The unaudited consolidated financial statements of registrant for the three and six months ended June 30, 2016 and 2015 follow. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TransBiotec, Inc. ("TransBiotec – DE"), formerly Imagine Media LTD., was incorporated August, 2007 in the State of Delaware. A corporation also named TransBiotec, Inc. ("TransBiotec – CA") was formed in the state of California July 4, 2004. Effective September 19, 2011 TransBiotec - DE was acquired by TransBiotec - CA in a transaction classified as a reverse acquisition as the shareholders of TransBiotec - CA retained the majority of the outstanding common stock of TransBiotec - DE after the share exchange. The financial statements represent the activity of TransBiotec - CA from July 4, 2004 forward, and the consolidated activity of TransBiotec - DE and TransBiotec - CA from September 19, 2011 forward. TransBiotec - DE and TransBiotec - CA 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 has not generated any revenues from its operations.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") as promulgated in the United States of America.
Principles of consolidation
The accompanying unaudited consolidated financial statements include the accounts of the Company and its majority owned subsidiary, Transbiotec-CA. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of unaudited consolidated 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. Specifically, such estimates were made by the Company for the valuation of derivative liability, stock compensation and beneficial conversion feature expenses. Actual results could differ from those estimates.
Cash
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. The Company does not have any cash equivalents as of June 30, 2016 and December 31, 2015.
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Property and equipment
Property and equipment are recorded at cost and depreciated under straight line methods over each item's estimated useful life.
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.
Net loss per share
The net loss per share is computed by dividing the net loss by the weighted average number of shares of common outstanding. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. The Company has 32,850,541 stock options that can be converted to common stock if exercised.
Financial Instruments
SC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
The carrying value of cash, accounts payable, accrued expenses, notes payable, related party payables, and other payable approximates their fair values due to their short-term maturities.
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.
Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an embedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Derivative Instruments
The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in fair value are recorded in the consolidated statement of income under other income (expenses).
The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instruments is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Sholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
Stock based compensation
The Company has share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options and warrants to purchase shares of Company common stock at the fair market value at the time of the grant. Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC718. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants of stock to non-employees and other parties are accounted for in accordance with the ASC 505.
Recent accounting pronouncement
In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 "Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). In connection with preparing financial statements for each annual and interim reporting period, an entity's management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management's evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.
When management identifies conditions or events that raise substantial doubt about an entity's ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management's plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern.
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
If conditions or events raise substantial doubt about an entity's ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management's plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):
|
a.
|
Principal conditions or events that raised substantial doubt about the entity's ability to continue as a going concern (before consideration of management's plans).
|
|
|
|
|
b.
|
Management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations.
|
|
|
|
|
c.
|
Management's plans that alleviated substantial doubt about the entity's ability to continue as a going concern.
|
If conditions or events raise substantial doubt about an entity's ability to continue as a going concern, but the substantial doubt is not alleviated after consideration of management's plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:
|
a.
|
Principal conditions or events that raise substantial doubt about the entity's ability to continue as a going concern.
|
|
|
|
|
b.
|
Management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations.
|
|
|
|
|
c.
|
Management's plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern.
|
The amendments in this Update are effective for the annual period ending after December 15, 2016, and for the annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating the impact of the adoptions of ASU 2014-15 on its consolidated financial statements.
Minority interest (Noncontrolling interest)
A subsidiary of the Company has minority members, representing ownership interests of 1.38% at March 31, 2016. The Company accounts for these minority, or noncontrolling interests pursuant to ASC 810-10-65 whereby gains and 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.
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
NOTE 2. RELATED PARTY TRANSACTIONS
As of June 30, 2016 and December 31, 2015, the Company had payables due to officers, for accrued compensation and services of $469,156 and $412,656 respectively.
On December 3, 2014, as part of a related party note payable agreement, the company agreed to convert 50% of certain outstanding accounts payable to common stock at a price of .09 per share. As of June 30, 2016, $110,893 of AP was converted into 1,232,144 common shares. All gains for a related party transaction are recorded to additional paid-in capital, therefore the difference between the value of shares and the accounts payable was transferred to additional paid-in capital for this transaction.
On July 1, 2015, the Company amended a note payable agreement with Lanphere Law Group, the company's largest shareholder, which forgave $108,000 of the principal balance. The original principal balance on the note was $214,335 and the new principal balance on the note after the debt forgiveness is $106,335.
