TRANSBIOTEC, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
TRANSBIOTEC, INC.
(A Development Stage Company)
Financial Statements
TABLE OF CONTENTS
Page
----
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of operations 3
Statements of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 7
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
TransBioTec, Inc.
Seal Beach, California
I have audited the accompanying balance sheets of TransBioTec, Inc. (a
development stage company) as of December 31, 2009 and 2010 and the related
statements of operations, stockholders' equity and cash flows for the years then
ended, and for the period from July 19, 2004 (inception) through December 31,
2010. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of TransBioTec, Inc. as of December
31, 2009 and 2010, and the results of its operations and its cash flows for the
years then ended, and for the period from July 19, 2004 (inception) through
December 31, 2010 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements the Company has suffered recurring losses from operations
and has a working capital deficit and stockholders' equity deficit that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 7. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Aurora, Colorado /s/ Ronald R. Chadwick, P.C.
August 17, 2011 RONALD R. CHADWICK, P.C.
1
TransBioTec,
Inc.
(A Development Stage Company)
BALANCE SHEETS
June 30, 2011
Dec. 31, 2009 Dec. 31, 2010 (Unaudited)
------------- ------------- -------------
ASSETS
Current assets
Cash $ 704 $ 30,695 $ 44,421
------------- ------------- -------------
Total current assets 704 30,695 44,421
------------- ------------- -------------
Fixed assets - net 9,422 2,043 1,273
------------- ------------- -------------
Total Assets 10,126 32,738 45,694
============= ============= ==============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 294,793 $ 279,840 $ 74,965
Accrued interest payable 260,071 508,180 516,678
Notes payable - current -
related parties 577,256 594,966 558,534
Notes payable - current 4,657 - -
Related party payables 361,565 130,565 157,827
Other payables 97,464 97,464 97,473
------------- ------------- -------------
Total current liabilties 1,595,806 1,611,015 1,405,477
------------- ------------- -------------
Notes payable - related
parties 153,879 153,879 -
------------- ------------- -------------
Total Liabilities 1,749,685 1,764,894 1,405,477
------------- ------------- -------------
Stockholders' Equity
Common stock, $.01 par
value; 100,000,000 shares
authorized;2,961,000 shares
issued and 2,161,000
outstanding (2009),
3,117,000 shares issued and
2,342,000 outstanding
(2010), & 3,475,544 shares
issued and 2,779,544
outstanding (2011) 29,610 31,170 34,755
Additional paid in capital 7,602,009 8,098,398 8,705,779
Treasury stock at cost;
800,000 (2009), 775,000
(2010) & 696,000 (2011)
common shares (250,000) (242,187) (217,499)
Deficit accumulated
during the development
stage (9,121,178) (9,619,537) (9,882,818)
------------- ------------- -------------
Total Stockholders' Equity (1,739,559) (1,732,156) (1,359,783)
------------- ------------- --------------
Total Liabilities and
Stockholders' Equity $ 10,126 $ 32,738 $ 45,694
============= ============= ==============
The accompanying notes are an integral part of the financial
statements.
