TRANSACT ENERGY CORP - Annual Report: 2011 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
FORM 10-K
X . ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
or
. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 333-139746
TRANSACT ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada |
| 98-0515445 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
SUITE 104-511 17503 La Cantera Parkway, San Antonio, TX, USA 78257
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code 210-561-6015
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock, par value $0.001
(Title of each class)
None
(Name of each exchange on which registered)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. . Yes X . No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. . Yes X . No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X . Yes . No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | . | Accelerated filer | . |
Non-accelerated filer | . (Do not check if a smaller reporting company) | Smaller reporting company | X . |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). . Yes X . No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. On June 30th, 2011 the aggregate market value of the voting stock of Transact Energy Corp. held by non-affiliates of the registrant was $311,783.64
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of March 31, 2012 we had issued and outstanding 22,332,669 shares common stock, $.001 par value
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. . Yes . No
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None
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PART I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K that are not historical facts are "forward-looking statements." Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "intends," "plan" "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-looking statements appear in Item 1 - "Business" and Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as elsewhere in this Annual Report and include statements regarding the following: the expected development and potential benefits from our products to consumers, progress in our efforts to develop our facilities and our products and to achieve and maintain regulatory approvals, the potential market demand for our products, our expectations regarding our short- and long-term capital requirements, our outlook for the coming months and information with respect to any other plans and strategies for our business.
The factors discussed herein, including those risks described in Item 1A, and expressed from time to time in our filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed in or implied by such statements. The forward-looking statements are made only as of the date of this filing, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
INTRODUCTION
Unless otherwise specified or required by context, as used in this annual report, the terms "we," "our," "us" and the "Company" refer collectively to (i) TransAct Energy Corp., a Nevada corporation ("TransAct").
The Company's current corporate structure results from the issuance of founding shares equal to nine million four hundred thousand (9,400,000), an initial public offering (IPO) of one million one hundred and two thousand shares (1,102,000) at twenty-five cents ($0.25) and eleven million eight hundred and thirty thousand six hundred and sixty-nine shares (11,830,669) shares for operations (including consulting, management and debt settlement). .
The Company was originally formed to manage energy related assets and has expanded its scope to power production. The Company incorporates new technologies to provide sustainable energy at power production cost parity.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP).
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.
Item 1. Business.
Our History and Business
We formed as a Nevada corporation on March 15, 2006 as TransAct Energy Corp. Although our business plan called for the securing and managing of any energy leasehold, the Company focused on securing producing and non-producing oil and gas leases in Alberta, Canada. On September 7, 2006 we acquired a one hundred percent (100%) interest in a Petroleum and Natural Gas Lease, from the province of Alberta, Canada for twelve thousand and fifty-one dollars ($12,051), the MedHat Project. We did not develop this resource. We looked to expand our holdings in Alberta through acquisitions and joint ventures for the following two years. We have since allowed this lease to lapse.
A distinct trend appeared in the energy sector supporting sustainable energies. About the same time in late 2008 the Company was introduced to Dr. Mory Gomshei one of the world’s leading geothermal experts and two of his geothermal power (using superheated water from the earth to turn turbines) projects in British Columbia, Canada. The acquisition, resource evaluation, exploration process and administration for geothermal are very similar and in many jurisdictions come under the petroleum sector. We worked with independent companies Aqua Terra Power and Aqua Terra Geothermal through the balance of 2009 on the two geothermal power projects in British Columbia. Other than lending Aqua Terra funds no formal arrangement was entered into pending them securing drill permits on the two projects. These licenses lapsed under their original owners and were re-posted by the government for public tender, an Ontario corporation associated with Dr. Ghomshei acquired most of the original licences and have initiated drilling applications. We entered discussions with this entity in the latter half of 2011 to form a Farm-in relationship. Discussions are ongoing.
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TransAct in mid-2009 started introducing the concept of geothermal power to markets in Western and South Asia with the plan to enter joint venture relationships to develop geothermal power projects in these areas. To enter these markets as a power producer the Company found it strategic to develop traditional carbon fuelled power projects in addition After discussions with the Republic of Iraq regarding geothermal opportunities in Northern Iraq, the Company, together with Spectrum Energy Project Investments (a UAE power company), submitted applications to the Basra Investment Commission to develop/manage three natural gas power plants. These multi-billion dollar projects come with long-term power purchase agreements (PPA) and sovereign guarantees and our application through Spectrum was shortlisted. We were unsuccessful in completing our acquisition of 50% of Spectrum and the initial offering lapsed.
On August 31, 2009, TransAct Energy completed and closed its initial public offering at twenty-five cents ($0.25) per share selling one million one hundred and two thousand shares (1,102,000) for a total capital raise of two-hundred and seventy four thousand three hundred and ninety-eight dollars ($274,398 USD). The majority of these funds were placed with Aqua Terra Power as convertible notes to secure and develop the four (4) geothermal licenses in British Columbia, Canada; the balance was used to pay the costs of the offering and a small amount went to working capital.
The Company was approved for listing on the OTCBB in December 2009 and received the trading symbol “TEGY.”
Throughout 2010 we laid the ground work for large power projects in South Europe, Asia and Africa; smaller projects for solar and hydrogen fuel cells specifically in India. We worked to secure markets for geothermal, new solar photo-voltaic and hydrogen fuel cell generators.
Joint development agreement negotiations took place in December 2010 clearing the way for Transact to enter into one major project in South East Asia in 2011. This project was stalled throughout 2011 because TransAct was unable to secure the funds it required to proceed.
The 2011 year was frustrated with the company’s inability to collect raised or earned funds into the company’s bank account. Thus projects, joint ventures and previous efforts were postponed or lost permanently. While we did maintain the company’s trading status the year was taken up with collection efforts and supporting business relationships while in limbo. We did initiate discussions on new waste to energy technologies to leverage the work we had done previously in this sector.
Business Strategy
The Company’s 2012 efforts will be focused on building out its waste to energy (“W2E”) division. After the funding setbacks of 2011 the company decided the best way to make up for lost time would be to focus on one joint venture (“JV”)with a private company that we could contribute to that was through its development stage and ready to operate. We have spent time and money through to 2011 in the Energy from Waste (“EFW”) sector. So we focused on and identified a company in EFW. We will continue to develop the relationship and affect a formal agreement in 2012. The business plan calls for a four plant build out initially in Europe, and then a cross-over to North America.
To execute our strategy the Company will keep its team lean and build human resources in the JV. All operations will be focused out of a central office either in the USA or Europe depending on the long-term focus of the JV partners.
In terms of funding the JV, the Company has secured a commitment (subject to their funding being secured) from a development company for approximately thirty million dollars ($30 Million USD) of which most will be allocated as equity for the JV’s planned facility in Scotland. The balance of the required project capital will be sourced out of one of several green funds we have developed relationships with in anticipation of a sustainable energy project. The Company is also developing funding sources that will take out the construction debt/equity structures upon plant commissioning; in order that the funder may secure ten to fifteen year guaranteed revenue streams. This will allow TransAct and its joint venture partners to move their funds into other projects on an ongoing basis.
Markets and Customers
In Europe the first EFW plant is planned for Scotland. The plant in Scotland has customers that need to dispose of food contaminated plastics and other customers that need to dispose of end-of–life-tires. The European Union has legislation in place requiring a 20% green fuel blend by 2020 which creates customers needing a green fuel that can blend with existing refined fuels. The fuels produced by the EfW process meet these criteria and have sales of the produced fuels ready to go. The Scotland plant will take us through to the end of the year.
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Employees
At December 31, 2011, the Company has a CEO and CFO under contract with everyone else required by the company being fulfilled by consultants on a demand basis.
The Company did not experience any labour disputes or labour stoppages during the current fiscal year.
Principal Products
The Company’s proposed products will be electricity, carbon credits, liquid petroleum gas, green fuels, carbon black, recycled steel and nylon from a proprietary waste processing plant. These will be the first emissions free EFW plants capable of processing waste in a cost effective manner.
Sources and Availability of Raw Materials
The waste required to be processed comes from local sources of food contaminated plastic and end-of-life tires. They pay the JV to take their waste under long-term (5 years or greater) contracts. The supplies of waste are ever growing with the restrictions on land-filling forcing processing solutions.
Seasonality of Business
The EFW plants run 351 days a year with two scheduled maintenance shutdowns summer and winter. The supply of waste and the sale of the resulting products have no seasonality; however fuel prices may have some seasonal influence.
Industry Practices/Needs for Working Capital
Each plant with operating subsidy, should cost approximately $105 Million dollars. The plant revenues are to bel pre-contracted prior to construction under long-term agreements with credible guarantees. With guaranteed earnings in place the financial industry has accepted an eighty percent debt to equity ratio. The resulting equity portion of $21 Million USD if required to see the plant through to profitability is in the due diligence stage of being completed.
Dependence on Few Customers
The company will have 9 to 10 customers for each plant. We elected to accept our 500 tonne per day quota of waste from two or three suppliers; however it can go to open market if we deem this more effective. The sale of the plants products are to single companies for each category. We have the option of open market sales should these prove more reliable.
Competitive Conditions
Every government on the planet is faced with growing amounts of garbage and the mandate to use it as a resource rather than bury or burn it. The demand for sustainable energy continues to increase almost everywhere on the planet at the same time. Climate changes affect the demand for heating and cooling and the lack of rain in certain areas impacts on the ability to produce hydro-electricity. Political instability or the threat there of, in oil producing regions sends countries that have petroleum based economies scrambling for alternatives. Economic instability impacts on many countries abilities to import energy causing them to look within their own borders for energy that provides autonomy. Finally the pressure is on all nations to look at and change the environmental impact of their power production.
Any technology that can produce clean energy from waste in a cost effective manner has a competitive advantage in the complex matrix of sustainable energy production. There have been no emissions free and cost effective energy from waste technologies to handle the ever growing waste. So governments have settled for incineration with scrubbers that remove the pollutants to established levels. The new emission targets being established for waste going forward, limits the competition. TransAct’s Energy from Waste technology will be the only technology capable of meeting the future conditions of competition in this arena.
