000 |

---

During the nine months ended September 30, 2025, our debt and liquidity positions were affected by the following:

- Net cash used in operations of approximately $577,000.

- Net cash used in investing activities of approximately $133,000.

- Net cash provided from financing activities of approximately $535,000.

***Results of Operations for the Three and Nine Months Ended September 30, 2025, Compared to the Three and Nine Months Ended September 30, 2024:***

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months**  | **For the three months**  | **For the nine months**  | **For the nine months**  |
|  | **ended** | **ended** | **ended** | **ended** |
|  | **September 30,** | **September 30,** | **September 30,** | **September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenue, Net | $2012000 | $2542000) | $4619000 | $6670000) |
| Gross Profit | 1232000 | 1561000) | 2861000 | 4086000) |
| Total Operating Expenses  | 1553000 | 1412000 | 5069000 | 5042000 |
| Income (Loss) from Operations | (321000) | 149000) | (2208000) | (956000) |
| Total Other Income (Expense) | (129000) | (90000) | 265000 | (265000) |
| Provision for (benefit from) Income Taxes | - | - | - | - |
| Net Income (Loss) | $(450000) | $59000) | $(1943000) | $(1221000) |
| Basic Net Income (Loss) per share | $(0.02) | $0.00) | $(0.10) | $(0.06) |
| Diluted Net Income (Loss) per share | $(0.02) | $0.00) | $(0.10) | $(0.06) |

---

*Revenue*

Total revenue for the three months ended September 30, 2025 and 2024, was $2,012,000 and $2,542,000, respectively, representing a decrease of $530,000 or 21% compared to the same prior year period. Revenues for the nine months ended September 30, 2025 and 2024, were $4,619,000 and $6,670,000, representing a decrease of $2,051,000 or 31% when compared to the same prior year period. The decrease in sales was attributable to and primarily driven by a timing reduction in iHP service sales in third quarter 2025 and year to date, as customer projects are being impacted by tariff uncertainty in their supply chains.

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*Product and Service Revenue*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months**  | **For the three months**  | **For the nine months**  | **For the nine months**  |
|  | **ended**  | **ended**  | **ended**  | **ended**  |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| SteraMist Product | $1603000 | $1766000) | $3255000 | $5247000) |
| Service and Training | 409000 | 776000) | 1364000 | 1423000) |
| Total  | $2012000 | $2542000) | $4619000 | $6670000) |

---

SteraMist Product-based revenues for the three months ended September 30, 2025 and 2024, were $1,603,000 and $1,766,000, representing a decrease of $163,000 or 9% when compared to the same prior year period. For the nine months ended September 30, 2025 and 2024, our product-based revenue was $3,255,000 and $5,247,000, respectively, representing a decrease of $1,992,000, or 38% compared to the same prior year period. The lower product revenue was attributable to delayed capital investment decisions by customers, as a result of the tariffs causing economic uncertainty in their supply chain.

Our service-based revenue for the three months ended September 30, 2025, and 2024, was $409,000 and $776,000, respectively, representing a decrease of $367,000 or 47%. For the nine months ended September 30, 2025, and 2024, our service-based revenue was $1,364,000 and $1,423,000, representing a decrease of $59,000 or 4% when compared to the same prior period in 2024. The decrease in service revenue in the quarter was due to the timing of service jobs in the prior year period with a key customer who restructured one of their sites during the prior year. This impact is temporary, and the customer's operations and related service activity are expected to resume on a normal schedule.

*Revenue by Geographic Region*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months**  | **For the three months**  | **For the nine months**  | **For the nine months**  |
|  | **ended**  | **ended**  | **ended**  | **ended**  |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| United States  | $1280000 | $1886000) | $3294000 | $5169000) |
| International  | 732000 | 656000 | 1325000 | 1501000) |
| Total  | $2012000 | $2542000) | $4619000 | $6670000) |

---

Our domestic revenue for the three months ended September 30, 2025 and 2024 was $1,280,000 and $1,886,000, respectively, a decrease of $606,000 or 32%, when compared to the same prior year period. For the nine months ended September 30, 2025 and 2024, our domestic revenue was $3,294,000 and $5,169,000, representing a decrease of $1,875,000 or 36% when compared to the same prior period in 2024. The lower product revenue was attributable to delayed capital investment by customers, as a result of impending tariffs causing economic uncertainty.