2
TransBioTec, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Period From
Period From July 19, 2004
Six Months Six Months July 19, 2004 (Inception)
Ended Ended (Inception) To
Year Ended Year Ended June 30, 2010 June 30, 2011 To June 30, 2011
Dec. 31, 2009 Dec. 31, 2010 (Unaudited) (Unaudited) Dec. 31, 2010 (Unaudited)
--------------- ---------------- --------------- ---------------- --------------- ----------------
Revenues $ - $ - $ - $ - $ - $ -
--------------- ---------------- --------------- ---------------- --------------- ----------------
- - - - - -
--------------- ---------------- --------------- ---------------- --------------- ----------------
Operating expenses:
Amortization &
depreciation 10,140 7,379 3,690 770 74,832 75,602
General and
administrative 790,323 242,383 159,595 150,062 9,044,362 9,194,424
--------------- ---------------- --------------- ---------------- --------------- ----------------
800,463 249,762 163,285 150,832 9,119,194 9,270,026
--------------- ---------------- --------------- ---------------- --------------- ----------------
Gain (loss) from
operations (800,463) (249,762) (163,285) (150,832) (9,119,194) (9,270,026)
--------------- ---------------- --------------- ---------------- --------------- ----------------
Other income (expense):
Interest expense (208,001) (248,597) (124,300) (112,449) (500,343) (612,792)
--------------- ---------------- --------------- ---------------- --------------- ----------------
Income (loss) before
provision for
income taxes (1,008,464) (498,359) (287,585) (263,281) (9,619,537) (9,882,818)
Provision for income
tax - - - - - -
--------------- ---------------- --------------- ---------------- --------------- ----------------
Net income (loss) $ (1,008,464) $ (498,359) $ (287,585) $ (263,281) $(9,619,537) $ (9,882,818)
=============== ================ =============== ================ =============== ================
Net income (loss) per
share
(Basic and fully
diluted) $ (0.48) $ (0.23) $ (0.13) $ (0.10)
=============== ================ =============== ================
Weighted average
number of
common shares
outstanding $ 2,109,150 $ 2,184,000 $ 2,166,000 $ 2,618,863
=============== ================ =============== ================
The accompanying notes are an integral part of the
financial statements.
3
TransBioTec, Inc.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During The
Amount Paid in Treasury Development Stockholders'
Shares ($.01 Par) Capital Stock Stage Equity
------------- -------------- --------------- ------------- -------------- -------------
Balances at December 31, 2008 2,865,200 $ 28,652 $ 7,483,467 $ (250,000) $ (8,112,714) $ (850,595)
Option exercise 50,000 500 4,500 5,000
Sales of common stock 25,000 250 62,250 62,500
Stock issued for note
conversion 20,800 208 51,792 52,000
Net income (loss) for the year (1,008,464) (1,008,464)
------------- -------------- --------------- ------------- -------------- -------------
Balances at December 31, 2009 2,961,000 $ 29,610 $ 7,602,009 $ (250,000) $ (9,121,178) $ (1,739,559)
Sales of common stock (26,000
shares newly issued and 25,000
shares sold out of treasury) 26,000 260 119,427 7,813 127,500
Stock issued for debt 130,000 1,300 323,700 325,000
Option issuances 53,262 53,262
Net income (loss) for the year (498,359) (498,359)
------------- -------------- --------------- ------------- -------------- -------------
Balances at December 31, 2010 3,117,000 $ 31,170 $ 8,098,398 $ (242,187) $ (9,619,537) $ (1,732,156)
Option exercise 10,000 100 900 1,000
Sales of common stock (79,000
shares sold out of treasury) - - 172,812 24,688 197,500
Stock issued for note
conversion 288,544 2,885 287,159 290,044
Stock issued for debt 60,000 600 146,510 147,110
Net income (loss) for the
period (263,281) (263,281)
------------- -------------- --------------- ------------- -------------- -------------
Balance at June 30, 2011 -
Unaudited 3,475,544 $ 34,755 $ 8,705,779 $ (217,499) $ (9,882,818) $ (1,359,783)
============= ============== =============== ============= ============== =============
The accompanying notes are an integral part of the
financial statements.