Availability of resources, upfront capital and customers willing to pay for the resulting energy, determine the generation resource. In markets where they have resources but not expertise or upfront capital the field of competition opens up for those able to build, own, and operate the facility at a profit over the long-term.
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The Company believes that the combination of the technologies emissions free status, low operating costs, ability to process all waste streams into useable energy with full carbon capture and a low "full life" cost will allow it to successfully compete for long-term waste processing and green energy supply agreements globally.
Factors that can influence the overall market for our product include some of the following:
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number of market participants buying and selling green energy;
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availability and cost of transmission;
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amount of electricity normally available in the market;
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fluctuations in electricity supply due to planned and unplanned outages of competitors’ generators;
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fluctuations in electricity demand due to weather and other factors;
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cost of fuel used by generators, which could be impacted by efficiency of generation technology and fluctuations in fuel supply;
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environmental regulations that impact us and our competitors;
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availability of production tax credits and other benefits allowed by tax law;
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relative ease or difficulty of developing and constructing new facilities; and
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credit worthiness and risk associated with buyers.
Environmental Compliance
The future TransAct Energy from Waste technology already meets the European Union Environmental Protection Agency emission free standards. The plants do not incinerate so there are no flue gases and no ash all waste delivered to the plant is converted to useable products.
The incoming waste is maintained in-doors under cover, at three-day processing levels, to avoid any possible nuisance.
The storage systems for fuels produced on site pending shipment meet or exceed regional standards for safety and environmental impact.
All known environmental issues in EFW plants have been identified and solutions obtained that will mitigate these issues beyond established compliance.
Available Information
We will be making available in the near term, through our Internet website at http://www.transactenergy.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Information on our website is not incorporated into this report and is not a part of this report.
Governmental Regulation
Although we intend to comply with all applicable laws and regulations, we cannot assure you that we are in compliance or that we will be able to comply with all future laws and regulations. Additional federal or state legislation, or changes in regulatory implementation, may limit our activities in the future or significantly increase the cost of regulatory compliance. If we fail to comply with applicable laws and regulations, criminal sanctions or civil remedies, including fines, injunctions, or seizures, could be imposed on us. This could have a material adverse effect on our operations.
The business of power plant development and operation is subject to substantial regulation under governmental laws relating to the development, upgrading, marketing, pricing, taxation, and transmission of electricity and other matters. Amendments to current laws and regulations governing development and operations of power plants could have a material adverse impact on our business. In addition, there can be no assurance that income tax laws, royalty regulations and government incentive programs related to the power industry generally, will not be changed in a manner which may adversely affect our progress and cause delays, inability to develop or abandonment of these interests.
Permits, leases, licenses, and approvals are required from a variety of regulatory authorities at various stages of development and operation of power projects. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted in respect of our activities or, if granted, will not be cancelled or will be renewed upon expiry. There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions which may adversely affect our development and operating activities.
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The development and operations of our proposed projects are or will be subject to stringent federal, provincial and local laws and regulations relating to improving or maintaining environmental quality. Environmental laws often require parties to pay for remedial action or to pay damages regardless of fault. Environmental laws also often impose liability with respect to divested or terminated operations, even if the operations were terminated or divested many years ago.
The development activities and operating programs on our proposed and future projects are or will be subject to extensive laws and regulations governing, development, production, imports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, plant safety, toxic substances and other matters. Power development and operations are also subject to risks and liabilities associated with pollution of the environment and disposal of waste products. Compliance with these laws and regulations will impose substantial costs on us and will subject us to significant potential liabilities.
Our business is subject to various federal, provincial, state and local laws and governmental regulations that may be changed from time to time in response to economic or political conditions. TransAct Energy Corp. in each jurisdiction is subject to regulation in respect of the production, sale and distribution of energy in the form of fuel or electricity. In many jurisdictions regulated utilities are required to purchase electricity on an avoided cost basis from renewable energy facilities, or they may acquire purchased power through bids or negotiated procedures.
TransAct will be required to obtain various government approvals for construction of future energy producing facilities.
For project development TransAct will hire consulting and engineering services for transmission and interconnection issues, plant siting, design, air quality, cooling water reuse, permitting, environmental engineering and regulatory compliance.
Environmental Credits
As a future “green” power producer, environmental-related credits, such as renewable energy credits or carbon credits may become available for sale to power companies (to allow them to meet their “green” power requirements) or to businesses which produce carbon based pollution. If available, these credits will belong exclusively to us or our joint venture, and may provide an additional source of revenue.
Item 1A. Risk Factors.
General Business Risks
We are a new business with limited operating history and making an investment in TransAct is risky. If we are unable to successfully identify and secure energy projects or energy conservation projects, then we will not be successful as a business. It will be difficult for you to evaluate an investment in our stock since our operating history is limited to developing our business plan, obtaining 100% interest in a petroleum and natural gas lease in Alberta, Canada referred to as the MedHat Project and bidding on multiple energy projects globally. As a young Company, we are especially vulnerable to any problems, delays, expenses and difficulties we may encounter while implementing our business plan. We have not proven the essential elements of profitable operations and you will bear the risk of complete loss of your investment if we are not successful.
Our future performance may depend on our ability to establish that a particular energy technology is economically sustainable. Sustainable energy technology development and operations involve a high degree of risk. The execution of our business plan is generally, dependent upon the existence of economically usable resources. Expansion of the production of energy from our technology interests is not certain and depends on successful production in quantities and containing sufficient marketable energy economically for future plants.
We have a need for substantial additional financing and will have to significantly delay, curtail or cease operations if we are unable to secure such financing. The Company requires substantial additional financing to fund the cost of acquiring and developing energy projects. The Company also requires funds for other operating activities and to finance the growth of our business, including the construction and commissioning of sustainable energy facilities. We may not be able to obtain the needed funds on terms acceptable to us or at all. Further, if additional funds are raised by issuing equity securities, significant dilution to our current shareholders may occur and new investors may get rights that are preferential to current shareholders. Alternatively, we may have to bring in joint venture partners to fund further development work, which would result in reducing our interests in the projects.
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We may be unable to obtain the financing we need to pursue our growth strategy in energy production, which may adversely affect our ability to expand our operations. When we identify an energy project that we may seek to acquire or to develop, a substantial capital investment will be required. Our continued access to capital, through project financing or through a partnership or other arrangements with acceptable terms, is necessary for the success of our growth strategy. Our attempts to secure the necessary capital may not be successful on favorable terms, or at all.
Market conditions and other factors may not permit future project and acquisition financing on terms favorable to us. Our ability to arrange for financing on favorable terms, and the costs of such financing, are dependent on numerous factors, including general economic and capital market conditions, investor confidence, the continued success of current projects, the credit quality of the projects being financed, the political situation in the jurisdiction in which the project is located and the continued existence of tax laws which are conducive to raising capital. If we are unable to secure capital through partnership or other arrangements, we may have to finance the projects using equity financing which will have a dilutive effect on our common stock. Also, in the absence of favorable financing or other capital options, we may decide not to build new plants or acquire facilities from third parties. Any of these alternatives could have a material adverse effect on our growth prospects and financial condition.
It is very costly to place plants into commercial production. Before the sale of any energy can occur, it will be necessary to construct a gathering and separating system, a plant a delivery system and considerable administrative costs would be incurred To fund expenditures of this magnitude, we may have to find a joint venture participant with substantial financial resources. There can be no assurance that a participant can be found and, if found, it would result in us having to substantially reduce our interest in the project.
We may be unable to realize our strategy of utilizing the tax and other incentives available for developing sustainable energy projects to attract strategic alliance partners, which may adversely affect our ability to complete these projects. Part of our business strategy is to utilize tax and other incentives available to developers of sustainable energy plants to attract strategic alliance partners with the capital sufficient to complete these projects. Many of the incentives available for these projects are new and highly complex. There can be no assurance that we will be successful in structuring agreements that are attractive to potential strategic alliance partners. If we are unable to do so, we may be unable to complete the development of our energy projects and our business could be harmed.
We may not be able to manage our growth due to the commencement of operations which could negatively impact our operations and financial condition. Significant growth in our operations will place demands on our operational, administrative and financial resources, and the increased scope of our operations will present challenges to us due to increased management time and resources required and our existing limited staff. Our future performance and profitability will depend in part on our ability to successfully integrate the operational, financial and administrative functions of our projects and other acquired properties into our operations, to hire additional personnel and to implement necessary enhancements to our management systems to respond to changes in our business. There can be no assurance that we will be successful in these efforts. Our inability to manage the increased scope of operations, to integrate acquired properties, to hire additional personnel or to enhance our management systems could have a material adverse effect on our results of operations.
If we incur material debt to fund our business, we could face significant risks associated with such debt levels. We will need to procure significant additional financing to construct, commission and operate our plants in order to generate and sell energy. If this financing includes the issuance of material amounts of debt, this would expose the Company to risks including, among others, the following:
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a portion of our cash flow from operations would be used for the payment of principal and interest on such indebtedness and would not be available for financing capital expenditures or other purposes;
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a significant level of indebtedness and the covenants governing such indebtedness could limit our flexibility in planning for, or reacting to, changes in our business because certain activities or financing options may be limited or prohibited under the terms of agreements relating to such indebtedness;
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a significant level of indebtedness may make us more vulnerable to defaults by the purchasers of electricity or in the event of a downturn in our business because of fixed debt service obligations; and
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the terms of agreements may require us to make interest and principal payments and to remain in compliance with stated financial covenants and ratios. If the requirements of such agreements were not satisfied, the lenders could be entitled to accelerate the payment of all outstanding indebtedness and foreclose on the collateral securing payment of that indebtedness, which would likely include our interest in the project.
