Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 2011
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No. 000-53316
TRANSBIOTEC, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 26-0731818
--------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3030 Old Ranch Parkway, Suite 350
Seal Beach, CA 90740
-------------------------------------- ------------
(Address of Principal Executive Office) Zip Code
Registrant's telephone number, including Area Code: (562) 280-0483
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 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 whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act): [ ] Yes [X] No
The aggregate market value of the voting stock held by non-affiliates of the
Company on June 30, 2011 was $1,168,000.
As of March 31, 2012, the Company had 27,976,868 issued and outstanding shares
of common stock.
Documents incorporated by reference: None
ITEM 1. DESCRIPTION OF BUSINESS.
------------------------
The Company was formed in August 2007 to publish and distribute Image
Magazine, a monthly entertainment guide for the Denver, CO area. The Company
generated only limited revenue and essentially abandoned its business plan
January 2009.
On September 19, 2011 the Company acquired approximately 52% of the
outstanding shares of TransBiotec, Inc., ("TBT") from TBT's directors, in
exchange for 12,416,462 shares of the Company's common stock. TBT is a
California Corporation. In connection with this transaction, Gregory Bloom and
Harlan Munn resigned as officers of the Company, Charles Bennington and Nicholas
Limer were appointed as officers and directors of the Company and Ronald
Williams was appointed an officer of the Company.
On January 17, 2012, the Company's Board of Directors amended the Company's
Certificate of Incorporation changing the name of the Company from Imagine
Media, Ltd. to TransBiotec, Inc.
On January 31, 2012 the Company acquired approximately 45% of the remaining
outstanding shares of TBT in exchange for 10,973,678 shares of the Company's
common stock. In connection with this acquisition, Gregory Bloom and Harlan Munn
resigned as directors of the Company and Sam Satyanarayana and Devadatt Mishal
were appointed directors of the Company.
Between the acquisitions in September 2011 and January 2012 the Company
owns approximately 97% of the outstanding shares of TBT.
As a result of the acquisition, TBT's business is that of the Company, and,
unless otherwise indicated, any references to the Company include the business
and operations of TBT.
TBT has developed and patented a preventative drunk driving system, named
"SOBR" which is comprised of a blood alcohol detection system and ignition
interlock device. The Company believes SOBR offers a unique solution to the
national drunk driving problem.
SOBR can be ether retrofitted or built into the steering wheel, yoke or
trim of any machine, including automobiles, busses, trucks, boats and aircraft.
For example, when a driver of a vehicle touches a sensor, the senor detects
vapors that emanate from the hands, and determines if there is ethanol alcohol
content. This information is instantly translated into an engine "start" or
"no-start" signal. If SOBR detects a Blood Alcohol Concentration ("BAC") that is
above a preset limit, the system does not allow the vehicle to start. In
addition, SOBR initiates random real-time tests while the vehicle is operating
to ensure that the operator's BAC does not increase over the preset limit after
the vehicle is started. If the system is tampered with while parked, the vehicle
will not start. If tampered with while driving, alarms will activate. If a
vehicle is equipped with a Global Positioning System, or Data Transmission
Module, SOBR can alert fleet operators or others monitoring a vehicle of the
detection of alcohol above legal limits.
1
The Company believes SOBR is the first product to the market of its kind.
The detection sensor is specific to ethanol alcohol that is found in beer, wine
and spirits and is calibrated to a specific operator which prevents other
persons from testing instead of the operator. Furthermore, when SOBR is
installed, the system is virtually unnoticeable, unlike breathalyzer ignition
interlock systems.
Several major insurance companies which have expressed interest in SOBR
since alcohol related accidents are a major factor in their loss ratios. If SOBR
could reduce their claims costs they may entertain establishing discounts for
its use.
SOBR requires approximately one hour to install in a vehicle. The control
box is mounted under the dash in the interior of the vehicle. In new vehicles
the sensor is installed as part of the steering wheel. In retrofits, the sensor
is installed on the dashboard for easy access.
TBT believes that the cost to manufacture and install SOBR on a vehicle
will be approximately $150-$250 less than existing breathalyzer systems.
SOBR requires a semi-annual recalibration much like current smog devices.
The re-calibration is accomplished with a hand held device plugged into the
control box and requires a trained technician approximately one hour to
complete.
The Company plans to license the installation and re-calibration rights to
the automotive service industry.
Marketing
---------
The following are the primary target markets for SOBR:
Original Equipment Market. Original Equipment Manufacturers ("OEM") are the
gate keepers for all new vehicle manufacturing. The Company will aggressively
pursue the OEM market once final beta testing is completed. The Company will
seek an experienced OEM partner to introduce SOBR to the new automotive market.
If public awareness and consumer interest generate demand for alcohol sensing
technology, auto manufacturers may begin installing SOBR as a factory installed
option. An additional strategy for the Company is to market to international car
manufacturers which may want to gain a market advantage over domestic auto
manufacturers.
Retro Fit Market. The Company will enter this market thru a variety of
sales channels including Zero Tolerance, teen driver, trucking, and airline.
Additionally, the Company will seek to have included in any federal legislation
a requirement that an ignition interlock system be retrofitted to all vehicles
in the U.S. There is significant rational to enact this requirement. The highest
percentage of drunken driving accidents and deaths occur in the young adult
population, with older vehicles. The objective is to eliminate drunk driving
accidents nationally, and the only viable option is to retro-fit every vehicle
in the US over a set period of time.
Zero-Tolerance Market. Many companies have significant financial interest
in eliminating drunk drivers from their operations. The Zero Tolerance
applications include trucking companies, buses, trains, taxis, pilot screening
and operating rooms at clinics and hospitals. In addition individuals may desire
2
to monitor a family member's vehicle such as an automobile operated by a minor.
