UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission file number 000-09908
TOMI ENVIRONMENTAL SOLUTIONS, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-1947988
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(State of incorporation) (I.R.S. Employer Identification No.)
9454 Wilshire Blvd., Penthouse, Beverly Hills, CA 90212
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(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code:
(800) 525-1698
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Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock,
par value $.01
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. [ ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ]
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Small reporting company [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the common stock held by non-affiliates of the
registrant as of the last business day of the Registrant's most recently
completed second fiscal quarter was approximately $73,738,500 based upon the
closing price of registrant's common stock on that date.
As of April 1, 2010 the registrant had 35,277,480 shares of common stock
outstanding.
Documents incorporated by reference: None.
TABLE OF CONTENTS
PART I
Page
Item 1. Business 2
Item 1A. Risk Factors 8
Item 2. Properties 11
Item 3. Legal Proceedings 11
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 12
Item 6. Selected Financial Data (Not Required) 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
(Not Required) 18
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 19
Item 9A. Controls and Procedures 19
Item 9B. Other Information (None) 20
PART III
Item 10. Directors, Executive Officers and Corporate Governance 20
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 23
Item 13. Certain Relationships and Related Transactions, and
Director Independence 24
Item 14. Principal Accountant Fees and Services 25
Item 15. Exhibits 25
Signatures 26
In this registration statement references to "TOMI," "we," "us," and "our" refer
to TOMI Environmental Solutions, Inc.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Securities and Exchange Commission ("SEC") encourages companies
to disclose forward-looking information so that investors can better
understand future prospects and make informed investment decisions.
This report contains these types of statements. Words such as "may,"
"will," "expect," "believe," "anticipate," "estimate," "project," or
"continue" or comparable terminology used in connection with any
discussion of future operating results or financial performance identify
forward-looking statements. You are cautioned not to place undue
reliance on the forward-looking statements, which speak only as of the
date of this report. All forward-looking statements reflect our present
expectation of future events and are subject to a number of important
factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.
1
PART I
Item 1. Business
Business
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The company provides global green environmental technology solutions for indoor
air pollution and infectious disease control. The company's technicians and/or
its licensees' technicians provide indoor air decontamination remediation and
surface disinfection of all commercial and residential structures including
medical facilities, hotel and motel rooms, prisons, airports, cruise ships and
schools, including both single family homes and multi-unit residences. The
Company has solutions for decontamination of air and surface disinfection of all
indoor and enclosed structures.
Products
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Our products contain the latest technology using three dimensional application
designed to decontaminate indoor air, surfaces and eliminate infections,
including inactivation of viruses, removal of all allergens and asthma triggers,
killing MRSA, C-Diff, mold spores, anthrax and all other bacteria and infectious
pathogens.
The company's three main products use the world's second and third strongest
oxidizers, hydroxyl radicals and UV ozone along with Ultra-Violet Germicidal
Irradiation. Each product is specific to one of the three mentioned above.
The worlds second strongest oxidizer is hydroxyl radicals and our patient
pending Hydroxyl Ultra-D Disinfection product uses activated dry mist hydroxyl
fog-killing >99.999% or 6 log of all harmful bacteria, viruses and spores-to
decontaminate and combat the surging number of healthcare associated infections
(HAI) and other infectious disease in hospitals, clinics, sports facilities,
and other healthcare settings. Our procedure takes less than 15 minutes to
complete along with approximately 30 additional minutes for air scrubbing in
most situations. It is an excellent adjunct for the remediation industry when
applied to all indoor structures.
We have also safely harnessed the world's third strongest oxidizer, ozone. Our
proprietary byproduct free ultraviolet ozone generators produce the cleanest
ozone without producing any harmful byproducts. Our state of the art ozone
generators safely and effectively eliminate odor, bacteria, allergens, mold
spores and all other contaminants.
TOMI's has recently written the first ever protocol to use UV produced ozone in
a large LEED certified commercial building and has recently successfully
completed the treatment of that building.
Our UV produced ozone generators are used by TOMI's certified professional
technicians and /or our licensees' certified technicians.
2
Ozone is a pale blue, unstable gas molecule because it consists of 3 atoms,
whereas oxygen is a molecule consisting of 2 oxygen atoms. This ozone molecule
is so unstable that it quickly breaks away from the other oxygen atoms. These
lone oxygen atoms go in search of other atoms to re-form into oxygen. If it
finds a carbon or sulfur molecule, it will break into that molecule destroying
it in the process. Free oxygen atoms are highly reactive and they will oxidize
or inactivate almost anything including most viruses, bacteria, and organic and
inorganic compounds they contact, making ozone an enormously powerful
disinfectant and oxidizer. Since most indoor air pollutants are carbon and
sulfur based, ozone will attack them, leaving only oxygen in their place.
Ozone is a much stronger oxidizer than common disinfectants such as chlorine and
hypochlorite. The usage of chlorine in many countries has been decreased
significantly due to the possible formation of carcinogenic by-products during
the disinfections process. In contrast, ozone disinfections using the Company's
methodology does not produce any harmful residues, all of our technicians wear
safety equipment prior to reentry and all micro- carcasses are vacuumed with
HEPA vacuum, all the residual ozone will be converted back to oxygen in a short
time using fans along with open ventilation. No person, pet or plant is ever
exposed to levels greater than EPA standards. Ozone produced using ultra-violet
is considered an environmentally friendly disinfectant.
Ultraviolet technology uses ultraviolet light to produce ozone, by passing
ambient air over an ultraviolet lamp, which splits oxygen molecules in the air
stream. Since ozone gas is unstable (a property that gives ozone its exceptional
oxidizing capabilities), ozone cannot be packaged or stored and must be
generated on site.
For decades ozone has been used in wastewater treatment applications, an ozone
generator combined with a compact air preparation unit is utilized to treat the
water safely and effectively.
Ozone is a much more powerful oxidizer than chlorine, as ozone statistically
disinfects quicker than chlorine. Ozone creates none of the trihalomethanes
commonly associated with chlorine compounds, and if properly matched to the
application, ozone will reduce most organic compounds to carbon dioxide, water
and residual heat. Finally, ozone eventually returns to oxygen.
Ozone is not to be confused with smog, which is commonly referred to as ozone.
Low level or surface ozone (smog) is formed when oxygen combines with volatile
organic compounds (nitrogen oxides from motor vehicles and power plant
emissions, solvents, etc.), which then chemically react in the presence of
sunlight and warmth.
Our proprietary UV ozone generators produce nothing but ozone. Most other
manufacturers of ozone equipment produce nitrous oxides, which when mixed with
moisture become nitric acid, which is dangerous. The EPA has determined that
the highest level of safe ozone is 0.05 ppm. Our high-powered generators produce
ozone at lethal levels sometimes exceeding 15.0 ppm. This is why people, pets,
or plants cannot remain in the property during our treatments that average 4 or
more hours in length.
3
The company's third product is our custom UVGI & filtration system which is the
long term maintenance solution to your indoor air and infectious disease control
problems. Our system destroys up to 99.99% of contaminants traveling through the
HVAC system and increases the efficiency of the system, resulting in less energy
consumption and saving to the consumer. During clinical trials, these
accessories were proven to reduce microbial and endotoxin concentrations in
ventilation systems by 99%.This resulted in significant reduction of respiratory
illnesses, both bacterial and viral.
Industry Summary
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Driven by rising demand for clean water, clean air and chemical-free treatment
processes, the global market for ozone technology is projected to grow at an
annual rate of 7.5% through 2012. The overall global water treatment market is
experiencing rapid growth due to a number of factors including:
. Rapid industrialization along with increases in infrastructure spending
. Increased awareness and concern for quality water, long-term health and
environmentally conscious manufacturing processes;
. Poor water quality, particularly in developing nations such as China
and India; and
. Water shortages resulting from droughts and shifts in population to
areas with insufficient water supplies.
Similarly, environmental concerns regarding indoor air quality and new emerging
infectious disease strains are driving demand for air purification products in
both the residential and commercial setting. While ozone technology has been in
existence for decades, the rising popularity of "green" products and services is
contributing to ozone's growing acceptance in air. Unlike chlorine and other
disinfectants, ozone technology employs a chemical-free process that can be
utilized to purify water and air and disinfect a variety of surfaces.
Additionally, because ozone reduces the need for continued use of costly
chemicals, companies are able to reduce expenses and generate a positive return
on investment. The ability to utilize more environmentally friendly products
and drive higher returns represents a compelling opportunity for many users of
ozone-based products and services.
The Company provides environmentally conscious products to customers looking for
cleaner, more effective solutions for their surface disinfection and air
treatment needs. Demand is increasing for non-chemical disinfection technologies
like ultraviolet ozone in markets such as wastewater, dairy, laundry,
agriculture, food and beverage manufacturing, hospitality, medical, process
water and pharmaceuticals, where companies are experiencing pressure to reduce
chemical by-products caused by chlorine gas and liquid chlorine, along with
significant energy savings.
Ozone technology, when used in air and water unlike chlorine and other chemical
disinfectants, utilizes a chemical-free process, whereby ozone molecules are
used to safely purify and disinfect the water and air with no chemical
byproducts. Once the ozone treatment process is complete, only harmless oxygen
is released back into the air and water. Ozone treatment also reduces and
frequently eliminates the need for costly chemicals used as disinfectants.
4
Market
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Recognition of indoor pollution, infectious airborne diseases and its health
affects is growing. The AMA has indicated that at least 50% of all illnesses are
caused or aggravated by indoor air pollution. The EPA made indoor pollution
among its top five most urgent environmental issues. According to the California
Air Resources Board, California alone lost 45 billion dollars due to direct and
indirect effects of indoor air pollution in one year alone. The Journal of
Pediatrics states that 39% of all asthma is caused by poor indoor air and that
cleaning those pollutants would help reduce asthma. Further, the EPA states
that today's homes contain an estimated 1,500 hazardous compounds from
approximately 3,000 man-made products. Even low levels of pollutants emitted by
these products can affect human health over a period of months or years. Ozone
can also be used to kill, inactivate, reduce, and in some cases eliminate most
of the broad causes of indoor pollution such as: allergens, dust mites,
bacteria, residue from pesticides, construction by-products, inactivate viruses,
and smoking and cooking odors.
In the U.S. 271 people die a day from hospital acquired infections. HAI kill
more people than AIDS, breast cancer and auto accidents combined. HAI are the
fourth leading cause of death in the U.S. About 1.7 million patients suffer from
care related infections annually, and will kill over 99,000 people this year
alone. Hospital acquired infections account for over $30.5 billion in excess
health costs per year.
The Hydroxyl Ultra-D disinfection process is a significant advance in the
reduction and possible elimination of these HAI.