Internationally, our revenue for the three months ended September 30, 2025 and 2024, was $732,000 and $656,000, respectively, representing an increase of $76,000 or 12% when compared to the same prior year period. For the nine months ended September 30, 2025 and 2024, our international revenue was $1,325,000 and $1,501,000, representing a decrease of $176,000 or 12% when compared to the same prior period in 2024. The lower product revenue was attributable to delayed capital investment by customers, as a result of impending tariffs causing economic uncertainty.

*Cost of Sales & Gross Profit*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** |
|  | **ended** | **ended** | **ended** | **ended** |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Cost of Sales | $780000 | $981000) | $1758000 | $2583000) |

---

Cost of sales was $780,000 and $981,000 for the three months ended September 30, 2025 and 2024, respectively, a decrease of $201,000 or 20%, compared to the prior year. Our gross profit as a percentage of sales was 61% compared to 61% in the same prior period, respectively.

Cost of sales was $1,758,000 and $2,583,000 for the nine months ended September 30, 2025 and 2024, respectively, a decrease of $825,000, or 32%, compared to the prior year. Our gross profit as a percentage of sales was 62% compared to 61% in the same prior period, respectively.

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*Professional Fees*

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** | |
|  | **ended** | **ended** | **Ended** | **Ended** | |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  | <br><br>**Change**  |
|  | **2025** | **2024** | **2025** | **2024** | **$** |
| Professional Fees  | $185000 | $105000 | $589000 | $387000 | $202000 |

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Professional fees were $185,000 and $105,000 for the three months ended September 30, 2025 and 2024, respectively, an increase of approximately $80,000 in the current year period. Professional fees were $589,000 and $387,000 for the nine months ended September 30, 2025 and 2024, respectively, an increase of approximately $202,000 in the current year period. Primarily, the increase is due to filing fees associated with our employee retention tax refunds and additional audit, legal and compliance costs incurred in the current year.

*Depreciation and Amortization*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months**  | **For the three months**  | **For the nine months** | **For the nine months** |
|  | **ended** | **ended** | **ended** | **ended** |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Depreciation and Amortization | $69000 | $70000) | $206000 | $224000) |

---

Depreciation and amortization were $69,000 and $70,000 for the three months ended September 30, 2025 and 2024, respectively, representing a decrease of $1,000 or 1%. Depreciation and amortization were $206,000 and $224,000 for the nine months ended September 30, 2025 and 2024, respectively, representing a decrease of $18,000, or 8%. The decrease in depreciation expense is due to a lower amount of fixed assets being depreciated in the current year period when compared to the same prior year periods.

*Selling Expenses*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** |
|  | **ended** | **ended** | **ended** | **ended** |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Selling Expenses | $144000 | $227000) | $630000 | $882000) |

---

Selling expenses for the three months ended September 30, 2025 were $144,000, as compared to $227,000 for the three months ended September 30, 2024, representing a decrease of approximately $83,000 or 37%. Selling expenses for the nine months ended September 30, 2025 were $630,000, as compared to $882,000 for the nine months ended September 30, 2024, representing a decrease of approximately $252,000 or 29%. The decline in selling expenses is due to a reduced marketing spend in the current year period.

*Research and Development*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** |
|  | **Ended** | **Ended** | **ended** | **ended** |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Research and Development | $11000 | $56000) | $139000 | $186000) |

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Research and development expenses for the three months ended September 30, 2025 were $11,000, as compared to $56,000 for the three months ended September 30, 2024, representing a decrease of approximately $45,000 or 80%. Research and development expenses for the nine months ended September 30, 2025 were $139,000, as compared to $186,000 for the nine months ended September 30, 2024, representing a decrease of approximately $47,000 or 25%. The decrease in research and development expenses is due to a reduction in allocated costs to R&D projects offset by additional expenses incurred to maintain the Company's patent and trademark portfolio in the current year period.