In such event, we cannot assure you that we would have sufficient funds available or could obtain the financing required to meet our obligations, including the repayment of outstanding principal and interest on such indebtedness.
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We may not be able to successfully integrate companies that we may acquire in the future, which could materially and adversely affect our business, financial condition, future results and cash flow. Our strategy is to continue to expand in the future, including through acquisitions. Integrating acquisitions is often costly, and we may not be able to successfully integrate our acquired companies with our existing operations without substantial costs, delays or other adverse operational or financial consequences. Integrating our acquired companies involves a number of risks that could materially and adversely affect our business, including:
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failure of the acquired companies to achieve the results we expect;
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inability to retain key personnel of the acquired companies;
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risks associated with unanticipated events or liabilities; and
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the difficulty of establishing and maintaining uniform standards, controls, procedures and policies, including accounting controls and procedures.
If any of our acquired companies suffer performance problems, the same could adversely affect the reputation of our group of companies and could materially and adversely affect our business, financial condition, future results and cash flow.
The success of our business relies on retaining our key personnel. We are dependent upon the services of our President and Chief Executive Officer, Roderick C. Bartlett, our Chief Financial Officer, Simon Thomas, our Director Joe F. Dickson, our Director Des Biali, and Dr. Mory Gomshei, our Advisor– Sustainable Power Engineering. The loss of any of their services could have a material adverse effect upon us. As of the date of this report, the Company has executed compensation agreements with some of these persons but does not hold key-man insurance on any of them.
The impact of governmental regulation could adversely affect our business by increasing costs for financing or development of energy plants. Our business is subject to certain jurisdictional laws and regulations, including laws and regulations on taxation, the exploration for and development, production and distribution of energy, and environmental and safety matters.
Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.
Because of these jurisdictional regulations, we could incur liability to governments or third parties for any unlawful discharge of pollutants into the air, soil or water, including responsibility for remediation costs. We could potentially discharge such materials into the environment via:
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leakage of fluids or airborne pollutants from gathering systems, pipelines, plant and storage tanks;
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damage resulting from accidents during normal operations; and
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explosions.
Because the requirements imposed by such laws and regulations are frequently changed, we cannot assure you that laws and regulations enacted in the future, including changes to existing laws and regulations, will not adversely affect our business by increasing cost and the time required to explore and develop geothermal projects.
Industry competition may impede our growth and ability to enter into energy purchase agreements on terms favorable to us, or at all, which would negatively impact our revenue. The electrical power generation and fuel production industry is highly competitive and we may not be able to compete successfully or grow our business. We compete in areas of pricing, grid access and markets. The industry in many jurisdictions is complex as it is composed of public utility districts, cooperatives and investor-owned energy companies. Many of the participants produce and distribute electricity and fuels. Their willingness to purchase electricity or fuel from an independent producer may be based on a number of factors and not solely on pricing and surety of supply. If we cannot enter into energy purchase agreements on terms favorable to us, or at all, it would negatively impact our revenue and our decisions regarding development of additional plants.
Actual costs of construction or operation of a plant may exceed estimates used in negotiation of energy purchase and energy financing agreements. If the actual costs of construction or operations exceed the model costs, the Company may not be able to build the contemplated energy plants, or if constructed, may not be able to operate profitably. The Company’s financing agreements will typically provide for a priority payback to our partner. If the actual costs of construction or operations exceed the model costs, we may not be able to operate profitably or receive the planned share of cash flow and proceeds from the project.
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There are some risks for which we do not or cannot carry insurance. Because our current operations are limited in scope, the Company carries property and, public liability insurance coverage as needed, but does not currently insure against any other risks.
As its operations progress, the Company will acquire additional coverage consistent with its operational needs, but the Company may become subject to liability for pollution or other hazards against which it cannot insure or cannot insure at sufficient levels or against which it may elect not to insure because of high premium costs or other reasons. In particular, coverage is not available for environmental liability or earthquake damage.
Our officers and directors may have conflicts of interests arising out of their relationships with other companies. Several of our directors and officers serve (or may agree to serve) as directors or officers of other companies or have significant shareholdings in other companies. To the extent that such other companies may participate in ventures in which the Company may participate, the directors may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. From time to time, several companies may participate in the acquisition and development of properties thereby allowing for their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment.
Risks Relating To the Market for Our Securities
A significant number of shares of our common stock are eligible for public resale. If a significant number of shares are resold on the public market, the share price could be reduced and could adversely affect our ability to raise needed capital. The market price for our common stock could decrease significantly and our ability to raise capital through the issuance of additional equity could be adversely affected by the availability and resale of such a large number of shares in a short period of time. If we cannot raise additional capital on terms favorable to us, or at all, it may delay our exploration or development of existing properties or limit our ability to acquire new properties, which would be detrimental to our business.
Because the public market for shares of our common stock is limited, investors may be unable to resell their shares of common stock. There is currently only a limited public market for our common stock on the OTCBB in the United States, and investors may be unable to resell their shares of common stock. The development of an active public trading market depends upon the existence of willing buyers and sellers that are able to sell their shares and market makers that are willing to make a market in the shares. Under these circumstances, the market bid and ask prices for the shares may be significantly influenced by the decisions of the market makers to buy or sell the shares for their own account, which may be critical for the establishment and maintenance of a liquid public market in our common stock. We cannot give you any assurance that an active public trading market for the shares will develop or be sustained.
The price of our common stock is volatile, which may cause investment losses for our shareholders. The market for our common stock although newly initiated is assumed to be highly volatile. The trading price of our common stock on the OTCBB is subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, and general economic and market conditions. In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to our market or relating to our Company could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of our stock price may cause investment losses for our shareholders.
We do not intend to pay any cash dividends in the foreseeable future. We intend to reinvest any earnings in the development of our projects. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash.
Our stock is subject to the Penny Stock rules, which impose significant restrictions on broker-dealers and may affect the resale of our stock. A penny stock is generally a stock that:
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is not listed on a national securities exchange or NASDAQ,
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is listed in the "pink sheets" or on the NASD OTC Bulletin Board,
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has a price per share of less than $5.00 and
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is issued by a company with net tangible assets less than $5 million.
The penny stock trading rules impose additional duties and responsibilities upon broker-dealers and salespersons effecting purchase and sale transactions in common stock and other equity securities, including:
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determination of the purchaser's investment suitability,
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delivery of certain information and disclosures to the purchaser, and
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receipt of a specific purchase agreement before effecting the purchase transaction.
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Many broker-dealers will not effect transactions in penny stocks, except on an unsolicited basis, in order to avoid compliance with the penny stock trading rules. In the event our common stock becomes subject to the penny stock trading rules,
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such rules may materially limit or restrict the ability to resell our common stock, and
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the liquidity typically associated with other publicly traded equity securities may not exist.
Because of the significant restrictions on trading penny stocks, a public market may never emerge for our securities. If this happens, you may never be able to publicly sell your shares.
Item 2. Properties.
Our principal mailing address is SUITE 104-511 17503 La Cantera Parkway, San Antonio, TX, USA 78257. Our telephone number is 210-561-6015. We have closed our dedicated office in Canada at #258-5489 Byrne Rd, Burnaby, BC and have no intention of operating in Canada.
Item 3. Legal Proceedings.
Our Company is not a party to any bankruptcy, receivership or other legal proceeding.
Terra Energy Corp. who’s President Chris van Vliet is a shareholder of TransAct through his legal council Palkowski & Company threatened in October 2010 to take legal action against TransAct Energy Corp. in regards to a $10,000 convertible promissory note. Terra Energy demanded conversion of the note to which TransAct Energy decided under the terms of the note they were not entitled to and instead issued them a cheque for payment in full which was promptly refused by Terra Energy. Since this time their legal council Mr. Robert J. Palkowski is no longer practising law and no further action has been taken. Terra Energy has verbally represented that they will only be satisfied with an issuance of common stock as demanded. We have had a legal review of the note in question and will defend the Company vigorously from any further claim.
Aqua Terra Power Corp. who’s president is Chris van Vliet a shareholder of TransAct Energy Corp. borrowed money from TransAct Energy in regards to geothermal projects in British Columbia, Canada. At the time TransAct was contemplating acquiring Aqua Terra Power if they were successful in their geothermal exploration. Aqua Terra was not successful and any contemplated relationship was terminated. Since that time the Aqua Terra notes payable to TransAct Energy, now totalling $306,766.86 (no further interest is accrued on this loan because of its status) matured and were demanded. No payment has been made and to the best of our understanding they have no ability to repay this debt. We will take legal action if the cost of said action can be justified.
Mr. Shahhid Vohra was under a two year contract with TransAct Energy Corp. this relationship was terminated by Vohra and accepted effective the end of September 2010. Vohra threatened legal action after making a claim against the Company of $44,263.66 through his council Robert J. Palkowski. The Company disagreed with the claim and instead claimed back that Vohra owed them $26,052.80. The Company intends on pursuing these funds. Vohra to date has taken no further action other than disparaging the Company to clients Vohra was aware of. The Company is assessing if any material damage has occurred.
Apollo Financial Management Group, LLC and their attorney Robert Cook accepted escrow funds from TransAct Energy in the amount of $15,000. The terms of the agreement with Apollo were never met and TransAct terminated the agreement and demanded repayment of the escrow funds. To date there has been no return of the funds nor any response to our claims so the Company will evaluate its next legal steps in collecting its money.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
11
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Company first traded on February 24, 2010 on the Over-The-Counter Bulletin Board (the “OTCBB”) under the trading symbol “TEGY”. Future trading prices of our common shares will depend on many factors, including, among others, our operating results and the market for similar securities.
As of March 31, 2012, there are 44 shareholders of record holding 13,836,688shares of the Company common stock that have not deposited their shares into a clearing house, 8,495,981 are on deposit and able to be traded. The total issued and outstanding is 22,332,669 shares of common stock. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no pre-emptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.
We have not paid, nor declared, any dividends since our inception and do not intend to declare any such dividends in the foreseeable future. Our ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that a corporation’s assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business.