The Company entered into a lease agreement with Lanphere Law Group, whereas the Company is the tenant and is paying monthly rent of $4,100.
NOTE 3. PROPERTY & EQUIPMENT
Property and equipment values recorded at cost are as follows:
|
|
Jun. 30,
|
|
|
Dec. 31,
|
|
|
|
2016
|
|
|
2015
|
|
Office and Lab Equipment
|
|
$
|
32,127
|
|
|
$
|
32,127
|
|
Furniture and fixtures
|
|
|
11,556
|
|
|
|
11,556
|
|
|
|
|
43,683
|
|
|
|
43,683
|
|
Less accumulated depreciation
|
|
|
(43,683
|
)
|
|
|
(43,683
|
)
|
Property & Equipment, Net
|
|
$
|
-
|
|
|
$
|
-
|
|
Depreciation expense for the six months ended June 30, 2016 and 2015 was none, and $369, respectively.
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
NOTE 4. NOTES PAYABLE
|
|
December 31,
2015
|
|
|
(Unaudited)
June 30,
2016
|
|
Note payable to related party, unsecured, due 8/3/2012, interest rate 0%. Currently in default.
|
|
$
|
1,950
|
|
|
$
|
1,950
|
|
|
|
|
|
|
|
|
|
|
Notes payable to related party, unsecured, due 12/31/2012, interest rate 0%. Currently in default.
|
|
$
|
11,810
|
|
|
$
|
11,810
|
|
|
|
|
|
|
|
|
|
|
Note payable to related party, unsecured, $731,763, 5-years at 0% simple interest, due 7/1/2016, payment amounts vary each month, various late penalties.
|
|
$
|
180,001
|
|
|
$
|
180,001
|
|
|
|
|
|
|
|
|
|
|
Note payable to non-related party, unsecured, due 2/8/12, quarterly interest due, convertible at holder's option at $0.3235688 per TBT - DE share, interest rate 30%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to non-related party, unsecured, due 2/8/12, quarterly interest due, convertible at holder's option at $0.3235688 per TBT - DE share, interest rate 30%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to non-related party, unsecured, due 2/17/12, quarterly interest due, convertible at holder's option at $0.3235688 per TBT - DE share, interest rate 30%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to non-related party, unsecured, due 2/18/12, quarterly interest due, convertible at holder's option at $0.3235688 per TBT - DE share, interest rate 30%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
Note payable to non-related party, unsecured, due 2/18/13, annual interest due, convertible at holder's option at $0.3235688 per TBT-DE share, interest rate 18%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
750
|
|
|
$
|
750
|
|
Note payable to non-related party, unsecured, due 2/18/13, annual interest due, convertible at holder's option at $0.3235688 per TBT-DE share, interest rate 18%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
6,875
|
|
|
$
|
6,875
|
|
Note payable to non-related party, unsecured, due 2/15/13, annual interest due, convertible at holder's option at $0.3235688 per TBT-DE share, interest rate 12%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
Note payable to non-related party, unsecured, due 2/20/13, annual interest due, convertible at holder's option at $0.3235688 per TBT-DE share, interest rate 12%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
3,750
|
|
|
$
|
3,750
|
|
Note payable to non-related party, unsecured, due 2/21/13, annual interest due, convertible at holder's option at $0.3235688 per TBT-DE. share, interest rate 12%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
2,625
|
|
|
$
|
2,625
|
|
Note payable to non-related party, unsecured, due 3/20/13, annual interest due, convertible at holder's option at $0.3235688 per TBT-DE share, interest rate 12%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
5,433
|
|
|
$
|
5,433
|
|
Note payable to non-related party, unsecured, due 3/22/13, annual interest due, convertible at holder's option at $0.3235688 per TBT-DE share, interest rate 12%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
3,203
|
|
|
$
|
3,203
|
|
|
|
|
|
|
|
|
|
|
Note payable to non-related party, unsecured, due 08/29/2013, simple interest 8% convertible at holder's option at $.249 per TBT-CA share. Currently in default. Principal balance including interest to be paid upon receipt of equity funding and/or sales revenue.
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to related party, unsecured, due 03/01/2013, simple interest 9%. Currently in default. Principal balance including interest to be paid upon receipt of equity funding and/or sales revenue.
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
Note payable to non-related party, unsecured, due 01/31/2013, simple interest 18%. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
3,938
|
|
|
$
|
3,938
|
|
Note payable to related party, unsecured, due 01/23/2014, simple interest 9%. Currently in default.
