TOMI Environmental Solutions Inc.'s (TOMZ:OTCQB) products kill pathogens—safely and effectively. Not just the coronavirus: Ebola, MERS, C. diff spores, sepsis, norovirus, anthrax, Staphylococcus, MRSA, Legionnaire's and Zika. The kill list also includes food borne illness such as E. coli and salmonella.
Simple. Safe. Effective. Fast
Tomi's lead product, SteraMist, is a propriety two-step process that aerosolizes and activates a 7.8% hydrogen peroxide solution, along with a "secret sauce," producing a fine aqueous mist. You probably have a bottle of hydrogen peroxide (H₂O₂) in your medicine cabinet; it's the world's safest natural sanitizer.
SteraMist's hydrogen peroxide concentration produces a highly effective, germ-killing aerosol. SteraMist is unique in that the mist—more like a fog—"atomizes" the liquid and quickly covers hard to reach surfaces, with the same velocity and characteristics of a gas. This works faster and with less saturation than ordinary sprays.
Speed and portability are primary advantages: SteraMist can clean a room in minutes. The SteraMist hospital "terminal clean" protocol is 55 minutes. Competitive products, we believe, are generally far more caustic or take up to eight hours. All are superior to bleach hand scrubbing.
SteraMist is proven to kill all known bacteria, spores and inactivate all known viruses on surface by a "six log" or 99.9999% reduction, the highest standard.
Ready to rollout: in China & worldwide
On February 4, 2020, after a lengthy three-year registration process, the next level began:
"TOMI Receives China CDC Registration Making SteraMist the Disinfection Industry Standard in China."
Tomi's news release noted:
"SteraMist is now the industry standard for disinfection throughout all of China. This registration allows China to take advantage of SteraMist disinfection and decontamination in a variety of verticals such as healthcare, pharmaceutical, commercial and residential, schools, and throughout the community."
Long, proven history
The Binary Ionization Technology (BIT) Platform was developed in response to the Congressional 2001 anthrax attacks, via a DARPA grant, after U.S. government officials saw the desperate need for a superior cleaning solution.
In June 2015, the Environmental Protection Agency (EPA) granted TOMI the first ever solution and technology combination registration. Registrations in all 50 states were secured. Further claims were received for C. difficile spores and H1N1 (swine flu), in addition to registration with the U.S. Food and Drug Administration (FDA) as a disinfectant medical device and further addition of microbes to its efficacy with the EPA.
- SteraMist's successful "proof of concept" in multiple commercial applications over many years confirm the technology is now primed for mass rollout.
- Tomi has taken careful steps to project its global IP, especially in China, and in 2017 received enhanced design patents.
- This author has followed Tomi for five years; San Diego-based technology incubators Titan (SteraMist inventor) and Maxwell Technologies (recently acquired by Tesla) since the mid-1990s. We have witnessed SteraMist applied and we believe the technology is "the real deal."
Global awareness increasing
We know the current coronavirus is just a bad flu. Most critically, we believe this outbreak now changes (finally) behavior standards in Asia, and globally.
- Blanket travel bans; locking down entire cities—not exactly efficient.
- Pathogens can mutate rapidly, even if a vaccine is developed. Limited value.
- Pills do not kill pathogen spread via surface contact, like doorknobs.
- What's next? Tomi's solution kills everything, not just coronavirus: Ebola, C. diff, various "superbugs," E. coli—even bedbugs and ordinary mold and mildew.
One protocol to kill them all. SteraMist solves multiple, mutating problems, now and in the future.
As of this date, Tomi remains off the radar; almost no press coverage, hardly a whisper—yet given landmark China CDC approval, this represents an opportunity. ..with enormous applications:
Vertical opportunities include: every hospital, school, airplane, restaurant (both front and kitchen) hotels, commercial and residential properties, gyms, food harvesting and transportation, etc.
Our thesis: life has changed in Asia. Forever. We know Tomi and SteraMist had an Asian conglomerate's interest after the MERS outbreak, but the interest faded (it always does) with the virus. Nobody wants to invest in safety. Until…
We believe an attitude change would benefit TOMZ shares, which could appreciate significantly.
Simple solutions often the best
SteraMist contains a high concentration of Reactive Oxidative Species (ROS). ROS cause damage to pathogenic organisms via mechanisms such as oxidation of unsaturated fatty acids and amino acids leading to cellular disruption and/or dysfunction.
The unique physiochemistry of the Activated Ionized Hydrogen Peroxide (AIHP) allows these ROS to exist in high concentrations without rapidly recombining and losing their reactivity.
The ionizing effect also leaves the room smelling fresh (Photo: Tomi)
San Diego-based technology incubator Titan Corp received the DARPA contract. Although Titan landed its first related patent in 2005, the technology was not a fit with a primary defense communications business, which included 4400 translators in Iraq. In 2005, L3 communications purchased Titan for $2.65 billion. However, since L3 is primarily a defense electronics contractor, SteraMist was "orphaned," TOMI founder Dr. Halden Shane bought the patents in 2013.
Giant, global opportunity
Healthcare associated infections affect over 2 million patients annually, in the U.S. alone, adding an estimated $30 billion in costs. We have no idea what the total costs will be in China, but it will not be cheap.
Time is money in healthcare, as in every business, so disinfecting a room, or entire ward, by hand, with bleach or caustic agents, or competitor's solutions (as we believe) with up to a six or eight-hour treatment time is not cost effective.
OK, find and kill the virus?
The approximate post terminal clean for SteraMist hospital treatment is 55 minutes; a short time to assure that environmental surface contamination will not pass to the next patient or hospital staff. We believe SteraMist should be incorporated as part of the routine cleaning process.