Mandated Market. The judicial mandated market monitors drivers convicted of
alcohol-related offenses. However, existing models are clunky, large, unsightly
and not driver specific. It is estimated that judicial mandated ignition
interlocks probably generate less than $45 million in annual revenue. TBT will
pursue this market with the goal of replacing the old, antiquated technology
with SOBR. TBT will sell or license its system into the judicial mandated market
through existing, state approved interlock providers on a wholesale basis.
Initially, the Company plans to market SOBR to:
o commercial transportation companies that operate tractor trailers,
taxis, construction vehicles, boats, trains, aircraft and other
vehicles,
o local, state and federal government agencies that operate fire trucks,
police cars and public transportation systems, and
o individuals may desire to monitor a family member's vehicle, such as a
vehicle operated by a minor.
The Company plans to establish a sales representative team and to advertise
via direct mail, email, print, internet and social media avenues.
Manufacturing
-------------
The manufacture of all components of the SOBR, as well as component
assembly, will be subcontracted to third parties. The final assembly, testing
and calibration of the SOBR will be performed by the Company.
If and when orders for SOBR exceed approximately 3,000 units, the Company
plans to transition the manufacturing and assembly processes offshore to
contractors who have the ability to manufacture SOBR to the Company's
specifications.
Competition
-----------
Currently, breathalyzer ignition interlocks are the only products on the
market which can detect alcohol and lock the ignition system of a vehicle. There
are several limitations inherent with their current design in that they are
easily circumvented and are invasive in their appearance and use. At present,
their market is limited to the mandated market.
The Company believes SOBR has the following advantages over current
breathalyzers:
o High level of accuracy as ethanol alcohol is distinguished from other
elements;
o The driver is the only one tested;
o Works during the entire operation of the vehicle without distracting
the driver;
o The system is non-invasive;
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o Easy retro fit installation;
o Unobtrusive in the vehicle;
o Difficult to circumvent.
o Possible opportunity for the consumer to obtain insurance discounts
that could offset some costs of the system.
Although the Company's technology differs substantially from its
competitors, the Company will compete with larger and more established breath
alcohol ignition interlock providers that have been utilizing breathalyzer
technology since approximately 1990.
The Company's main competitors will be National Interlock Systems, Inc.,
Lifesafer Interlock, Guardian Interlock Systems, Consumer Safety Technology,
Smart Start, Inc., AAA Interlock and Drager.
Intellectual Property
---------------------
SOBR is protected by three patents filed with the United States Patent and
Trademark Office. Patent 6620108, which expires on December 26, 2021, pertains
to the technology that identifies the vehicle's operator. Patent 7173536, which
expires on August 28, 2024, pertains to the substance detection and alarm
system. Patent 7377186, which expires on April 6, 2025, pertains to the
interface system between the substance detection system and vehicle ignition
system.
Government Regulation
---------------------
At the present time, only the judicially mandated market is regulated.
Devices sold into this market must be approved by state government agencies.
Since the Company plans to enter this market last, the Company will not,
initially, be subject to government regulation.
Ventura Agreement
-----------------
On September 15, 2011 TBT entered into an agreement with Ventura LLC
("Ventura"). Pursuant to the agreement, Ventura will receive the following
shares of the Company's common stock:
o 842,544 shares for assisting with the Company's acquisition of its 52%
interest in TBT;
o 842,544 shares when $250,000 is raised from the sale of 100,000 shares
of the common stock of TBT at $2.50 per share. All shares sold in this
offering will be exchanged for shares of the common stock of the
Company on the basis of one TBT share for 7.726 shares of the
Company's common stock;
o 842,544 for shares sold by the Company prior to March 31, 2012 to
investors introduced to the Company by Ventura, provided at least
$250,000 is raised from such investors prior to March 31, 2012;
4
As of March 31, 2012 Ventura had raised $334,156 for either TBT or the
Company.
General
-------
The Company's offices, consisting of approximately 1000 square feet, are
located at 3030 Old Ranch Parkway, Suite 350, Seal Beach, CA 90740. The Company
sub-leases this space at a rate of $1700 per month. The Company uses this space
for its executive offices.
The Company's website is www.transbiotec.com.
As of March 31, 2012 the Company employed four persons on a full time basis
and one person on a part-time basis.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
--------------------------
Not applicable.
ITEM 2. PROPERTIES.
-----------
None.
ITEM 3. LEGAL PROCEEDINGS.
------------------
On December 6, 2006 Orange County Valet and Security Patrol, Inc. filed a
suit against TBT in Orange County California State Superior Court for Breach of
Contract in the amount of $9,720.00. As of the date of this report the lawsuit
remained pending, however, the plaintiff has not taken any further action in
this case.
On November 14, 2005, Fashion Furniture Rental, Inc. filed a lawsuit
against TBT in the Orange County California State Superior Court for breach of
contract. In 2012 Fashion Furniture Rental obtained a judgment against the
Company in the approximate amount of $61,000.
ITEM 4. MINE SAFETY DISCLOSURE.
-----------------------
Not applicable.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
------------------------------------------------------------------------
ISSUER PURCHASE OF EQUITY SECURITIES.
-------------------------------------
The Company's common stock is quoted on the OTC Bulletin Board under the
symbol "IMLE". There is only a limited market for the Company's common stock.
As of March 31, 2012 the Company had 27,976,868 outstanding shares of
common stock and 146 shareholders of record.
The table below sets forth the high and low closing prices for the
Company's common stock for the dates indicated as reported by the OTC Bulletin
Board. The market quotations reflect inter-dealer prices without retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.
5
Quarter Ended High Low
------------- ---- ---
March 31, 2010 $1.25 $0.20
June 30, 2010 $1.01 $0.35
September 30, 2010 $0.53 $0.15
December 31, 2010 $0.51 $0.10
March 31, 2011 $0.40 $0.10
June 30, 2011 $0.80 $0.30
September 30, 2011 $1.36 $0.69
December 31, 2011 $1.40 $0.51
Holders of common stock are entitled to receive dividends as may be
declared by the Board of Directors. The Board of Directors is not obligated to
declare a dividend, and it is not anticipated that future dividends will be
paid.