Item 6. Selected Financial Data.
Not Applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
TransAct Energy Corp. is a Nevada corporation. The Company’s shares of common stock trade on the over the counter bulletin board under the symbol “TEGY”. TEGY is a development stage company and has not started receiving revenues from operating activities.
During the year the company’s efforts to establish itself as a sustainable energy company were stymied by the lack of working capital. Although the company had raised capital under contract the funds were never released to the company and remain in dispute. Other efforts to raise capital ended similarly where commitments were made but never delivered. The company was able to borrow small amounts to sustain certain costs but overall did not have operating funds.
Past negotiations related to power technologies have been abandoned while management attempts to regroup and find alternative funds to move forward with its business plan. We have relied heavily on our suppliers to hold our accounts while we go through the process of collecting money due or securing new funds.
Plan of Operation
For the 2012 year the Company’s focus is to:
1.)
Secure working capital significant enough to pay all accounts payable and fund day to day operations through 2012;
2.)
Complete a joint venture agreement and initiate the development of a waste to energy plant in Scotland;
Results of Operations
Period from January 1, 2011 to December 31, 2011
We generated zero ($”0” USD) in revenue from January 1, 2011 to December 31, 2011. For the year ended December 31, 2011 our expenses were $1,274,577. Expenses consisted of professional fees, administrative and management fees and miscellaneous expenses. The professional fees incurred in 2011 were, to a large extent, to our auditors and legal counsel for continued SEC reporting requirements. During 2011 we recorded non-cash interest expense of $29,895 as a result of beneficial conversion on notes payable issued during 2011. As a result, we have reported a net loss of $(1,545,762) for the period ended December 31, 2011. Our total net loss from inception on March 15, 2006 through December 31, 2011 was $(2,912,477)
Stock-Based Compensation Costs
Stock-based compensation represents 0.36% of the Company’s operating expenses for the fiscal year ended December 31, 2011. The stocks are a part of our annual executive compensation plan, and are issued to obtain, retain and motivate our directors, executives and employees.
12
Liquidity and Capital Resources
At December 31, 2011 we had total assets of $1,063. Our Current assets are $”0”. Further we have $1,063 in software. Current liabilities at December 31, 2011 totalled $1,372,932 they consisted of accounts payable in the amount of $161,047, accrued interest of $256,545, compensation payable in the amount of $740,257, notes payable, net in the amount of $213,050,.
We filed a registration statement on Form S-1 with the Securities and Exchange Commission to register up to 2,000,000 shares of common stock for sale at a price of $.25 per share for a total of up to $500,000. The registration statement was declared effective on December 12, 2008. We exceeded the minimum of our offering of $250,000 on or before August 31, 2009 and subsequently closed the offering. We issued a total of 1,102,000 shares under our offering of $0.25 per share to raise a total of $274,398. The funds were used as per the prospectus to cover the offering costs and to secure additional business for our operations.
Potential Acquisitions
The Company intends to grow through the acquisition of ownership or interests in properties and/or technology rights that it believes will create value as the Company’s energy resources, and through possible mergers with or acquisitions of operating energy plants and or other renewable energy properties.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been made. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for the financial statements.
Cash and Cash Equivalents
The Company considers cash deposits and highly liquid investments to be cash and cash equivalents for financial reporting presentation on the balance sheet and statement of cash flows. The Company subscribes to the accounting standards that define cash equivalents as highly liquid, short-term instruments that are readily convertible to known amounts of cash, which are generally defined investments that have original maturity dates of less than three months.
Contractual Obligations
We have material commitments for the next twelve months that include, the office facilities, support staff, supporting professionals (including our accountants, lawyers and auditors) and the management compensation agreements. We will require additional capital to meet our liquidity needs. As a result, our independent auditors have expressed substantial doubt about our ability to continue as a going concern. In the past, we have relied on capital contributions from shareholders to supplement operating capital when necessary. We anticipate that we will receive sufficient contributions from shareholders to continue operations for at least the next twelve months. However, there are no agreements or understandings to this effect. We may sell common stock, take loans from officers, directors or shareholders or enter into debt financing agreements.
Need for Additional Financing
We estimate our upcoming expenses to be $4,000,000.00 per year. We do not have any commitments for capital expenditures however we do anticipate entering into commitments to secure acquisitions. We believe we will need additional funds to cover our expenses and acquisitions for the next twelve months. Our need for capital may change dramatically as we pursue our business plan during that period. At present, we have no material understandings, commitments or agreements with respect to the acquisition of any business venture or capital commitments. Further, we cannot assure that we will be successful in consummating business opportunities on favourable terms or we will be able to profitably manage any business opportunities. Should we require additional capital, we may seek additional advances from officers, sell common stock or find other forms of debt financing.
We intend to raise $25,000,000.00 in order to satisfy our immediate ongoing expenses and planned business strategy. The likelihood is that we will have to secure a private placement or convertible debt to affect the raise of capital. Either scenario will result in the sale of equity and add to the dilution of existing shareholders.
Off Balance Sheet Arrangements
As of December 31, 2011, the Company does not have any off balance sheet arrangements.
13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 8. Financial Statements and Supplementary Data.
See Financial Statements following the signature page of this report.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and Procedures.
None.
Item 9A(T). Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). We are committed to maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures and implementing controls and procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act and based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2010, the end of the period covered by this Report. However anticipating greater levels of business activity in the near term we expect that we will require a financial controller in order to maintain our disclosure controls and procedures. Steps have been taken to bring on this person in a timely manner.
Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management, with the participation of the President, evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our management, with the participation of the President, concluded that, as of December 31, 2010, our internal control over financial reporting was effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
(b) Changes in Internal Control over Financial Reporting. There were no changes in the Company's internal controls or procedures over financial reporting, known to the chief executive officer or the chief financial officer that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other Information.
There are no further disclosures. All information that was required to be disclosed in 2011 has been disclosed.
14
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Identification of Directors, Executive Officers and Significant Employees
The following sets forth certain information concerning the current directors, executive officers and significant employees of our company. Each director has been elected to serve until our next annual meeting of stockholders and until his successor has been elected and qualified. Each executive officer serves at the discretion of the board of directors of our Company, and each has been elected for a 1 year term.
NAME | AGE | POSITION |
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Roderick C. Bartlett (1) | 56 | Chief Operating Officer and Director Corporate Secretary |
Simon Thomas (1) Joseph F. Dickson (1) (2) | 58 57 | Chief Financial Officer, and Director Director |
Des Biali (2) | 65 | Director |
(1) | Member of the Compensation and Governance Committees. |
(2) | Independent Director. |
Our director and executive officer has not, during the past five years:
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had any bankruptcy petition filed by or against any business of which such individual was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time,
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been convicted in a criminal proceeding and is not subject to a pending criminal proceeding,
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been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; or been found by a court of competent jurisdiction (in a civil action), the Securities Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Business Experience
The following is a brief biography of our officers and directors.
Rod Bartlett. President, CEO and Director has over 30 years of experience in business development. Rod was a founding shareholder of TransAct Energy Corp. and has been instrumental in bringing it through the regulatory and business development process. Rod is heavily involved in the negotiations related to securing future business for the company. During the last decade, Rod has been active in the public markets. ActionView International (advertising), Quest Oil (oil & gas), and S2C Global Systems (water distribution) are a few of the companies that he has been instrumental in developing and taking them to the next level.
Des Biali (B.Sc. Electrical Engineering, P.Eng.). Director & Advisory Board Member: Des Biali has owned and operated DB Systems Inc. for the past 20 years. Prior to this, he was an Engineering Consultant with R.J. Wong and Associates Ltd., responsible for detailed engineering, design, and construction supervision of major projects. Mr. Biali has a degree in engineering, post graduate training in advanced control systems from the University of Saskatchewan, Canada and is a licensed member of the Association of Professional Engineers in British Columbia and Saskatchewan, Canada:
Joseph F. Dickson. Corporate Secretary and Director: Joseph Dickson was the Chief Operating Officer of Innovation Fuels, Inc. out of Syracuse, NY leading the company’s bio-diesel plant operation and project development efforts from Sept. 2007 until Dec. 2009. Mr. Dickson was the Director of Entrepreneurship at Syracuse University, Syracuse, NY from Feb. 2006 to Sept. 2007, the COO, Integrated Defense Systems, Inc., Glen Rock, PA from June 2005 to Jan. 2006 and the COO, Drug Risk Solutions, LLC a drug discovery company from June 2000 to June 2005. Mr. Dickson has 30 years of business experience in new ventures, business plan execution, organizational management, and operations. He has a background in high tech product design and development, manufacturing, and sales and marketing to commercial and military markets gained while working at GE and other high tech companies. He started and successfully financed two companies in the microelectronics and information technology industries. He has an undergraduate degree in chemistry and an MBA.
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Simon G Thomas. Chief Financial Officer and Director: Mr. Thomas is a British citizen with residency in Rome, Italy. Mr Thomas has spent the past ten years as an independent global project funding consultant across a diverse range of industry. The six years preceding this Mr. Thomas focused in electronics exclusively consulting on projects and their funding throughout the Eastern blocks, Asia and Far East countries. For twelve years starting in 1983 Mr. Thomas was the managing director of Electronic Applications Ltd. This company acted as overseas agents for a number of equipment manufacturers such as Gerber Scientific and Westinghouse. Mr. Thomas’s formal education included a degree in Business studies from Loughton College of Further Education.
Significant Employees Who Are Not Executive Officers
Family
There are no family relationships between the members of our board of directors.
Audit Committee and Audit Committee Financial Expert
To date, the newly formed board of directors (“BOD”) has not formed a formal audit committee, nor has it secured an audit committee financial expert. The BOD intends to form said committee and secure said expert when it becomes operational.
Audit Committee Financial Expert
Our board of directors currently acts as our audit committee. Because we have not commenced significant operations to date, our Board of Directors is still in the process of finding an "audit committee financial expert" (as defined in Regulation S-K) and directors that are "independent" (as that term is used in Section 10A of the Securities Exchange Act).