*Consulting Fees*

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** | |
|  | **ended** | **ended** | **ended** | **ended** | |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  | <br><br>**Change**  |
|  | **2025** | **2024** | **2025** | **2024** | **$** |
| Consulting Fees  | $73000 | $44000 | $238000 | $181000 | $57000 |

---

Consulting fees were $73,000 and $44,000 for the three months ended September 30, 2025 and 2024, respectively, representing an increase of $29,000, or 66% in the current period. Consulting fees were $238,000 and $181,000 for the nine months ended September 30, 2025 and 2024, respectively, representing an increase of $57,000, or 31%, in the current period. The increase in consulting fees is due to the hiring of additional consultants in the current year period.

*General and Administrative Expense*

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** | |
|  | **ended** | **ended** | **ended** | **ended** | |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  | <br><br>**Change**  |
|  | **2025** | **2024** | **2025** | **2024** | **$** |
| General and Administrative  | $1072000 | $910000 | $3266000 | $3181000 | $85000 |

---

General and administrative expenses were $1,072,000 and $910,000 for the three months ended September 30, 2025 and 2024, respectively, an increase of $162,000 or 18% in the current period. The increase was primarily attributable to an increase in credit loss expense offset by various reductions due to cost-cutting initiatives implemented during the current year.

General and administrative expenses were $3,266,000 and $3,181,000 for the nine months ended September 30, 2025 and 2024, respectively, an increase of $85,000, or 3% in the current period. The increase was primarily attributable to an increase in credit loss expense offset by various reductions due to cost-cutting initiatives implemented during the current year.

*Other Income and Expense*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** |
|  | **ended** | **ended** | **ended** | **ended** |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Other Income  | $- | $- | $535000 | $- |
| Interest Income  | 1000 | 3000) | 86000 | 15000 |
| Interest Expense | (130000) | (94000) | (356000) | (280000) |
| Other Income (Expense) | $(129000) | $(91000) | $265000 | $(265000) |

---

Other income was approximately $535,000 and $0 for the nine months ended September 30, 2025, and 2024. Other income consisted of employee retention tax credits received in the current year period.

Interest income was approximately $1,000 and $3,000 for the three months ended September 30, 2025, and 2024, respectively. Interest income was approximately $86,000 and $15,000 for the nine months ended September 30, 2025, and 2024. The increase for the nine months was due to interest income in connection with the employee retention tax credits received in the current year period.

Interest expense was $130,000 and $94,000 for the three months ended September 30, 2025, and 2024, respectively. Interest expense was $356,000 and $280,000 for the nine months ended September 30, 2025, and 2024, respectively. The increase in interest expense was due to the issuance of additional convertible notes in the current year periods.

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*Provision for Income Taxes*

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the three months** | **For the three months** | **For the nine months** | **For the nine months** | |
|  | **ended** | **ended** | **ended** | **ended** | |
|  | **September 30,**  | **September 30,**  | **September 30,**  | **September 30,**  | <br><br>**Change**  |
|  | **2025** | **2024** | **2025** | **2024** | **$** |
| Provision for Income Tax Expense (Benefit)  | $- | $- | $- | $- | $- |

---

Provision for income tax was $0 for the three and nine months ended September 30, 2025 and 2024.

***Liquidity and Capital Resources***

As of September 30, 2025, we had cash and cash equivalents of approximately $490,000 and working capital of $2,493,000. Our principal capital requirements are to fund operations, invest in research and development and capital equipment, and the continued costs of compliance with public company reporting requirements. We have historically funded our operations through funds generated through operations and debt and equity financing. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and may include operating and financial covenants that would restrict our operations. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all.

For the nine months ended September 30, 2025 and 2024, we incurred losses from operations of ($2,209,000) and ($956,000), respectively. Cash used in operations for the nine months ended September 30, 2025 and 2024 was ($577,000) and ($1,453,000), respectively.

