EXHIBIT 10.3
AGREEMENT TO EXCHANGE SECURITIES
BETWEEN
CERTAIN SHAREHOLDERS OF TRANSBIOTEC, INC.
TRANSBIOTEC, INC.
AND
IMAGINE MEDIA, LTD.
INDEX
Page
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ARTICLE I - EXCHANGE OF SECURITIES ..................................... 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES ............................ 5
2.0l - Organization ................................................ 5
2.02 - Capital ..................................................... 5
2.03 - Directors and Officers ...................................... 5
2.04 - Financial Statements ........................................ 5
2.05 - Absence of Changes .......................................... 6
2.06 - Absence of Undisclosed Liabilities .......................... 6
2.07 - Tax Returns ................................................. 6
2.08 - Corporate Matters............................................ 6
2.09 - Trade Names and Rights ...................................... 6
2.l0 - Contracts and Leases ........................................ 6
2.ll - Insurance Policies .......................................... 6
2.l2 - Compliance with Laws ........................................ 6
2.l3 - Litigation .................................................. 7
2.l4 - Ability to Carry Out Obligations ............................ 7
2.l5 - Full Disclosure ............................................. 7
2.l6 - Assets ...................................................... 7
2A - Organization .................................................. 7
2B - Directors and Officers, Compensation; Banks ................... 7
2C - Capital ....................................................... 7
2D - Financial Statements .......................................... 8
2E - Absence of Changes ............................................ 8
2F - Absence of Undisclosed Liabilities ............................ 8
2G - Tax Returns ................................................... 8
2H - Corporate Matters ............................................. 8
2I - Trade Names and Rights ........................................ 8
2J - Contracts and Leases .......................................... 9
2K - Insurance Policies ............................................ 9
2L - Compliance with Laws .......................................... 9
2M - Litigation .................................................... 9
2N - Ability to Carry Out Obligations .............................. 9
2O - Full Disclosure ............................................... 9
2P - Assets ........................................................ 9
ARTICLE III - REPRESENTATIONS OF SHAREHOLDERS OF TRANSBIOTEC............ 9
3.1 - Ability to Carry Out Obligations.............................. 10
3.2 - Restricted Securities ........................................ 10
3.3 - Risk Assessment .............................................. 10
2
ARTICLE IV - OBLIGATIONS BEFORE CLOSING ................................ 11
4.0l - Investigative Rights ........................................ 11
4.02 - Conduct of Business ......................................... 11
ARTICLE V - CONDITIONS PRECEDENT TO PERFORMANCE BY IMAGINE.............. 11
5.0l - Conditions .................................................. 11
5.02 - Accuracy of Representations ................................. 11
5.03 - Performance.................................................. 11
5.04 - Absence of Litigation ....................................... 12
5.05 - Other ....................................................... 12
ARTICLE VI - CONDITIONS PRECEDENT TO PERFORMANCE BY TRANSBIOTEC ........ 12
6.0l - Conditions .................................................. 12
6.02 - Accuracy of Representations ................................. 12
6.03 - Performance ................................................. 12
6.04 - Absence of Litigation ....................................... 12
6.05 - Other ....................................................... 13
ARTICLE VII - CLOSING .................................................. 13
7.0l - Closing ..................................................... 13
7.02 - Exchange of Securities ...................................... 13
7.03 - Officers and Directors ...................................... 13
ARTICLE VIII - REMEDIES ................................................ 13
8.0l - Arbitration ................................................. 13
8.02 - Costs ....................................................... 13
8.03 - Termination ................................................. 14
ARTICLE IX - MISCELLANEOUS ............................................. 14
9.0l - Captions and Headings ....................................... 14
9.02 - No Oral Change .............................................. 14
9.03 - Non-Waiver .................................................. 14
9.04 - Time of Essence ............................................. 14
9.05 - Entire Agreement ............................................ 15
9.06 - Governing Law ............................................... 15
9.07 - Counterparts ................................................ 15
9.08 - Notices ..................................................... 15
9.09 - Binding Effect .............................................. 15
9.l0 - Effect of Closing ........................................... 15
9.ll - Mutual Cooperation .......................................... 15
9.12 - Expenses..................................................... 16
LIST OF SCHEDULES AND EXHIBITS
Schedule 1- Allocation of Shares................................. 19
Exhibit A - Officers and Directors (TBT) ........................... 21
Exhibit B - Options, Warrants and Convertible Securities (TBT) .....
Exhibit C - Financial Statements - Changes in Financial Condition
(TBT) .................................................. 22
3
Exhibit D - Patents, Trademarks, Trade Names, and Copyrights (TBT).. 23
Exhibit E - Material Contracts (TBT)................................ 24
Exhibit F - Insurance Policies and Litigation (TBT)................. 25
Exhibit G - Officers and Directors, Bank Accounts, Safe Deposit
Boxes, Powers of Attorney (Imagine)..................... 26
Exhibit H - Options, Warrants and Convertible Securities (Imagine) . 27
Exhibit I - Financial Statements - Changes in Financial Condition
(Imagine)............................................... 28
Exhibit J - Patents, Trademarks, Trade Names and Copyrights
(Imagine) .............................................. 29
Exhibit K - Material Contracts (Imagine) ........................... 30
Exhibit L- Insurance Policies (Imagine)............................ 31
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AGREEMENT TO EXCHANGE SECURITIES
THIS AGREEMENT, made this 18th day of August, 2011, by and between Imagine
Media, Ltd. ("Imagine"), TransBiotec, Inc. ("TBT"), and certain Shareholders of
TBT (the "TBT Shareholders"), is made for the purpose of setting forth the terms
and conditions upon which Imagine will acquire certain outstanding shares of TBT
in exchange for shares of Imagine's common stock.
In consideration of the mutual promises, covenants, and representations
contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE I
EXCHANGE OF SECURITIES
1.01 Subject to the terms and conditions of this Agreement, Imagine agrees
to issue, and TBT Shareholders agree to accept, 12,416,462 shares of Imagine's
common stock (the "Stock") in exchange for 1,607,032 outstanding shares of TBT
(the "Shares"). The shares of Imagine will be issued to the TBT Shareholders in
accordance with Schedule 1 attached to this Agreement.
ARTICLE IIREPRESENTATIONS AND WARRANTIES
TBT represents and warrants to Imagine that:
2.0l Organization. TBT is a corporation duly organized, validly existing,
and in good standing under the laws of California.
2.02 Capital. The list of the TBT Shareholders, and the shares they hold in
TBT, is attached as Schedule 1. All of the shares are validly issued, fully
paid, and non-assessable. Except as shown on Exhibit B, at closing, there will
be no outstanding subscriptions, options, rights, warrants, convertible
securities, or other agreements or commitments obligating TBT to issue or to
transfer any additional shares.