Audit Committee
Our audit committee will oversee a broad range of issues surrounding our accounting and financial reporting processes and audits of our financial statements, including by (1) assisting our board in monitoring the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditor's qualifications and independence and the performance of our internal audit function and independent auditors, (2) appointing, compensating, retaining and overseeing the work of any independent registered public accounting firm engaged for the purpose of performing any audits, reviews or attest services, and (3) preparing the audit committee report that may be included in our annual proxy statement or annual report on Form 10-K. We will have at least three directors on our audit committee, each of whom will be independent under the requirements of the NASDAQ Capital Market, the Sarbanes-Oxley Act and the rules and regulations of the SEC.
Other Committees of the Board
Compensation Committee. Our compensation committee will review and recommend our policies relating to compensation and benefits for our executive officers and other significant employees, including reviewing and approving corporate goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers, evaluating the performance of our executive officers relative to goals and objectives, determining compensation for these executive officers based on these evaluations and overseeing the administration of our incentive compensation plans. The compensation committee will also prepare the compensation committee report that may be included in our annual proxy statement or annual report on Form 10-K. We will have at least two directors on our compensation committee, each of whom will be independent under the requirements of the NASDAQ Capital Market.
Nominating and corporate governance committee. Our nominating and corporate governance committee will (1) identify, review and recommend nominees for election as directors, (2) advise our board of directors with respect to board composition, procedures and committees, (3) recommend directors to serve on each committee, (4) oversee the evaluation of our board of directors and our management, and (5) develop, review and recommend corporate governance guidelines and policies. We will have at least two directors on our nominating and corporate governance committee, each of whom will be independent under the requirements of the NASDAQ Capital Market.
Code of Ethics We have recently adopted a Code of Ethics and Business Conduct authorizing the establishment of a committee to ensure that our disclosure controls and procedures remain effective. Our Code also defines the standard of conduct expected by our officers, directors and employees.
16
Item 11. Executive Compensation.
We have a formal compensation agreements or employment contracts with our Chief Financial Officer, and Chief Executive Officer. We do not currently have a compensation agreement with our BOD and our Advisory Board members, although we intend to do so in the future. All Officers, Directors and Advisory Board members are reimbursed for their expenses related to Company service. Our officer did receive compensation for the year ended December 31, 2010.
Simon Thomas became the companies CFO and a director effective January 1st, 2011. Joe Dickson ceased to be the CFO effective Dec 31st, 2010.
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year Ended | Annual Compensation | Long Term Compensation | All Other Compensation ($) | ||||||
Awards | Payouts | |||||||||
Salary ($) | Bonus ($) | Other Annual Compensation ($) | Restricted Stock Awards ($) | Securities Underlying Options/ SARs (#) | LTIP Payouts ($) | |||||
Roderick Bartlett, CEO, |
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President and Director | 2011 | $ | 250,000 | 0- | -0- | -0- | -0- | -0- | $ | -0- |
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Simon Thomas, CFO, |
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Treasurer and Director | 2011 | $ | 250,000 | 0- | -0- | -0- | -0- | -0- | $ | -0- |
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Des Biali, |
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Director | 2011 | $ | -0- | 0- | -0- | -0- | -0- | -0- | $ | -0- |
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Joe F. Dickson, | 2011 | $ | -0- | 0- | -0- | -0- | -0- | -0- | $ | -0- |
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17
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth as of March 24, 2012, the name and shareholdings of each person known to us that either directly or beneficially holds more than 5% of our 22,332,669 issued and outstanding shares of common stock, $.001 par value. The table also lists the name and shareholdings of each director and of all officers and directors as a group. Except as otherwise indicated, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable.
Name & Address | Title of Class | Number of Shares Beneficially Owned | % of Class |
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Roderick Bartlett(1) 17503 La Cantera Parkway, Ste 104-511 San Antonio TX 78257 | Common | 1,031,670 | 4.62% |
Simon Thomas (1) Via Aurelia 325, Pal 7, 00165 Rome Italy | Common | 200,000 | 0.90% |
Joe F Dickson (1) 2345 Tucker Rd, New Woodstock, NY 13122 | Common | 315,423 | 1.41% |
Des Biali (1) 17503 La Cantera Parkway, Ste 104-511 San Antonio TX 78257 | Common | 0 | 0% |
All directors and executive officers as a group: (4 person) | Common | 1,547,093 | 6.93% |
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(1)
Officer and/or director.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
We have received funds from our officers and directors to fund the Company’s activities. Currently we owe Mr. Rod Bartlett $94,777.97 (which includes interest). Our Canadian office billed for office services to an unrelated Company that has similar officers and directors as TransAct $1210 CDN dollars.. The Company lent Aqua Terra Power a company wholly owned by one of our shareholders, $263,519.87. Terra Energy, a company owned by one of our shareholders lent us $27,500.
Except for the foregoing, we have not been a party to any transaction, proposed transaction or series of transactions in which the amount involved exceeded the lesser of $120,000 or one percent of the average of the Company's total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holders or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.
Except for the foregoing, none of the following parties has, since the date of incorporation of the Company, had any material interest, direct or indirect, in any transaction with the Company or in any presently proposed transaction that has or will materially affect us:
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any of our directors or officers;
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any person proposed as a nominee for election as a director;
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any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or
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any relative or spouse of any of the foregoing persons who has the same house as such person.
18
Item 14. Principal Accounting Fees and Services.
The fees for services billed by Pritchett, Siler & Hardy, P.C. to the Company in the last two fiscal years were as follows:
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| Twelve months ended on |
| Twelve months ended on |
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| December 31, 2011 |
| December 31, 2010 |
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Audit Fees | $ | 21,822 | $ | 15,940 |
Audit-Related Fees | $ | 0 | $ | 0 |
Tax Fees | $ | 0 | $ | 0 |
All Other Fees | $ | 0 | $ | 0 |
Total Fees | $ | 21,822 | $ | 15,940 |
Audit Fees. The 2010 fees were comprised of professional services rendered in connection with the audit of our financial statements for our annual report on Form 10-K and the review of our quarterly financial statements for our quarterly reports on Form 10-Q that are customary under auditing standards generally accepted in the United States. The 2011 fees did not include professional services rendered in connection with the audit of our financial statements for our annual report on Form 10-K but they did include fees for the review of our first and second quarterly financial statements for our quarterly reports on Form 10-Q that are customary under auditing standards generally accepted in the United States
Audit Committee Pre Approval Policies and Procedures
The Company does not have an audit committee and is in search of qualified candidates to form such committee. As a result, the Company does not have any pre-approval policies or procedures for audit or non-audit services.
19
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Index to Financial Statements and Financial Statement Schedules
The following un-audited financial statements are included on the pages indicated:
F-1 Balance Sheets as of December 31, 2011 and 2010
F-2 Statements of Operations for the years ended December 31, 2011 and 2010
F-3 Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2011 and 2010
F-4 Statements of Cash Flows for the years ended December 31, 2011 and 2010
F-5 Notes to Financial Statements
(b) Exhibits
Exhibit Number | Title | Location |
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Exhibit 3(i) | Articles of Incorporation | * |
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Exhibit 3(ii) | Bylaws | * |
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Exhibit 31 | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Attached |
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Exhibit 31 | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Attached |
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Exhibit 32 | Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** | Attached |
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Exhibit 32 | Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** | Attached |
* Incorporated by reference. Filed as exhibit to S-1 filed October 28, 2008
**The Exhibit attached to this Form 10-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRANSACT ENERGY CORP.
By: /s/ Roderick C. Bartlett | Chief Executive Officer, Corporate Secretary | April 13, 2012 |
Roderick C. Bartlett |
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By /s/ Simon Thomas | Chief Financial Officer, | April 13, 2012 |
Simon Thomas |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Roderick C. Bartlett | Director | April 13, 2012 |
Roderick C. Bartlett |
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By /s/ Simon Thomas | Director | April 13, 2012 |
Simon Thomas |
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By: /s/ Des Biali | Director | April 13, 2012 |
Des Biali |
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By: /s/ Joe F. Dickson |
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Joe F. Dickson | Director | April 13, 2012 |
21
TRANSACT ENERGY CORP.
[A Development Stage Company]
FINANCIAL STATEMENTS
DECEMBER 31, 2011
(Unaudited)
F-1
TRANSACT ENERGY CORP.
