TOMI Environmental Solutions, Inc.
For the period ended Dec 31, 2025. Filed Mar 31, 2026.
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FY2025 · Filed Mar 31, 2026
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Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2025. Our disclosure controls and procedures are intended to ensure that information we are required to disclose in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2025, due to the material weaknesses described below. Notwithstanding this conclusion, our management has determined that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements, and projections of any evaluation of effectiveness are subject to the risk that controls may become inadequate due to changes in conditions or deterioration in compliance.
Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management concluded that our internal control over financial reporting was not effective as of December 31, 2025.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknesses as of December 31, 2025:
| · | Limited resources within the finance and accounting departments with sufficient knowledge and experience in applying U.S. GAAP, including developing appropriate accounting estimates, reserves, and allowances in a timely manner and maintaining proper segregation of duties; and |
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| · | Policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions were either not fully designed and in place or not operating effectively. |
These control deficiencies, if not fully remediated, could result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that these control deficiencies constitute material weaknesses.
Remediation - Progress and Actions Taken
Management, with oversight from our Audit Committee, has implemented the following specific remediation actions during fiscal year 2025:
| · | Strengthened Finance Function. In May 2025, we appointed a new Chief Financial Officer with substantial experience in financial accounting, U.S. GAAP, and SEC reporting. This appointment has supported improvement in the finance and accounting function's ability to address the identified deficiencies. |
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| · | Written Accounting Policies and Procedures. We have designed and implemented written accounting policies and procedures governing the review, supervision, and monitoring of our accounting and SEC reporting functions, appropriate for the size and nature of our operations. |
| · | Month-End Revenue Close Process. We implemented a structured month-end close process for revenue recognition to provide more consistent review and earlier identification of required adjustments. |
| · | Monthly Physical Inventory Counts. We implemented monthly physical inventory counts to strengthen inventory controls and reduce year-end adjustments. |
| · | Deferred Revenue Accounting Framework. Effective with the quarter ended June 30, 2025, we implemented formal policies and procedures for the identification, measurement, and recognition of deferred revenue in accordance with ASC 606, integrated into our period-end close process. |
| · | 13-Week Rolling Cash Flow Forecast. We introduced a 13-week rolling cash flow forecasting process to improve liquidity management, forward planning, and management oversight of cash resources. |
| · | Daily Bank Reconciliations. We implemented daily bank reconciliations to strengthen cash controls and provide timely visibility over cash balances. |
| · | Realignment of Roles and Responsibilities. We have realigned roles and responsibilities within the accounting team to improve segregation of duties and to better utilize the skills and experience of existing personnel. |
| · | Continued Training and Third-Party Support. We continue to recruit and train personnel with appropriate internal controls knowledge and accounting experience and engage third-party consultants and specialists where appropriate to supplement internal capabilities. |
| · | While the material weaknesses had not been fully remediated as of December 31, 2025, management believes the actions taken to date represent meaningful progress in addressing the identified control deficiencies. We are committed to continuing this process and will continue to review and enhance our financial reporting controls and procedures. |
Changes in Internal Control Over Financial Reporting
During the fiscal quarter ended December 31, 2025, we completed the rollout of our written accounting policies and procedures and operationalized enhanced financial statement review procedures, as described above. The deferred revenue recognition framework was implemented in the quarter ended June 30, 2025, and continued to operate during the remainder of fiscal year 2025. Except as described above, there have been no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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