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Note payable to related party, unsecured, due 07/02/2014, simple interest 9%. Currently in default.
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Note payable to non-related party, unsecured, due 10/25/2013, simple interest 18%. Currently in default.
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
Note payable to non-related party, unsecured, due 12/27/2013, simple interest 9% quarterly, Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Note payable to non-related party, unsecured, due 9/11/2014, simple interest 10% yearly, Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
Note payable to related party, unsecured, due 11/12/2014, simple interest 9%, Convertible at $0.04 per share, currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
11,000
|
|
|
$
|
11,000
|
|
Note payable to related party, unsecured, due 4/08/2015, simple interest 7%, Convertible at $0.0072 per share. Currently in default. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue.
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Note payable to related party, unsecured, due 8/05/2015, simple interest 7%, default interest 10%. Currently in default. Note contains a stock option.
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Note payable to related party unsecured, due 12/02/2015, simple interest 7%, default interest 10%. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue. Currently in default.
|
|
$
|
106,334
|
|
|
$
|
106,334
|
|
Note payable to non-related party, unsecured, due 3/26/2016, simple interest 8%, convertible at $0.0017 per share. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue. Currently in default.
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Note payable to related party, unsecured, due 4/11/2016, simple interest 10%. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue. Currently in default.
|
|
$
|
13,000
|
|
|
$
|
13,000
|
|
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
Note payable to related party, unsecured, due 11/11/2015, simple interest 10%. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue. Currently in default.
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
Note payable to non-related party, unsecured, due 11/11/2015, simple interest 10%. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue. Currently in default.
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
Note payable to related party, unsecured, due 12/26/2015, simple interest 10%. Principal balance including interest to be paid upon the receipt of equity funding and/or sales revenue. Currently in default.
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Note payable to related party, unsecured, due on demand, simple interest 10%.
|
|
$
|
-
|
|
|
$
|
15,277
|
|
Note payable to related party, unsecured, due 7/23/2016, simple interest 10%.
|
|
$
|
-
|
|
|
$
|
15,000
|
|
Note payable to related party, unsecured, due 5/1/2017, simple interest 7%. Note contains a stock option.
|
|
$
|
-
|
|
|
$
|
3,750
|
|
Note payable to related party, unsecured, due 11/9/2016, simple interest 7%. Note contains a stock option.
|
|
$
|
-
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
652,669
|
|
|
$
|
701,696
|
|
Less note discounts
|
|
|
(6,250
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Less current - related parties
|
|
|
(489,095
|
)
|
|
|
(538,122
|
)
|
|
|
|
|
|
|
|
|
|
Less current – non-related parties
|
|
|
(157,324
|
)
|
|
|
(163,574
|
)
|
|
|
|
|
|
|
|
|
|
Long-term – related parties
|
|
$
|
-
|
|
|
$
|
-
|
|
Required principal payments from June 30, 2016 forward are as follows:
2016
|
|
$
|
701,696
|
|
2017
|
|
$
|
-
|
|
2018
|
|
$
|
-
|
|
2019
|
|
$
|
-
|
|
2020
|
|
$
|
-
|
|
|
|
$
|
701,696
|
|
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
Interest expense under notes payable for the six months ended June 30, 2016 and June 30, 2015 was $58,477 and $88,466, respectively.
During the six months ended June 30, 2016 and June 30, 2015 the Company recognized a beneficial conversion feature expense on borrowing from convertible notes of $6,250 and $11,250, respectively.
During the six months ended June 30, 2016 and June 30, 2015 the unamortized note discount from the beneficial conversion feature was none, and $18,750, respectively.
In 2012 the company borrowed $110,000 under convertible notes with a variable conversion price based on a percentage of market price. Notes converted at December 31, 2014 and June 30, 2016 were $103,395 and $103,395, respectively. The Company determined that these notes have an embedded derivative and are therefore accounted for at fair value. The Company recorded fair market value adjustments for the six months ended June 30, 2016 and June 30, 2015 of none and $(25,456), respectively. The fair market value adjustments were based on the Black-Sholes method using the following assumptions: risk free rates ranging between 0.10% - 0.21%, dividend yield of 0%, expected life of 1 year, volatility between 128% - 354%. The fair value derivative liability under the notes as of June 30, 2016 and December 31, 2015 was none and none, respectively.
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.