[A Development Stage Company]
(Unaudited)
CONTENTS
| PAGE |
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Balance Sheets, December 31, 2011 and 2010 | F-3 |
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Statements of Operations, for the years ended December 31, 2011 and 2010 and from inception on March 15, 2006 through December 31, 2011 | F-4 |
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Statement of Stockholders’ Equity (Deficit), from inception on March 15, 2006 through December 31, 2011 | F-5 |
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Statements of Cash Flows, for the years ended December 31, 2011 and 2010 and from inception on March 15, 2006 through December 31, 2011 | F-6 |
|
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Notes to Financial Statements | F-7 |
F-2
TRANSACT ENERGY CORP. | ||||
(A Development Stage Company) | ||||
BALANCE SHEETS | ||||
(Unaudited) | ||||
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|
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|
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| December 31, |
| December 31, |
|
| 2011 |
| 2010 |
|
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ASSETS |
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Current |
|
|
|
|
Cash | $ | - | $ | 2,498 |
Prepaid expenses |
| - |
| 903 |
Total Current Assets |
| - |
| 3,401 |
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|
Software |
| 1,063 |
| 2,223 |
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|
| $ | 1,063 | $ | 5,624 |
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|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
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|
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|
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Current |
|
|
|
|
Bank indebtedness | $ | 2,033 | $ | - |
Accounts payable |
| 161,047 |
| 62,276 |
Accrued interest |
| 24,991 |
| 11,522 |
Accrued interest - related party |
| 231,554 |
| 6,169 |
Compensation payable |
| 740,257 |
| 289,949 |
Deposit for stock purchase |
| - |
| 40,000 |
Notes payable - net of discount |
| 49,583 |
| 65,355 |
Notes payable - Related parties, net of discount |
| 163,467 |
| 77,277 |
Total Current Liabilities |
| 1,372,932 |
| 552,548 |
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Stockholders' Equity (Deficit) |
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|
Preferred stock, $.001 par value, 10,000,000 shares authorized no shares issued and outstanding |
| - |
| - |
Common Stock, $.001 par value, 100,000,000 shares authorized 22,332,669 (Dec 2010 - 19,964,655) shares issued and outstanding |
| 22,333 |
| 19,965 |
Capital in excess of par value |
| 1,518,275 |
| 1,350,257 |
Subscriptions receivable |
| - |
| (550,431) |
Deficit accumulated during the development stage |
| (2,912,477) |
| (1,366,715) |
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Total Stockholders' Equity (Deficit) |
| (1,371,869) |
| (546,924) |
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| $ | 1,063 | $ | 5,624 |
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The accompanying notes are an integral part of these financial statements. | ||||
F-3
TRANSACT ENERGY CORP. | ||||||
(A Development Stage Company) | ||||||
STATEMENTS OF OPERATIONS | ||||||
(Unaudited) | ||||||
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| Cumulative |
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| from inception |
| For the |
| For the |
|
| March 15, 2006 |
| Year ended |
| Year ended |
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| December 31, |
| December 31, |
| December 31, |
|
| 2011 |
| 2011 |
| 2010 |
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|
|
REVENUE | $ | - | $ | - | $ | - |
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EXPENSES |
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|
General and administrative |
| 2,236,834 |
| 1,274,577 |
| 757,564 |
Unsuccessful lease purchases |
| 18,673 |
| - |
| - |
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|
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Total Expenses |
| 2,255,507 |
| 1,274,577 |
| 757,564 |
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LOSS BEFORE OTHER INCOME (EXPENSE) |
| (2,255,507) |
| (1,274,577) |
| (757,564) |
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|
|
Interest income |
| 50,954 |
| - |
| 39,184 |
Interest expense |
| (430,630) |
| (306,049) |
| (56,023) |
Gain on debt settlement |
| 34,864 |
| 34,864 |
| - |
Loss on write off of investment in lease |
| (12,684) |
| - |
| (12,684) |
Allowance for loss on loans receivable and related interest |
| (299,474) |
| - |
| (299,474) |
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LOSS FROM OPERATIONS |
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BEFORE INCOME TAXES |
| (2,912,477) |
| (1,545,762) |
| (1,086,561) |
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CURRENT TAX EXPENSE |
| - |
| - |
| - |
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DEFERRED TAX EXPENSE |
| - |
| - |
| - |
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NET LOSS | $ | (2,912,477) | $ | (1,545,762) | $ | (1,086,561) |
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LOSS PER COMMON SHARE | $ | - | $ | (0.02) | $ | (0.10) |
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The accompanying notes are an integral part of these financial statements. | ||||||
F-4
TRANSACT ENERGY CORP. | |||||||||||
(A Development Stage Company) | |||||||||||
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||
FROM INCEPTION ON MARCH 15, 2006 THROUGH DECEMBER 31, 2011 | |||||||||||
(Unaudited) | |||||||||||
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| Deficit |
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| Accumulated |
| Preferred |
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| Common |
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| Capital in |
| During the |
| stock |
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| Stock |
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| Excess of |
| Development |
| Shares |
| Amount |
| Shares |
| Amount |
| Par Value |
| Stage |
BALANCE, March 15,2006 | - | $ | - |
| - | $ | - | $ | - | $ | - |
Issuance of 8,500,000 shares of common stock for cash at $.001 per share, April 2006 | - |
| - |
| 8,500,000 |
| 8,500 |
| - |
| - |
Issuance of 900,000 shares of common stock for cash at $.05 per share, August 2006 | - |
| - |
| 900,000 |
| 900 |
| 44,100 |
| - |
Net loss for the period ended December 31, 2006 | - |
| - |
| - |
| - |
| - |
| (12,181) |
BALANCE, December 31, 2006 | - |
| - |
| 9,400,000 |
| 9,400 |
| 44,100 |
| (12,181) |
Net loss for the year ended December 31, 2007 | - |
| - |
| - |
| - |
| - |
| (22,024) |
BALANCE, December 31, 2007 | - |
| - |
| 9,400,000 |
| 9,400 |
| 44,100 |
| (34,205) |
Net loss for the year ended December 31, 2008 | - |
| - |
| - |
| - |
| - |
| (54,563) |
BALANCE, December 31, 2008 | - |
| - |
| 9,400,000 |
| 9,400 |
| 44,100 |
| (88,768) |
Issuance of 1,102,000 shares of common stock for cash at $.25 per share, September 2009 | - |
| - |
| 1,102,000 |
| 1,102 |
| 274,398 |
| - |
Deferred offering costs offset against offering | - |
| - |
| - |
| - |
| (13,263) |
| - |
Beneficial conversion feature on notes payable | - |
| - |
| - |
| - |
| 65,464 |
| - |
Net loss for the year ended December 31, 2009 | - |
| - |
| - |
| - |
| - |
| 191,386 |
BALANCE, December 31, 2009 | - |
| - |
| 10,502,000 |
| 10,502 |
| 370,699 |
| (280,154) |
Issued for services at $ .55 per share | - |
| - |
| 135,000 |
| 135 |
| 74,115 |
| - |
Issued for services at $ 1.39 per share | - |
| - |
| 48,775 |
| 49 |
| 67,693 |
| - |
Shares issued to existing shareholders in exchange for 1,008,625 free trading shares valued at $.50 per share | - |
| - |
| 1,109,488 |
| 1,110 |
| 553,634 |
| - |
Issuance of 7,770,148 common shares pursuant to conversion of notes payable at $ .01 per share | - |
| - |
| 7,770,148 |
| 7,770 |
| 69,931 |
| - |
Issuance of 315,909 common shares valued at $.41 -$.47 per share in exchange for compensation and consulting services | - |
| - |
| 315,909 |
| 316 |
| 142,934 |
| - |
Beneficial conversion feature on notes payable | - |
| - |
| - |
| - |
| 56,334 |
| - |
Issuance of 83,333 common shares on conversion of debt at $.18 per share | - |
| - |
| 83,333 |
| 83 |
| 14,917 |
| - |
Net loss for the year ended December 31,2010 | - |
| - |
| - |
| - |
| - |
| (1,086,561) |
BALANCE, December 31, 2010 | - | $ | - |
| 19,964,653 | $ | 19,965 | $ | 1,350,257 | $ | (1,366,715) |
Issuance of 838,235 shares of common stock for cash at $.15,$.17 & $.20 per share, June 2011 | - |
| - |
| 838,237 |
| 838 |
| 139,162 |
| - |
Issuance of 375,739 common shares valued at $.015 per share pursuant to compensation agreements | - |
| - |
| 375,739 |
| 376 |
| 5,260 |
| - |
Issuance of 404,040 common shares on conversion of notes payable at $.03 per share | - |
| - |
| 404,040 |
| 404 |
| 11,596 |
| - |
Issuance of 750,000 common shares on conversion of debt at $.013 per share | - |
| - |
| 750,000 |
| 750 |
| 9,250 |
| - |
Beneficial conversion feature on notes payable | - |
| - |
| - |
| - |
| 2,750 |
| - |
Net loss for the year ended December 31,2011 | - |
| - |
| - |
| - |
| - |
| (1,545,762) |
| - | $ | - |
| 22,332,669 | $ | 22,333 | $ | 1,518,275 | $ | (2,912,477) |
The accompanying notes are an integral part of these financial statements. | |||||||||||
F-5
TRANSACT ENERGY CORP. | ||||||
(A Development Stage Company) | ||||||
STATEMENTS OF CASH FLOWS | ||||||
(Unaudited) | ||||||
|
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|
|
|
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| Cumulative |
|
|
|
|
|
| from inception |
| For the |
| For the |
|
| March 15, 2006 to |
| Year ended |
| Year ended |
|
| December 31, |
| December 31, |
| December 31, |
|
| 2011 |
| 2011 |
| 2010 |
Cash Flow From Operating Activities: |
|
|
|
|
|
|
Net loss for the period | $ | (2,912,477) | $ | (1,545,762) | $ | (1,086,561) |
Adjustments to reconcile net loss to cash used by operating activities: |
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|
|
Stock issued for services |
| 288,242 |
| 3,000 |
| 302,402 |
Stock issued for expenses |
| 4,313 |
| - |
| - |
Debt issued for services |
| 12,847 |
| - |
| - |
Amortization |
| 2,417 |
| 1,160 |
| 1,160 |
Loss on write off of investment in lease |
| 12,684 |
| - |
| 12,684 |
Allowance for interest receivable |
| 50,954 |
| - |
| 50,954 |
Allowance for loans receivable |
| 248,521 |
| - |
| 248,521 |
Interest expense from beneficial conversion feature on notes payable |
| 124,548 |
| 29,895 |
| 29,189 |
Loss on stock subscriptions receivable |
| 550,431 |
| 550,431 |
| - |
Gain on debt settlement |
| (34,864) |
| (34,864) |
| - |
Change in assets and liabilities: |
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|
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|
|
|
Decrease (Increase) in interest receivable |
| (50,954) |
| - |
| (39,184) |
Decrease (Increase) in prepaid expenses |
| - |
| 903 |
| (903) |
Increase (decrease) in accounts payable |
| 167,347 |
| 98,771 |
| (20,777) |
Increase in compensation payable |
| 740,207 |
| 450,308 |
| 289,949 |
Increase in accrued interest |
| 262,532 |
| 238,854 |
| 26,834 |
Net Cash (used) by Operating Activities |
| (533,252) |
| (207,304) |
| (185,732) |
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|
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Cash Flows From Investing Activities: |
|
|
|
|
|
|
Acquisition of oil and gas leases |
| (12,684) |
| - |
| - |
Purchase of software |
| (3,480) |
| - |
| - |
Loans receivable |
| (263,521) |
| - |
| - |
Proceeds from loans receivable |
| 15,000 |
| - |
| - |
Net Cash (Used) by Investing Activities |
| (264,685) |
| - |
| - |
|
|
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|
Cash Flow From Financing Activities |
|
|
|
|
|
|
Proceeds from common stock issuance |
| 429,000 |
| 100,000 |
| - |
Proceeds received for stock not yet issued |
| 40,000 |
| - |
| 40,000 |
Stock offering costs |
| (13,263) |
| - |
| - |
Proceeds from notes payable |
| 399,096 |
| 161,702 |
| 144,430 |
Repayment of notes payable |
| (58,929) |
| (58,929) |
| - |
Net Cash Provided by Financing Activities |
| 795,904 |
| 202,773 |
| 184,430 |
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Net Increase (Decrease) in Cash |
| (2,033) |
| (4,531) |
| (1,302) |
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Cash at Beginning of Period |
| - |
| 2,498 |
| 3,800 |
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Cash (Bank Indebtedness) at End of Period | $ | (2,033) | $ | (2,033) | $ | 2,498 |
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Supplemental Disclosures of Cash Flow Information: |
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Cash paid during the period for: |
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Interest | $ | - | $ | - | $ | - |
Income taxes | $ | - | $ | - | $ | - |
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Supplemental Schedule of Noncash Investing and Financing Activities: |
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For the years ended December 31, 2011 and 2010: |
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Shares issued for services | $ | 305,402 | $ | 3,000 | $ | 302,402 |
Shares issued on conversion of debt |
| 114,701 |
| 22,000 |
| 92,701 |
Shares issued to shareholders in exchange for free trading shares |
| 554,744 |
| - |
| 554,744 |
Subscriptions receivable |
| (550,431) |
| - |
| (550,431) |
Beneficial conversion feature on notes payable |
| 59,084 |
| - |
| - |
|
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The accompanying notes are an integral part of these financial statements. | ||||||
F-6
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - TransAct Energy Corp. (“the Company”) was organized under the laws of the State of Nevada on March 15, 2006. The Company is in the business of developing and managing power production facilities globally, primarily using alternative/sustainable energy sources. The Company has not generated revenues and is considered a development stage company as defined in Accounting Standards Codification (“ASC”) Topic No. 915. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.