Accordingly, we seek to position TOMI Environmental Solution, Inc. as a green
global leader in the commercial and residential air remediation and infectious
disease control industry. We have developed and acquired a platform of green
environmental friendly products and technologies. TOMI Environmental Solution,
Inc. methodology is a process that purifies the air and decontaminates the
indoor surfaces of buildings and homes. This process eliminates most germs,
viruses, bacteria, mildew, allergens, asthma triggers and mold spores, in a
multi-process one-day event. It also eliminates pet odors, cooking smells,
smoking odors, VOC's and chemical smells (such as paint, glue, new carpets,
etc.).
The Company certifies, licenses and sells indoor air quality and infectious
disease control products that utilize ozone, hydroxyl radicals and ultraviolet
technologies to deliver purified air in commercial, residential and mobile
transportation environments. The Company's applications and systems provide a
protection against the following: infectious diseases; airborne microbes,
including bacteria, viruses, mold spores, mildew and fungus; organic compounds;
and inorganic compounds.
The Company's products also address the consumer's growing concern over air
quality and infectious disease and offers relief to individuals who suffer from
allergies, asthma and lung disease when used in conjunction with the Company's
UVGI and filtering systems.
5
Services
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The Company presently has four service hubs complete with service vans and
certified, trained personnel. The Company has an alliance partner that has been
in the remediation industry for over 25 years and supports disaster relief in
40 states. Also the company has recently licensed, certified and sold its
equipment to a large New York based environmental remediation company. TOMI
Environmental Solutions offers a 16 hour air remediation and infectious control
certification program to the remediation industry throughout the United States.
In addition to 8 full time employees, the Company employees 15 part time
independent contractors, some of whom are certified trained personnel.
On February 23, 2008 we purchased from S.C.O. Medallion Healthy Homes LTD all
intellectual property for the Medallion methodology system and all marketing
materials, studies and information required to operate the system including
patents, trademarks, extensions, applications, copyrights, equipment and
technology that specifically relate to the products and services of the
business. On April 18, 2008 we purchased from Air Testing and Design, Inc.
intellectual property in connection with our commercial generator system. This
provides us with the ozone treatment system that is one of the cores of our
business model.
In September 2009 the company purchased 19 percent of Advanced Disinfectant
Technologies, LLC the company that supplies the Ultra-D fogger. It has also
entered into a Letter of Intent to purchase the remaining 81 percent of the
company.
We provide indoor pollution maintenance for all buildings. We call our system
the "Terminator", and it involves installation of a UVGI system in the air ducts
or air conditioning systems. This purifies the air before it enters the indoor
environment and insures the client of a clean fresh air supply at all times.
Our ozone air and surface remediation along with our hydroxyl mist is a remedy
for most indoor pollution and infectious disease concerns. When extreme
contamination problems exist, we may call in other professionals to assist in
the remediation process and/or refer the client to another source for the
solution.
Our air remediation and infectious disease control treatment involves placing
TOMI's Environmental Solution, Inc products throughout an uninhabited home or
building. Depending on the type of contamination, the equipment are left
running for 15 minutes if using the Ultra-D fogger or 4 hours or longer if using
our UV ozone generators. This is the essential time allotted for our products to
oxidize, inactivate or kill all the contaminants in the indoor environment,
leaving the space contaminant, infectious disease and odor free. This one step
process kills and or eliminates most allergens, bacteria, mold spores and
viruses.
Decontaminated space will remain as such, as long as you do not reintroduce the
problem. Once our treatment is complete, the indoor environment is a healthy
place to reside or work.
The cost per treatment depends on the size of the building, type of
contamination and products used.
6
The Company intends to target the following three market segments:
The Remediation Industry. A professional certified remediation company waits
until an emergency or disaster occurs before they can earn fees. TOMI has
implemented and plans to expand its certification, license and equipment program
throughout the United States. This program will allow these disaster
professionals to earn fees doing routine air remediation and infectious disease
control without the need of a disaster. It will also arm the professional with
state of the art technology to be used in their everyday challengers' in
treating indoor environments. TOMI will receive a percentage of all revenue from
jobs completed using TOMI's equipment under TOMI's exclusive certification and
licensing agreement. There are over 20,000 certified professional remediators in
the United States.
Hospitality. Our products will primarily be used for air remediation and surface
cleaning to make the hospitality-related companies (hotels, motels, etc.)
greener and cleaner prior to the check-in of hotel guests. Also, as additional
revenue, we will be able to apply the UVGI & filtration system to these hotels
to maintain cleaner healthier air and save in energy costs.
Hospital. This should be the easiest to penetrate as we have a solution to
healthcare facilities' biggest problem: the spread of airborne contaminants.
Senate Bill 1058-MRSA became effective January 1, 2009. The enactment of this
bill demonstrates the concern hospitals have for the spreading of MRSA as we
already know that the hospital industry will be held responsible for any
hospital-acquired infection prior to 2009. Using the Ultra-D fogger will
eliminate HAI,s in patient rooms, infectious disease rooms and operatory suites.
Our UVGI/filtration product, enables us to reduce expenses for coil cleaning,
which can range from $500 - $15,000, saving 25 - 30% of energy costs and reduce
unit down time. Therefore, we will be able to enhance the well being of staff
and patients by delivering clean, particulate-free air. We can reduce filtration
cots by as much as 50% and will be able to offer a product that will
decontaminate rooms identified with disease-causing elements. This is handled by
our own infectious disease industrial hygienist and staff doctors selling to
current hospital administrators and staff that we already know.
Competitors & Future Competition
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Although we are unaware of any direct public competition, we believe that we
will be faced with competition from an array of household cleansers, pesticides,
along with local mom and pop companies among others for our services. Many
retailers market a variety of air purifiers. The ozone generation business may
lead to multiple competitors and competition.
Employees
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We currently have 8 employees, all of which are full time.
7
Item 1A. Risk Factors
We operate in a rapidly changing environment that involves a number of risks,
some of which are beyond our control. A number of these risks are listed below.
These risks could affect actual future results and could cause them to differ
materially from any forward-looking statements we have made in this Annual
Report. You should carefully consider the risks described below, as well as the
other information set forth in this Form 10-K. Should they materialize, any of
the risks described below could significantly and adversely affect our business,
prospects, financial condition or results of operations. In that case, the
trading price of our common stock could fall and you may lose all or part of the
money you paid to buy our securities.
Risk Related To Our Business
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Our independent registered public accounting firm has issued a "going concern"
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opinion.
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Our ability to continue as a going concern is dependent upon our ability to
generate profitable operations in the future and/or to obtain the necessary
financing to meet our obligations and repay our liabilities arising from normal
business operations when they come due. We plan to continue to provide for our
capital requirements by issuing additional equity. No assurance can be given
that additional capital will be available when required or on terms acceptable
to us. We also cannot give assurance that we will achieve sufficient revenues in
the future to achieve profitability and cash flow positive operations. The
outcome of these matters cannot be predicted at this time and there are no
assurances that, if achieved, we will have sufficient funds to execute our
business plan or to generate positive operating results. Our independent
registered public accounting firm has indicated that these matters, among
others, raise substantial doubt about our ability to continue as a going
concern.
No assurance of sales or profitability.
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The Company's business is dependent upon the acceptance of its products,
licenses and services as an effective and reliable method to perform indoor air
remediation and infectious disease control. The Company's business is also
dependent on the effectiveness of its marketing program to convince potential
clients, potential independent contractors and remediators to utilize its
products and services so that the Company will become profitable. There can be
no assurance that the public or industry participants will accept the Company's
services, or that the Company will be successful or that its business will earn
any profit. There can be no assurance that the Company will earn material
revenues or that investors will not lose their entire investment. There is no
assurance that the Company will operate its business successfully or that its
common stock will have value. A failure of the Company's marketing campaign
would have a material adverse impact on its operating results, financial
condition and business performance.
Competition.
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The remediation industry is extremely competitive. The Company's principal
competitors will include other remediators and abatement companies. These
competitors may have longer operating histories, greater name recognition,
larger installed customer bases, and substantially greater financial and
marketing resources than the Company. The Company believes that the principal
factors affecting competition in this proposed market include name recognition,
and the ability to receive referrals based on client confidence in the Company's
8
service. There are no significant barriers of entry that could keep potential
competitors from opening similar facilities. The Company's ability to compete
successfully in the industry will depend in large part upon its ability to
market and sell its indoor air remediation and infectious disease control
products and services. Be able to respond effectively to changing insurance
industry standards and methodology. There can be no assurance that the Company
will be able to compete successfully in the remediation industry, or that future
competition will not have a material adverse effect on the business, operating
results, and financial condition of the Company.
Dependence on key personnel.
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The Company's success is substantially dependent on the performance of its
executive officers and key employees. Given the Company's early stage of
operation, the Company is dependent on its ability to retain and motivate high
quality personnel. Although the Company believes it will be able to engage
qualified personnel for such purposes, an inability to do so could materially
adversely affect the Company's ability to market and perform its services. The
loss of one or more of its key employees or the Company's inability to hire and
retain other qualified employees could have a material adverse effect on the
Company's business.
Inability to sell its license and equipment packages.
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In the short-term, the success of the Company's business plan depends heavily on
its ability to sell its certification, license and equipment packages, and in
the longer term, on its ability to profitably integrate and operate those
businesses. There is no assurance that the Company will be able to find and
license the new businesses that it needs to successfully implement its business
plan. The Company needs to sell its packages in order to grow at an attractive
pace. A failure of the Company to sell its licenses and equipment packages will
likely have an adverse impact on its operating results, financial condition and
business performance.
We may not be able to manage our growth effectively, create operating
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efficiencies or achieve or sustain profitability.
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The ability to manage and operate our business as we execute our growth strategy
will require effective planning. Rapid growth could strain our internal
resources, leading to a lower quality of customer service, reporting problems
and delays in meeting important deadlines, resulting in loss of market share
and other problems that could adversely affect our reputation and financial
performance. Our efforts to grow have placed, and we expect will continue to
place, a significant strain on our personnel, management systems, infrastructure
and other resources. Our ability to manage future growth effectively will also
require us to continue to update and improve our operational, financial and
management controls and procedures. If we do not manage our growth effectively,
we could be faced with slower growth and a failure to achieve or sustain
profitability.
We may incur significant costs as a result of operating as a public company, and
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our management devotes substantial time to new compliance initiatives.
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We may incur significant legal, accounting and other expenses as a public
company, including costs resulting from regulations regarding corporate
governance practices. Our management and other personnel devote a substantial
amount of time to these compliance initiatives. Moreover, these rules and
9
regulations have increased our legal and financial compliance costs and will
make some activities more time-consuming and costly. For example, these rules
and regulations could make it more difficult for us to attract and retain
qualified persons to serve on our board of directors or as executive officers.