Trades of the Company's common stock, are subject to Rule 15g-9 of the
Securities Exchange Act of 1934, which imposes certain requirements on
broker/dealers who sell securities subject to the rule to persons other than
established customers and accredited investors. For transactions covered by the
rule, brokers/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser's written agreement to
the transaction prior to sale. The Securities and Exchange Commission also has
rules that regulate broker/dealer practices in connection with transactions in
"penny stocks". Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in that security is provided by the
exchange or system). The penny stock rules require a broker/ dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker/dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker/dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker/dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA.
------------------------
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
------------------------------------------------------------------------
OF OPERATIONS.
--------------
The Company was formed in August 2007 to publish and distribute Image
Magazine, a monthly guide and entertainment source for the Denver, Colorado
area. The Company generated only limited revenue and essentially abandoned its
business plan in January 2009.
6
On September 19, 2011 the Company acquired approximately 52% of the
outstanding shares of TBT from TBT's directors, in exchange for 12,416,462
shares of the Company's common stock.
On January 31, 2012 the Company acquired approximately 45% of the remaining
outstanding shares of TBT in exchange for 10,973,678 shares of the Company's
common stock.
Between the acquisitions in September 2011 and January 2012 the Company
owns approximately 97% of the outstanding shares of TBT.
As a result of the acquisition, TBT's business is that of the Company's,
and, unless otherwise indicated, any references to the Company include the
business and operations of TBT.
TBT as the accounting acquirer in the transaction recorded the acquisition
as the issuance of stock for the net monetary assets of the Company accompanied
by a recapitalization. This accounting for the transaction was identical to that
resulting from a reverse acquisition, except that no goodwill or other
intangible assets were recorded.
TBT has developed and patented a high technology, state-of-the-art
transdermal sensing device that detects blood alcohol levels through a person's
skin. See Item 1 of this report for further information.
The following discussion:
o summarizes the Company's plan of operation; and
o analyzes the Company's financial condition and the results of its
operations for the year ended December 31, 2011.
This discussion and analysis should be read in conjunction with TBT's
financial statements included as part of this report.
Plan of Operation and Capital Requirements
-------------------------------------------
The Company's plan of operations is as follows:
Projected Estimated
Activity Completion Date Cost
-------- --------------- ---------
Develop relationship with initial customers
willing to work with Company in refining SOBR.
The Company will discount the price for units
sold to customers who partnered with Company in
this phase. Identify add-on features that may
appeal to customers. Complete design of printed
circuit boards and injection molding tools.
Sales target of 500 units. June 2012 $160,000
Outsource manufacturing, packaging and shipping.
7
Complete joint venture agreement with GPS partner.
Develop add-on features such as cameras, GPS and
radio interfaces, and a fingerprint reader which
would allow the SOBR to determine the driver's
identity and blood alcohol content at the same
time. Improve production capability to 1,000
units per month. August 2012 $185,000
Improve manufacturing capability to 10,000 units
per month. December 2012 $370,000
The Company will maintain its research and development efforts with a goal
of continuously improving the SOBR.
TBT's sources and (uses) of funds for the year ended December 31, 2011 and
2010 are shown below:
Year ended December 31,
------------------------
2010 2011
---- ----
Net cash provided by
(used for) operations ($94,752) ($433,176)
Loans, net of loan repayments ($2,757) 74,500
Sale of common stock $127,500 $436,000
The following table summarizes the Company's contractual obligations as of
December 31, 2011:
2012 2013 2014 Total
---- ---- ---- -----
Notes payable, together with
accrued interest $277,260 $185,375 $196,881 $659,516
The Company does not have any off-balance sheet arrangements that have or
are reasonable likely to have a current or future material effect on its
financial condition, changes in financial condition, results of operations,
liquidity or capital resources.
Other than as disclosed above, the Company does not know of any trends,
demands, commitments, events or uncertainties that will result in, or that
reasonably likely to result in, the Company's liquidity increasing or decreasing
in any material way.
Other than as disclosed above, the Company does not know of any
significant changes in its expected sources and uses of cash.
Results of Operations
---------------------
The Company was formed in August 2007 and generated only limited revenue
before it effectively ceased operations in January 2009. TBT was formed in July
2004 and has never generated any revenue.
8
Material changes in the Company's Statement of Operations for the year
ended December 31, 2011 as compared to the same period in the prior year are
discussed below:
Increase (I)
Item or Decrease (D) Reason
---- --------------- ------
Professional and Subcontractor Fees (I) Product Development Costs
Research and Product Development (I) Purchase of materials
Salary and Wages (I) Hiring two sales
representatives and a
scientist.
Travel (I) Travel required in
connection with the
acquisition of
TransBiotec (California).
Advertising (I) Website design and
marketing materials
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
------------------------------------------------------------
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------
See the financial statements attached to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
On August 26, 2011, Cordovano and Honeck, LLP ("CH") resigned as the
Company's independent registered public accounting firm.
The reports of CH regarding the Company's financial statements for the
fiscal years ended December 31, 2010 and 2009 did not contain any adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During the years ended
December 31, 2010 and 2009, and during the period from December 31, 2010 through
August 26, 2011, the date of resignation, there were no disagreements with CH on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of CH would have caused it to make reference to such disagreement
in its reports.
On October 20, 2011 the Company engaged Ronald Chadwick, P.C. as its
independent registered public accounting firm.
Prior to engaging Ronald Chadwick, P.C., the Company did not consult with
Ronald Chadwick, P.C. regarding the application of accounting principles to a
9
specific completed or contemplated transaction or regarding the type of audit
opinion that might be rendered by Ronald Chadwick, P.C. on the Company's
financial statements, and Ronald Chadwick, P.C. did not provide any written or
oral advice that was an important factor considered by the Company in reaching a
decision as to any accounting, auditing or financial reporting issue.