4
TransBioTec, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period From
Six Months Six Months Period From July 19, 2004
Ended Ended July 19, 2004 (Inception) To
Year Ended Year Ended June 30, 2010 June 30, 2011 (Inception) To June 30, 2011
Dec. 31, 2009 Dec. 31, 2010 (Unaudited) (Unaudited) Dec. 31, 2010 (Unaudited)
--------------- -------------- --------------- --------------- ------------- --------------
Cash Flows From
Operating Activities:
Net income (loss) $ (1,008,464) $ (498,359) $ (287,585) $ (263,281) $ (9,619,537) $ (9,882,818)
Adjustments to
reconcile net loss
to net cash provided
by (used for)
operating activities:
Amortization &
depreciation 10,140 7,379 3,690 770 74,832 75,602
Compensatory equity
issuances - 53,262 53,262 - 6,339,317 6,339,317
Asset write offs 37,513 - - - 37,513 37,513
Other assets 283 - - - - -
Accrued payables 536,281 342,966 215,474 81,392 1,321,346 1,402,738
Note pay. benefical
conversion expense - - - 203,564 203,564
Original issue
discount - interest
expense 40,000 - - - 40,000 40,000
--------------- -------------- --------------- --------------- ------------- --------------
Net cash provided
by (used for)
operating activities (384,247) (94,752) (15,159) (181,119) (1,602,965) (1,784,084)
--------------- -------------- --------------- --------------- ------------- --------------
Fixed asset purchases - - - - (76,875) (76,875)
--------------- -------------- --------------- --------------- ------------- --------------
Net cash provided
by (used for)
investing activities - - - - (76,875) (76,875)
--------------- -------------- --------------- --------------- ------------- --------------
(Continued On Following Page)
The accompanying notes are an integral part of the financial statements.
5
TransBioTec, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued From Previous Page)
Period From
Six Months Six Months Period From July 19, 2004
Ended Ended July 19, 2004 (Inception) To
Year Ended Year Ended June 30, 2010 June 30, 2011 (Inception) To June 30, 2011
Dec. 31, 2009 Dec. 31, 2010 (Unaudited) (Unaudited) Dec. 31, 2010 (Unaudited)
--------------- -------------- --------------- --------------- ------------- --------------
Cash Flows From Financing
Activities:
Notes & loans
payable - borrowings 253,651 5,000 5,000 2,845 770,261 773,106
Notes & loans
payable - payments (19,469) (7,757) (2,328) (6,500) (27,226) (33,726)
Repurchase of
treasury stock - - - - (250,000) (250,000)
Equity issuances 67,500 127,500 12,500 198,500 1,217,500 1,416,000
--------------- -------------- --------------- --------------- ------------- --------------
Net cash provided by
(used for) financing
activities 301,682 124,743 15,172 194,845 1,710,535 1,905,380
--------------- -------------- --------------- --------------- ------------- --------------
Net Increase (Decrease)
In Cash (82,565) 29,991 13 13,726 30,695 44,421
Cash At The Beginning Of
The Period 83,269 704 704 30,695 - -
--------------- -------------- --------------- --------------- ------------- --------------
Cash At The End Of The
Period $ 704 $ 30,695 $ 717 $ 44,421 $ 30,695 $ 44,421
=============== ============== =============== =============== ============= ==============
Schedule Of Non-Cash
Investing And Financing
Activities
Compensatory equity
issuances $ - $ 53,262 $ - $ - $ 6,339,317 $ 6,339,317
Debt converted to
capital $ 52,000 $ 325,000 $ - $ 437,154 $ 377,000 $ 814,154
Supplemental
Disclosure
Cash paid for
interest $ 544 $ 488 $ 244 $ - $ 6,672 $ 6,672
Cash paid for
income taxes $ - $ - $ - $ - $ - $ -
The accompanying notes are an integral part of
the financial statements.
6
TRANSBIOTEC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TransBioTec, Inc. (the "Company") was incorporated in the State of California on
July 19, 2004. The Company has developed and plans to market and sell a
non-invasive alcohol sensing system which includes an ignition interlock. The
Company is currently considered to be in the development stage, and has not
generated revenues from its activities.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and cash equivalents
-------------------------
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Accounts receivable
-------------------
The Company reviews accounts receivable periodically for collectability and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary. At December 31, 2009 and 2010, and June 30, 2011 the Company
had no balance in accounts receivable or the allowance for doubtful accounts.