In addition, the Sarbanes-Oxley Act of 2002 ("SOX") requires, among other
things, that we maintain effective internal control over financial reporting
and disclosure controls and procedures. For the year ended December 31, 2009,
we performed system and process evaluation and testing of our internal control
over financial reporting to allow management to report on the effectiveness of
our internal control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent
registered public accounting firm in the year ending December 31, 2010, may
reveal deficiencies in our internal control over financial reporting that are
deemed to be material weaknesses. Our compliance with Section 404 may require
that we incur substantial expense and expend significant management time on
compliance-related issues. Moreover, if our independent registered public
accounting firm identify deficiencies in our internal control over financial
reporting that are deemed to be material weaknesses, the market price of our
stock would likely decline and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities, which would require
additional financial and management resources.
There are inherent limitations in all control systems, and misstatements due to
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error or fraud may occur and may not be detected.
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While we continue to take action to ensure compliance with the disclosure
controls and other requirements of SOX, there are inherent limitations in our
ability to control all circumstances. Our management, including our Chief
Executive Officer, does not expect that any company's controls, including our
own, will prevent all error and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. In addition, the design of a
control system must reflect the fact that there are resource constraints and
the benefit of controls must be evaluated in relation to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, in our Company have been detected. These inherent limitations include
the realities that judgments in decision making can be faulty and that
breakdowns can occur because of simple errors or mistakes. Further controls can
be circumvented by individual acts of some persons, by collusion of two or more
persons, or by management override of the controls. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time, a
control may be inadequate because of change in conditions or the degree of
compliance with the policies or procedures may deteriorate. Because of inherent
limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.
10
Risk Related To Our Securities
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Our stock price is volatile and there is a limited market for our shares.
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The stock markets generally have experienced, and will probably continue to
experience, extreme price and volume fluctuations that have affected the market
price of the shares of many small capital companies. These fluctuations have
often been unrelated to the operating results of such companies. Factors that
may affect the volatility of our stock price include the following:
. Our success, or lack of success, in developing and marketing our
products and services;
. Our ability to maintain compliance with OTCBB listing requirements;
. Our ability to raise the required capital to fund our business;
. The announcement of new products, services, or technological innovations
by us or our competitors;
. Changes in the executive leadership of the company;
. Quarterly fluctuations of our operating results;
. Changes in revenue or earning estimates; and
. Competition.
Based on the factors described above, recent trends should not be considered
reliable indicators of our future stock prices or financial results.
Our shares of common stock have been traded on the OTCBB. There has been limited
trading in our common stock and we cannot give assurances that such a market
will develop further or be maintained.
Investors should not expect the payment of dividends by us.
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We do not expect to pay dividends on our common stock in the foreseeable future.
Investors who require cash dividends from their investments should not purchase
our common stock or warrants.
Item 2. Properties
The Company leases 1,300 sq ft at 9454 Wilshire Blvd., Beverly Hills, CA 90212
at $72,000 annually, on a month-to-month tenancy, in a professional office
building. We believe the current facilities are adequate for the immediate
future.
Item 3. Legal Proceedings
We are not a party to any proceedings or threatened proceedings as of the date
of this filing.
11
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Market Information
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The Company's common stock commenced trading on the OTC Bulletin
Board ("OTCBB") on June 24, 2008. The following table sets forth, for
the periods indicated, the last sale prices for the common stock as reported
by the OTCBB.
Period High Low
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Fiscal 2010
1st Quarter $ 2.25 $ 0.16
Fiscal 2009
4th Quarter $ 7.00 $ 1.55
3rd Quarter $ 9.00 $ 1.95
2nd Quarter $ 4.99 $ 1.70
1st Quarter $ 9.00 $ 2.35
Holders and Dividends
- ---------------------
As of March 15, 2010 we had 738 shareholders of record holding 35,227,480
common shares.
We have not paid cash or stock dividends on our common stock. We have no
present plan to pay any dividends, but intend to reinvest our earnings, if any.
Recent Sales of Unregistered Securities
- ---------------------------------------
All sales of unregistered securities in fiscal 2009 have been previously
reported.
Issuer Purchase of Securities
- -----------------------------
None.
Item 6. Selected Financial Data
(Not Required)
12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In this report references to "TOMI" "we," "us," and "our" refer to TOMI
Environmental Solutions, Inc.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Securities and Exchange Commission ("SEC") encourages companies to disclose
forward-looking information so that investors can better understand future
prospects and make informed investment decisions. This report contains these
types of statements. Words such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "project," or "continue" or comparable terminology
used in connection with any discussion of future operating results or financial
performance identify forward-looking statements. You are cautioned not to place
undue reliance on the forward-looking statements, which speak only as of the
date of this report. All forward-looking statements reflect our present
expectation of future events and are subject to a number of important factors
and uncertainties that could cause actual results to differ materially from
those described in the forward-looking statements.
Overview of the Business
- ------------------------
TOMI Environmental Solutions, Inc. (formerly "The Ozone Man, Inc.") (The
"Company" or "TOMI") provides green, energy-efficient environmental solutions
for infectious disease control and air remediation through inspection, air
quality testing, training and treatment using our premier platform of UV Ozone
generation services, products and technologies. Our focus to combat Hospital
infection control was recently enhanced with the addition of (MRA) TM - Magnetic
Resolution Activation product line as an additional cost effective method to
control the spread of infectious disease and can also be used after a biological
attack of our homeland.
Our products and services cover a broad spectrum of commercial structures
including office buildings, medical facilities, hotel, single homes, multi-unit
residences and schools. Our products and services have also been used in
restaurants and dairies.
We commenced our operations in the fourth quarter of 2007 and since 2008 we
began to implement our business plan by acquiring for cash both the intellectual
property and methodology that forms the basis of our ozone treatment system that
is at the core of our plan. We have also opened five service hubs around the
country in California, New York/New Jersey, Florida and North Carolina with
service vans and certified, trained personnel and we expect to continue the
expansion of our facilities.
During the second quarter of 2009, we exited the status of development stage
enterprise because we commenced our planned principal operations and because we
earned revenues during the quarter ended June 30, 2009.
We purchased 19% of the outstanding interests of Advanced Disinfectant
Technologies LLC ("Adtec") in October 2009 for 190,000 shares of our common
stock and we have entered into a letter of intent to purchase the remaining
interest of 81% in Adtec. Although Adtec has had minimal revenues to date, as
it has essentially been a research and development company, we believe its
hydroxal mist fogger will be an integral part of our product line. Adtec's
advantage over its competitors rests in the efficiency of its fogger as it
disinfects quicker and therefore cuts down labor costs. Further, its hydrogen
peroxide concentration is four times less than others and is not caustic to
electronic equipment.
13
On November 15, 2009, we executed a license/sales agreement with Degmor
Industries, a leading environmental remediation firm based in New York City with
expertise in facility restoration after disaster related and environmental
contamination. Degmor has been servicing a broad array of clients in the New
York metro area for more than twenty years. Under the terms of the agreement,
we granted Degmor a license for our Ultraviolet byproduct free ozone generator,
High Tech Hydroxyl Mist Ultra-D Disinfection Systems and our UVGI and Filtration
Products to be used in the purification of indoor air, decontamination of
surfaces and elimination of infectious diseases. We will receive 12.5% of all
gross revenues earned by Degmor under the licensed technology. After the first
year of license agreement, we will receive a license fee of 10% of gross
revenues. We will also receive an annual recertification fee of $7,500 per year
after the first year of license agreement.
Business Outlook
- ----------------
TOMI's business growth strategy is to be "Your Professional Infectious Disease
Control & Air Remediation Company" We have developed and acquired premier
platform of UV Ozone generators, the Ultra-D fogger and the UVGI "Terminator"
Our strategy is continue to align our company with other premiere emergency
disaster relief ,environmental remediators and other general certified
remediators throughout the country. We will continue to train, certify and
license our products with a recurring fee from work performed in the treatment
of infectious disease control and air remediation. Our certification process
will allow over 20,000 certified remediators to be put into a position to add
revenue to their bottom line while waiting for an emergency or disaster to
happen. With our quality customer base in Rolyn and Degmor, TOMI potentially
has a great lead in the market. We have a sustainable competitive advantage
because of our unique technology. TOMI is not in a sector already crowded by
other venture backed companies, which leads us to the potential of material
growth prospects. We are also creating a standard in the industry that will
undoubtedly put the remediating industry in the forefront in the treatment of
indoor air pollution and infectious disease control. We also strive to generate
top-notch research on other air remediation solutions including hydroxyl
radicals.
We continue to pursue complementary businesses in the manufacturing of other
indoor air remediation products, testing labs and other indoor air maintenance
products.
During the fourth quarter of 2009, the Company began generating revenue related
to commercial projects, licensing fees and the sales from its equipment and
product line. TOMI continues to pursue revenue from multiple sources and
anticipates that our revenue stream will grow more diverse in the coming
quarters.
Critical Accounting Policies and Estimates
- ------------------------------------------
Our discussion and analysis of our financial condition and results of operations
are 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.
14
The SEC defines critical accounting policies as those that are, in management's
view, most important to the portrayal of our financial condition and results of
operations and most demanding of our judgment. We consider the following
policies 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 our results of operations, financial position and cash
flows.
Income (Loss) Per Share
- -----------------------
The computation of income (loss) per share is based on the weighted average
number of common shares outstanding during the periods presented. Diluted income
(loss) per common share is computed based on the weighted average number of
common shares outstanding plus the dilutive effect of common stock equivalents.
Revenue Recognition
- -------------------
For revenue from services and product sales, the Company recognized revenue in
accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition" (SAB
No. 104), which superseded Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB No. 101). SAB No. 104 requires that
four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) service has been rendered or delivery has
occurred; (3) the selling price is fixed and determinable; and (4)
collectibility is reasonably assured. Determination of criteria (3) and (4)
are based on management's judgment regarding the fixed nature of the selling
prices of the services rendered or products delivered and the collectibility of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowance, and other adjustments will be provided for in the same
period the related sales are recorded.
Intangible Assets
- -----------------
We report intangible assets in accordance with FASB Statement No. 142, Goodwill
and Other Intangible Assets which requires than an intangible asset with
indefinite useful economic life not be amortized, but instead be separately
tested for impairment using a fair-value approach. The evaluation of possible
impairment of intangible assets is affected by factors such as changes in
economic conditions and changes in operating performance. These factors could
cause us to recognize a material impairment charge as we assess the ongoing
expected cash flows and carrying amounts of intangible assets.