ITEM 9A. CONTROLS AND PROCEDURES.
------------------------
Disclosure Controls and Procedures
Under the direction and with the participation of the Company's principal
and executive financial officer, the Company carried out an evaluation of the
effectiveness of the design and operation of its disclosure controls and
procedures as of December 31, 2011. The Company maintains disclosure controls
and procedures that are designed to ensure that information required to be
disclosed in its periodic reports with the Securities and Exchange Commission is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and regulations, and that such information is accumulated and
communicated to the Company's management, including its principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure. the Company's disclosure controls and
procedures are designed to provide a reasonable level of assurance of reaching
its desired disclosure control objectives. Based on this evaluation, the
Company's principal executive and financial officer concluded that the Company's
disclosure controls and procedures were effective.
10
Management's Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting. As defined by the
Securities and Exchange Commission, internal control over financial reporting is
a process designed by, or under the supervision of the Company's principal
executive officer and principal financial officer and implemented by the
Company's Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company's financial statements in accordance with U.S.
generally accepted accounting principles.
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.
The Company's management evaluated the effectiveness of its internal
control over financial reporting as of December 31, 2011 based on criteria
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission, or the COSO Framework.
Management's assessment included an evaluation of the design of the Company's
internal control over financial reporting and testing of the operational
effectiveness of those controls.
Inherent in any small business is the pervasive problem involving
segregation of duties. Since the Company has a small accounting department,
segregation of duties cannot be completely accomplished at this stage in its
corporate lifecycle. Accordingly, the Company's management has added
compensating controls to reduce and minimize the risk of a material misstatement
in the Company's annual and interim financial statements.
Based on this evaluation, the Company's management concluded that the
Company's internal control over financial reporting was effective as of December
31, 2011.
There was no change in the Company's internal control over financial
reporting that occurred during the quarter ended December 31, 2011 that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
------------------
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
-------------------------------------------------------
Following the acquisitions of the Company's interest in TBT, Greg Bloom and
Harlan Munn resigned as officers of the Company and the following persons were
appointed as the new management of the Company.
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Name Age Position
---- --- --------
Charles Bennington 67 President, Chief Executive Officer, Principal
Financial Officer, Principal Accounting Officer
and Director
Ronald Williams 66 Chief Technology Officer
Nicholas Limer 66 Secretary and a Director
Sam Satyanarayana 71 Director
Devadatt Mishal 63 Director
The Company's directors serve until the next annual meeting of the
Company's shareholders and until their successors have been duly elected and
qualified. The Company's officers serve at the discretion of the Company's
directors.
Information concerning the Company's officers and directors follows:
Charles Bennington has been TBT's President and its Principal Executive,
Financial and Accounting Officer since December 2006. Between May 2005 and
December 2006 Mr. Bennington was TBT's Chief Operating Officer. Mr. Bennington
has been a director of TBT since April 2005. Mr. Bennington holds a Degree in
Finance and Banking from the University of Miami, Ohio.
Ronald Williams has been TBT's Chief Technology Officer since October 28,
2005. Mr. Williams has been a director of TBT since June 3, 2010. Since 1993,
Mr. Williams has owned and operated a mixed fruit tree orchard in Fallbrook,
California. Since 1972, Mr. Williams has worked as an aerospace engineer and
since 2005 Mr. Williams has been employed by the Aerospace Corporation in El
Segundo, California. Mr. Williams holds a Bachelor of Science Degree in physics
from the University of California at Los Angeles and has performed graduate
studies in mechanical and material engineering at Cal State Northridge.
Nicholas Limer has been a director of TBT since April 8, 2005. Since 1998
Mr. Limer has acquired, developed and managed self storage properties in
Southern California and Hawaii. Mr. Limer's the Managing Member of McKenna's On
The Bay restaurant in Long Beach. Mr. Limer holds a Bachelor of Science Degree
in Aeronautical Engineering from the Polytechnic Institution of Brooklyn, a
Masters of Science Degree in Engineering from California State University, Long
Beach and a Masters of Business Administration Degree from California State
University, Long Beach.
Sam Satyanarayana has been a director of TBT since June 3, 2010. Between
October 2004 and December 2006 Mr. Satyanarayana was TBT's Chief Executive
Officer and President. Since 1990, Mr. Satyanarayana has been the Chief
Executive Officer of Autosense International which designs, manufactures and
markets breath alcohol ignition devices. Mr. Satyanarayana holds a Bachelor of
Science Degree in Computer Engineering from the University of Mysore, India, a
Masters of Science in Engineering from Oklahoma State University and a Masters
of Business Administration from the University of Rochester.
Devadatt Mishal has been a director of TBT since June 3, 2010. Dr. Mishal
has been practicing as an Obstetrician and Gynecologist since March 1982 in
Downey, California. Dr. Mishal received his medical degree from Lokmanya Tilak
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Municipal Medical College in Bombay, India.
Sam Satyanarayana and Devadatt Mishal are independent directors, as that
term is defined in Section 803 of the listing standards of the NYSE Amex. No
director is a "financial expert" as that term is defined in the regulations of
the Securities and Exchange Commission.
The Company does not have a compensation committee. The Company's Board of
Directors serves as its Audit Committee.
The Company believes all of its directors are qualified to act as such due
to their longstanding relationship with the Company or TBT.
The Company has not adopted a Code of Ethics applicable to its officers.
ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
The Company has not adopted a Code of Ethics applicable to its principal
executive, financial, and accounting officers and persons performing similar
functions. The Company does not believe a Code of Ethics is necessary at this
time since the Company only has three officers.
The following table shows the compensation paid or accrued during the two
years ended December 31, 2011 to the executive officers of the Company.