Property and equipment
----------------------
Property and equipment are recorded at cost and depreciated under straight line
methods over each item's estimated useful life.
Revenue recognition
-------------------
Revenue is recognized on an accrual basis as earned under contract terms. The
Company has had no revenues to date
7
TRANSBIOTEC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont'd)
Advertising costs
-----------------
Advertising costs are expensed as incurred. The Company recorded no material
advertising costs in 2009 or 2010, or for the six months ended June 30, 2011.
Income tax
----------
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740
deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Net income (loss) per share
---------------------------
The net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
Financial Instruments
---------------------
The carrying value of the Company's financial instruments, as reported in the
accompanying balance sheets, approximates fair value.
Long-Lived Assets
-----------------
In accordance with ASC 350, the Company regularly reviews the carrying value of
intangible and other long-lived assets for the existence of facts or
circumstances, both internally and externally, that may suggest impairment. If
impairment testing indicates a lack of recoverability, an impairment loss is
recognized by the Company if the carrying amount of a long-lived asset exceeds
its fair value.
Products and services, geographic areas and major customers
-----------------------------------------------------------
The Company is currently in the developmental stage and has no revenue.
8
TRANSBIOTEC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont'd)
Stock based compensation
------------------------
The Company accounts for employee and non-employee stock awards under ASC 718,
whereby equity instruments issued to employees for services are recorded based
on the fair value of the instrument issued and those issued to non-employees are
recorded based on the fair value of the consideration received or the fair value
of the equity instrument, whichever is more reliably measurable.
NOTE 2. RELATED PARTY TRANSACTIONS
At year end 2009 and 2010, and June 30, 2011 the Company had payables due to
officers for accrued compensation of $361,565, $130,565, and $157,827.
In 2009 a related party shareholder converted $52,000 in note principal and
interest into 20,800 common shares. In 2010 an officer converted $325,000 in
compensation owed him into 130,000 common shares. During the six months ended
June 30, 2011 related party shareholders converted $290,044 in note principal
and interest into 288,544 common shares.
NOTE 3. FIXED ASSETS
Fixed asset values recorded at cost are as follows:
(Unaudited)
December 31, March 31,
2009 2010 2011
---- ---- ----
Automobile $ 33,383 $ 33,383 $ 33,383
Office and Lab Equipment 31,896 31,896 31,896
Furniture and fixtures 11,596 11,596 11,596
------ ------ ------
76,875 76,875 76,875
Less accumulated depreciation (67,453) (74,832) (75,602)
--------- -------- --------
Total $ 9,422 $ 2,043 $ 1,273
========= ======== ========
9
TRANSBIOTEC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
NOTE 3. FIXED ASSETS (cont'd)
Depreciation expense in 2009 and 2010, and for the six months ended June 30,
2011 was $10,140, $7,379 and $770 respectively.
NOTE 4. NOTES PAYABLE
(Unaudited)
December 31, June 30,
2009 2010 2011
---- ---- ----
Note payable to related party,
unsecured, due 8/3/2012,
interest rate 0% $ 1,950 $ 1,950 $ 1,950
Note payable to related party,
unsecured, due 9/17/2008,
convertible at holder's
option at $1 per share,
interest rate 10% plus agreed
upon amounts $187,256 $184,156 $ 0
Note payable to related party,
unsecured, due 12/15/2013,
monthly interest due,
convertible at holder's
option at $2.50 per share,
interest rate 22.1% $150,000 $150,000 $150,000
Note payable to related party,
unsecured, due 05/28/2009,
convertible at holder's option
at $2.50 per share, original
issue discount of 20%, with
interest at $444 per day after
due date $240,000 $240,000 $240,000
Note payable to related party,
unsecured, due 07/27/2012,
convertible at holder's option
at $2.50 per share,
interest rate 8% $151,929 $151,929 $154,774
10
TRANSBIOTEC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
NOTE 4. NOTES PAYABLE (cont'd)
(Unaudited)
December 31, June 30,
2009 2010 2011
---- ---- ----
Notes payable to related parties,
unsecured, due 01/29/2011,
convertible at holder's option
at $2.50 per share, interest
rate 9% $ - $ 5,000 $ -
Notes payable to related parties,
unsecured, due 12/31/2012,
interest rate 0% $ - $ 15,810 $ 11,810
Note payable to Ford Motor Credit,
secured, payment $584.25 per month $ 4,657 $ - $ -
-------- -------- --------
$735,792 $748,845 $558,534
Less current portion (581,913) (594,966) (558,534)
-------- -------- --------
Long-term portion $153,879 $153,879 $ 0
======== ======== ========
Required principal payments from December 31, 2010 forward are as follows:
2011 $ 581,913
2012 153,879
-----------
$ 735,792
===========
Interest expense under notes payable in 2009 and 2010, and for the six months
ended June 30, 2011 was $206,078, $238,851, and $107,575.
