TEGY Transact Energy Corporation (CE)

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

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.

Interim Condensed Financial Statements - The accompanying interim financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at  June 30, 2014 and 2013 and for the periods then ended have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2013 unaudited financial statements.  The results of operations for the periods ended June 30, 2014 and 2013 are not necessarily indicative of the operating results for the full year.

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 June 30, 2014 and 2013 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, 2013 and 2012, the Company recognized no interest and penalties. The Company had no accruals for interest and penalties at June 30, 2014 and June 30, 2013. 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 9].

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.

10

TRANSACT ENERGY CORP.

[ A Development Stage Company ]

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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. 2011-8 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.

Foreign Currency Translation - The Financial statements are presented in United States dollars. In accordance with ASC 830 “Foreign Currency Matters”, foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at the exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rate of exchange during the year.

Gains or losses resulting from foreign currency transactions are included in results of operation.

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.

Reclassification – Certain prior year amounts have been reclassified to conform with current year presentation.

NOTE 2 – LOANS RECEIVABLE

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 secured 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 June 30, 2011 and December 31, 2010 interest receivable was $50,954. 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, 2010 the Company recorded a total allowance of $299,475 charged to operations including principal of $248,521 and interest of $50,954.

11

TRANSACT ENERGY CORP.

[ A Development Stage Company ]

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

NOTE 4 – NOTES PAYABLE

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. 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 un-cashed 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 June 30, 2014 accrued interest was $ 5932.

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 June 30, 2014 accrued interest was $9,605.

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.

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 was amortized over the life of the notes. The remaining unamortized discount has been expensed as interest since the note was repaid.

The $25,000 and $18,093 ($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 $2,002 ($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

$ 103,272 at June 30, 2014.

The $ 4523 ($5,000 CAD) promissory note payable dated September 12, 2011 is unsecured and bears interest at $ 505 ($500 CAD) up to September 16, 2011 and $ 50 ($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 $ 48,331 at June 30, 2014.

The $2,500 promissory note payable dated April 2, 2013 is unsecured, bears interest at 10% per annum and is due on demand. At June 30, 2014 accrued interest was $274.

The $100,000 promissory note payable dated June 30, 2013 is unsecured and is non-interest bearing.

12

TRANSACT ENERGY CORP.

[ A Development Stage Company ]

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

NOTE 4 - NOTES PAYABLE – CONTINUED

The $1,000 promissory note payable dated July 23, 2013 is unsecured, bears interest at 10% per annum and is due on demand. It was paid out on May 6, 2014.  At June 30, 2014 accrued interest was $80.

An $8,700 promissory note payable dated January 17, 2013 to an individual whose shareholdings equal less than 10% in TransAct is unsecured, has a fixed interest component of $1,300. The owner of this note negotiated to change the terms of the note to that of a $10,000 convertible note payable effective Aug 21, 2013 is unsecured, bears interest at 12% per annum and is convertible into common stock of the company within the one year term of the loan at 75% of the closing price on the day the conversion is elected but no less than $.036. This note was subsequently converted and as such has been paid out in full.

A $10,000 convertible note payable effective Aug 21, 2013 to an individual whose shareholdings equal less than 10% in TransAct is unsecured, bears interest at 12% per annum and is convertible into common stock of the company within the one year term of the loan at 75% of the closing price on the day the conversion is elected but no less than $.036. This note was subsequently converted and as such has been paid out in full.

A $10,000 convertible note payable effective Sep 6, 2013 to an individual whose shareholdings equal less than 10% in TransAct is unsecured, bears interest at 12% per annum and is convertible into common stock of the company within the one year term of the loan at 75% of the closing price on the day the conversion is elected but no less than $.04. At June 30, 2014 accrued interest was $977.

A $22,030 promissory note payable dated February 24, 2011 to a former officer (more than 6 months ago) 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 June 30, 2014 accrued interest was $ 475,440.

A $46,660 promissory note payable dated April 22, 2011 to a former officer (more than 6 months ago) 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 June 30, 2014 accrued interest was $ 463,391.

A $3,000 convertible promissory note payable to a former officer (more than 6 months ago) 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 June 30, 2014 accrued interest was $7,677.

NOTE 5 – NOTES PAYABLE – RELATED PARTIES

Promissory notes payable after being reduced up to and including the end of June 2014 total $36,047 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 June 30, 2014 accrued interest was $827.

Accrued interest and late fees for the notes at June 30, 2014 and December 31, 2013 was $ 1,026,304 and $873,558 respectively.

13

TRANSACT ENERGY CORP.

[ A Development Stage Company ]

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

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 June 30, 2014 and December 31, 2013.