Fair Value Measurement
- ----------------------
Effective January 1, 2008, the Company adopted the provisions of ASC 820, "Fair
Value Measurements". ASC 820 defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles
and expands disclosures about fair value measurements. The implementation of
this standard did not have any impact on the Company's consolidated financial
positions, results of operations, or cash flows. The carrying amounts of cash
and cash equivalents, accounts payable and other accrued expenses approximate
fair value because of the short maturity of these items. The carrying amounts
of outstanding debt issued pursuant to credit agreements approximate fair value
because interest rates over the term of these instruments approximate current
market interest rates.
15
Stock-Based Compensation
- ------------------------
We account for stock-based compensation in accordance with FASB ASC 718,
Compensation - Stock Compensation. Under the provisions of FASB ASC 718, stock-
based compensation cost is estimated at the grant date based on the award's fair
value and is recognized as expense over the requisite service period. The
Company currently has one active stock-based compensation plan, TOMI
Environmental Solutions, Inc. Stock Option and Restricted Stock Plan (the
"Plan"). The Plan calls for the Company through a committee of its Board of
Directors, to issue up to 2,500,000 shares of restricted common stock or stock
options. The Company generally issues grants to its employees, consultants, and
board members. Stock options are granted with an exercise price equal to the
closing price of its common stock on the date of grant with a term no greater
than 10 years. Generally, stock options vest over two to four years. Incentive
stock options granted to shareholders who own 10% or more of the Company's
outstanding stock are granted at an exercise price that may not be less than
110% of the closing price of the Company's common stock on the date of grant
and have a term no greater than five years. At the date of grant, the Company
determines the fair value of the stock option award and recognizes compensation
expense over the requisite service period, which is generally the vesting period
of the award. The fair value of the stock option award is calculated using the
Black-Scholes option-pricing model. As of December 31, 2009, there have been no
grants made pursuant to the Plan.
Recent Accounting Pronouncements
- --------------------------------
In May 2009 FASB issued ASC 855 (formerly SFAS 165), Subsequent Events effective
for interim and annual financial periods ending after June 15, 2009. The
objective of this Statement is to establish general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In particular,
this Statement sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial statements.
It requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date, that is, whether that date
represents the date the financial statements were issued or were available to
be issued. It also includes the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements. It addresses the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. This
pronouncement had no material impact on the Company's financial statements.
On April 9, 2009 the FASB Issued ASC 825 (formerly Staff Position FAS 107-1 and
APB 28-1), Interim Disclosures about Fair Value of Financial Instruments. This
requires disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies as well as in annual financial
statements. This ASC also requires those disclosures in summarized financial
information at interim reporting periods. This ASC shall be effective for
interim reporting periods ending after June 15, 2009. This pronouncement had no
material impact on the Company's financial statements.
In June 2009 FASB issued ASC 810 (formerly SFAS 167 which is an amendment to
FASB Interpretation No. 46), Consolidation of Variable Interest Entities, to
require an enterprise to perform an analysis to determine whether the
enterprise's variable interest or interests give it a controlling financial
interest in a variable interest entity. This Statement requires ongoing
reassessments of whether an enterprise is the primary beneficiary of a variable
interest entity. This Statement eliminates the quantitative-based risks and
rewards calculation previously required for determining the primary beneficiary
16
of a variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity
that most significantly impact the entity's economic performance. This Statement
shall be effective as of the beginning of each reporting entity's first annual
reporting period that begins after November 15, 2009. This pronouncement had no
material impact on the Company's financial statements.
In June 2009 FASB issued ASC 105 (formerly SFAS 168), The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles. This ASC identifies the sources of accounting principles and the
framework for selecting the principles used in preparing the financial
statements of nongovernmental entities that are presented in conformity with
GAAP. ASC 105 arranges these sources of GAAP in a hierarchy for users to apply
accordingly. The GAAP hierarchy will include only two levels of GAAP:
authoritative and non-authoritative. This Codification supersedes all existing
non-SEC accounting and reporting standards. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. In the Board's view, the adoption of this ASC will not
change GAAP, and as a result, will not have a material impact on the company's
financial statements.
In August 2009, the FASB issued a new accounting standard which provides
additional guidance on the measurement of liabilities at fair value.
Specifically, when a quoted price in an active market for the identical
liability is not available, the new standard requires that the fair value of a
liability be measured using one or more of the valuation techniques that should
maximize the use of relevant observable inputs and minimize the use of
unobservable inputs. In addition, an entity is not required to include a
separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of a liability. We adopted this standard
in the fourth quarter of 2009 and the adoption did not have a material impact on
our consolidated financial statements.
In October 2009, the FASB issued a new accounting standard which provides
guidance for arrangements with multiple deliverables. Specifically, the new
standard requires an entity to allocate consideration at the inception of an
arrangement to all of its deliverables based on their relative selling prices.
In the absence of the vendor-specific objective evidence or third-party evidence
of the selling prices, consideration must be allocated to the deliverables based
on management's best estimate of the selling prices. In addition, the new
standard eliminates the use of the residual method of allocation. In October
2009, the FASB also issued a new accounting standard which changes revenue
recognition for tangible products containing software and hardware elements.
Specifically, tangible products containing software and hardware that function
together to deliver the tangible products' essential functionality are scoped
out of the existing software revenue recognition guidance and will be accounted
for under the multiple-element arrangements revenue recognition guidance
discussed above. Both standards will be effective for us in the first quarter of
2011. Early adoption is permitted. The adoption of this standard did not have a
material impact on our consolidated financial statements.
On April 13, 2010, the Company's Board of Directors rescinded the transaction
entered into in February 2009 with Taurus Global Opportunity Fund, canceled the
Series B stock and 350,000 common shares and paid the holders $3,563,062 from
the proceeds of the restricted investment.
17
Results of Operations for the Year Ended December 31, 2009 Compared to the Year
- -------------------------------------------------------------------------------
Ended December 31, 2008:
- ------------------------
We began our planned principal operations during the second quarter of 2009.
Revenue for the year ended December 31, 2009 and 2008 totaled $499,172 and
$10,335, respectively. Revenue and operating results for the two periods are
not comparable because the Company began its planned principal operations during
the second quarter of 2009 and was in its development stage during the prior
year.
Net (loss) income for the year ended December 31, 2009 totaled $14,898,545. The
net income for the year ended December 31, 2009 is primarily attributed to a
non-cash compensatory credit element from equity issuances of $18,312,558. On
March 31, 2009, the Company and Tiger Management, LLC amended the management
service agreement to establish the vesting period for the Series A Preferred
Stock issued. The vesting period was established to be the period June 2007
through December 31, 2010 and until the Company had reached at least one million
in annual gross revenue. Our Board of Directors' amended the Company's articles
of incorporation to reduce the conversion rate to common stock for its Series A
Preferred Stock from five shares to one share and to reduce the par value per
Series A Preferred Stock to $0.01 from $25. As a result, the Company recorded
$18,312,558 in compensation credit for equity issuance during the first quarter
of 2009. The Company had previously recorded $20,400,000 in non-cash other
general and administrative expenses during the year ended December 31, 2008.
The fair value was determined using the price of the stock on the date the board
approved the amendment to the agreement. Professional and consulting fees
include legal, accounting and consulting expenses. General and administrative
expenses primarily include payroll and payroll related expenses, rent and
depreciation.
Liquidity and Capital Resources
- -------------------------------
We plan on funding operations and our liquidity needs from licensing
arrangements, structured similarly to the Degmor Licensing Agreement that have
profit margins from sale of equipment, licensing of equipment, recurring income
from solution sales, along with a 12% income from annual gross sales for the
utilization of the equipment licensed. We also intend to continue to raise
equity capital through the sale of restricted stock. Furthermore, we are
currently negotiating equity and/or debt financing in the amount of up to $5
million dollars.
Off-Balance Sheet Arrangements
None.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
(Not Required)
Item 8. Financial Statements and Supplementary Data
See pages F-1 to F-16.
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
TOMI Environmental Solutions, Inc. (A Florida Corporation)
We have audited the accompanying consolidated balance sheets of TOMI
Environmental Solutions, Inc. and Subsidiary ("the Company") as of December 31,
2009 and 2008 and the related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for each of the two years in
the period ended December 31, 2009. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. Also, an audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TOMI Environmental Solutions,
Inc. and Subsidiary at December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the two years ended December 31,
2009 in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has had limited revenues for the year ended December
31, 2009 and has not been able to generate positive cash from operations for
the years ended December 31, 2009 and 2008. In addition, after giving effect
to the rescission transaction (see Note 12), the Company has a working capital
and stockholders' deficiency. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
those matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
WOLINETZ, LAFAZAN & COMPANY, P.C.
Rockville Centre, New York
April 15, 2010
F-1
TOMI Environmental Solutions, Inc.
----------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
ASSETS December 31, December 31,
------ 2009 2008
------------ ------------
Current Assets:
- ---------------
Cash and Cash Equivalents $ 13,126 $ 367,697
Investment - Restricted 3,563,062 -
Accounts Receivable 11,660 4,590
Notes Receivable 75,000 -
Deferred Cost 122,576 -
Prepaid Assets 2,751 18,710
------------ ------------
Total Current Assets 4,297,625 390,997
------------ ------------
Property and Equipment - net 306,633 372,990
------------ ------------
Other Assets:
- -------------
Intangible Assets, net 102,767 111,100
Security Deposits 5,416 6,620
------------ ------------
Total Other Assets 108,183 117,720
------------ ------------
TOTAL ASSETS $ 4,712,441 $ 881,707
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities:
- --------------------
Accounts Payable and Accrued Expenses $ 118,124 $ 175,327
Accrued Officers Compensation 827,868 546,536
Notes Payable - Current Portion 45,896 43,976
Deferred Revenue 199,022 -
Obligations to be settled through issuance
of common stock 268,500 -
Dividends Payable on Preferred Convertible Stock 205,685 90,667
------------ ------------
Total Current Liabilities 1,665,095 856,506
Long-term Liabilities:
- ----------------------
Non-Current Portion of Notes Payable - Other 20,468 66,365
------------ ------------
Total Liabilities 1,685,563 922,871
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
Stockholders' Equity (Deficit):
- -------------------------------
Cumulative Convertible Series A Preferred Stock,
$0.01 par value, 1,000,000 shares authorized,
510,000 shares issued and outstanding at
December 31, 2009 and December 31, 2008. 5,100 5,100
Cumulative Convertible Series B Preferred Stock,
$1,000 stated value, 7.5% cumulative dividend,
4,000 shares authorized, 3,250 shares issued and
outstanding at December 31, 2009 and none at
December 31, 2008. 3,250,000 -
Common Stock, $.01 par value, 75,000,000 shares
authorized; 35,277,480 and 34,474,515 shares
issued and outstanding at December 31, 2009 and
December 31, 2008, respectively. 352,774 344,744
Additional Paid-in Capital 9,683,721 22,758,193
Accumulated Deficit (9,489,312) (23,149,201)
Deferred compensation (1,284,855) -
------------ ------------
Total Stockholders' Equity (Deficit) 3,026,878 (41,164)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 4,712,441 $ 881,707
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
TOMI Environmental Solutions, Inc.