Although Tomi does not currently make any such claims, we further believe the potential exists (given its gas-like, low corrosive vapor) for SteraMist adaption in densely packed locations vulnerable to airborne transmission, including factories and offices.
We hope this is a no brainer. Tomi can safely and rapidly disinfect an aircraft, hotel room, etc., with faster coverage, safer, less labor, less liquid and less corrosion. Complete coverage is not an easy application. A small miss can transmit.
Compared to competitors, based on our understanding, SteraMist technology has a quicker and higher kill level, in a shorter time, leaves no residue, is eco-friendly, is not effected by humidity, is not caustic, does not blister painted surfaces, contains no silver ions, requires no humidify alteration prior to use, has a shorter treatment time, is quicker to exhaust due to the production of the reactive oxygen species verses nebulization of higher concentrates of hydrogen peroxide, contains no bleach, rooms require little or no prep prior to treatment, and converts to oxygen and water.
In addition, SteraMist replaces traditional formaldehyde, ultra-violet devices, quat ammonia products, hydrogen peroxide vapor (HPV), peracetic acids and silver ions/anions products, glutaraldehyde, chlorine dioxide and titanium dioxide as decontamination solutions.
UK-based Steris (NYSE: STE) develops and markets multiple products in the sterilization business, including Vaprox, a vaporized hydrogen peroxide (VHP) decontamination device, used mostly in clean rooms and pharmaceutical processing. Steris now trades near a $13 billion market cap; Tomi a miniscule fraction. Steris was built through a series of acquisitions.
After repeated company visits, several years ago, we patiently waited for the right moment. It has arrived. Our vision for Tomi is more a buyout or licensing play. The company has survived while being chronically undercapitalized for years. Although managed in a classy, professional manner, Tomi has not the talent depth and operational experience for a global roll-out, in our opinion. The founder/CEO is turning 75. Tomi has developed slowly, seemingly a snail's pace, the past six years, and acts more akin to a private club than an aggressive tech start-up.
However, we argue the tsunami tailwind affords Tomi an epic moment. A quick pivot, or a gorilla partner, and Tomi could soon deserve a valuation in the biotech realm.
Tomi still looks cheap (chart source: Stockcharts)
We do not know the exact float, but insider ownership is high: 3rd party reports show 41%; there are also several large long-term investors. The current effective float could be only 10% or 20%, which means any whiff of success would probably require a dramatically higher share price to reach orderly market stability. There is a $5 million note due in April, which the company believes it can easily refinance.
E. coli outbreaks at Chipotle, and others, chopping off billions in market value, are now a seemingly continual chain of food safety problems. This is a huge opportunity for Tomi. SteraMist's advantages are its portability; it can be deployed near harvest, without side effects. The company is currently working toward a direct food and crop application using a 1% acceptable concentration of hydrogen peroxide.
Most interesting, the initial emphasis is on the profitable organic market. The objective is to prevent/and or minimize food decay without harsh chemicals. We like organic.
In the future, potential exists for a restaurant industry application of a brief spray at day's end. While scrubbing is fine, this added layer of final protection reaches all surface areas: safe for food and humans.
Portable pandemic treatment
SteraMist best performs, and outshines, in the most difficult cases. Only good fortune kept Ebola from greater global carnage. SteraMist's portability, ease-of-use and "6 log kill" make it an ideal solution component. This was successfully demonstrated in its 2015 deployment to Monrovia, Liberia, to decontaminate the Ebola treatment center.
Mosquitoes are crafty buggers. Although Zika is now "forgotten," the opportunity remains. SteraMist kills mosquitoes. While fumigation may be acceptable outdoors, indoors it creates serious problems. SteraMist is ideal for a rapid, safe indoor mosquito abatement, since repeated poison fumigating is unhealthy.
Prompt SteraMist adaption allows authorities to rapidly provide citizens with an immediate, highly visible, long-term solution, not just for coronavirus, but a vast array of pathogens. The SteraMist solution could become an integral component in health preservation globally.
Given the timeliness, this report is intended only as a brief overview. Tomi has a wealth of additional information on the company's website at www.tomimist.com, in addition to posted 10K and Qs. Please review.
Investors may like what they see. Tomi Environmental Solutions is an unknown, timely opportunity.
Frederick Lacy, President of Fincom Investment Partners, began as a Chicago commodity broker in 1984. In 1987 he joined Bateman Eichler, Hill Richards in Los Angeles, focusing on small to mid-cap equities, ultimately "retiring" in 2000 as a Managing Director of Investment Banking. Mr. Lacy has been involved in numerous investments, from arranging start-up capital for what became Petrohawk, which sold for $15 Billion, to mobile payments in India. Several long-time clients were founding investors of Cheniere Energy. Mr Lacy's decades in California technology includes arranging an early $13 million VC financing for "permanent ledger" software (now commonly known as "blockchain") led by top-tier fund Upfront Ventures. Other investments include 3D holographic display technology, early mobile applications, power conversion, along with multiple consumer health-related products: Canadian Glacier bottled water, Kinetin skin cream, a proprietary oxidative-stress formula, and UV purification systems. In 1989 Mr. Lacy hosted "the Venture Capitalist" which aired on (now) CNBC, and has followed the natural foods industry for 35 years.[NLINSERT]
This report is for informational purposes only and is not a solicitation of any security purchase or sale. Opinions expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, Fincom Investment Partners cannot guarantee its accuracy. Do your own due diligence. Any opinions or estimates constitute our best judgment as of the date of publication, and are subject to change without notice. We recommend investors conduct thorough investment research of their own, including detailed review of the related Companies' filings, and consult a qualified investment adviser. Fincom Investment Partners and its officers and directors own shares in Tomi Environmental Solutions and may buy or sell shares at any time without prior notice.
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