NOTE 6. STOCK OPTIONS AND SUBSCRIPTIONS PAYABLE
The Company accounts for employee and non-employee stock options under ASC 718 and ASC 505, 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 2012, the Company had 22,500 options outstanding for shares in Transbiotec – CA. The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 2.67%, dividend yield of 0%, expected life of five years, volatility of 100%. During the year ended December 31, 2012 no options were exercised or expired, leaving a December 31, 2012 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 TransBiotec - CA. During the year ended December 31, 2014, 20,000 options were exercised, leaving a December 31, 2014 outstanding balance of 2,500 non-employee stock options, exercisable at $0.10 per share with the option terms expiring in January 2015. During the year ended December 31, 2015, no options were exercised as all outstanding options expired in January 2015 leaving no outstanding balance of non-employee stock options in the stock of Transbiotec-CA at December 31, 2015. During the six months ended June 30, 2016, no options were exercised as all outstanding options expired in January 2015 leaving no outstanding balance of non-employee stock options in the stock of Transbiotec-CA at June 30, 2016
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
During 2012 the Company granted 29,678 stock options for shares in Transbiotec - DE. The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 0.8%, dividend yield of 0%, expected life of five years, volatility of 189%. No options were exercised or expired, leaving a December 31, 2012 outstanding balance of 29,678 options for Transbiotec – DE. The Company incurred and recorded compensation expense under these stock option grants of $4,042 in 2012, vested immediately.
During 2013 the Company granted 5,321,735 stock options for shares in Transbiotec - DE. The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rates between 7% - 14%, dividend yield of 0%, expected life of five years, volatility between 179% - 186%. No options were exercised or expired, leaving a December 31, 2013 outstanding balance of 5,351,413 options for Transbiotec – DE. The Company incurred and recorded compensation expense under these stock option grants of $145,997 in 2013, vested immediately.
During 2014 the Company granted 8,403,633 stock options for shares in Transbiotec - DE. The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rates between 1.55% - 1.77%, dividend yield of 0%, expected life of five years, volatility between 147% - 178%. No options were exercised or expired, leaving a December 31, 2014 outstanding balance of 13,755,046 options for Transbiotec – DE. The Company incurred and recorded compensation expense under these stock option grants of $69,886 in 2014, vested immediately.
During the year ended December 31, 2015, the Company granted 16,282,995 stock options for shares in Transbiotec - DE. The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate between 1.37% - 1.68%, dividend yield of 0%, expected life of five years, a volatility range of 172% - 174%. No options were exercised or expired, leaving a December 31, 2015 outstanding balance of 30,038,041 options for Transbiotec – DE. The Company incurred and recorded compensation expense under these stock option grants of $27,731 during the year ended December 31, 2015, vested immediately.