2.03 Officers and Directors. Exhibit A to this Agreement contains the names
of the officers and directors of TBT.
2.04 Financial Statements. Exhibit C to this Agreement contains the
financial statements of TBT as of March 31, 2011. The financial statements have
been prepared in accordance with generally accepted accounting principles
consistently followed by TBT throughout the periods indicated and fairly present
the financial position of TBT as of the dates of the balance sheets included in
the financial statements, and the results of its operations for the periods
indicated.
2.05 Absence of Changes. Since March 31, 2011 there has not been any change
in the financial condition or operations of TBT, other than changes reflected on
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Exhibit C or changes in the ordinary course of business, which changes have not
in the aggregate been materially adverse.
2.06 Absence of Undisclosed Liabilities. TBT did not, as of March 31, 2011,
have any debt, liability, or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, and whether due or to become due, that is
not reflected on Exhibit C.
2.07 Tax Returns. Within the times and in the manner prescribed by law, TBT
has filed all federal, state and local tax returns required by law and has paid
all taxes, assessments, and penalties due and payable. No federal income tax
returns have been audited by the Internal Revenue Service. The provision for
taxes, if any, reflected in TBT 's balance sheet as of March 31, 2011 is
adequate for any and all federal, state, county and local taxes for the period
ending on the date of that balance sheet and for all prior periods, whether or
not disputed. There are no present disputes as to taxes of any nature payable by
TBT.
2.08 Corporate Matters. The minutes of TBT are a complete and accurate
record of all meetings of the shareholders and/or directors and TBT and
accurately reflect all actions taken at such meetings. The signatures of the
shareholders and/or directors on such minutes are the valid signatures of TBT's
shareholders and/or directors who were duly elected or appointed.
2.09 Patents, Trademarks, Trade Names, and Copyrights. Exhibit D attached
hereto and made a part hereof lists all trademarks, trademark registrations or
applications, trade names, service marks, patents, copyrights, copyright
registrations or applications which are owned by TBT. No person other than TBT
owns any trademark, trademark registration or application, service mark, trade
name, copyright, or copyright registration or application the use of which is
necessary or contemplated in connection with the operation of TBT 's business.
2.10 Contracts and Leases. Exhibit E attached hereto and made a part hereof
contains a summary of the provisions of all material contracts, leases, and
other agreements of TBT presently in existence or which have been agreed to by
TBT (whether written or oral). TBT is not in default under of these agreements
or leases. For the purposes of this Agreement, "Material" shall be any amounts
over $10,000.
2.11 Insurance Policies. Exhibit F to this Agreement is a description of
all insurance policies held by TBT concerning its business and properties. All
these policies are in the respective principal amounts set forth in Exhibit F
and are in full force and effect.
2.12 Compliance with Laws. TBT has complied with, and is not in violation
of, applicable federal or local statutes, and regulations affecting its
properties or the operation of its business including but not limited to federal
and state securities laws. TBT does not have any employee benefit plan which is
subject to the provisions of the Employee Retirement Income Security Act of
1974.
2.13 Litigation. TBT is not a party to any suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation
pending or, to the best knowledge of TBT threatened, against or affecting TBT or
its business, assets, or financial condition, except as listed on Exhibit F. TBT
is not in default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or instrumentality.
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TBT is not engaged in any legal action to recover moneys due to TBT or damages
sustained by TBT.
2.14 Ability to Carry Out Obligations. TBT has the right, power, and
authority to enter into, and perform its obligations under, this Agreement. The
execution and delivery of this Agreement by TBT and the performance by TBT of
its obligations hereunder will not cause, constitute, or conflict with or result
in (a) any breach or violation or any of the provisions of or constitute a
default under any license, mortgage, articles of incorporation or other
agreement to which TBT is a party, or by which it may be bound, nor will any
consents or authorizations of any party other than those hereto be required; (b)
an event that would permit any party to any agreement to terminate it or to
accelerate the maturity of any indebtedness or other obligation of TBT; or (c)
an event that would result in the creation or imposition or any lien, charge, or
encumbrance on any asset of TBT or would create any obligation for which TBT
would be liable, except as contemplated by this Agreement.
2.15 Full Disclosure. None of the representations and warranties made by
TBT, contains any untrue statement of material fact.
2.16 Assets. TBT has good and marketable title to all of its property,
which consists of the property shown on Exhibit D
Imagine represents and warrants to TBT and the TBT Shareholders that:
2A. Organization. Imagine is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
2B. Officers and Directors, Accounts, Safe Deposit Boxes and Powers of
Attorney. Exhibit G to this Agreement contains: (i) the names and titles of all
directors and officers of Imagine and all persons, together with their titles
whose compensation, and the tasks for which they receive such compensation, from
Imagine as of the date of this Agreement will equal or its expected to equal or
exceed, at an annual rate, the sum of $1,000; (ii) the name and address of each
bank with which Imagine has an account or safety deposit box, and the names of
all persons who are authorized to draw thereon or have access thereto; and (iii)
the names of all persons who have a power of attorney from Imagine and a summary
of the terms thereof.
2C. Capital. The authorized capital stock of Imagine consists of
100,000,000 shares of common stock. Immediately prior to closing 1,410,650
shares of common stock will be issued and outstanding. All of the shares are
validly issued, fully paid, and non-assessable. Imagine has not issued any
shares, warrants or other convertible securities of preferred stock. At closing,
there will be no outstanding subscriptions, options, rights, warrants,
convertible securities, or other agreements or commitments obligating Imagine to
issue or to transfer from treasury any additional shares of its capital stock of
any class except as reflected on Exhibit H.
2D. Financial Statements. Exhibit I to this Agreement sets forth balance
sheets of Imagine as of March 31, 2011, and the related statements of income and
retained earnings for the period then ended. The financial statements have been
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prepared in accordance with U.S. generally accepted accounting principles as
consistently followed by Imagine throughout the periods indicated, and fairly
present the financial position of Imagine as of the dates of the balance sheets
included in the financial statements, and the results of its operations for the
periods indicated.
2E. Absence of Changes. Since March 31, 2011, there has not been any change
in the financial condition or operations of Imagine, except (i) changes in the
ordinary course of business, which changes have not in the aggregate been
materially adverse, and (ii) changes disclosed on Exhibit I, which changes have
not in the aggregate been materially adverse.
2F. Absence of Undisclosed Liabilities. Imagine did not as of March 31,
2011 have any debt, liability, or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, and whether due or to become due, that is
not reflected on Exhibit I.
2G. Tax Returns. Within the times and in the manner prescribed by law,
Imagine has filed all federal, state, and local tax returns required by law and
has paid all taxes, assessments, and penalties due and payable. No federal
income tax returns of Imagine have been audited by the Internal Revenue Service.
