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10. CONTRACTS AND AGREEMENTS | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
10. CONTRACTS AND AGREEMENTS | Manufacturing Agreement In November 2016, we entered into a new manufacturing and development agreement with RG Group Inc. The agreement does not provide for any minimum purchase commitments and is for a term of two years with provisions to extend. The agreement also provides for a warranty against product defects for one year from the sale to the end user. As of December 31, 2017 and 2016, balances due to RG Group, Inc. accounted for approximately 45% and 31% of total accounts payable, respectively. At December 31, 2017 and 2016, we maintained required deposits with RG Group, Inc. in the amounts of $0 and $147,010, respectively. For the years ended December 31, 2017 and 2016, RG Group, Inc. accounted for 73% and 78% of cost of goods sold, respectively. Agreements with Directors In March 2017, we increased the annual board fee to directors to $30,000, to be paid on a quarterly basis, with the exception of the audit committee chairperson, whose annual fee we increased to $35,000, also to be paid on a quarterly basis. In addition, we issued to each of our four board members 50,000 shares of common stock in April 2017. The 200,000 shares of common stock were valued at $32,000 for the year ended December 31, 2017. In December 2017, we increased the annual board fee to directors to $40,000 in cash, to be paid on a quarterly basis, with the exception of the audit committee chairperson, whose annual fee we increased to $45,000, also to be paid on a quarterly basis. The board fee also includes the issuance of 75,000 shares of common stock on an annual basis. At our 2017 Annual Meeting of Shareholders, our shareholders elected Mr. Ronald E. Ainsworth to our board of directors, to serve as a Class I director. The term of his service as director commenced on July 7, 2017 and will expire at our 2018 Annual Meeting of Shareholders, unless Mr. Ainsworth sooner resigns or is removed. In his capacity as a director, Mr. Ainsworth is entitled to an annual fee in the amount of $30,000 paid on a quarterly basis and the grant of 50,000 shares of our common stock. Mr. Ainsworth is a principal in 41 North International, LLC (see Note 8). The agreement with 41 North was terminated on October 31, 2017. Other Agreements In June 2015, we launched the TOMI Service Network (“TSN”). The TSN is a national service network composed of existing full service restoration industry specialists that have entered into licensing agreements with us to become Primary Service Providers (“PSP’s”). The licensing agreements grant protected territories to PSP’s to perform services using our SteraMist™ platform of products and also provide for potential job referrals to PSP’s whereby we are entitled to referral fees. Additionally, the agreement provides for commissions due to PSP’s for equipment and solution sales they facilitate to other service providers in their respective territories. As part of these agreements, we are obligated to provide to the PSP’s various training, ongoing support and facilitate a referral network call center. As of December 31, 2017, we had entered into 69 licensing agreements in connection with the launch of the TSN. The licensing agreements contain fixed price minimum equipment and solution orders based on the population of the territories granted pursuant to the licensing agreements. The nature and terms of our TSN agreements may represent multiple deliverable arrangements. Each of the deliverables in these arrangements typically represent a separate unit of accounting. n May 2015, we were awarded a grant by the United States Agency for International Development (“USAID”) in the amount of $559,000 for the development of SteraMist™ Mobile Decontamination Chambers to fight the Ebola epidemic. The grant is based on milestones set forth in the agreement between the Company and USAID. In May 2016, we completed the USAID grant by completing the sixth and final milestone and received gross proceeds in the amount of $559,003 during the period of the agreement. The Company incurred costs in connection with the grant through December 31, 2016 in the amount of $359,112. The proceeds received as part of the grant in excess of the costs incurred has been presented on our statement of operations in the amount of $199,891 for the year ended December 31, 2016.

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