Cash and Cash Equivalents - The Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents.
Software and related amortization - Software is recorded at cost and the Company provides for amortization using the straight line method over three years.
Income Taxes - The Company accounts for income taxes in accordance with ASC Topic No. 740, “Accounting for Income Taxes.”
The Company adopted the provisions of ASC Topic No. 740, “Accounting for Income Taxes”, on January 1, 2007. As a result of the implementation of ASC Topic No. 740, the Company recognized approximately no increase in the liability for unrecognized tax benefits.
The Company has no tax positions at December 31, 2011 and 2010 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended December 31, 2010 and 2009, the Company recognized no interest and penalties. The Company had no accruals for interest and penalties at December 31, 2011 and 2010. All tax years starting with 2008 are open for examination.
Loss Per Share - The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with ASC Topic No. 260, “Earnings Per Share” [See Note 11].
Accounting Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management.
Recently Enacted Accounting Standards - In September 2009 the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.
Accounting Standards Update (“ASU”) ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures – Overall, ASU No. 2009-13 (ASC Topic 605),
Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU’s No. 2009-2 through ASU No. 2011-2 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.
Investment in Leases - All costs such as bid fees and lease rental payments related to the acquisition of energy leases are deferred and amortized on a straight-line basis over the term of the lease (See Note 3).
Foreign Currency Translation - Transactions in foreign currencies are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the weighted average exchange rate for each period for revenues, expenses, gains and losses. Translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) when material and foreign currency transaction gains and losses are recorded in other income and expense.
Stock Offering Costs - Costs incurred in connection with stock offerings will be deferred and offset against the proceeds of the stock offering. Costs incurred in connection with unsuccessful offerings will be expensed.
F-7
NOTE 2 – LOANS RECEIVABLE – RELATED PARTY
The $12,000, $5,000, $7,000, $212,000 and $12,520 loans receivable from a company whose sole shareholder holds less than 10% in TransAct, are unsecured and were due on November 1, November 10, November 29, December 6 and December 6, 2010, respectively. The loans are secured by certain assets and equipment of the company and bear interest at rates between 15% and 18% per annum for the terms of the loans. At December 31, 2010 and December 31, 2009 Interest receivable was $50,954 and $40,505 respectively. These notes have not been granted an extension, are in default and management has formally demanded payment of the outstanding principal and interest and may pursue legal action if the cost of said action can be justified. At December 31, 2011 the Company has recorded a total allowance of $299,475 charged to operations including principal of $248,521 and interest of $50,954.
NOTE 3 - SOFTWARE
Accumulated Net Book Value |
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| ||
|
| Cost |
| Amortization |
| 2011 |
| 2010 |
|
|
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|
|
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|
|
Software | $ | 3,480 | $ | 2,417 | $ | 1,063 | $ | 2,223 |
NOTE 4 – NOTES PAYABLE
The $25,000 convertible promissory note dated June 10, 2010 and $40,000 convertible promissory note dated October 5, 2010 bore interest at 8% per annum and were due and payable on March 11, 2011 and July 7, 2011, respectively. The holder had the option to convert the entire principal amount of each particular note on or before March 11, 2011 and July 7, 2011 into common shares of the Company based on a conversion rate of 60% of the market price being the average of the lowest three trading prices over the past ten days prior to the conversion. At no time could the holder convert into an amount of shares which would result in the holder and its affiliates to beneficially own more than 4.99% of the outstanding shares of common stock. In February 2011 the holder elected to convert $12,000 of the June 10, 2010 note into 404,040 common shares of the Company which were issued. In February 2011 the terms of the June 10, 2010 and October 5, 2010 convertible promissory notes were amended by both parties to include a repayment option. Under this repayment option the borrower had the right to repay the balance of a note in cash equal to 150% of the outstanding principal and interest. On February 24, 2011 the Company paid $22,000 including $9,000 of interest to repay the remaining $13,000 balance of the June 10, 2010 note. In addition, on April 21, 2011 the Company paid $61,600 including $21,600 of interest to repay the $40,000 note dated October 5, 2010.
Accrued interest for the notes at December 31, 2011 and December 31, 2010 were $ 0 and $2,515 respectively. A beneficial conversion feature of $53,334 has been recorded as a discount to the notes with an offset to additional paid in capital. The discount will be amortized over the life of the notes. Interest expense relating to the notes for the period ended December 31, 2011 was $ 0. The remaining unamortized discount has been expensed as interest since the note was repaid during the period.
The $25,000 and $19,666 ($20,000 CAD) promissory notes payable dated April 22, 2011 and March 31, 2011 respectively are unsecured and bear interest at 60% per annum or $2,500 and $1,925 ($2,000 CAD) respectively whichever is greater. The notes are due on demand and may be prepaid in whole or part without penalty. Accrued interest was $19,287 at December 31, 2011.
The $ 4,917 ($5,000 CAD) promissory note payable dated September 12, 2011 is unsecured and bears interest at $481 ($500 CAD) up to September 16, 2011 and $ 48 ($50 CAD) per diem until all principal and interest is repaid. The note is due on demand and may be prepaid in whole or part without penalty. Accrued interest was $ 5,703 at December 31, 2011.
F-8
NOTE 5 – NOTES PAYABLE – RELATED PARTIES
a)
The $10,000 convertible promissory note payable to a company whose shareholders hold less than 10% in TransAct is unsecured, bears interest at 10% per annum and was due and payable on March 31, 2010. The payee had the option to convert the entire principal amount on or before April 29, 2009 into common shares of the Company based on a conversion rate of $.00345 per share and no interest was payable if the principal was converted to shares of the Company. The payee did not exercise its conversion option. The note is currently outstanding and in October 2010 the Company issued a check in the amount of $11,876 as payment in full of principal and interest which was returned uncashed by the payee. The Company is currently in dispute regarding the expiration date of the conversion option in the agreement and the note remains in default. At December 31, 2011 accrued interest was $ 3,186.
b)
The $17,500 promissory note payable to a company whose shareholders hold less than 10% in TransAct is unsecured, bears interest at 10% per annum and is due on demand. This note is currently in default. At December 31, 2011 accrued interest was $ 4,799.
c)
Promissory notes payable totalling $74,277 to an officer and shareholder are secured by certain assets and equipment of the Company and bear interest at 8% and 10% per annum and are due on demand. At December 31, 2011 accrued interest was $10,965.
d)
A $3,000 convertible promissory note payable to a former officer is secured by certain assets and equipment of the Company and bore interest at 8% per annum through the due date in November 2010 and is currently in default and bearing interest at 60% the highest lawful rate. A beneficial conversion feature of $3,000 has been recorded as a discount to the note with an offset to additional paid in capital. The discount was fully amortized in 2010. At December 31, 2011 accrued interest was $ 2,733.
e)
A $22,030 promissory note payable dated February 24, 2011 to a former officer bears interest of $6,000 and was due on March 4, 2011. This note is accruing interest at $360 per day for every day after March 4, 2011 until the note is repaid in full. At December 31, 2011 accrued interest was $ 114,720.
f)
A $46,660 promissory note payable dated April 22, 2011 to a former officer bears interest at 1% per diem. A beneficial conversion feature of $2,750 was recorded as a discount to the notes with the offset to Additional Paid In Capital. In May 2011 the holder of the note converted $10,000 of principal into 750,000 shares of common stock and the discount was expensed to interest. The remaining balance of $36,660 is due on demand. At December 31, 2011 accrued interest was $ 95,150.