A breakdown of our statement of cash flows for the nine months ended September 30, 2025 and 2024 is provided below:

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| | | |
|:---|:---|:---|
|  | **For the nine months ended** <br>**September 30,**  | **For the nine months ended** <br>**September 30,**  |
|  | **2025** | **2024** |
| Net Cash (Used) in Operating Activities  | $(577000) | $(1453000) |
| Net Cash (Used) in Investing Activities  | $(133000) | $(105000) |
| Net Cash Provided By Financing Activities  | $535000 | $28000 |

---

*Operating Activities*

Cash used in operations for the nine months ended September 30, 2025 and 2024 was $577,000 and $1,453,000, respectively. The decrease was primarily attributable to management action on working capital with a focus on accounts receivable and inventory.

*Investing Activities*

Cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $133,000 and $105,000, respectively. The increase was attributable to patent and trademark costs incurred in the current year period compared to property and equipment purchased in the prior year period.

*Financing Activities*

Cash provided by financing activities for the nine months ended September 30, 2025 and 2024 was $535,000 and $28,000, respectively. The increase is attributable to the proceeds from the issuance of convertible notes in the current year period.

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*Liquidity*

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

· ramp up and expansion of our internal sales force and manufacturer's representatives;

· length of our sales cycle;

· global and regional response to the outbreak of infectious diseases;

· expansion into new territories and markets; and

· timing of orders from distributors.

We continue to implement measures to improve financial results and cash flows, including optimizing our product mix, expanding recurring solution sales, and managing overhead. Management expects these actions to support our liquidity needs through 2025.

We could incur operating losses and an increase of costs related to the continuation of product and technology development, sales expense as we continue to grow our sales teams, inventory as we continue to ensure we have products needed and geographic presence, tooling capital expenditures as we ramp up and streamline our production and administrative activities including compliance with the Sarbanes-Oxley Act of 2002 Section 404.

For the nine months ended September 30, 2025 and 2024, our net loss was approximately $1,943,000 and $1,221,000, respectively, and the cash used in operations was approximately $577,000 and $1,453,000, respectively. As of September 30, 2025, we had approximately $490,000 of cash and cash equivalents and an accumulated deficit of $56.2 million. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements in this Form 10-Q are issued. While we cannot predict our liquidity position beyond the next twelve months, we are expecting our business opportunities and customer base to continue to expand and grow, which may provide us with additional liquidity to fund our operations. We continue to consider and pursue various financing transactions such as equity and debt offerings, and we expect to raise additional capital through the sale of convertible debt securities as described in more detail below. However, there can be no assurance that we will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to the Company, as our ability to raise capital may be affected by various factors, including general market conditions, volatility of our stock price, investor interests and expectations, and our financial performance.

On November 7, 2023, we entered into a Securities Purchase Agreement (the "SPA") with certain accredited investors (collectively, the "Investors") pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the "Private Placement") in one or more closings up to an aggregate principal amount of $5,000,000 (the "Notes"). As of November 7, 2023, we issued and sold an aggregate of $2,600,000 of Notes pursuant to the SPA before deducting the placement agent's fees and other estimated offering expenses. The initial closing of the Private Placement occurred on November 7, 2023. The Notes are due on the fifth anniversary of the issuance date of the Notes and bear simple interest at a rate of 12% per annum, payable in equal monthly installments. The Notes are convertible into shares of our Common Stock, at the option of the holder, at an initial conversion price of $1.25 per share, which shall not exceed $1.55 per share. In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on any twenty days within a thirty day period of consecutive trading days, or if a "fundamental change" occurs (as defined in the SPA). The Notes are unsecured and senior to other indebtedness subject to certain exceptions.

During the nine months ended September 30, 2025, we entered into securities purchase agreements (the " 2025 SPA") with certain accredited investors (collectively, the "Investors") pursuant to which we sold an aggregate of $535,000 of convertible promissory notes to Investors (the "Note") in private placement transactions. The 2025 SPA allows us to offer and sell in multiple closings up to an aggregate principal amount of $3,000,000 of Notes. The Notes are due on the fifth anniversary of their issuance and bear interest at a rate of 12% per annum, payable in equal monthly installments. The Notes are convertible at any time into shares of the Company's common stock, at the option of the holder at a conversion price of $1.25 per share, as adjusted, which shall not exceed $1.55 per share. In addition, the Company can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on the Nasdaq Capital Market for any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a "fundamental change" occurs (as defined in the SPA). The Notes are unsecured and senior to other indebtedness of the Company subject to certain exceptions. The offer and sale of the Notes pursuant to the 2025 SPA is not registered under the Securities Act of 1933, as amended (the "Securities Act"), as it is exempt from registration pursuant to Section 4(a)(2) thereof and Rule 506(b) promulgated thereunder. We also entered into registration rights agreements with the Investors pursuant to which we agreed to register the resales of shares of common stock issuable upon conversion of the Notes.