----------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
For the Year Ended For the Year Ended
December 31, 2009 December 31, 2008
------------------ ------------------
Net Revenues $ 499,172 $ 10,335
Cost of Sales 200,619 -
------------------ ------------------
Gross Profit 298,553 10,335
------------------ ------------------
Costs and Expenses:
- -------------------
Professional Fees 577,869 1,090,021
Other General and Administrative Expenses 1,370,871 1,248,225
Impairment on Investment, Research and Development 902,500 -
Management and Consulting Fees (18,312,558) 20,400,000
------------------ ------------------
Total Costs and Expenses (14,607,365) 22,738,246
------------------ ------------------
Income (Loss) from Operations 14,905,918 (22,727,911)
------------------ ------------------
Other Income (Expenses):
- ------------------------
Financing Costs - (14,444)
Loss of investment- restricted (1,238,656) -
Investment Loss 729,206 -
Interest Income 2,109 -
Interest Expense (9,482) (3,224)
------------------ ------------------
Total Other Expense (736,579) (17,668)
------------------ ------------------
Net Income (Loss) $ 14,169,339 $ (22,745,579)
================== ==================
Income (Loss) attributable to common stockholders
Net Income (Loss) $ 14,169,339 $ (22,745,579)
Preferred stock dividend 205,685 90,667
------------------ ------------------
Income (Loss) attributable to common stockholders $ 13,963,654 $ (22,836,246)
================== ==================
Net Income (Loss) per Common Share - Basic $ 0.40 $ (0.66)
================== ==================
Net Income (Loss) per Common Share - Diluted $ 0.39 $ (0.66)
================== ==================
Weighted Average Common Shares Outstanding - Basic 34,864,011 34,391,534
================== ==================
Weighted Average Common Shares Outstanding - Diluted 36,024,011 34,391,534
================== ==================
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
TOMI Environmental Solutions, Inc.
----------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------------
For the YearS Ended December 31, 2009 and December 31, 2008
-----------------------------------------------------------
SERIES A SERIES B
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED
--------------------- ----------------- --------------------- PAID-IN ACCUMULATED STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Balance -
12/31/2007 - $ - - $ - 34,940,437 $349,404 $ 29,900 $ (403,622) $ - $ (24,318)
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Return of
Common Stock in
Connection with
Reverse
Acquisition - - - - (42,475) (425) 425 - - -
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
Pursuant to a
Private
Placement @
$.20 per share - - - - 3,060,000 30,600 581,400 - - 612,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
Pursuant to a
Private
Placement @
$.50 per share - - - - 100,000 1,000 49,000 - - 50,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
Pursuant to a
Private
Placement @
$.90 per share - - - - 971,553 9,715 864,685 - - 874,400
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
Pursuant to a
Private
Placement @
$1.00 per share - - - - 25,000 250 24,750 - - 25,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
for services @
$2.00 per share - - - - 420,000 4,200 835,800 - - 840,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
upon Conversion
of Convertible
Debt @ $.0125
per share - - - - 2,000,000 20,000 5,000 - - 25,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Convertible
Preferred Stock
to Related Party
for Services
Rendered @ $.01
per share 510,000 12,750,000 - - - - 7,650,000 - - 20,400,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Repurchase and
Retirement of
Common Stock @
$.001 per share - - - - (7,000,000) (70,000) 63,000 - - (7,000)
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Dividends on
Cumulative
Convertible
Preferred Stock
as of 12/31/08 - - - - - - (90,667) - - (90,667)
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Net Loss for
the Period
January 1, 2008
to December
31, 2008 - - - - - - - (22,745,579) - (22,745,579)
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Balance -
12/31/2008 510,000 $ 12,750,000 - - 34,474,515 $344,744 $10,103,293 $(23,149,201) $ - $ (41,164)
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock in
Lieu of Cash
Compensation - - - - 162,965 1,630 418,196 - - 419,826
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
Pursuant to
a Private
Placement @
$5.00 per share,
net of
offering cost - - - - 350,000 3,500 1,546,500 - - 1,550,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Common Stock
Pursuant to
a Private
Placement @
$2.00 per share - - - - 100,000 1,000 199,000 - - 200,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Issuance of
Convertible
Series B
Preferred Stock
@ $1,000
per share - - 3,250 3,250,000 - - - - - 3,250,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Dividends on
Cumulative
Convertible
Series B
Preferred Stock - - - - - - (205,685) - - (205,685)
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Reversal of
dividends - - - - - - 90,667 - - 90,667
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Deferred
Compensation - - - - - - 2,138,808 - (2,138,808) -
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Amortization of
Deferred
Compensation - - - - - - - - 853,953 853,953
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Forgiveness of
Compensation - - - - - - 150,000 - - 150,000
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Common Stock
Issued to
Acquire LLC
Interest - - - - 190,000 1,900 900,600 - - 902,500
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Change of Par
Value for
Series A
Preferred stock
from $25 per
share to $.01
per share - (12,744,900) - - - - (5,567,658) - - (18,312,558)
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Net Income - - - - - - - 13,659,889 - 13,659,889
- ---------------- ------- ------------- ------ ---------- ----------- --------- ------------ ------------- ------------ -------------
Balance -
12/31/2009 510,000 $ 5,100 3,250 $3,250,000 35,277,480 $352,774 $ 9,683,721 $ (8,979,862) $(1,284,855) $ 3,026,878
================ ======= ============= ====== ========== =========== ========= ============ ============= ============ =============
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
TOMI Environmental Solutions, Inc.
----------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
For the Year Ended For the Year Ended
December 31, 2009 December 31, 2008
------------------ ------------------
OPERATING ACTIVITIES
Net Income (Loss) $ 13,659,889 $ (22,745,579)
Adjustments to reconcile net income (loss) to net
cash (used) by operating activities:
Depreciation and amortization 94,090 32,987
Amortization of Debt Discount - 14,444
Common and Preferred Stock Issued for Services 373,155 21,302,000
Common Stock Issued for Acquisition 902,500 -
Amortization of Deferred Compensation 853,953 -
Management and Consulting Fees (18,312,558) -
Increase in deferred revenue 199,022 -
Loss on investment- restricted 1,238,656 -
Changes in Operating Assets and Liabilities:
Decrease (Increase) in Security Deposits 1,204 (6,620)
(Increase) in Accounts Receivable (7,070) (4,590)
(Increase) in Prepaid and other current assets (106,617) (18,710)
Increase in Accounts Payable and Accrued Liabilities 689,299 705,007
------------------ ------------------
Net Cash (Used) in Operating Activities (414,477) (721,061)
------------------ ------------------
INVESTING ACTIVITIES
Purchase of Restricted Investments (4,801,562) -
Capital Expenditures (19,556) (405,977)
Purchase of Intangible Assets - (111,100)
------------------ ------------------
Net Cash (Used) in Investing activities (4,821,118) (517,077)
------------------ ------------------
FINANCING ACTIVITIES
Payment for Notes Receivables (75,000) -
Proceeds from the Sale of Common Stock 1,950,000 1,499,400
Expense of private placement (200,000) -
Purchase of Cancelled Common Stock - (7,000)
Proceeds from sale of Cumulative Convertible
Series B Preferred Stock 3,250,000 -
(Payment) Proceeds of Note Payable - Other (Net) (43,976) 110,340
------------------ ------------------
Net Cash Provided by Financing Activities 4,881,024 1,602,740
------------------ ------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (354,571) 364,602
------------------ ------------------
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 367,697 3,095
------------------ ------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 13,126 $ 367,697
================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense $ 9,482 $ 6,191
================== ==================
Income taxes $ - $ -
================== ==================
Supplemental Disclosures of Cash Flow Information:
- --------------------------------------------------
Non Cash Financing Activities:
Issuance of Common Stock for payment of accounts payable $ 46,670 $ -
================== ==================
Forgiveness of Accrued Compensation to Related Party $ 150,000 $ -
================== ==================
Dividends payable on preferred stock $ 205,685 $ 90,667
================== ==================
Return of Overissuance of Shares Related to
Recapitalization $ - $ 425
================== ==================
Reversal of dividends payable on preferred stock -
Series A $ (90,667) $ -
================== ==================
Change in stated value on preferred stock - Series A $ (12,744,900) $ -
================== ==================
Issuance of common stock for purchase of LLC interest $ 902,500 $ -
================== ==================
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF BUSINESS
TOMI Environmental Solutions, Inc. (formerly "The Ozone Man, Inc.") (The
"Company" or "TOMI") provides green, energy-efficient environmental solutions
for infectious disease control and air remediation through inspection, air
quality testing, training and treatment using our premier platform of UV Ozone
generation services, products and technologies. Our focus to combat Hospital
infection control was recently enhanced with the addition of (MRA) TM - Magnetic
Resolution Activation product line as an additional cost effective method to
control the spread of infectious disease and can also be used after a biological
attack of our homeland security.
Our products and services cover a broad spectrum of commercial structures
including office buildings, medical facilities, hotels, single homes, multi-unit
residences and schools. Our products and services have also been used in
restaurants and dairies.
During the second quarter of 2009, the Company exited the status of development
stage enterprise. The Company commenced its planned principal operations and
earned revenues during the quarter ended June 30, 2009. The Company changed its
name to TOMI Environmental Solutions, Inc.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
- -------------
The Company had limited revenues during the year ended December 31, 2009. The
Company has not been able to generate positive cash from operations for the
years ended December 31, 2009 and 2008. In addition, after giving effect to
the rescission transaction (see Note 11), the Company has a negative working
capital and stockholder deficiency. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
The Company plans on funding operations and liquidity needs from licensing
arrangements, equity and/or debt financing and continuing to raise funds through
the sale of its common stock.
There can be no assurance that additional funds required during the next year or
thereafter will be generated from operations. Should the Company seek
additional funds from external sources such as debt or additional equity
financings or other potential sources there can be no assurance that such funds
will available or available on terms acceptable to the Company or that they
will not have a significant dilutive effect on the Company's existing
stockholders. The lack of additional capital resulting from the inability to
generate cash flow from operations or to raise capital from external sources
would force the Company to substantially curtail or cease operations and would,
therefore, have a material adverse effect on its business.
Accordingly, the Company's existence is dependent on management's ability to
develop profitable operations and resolve its liquidity problems. The
accompanying financial statements do not include any adjustments related to the
recoverability or classification of asset-carrying amounts or the amounts and
classification of liabilities that may result should the Company be unable to
continue as a going concern.