The provision for taxes, if any, reflected in Imagine's balance sheet as of
March 31, 2011, is adequate for any and all federal, state, county, and local
taxes for the period ending on the date of that balance sheet and for all prior
periods, whether or not disputed. There are no present disputes as to taxes of
any nature payable by Imagine.
2H. Corporate Matters. The minutes of Imagine are a complete and accurate
record of all meetings of the shareholders and directors of Imagine and
accurately reflect all actions taken at such meetings. The signatures of the
directors and/or officers on such minutes are the valid signatures of Imagine's
directors and/or officers who were duly elected or appointed.
2I. Patents, Trademarks, Trade Names and Copyrights. Exhibit J attached
hereto and made a part hereof lists all trademarks, trademark registrations or
applications, trade names, service marks, patents, copyrights, copyright
registrations or applications which are owned by Imagine. No person, other than
Imagine, will own any trademark, trademark registration or application, service
mark, trade name, copyright, or copyright registration or application the use of
which is necessary or contemplated in connection with the operation of the
business of Imagine, as such business is to be conducted after the closing of
this transaction.
2J. Contracts and Leases. Exhibit K attached hereto and made a part hereof
contains a summary of the provisions of all material contracts, leases, and
other agreements of Imagine presently in existence or which have been agreed to
by Imagine (whether written or oral).
2K. Insurance Policies. Exhibit L to this Agreement is a description of all
insurance policies held by Imagine concerning its business and properties. All
these policies are in the respective principal amounts set forth in Exhibit L
and are in full force and effect.
2L. Compliance with Laws. Imagine has complied with, and is not in
violation of, applicable federal, state, or local statutes, laws, and
regulations affecting its properties or the operation of its business, including
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but not limited to federal and state securities laws. Imagine does not have any
employee benefit plan which is subject to the provisions of the Employee
Retirement Income Security Act of 1974.
2M. Litigation. Imagine is not a party to any suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation
pending or, to the best knowledge of Imagine threatened, against or affecting
Imagine or its business, assets, or financial condition. Imagine is not in
default with respect to any order, writ, injunction, or decree of any federal,
state, local, or foreign court, department, agency, or instrumentality. Imagine
is not engaged in any legal action to recover moneys due to it or damages
sustained by it.
2N. Ability to Carry Out Obligations. Imagine has the right, power, and
authority to enter into, and perform its obligations under, this Agreement. The
execution and delivery of this Agreement by Imagine and the performance by
Imagine of its obligations hereunder will not cause, constitute, or conflict
with or result in (a) any breach or violation or any of the provisions of or
constitute a default under any license, indenture, mortgage, charter,
instrument, articles of incorporation, by-law, or other agreement or instrument
to which Imagine is a party, or by which it may be bound, nor will any consents
or authorizations of any party other than those hereto be required, (b) an event
that would permit any party to any agreement or instrument to terminate it or to
accelerate the maturity of any indebtedness or other obligation of Imagine, or
(c) an event that would result in the creation or imposition or any lien,
charge, or encumbrance on any asset of Imagine or would create any obligations
for which Imagine would be liable, except as contemplated by this Agreement.
2O. Full Disclosure. None of representations and warranties made by
Imagine, or in any certificate or memorandum furnished or to be furnished by
Imagine, or on its behalf, contains or will contain any untrue statement of
material fact, or omit any material fact the omission of which would be
misleading. Imagine has disclosed to TBT all reasonably foreseeable
contingencies which, if such contingencies transpired, would have a material
adverse effect on Imagine.
2P. Assets. Imagine has good and marketable title to all of its property.
ARTICLE III
REPRESENTATIONS OF THE TBT SHAREHOLDERS OF TBT
3.1 Ability to Carry Out Obligations. Each of the TBT Shareholders,
severally and not jointly, represent to Imagine that he, she or it has the
right, power, and authority to enter into, and perform his or her obligations
under this Agreement, and that all necessary corporate actions needed to
transfer shares of TBT to Imagine have been taken. The execution and delivery of
this Agreement by such Shareholder and the delivery by such Shareholder of the
shares in TBT pursuant to Article I will not cause, constitute, or conflict with
or result in any breach or violation or any of the provisions of or constitute a
default under any license, mortgage, or agreement to which he or she is a party,
or by which he or she may be bound, and any consents or authorizations of any
party which are required, have been duly obtained or will be obtained at or
prior to the Closing. Each of the TBT Shareholders, severally and not jointly,
represent and warrant to Imagine that the shares of TBT that such Shareholder
will deliver at closing will be free of any liens or encumbrances.
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3.2 Restricted Securities. Each TBT Shareholder understands that the shares
being acquired from Imagine represent restricted securities as that term is
defined in Rule l44 of the Securities and Exchange Commission.
3.3 Risk Assessment. The TBT Shareholders represent that they are
sophisticated investors and have the requisite knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of an investment in Imagine. In making the decision to invest in Imagine and
signing this Agreement, they have relied on their own knowledge and upon
independent investigations made by them. In addition, they represent that they
(i) have been given the full opportunity and time in which to carry out a "due
diligence" investigation of Imagine and anything else related to Imagine, (ii)
have received in the course of such "due diligence" investigation all materials,
information, documentation and answers which they requested and obtained
information necessary to verify the accuracy of the information provided to
them, (iii) were satisfied with the results of the investigation, (iv) have
consulted with their own tax and legal advisors concerning the affect of this
transaction on their personal financial and tax situations and have not relied
on any other person in regards thereto, and (v) it appears to them suitable for
their objectives and therefore have signed this Agreement.
ARTICLE IV
OBLIGATIONS BEFORE CLOSING
4.0l Investigative Rights. From the date of this Agreement until the date
of closing, each party shall provide to the other party, and such other party's
counsel, accountants, auditors, and other authorized representatives, full
access during normal business hours to all of each party's properties, books,
contracts, commitments, records and correspondence and communications with
regulatory agencies for the purpose of examining the same. Each party shall
furnish the other party with all information concerning each party's affairs as
the other party may reasonably request.
4.02 Conduct of Business. Prior to the closing, and except as contemplated
by this Agreement, each party shall conduct its business in the normal course,
and shall not sell, pledge, or assign any assets, without the prior written
approval of the other party, except in the regular course of business. Except as
contemplated by this Agreement, neither party to this Agreement shall issue or
sell any shares, stock, options or other securities, amend its Articles of
Association, Articles of Incorporation or By-laws, declare dividends, redeem or
sell stock or other securities, incur additional or newly-funded material
liabilities, acquire or dispose of fixed assets, change senior management,
change employment terms, enter into any material or long-term contract,
guarantee obligations of any third party, settle or discharge any balance sheet
receivable for less than its stated amount, pay more on any liability than its
stated amount, or enter into any other transaction other than in the regular
course of business, or enter into any agreement or take any action that is
likely to cause any of the representations and warranties of such party under
this Agreement not to be true and correct as of the Closing, or that is likely
to affect the Closing. However, and notwithstanding any provision in this
Agreement to the contrary, Imagine hereby assents and permits TBT to raise
further financing in any manner.
