Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2008, for The Ozone Man, Inc. (also referred to as TOMI Environmental Solutions, Inc. in metadata). The Company is classified as a development stage company engaged in home inspection, air quality testing, and ozone indoor decontamination. It has not yet generated material revenues from its planned principal operations. The financial statements reflect a reverse acquisition completed in October 2007, where The Ozone Man, Inc. (Nevada) is treated as the accounting acquirer.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2008 | Nine Months Ended Sep 30, 2008 | Balance Sheet (Sep 30, 2008) |
|---|---|---|---|
| Net Revenues | $3,086 | $3,086 | N/A |
| Net Loss | $(1,057,505) | $(1,521,335) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $534,734 |
| Total Assets | N/A | N/A | $877,810 |
| Total Liabilities | N/A | N/A | $229,062 |
| Working Capital | N/A | N/A | $348,218 |
| Long-Term Debt | N/A | N/A | $38,379 |
| Convertible Note Payable | N/A | N/A | $25,000 |
Note: Margins are not applicable due to negligible revenue and significant operating losses.
Material Changes vs. Prior Period
- Revenue: The Company generated minimal revenue of $3,086 for both the three and nine-month periods, compared to $0 in the prior year periods. The filing does not provide a clear value for prior year revenue as the company was in a shell or development stage.
- Expenses: Total costs and expenses for the nine months ended September 30, 2008, were $1,508,868. A significant portion ($902,000) consisted of professional and consulting fees paid via the issuance of common stock rather than cash.
- Assets: Total assets increased from $3,095 at December 31, 2007, to $877,810 at September 30, 2008, driven primarily by cash raised from equity offerings and the acquisition of property, equipment, and intangible assets.
- Equity: Stockholders' equity improved from a deficit of $(24,318) to a positive balance of $648,748, largely due to private placements of common stock totaling approximately $1.3 million in the first nine months of 2008.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: Management explicitly states that the Company's losses and lack of material revenue raise substantial doubt about its ability to continue as a going concern. Continued operations depend on raising additional capital.
- Liquidity Strategy: The Company is actively engaged in a private placement (Regulation D, Rule 505). It raised approximately $1.3 million in the first nine months of 2008 and an additional $200,000 in October 2008 (subsequent event). Management believes these funds will sustain operations through the first quarter of 2009.
- Unusual Items:
- Stock for Services: Significant expenses were settled by issuing 730,000 shares of common stock valued at $902,000 during the nine-month period.
- Debt Forgiveness: The Company recorded $25,000 in debt forgiveness income in 2007 related to legal services.
- Convertible Note: A $25,000 convertible note payable to a related party was assigned to an unrelated third party in July 2008.
- Risks: Risks include the inability to generate cash flow from operations, failure to secure additional financing, and potential dilution of existing shareholders if equity financing is required.
Investor Verification Checklist
- Verify the status of the ongoing private placement and whether the projected $1.3 million+ in capital is sufficient to reach profitability.
- Confirm the valuation methodology used for the $902,000 of services paid in stock to ensure fair market value was applied.
- Review the terms of the $51,080 long-term debt collateralized by delivery equipment and the $25,000 convertible note.
- Assess the commercial viability of the "Medallion methodology system" and other intangible assets purchased for $110,000.
- Monitor the "Going Concern" warning and the Company's ability to secure funding beyond Q1 2009.