F-6
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation
- ---------------------------
The accompanying financial statements include the accounts of TOMI (a Florida
Corporation) (Parent) and its wholly owned subsidiary, The Ozone Man, Inc. (a
Nevada Corporation). All significant 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 effect on previously reported results of operations or financial
position.
Restricted Investment
- ---------------------
The restricted investment in the amount of $3,563,062 at December 31, 2009 is
carried at net realizable value (See Note 12).
Property and Equipment
- ----------------------
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
which approximate three to five years.
Advertising Costs
- -----------------
The Company's policy is to charge advertising costs to operations as incurred.
The Company incurred advertising costs of $22,295 and $17,494 for the year ended
December 31, 2009 and 2008, respectively.
Income (Loss) Per Share
- -----------------------
The computation of income (loss) per share is based on the weighted average
number of common shares outstanding during the periods presented. Diluted income
(loss) per common share is computed based on the weighted average number of
common shares outstanding plus the dilutive effect of common stock equivalents.
For the year ended December 31, 2009 and December 31, 2008, the Company had
510,000 shares of Convertible Series A Preferred Stock outstanding at a
conversion rate of one common shares for every preferred share (510,000 common
shares) and 3,250 Series B Convertible Preferred Stock at a conversion rate of
two hundred common shares for every preferred share (650,000 common shares);
these common stock equivalents were included in diluted earnings per common
share for the year ended December 31, 2009. For the year ended December 31,
2008, diluted loss per common share is the same as basic loss per common share
because the effect of any potentially dilutive securities outstanding would be
anti-dilutive and has therefore, been excluded from the computation. The common
stock issued and outstanding has been included for all presented periods with
respect to the effect of the recapitalization.
F-7
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
- -------------------
For revenue from services and product sales, the Company recognized revenue in
accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition" (SAB
No. 104), which superseded Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB No. 101). SAB No. 104 requires that
four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) service has been rendered or delivery has
occurred; (3) the selling price is fixed and determinable; and (4)
collectibility is reasonably assured. Determination of criteria (3) and (4)
are based on management's judgment regarding the fixed nature of the selling
prices of the services rendered or products delivered and the collectibility of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowance, and other adjustments will be provided for in the same
period the related sales are recorded.
Fair Value of Financial Instruments
- -----------------------------------
The Company uses the following methods and assumptions in estimating our fair
value disclosures for financial instruments:
. Accounts Payable and Accrued Liabilities
The carrying amount reported in the balance sheets for accounts payable
approximates fair value because of relatively short payment terms.
. Cash Equivalents
The carrying amounts reported in the balance sheets for cash equivalents
approximate fair value because of the relatively short time to maturity.
. Accounts Receivable
The carrying amount reported in the balance sheets for accounts receivable
approximates fair value because of relatively short collection terms.
. Investment Securities
FASB ASC 820, Fair Value Measurements and Disclosures, requires us to determine
the fair value of financial assets and liabilities using a specified fair-value
hierarchy. The objective of the fair-value measurement of our financial
instruments is to reflect the hypothetical amounts at which we could sell an
asset or transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). FASB ASC 820 describes three
levels of inputs that may be used to measure fair value, as follows:
. Level 1 inputs are quoted prices in active markets for identical
assets or liabilities that the reporting entity has the ability to
access at the measurement date.
F-8
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
. Level 2 inputs are inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly.
. Level 3 inputs are unobservable inputs for the asset or liability
that are supported by little or no market activity and that are
significant to the fair value of the underlying asset or liability.
Our investments are classified within Level 2 of the fair-value hierarchy.
Long-Lived Assets
- -----------------
We review property and equipment and intangible assets for impairment whenever
events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. We measure recoverability of these assets by comparing the
carrying amounts to the future undiscounted cash flows the assets are expected
to generate. If property and equipment and intangible 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 have made no
material adjustments to our long-lived assets in any of the years presented.
Intangible assets with definite lives are amortized over their estimated useful
lives. We amortize our acquired intangible assets on a straight-line basis over
a 10 year period.
Income Taxes
- ------------
We account for income taxes in accordance with FASB ASC 740, Accounting for
Income Taxes, which requires that deferred tax assets and liabilities be
recognized using enacted tax rates for the effect of temporary differences
between the book and tax bases of recorded assets and liabilities. ASC 740 also
requires that deferred tax assets be reduced by a valuation allowance if it is
more likely than not that some or all of the deferred tax assets will not be
realized.
Stock-Based Compensation
- ------------------------
We account for stock-based compensation in accordance with FASB ASC 718,
Compensation - Stock Compensation. Under the provisions of FASB ASC 718, stock-
based compensation cost is estimated at the grant date based on the award's fair
value and is recognized as expense over the requisite service period. The
Company currently has one active stock-based compensation plan, TOMI
Environmental Solutions, Inc. Stock Option and Restricted Stock Plan (the
"Plan"). The Plan calls for the Company through a committee of its Board of
Directors, to issue up to 2,500,000 shares of restricted common stock or stock
options. The Company generally issues grants to its employees, consultants, and
board members. Stock options are granted with an exercise price equal to the
closing price of its common stock on the date of grant with a term no greater
than 10 years. Generally, stock options vest over two to four years. Incentive
stock options granted to shareholders who own 10% or more of the Company's
outstanding stock are granted at an exercise price that may not be less than
110% of the closing price of the Company's common stock on the date of grant
and have a term no greater than five years. At the date of grant, the Company
determines the fair value of the stock option award and recognizes compensation
expense over the requisite service period, which is generally the vesting
period of the award. The fair value of the stock option award is calculated
using the Black-Scholes option-pricing model. As of December 31, 2009, there
have been no grants made pursuant to the Plan.
F-9
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
- --------------------------------
In May 2009 FASB issued ASC 855 (formerly SFAS 165), Subsequent Events effective
for interim and annual financial periods ending after June 15, 2009. The
objective of this Statement is to establish general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In particular,
this Statement sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial statements.
It requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date, that is, whether that date
represents the date the financial statements were issued or were available to
be issued. It also includes the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements. It addresses the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. This
pronouncement had no material impact on the Company's financial statements.
On April 9, 2009 the FASB Issued ASC 825 (formerly Staff Position FAS 107-1 and
APB 28-1), Interim Disclosures about Fair Value of Financial Instruments. This
requires disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies as well as in annual financial
statements. This ASC also requires those disclosures in summarized financial
information at interim reporting periods. This ASC shall be effective for
interim reporting periods ending after June 15, 2009. This pronouncement had no
material impact on the Company's financial statements.
In June 2009 FASB issued ASC 810 (formerly SFAS 167 which is an amendment to
FASB Interpretation No. 46), Consolidation of Variable Interest Entities, to
require an enterprise to perform an analysis to determine whether the
enterprise's variable interest or interests give it a controlling financial
interest in a variable interest entity. This Statement requires ongoing
reassessments of whether an enterprise is the primary beneficiary of a variable
interest entity. This Statement eliminates the quantitative-based risks and
rewards calculation previously required for determining the primary beneficiary
of a variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity
that most significantly impact the entity's economic performance. This Statement
shall be effective as of the beginning of each reporting entity's first annual
reporting period that begins after November 15, 2009. This pronouncement had
no material impact on the Company's financial statements.
F-10
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 2009 FASB issued ASC 105 (formerly SFAS 168), The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles. This ASC identifies the sources of accounting principles and the
framework for selecting the principles used in preparing the financial
statements of nongovernmental entities that are presented in conformity with
GAAP. ASC 105 arranges these sources of GAAP in a hierarchy for users to apply
accordingly. The GAAP hierarchy will include only two levels of GAAP:
authoritative and non-authoritative. This Codification supersedes all existing
non-SEC accounting and reporting standards. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. In the Board's view, the adoption of this ASC will not
change GAAP, and as a result, will not have a material impact on the company's
financial statements.
In August 2009, the FASB issued a new accounting standard which provides
additional guidance on the measurement of liabilities at fair value.
Specifically, when a quoted price in an active market for the identical
liability is not available, the new standard requires that the fair value of a
liability be measured using one or more of the valuation techniques that should
maximize the use of relevant observable inputs and minimize the use of
unobservable inputs. In addition, an entity is not required to include a
separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of a liability. We adopted this standard
in the fourth quarter of 2009 and the adoption did not have a material impact on
our consolidated financial statements.
In October 2009, the FASB issued a new accounting standard which provides
guidance for arrangements with multiple deliverables. Specifically, the new
standard requires an entity to allocate consideration at the inception of an
arrangement to all of its deliverables based on their relative selling prices.
In the absence of the vendor-specific objective evidence or third-party evidence
of the selling prices, consideration must be allocated to the deliverables based
on management's best estimate of the selling prices. In addition, the new
standard eliminates the use of the residual method of allocation. In October
2009, the FASB also issued a new accounting standard which changes revenue
recognition for tangible products containing software and hardware elements.
Specifically, tangible products containing software and hardware that function
together to deliver the tangible products' essential functionality are scoped
out of the existing software revenue recognition guidance and will be accounted
for under the multiple-element arrangements revenue recognition guidance
discussed above. Both standards will be effective for us in the first quarter
of 2011. Early adoption is permitted. The adoption of this standard did not have
a material impact on our consolidated financial statements.
F-11
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
December 31, 2009 December 31, 2008
----------------- -----------------
Furniture and fixture $ 16,877 $ 13,339
Equipment 188,734 172,872
Vehicles 219,766 219,766
----------------- -----------------
425,377 405,977
Less: Accumulated depreciation 118,744 32,987
----------------- -----------------
$ 306,633 $ 372,990
================= =================
Depreciation was $85,757 and $32,987 during the year ended December 31, 2009
and 2008, respectively.
NOTE 4: INTANGIBLE ASSETS
On February 23, 2008 the Company purchased from S.C.O. Medallion Healthy Homes
LTD all intellectual property for the Medallion methodology system for $60,000.
On April 18, 2008 the Company purchased intellectual property from Air Testing
and Design, Inc. for $50,000. The property purchased includes patents,
trademarks, literature, drawings, schematics, vendor lists and rights to
purchase and resell equipment and other proprietary and intellectual property
associated with the ozone generators manufactured by the seller.
The Company began amortizing the intangible assets during the second quarter of
2009 over the estimated useful life of ten years. The Company recorded
amortization expense of $8,333 during the year ended December 31, 2009. These
assets are tested for impairment annually or if certain circumstances indicate
a possible impairment may exist in accordance with ASC 350, Intangibles -
Goodwill and Other. The carrying value of these assets is assessed at least
annually and an impairment charge is recorded if appropriate. As of December
31, 2009 there was no impairment.