================================================================================
All Other
Name and Stock Option Annual
Principal Fiscal Salary Bonus Awards Awards Compensation
Position Year (1) (2) (3) (4) (5) Total
--------------------------------------------------------------------------------
Charles Bennington 2011 $120,000 - - - - $120,000
President and 2010 $120,000 - - - - $120,000
Officer
Chief Executive (6)
Ronald Williams 2011 $ - - - - - -
Chief Technology
Officer
Nicholas Limer 2011 $ - - - - - -
Secretary and
Director
Gregory Bloom 2011 $ - - - - - -
President (6) 2010
(1) The dollar value of base salary (cash and non-cash) earned.
(2) The dollar value of bonus (cash and non-cash) earned.
(3) During the periods covered by the table, the value of the Company's shares
issued as compensation for services to the persons listed in the table.
13
(4) The value of all stock options granted during the periods covered by the
table.
(5) All other compensation received that the Company could not properly report
in any other column of the table.
(6) In September 2011 Charles Bennington, Ronald Williams and Nicholas Limer
became officers of the Company and Gregory Bloom resigned as an officer of
the Company.
In May 2011 the Company entered into an employment agreement with Mr.
Bennington which expires on the earlier of December 31, 2016 or Mr. Bennington's
death. The employment agreement provides that the Company will pay Mr.
Bennington a salary of $120,000 during the first year of the agreement, $156,000
during the second year of the agreement, $172,000 during the third year of the
agreement, $190,000 during the fourth year of the agreement and $208,000 during
the fifth year of the agreement. In addition the agreement allows Mr. Bennington
to participate in all employee benefit plans generally available to the
Company's employees.
Long-Term Incentive Plans. The Company does not provide its officers or
employees with pension, stock appreciation rights, long-term incentive or other
plans and has no intention of implementing any of these plans for the
foreseeable future.
Employee Pension, Profit Sharing or other Retirement Plans. The Company
does not have a defined benefit, pension plan, profit sharing or other
retirement plan, although it may adopt one or more of such plans in the future.
Compensation of Directors. The Company's directors did not receive any
compensation for their services as directors during the fiscal year ended
December 31, 2010.
Compensation Committee Interlocks
---------------------------------
During the year ended December 31, 2011, no officer of the Company was also
a member of the compensation committee or a director of another entity, which
other entity had one of its executive officers serving as a director of the
Company or as a member of the Company's compensation committee.
Stock Option and Bonus Plans
----------------------------
The Company has not adopted any stock option or stock bonus plans.
The following shows the amounts the Company expects to pay to its officers
during the twelve months ending December 31, 2012 and the amount of time these
persons expect to devote to the Company.
% of time
Projected to be devoted to
Name Position Compensation Company's business
---- -------- ------------ ------------------
Charles Bennington Chief Executive Officer $120,000 100%
Ronald Williams Chief Technology Officer $ 42,000 25%
Nicholas Limer Secretary $ 12,000 25%
14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table shows the ownership, of those persons owning
beneficially 5% or more of the Company's common stock and the number and
percentage of outstanding shares owned by each of the Company's directors and
officers and by all officers and directors as a group as of March 31, 2012.
Unless otherwise indicated, each owner has sole voting and investment power over
their shares of common stock.
Percent of
outstanding
Name and Address Shares Owned shares owned
---------------- ------------ ------------
Charles Bennington 1,004,422 4.0%
3030 Old Ranch Parkway, Ste 350
Seal Beach, CA 90740
Ronald Williams -- --
35569 Rice Canyon Road
Fallbrook CA 92028
Nicholas Limer 5,466,720 (1) 21.9%
3030 Old Ranch Parkway, Ste 350
Seal Beach, CA 90740
Sam Satyanarayana 5,636,267 22.6%
683 E. Brokaw Rd
San Jose, Ca 95112
Devadatt Mishal
3030 Old Ranch Parkway, Ste 350
Seal Beach, CA 90740 309,053 1.2%
All officers and directors as a
group (5 persons) 12,416,462 49.8
(1) 3,245,060 of these shares are held of record by relatives of Mr. Limer.
However Mr. Limer is deemed to be the beneficial owner of these shares.
o Less than 1%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.
---------------------------------------------------------------------
On February 10, 2010 the Company's board of directors authorized the
issuance of 10,000 shares to the Company's directors for services to the Company
15
during 2009. The shares were valued at $1.00 per share resulting in total
compensation expense of $30,000, which was recorded as stock based compensation
for the year ended December 31, 2009.
None of the advances earn interest and are payable to the holder on demand.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
---------------------------------------
Cordovano and Honeck, LLP audited the Company's financial statements for
the year ended December 31, 2010. The following table shows the fees billed to
the Company for the year ended December 31, 2010 by Cordovano and Honeck, LLP.
2010
----
Audit Fees $15,648
Audit Related Fees --
Design and Implementation Fees --
Audit fees represent amounts billed for professional services rendered for
the audit of the Company's annual financial statements and for reviewing
unaudited financial statements included in the Company's 10-Q reports. Before
Cordovano and Honeck, LLP was engaged by the Company to render audit services,
the engagement was approved by the Company's Directors.
Ronald Chadwick, P.C. audited the Company's financial statements for the
year ended December 31, 2011. The following table shows the fees billed to the
Company for the year ended December 31, 2011 by Ronald Chadwick, P.C.
2011
----
Audit Fees $19,154
Audit Related Fees --
Design and Implementation Fees --
Audit fees represent amounts billed for professional services rendered for
the audit of the Company's annual financial statements and for reviewing
unaudited financial statements included in the Company's 10-Q reports. Before
Ronald Chadwick, P.C. was engaged by the Company to render audit services, the
engagement was approved by the Company's Directors.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.