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ARTICLE V
CONDITIONS PRECEDENT TO PERFORMANCE BY IMAGINE
5.01 Conditions. Imagine's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in this
Article V. Imagine may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by Imagine of any other condition of or any of
Imagine's other rights or remedies, at law or in equity, if TBT shall be in
default of any of its representations, warranties, or covenants under this
agreement.
5.02 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by TBT in this Agreement or in any
written statement that shall be delivered to Imagine by TBT under this Agreement
shall be true on and as of the Closing Date as though made at those times.
5.03 Performance. TBT shall have performed, satisfied, and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it, on or before the closing. TBT shall have
obtained all necessary consents and approvals necessary to consummate the
transactions contemplated hereby.
5.04 Absence of Litigation. No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the Closing.
5.05 Other. In addition to the other provisions of this Article V,
Imagine's obligations hereunder shall be subject to the satisfaction, at or
before the Closing, of the following:
o the liabilities of TBT will not exceed $250,000 and
o TBT will have submitted to Imagine financial statements, audited as
necessary and in proper form, which will be required to be filed by
Imagine in an 8-K report with the Securities and Exchange Commission.
ARTICLE VI
CONDITIONS PRECEDENT TO PERFORMANCE BY TBT
6.01 Conditions. TBT and the TBT Shareholders' obligations hereunder shall
be subject to the satisfaction, at or before the Closing, of the conditions set
forth in this Article VI. TBT may waive any or all of these conditions in whole
or in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by TBT of any other condition of or any of
TBT 's other rights or remedies, at law or in equity, if Imagine shall be in
default of any of its representations, warranties, or covenants under this
agreement.
6.02 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by Imagine in this Agreement or in
any written statement that shall be delivered to TBT by Imagine under this
Agreement shall be true on and as of the Closing Date as though made at those
times.
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6.03 Performance. Imagine shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it, on or before the closing. Imagine shall have
obtained all necessary consents and approvals necessary to consummate the
transactions contemplated hereby.
6.04 Absence of Litigation. No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the closing.
6.05 Other. In addition to the other provisions of this Article VI, TBT's
and the TBT Shareholders' obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of the following:
o The liabilities of Imagine will not exceed $55,000 and
o Imagine will not have more than 1,500,000 outstanding shares of common
stock.
ARTICLE VII
CLOSING
7.0l Closing. The closing of this transaction shall be held at the offices
of Hart and Trinen, or such other location as the parties may agree. Unless the
closing of this transaction takes place before August 15, 2011, then either
party may terminate this Agreement without liability to the other party, except
as otherwise provided in Section 9.12, excluding claims for breaches of
obligations by any party hereto prior to such termination.
7.02 Exchange of Securities. On the Closing Date, the outstanding shares
held by the TBT Shareholders will be exchanged for fully paid and non-assessable
shares of Imagine in accordance with Schedule 1 to this Agreement.
7.03 Officer and Directors. At the closing of this Agreement Imagine will
cause Nicholas Limer, Charles Bennington, Ronald Williams, Sam Satyanarayana and
Devadatt Mishal to be appointed as a directors of Imagine. Simultaneous with
such appointment, all present officers and directors of Imagine will resign.
ARTICLE VIII
REMEDIES
8.01 Arbitration. Any dispute in any way involving this Agreement will be
settled through binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in placeCityDenver,
StateColorado.
8.02 Costs. If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorney's fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
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8.03 Termination. In addition to the other remedies, Imagine or TBT may on
or prior to the Closing Date terminate this Agreement, without liability to the
other party:
(i) If any bona fide action or proceeding shall be pending against Imagine
or TBT on the Closing Date that could result in an unfavorable judgment, decree,
or order that would prevent or make unlawful the carrying out of this Agreement
or if any agency of the federal or of any state or national government shall
have objected at or before the Closing Date to this acquisition or to any other
action required by or in connection with this Agreement;
(ii) If the legality and sufficiency of all steps taken and to be taken by
each party in carrying out this Agreement shall not have been approved by the
respective party's counsel, which approval shall not be unreasonably withheld.
(iii) If a party breaches any representation, warranty, covenant or
obligation of such party set forth herein and such breach is not corrected
within ten days of receiving written notice from the other party of such breach.
ARTICLE IX
MISCELLANEOUS
9.01 Captions and Headings. The Article and paragraph headings throughout
this Agreement are for convenience and reference only, and shall in no way be
deemed to define, limit, or add to the meaning of any provision of this
Agreement.
9.02 No Oral Change. This Agreement and any provision hereof, may not be
waived, changed, modified, or discharged orally, but only by an agreement in
writing signed by all parties hereto.
9.03 Non-Waiver. Except as otherwise expressly provided herein, no waiver
of any covenant, condition, or provision of this Agreement shall be deemed to
have been made unless expressly in writing and signed by the party against whom
such waiver is charged; and (i) the failure of any party to insist in any one or
more cases upon the performance of any of the provisions, covenants, or
conditions of this Agreement or to exercise any option herein contained shall
not be construed as a waiver or relinquishment for the future of any such
provisions, covenants, or conditions, (ii) the acceptance of performance of
anything required by this Agreement to be performed with knowledge of the breach
or failure of a covenant, condition, or provision hereof shall not be deemed a
waiver of such breach or failure, and (iii) no waiver by any party of one breach
by another party shall be construed as a waiver with respect to any other or
subsequent breach.
9.04 Time of Essence. Time is of the essence of this Agreement and of each
and every provision hereof.
9.05 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements,
understandings and the letters of intent between the parties.
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9.06 Governing Law. This Agreement and its application shall be governed by
the laws of placeStateDelaware.
9.07 Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.08 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
TransBiotec, Inc.
3030 Old Ranch Road, Suite 350
Seal Beach, CA 90740
Imagine Media, Ltd.
7750 N. Union Blvd., #201
Colorado Springs, CO 80920
With copy to:
HART & TRINEN
1624 Washington Street
Denver, CO 80203
9.09 Binding Effect. This Agreement will be binding upon the parties herein
even though this Agreement may not be signed by all persons whose names appear
on the signature page of this Agreement. This Agreement shall inure to and be
binding upon and be enforceable against the respective successors of each of the
parties to this Agreement. No party may assign or transfer any of its rights or
obligations hereunder, without the prior written consent of the other parties
hereto. Nothing in this Agreement, express or implied, shall give to any person
other than the parties hereto any benefit or any legal or equitable right,
remedy or claim under this Agreement.
