SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000 Commission File Number 0-23382
TRANS GLOBAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1544008
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1393 Veterans Memorial Highway, Hauppauge, NY 11788
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 724-0006
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.
Yes X No
Number of shares of common stock outstanding as of November 1, 2000: 2,889,716
<PAGE> 2
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
INDEX
Part 1 - Financial Information:
Item 1. Financial Statements: Page No.
---------
Report of Independent Certified Public Accountants 3
Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999. 4-5
Consolidated Statements of Operations-
Three and Nine Months Ended September 30, 2000 (unaudited) and
September 30, 1999 (unaudited). 6
Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 2000 (unaudited)
and September 30, 1999 (unaudited). 7-9
Consolidated Statement of Stockholders' Equity - 10-11
Nine Months Ended September 30, 2000 (unaudited).
Notes to Consolidated Financial Statements 12-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-17
Part 11 Other Information 18
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
To the Stockholders and Board of Directors of Trans Global Services, Inc.
Hauppauge, New York
We have reviewed the accompanying consolidated balance sheet of Trans Global
Services, Inc. and its subsidiaries as of September 30, 2000, and the related
consolidated statements of operations for the three and nine month periods ended
September 30, 2000, the related consolidated statement of stockholders' equity
for the nine months ended September 30, 2000 and the related consolidated
statement of cash flows for the nine months ended September 30, 2000. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended [ not presented herein]; and in our report dated
February 11, 2000, we expressed an unqualified opinion on those consolidated
financial statements.
We have not reviewed the accompanying consolidated statements of operations for
the three and nine month periods ended September 30, 1999 or the consolidated
statement of cash flows for the nine months ended September 30, 1999 and give no
assurance on them.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
November 3, 2000
<PAGE> 4
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 176,443 $ 43,141
Accounts Receivable- Net of allowance
for doubtful accounts of $62,500 2,011,516 2,518,343
Notes Receivable- i-engineering.com, Inc. 319,889 -0-
Deferred Loan Costs 5,250 -0-
Prepaid Expenses and Other Current Assets 22,835 100,865
-------- ---------
Total Current Assets 2,535,933 2,662,349
Property and Equipment-Net 130,182 162,820
Other Assets:
Due from Arc Networks -0- 1,171,673
Customer Lists 1,994,941 2,163,655
Goodwill, Net 641,960 678,392
Deferred Tax Asset-Non Current 490,000 490,000
Other Assets 38,145 36,373
Investment in i-engineering.com, Inc. 329,130 -0-
--------- ---------
Total Other Assets 3,494,176 4,540,093
--------- ---------
Total Assets $ 6,160,291 $ 7,365,262
============= ===========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 5
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable and Accrued Expenses $ 229,234 $ 402,735
Accrued Payroll and Related Taxes and Expenses 697,946 359,295
Loans Payable, Asset-based lender 958,689 2,056,372
Notes Payable 263,809 -0-
--------- ---------
Total Current Liabilities 2,149,678 2,818,402
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.01 Par Value, 25,000,000
Shares Authorized. At December 31, 1999--
3,819,716 Shares Issued; 2,669,716 Outstanding
At September 30, 2000-- 4,089,716 Issued;
2,889,716 Outstanding
40,897 38,197
Capital in Excess of Par Value 13,499,281 12,887,851
Accumulated Deficit (6,887,883) ( 5,812,506)
----------- ------------
6,652,295 7,113,542
Less Treasury Stock, at cost
1,150,000 shares- 1999
1,200,000 shares- 2000 (2,641,682) (2,566,682)
----------- ------------
Total Stockholders' Equity 4,010,613 4,546,860
---------- -----------
Total Liabilities and Stockholders' Equity $ 6,160,291 $ 7,365,262
============ ===========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 6
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenue $ 5,455,547 $ 8,353,145 $ 17,457,850 $ 29,048,875
Cost of Services Provided 4,943,381 7,612,824 15,719,359 26,825,174
---------- ---------- ---------- ----------
Gross Profit 512,166 740,321 1,738,491 2,223,701