On November 5, 2025, we entered into an Equity Purchase Agreement with Hudson Global Ventures, LLC, pursuant to which and upon the terms and subject to the conditions set forth therein, we have the right, but not the obligation, to sell to Hudson up to $20,000,000 of shares of our common stock, par value $0.01 per share, from time to time over a 24-month period.

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***Critical Accounting Estimates***

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimation process requires assumptions to be made about future events and conditions, and as such, is inherently subjective and uncertain. Actual results could differ materially from our estimates.

The SEC defines critical accounting estimates as those that are, in management's view, most important to the portrayal of our financial condition and results of operations and the most demanding of our judgment. We consider the following estimates to be critical to an understanding of our consolidated financial statements and the uncertainties associated with the complex judgments made by us that could impact on our results of operations, financial position and cash flows.

Revenue Recognition

We recognize revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification ("ASC, Topic 606"), Revenue from Contracts with Customers. We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligation(s). At contract inception, we assess the goods or services promised within each contract, assess whether each promised good or service is distinct and identify those that are performance obligations.

We must use judgment to determine: a) the number of performance obligations based on the determination under step (ii) above and whether those performance obligations are distinct from other performance obligations in the contract; b) the transaction price under step (iii) above for each distinct performance obligation identified in step (ii) above; and c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above.

Title and risk of loss generally pass to our customers upon shipment. Our customers include end users as well as dealers and distributors who market and sell our products. Our revenue is not contingent upon resale by the dealer or distributor, and we have no further obligations related to resale of our products by dealers and distributors. Shipping and handling costs charged to customers are included in Product Revenues. The associated expenses are treated as fulfillment costs and are included in Cost of Revenues. Revenues are reported net of sales taxes collected from customers.

Product revenue includes sales from our standard and customized equipment, solutions and accessories sold with our equipment. Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products.

Service and training revenue include sales from our high-level decontamination and service engagements, validation of our equipment and technology and customer training. Service revenue is recognized as the agreed upon services are rendered to our customers in an amount that reflects the consideration we expect to receive in exchange for those services.

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

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Costs to Obtain a Contract with a Customer

We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling expenses.

Contract Balances

As of September 30, 2025, and December 31, 2024 we had contract balances and unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed in the amounts of $309,752 and $211,724, respectively.

Arrangements with Multiple Performance Obligations

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

Significant Judgments

Our contracts with customers for products and services often dictate the terms and conditions of when the control of the promised products or services is transferred to the customer and the amount of consideration to be received in exchange for the products and services. We also record an estimated allowance for anticipated product returns.

Use of Estimates

The preparation of 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 consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to allowance for credit losses, inventory, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities.

Accounts Receivable

Accounts receivables are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. Management assesses the collectability of outstanding customer invoices and maintains an allowance resulting from the expected non-collection of customer receivables. In estimating this reserve, management considers factors such as historical collection experience, customer creditworthiness, specific customer risk, and current and expected general economic conditions For those customers to whom we extend credit, in accordance with the Current Expected Credit Loss (CECL) model, we make a risk-based evaluation at the point of sale which is further reviewed on both an individual and collective (pool) basis during each reporting period based on ASC 326. We are required to estimate and report expected credit losses over the entire life of a financial asset, considering historical data, current conditions, and future forecasts, even if the risk of loss is remote.

We have implemented a policy of reserving credit losses based on our best estimate of the amount of potential credit losses in existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be at risk.

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Inventories

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods. We expense costs to maintain certification to cost of goods sold as incurred.

We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence, and future customer demand. We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories may not be usable or realized when comparing our current inventory levels to anticipated demand for our product

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 and nine months ended September 30, 2025 and 2024.