-----------------------------------------
Exhibit
Number Exhibit Name
-------- ------------
3.1 Certificate of Incorporation (1)
3.2 Bylaws (1)
4.1 Specimen Common Stock Certificate (1)
9.1 Spin-off Trust Agreement (1)
10.1 Form of Work For Hire Agreement (1)
16
10.2 Assignment and Assumption Agreement (1)
14.0 Code of Ethics (2)
21.0 List of Subsidiaries (1)
31 Certifications
32 Certification pursuant to Section 906 of the Sarbanes
Oxley Act of 2002
(1) Incorporated by reference to Registrant's Registration Statement on Form
SB-2 as filed with the Commission on January 31, 2008.
(2) Incorporated by reference to Registrant's Annual Report on Form 10-K for
the year ended December 31, 2008
17
Imagine Media, Ltd. And Subsidiary
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010 and 2011
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
Imagine Media, Ltd.
Seal Beach, California
I have audited the accompanying consolidated balance sheets of Imagine Media,
Ltd. (a development stage company) as of December 31, 2010 and 2011 and the
related consolidated 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, 2011. 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 (country-regionplaceUnited 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Imagine
Media, Ltd. as of December 31, 2010 and 2011, and the consolidated 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, 2011 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 8 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 8. 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.
April 6, 2012 RONALD R. CHADWICK, P.C.
18
Imagine Media, Ltd.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
Dec. 31, 2010 Dec. 31, 2011
--------------- -------------
ASSETS
Current assets
Cash $ 30,695 $ 108,019
Due from Triumph Capital - 100
Prepaid expenses - 192
--------------- -------------
Total current assets 30,695 108,311
--------------- -------------
Fixed assets - net 2,043 1,132
--------------- -------------
Total Assets $ 32,738 $ 109,443
=============== =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 279,840 $ 207,660
Accrued interest payable 508,180 87,411
Notes payable - current -
related parties 594,966 191,260
Notes payable - current - 86,000
Notes payable - 8% Debenture - 30,000
Related party payables 130,565 288,448
Other payables 97,464 158,006
--------------- -------------
Total current liabilities 1,611,015 1,048,785
--------------- -------------
Notes payable - related parties 153,879 549,263
--------------- -------------
Total Liabilities 1,764,894 1,598,048
--------------- -------------
Stockholders' Equity
Common stock, $.00001 par
value; 100,000,000 shares
authorized; 9,309,450
(2010) and 25,471,672 (2011)
shares issued and outstanding 93 254
Additional paid in capital 7,887,288 9,266,959
Deficit accumulated during the
development stage (9,619,537) (10,720,938)
--------------- -------------
Total Imagine Media, Ltd.
stockholders' equity (1,732,156) (1,453,725)
Noncontrolling interest - (34,880)
--------------- -------------
Total Stockholders' Equity (1,732,156) (1,488,605)
--------------- -------------
Total Liabilities and
Stockholders' Equity $ 32,738 $ 109,443
=============== =============
The accompanying notes are an integral part of the
consolidated financial statements.
19
Imagine Media, Ltd.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period From
July 19, 2004
(Inception) To Year Ended Year Ended
Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2011
---------------- --------------- --------------
Revenues $ - $ - $ -
---------------- --------------- --------------
- - -
---------------- --------------- --------------
Operating expenses:
Amortization & depreciation 75,743 7,379 911
General and administrative 9,681,239 242,383 636,877
---------------- --------------- --------------
9,756,982 249,762 637,788
---------------- --------------- --------------
Gain (loss) from operations (9,756,982) (249,762) (637,788)
---------------- --------------- --------------
Other income (expense):
Interest expense (974,798) (248,597) (474,455)
Interest expense - beneficial
conversion feature (70,000) - (70,000)
---------------- --------------- --------------
(1,044,798) (248,597) (544,455)
---------------- --------------- --------------
Income (loss) before provision for
income taxes (10,801,780) (498,359) (1,182,243)
Provision for income tax - - -
---------------- --------------- --------------
Net income (loss) (10,801,780) (498,359) (1,182,243)
Less: Net (income) loss
attributable to
noncontrolling interest 80,842 - 80,842
---------------- --------------- --------------
Net income (loss) attributable
to Imagine Media, Ltd. $ (10,720,938) $ (498,359) $ (1,101,401)
================ =============== ==============
Net income (loss) per share (Imagine
Media, Ltd.)
(Basic and fully diluted) $ (0.06) $ (0.10)
=============== ==============
Weighted average number of
common shares outstanding 8,639,629 11,344,444
=============== ==============
The accompanying notes are an integral part of the consolidated financial
statements.
20
Imagine Media, Ltd.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accumulated Stockholders'
Common Stock Additional During The Equity - Total
Amount Paid in Development Imagine Noncontrolling Stockholders'
Shares ($.0001 Par) Capital Stage Media, Ltd. Interest Equity
---------- ------------ ------------ ------------ ------------- -------------- ------------
Balances at December 31,
2009 8,589,975 $ 86 $ 7,381,533 $ (9,121,178) $ (1,739,559) $ - $(1,739,559)
Stock issued for cash 202,725 2 127,498 127,500 127,500
Stock issued for debt
retirement 516,750 5 324,995 325,000 325,000
Option issuances 53,262 53,262 53,262
Net income (loss) for
the year (498,359) (498,359) - (498,359)
---------- ------------ ------------ ------------ ------------- -------------- ------------
Balances at December 31,
2010 9,309,450 $ 93 $ 7,887,288 $ (9,619,537) $ (1,732,156) $ - $(1,732,156)
Stock issued for cash 977,455 10 435,990 436,000 436,000
Stock issued for debt
retirement 2,647,477 26 1,110,849 1,110,875 1,110,875
Stock issued for reverse
acquisition 1,410,650 14 (191,095) (191,081) (191,081)
Reverse acquisition -
net deficit of
noncontrolling
interest 607,690 607,690 (607,690) -
Fractional shares (1,565) - -
Paid in capital -
beneficial conversion
feature 70,000 70,000 70,000
Share exchange -
noncontrolling
interest 11,128,205 111 (653,763) (653,652) 653,652 -
Net income (loss) for
the year (1,101,401) (1,101,401) (80,842) (1,182,243)
---------- ------------ ------------ ------------ ------------- -------------- ------------
Balances at December 31,
2011 25,471,672 $ 254 $ 9,266,959 $(10,720,938) $ (1,453,725) $ (34,880) $(1,488,605)
========== ============ ============ ============ ============= ============== ============
The accompanying notes are an integral part of the
consolidated financial statements.