Selling, General and Administrative 759,413 1,021,330 2,436,274 2,838,052
Amortization of Intangibles 68,382 68,382 205,146 205,146
--------- --------- ---------- ----------
Total Operating Expenses 827,795 1,089,712 2,641,420 3,043,198
Operating (Loss) ( 315,629) (349,391) ( 902,929) ( 819,497)
Other Income (Expenses):
Interest Expense ( 216,590) ( 72,660) ( 416,032) ( 201,697)
Interest Income 24,284 30,042 104,472 94,334
Other Income (Expense) 64,327 ( 22,508) 139,112 ( 62,581)
-------- -------- ---------- -----------
Total Other (Expenses)-Net ( 127,979) ( 65,126) ( 172,448) ( 169,944)
--------- --------- ---------- -----------
Loss before income taxes ( 443,608) ( 414,517) (1,075,377) ( 989,441)
Income taxes -0- -0- -0- -0-
--------- --------- --------- ----------
Net Loss $ ( 443,608) $ ( 414,517) $ (1,075,377) $( 989,441)
=========== =========== ============= ===========
Basic and fully diluted Loss Per Share $ ( .15) $ ( .16) $ ( .37) $( .31)
-------- -------- ------------ -----------
Weighted Average Number of Shares
of Common Stock 2,889,716 2,669,716 2,876,577 3,175,211
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 7
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<TABLE> Nine Months Ended
<CAPTION> September 30,
2 0 0 0 1 9 9 9
<S> <C> <C>
Operating Activities:
Net Loss $(1,075,377) $ ( 989,441)
Adjustments to Reconcile Net Loss
to Net Cash Provided By
Operations:
Depreciation and Amortization 259,312 305,846
Debt Issuance Costs 210,000 -0-
Changes in Operating Assets and Liabilities:
Decrease in Assets:
Receivables 506,827 899,642
Loan Receivable - Officer -0- 5,000
Prepaid Expenses and Other
Current Assets 78,030 170,609
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued
Expenses (173,501) (128,606)
Accrued Payroll and Related
Taxes and Expenses 338,651 644,049
Accrued Income Taxes Payable -0- ( 13,496)
--------- ---------
Total Adjustments 1,219,319 1,883,044
--------- --------
Net Cash Provided by Operating Activities 143,942 893,603
--------- ---------
Forward
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 8
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION> Nine Months Ended
September 30,
2000 1999
<S> <C> <C>
Net Cash -
Operating Activities Forwarded $ 143,952 $ 893,603
Investing Activities:
Capital Expenditures ( 21,528) ( 61,051)
Deferred Acquisition Costs -0- 45,904
Repayments from Arc Networks 1,171,673 82,755
Other, net ( 1,772) ( 5,959)
Investment in Preferred Stock of former Affiliate -0- ( 3,500)
Note Receivable ( 319,889) -0-
--------- ----------
Net Cash - Investing Activities 828,484 ( 33,659)
Financing Activities:
Net Payments to
Asset-Based Lender (1,097,683) ( 699,571)
Repayment of Note Payable -0- ( 126,767)
Deferred Loan Costs ( 5,250) -0-
Notes Payable 263,809 -0-
---------- ---------
Net Cash - Financing Activities ( 839,124) ( 826,338)
---------- ----------
Net Increase in Cash 133,302 33,606
Cash - Beginning of Year 43,141 234,917
---------- ----------
Cash - September 30 $ 176,443 $ 268,523
=========== ===========
Supplemental Disclosures of Cash
Flow Information:
Cash paid for:
Interest $ 237,123 $ 201,697
Income Taxes $ -0- $ -0-
</TABLE>
Supplementary Disclosure of Non Cash Investing and Financing Activities during
the nine months ended September 30, 2000.
In connection with the $1,000,000 raised in January, 2000, from the sale of
subordinated notes due July 2001, the Company issued warrants to purchase
250,000 shares of the Company's common stock at $.35 per share to the investors.
In addition, the Company issued warrants to purchase 300,000 shares of the
Company's common stock at $.35 per share to the placement agent and 25,000
shares to a director for services relating to the financing. The Company
incurred a charge of $210,000. This charge has been credited to capital in
excess of par value.
See Notes to Consolidated Financial Statements
<PAGE> 9
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Continued
-----------------------------------------------------------------------------
Pursuant to an agreement with i-engineering.com, Inc., the Company (i) loaned
$500,000 to i-engineering.com, Inc. on a short-term basis, (ii) issued 270,000
shares of Common Stock to i-engineering.com, Inc. and (iii) acquired a minority
interest in i-engineering.com, Inc. The value of this interest was determined by
the market value of the Company's shares exchanged which was $331,830.
See Notes to Consolidated Financial Statements
<PAGE> 10
Trans Global Services, Inc.