11
TRANSBIOTEC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
NOTE 5. INCOME TAXES
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur.
At December 31, 2009 and 2010 the Company had net operating loss carryforwards
of approximately $604,000 and $1,045,000 respectively, which begin to expire in
2027. The deferred tax asset of at each date of $120,000 and $209,000 created by
the net operating losses has been offset by a 100% valuation allowance. The
change in the valuation allowance in 2009 and 2010 was approximately $21,000 and
$89,000.
NOTE 6. STOCK OPTIONS
The Company accounts for employee and non-employee stock options under ASC 718,
whereby option costs are recorded based on the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable. Unless otherwise provided for, the Company covers option
exercises by issuing new shares.
The Company's stock option activity is described below.
Non-employee stock options
--------------------------
At the beginning of 2009 the Company had 60,000 non-employee stock options
outstanding, allowing the holder to purchase one share of common stock per
option, exercisable at $0.10 per share, with terms expiring from 2011 - 2013.
During the year 50,000 options were exercised, and no options expired, leaving a
2009 year end outstanding balance of 10,000 non-employee stock options expiring
in December 2011.
During 2010 the Company granted 22,500 options for services, allowing the holder
to purchase one share of common stock per option, with 22,500 options
exercisable immediately at prices from $0.10 - $0.15 per share with the option
terms expiring from January 2012 through January 2015. During 2010 no options
were exercised, and no options expired, leaving a 2010 year end outstanding
balance of 32,500 non-employee stock options. The fair value of the 22,500
options granted in 2010 was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk free
interest rate of 1.08% - 2.67%, dividend yield of 0%, expected lives of 2 - 5
years, volatility of 100%. The Company incurred and recorded compensation
expense under these stock option grants of $53,262 in 2010.
12
TRANSBIOTEC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2010, & June 30, 2011 (Unaudited)
NOTE 6. STOCK OPTIONS (cont'd)
During the six months ended June 30, 2011 10,000 options were exercised, and no
options expired, leaving a June 30, 2011 outstanding balance of 22,500
non-employee stock options, exercisable at prices from $0.10 - $0.15 per share
with the option terms expiring from January 2012 through January 2015.
Employee stock options
----------------------
The Company had no outstanding employee stock options in 2009 or 2010, or during
the six months ended June 30, 2011.
NOTE 7. GOING CONCERN
The Company has suffered recurring losses from operations and has a working
capital deficit and stockholders' deficit, and in all likelihood will be
required to make significant future expenditures in connection with continuing
marketing efforts along with general administrative expenses. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
The Company may raise additional capital through the sale of its equity
securities, through an offering of debt securities, or through borrowings from
financial institutions or others. By doing so, the Company hopes to generate
revenues from sales of its alcohol sensing and ignition lock systems. Management
believes that actions presently being taken to obtain additional funding provide
the opportunity for the Company to continue as a going concern.
13