21
Imagine Media, Ltd.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period From
July 19, 2004
(Inception)
To Year Ended Year Ended
Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2011
------------------ ----------------- --------------
Cash Flows From Operating Activities:
Net income (loss) $ (10,801,780) $ (498,359) $ (1,182,243)
Adjustments to reconcile net
loss to net cash provided by
(used for) operating
activities:
Amortization & depreciation 75,743 7,379 911
Compensatory equity issuances 6,339,317 53,262 -
Asset write offs 37,513 - -
Accrued payables 1,999,502 342,966 678,156
Note pay. benefical conversion
expense 273,564 - 70,000
Original issue discount -
interest expense 40,000 - -
----------------- ----------------- --------------
Net cash provided by (used
for) operating activities (2,036,141) (94,752) (433,176)
------------------ ----------------- --------------
Cash Flows From Investing Activities:
Fixed asset purchases (76,875) - -
------------------ ----------------- --------------
Net cash provided by (used
for) investing activities (76,875) - -
------------------ ----------------- --------------
(Continued On Following Page)
The accompanying notes are an integral part of the consolidated
financial statements.
22
Imagine Media, Ltd.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued From Previous Page)
Period From
July 19, 2004
(Inception)
To Year Ended Year Ended
Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2011
------------------ ----------------- --------------
Cash Flows From Financing Activities:
Notes & loans payable
- borrowings 856,261 5,000 86,000
Notes & loans payable
- payments (38,726) (7,757) (11,500)
Repurchase of equity (250,000) - -
Equity issuances 1,653,500 127,500 436,000
---------------- ----------------- --------------
Net cash provided by
(used for) financing
activities 2,221,035 124,743 510,500
---------------- ----------------- --------------
Net Increase (Decrease) In Cash 108,019 29,991 77,324
Cash At The Beginning Of The
Period - 704 30,695
---------------- ----------------- --------------
Cash At The End Of The Period $ 108,019 $ 30,695 $ 108,019
================ ================= ==============
Schedule Of Non-Cash Investing And Financing
Activities
Compensatory equity issuances $ 6,339,317 $ 53,262 $ -
Debt converted to capital $ 1,487,875 $ 325,000 $ 1,110,875
Supplemental Disclosure
Cash paid for interest $ 7,235 $ 488 $ 563
Cash paid for income taxes $ - $ - $ -
The accompanying notes are an integral part of the consolidated
financial statements.
23
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Imagine Media, LTD. was incorporated in August 2007 in the State of Delaware.
TransBioTec Inc. was formed in the state of California in July 2004. Effective
September 19, 2011 Imagine Media, LTD. was acquired by TransBioTec, Inc. in a
transaction classified as a reverse acquisition. In January 2012 Imagine Media,
LTD. changed its name to TransBioTec, Inc., resulting in a parent company and
subsidiary of the same name. The financial statements represent the activity of
TransBioTec, Inc. from July 19, 2004 forward, and the consolidated activity of
Imagine Media, LTD. and TransBioTec, Inc. from September 19, 2011 forward.
Imagine Media, LTD. and TransBioTec, Inc. are hereinafter referred to
collectively as the "Company". 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.
Principles of consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its majority owned subsidiary. All intercompany accounts and
transactions have been eliminated in consolidation.
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.
24
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont'd)
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, 2010 and 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
Advertising costs
-----------------
Advertising costs are expensed as incurred. The Company recorded no material
advertising costs in 2010 or 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 carry
forwards 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.
25
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont'd)
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.
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.
Minority Interest (Noncontrolling interest)
-------------------------------------------
A subsidiary of the Company has minority members, representing ownership
interests of 2.46% at December 31, 2011. The Company accounts for these
minority, or noncontolling interests pursuant to ASC 810-10-65 whereby gains or
losses in a subsidiary with a noncontrolling interest are allocated to the
noncontrolling interest based on the ownership percentage of the noncontrolling
interest, even if that allocation results in a deficit noncontrolling interest
balance.
26
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. RELATED PARTY TRANSACTIONS
At year end 2010 and 2011, the Company had payables due to officers for accrued
compensation of $130,565 and $30,565 respectively.
In 2010 an officer converted $325,000 in compensation owed him into 516,750
common shares. During the year ended December 31, 2011 related party
shareholders converted $829,164 in note principal and interest and $135,000 in
compensation into 2,408,977 common shares.
NOTE 3. FIXED ASSETS
Fixed asset values recorded at cost are as follows:
December 31,
-----------------------
2010 2011
----------- ----------
Automobile $ 33,383 $ 33,383
Office and Lab Equipment 31,896 31,896
Furniture and fixtures 11,596 11,596
---------- ----------
76,875 76,875
Less accumulated depreciation (74,832) (74,743)
---------- ----------
Total $ 2,043 $ 1,132
========== ==========
Depreciation expense in 2010 and 2011 was $7,379 and $911 respectively.