During the six months ended June 30, 2016, the Company granted 2,812,500 stock options for shares in Transbiotec - DE. The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 1.30%, dividend yield of 0%, expected life of five years, a volatility rate of 164%. No options were exercised or expired, leaving a June 30, 2016 outstanding balance of 32,850,541 options for Transbiotec – DE. The Company incurred and recorded compensation expense under these stock option grants of $10,523 during the six months ended June 30, 2016, vested immediately.
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
A summary of stock option activity for California is as follows:
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2016
|
|
|
-
|
|
|
$
|
-
|
|
A summary of stock option activity for Delaware is as follows:
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
30,038,041
|
|
|
$
|
.0143
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,812,500
|
|
|
|
.0040
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2016
|
|
|
32,850,541
|
|
|
$
|
.0134
|
|
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
Following is a summary of the status of options for Delaware outstanding at March 31, 2016:
Exercise
Price
|
|
|
Number
of Shares
|
|
|
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
|
Exercised at
March 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.0900
|
|
|
|
29,678
|
|
|
2 years
|
|
|
0.0900
|
|
|
|
-
|
|
$
|
0.1700
|
|
|
|
83,333
|
|
|
3 years
|
|
|
0.1700
|
|
|
|
-
|
|
$
|
0.1700
|
|
|
|
27,778
|
|
|
3 years
|
|
|
0.1700
|
|
|
|
-
|
|
$
|
0.1700
|
|
|
|
362,624
|
|
|
3 years
|
|
|
0.1700
|
|
|
|
-
|
|
$
|
0.1300
|
|
|
|
80,914
|
|
|
3 years
|
|
|
0.1300
|
|
|
|
-
|
|
$
|
0.1300
|
|
|
|
429,086
|
|
|
3 years
|
|
|
0.1300
|
|
|
|
-
|
|
$
|
0.0600
|
|
|
|
38,000
|
|
|
3 years
|
|
|
0.0600
|
|
|
|
-
|
|
$
|
0.0400
|
|
|
|
250,000
|
|
|
3 years
|
|
|
0.0400
|
|
|
|
-
|
|
$
|
0.0400
|
|
|
|
1,625,000
|
|
|
3 years
|
|
|
0.0400
|
|
|
|
-
|
|
$
|
0.0500
|
|
|
|
400,000
|
|
|
3 years
|
|
|
0.0500
|
|
|
|
-
|
|
$
|
0.0400
|
|
|
|
75,000
|
|
|
3 years
|
|
|
0.0400
|
|
|
|
-
|
|
$
|
0.0400
|
|
|
|
300,000
|
|
|
3 years
|
|
|
0.0400
|
|
|
|
-
|
|
$
|
0.0200
|
|
|
|
300,000
|
|
|
3 years
|
|
|
0.0200
|
|
|
|
-
|
|
$
|
0.0200
|
|
|
|
1,200,000
|
|
|
3 years
|
|
|
0.0200
|
|
|
|
-
|
|
$
|
0.0400
|
|
|
|
150,000
|
|
|
3 years
|
|
|
0.0400
|
|
|
|
-
|
|
$
|
0.0125
|
|
|
|
1,200,000
|
|
|
4 years
|
|
|
0.0125
|
|
|
|
|
|
$
|
0.0150
|
|
|
|
50,137
|
|
|
4 years
|
|
|
0.0150
|
|
|
|
-
|
|
$
|
0.0150
|
|
|
|
140,000
|
|
|
4 years
|
|
|
0.0150
|
|
|
|
-
|
|
$
|
0.0190
|
|
|
|
31,256
|
|
|
4 years
|
|
|
0.0190
|
|
|
|
-
|
|
$
|
0.0161
|
|
|
|
167,702
|
|
|
4 years
|
|
|
0.0161
|
|
|
|
-
|
|
$
|
0.0147
|
|
|
|
204,082
|
|
|
4 years
|
|
|
0.0147
|
|
|
|
-
|
|
$
|
0.0200
|
|
|
|
75,000
|
|
|
4 years
|
|
|
0.0200
|
|
|
|
-
|
|
$
|
0.0198
|
|
|
|
75,758
|
|
|
4 years
|
|
|
0.0198
|
|
|
|
-
|
|
$
|
0.0213
|
|
|
|
165,915
|
|
|
4 years
|
|
|
0.0213
|
|
|
|
-
|
|
$
|
0.0195
|
|
|
|
133,262
|
|
|
4 years
|
|
|
0.0195
|
|
|
|
-
|
|
$
|
0.0188
|
|
|
|
79,787
|
|
|
4 years
|
|
|
0.0188
|
|
|
|
-
|
|
$
|
0.0140
|
|
|
|
229,714
|
|
|
4 years
|
|
|
0.0140
|
|
|
|
-
|
|
$
|
0.0190
|
|
|
|
50,000
|
|
|
4 years
|
|
|
0.0190
|
|
|
|
-
|
|
$
|
0.0127
|
|
|
|
42,283
|
|
|
4 years
|
|
|
0.0127
|
|
|
|
-
|
|
$
|
0.0090
|
|
|
|
213,833
|
|
|
4 years
|
|
|
0.0090
|
|
|
|
-
|
|
$
|
0.0074
|
|
|
|
48,649
|
|
|
4 years
|
|
|
0.0074
|
|
|
|
-
|
|
$
|
0.0060
|
|
|
|
375,000
|
|
|
4 years
|
|
|
0.0060
|
|
|
|
-
|
|
$
|
0.0098
|
|
|
|
612,245
|
|
|
4 years
|
|
|
0.0098
|
|
|
|
-
|
|
$
|
0.0098
|
|
|
|
61,224
|
|
|
4 years
|
|
|
0.0098
|
|