9.10 Effect of Closing. All representations, warranties, covenants, and
agreements of the parties contained in this Agreement, or in any instrument,
certificate, opinion, or other writing provided for in it, shall survive the
closing of this Agreement and shall remain in effect for a period of twelve
months thereafter. In the event there is any material misrepresentation or
warranty of any party to this Agreement, then Imagine (if such misrepresentation
is made by TBT) or TBT ( if such misrepresentation is made by Imagine) may
recind this Agreement during the 90 day period following the closing of this
Agreement.
14
9.11 Mutual Cooperation. The parties hereto shall cooperate with each other
to achieve the purpose of this Agreement, and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein. Neither party will
intentionally take any action, or omit to take any action, which will cause a
breach of such party's obligations pursuant to this Agreement.
9.12 Expenses. Each of the parties hereto agrees to pay all of its own
expenses (including without limitation, attorneys' and accountants' fees)
incurred in connection with this Agreement, the transactions contemplated herein
and negotiations leading to the same and the preparations made for carrying the
same into effect. Each of the parties expressly represents and warrants that no
finder or broker has been involved in this transaction and each party agrees to
indemnify and hold the other party harmless from any commission, fee or claim of
any person, firm or corporation employed or retained by such party (or claiming
to be employed or retained by such party) to bring about or represent such party
in the transactions contemplated by this Agreement.
15
AGREED TO AND ACCEPTED as of the date first above written.
IMAGINE MEDIA, LTD.
By: /s/ Gregory A. Bloom
---------------------------------
Gregory A. Bloom, President
TRANSBIOTEC, INC.
By: /s/ Charles Bennington
---------------------------------
Charles Bennington, Chief Executive Officer
SHAREHOLDERS OF TRANSBIOTEC, INC.
/s/ Charles Bennington
--------------------------------
Charles Bennington
/s/ Nick Limer
--------------------------------
Nick Limer
/s/ Devadatt Mishal
--------------------------------
Devadatt Mishal
/s/ Sam Satyanarayana
--------------------------------
Sam Satyanarayana
16
Schedule 1
Allocation of Shares of Common Stock
Shares of Shares of Imagine
Name of Shareholder TBT Owned to be Received
------------------- --------- -----------------
Charles Bennington 130,000 1,004,422
Nick Limer 707,544 5,466,720
Devadatt Mishal 40,000 309,053
Sam Satyanarayana 729,488 5,636,267
---------- ----------
1,607,032 12,416,462
========= ==========
17
EXHIBIT A
Officers and Directors (TBT)
Name Position
---- --------
Chuck Bennington Chief Executive Officer and Director
Ronald Williams Chief Technology Officer and Director
Nick Limer Secretary and Director
Sam Satyanarayana Director
Devadatt Mishal Director
18
EXHIBIT B
Options, Warrants and Convertible Securities (TBT)
Common Stock Options
Shares Receivable
Number of Upon Exercise of
Option Holder Options Option Exercise Price Expiration Date
------------- ------- ------ -------------- --------------
Robert Moats 1,000 1,000 $0.10 1/26/15
Michael Pizzi 20,000 20,000 $0.15 1/7/12
Phillip Yates 1,500 1,500 $0.10 1/8/15
Vernon Justus 50,000 50,000 $0.10 -
Warrants
None.
Convertible Securities
None.
19
EXHIBIT C
Financial Statements- Changes in
Financial Condition (TBT)
Attached
20
TransBioTec, Inc
(A Development Stage Company)
BALANCE SHEETS
Dec. 31, Dec. 31, March 31, 2010
2009 2010 (Unaudited)
--------- --------- --------------
ASSETS
Current assets
Cash $ 705 $ 30,695 $ 10,202
--------- --------- --------------
Total current assets 705 30,695 10,202
--------- --------- --------------
Fixed assets - net 9,424 2,045 3,829
--------- --------- --------------
Total Assets $ 10,129 $ 32,741 $ 14,031
========= ========= ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $294,793 $ 279,840 $ 171,432
Accrued interest payable 260,071 520,767 520,767
Judgement Payable 97,464 97,464 97,464
Notes payable - related
parties 577,256 594,966 114,339
Notes payable - current 4,657 - -
Other Accrued Liabilities 361,565 130,565 130,565
--------- --------- --------------
Total current liabilties 1,595,806 1,623,602 1,034,567
---------- --------- --------------
Notes payable 153,879 153,479 -
--------- --------- --------------
Total Liabilities 1,749,685 1,777,081 1,034,567
---------- --------- --------------
Stockholders' Equity
Common stock, $.01 par
value; 100,000,000 shares
authorized; 2,346,544
shares (2009), and
2,399,544 and 3,059,032
in 2010 and 2011
respectively issued and
outstanding 21,610 23,420 30,590
Additional paid in
capital 1,075,601 1,582,006 2,395,490
Deficit accumulated during
the development stage (2,836,767) (3,349,766) (3,446,616)
----------- --------- --------------
Total Stockholders' Equity (1,739,556) (1,744,340) (1,020,536)
----------- --------- --------------
Total Liabilities and
Stockholders' Equity $ 10,129 $ 32,741 $ 14,031
=========== ========= ==============
The accompanying notes are an integral part of the financial
statements.
TransBioTec
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Period From
Period From Jan. 1, 2004
Three Months Three Months Jan. 1, 2004 (Inception)
Ended Ended (Inception) To
Year Ended Year Ended March 31, 2010 March 31, 2011 To March 31, 2011
Dec. 31, 2009 Dec. 31, 2010 (Unaudited) (Unaudited) Dec. 31, 2010 (Unaudited)
--------------- ---------------- --------------- ---------------- --------------- ---------------
Revenues $ - $ - $ - $ - $ - $ -
--------------- ---------------- --------------- ---------------- --------------- ---------------
- - - - - -
--------------- ---------------- --------------- ---------------- --------------- ---------------
Operating expenses:
Amortization
& depreciation 10,140 8,841 - - 97,727 97,727
General and
administrative 790,319 187,259 51,133 86,412 2,771,175 2,860,586
--------------- ---------------- --------------- ---------------- --------------- ---------------
800,459 196,100 51,133 86,412 2,868,901 2,958,313
--------------- ---------------- --------------- ---------------- --------------- ---------------
Operating - other:
Gain on asset sales - - - - - -
--------------- ---------------- --------------- ---------------- --------------- ---------------
Gain (loss) from
operations (800,459) (196,100) (51,133) (86,412) (2,868,901) (2,958,313)
--------------- ---------------- --------------- ---------------- --------------- ---------------
Other income
(expense):
Option Expense (55,715)
Interest expense (208,001) (261,185) (112) (7,437) (480,864) (488,302)
--------------- ---------------- --------------- ---------------- --------------- ---------------
Income (loss)
before provision
for income taxes (1,008,460) (513,000) (51,245) (96,849) (3,349,765) (3,446,615)
Provision for
income tax - - - - - -
--------------- ---------------- --------------- ---------------- --------------- ---------------
Net income (loss) $ (1,008,460) $ (513,000) $ (51,245) $ (96,849) $ (3,349,765) $ (3,446,615)
=============== ================ =============== ================ =============== ===============
Net income (loss)
per share
(Basic and
fully diluted) $ (0.43) $ (0.22) $ (0.02) $ (0.04)
=============== ================ =============== ================
Weighted average
number of
common shares
outstanding 2,346,544 2,373,044 2,346,544 3,059,032
=============== ================ =============== ================
The accompanying notes are an integral part of the
financial statements.