NOTE 5: LONG TERM DEBT
The Company finances five field service vehicles using notes with various terms
that are recorded in the financial statements as notes payable. The notes expire
at various times through March 2012 and have interest rates from 8.8% to 10.1%
per annum and payable in monthly installments of $4,448 including principal and
interest and due by March, 2012. The remaining notes payable amount will mature
through 2012 as follows: 2010 - $45,896, 2011 - $16,153, 2012 - $4,316. Each
note is secured by the vehicle acquired.
F-12
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009 December 31, 2008
----------------- -----------------
Total Vehicle Notes $ 66,364 $ 110,341
Less: Current Portion 45,896 43,996
----------------- -----------------
Long term Portion $ 20,468 $ 66,345
================= =================
NOTE 6: SHAREHOLDERS' EQUITY
The Company's Board of Directors may, without further action by the Company's
stockholders, 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 preferred stock may be entitled to receive a preference payment
in the event of any liquidation, dissolution or winding-up of the Company
before any payment is made to the holders of the common stock. Furthermore,
the board of directors could issue preferred stock with voting and other
rights that could adversely affect the voting power of the holders of the
common stock.
On February 27, 2009 the Company completed the sale of 350,000 shares of its
common stock and 3,250 shares of Series B Convertible Preferred Stock for per
share purchase prices of $5.00 and $1,000, respectively. Gross proceeds from
the sale were $5,000,000. The Company incurred costs of $200,000 in connection
with the sale.
Under the terms of the Subscription Agreement, the Company created a new class
of preferred stock as Series B Convertible Preferred Stock ("Series B"). The
Company is authorized to issue 4,000 shares of its new Series B preferred stock.
The Series B stock is convertible into 200 shares of the Company's common stock
for every share of Series B stock. The Series B preferred has a stated value of
$1,000 per share, carries an annual cumulative dividend of 7.5% and is senior in
liquidation preference to all other classes of stock. As of December 31, 2009
the Company accrued $205,685 for these dividends.
The Company Board of Directors' amended the Company's articles of incorporation
on March 31, 2009 to reduce the par value per share for its Cumulative
Convertible Series A Preferred Stock ("Series A Preferred Stock") to $0.01 from
$25 and to reduce the conversion rate to common stock to one from five. The
effect of the change in par value has been reflected in the consolidated
financial statements. All share and per share data have been retroactively
adjusted to reflect the recapitalization.
On October 12, 2009, the Company purchased 19% of the issued and outstanding
member interests of Advanced Disinfectant Technologies LLC ("Adtec"). Pursuant
to the agreement the Company purchased the stated interest in Adtec for
consideration of 190,000 shares of its common stock valued at $902,500 based on
the closing price of the Company's common stock of $4.75 on October 12, 2009.
Adtec has had minimal revenues since inception and is essentially engaged in
research and development; as a result, the $902,500 acquisition cost has been
expensed.
On November 3, 2009, TOMI issued 100,000 common shares for $200,000 to Degmor
under a stock subscription agreement.
The Company issued 87,965 common shares valued at $419,826 during the year ended
December 31, 2009 as compensation for services rendered by consultants.
F-13
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: RELATED PARTY
On November 16, 2008, the Company entered into an employment agreement with its
President and CEO, Dr. Halden Shane, ("Employment Agreement"). As of December
31, 2009, the Company has accrued $827,868 for unpaid wages under the employment
agreement. On September 18, 2009, the Board of Directors accepted an offer by
Dr. Halden Shane to forego $150,000 in unpaid wages. The foregone compensation
has been recorded as an increase to additional paid-in capital.
On September 18, 2009, the Board of Directors granted 75,000 Shares of the
Company's common stock, valued at $146,250, to Dr. Halden Shane. The common
shares were valued based on the closing price per common share at the date of
grant. The common shares vest after two years of employment from the date of
grant. The fair market value of the unvested shares has been recorded as
deferred compensation at December 31, 2009.
On December 15, 2008 the Board of Directors approved the issuance of 510,000
shares of the Company's Series A Preferred Stock to Tiger Management, LLC, a
limited liability company wholly owned by the Company's CEO. The shares were
issued for management services performed by Tiger Management, LLC in 2007 and
2008 and were convertible into five shares of the Company's common stock at the
holder's option. The Company recorded a non-cash expense of $20,400,000 in
management and consulting fees during the year ended December 31, 2008, for
services rendered based on the fair value of the underlying common stock. The
fair value was determined using the price of the stock on the date the board
approved the issuance.
On March 31, 2009, the Company and Tiger Management, LLC amended the management
service agreement to include the vesting period for the Series A Preferred Stock
issued. The vesting period was established as June 2007 through December 31,
2010 and until the Company had reached at least one million dollars in annual
gross revenue. The Series A Preferred Stock issued to the CEO was also amended
to remove dividends; therefore, dividends accrued of $90,667 at December 31,
2008 were reversed during the three months ended March 31, 2009.
The Company's Board of Directors' amended its articles of incorporation on March
31, 2009 to reduce the conversion rate to common stock for its Series A
Preferred Stock from five shares to one and to reduce the par value per share of
Series A Preferred Stock to $0.01 from $25. As a result, of both the
establishment of a vesting period and the change in conversion rate, the Company
has recorded $18,312,558 in compensation credit for equity issuance during the
first quarter of 2009. The Company had previously recorded $20,400,000 in other
general and administrative expenses during the year ended December 31, 2008. At
December 31, 2009, the Company has recorded $1,138,605 in deferred compensation
related to the vesting feature and this deferred amount will be amortized over
the remaining 12 month period. Amortization of deferred compensation was
$853,953 for the year ended December 31, 2009. The fair value was determined
using the price of the stock on the date the board approved the amendment to
the agreement. All share and per share data have been retroactively adjusted
to reflect the recapitalization.
F-14
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company is subject to a legal proceeding and claim which has arisen in the
ordinary course of its business. This action, when finally concluded and
determined, will not in the opinion of management, have a material adverse
effect upon the financial position, liquidity and results of operations of the
Company.
NOTE 9: DEFERRED REVENUE
On November 15, 2009, the company executed a license/sales agreement with Degmor
Industries, an environmental remediation firm based in New York City. Under the
terms of the agreement, the Company granted Degmor a license for its Ultraviolet
byproduct free ozone generator, High Tech Hydroxyl Mist Ultra-D Disinfection
Systems and its UVGI and Filtration Products to be used in the purification of
indoor air, decontamination of surfaces and elimination of infectious diseases.
Further, the Company will provide Certification Programs to Degmor Industries.
The Company will receive an annual fee of 12.5% of all gross by Degmor under the
license agreement. After one year from the date of agreement, the annual fee
rate will drop to 10% sales by Degmor. Degmor will also pay the Company annual
Recertification fee of $7,500 after the first 12 month period; the initial
Certification fee is $0.
Under the license agreement, Degmor is required to purchase the necessary
equipment and solutions which includes Ultra-violet byproducts free ozone
generators, the High Tech Hydroxyl Mist Ultra D Disinfection System and the
Advanced UVGI and Filtration Products and all OSHA required safety equipment
and monitoring devices at a cost of $270,000. At December 31, 2009, Degmor
made a down payment of $199,022 for the purchase of the equipment. The related
equipment costing $122,576 had not been shipped to Degmor by year end and
therefore, at December 31, 2009, the related down payment and equipment cost has
been recorded as deferred revenue and deferred cost, respectively. Subsequent
to year end, Degmor paid the Company $70,000 for the remaining amount due for
the equipment purchase and the Company delivered the equipment to Degmor.
NOTE 10: NOTES RECEIVABLES
The Company executed a promissory note with Adtec in the amount of $75,000 on
November 23, 2009. The note is due on or before November 30, 2010. The note
bears interest of 8% per annum. In the event of default, the Company is
entitled to receive seven foggers at no charge or to deduct any unpaid amounts
from the acquisition of the remaining 81% of Adtec.
F-15
TOMI ENVIRONMENTAL SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: INCOME TAXES
At December 31, 2009 the Company had a deferred tax asset of approximately
$1,399,000 representing the benefit of its net operating loss carry-forwards.
The Company has not recognized any tax benefit or tax assets from these loss
carry-forwards loss carry due to the fact that realization of the tax benefit
is uncertain and therefore, a valuation allowance equal to 100% of the tax
benefit has been applied against the value of any tax asset arising from these
losses. The difference between the federal statutory tax rate of 34% and the
Company's effective tax rate of 0% is due to an increase in the valuation
allowance of approximately $767,000 in 2009.
NOTE 12: SUBSEQUENT EVENTS
The Company has evaluated subsequent events through April 15, 2010.
On April 13, 2010, the Company's Board of Directors rescinded the transaction
entered into in February 2009 with Taurus Global Opportunity Fund, canceled the
Series B stock and 350,000 common shares and paid the holders $3,563,062 from
the proceeds of the restricted investment. (See Note 6)
F-16
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
During the two most recent fiscal years we have not had a change in, or
disagreement with, our independent registered public accounting firm.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
- ----------------------------------
Our management, with the participation of our Principal Executive Officer who is
also our Principal Financial Officer, conducted an evaluation of the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this Annual Report (December 31, 2009, as is defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. 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
Securities Exchange Act of 1934 is (i) recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission'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 concluded that, as of
the end of the period covered by this Annual Report, our disclosure controls and
procedures were effective. Our management has concluded that the financial
statements included in this 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 generally accepted accounting principles.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of future
events.
Management's Report on Internal Control Over Financial Reporting
- ----------------------------------------------------------------
Management is responsible for establishing and maintaining adequate internal
control over our financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)
of 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 for external purposes in
accordance with accounting principles generally accepted in the United States
of America.
Our internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of our
assets, (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and
that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors, and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on the
financial statements.
19
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Our management, with the participation of our Principal Executive Officer,
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, our Principal Executive Officer concluded
that, as of the end of the period covered by this Annual Report, our internal
control over financial reporting was effective.
This Annual Report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this Annual Report.
Changes in Internal Control Over Financial Reporting
- ----------------------------------------------------
During our most recent fiscal quarter, 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.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our executive officers and directors, their ages and biographical
information are presented below. Our bylaws require three directors who
serve until our next annual meeting or until each is succeeded by a
qualified director. Our executive officers are appointed by our Board of
Directors and serve at its discretion. There are no existing family
relationships between or among any of our executive officers or directors.
Name Age Position Held Director Since
- -------------------- --- ------------------------ --------------
Halden S. Shane 65 Chief Executive Officer, October 2007
Chairman of the Board
Richard L. Johnson 74 Secretary, Director October 2007
Willie L. Brown, Jr. 75 Director October 2007
Harold W. Paul 61 Director June 2009
20
Halden S. Shane: Dr. Shane has been our Chairman since the Company's inception.