*Recently issued accounting pronouncements not yet adopted*

In December 2023, FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will adopt ASU 2023-09 in its fourth quarter of 2025 using a prospective transition method.

In November 2024, FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). In January 2025, ASU No. 2025-01 was issued to clarify the effective date for all public business entities. The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements once adopted. We are currently evaluating the provisions of this ASU.

In July 2025, FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.

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**Item 3. Quantitative and Qualitative Disclosures About Market Risk.**

Not Applicable.

**Item 4. Controls and Procedures.**

**Evaluation of Disclosure Controls and Procedures**

Our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective at the reasonable assurance level because we have identified a material weakness in our internal control over financial reporting as discussed below, and such material weakness has not been remediated as of September 30, 2025. Our management has concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

**Material Weakness in Internal Control Over Financial Reporting**

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management has concluded that, as of September 30, 2025, we did not maintain effective controls over the preparation, review, presentation and disclosure of our financial statements. Specifically, we noted the following:

· There are limited resources within the finance and accounting departments with sufficient knowledge and experience in applying U.S. GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintain proper segregation of duties; and,

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

These control deficiencies, if not remediated, could result in a misstatement to the annual or interim consolidated financial statements which would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that these control deficiencies constitute material weaknesses.

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**Remediation Plans**

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

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| We plan to expand the resources within the finance and accounting departments with personnel who possess sufficient knowledge and experience in applying U.S. GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintain proper segregation of duties. In this regard, in May 2025, the Board appointed a new Chief Financial Officer with substantial experience and skills in financial accounting matters. |
| We will design and implement additional policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions to improve the effectiveness of our internal controls and to ensure the timely reporting with the SEC in accordance with GAAP. |
| We will continue to recruit and train personnel with appropriate internal controls, accounting knowledge and experience commensurate with our accounting and reporting requirements, in addition to engaging and utilizing third party consultants and specialists. Our management also continues to reallocate and align roles and responsibilities within the accounting team to optimize and leverage the skills and experience of various personnel. |

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We believe the measures described above will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures.

**Changes in Internal Control Over Financial Reporting**

During the three months ended September 30, 2025 and except as disclosed above regarding the material weaknesses and related remediation plans, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

**Limitations on Effectiveness of Controls and Procedures**

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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**PART II: OTHER INFORMATIN**

**Item 1. Legal Proceedings**.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We currently are not a party to any legal proceedings, the adverse outcome of which, in management's opinion, individually or in the aggregate, would have a material adverse effect on the results of our operations, financial position or cash flows. Regardless of the outcome, any litigation could have an adverse impact on us due to defense and settlement costs, diversion of management resources and other factors.

**Item 1A. Risk Factors.**

You should carefully consider the information described in the "Risk Factors" section of our Annual Report for the fiscal year ended December 31, 2024, as filed with the SEC on April 14, 2025, as amended. There have been no material changes to the risk factors we previously disclosed in our filings with the SEC, including the Annual Report. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

**Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.**

During 2025, we entered into Securities Purchase Agreements (the "SPA") with certain accredited investors (collectively, the "Investors") pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the "Private Placement") in one or more closings up to an aggregate principal amount of $3,000,000 of convertible promissory notes, referred to here as the Notes. Pursuant to the SPA and as of September 30, 2025, we sold and issued the Notes to purchase an aggregate of 428,000 shares of common stock at an exercise price of $1.25 per share in exchange for aggregate gross proceeds of $535,000. The securities were issued in private placements in reliance on Section 4(a)(2), and/or Rule 506 of Regulation D of the Securities Act, and since the foregoing issuances did not involve a public offering, the recipient took the securities for investment and not resale, we took appropriate measures to restrict transfer, and the recipient was (a) an "accredited investor"; and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act.

The Notes mature and are due on the fifth anniversary of the issuance date in 2030. The Notes bear simple interest at a rate of 12% per annum, payable in equal monthly installments. The Notes are convertible into shares of our Common Stock, at the option of the holder, at a conversion price of $1.25 per share, which shall not exceed $1.55 per share. In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a "fundamental change" occurs (as defined in the Securities Purchase Agreement). The Notes are unsecured and senior to other indebtedness subject to certain exceptions.