TransBioTec
(Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock During The
Amount Additional Development Stockholders'
Shares ($.001 Par) Paid in Capital Stage Equity
------------------- ------------- ------------------ --------------- --------------
Balances at December 31, 2008 2,065,200 $ 20,652 $ 957,059 $ (1,828,307) $ (850,595)
6/4/2009 option exercise @ $.10 -
Vernon Justus 50,000 $ 500 $ 4,500 $ 5,000
8/5/2009 stock issued for cash @
$2.50 Aeron Calkins 20,000 $ 200 $ 49,800 $ 50,000
9/24/2009 stock issued for cash @
$2.50 Phillip Yates 5,000 $ 50 $ 12,450 $ 12,500
10/12/2009 stock issued for note
conversion Mark J. Mendel @ $2.50 20,800 $ 208 $ 51,792 $ 52,000
per share
Gain (loss) for the year (1,008,464) (1,008,464)
------------------- ------------- ------------------ --------------- --------------
Balances at December 31, 2009 2,161,000 $ 21,610 $ 1,075,601 $ (2,836,771) $ (1,739,559)
1/11/2010 stock issued for cash @
$2.50 Phil Yates 5,000 $ 50 $ 12,450 $ 12,500
7/2/2010 stock issued for cash @
$2.50 Nancy Smith 6,000 $ 60 $ 14,940 $ 15,000
11/10/2010 stock issued for cash @
$2.50 Robert Asplundh 10,000 $ 100 $ 24,900 $ 25,000
12/07/2010 stock issued for cash @
$2.50 Dembeck, Dembeck, and Jacob 30,000 $ 300 $ 74,700 $ 75,000
12/29/2010 stock issued for debt of
officers wages @ $2.50 - Bennington 130,000 $ 1,300 $ 323,700 $ 325,000
Jan 2010 - option issuances $ 55,715 $ 55,715
Gain (loss) for the year (513,000) (513,000)
------------------- ------------- ------------------ --------------- --------------
Balances at December 31, 2010 2,342,000 $ 23,420 $ 1,582,006 $ (3,349,771) $ (1,744,344)
Conversion of Notes and Cash
purcahses 717,000 $ 7,170 $ 813,484 $ 820,654
Gain (loss) for the year $ (96,849) $ (96,849)
------------------- ------------- ------------------ --------------- --------------
Balance at March 31, 2011 $ 30,590 $ 2,395,490 $ (3,446,616) $ (1,020,536)
=================== ============= ================== =============== ==============
3,059,000
The accompanying notes are an integral part of
the financial statements.
TransBioTec
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period From
Period From Jan. 10, 2004
Three Months Three Months Jan. 10, 2004 (Inception)
Ended Ended (Inception) To
Year Ended Year Ended March 31, 2010 March 31, 2011 To March 31, 2010
Dec. 31, 2009 Dec. 31, 2010 (Unaudited) (Unaudited) Dec. 31, 2010 (Unaudited)
------------- ------------- -------------- -------------- ------------- --------------
Cash Flows From Operating
Activities:
Net income (loss) $ (1,008,460) $ (513,000) $ (51,245) $ (96,849) $ (3,349,766) $ (3,446,616)
Adjustments to reconcile
net loss to net cash
provided by (used for)
operating activities:
Amortization &
depreciation (5,391) 7,379 (1,784) 74,832 73,048
Stock issued for services - - -
Non cash lease income - -
Non cash interest expense - -
Gain (loss) on asset sales 283 -
Accrued payables 534,281 14,744 34,122 (108,408) 1,028,636 920,228
Accrued payables -
related parties - - - -
------------- ------------- -------------- -------------- ------------- --------------
Net cash provided
by (used for)
operating activities (479,287) (490,877) (17,123) (207,041) (2,246,298) (2,453,340)
------------- ------------- -------------- -------------- ------------- --------------
Cash Flows From Investing
Activities:
Funds loaned to related
party - -
Collections of related
party loans - -
Fixed asset purchases - - (76,877) (76,877)
Intangible Assets 53,044 -
------------- ------------- -------------- -------------- ------------- --------------
Net cash provided
by (used for)
investing activities 53,044 - - - (76,877) (76,877)
------------- ------------- -------------- -------------- ------------- --------------
Cash Flows From Financing
Activities:
Notes & loans payable
- borrowings 224,182 12,653 4,505 (634,106) 748,445 114,339
Notes & loans payable
- payments
Sales of common stock 119,500 508,215 12,650 820,654 1,605,426 2,426,080
------------- ------------- -------------- -------------- ------------- --------------
Net cash provided
by (used for)
financing activities 343,682 520,868 17,155 186,548 2,353,871 2,540,419
------------- ------------- -------------- -------------- ------------- --------------
Net Increase (Decrease)In Cash (82,561) 29,991 32 (20,494) 30,695 10,201
Cash At The Beginning Of The
Period 83,269 708 708 30,699 - -
------------- ------------- -------------- -------------- ------------- --------------
Cash At The End Of The Period $ 708 $ 30,699 $ 740 $ 10,205 $ 30,695 $ 10,201
============= ============= ============== ============== ============= ==============
EXHIBIT D
Patents, Trademarks, Trade Names and
Copyrights (TBT)
Patents
Patent Number Date of Patent Description
------------- -------------- -----------
6,620,108 12/26/01 Apparatus and system that identifies vehicle
or machine operator.
7,173,536 2/6/10 Substance detection and alarm system.
7,377,186 5/27/11 Interface system between substance detection
system and vehicle or machine ignition
system.
Trademarks
None.
Trade Names
None.
Copyrights
None.