For the past three years he has served as President and CEO of Tiger Management
International, a private management company that deals in business management of
private and public companies. Dr. Shane resigned all positions and closed Tiger
Management International in 2009. Dr. Shane was founder and CEO of Integrated
Healthcare Alliance, Inc. and also founder and General Partner of Doctors
Hospital West Covina, California. Prior thereto, Dr. Shane practiced podiatric
surgery specializing in ankle arthroscopy.
Richard L. Johnson: Since his admission to the California State Bar Association
in 1961, Mr. Johnson has served as a business manager/attorney and consultant to
a variety of individuals and companies. He is presently active in private
practice in Los Angeles, California.
Willie Brown, Jr.: Mr. Brown has served two terms as the Mayor of the City and
County of San Francisco (1996-2004). Prior to his service as Mayor, Mr. Brown
served as speaker of the California State assembly from 1980 through 1995. Mr.
Brown had also been a member of the state assembly since 1964 and has served on
the Boards of California State University and Calpers.
Harold W. Paul: Mr. Paul has been a director since June 2009. He has been
engaged in the private practice of law for thirty five years, primarily as a
securities specialist. Mr. Paul has been company counsel to public companies
listed on the Amex, Nasdaq and OTC exchanges. He has served as a director for
six public companies in a variety of industries, including technology and
financial services. He holds a BA degree from SUNY at Stony Brook and a JD from
Brooklyn Law School and is admitted to practice in New York and Connecticut.
Audit Committee
- ---------------
The Company's audit committee was established in June 2009 and is currently
comprised of Willie L. Brown, Jr. and Harold W. Paul.
Our Board has determined that it does not have a member of its Audit Committee
that qualifies as an "audit committee financial expert" as defined in Item
401(e) of Regulation S-B, and is "independent" as the term is used in Item
7(d)(3)(iv) of Schedule 14A under the Exchange Act.
We believe that retaining an independent director who would qualify as an "audit
committee financial expert" would be overly costly and burdensome and is not
warranted in our current circumstances.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
executive officers and persons who own more than ten percent of a registered
class of our equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
our common stock. Officers, directors and greater than ten-percent beneficial
owners are required by SEC regulations to furnish us with copies of all Section
16(a) reports they file. We believe no reports were required to be filed during
the past fiscal year.
21
Code of Ethics
- --------------
The Board adopted a Code of Ethics in 2008 applies to, among other persons,
Board members, officers including our Chief Executive Officer, contractors,
consultants and advisors. Our Code of Ethics sets forth written standards
designed to deter wrongdoing and to promote:
1) honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
2) full, fair, accurate, timely and understandable disclosure in reports
and documents that we file with or submit to the SEC and in other public
communications made by us;
3) compliance with applicable governmental laws, rules and regulations;
4) the prompt internal reporting of violations of the Code of Ethics to
an appropriate person or persons identified in the Code of Ethics; and
5) accountability for adherence to the Code of Ethics.
Item 11. Executive Compensation
Executive Officer Compensation
- ------------------------------
- ------------- ---- ---------- ----- ----------- ------ --------- --------- ------- -------
Name and Year Salary Bonus Stock Option Non- Change in All Total
Principal ($) ($) Awards Awards Equity Pension Other ($)
Position ($) ($) Incentive Value and Compen-
Plan Non- sation
Compen- qualified ($)
sation Deferred
($) Compen-
sation
Earnings
($)
- ------------- ---- ---------- ----- ----------- ------ --------- --------- ------- -------
Halden Shane, 2009 20,000 (1) - 146,250 (2) - - - - 166,250
PEO, PFO 2008 25,000 (1) - - - - - - 25,000
2007 - - - - - - - -
- ------------- ---- ---------- ----- ----------- ------ --------- --------- ------- -------
(1) Does not include deferred compensation in the amounts of $827,868 and
$546,536 as of December 31, 2009 and December 31, 2008 respectively.
(2) On September 18, 2009, Dr. Shane was issued 75,000 shares of common stock
valued at $146,250 based on the closing price on that date. The shares vest
2 years after issuance provided he is still employed by the company at that
time. The fair market value of the shares has been recorded as deferred
compensation as of September 30, 2009.
The following discussion addresses any and all compensation awarded to, earned
by or paid to our named executive officers for the fiscal years ended December
31, 2009. We have not had a bonus, profit sharing, or deferred compensation plan
for the benefit of employees, officers or directors.
22
We have not paid any salaries or other compensation to officers or directors for
their service on the Board of Directors for the year ended December 31, 2009 and
2008. In September 2009 the board adopted a resolution to compensate outside
directors 20,000 options per year and meeting fees payable annually payable on
January 2 of each year. We have entered into an employment agreement with our
CEO, Dr. Halden Shane, effective January 1, 2009. Dr. Shane was paid $20,000
and $25,000 during the year ended December 31, 2009 and 2008, respectively. At
December 31, 2009 and 2008, Dr. Shane was owed $827,868 and $546,536,
respectively, in unpaid salary. It is intended Dr. Shane will defer any
compensation until such time as business operations provide sufficient cash flow
to provide for salaries.
Retirement or Change of Control Arrangements
- --------------------------------------------
We do not offer retirement benefit plans to our executive officers, nor have we
entered into any contract, agreement, plan or arrangement, whether written or
unwritten, that provides for payments to a named executive officer at or in
connection with the resignation, retirement or other termination of a named
executive officer, or a change in control of the company or a change in the
named executive officer's responsibilities following a change in control.
Compensation of Directors
- -------------------------
A directors' compensation plan was adopted on September 18, 2009 and is
comprised of 20,000 options for outside directors upon appointment or election
to the board and 20,000 options issued annually the first day of each calendar
year that the outside director is continuing in service, together with cash
fees for each committee or subcommittee meeting attended. The options are to be
issued from the company's stock option plan. Meeting fees are set at $1,000 and
$500 for each committee or subcommittee meeting, respectively, attended in
person, and $750 and $375 for each committee and subcommittee meeting,
respectively, attended by telephone.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Securities Under Equity Compensation Plans
- ------------------------------------------
The Board of Directors adopted the 2008 Stock Option Plan comprised of 2,500,000
shares and the plan was approved by the shareholders on May 13, 2009.
In January 2010, Willie L. Brown, Jr. and Harold W. Paul were issued 20,000
options each.
Beneficial Ownership
- --------------------
The following table sets forth the beneficial ownership of our outstanding
common stock by our management and each person or group known by us to own
beneficially more than 5% of our outstanding common stock. Beneficial ownership
is determined in accordance with SEC rules and regulations, which generally
requires voting or investment power with respect to securities. Except as
indicated by footnote, the persons named in the table below have sole voting
power and investment power with respect to all shares of common stock shown as
beneficially owned by them. The percentage of beneficial ownership is based on
35,227,480 shares of common stock outstanding as of March 15, 2010.
23
CERTAIN BENEFICIAL OWNERS
Name and address of Amount and nature of Percent
beneficial owners beneficial owner of class
- --------------------------------- -------------------- -------
Shane Family Trust (1) 5,000,000 14.2%
11710 Wetherby Lane
Los Angeles, CA 90077
Richard L. Johnson 2,300,000 6.5%
9454 Wilshire Blvd., Penthouse
Beverly Hills, CA 90212
Willie Brown, Jr. (2) 120,000 *%
9454 Wilshire Blvd., Penthouse
Beverly Hills, CA 90212
Harold W. Paul (2) 251,000 1%
9454 Wilshire Blvd., Penthouse
Beverly Hills, CA 90212
Juliann Gold 3,512,500 10.0%
9903 Santa Monica Blvd
Beverly Hills, CA 90212
Roar Investment LLC 2,512,900 7.1%
9903 Santa Monica Blvd
Beverly Hills, CA 90212
Belinha Shane (3) 3,000,000 8.5%
11710 Wetherby Lane
Los Angeles, CA 90077
Directors and Officers as a Group 7,671,000 21.8%
(1) Halden Shane is a trustee of the Share Family Trust.
(2) Includes 20,000 options currently exercisable.
(3) Belinha Shane is the wife of Halden Shane. He disclaims beneficial
ownership of any shares held in her name.
Item 13. Certain Relationships and Related Transactions, and
Director Independence
Transactions with Related Parties
- ---------------------------------
We have not engaged in any transactions during the past fiscal year involving
our executive officers, directors, more than 5% stockholders or immediate family
members of such persons.
Director Independence
- ---------------------
None of our directors are independent directors as defined by NASD Rule
4200(a)(15).
24
Item 14. Principal Accountant Fees and Services
Accountant Fees
- ---------------
The following table presents the aggregate fees billed for each of the last two
fiscal years by our independent registered public accounting firm Wolinetz,
Lafazan & Company, P.C., Certified Public Accountants, in connection with the
audit of our financial statements and other professional services rendered by
that accounting firm.
2009 2008
-------- --------
Audit fees $ 60,630 $ 37,000
Audit-related fees 0 0
Tax fees 0 0
All other fees $ 0 $ 0
Audit fees represent the professional services rendered for the audit of our
annual financial statements and the review of our financial statements included
in quarterly reports, along with services normally provided by the accounting
firm in connection with statutory and regulatory filings or engagements. Audit-
related fees represent professional services rendered for assurance and related
services by the accounting firm that are reasonably related to the performance
of the audit or review of our financial statements that are not reported under
audit fees.
Tax fees represent professional services rendered by the accounting firm for tax
compliance, tax advice, and tax planning. All other fees represent fees billed
for products and services provided by the accounting firm other than the
services reported for the other categories.
Pre-approval Policies
- ---------------------
Our audit committee evaluates and approves the scope, cost and engagement of an
auditor and has done so this year. The Company does not otherwise rely on pre-
approval policies and procedures.
Item 15. Exhibits
No. Description
- --- -----------
31.1 CEO's Certification Pursuant to Rule 13a-14 and 15d-14 Under
The Securities Exchange Act of 1934, As Amended
31.2 CFO's Certification Pursuant to Rule 13a-14 and 15d-14 Under
The Securities Exchange Act of 1934, As Amended
32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
25
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned who is duly
authorized.
TOMI ENVIRONMENTAL SOLUTIONS, INC.
Date: April 15, 2010
By: /s/ Halden Shane
- ---------------------------
Halden Shane
Principal Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: April 15, 2010
By: /s/ Halden Shane
- ---------------------------
Halden Shane
Principal Executive Officer
Principal Financial and Accounting Officer
Date: April 15, 2010
By: /s/Richard Johnson
- ---------------------------
Richard Johnson
Secretary and Director
Date: April 15, 2010
By: /s/Willie Brown, Jr.
- ---------------------------
Willie Brown, Jr.
Director
Date: April 15, 2010
By: /s/Harold W. Paul
- ---------------------------
Harold W. Paul
Director
26