|
|
-
|
|
$
|
0.2500
|
|
|
|
25,000
|
|
|
4 years
|
|
|
0.2500
|
|
|
|
-
|
|
$
|
0.0680
|
|
|
|
450,000
|
|
|
4 years
|
|
|
0.0680
|
|
|
|
-
|
|
$
|
0.0072
|
|
|
|
123,828
|
|
|
4 years
|
|
|
0.0072
|
|
|
|
-
|
|
$
|
0.0056
|
|
|
|
375,000
|
|
|
4 years
|
|
|
0.0056
|
|
|
|
-
|
|
$
|
0.0070
|
|
|
|
250,000
|
|
|
4 years
|
|
|
0.0070
|
|
|
|
-
|
|
$
|
0.0070
|
|
|
|
373,714
|
|
|
4 years
|
|
|
0.0070
|
|
|
|
-
|
|
$
|
0.0041
|
|
|
|
850,244
|
|
|
4 years
|
|
|
0.0041
|
|
|
|
-
|
|
$
|
0.0045
|
|
|
|
2,000,000
|
|
|
4 years
|
|
|
0.0045
|
|
|
|
-
|
|
$
|
0.0024
|
|
|
|
150,000
|
|
|
5 years
|
|
|
0.0024
|
|
|
|
-
|
|
$
|
0.0010
|
|
|
|
7,625,544
|
|
|
5 years
|
|
|
0.0010
|
|
|
|
-
|
|
$
|
0.0024
|
|
|
|
1,770,000
|
|
|
5 years
|
|
|
0.0024
|
|
|
|
-
|
|
$
|
0.0023
|
|
|
|
400,782
|
|
|
5 years
|
|
|
0.0023
|
|
|
|
-
|
|
$
|
0.0012
|
|
|
|
275,000
|
|
|
5 years
|
|
|
0.0012
|
|
|
|
-
|
|
$
|
0.0017
|
|
|
|
1,764,706
|
|
|
5 years
|
|
|
0.0017
|
|
|
|
-
|
|
$
|
0.0018
|
|
|
|
2,463,333
|
|
|
5 years
|
|
|
0.0018
|
|
|
|
-
|
|
$
|
0.0021
|
|
|
|
285,714
|
|
|
5 years
|
|
|
0.0021
|
|
|
|
-
|
|
$
|
0.0018
|
|
|
|
333,333
|
|
|
5 years
|
|
|
0.0018
|
|
|
|
-
|
|
$
|
0.0018
|
|
|
|
1,083,333
|
|
|
5 years
|
|
|
0.0018
|
|
|
|
-
|
|
$
|
0.0018
|
|
|
|
131,250
|
|
|
5 years
|
|
|
0.0018
|
|
|
|
-
|
|
$
|
0.0040
|
|
|
|
2,250,000
|
|
|
5 years
|
|
|
0.0040
|
|
|
|
-
|
|
$
|
0.0040
|
|
|
|
562,500
|
|
|
5 years
|
|
|
0.0040
|
|
|
|
-
|
|
Total
|
|
|
|
32,850,541
|
|
|
|
|
|
0.0134
|
|
|
|
|
|
TransBiotec, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2016
Employee stock options
The parent company had no outstanding employee stock options.
Stock subscriptions received
At June 30, 2016 and December 31, 2015, the Company converted certain accounts payable into common shares which amounts to $31,897 for 1,319,229 common shares to be issued, and $55,868 for 6,049,578 common shares to be issued, respectively.
At June 30, 2016 and December 31, 2015, the Company converted certain notes payable into preferred shares which amounts to $14 for 1,388,575 preferred shares to be issued.
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. As of June 30, 2016, the accumulated deficit is $16,785,603. 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.
NOTE 8. COMMON STOCK
On June 11, 2015, as an inducement for a loan, the Company issued 834,408 shares of its common stock on said date valued at $1,502 with a purchase price of $0.0018 per share.
On August 20, 2015, the Company converted accrued interest of $3,900 into 1,000,000 shares of its common stock, with a purchase price $0.0039 per share.
On January 21, 2016, the Company issued for $25,000 cash, 5,000,000 shares of its common stock, with a purchase price of $0.0050 per share.
On January 21, 2016, the Company converted $9,750 of its account payable into 2,500,000 shares of its common stock, with a purchase price of $0.0039 per share.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its office space under a long-term operating lease expiring in June 2019. Rent expense under this lease was $26,210 and none for the six months ended June 30, 2016 and June 30, 2015, respectively.
As of March 31, 2016, future minimum annual payments under operating lease agreements for years ending December 31 are as follows.
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
24,600
|
|
|
|
49,200
|
|
|
|
49,200
|
|
|
|
24,600
|
|
|
|
-
|
|
|
|
147,600
|
|
|
|
$
|
24,600
|
|
|
$
|
49,200
|
|
|
$
|
49,200
|
|
|
$
|
24,600
|
|
|
$
|
-
|
|
|
$
|
147,600
|
|