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.  

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.

In May 2012 the Company issued 3,316,500 common shares for consulting services at a value of $.035 per share (see Note 10).

In May 2012 the Company issued 275,000 common shares as a fee related to financing services at a value of $.0182 per share.

In May 2012 the Company issued 625,000 common shares for compensation services at a value of $.05 per share.

In May 2012 the Company issued 119,783 common shares for compensation services at a value of $.045 per share.

In May 2013 the Company issued 2,600,000 common shares as payment related to a technology purchase agreement at a value of $.0502 per share.

In May 2013 the Company issued 500,000 common shares for compensation services at a value of $.0501 per share.

At June 30, 2013 the Company caused the cancellation of 250,000 shares that had been issued for compensation services 125,000 shares at a value of $.0501 and 125,000 shares at $.05.

In August 2013 the Company issued 555,556 common shares pursuant to a convertible option of notes payable totaling $20,000 at $.036 per share.

14

TRANSACT ENERGY CORP.

[ A Development Stage Company ]

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

NOTE 6 - CAPITAL STOCK - CONTINUED

In March 2014 the Company authorized the issuance of 450,000 common shares for compensation services at a value of $.041 per share.

In March 2014 the Company authorized the issuance of 14,210,235 common shares for $397,887 of compensation payable.

In April 2014 the Company authorized the issuance of 200,000 common shares for compensation services at a value of $.05 per share.

In April 2014 the Company authorized the issuance of 474,360 common shares pursuant to a convertible option of notes payable totaling $23,718 at $.05 per share.

NOTE 7 - 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 8 - RELATED PARTY TRANSACTIONS

Management Compensation – The Company has accrued executive compensation of $62,500 to the President of the Company for the period ended June 30, 2014 (See Note 10).

The Company has accrued executive compensation of $25,000 to the SVP Technology of the Company for the year to date period ended June 30, 2014 (See Note 10).

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.

15

TRANSACT ENERGY CORP.

[ A Development Stage Company ]

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

NOTE 10 – 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 has threatened legal action after making a claim against the Company of $44,264 through his legal counsel. The Company has claimed back that Vohra owes them $26,052 and intends on pursuing this claim. The $26,052 was charged to operations for the year ended December 31, 2010 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. This agreement was terminated effective June 30, 2013, $105,000 salary and 200,000 shares were paid under this contract.  

Lease agreement - The Company was committed to a three year lease for office space which commenced July 1, 2010 and expires 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 had 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 had 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 September 30, 2012 the Company has not received any funds nor any response and has expensed the $15,000 as consulting fees in 2011. 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 $ 42,038 ($42,000 CAD) per annum which was terminated on December 31, 2011. At March 31, 2013 $57,268 is included in compensation payable on the balance sheet. The accruals and interest for this agreement were settled by the issuance of stock in March 2014.

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 was to receive 1,000,000 free trading common shares valued at $.50 per share.

16

TRANSACT ENERGY CORP.

[ A Development Stage Company ]

NOTES TO INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Unaudited – Prepared By Management)

NOTE 10 – COMMITMENTS AND CONTINGENCIES – CONTINUED

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 September 30, 2012 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 in 2011. If any shares are returned they will be recorded as an expense recovery in the period received.

Financing Agreement- 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 which was never fulfilled. Given the economic conditions in Cyprus including the state of the banks the Company considers this matter null and void and does not intend on pursuing it any further.

Consulting Agreement- On May 3, 2012 the company entered into an agreement whereby 3,015,000 free trading shares are to be issued in exchange for a $20,000 advance to TransAct and the settlement of any and all obligations given to the parties of the agreement. These shares are intended to be sold to cover their costs including the advances and any balance of these shares not used in settlement would be used to raise capital and split evenly between the parties. The portion that goes to the consulting company will be expensed as consulting fees. 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 May 30, 2012 the Company issued 3,316,500 common shares, including 301,500 bonus shares, valued at $.036 per share. In June 2014 the company returned the original $20,000.

Loan Agreement -Pursuant to an Agreement on June 28 ^th , 2012 that was extended to August 31, 2012 and then on Aug 30 ^th , 2012 to November 15 ^th , 2012, and is now extended to May 15, 2014; where originally on May 11, 2012 the Company arranged for 3,005,000 free trading shares to be placed as additional security for a $100,000 loan as a retainer for a financing of 100 million dollars. TransAct has a Memorandum of Understanding (MOU) to receive one third or 30 million dollars of this financing.

If these shares are used to repay the loan TransAct will have to issue the shares used plus 10% additional shares to the contributing shareholders and expense whatever shares used as financing costs.