NOTE 4. NOTES PAYABLE
Dec 31, 2010 Dec 31, 2011
------------ ------------
Note payable to related party, unsecured,
due 8/3/2012, interest rate 0% $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 $184,156 -
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 -
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
27
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. NOTES PAYABLE (cont'd)
per day after due date $200,000 -
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 -
Notes payable to related party, unsecured,
due 01/29/2011, convertible at holder's
option at $2.50 per share, interest rate 9% $5,000 -
Notes payable to related party, unsecured,
due 12/31/2012, interest rate 0% $15,810 $11,810
Note payable, unsecured, due 09/15/2012,
convertible at holder's option at $2.50
per TransBioTec share, and any TransBioTec
shares then converted into Imagine
Media, LTD. shares at 7.726 shares for 1
TransBiotec share, interest rate 10% - $16,000
Note payable, unsecured, due 2/8/12,
quarterly interest due, convertible at holder's
option at $0.3235688 per IMLE share,
interest rate 30% - $10,000
Note payable, unsecured, due 2/8/12, quarterly
interest due, convertible at holder's option at
$0.3235688 per IMLE share, interest rate 30% - $25,000
Note payable, unsecured, due 2/17/12, quarterly
Interest due, convertible at holder's option at
$0.3235688 per IMLE share, interest rate 30% - $25,000
Note payable, unsecured, due 2/18/12, quarterly
Interest due, convertible at holder's option at
$0.3235688 per IMLE share, interest rate 30% - $10,000
Note payable to related party, unsecured, lien
against company assets, $731,763,
5-years at 0% simple interest, due
7/1/2016, payment amounts
vary each month. - 726,763
28
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. NOTES PAYABLE (cont'd)
Note payable to Ford Motor Credit,
secured, payment $584.25 per month - -
$ 748,845 $ 826,523
Less current portion (594,966) (277,260)
--------- ----------
Long-term portion $ 153,879 $ 549,263
========= ==========
Required principal payments from December 31, 2011 forward are as follows:
2012 $ 277,260
2013 $ 185,375
2014 $ 196,881
2015 $ 123,709
2016 $ 43,298
---------
$ 826,523
Interest expense under notes payable in 2010 and 2011 $248,597 and $474,455
respectively. In addition, the Company recognized a $70,000 beneficial
conversion feature expense in 2011 on borrowing from convertible notes
convertible.
Convertible debenture payable to
unrelated party, unsecured, due
04/1/2009, convertible at holder's
option at $.25 per share, interest
rate 8% Default interest rate 12% $ 30,000 $ 30,000
29
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2010 and 2011 the Company had net operating loss carry forwards
of approximately $1,045,000 and $2,041,000 respectively, which begin to expire
in 2031. The deferred tax asset of at each date of $209,000 and $408,000 created
by the net operating losses has been offset by a 100% valuation allowance. The
change in the valuation allowance in 2010 and 2011 was approximately $89,000 and
$199,000.
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 2010 the Company had 10,000 non-employee stock options
outstanding in the Company's subsidiary TransBiotec, Inc. 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 2011 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.
30
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. STOCK OPTIONS (cont'd)
During the year ended December 31, 2011 10,000 options were exercised, and no
options expired, leaving a December 31, 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. All of
these options are for the stock of the Company's subsidiary Transbiotec, Inc.
The parent company, Imagine Media, Ltd. has no stock options outstanding.
Employee stock options
----------------------
The Company had no outstanding employee stock options in 2010 or 2011.
NOTE 7. REVERSE ACQUISITION
Effective September 19, 2011 Imagine Media, LTD. entered into a share exchange
agreement (the "Agreement") with Transbiotec, Inc. and certain shareholders of
Transbiotec, Inc., acquiring 51.44% of the outstanding common stock of
Transbiotec, Inc. through the issuance of 12,416,462 shares of its common stock
with no readily available market price. The transaction was accounted for as a
reverse acquisition as the shareholders of Transbiotec, Inc. retained the
majority of the outstanding common stock of Imagine Media, LTD. after the share
exchange. Effective with the Agreement, the Company's stockholders' equity was
retroactively recapitalized as that of Transbiotec, Inc., while the net deficit
of Imagine Media, LTD. valued at $(191,081), consisting of cash $6, accounts
payable $96,952, related party payables $54,835, notes payable $30,000, and
interest payable $9,300, was recorded as being acquired in the reverse
acquisition for its 1,410,650 outstanding common shares on the acquisition date.
Subsequent to the September 19, 2011 recapitalization, Imagine Media, LTD. and
Transbiotec, Inc. remain separate legal entities (with Imagine Media, LTD. as
the parent of Transbiotec, Inc.). The accompanying consolidated financial
statements exclude the financial position, results of operations and cash flows
of Imagine Media, LTD. prior to the September 19, 2011 acquisition. In December
2011 Imagine Media, LTD. acquired a further 46.1% interest in TransBiotec, Inc.
through an exchange of 11,128,205 Imagine Media, LTD. common shares for
1,440,300 Transbiotec, Inc. common shares. At December 31, 2011 Imagine Media,
LTD. owned 97.54% of TransBioTec, Inc.
If Imagine Media, LTD.'s operating activity for the years ended December 31,
2010 and 2011 is combined with TransBiotec, Inc.s activity for the same periods,
the pro forma results are as follows:
2010 2011
------------- -------------
Pro forma revenue $ - $ -
============= =============
Pro forma net income (loss) $ (569,596) $ (1,130,068)
============= =============
Pro forma net income (loss) per share $ (.065) $ (.10)
============= =============
Pro forma weighted average common
shares outstanding 8,699,254 11,344,444
============= =============
31
Imagine Media, LTD.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. GOING CONCERN (cont'd)
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.
32
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, thereunto duly
authorized.
TRANSBIOTEC, INC.
April 16, 2012 By:/s/ Charles Bennington
--------------------------------------
Charles Bennington, Principal Executive
Officer
In accordance with the Exchange Act, this Report has been signed by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Charles Bennington
------------------------- Principal Executive April 16, 2012
Charles Bennington Financial and Accounting
Officer and a Director
/s/ Nicholas Limer Director April 16, 2012
-------------------------
Nicholas Limer
Director
-------------------------
Sam Satyanarayana
/s/ Devadatt Mishal Director April 16, 2012
-------------------------
Devadatt Mishal
Director
-------------------------
Ron Williams
TRANSBIOTEC, INC.
FORM 10-K
EXHIBITS