21
EXHIBIT E
Material Contracts (TBT)
1. Employment Agreement with Charles Bennington
2. Agreement with Ventura LLC
3. Consulting Agreement with Vcfo
4. Consulting Agreement with Nolann Williams
22
EXHIBIT F
Insurance Policies (TBT)
Coverage Expiration
Policy Insurer Limit Date
------ ------- -------- ----------
Commercial General Allied $2,000,000 12/12/11
Liability
Commercial Property Allied $ 120,000 12/12/11
Directors and Officers Scottsdale $2,000,000 12/21/11
Liability
Commercial Auto Travelers $ 500,000 9/20/11
Litigation (TBT)
Case Name Case Number Disposition Description
--------- ----------- ----------- -----------
Orange County Valet and 06HL05214 Pending Breach of contract claim in
Security Patrol, Inc. vs. the amount of $9,000
TransBiotec, et al.
Fashion Furniture Rental, 05CC12107 Pending Breach of contract claim
Inc. vs. TransBiotec
23
EXHIBIT G
Officers and Directors (Imagine)
Name Position
---- --------
Gregory Bloom President and Director
Bank Accounts, Safe Deposit
Boxes, Powers of Attorney (Imagine)
None.
24
EXHIBIT H
Options, Warrants and Convertible Securities (Imagine)
None.
25
EXHIBIT I
Financial Statements- Changes in Financial
Condition (Imagine)
Attached.
26
Imagine Media, Ltd. And Subsidiary
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Quarter Ended March 31, 2011
Imagine Media, Ltd. And Subsidiary
Consolidated Condensed Financial Statements
(Unaudited)
TABLE OF CONTENTS
Page
----
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidated condensed balance sheets 1
Consolidated condensed statements of operations 2
Consolidated condensed statement of shareholders' deficit 3
Consolidated condensed statements of cash flows 4
Notes to consolidated condensed financial statements 5-7
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Balance Sheets
March 31, December 31,
2011 2010
---------- ---------------
(unaudited) (Derived from
audited financial
statements)
Assets
Current assets:
Cash and cash equivalents $ 37 $ 83
---------- -----------
Total current assets 37 83
---------- -----------
Total assets $ 37 $ 83
========== ===========
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable:
Trade creditors $ 103,359 $ 101,555
Related party 3,000 3,000
Short term advance 17,300 17,300
Indebtedness to related parties 39,440 39,440
Convertible debenture 30,000 30,000
Accrued interest payable 8,400 7,500
Other accrued expenses 9,227 3,082
---------- -----------
Total current liabilities 210,726 201,877
---------- -----------
Commitments - -
Shareholders' deficit
Common stock , $.00001 par value.
Authorized 100,000,000 shares,
1,410,650 shares issued and
outstanding 14 14
Additional paid-in capital 487,276 487,276
Retained deficit (697,979) (689,084)
---------- -----------
Total shareholders' deficit (210,689) (201,794)
---------- -----------
Total liabilities and
shareholders' deficit 37 83
========== ===========
The accompanying notes are an integral part of these financial statements
1
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Statements of Operations
(unaudited)
For the Three Months Ended
March 31,
-------------------------------------
2011 2010
--------------- ---------------
Net sales and gross revenues:
Advertising sales, net of
discount of $0 and $0, respectively - -
---------- -----------
Total sales and revenues - -
---------- -----------
Operating expenses:
Editorial, production and
circulation - -
Selling, general and
administrative 7,996 10,974
---------- -----------
Total operating expenses 7,996 10,974
---------- -----------
Loss from operations (7,996) (10,974)
Other income (expense):
Interest expense (900) (900)
---------- -----------
Loss before income taxes (8,896) (11,874)
Income tax provision - -
---------- -----------
Net loss $ (8,896) $ (11,874)
========== ===========
Basic and diluted loss per share $ (0.01) $ (0.01)
========== ===========
Weighted average common shares
outstanding 1,410,650 1,400,650
========== ===========
The accompanying notes are an integral part of these financial statements
2
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Statement of Changes in Shareholders' Deficit
(Unaudited)
Common Stock
-------------------------------- Additional Retained
Shares Par Value Paid-in Capital Deficit Total
---------------- -------------- --------------- ----------- -------------
Balance at December 31, 2008 1,122,650 $ 11 $ 392,779 $ (541,052) $ (148,262)
Conversions of accounts payable to
common stock (Notes 2 & 3) 104,000 1 25,999 - 26,000
Conversions of short term advances
and accrued interest to common 111,400 1 27,849 - 27,850
stock (Notes 2 & 3)
Conversions of indebtedness to
related parties to common stock (Note 2) 42,600 1 10,649 - 10,650
Net loss - - - (77,705) (77,705)
---------- --------- ---------- ---------- ----------
Balance at December 31, 2009 1,380,650 14 457,276 (618,757) (161,467)
Conversions of indebtedness to
related parties to common
stock (Note 2) 30,000 - 30,000 - 30,000
Net loss - - - (70,327) (70,327)
---------- --------- ---------- ---------- ----------
Balance at December 31, 2010 1,410,650 $ 14 $ 487,276 $ (689,084) $ (201,794)
========== ========= ========== ========== ==========
Net loss (8,896) (8,896)
---------- --------- ---------- ---------- ----------
Balance at March 31, 2011 1,410,650 $ 14 $ 487,276 $ (697,980) $ (210,690)
========== ========= ========== ========== ==========
The accompanying notes are an integral part of these financial statements
3
Imagine Media, Ltd. and Subsidiary
Consolidated Condensed Statements of Cash Flows
(unaudited)
For the Three Months Ended
March 31,
----------------------------
2011 2010
------- --------
Cash flows from operating activities:
Net loss $ (8,896) $(11,874)
Adjustments to reconcile net loss to net
cash used by operating activities:
Stock issued to Directors' in
exchange for services -
Changes in assets and liabilities:
Receivables - -
Other assets - -
Accounts payable 1,804 4,009
Accrued expenses 7,045 900
-------- --------
Net cash used in operating activities (47) (6,965)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common stock - -
Proceeds from related party short term
advances - 6,950
Repayments on related party short term
advances - -
Proceeds from other short term advances - -
Repayments on other short term advances - -
-------- --------
Net cash provided by financing activities - 6,950
-------- --------
Net change in cash and cash equivalents (47) (15)
Cash and equivalents:
Beginning of period 83 94
-------- --------
End of period $ 37 $ 79
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ - $ -
======== ========
Interest $ - $ -
======== ========
Supplemental disclosure of non-cash
financing activities:
Stock issued as payment of liability for
services performed during 2009 $ - $ 30,000
======== ========
The accompanying notes are an integral part of these financial statements
4
(1) Unaudited Financial Information
The accompanying consolidated condensed financial statements of Imagine Media,
Ltd. (the "Company") are unaudited and have been prepared in accordance with the
instructions to quarterly reports on Form 10-Q. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in
financial position at March 31, 2011, and for all periods presented, have been
made. Certain information and footnote data necessary for a fair presentation of
financial position and results of operations in conformity with accounting
principles generally accepted in the United States of America have been
condensed or omitted. It is therefore suggested that these financial statements
be read in conjunction with the summary of significant accounting policies and
notes to financial statements included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission (the "SEC") for the year
ended December 31, 2010. The results of operations for the period ended March
31, 2011 are not necessarily an indication of operating results for the full
year.