**Item 3. Defaults Upon Senior Securities.**

None.

**Item 4. Mine Safety Disclosures.**

Not applicable.

**Item 5. Other Information.** 

*10b5-1 Arrangements*

To the best of the Company's knowledge during the fiscal quarter ended September 30, 2025, no director or officer (as defined in Rule 16a-1(f) of the Securities Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements.

**Item 6. Exhibits.**

The documents listed in the Exhibit Index of this Form 10-Q are incorporated herein by reference.

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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| | | |
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|  | **TOMI ENVIRONMENTAL SOLUTIONS, INC.** | **TOMI ENVIRONMENTAL SOLUTIONS, INC.** |
| Date: November 14, 2025 | By: | /s/ HALDEN S. SHANE |
|  |  | Halden S. Shane |
|  |  | Chief Executive Officer |
|  |  | (Principal Executive Officer) |
| Date: November 14, 2025 | By: | /s/ DAVID VANSTON |
|  |  | David Vanston |
|  |  | Chief Financial Officer |
|  |  | (Principal Financial Officer and |
|  |  | Principal Accounting Officer) |

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**EXHIBIT INDEX**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Exhibit Number** | **Description of Exhibit** | **Form** | **File No.** | **Date** | **Exhibit** | **Filed Herewith** |
| [31.1](tomz_ex311.htm) | [Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](tomz_ex311.htm) |  |  |  |  | X |
| [31.2](tomz_ex312.htm) | [Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](tomz_ex312.htm) |  |  |  |  | X |
| [32.1#](tomz_ex321.htm) | [Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](tomz_ex321.htm) |  |  |  |  | X |
| [32.2#](tomz_ex322.htm) | [Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](tomz_ex322.htm) |  |  |  |  | X |
| 101.INS | XBRL Instance Document |  |  |  |  | X |
| 101.SCH | XBRL Taxonomy Extension Schema |  |  |  |  | X |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase |  |  |  |  | X |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase |  |  |  |  | X |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase |  |  |  |  | X |

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# This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, or the Exchange Act.

## Exhibit 31.1

**EXHIBIT 31.1** 

**CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF**

**THE SARBANES-OXLEY ACT OF 2002**

I, Halden S. Shane, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of TOMI Environmental Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2025

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| |
|:---|
| /s/ HALDEN S. SHANE  |
| Halden S. Shane<br> Chief Executive Officer<br> (Principal Executive Officer) |

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## Exhibit 31.2

**EXHIBIT 31.2** 

**CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF**

**THE SARBANES-OXLEY ACT OF 2002**

I, David Vanston, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of TOMI Environmental Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2025

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| |
|:---|
| /s/ DAVID VANSTON  |
| David Vanston <br> Chief Financial Officer<br> (Principal Financial Officer and Principal Accounting Officer) |

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## Exhibit 32.1

**EXHIBIT 32.1** 

**CERTIFICATION PURSUANT TO** 

**18 U.S.C. SECTION 1350,** 

**AS ADOPTED PURSUANT TO** 

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002** 

In connection with the quarterly report of TOMI Environmental Solutions, Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2025, as filed with the Securities and Exchange Commission on November 14, 2025 (the "Report"), I, Halden S. Shane, Chief Executive Officer of the Company, certify as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2025

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| |
|:---|
| /s/ HALDEN S. SHANE  |
| Halden S. Shane<br> Chief Executive Officer<br> (Principal Executive Officer) |

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## Exhibit 32.2

**EXHIBIT 32.2** 

**CERTIFICATION PURSUANT TO** 

**18 U.S.C. SECTION 1350,** 

**AS ADOPTED PURSUANT TO** 

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002** 

In connection with the quarterly report of TOMI Environmental Solutions, Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2025, as filed with the Securities and Exchange Commission on November 14, 2025 (the "Report"), I, David Vanston, Chief Financial Officer of the Company, certify as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2025

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| |
|:---|
| /s/ DAVID VANSTON  |
| David Vanston<br> Chief Financial Officer<br> (Principal Financial Officer and <br> Principal Accounting Officer) |

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