Accrued interest and late fees for the notes at December 31, 2011 and December 31, 2010 was $ 231,554 and $10,149 respectively.
NOTE 6 - CAPITAL STOCK
Preferred Stock - The Company has authorized 10,000,000 shares of preferred stock, $.001 par value, with such rights, preferences and designations and to be issued in such series as determined by the Board of Directors. No shares are issued and outstanding at December 31, 2011.
Common Stock - The Company has authorized 100,000,000 shares of common stock, $.001 par value, with such rights, preferences and designations and to be issued in such series as determined by the Board of Directors.
During April 2006, the Company issued 8,500,000 shares of its previously authorized, but unissued common stock. Total proceeds from the sale of stock amounted to $8,500 (or $.001 per share).
During August 2006, the Company issued 900,000 shares of its previously authorized, but unissued common stock. Total proceeds from the sale of stock amounted to $45,000 (or $.05 per share).
During September 2009, the Company issued 1,102,000 shares of its previously authorized, but unissued common stock. Total proceeds from the sale of stock amounted to $275,500 (or $.25 per share). Offering costs of $13,263 were netted against the proceeds.
On July 6, 2010, the Company issued 125,000 common shares in exchange for consulting services at a value of $.55 per share.
On July 6, 2010, the Company issued 48,775 common shares in exchange for consulting services at a value of $1.39 per share.
On July 6, 2010, the Company issued 10,000 common shares in exchange for consulting services at a value of $.55 per share.
During September 2010, the Company issued 1,109,488 shares of its previously authorized, but unissued common stock for consulting services at a value of $.50 per share.
F-9
NOTE 6 - CAPITAL STOCK (continued)
In November 2010 the Company issued 225,000 shares of its previously authorized, but unissued common stock for consulting and compensation services at a value of $.50 per share.
On November 3, 2010 the Company issued 90,909 common shares in exchange for consulting services at a value of $.41 per share.
In November 2010 the Company issued 2,828,892 common shares pursuant to a convertible option of certain promissory notes totaling $28,289 including principal and interest.
In December 2010 the Company issued 4,941,256 common shares pursuant to a convertible option of certain promissory notes totaling $49,412 including principal and interest.
In December 2010 proceeds were received for 200,000 common shares at $.15 per share and 50,000 common shares at $.20 per share for a total of $ 40,000. These shares were issued in June 2011.
In January 2011 the Company issued 588,235 common shares at $.17 per share for total proceeds received of $100,000.
In February 2011 the Company issued 404,040 common shares pursuant to a convertible option of a note payable totaling $12,000 at $.0297 per share.
In June 2011 the Company issued 200,000 common shares for compensation services at a value of $.015 per share.
In June 2011 the Company issued 750,000 common shares pursuant to a convertible option of a note payable totaling $10,000 at $.013 per share.
In June 2011 the Company issued 175,739 common shares at a value of $.015 per share in exchange for consulting services accrued as a liability at December 31, 2010 in the amount of $ 37,500. The difference of $34,864 has been recorded as a gain on debt settlement.
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with ASC Topic No. 740, “Income Taxes.” This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.
The Company adopted the provisions of ASC Topic 740, “Accounting for Uncertainty in Income Taxes”, on January 1, 2007. As result of the implementation of ASC Topic 740, the Company recognized approximately no increase in the liability for unrecognized tax benefits.
The Company has no tax provisions at December 31, 2011 and 2010, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the periods ended December 31, 2011 and 2010, the Company recognized no interest and penalties. The Company had no accruals for interest and penalties at December 31, 2011 and December 31, 2010.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss (NOL). Tax credit 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.
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NOTE 7 - INCOME TAXES (continued)
Net deferred tax assets (liabilities) consist of the following components as of December 31, 2011 and 2010:
|
| 2011 |
| 2010 |
Deferred tax assets: |
|
|
|
|
NOL Carryover | $ | 1,086,500 | $ | 273,300 |
Related Party Accrual |
| - |
| - |
Valuation allowance |
| (1,086,500) |
| (273,300) |
Net deferred tax asset | $ | - | $ | - |
The income tax provision differs from the amount of estimated income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the periods ended December 31, 2011 and 2010 due to the following:
|
| 2011 |
| 2010 |
Book Loss (20% statutory rate) | $ | (309,152) | $ | (217,300) |
|
|
|
|
|
Valuation allowance |
| 309,152 |
| 217,300 |
Tax at effective rate | $ | - | $ | - |
At December 31, 2011, the Company had net operating loss carry forwards of approximately $ 2,912,477 that may be offset against future taxable income from the year 2012 through 2031. No tax benefit has been reported in the December 31, 2011 or 2010 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has a working capital deficit and has incurred losses since its inception. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans and/or through additional sales of its common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 9 - RELATED PARTY TRANSACTIONS
Management Compensation -
The Company has also accrued executive compensation of $250,000 to the President of the Company for the year ended December 31, 2011 (See Note 11).
The Company has accrued executive compensation of $ 250,000 to the CFO of the Company for the year ended December 31, 2011 (See Note 11).
NOTE 10 - LOSS PER SHARE
The following data show the amounts used in computing loss per share for the periods presented:
|
| Year ended |
| Year ended |
|
| December 31, |
| December 31, |
|
| 2011 |
| 2010 |
Loss from operations available to common shareholders (numerator) | $ | (1,545,762) | $ | (1,086,561) |
Weighted average number of common shares outstanding during the period used in loss per share (denominator) |
| 21,874,065 |
| 11,347,937 |
Dilutive loss per share was not presented, as the Company had no common equivalent shares for all periods presented that would affect the computation of diluted loss per share.
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NOTE 11 – COMMITMENTS AND CONTINGENCIES
Compensation agreement - Effective October 1, 2009 through September 30, 2011, the Company entered into a compensation agreement with Shahhid Shafiq Vohra to assist the Company with business development globally for consideration of $90,000 for the contract period to be paid over 12 months plus 100,000 common shares of the Company valued at $0.55 per share which were issued in July 2010. On September 30, 2010 Shahhid Vohra resigned and terminated the agreement. Vohra threatened legal action after making a claim against the Company of $44,264 through his legal council. The Company has claimed back that Vohra owes them $26,052 and intends on pursuing this claim. The $26,052 has been charged to operations as consulting fees. If any funds are received they will be recorded as an expense recovery in the year received.
Compensation agreement - Effective January 1, 2011 the Company entered into a CFO compensation agreement for a term of 5 years to December 31, 2016. The agreement pays an annual base salary of $250,000 and includes a signing bonus of 200,000 shares which was issued in June 2011. The compensation agreement also provides for a cash bonus equal to 3% of the annual EBITDA to a maximum of $15,000,000 in the first year with a 10% increase each year thereafter.
Lease agreement - The Company was committed to a three year lease for office space which commenced July 1, 2010 and expired on June 30, 2013. In September 2011 the lease was terminated by both parties and the Company forfeited its lease deposit and the landlord subsequently subleased the property.
Financing agreement - In April 2010 the Company entered into an investment banking agreement to arrange funding of not less than $6,000,000 through the sale of common shares of the Company. The Company has agreed to pay a fee in the amount of $50,000 of which $15,000 was paid and still held in escrow, to be disbursed for third party due diligence expenses according to the terms of the agreement. Under the terms of the agreement the Company has also agreed to pay a fee of not less than 2% of the monies obtained as a loan and 8% of the monies obtained via equity investors. In November 2010 the Company terminated this agreement due to unfulfilled terms and requested the funds held in escrow to be released back to the Company. As of December 31, 2011 the Company has not received any funds nor any response and has expensed the $15,000 as consulting fees. If any funds are returned they will be recorded as an expense recovery in the year received.
Compensation agreement – The President and Chief Executive Officer agreement pays an annual base salary of $250,000 which has been accrued to date, with a cash bonus annually based on 5% of EBITDA and a stock bonus formulated around the return on invested capital where the issued and outstanding stock of the Company times the rate of return divided by ten will equate to the stock issued.
Administration agreement – The agreement for administration services paid a salary of $ 41,541 ($42,000 CAD) per annum which was terminated on December 31, 2011. At December 31, 2011 $ 45,004 is included in compensation payable on the balance sheet.
Consulting agreement - Pursuant to an agreement dated September 15, 2010 the Company entered into a strategic and financial consulting agreement to assist the Company in its current financing activities. As an engagement fee for their services, the consultant is to receive 1,000,000 free trading common shares valued at $.50 per share.
In order to facilitate the terms of this agreement the Company by way of special resolution identified certain shareholders of the Company that had sufficient unrestricted common shares and agreed to replace the unrestricted shares with restricted common shares plus an incentive of an additional 10% of bonus shares. In September 2010 the Company issued 1,109,488 common shares, including 100,863 bonus shares, valued at $.50 per share.
In January 2011 the Company, due to the unfulfilled terms by the consultant, demanded a full refund of the shares issued. The Company is currently negotiating for a return of 70% of the original 1,000,000 free trading common shares. As of June 30, 2011 the Company has not received any return of the shares or any response and has expensed the stock subscription receivable in the amount of $550,431 as consulting fees. If any shares are returned they will be recorded as an expense recovery in the period received.
NOTE 12 – SUBSEQUENT EVENTS
Pursuant to an agreement dated April 27, 2011 the Company agreed to issue a $3,000,000 convertible promissory note payable to a company whose shareholders hold less than 10% in TransAct. The convertible note is unsecured, bears interest at 8 % per annum and is due and payable on April 16, 2013. The note may be repaid by the Company in whole or part without penalty. The holder has the option to convert all or a portion of the entire principal amount on or before April 16, 2013 into a unit consisting of one common share of the Company at $ .40 per share and one warrant to purchase an additional share at $ .80 per share. To date the note has not been funded, however the Company was awarded a court order by the Cypriot courts and is waiting for the courts to enforce the holder’s bank to release the funds to the Company.
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined there are no additional events to disclose.
F-12