(2) Going Concern
As shown in the accompanying financial statements, the Company has incurred
operating losses and, at March 31, 2011, had both a working capital deficit and
a net capital deficiency of $(210,689). These factors may indicate that the
Company will be unable to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flow to meet obligations on a timely basis
and ultimately to attain profitability. To do this, the Company is seeking to
acquire another business which, as of March 31, 2011, had not occurred. However,
management plans, in the near-term, to (1) restructure debt and (2) increase
ownership equity in order to increase working capital. There is, of course, no
assurance that management will be successful in those efforts. The Company's
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
In their report on the Company's financial statements for the year ended
December 31, 2010, the Company's independent auditors expressed substantial
doubt as to the Company's ability to continue as a going concern.
(3) Related Party Transactions
On February 10, 2010 the Company's board of directors authorized the issuance of
10,000 shares to each of the Company's three directors for services to the
Company 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.
5
(3) Related Party Transactions (cont'd)
Indebtedness to related parties
During the year ended December 31, 2008, an affiliate controlled by a
shareholder advanced $16,000 to the Company for working capital purposes. As of
December 31, 2008 the Company had repaid a total of $4,000 of these cash
advances. In addition, the affiliate made a direct advance to the Company of
$650, which remained unpaid at December 31, 2008. On March 1, 2009, $10,650 of
the advances was converted to 42,600 shares of common stock at a conversion
price of $.25 per share, the fair value of the stock on the conversion date. At
March 31, 2011, $2,000 of the working capital advance was unpaid.
During the years ended December 31, 2010 and 2009, a shareholder advanced the
Company $4,740 and $7,100, respectively. At March 31, 2011, the entire $11,840
balance remained unpaid.
During the years ended December 31, 2010 and 2009, a shareholder advanced the
Company $100 and $8,000, respectively. At March 31, 2011, the entire $8,100
balance remained unpaid.
During the years ended December 31, 2010 and 2009, an affiliate controlled by a
shareholder advanced the Company $2,500 and $3,000, respectively. At March 31,
2011, the entire $5,500 balance remained unpaid.
In June 2009, an affiliate controlled by a shareholder advanced the Company a
total of $12,000, which remained unpaid at March 31, 2011.
None of the advances earn interest and are payable to the holder on demand.
(4) Convertible Debenture and Short term advances
On October 1, 2008 the Company issued an 8% Convertible Debenture to an attorney
in exchange for $30,000 owed to the attorney for prior services. The Debenture
is convertible by the holder into shares of the company's common stock at a
conversion price of $0.25. The debenture matured April 1, 2009. Upon default of
the debenture, the default interest rate of 12% was effective. As of March 31,
2011 the debenture, together with $8,400 of accrued interest, had neither been
converted nor paid.
6
During the year ended December 31, 2008 the Company received $15,000 from a
non-affiliate as a short term advance. During the first quarter of 2009 an
additional $150 was advanced to the Company by the same non-affiliate. On March
1, 2009 the total of $15,150 together with accrued interest of $200 was
converted to 61,400 shares of common stock at a conversion price of $.25 per
share, the fair value of the stock on the conversion date. During the year ended
December 31, 2009, this non-affiliate advanced the Company an additional $6,000
to be used for working capital purposes. During the year ended December 31,
2010, the non-affiliate advanced another $11,300to the
7
(4) Convertible Debenture and Short term advances (cont'd)
Company. As of March 31, 2011 the $17,300 payable to the non-affiliate was due
on demand.
(5) Equity
Common stock
Upon the effectiveness on July 14, 2008 of the Registration Statement filed with
the SEC by Imagine Media, Ltd. ("Media"), Imagine Holdings Corp. ("Holdings")
has completed the spin-off of its magazine business to its shareholders of
record as of August 23, 2007. The transaction was effected by the issuance of
992,650 shares of Media $0.00001 par value common stock to Holdings in exchange
for certain assets, subject to liabilities, of Holdings, consisting primarily of
its 60 percent of the issued and outstanding common stock of Imagine Operations,
Inc. ("Operations").
On February 10, 2010 Directors' were issued 30,000 shares of the Company's
common stock valued at $1.00 per share or $30,000.
(6) Trademark Contingency
The Company has learned that a third party in Orange County, CA publishes a
regional magazine under the name "Image Magazine." The publisher of the
California-based Image Magazine has registered the trademark "Image Magazine"
with the United States Patent and Trademark Office, which trademark registration
was issued in 2006, and also owns and uses the domain name "imagemagazine.com".
Preliminary contact with the principals of the California-based magazine has
been made in an effort to resolve our conflicting uses of the same trademark and
have agreed in principle to resolve the matter through the execution of a
trademark license; however, no assurance can be given that such a license can be
finalized. Management does not expect this potential infringement issue to have
a material impact due to the Company's discontinuation of its publishing
operations.
(7) Subsequent Event
In April 2011 the Company entered into a tentative agreement to acquire
Transbiotec, Inc. ("TBT") in exchange for 23,557,810 shares of the Company's
common stock.
TBT has developed and patented a sensor that detects blood alcohol levels
through a person's skin. The system senses ethanol excreted through
perspiration. If alcohol is detected, a signal is sent to a vehicle's ignition
control system which prevents the vehicle from starting. TBT has developed a
prototype of the sensor and has completed beta testing of the device.
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(7) Subsequent Event (cont'd)
Initially, TBT intends to offer its sensor only for commercial vehicle
applications. Later, TBT plans to market its sensor to the public for use in
automobiles, SUV's, RV's, boats and other vehicles.
Completion of the Company's acquisition of TBT is subject to the satisfaction of
several conditions including without limitation, the execution of a definitive
agreement, the satisfactory completion of due diligence by both parties, and the
completion of an audit of TBT's financial statements. There can be no assurance
that the transaction will be consummated.
9
EXHIBIT J
Patents, Trademarks, Trade Names and Copyrights (Imagine)
None.
27
EXHIBIT K
Material Contracts (Imagine)
None.
28
EXHIBIT L
Insurance Policies (Imagine)
None.
Litigation (Imagine)
None.
29