Consolidated Statement of Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Shares Amounts
<S> <C> <C>
Common Stock $.01 Par Value; Authorized
25,000,000 shares
Balance December 31, 1999 3,819,716 $38,197
Issuance of shares of Common Stock-
i-engineering.com, Inc. 270,000 2,700
---------- --------
Balance - September 30, 2000 4,089,716 $40,897
=======
Capital in Excess of Par Value
Balance - December 31, 1999 $12,887,851
Issuance of below market warrants 210,000
Issuance of shares of Common Stock-
i-engineering.com, Inc. 326,430
Purchase of Treasury Stock 75,000
----------
Balance - September 30, 2000 $13,499,281
===========
Accumulated Deficit
Balance - December 31, 1999 $(5,812,506)
Net (Loss) (1,075,377)
------------
Balance - September 30, 2000 $(6,887,883)
===========
Treasury Stock
Balance December 31, 1999 1,150,000 $(2,566,682)
Purchase of treasury stock - 2000 50,000 ( 75,000)
--------- -----------
Balance - September 30, 2000 1,200,000 $(2,641,682)
========= ============
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 11
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
<TABLE>
<CAPTION> AMOUNT
<S> <C>
Total Stockholders' Equity
Balance - December 31, 1999 $ 4,546,860
Issuance of Below Market Warrants 210,000
Issuance of shares of Common Stock -i-engineering.com, Inc. 329,130
Net loss for the nine Months Ended September 30, 2000 (1,075,377)
-----------
Balance - September 30, 2000 $ 4,010,613
===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 12
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
(1) Basis of Presentation
Trans Global Services, Inc. (the "Company" or "Trans Global"), a Delaware
corporation, operates through two subsidiaries, Avionics Research Holdings,
Inc., formerly known as ARC Acquisition Group, Inc.["Holdings"] and Resource
Management International,Inc. ["RMI"]. The Company is engaged in providing
technical temporary staffing services throughout the United States, principally
in the aerospace and aircraft industry.
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position of the Company as of September 30, 2000
and the results of its operations for the three and nine months ended September
30, 2000 and 1999. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
together with management's discussion and analysis of financial condition and
results of operations contained in the Company's Form 10-K for the year ending
December 31, 1999. The results of operations for the three and nine months ended
September 30, 2000 are not necessarily indicative of the results for the entire
year or any future interim period.
(2) Summary of Significant Accounting Policies
The accounting policies followed by the Company are set forth in Note 2 to the
Company's consolidated financial statements included in the Company's Form 10-K
for the year ended December 31, 1999.
(3) Transaction with - i-engineering.com, Inc.
Pursuant to an agreement with i-engineering.com, Inc., the Company (i) loaned
$500,000 to i-engineering.com on a short-term basis, (ii) issued 270,000 shares
of Common Stock to i-engineering.com and (iii) acquired an equity interest in
i-engineering.com. In connection with the agreement, the chief executive officer
of the Company was elected a director of i-engineering.com and the Company
agreed to include the chief executive officer of i-engineering.com as a nominee
for election as a director, and he was elected as a director at the Company's
2000 annual meeting. At September 30, 2000 i-engineering.com, Inc. had repaid
$200,000 of the short-term loan and is in default with respect to the remaining
$300,000. The Company has notified i-engineering.com, Inc., of the default. (See
note 6)
(4) Loan Payable - Asset Based Lender
One June 7, 2000 the Company entered into a one year revolving credit agreement
with an asset-based lender. Pursuant to the credit agreement, the Company can
borrow up to 85% of its qualified accounts receivables at an interest rate of
prime plus 2% with a minimum monthly compensation of $12,000. The maximum
availability on the credit agreement is $2.5 million.
The Company terminated its agreement with its previous lender.
<PAGE> 13
TRANS GLOBAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
(5) Notes Payable
In January, 2000 the Company raised $1 million through the issuance of 10%
subordinated promissory notes due July 2001 or earlier upon the Company's
receipt of payment of the note from Arc Networks, Inc., in the principal amount
of $994,000 as of June 30, 2000 (the "Arc Note"). In connection with the
subordinated notes, the Company issued warrants to purchase 575,000 shares of
the Company's common stock at $.35 per share to the investors, the placement
agent and others who assisted the Company in the financing, including a director
of the Company. At September 30, 2000 the Company had repaid the noteholders
$750,000 of the principal amount plus interest. The Company is in default with
respect to the remaining $250,000. (See note 6)
(6) Subsequent Event
Subsequent to September 30, 2000 (a) i-engineering.com has made payments of
$100,000 to reduce the principal amount and accrued interest of the note to
$223,174.46 as November 10, 2000, (b) the chief executive officer resigned as a
director of i-engineering.com and (c) the Company paid an additional $100,000,
plus accrued interest, to the holders of the notes payable, thereby reducing the
amount outstanding to the noteholders to $150,000 plus interest.
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
Revenue from technical temporary staffing services is based on the hourly cost
of payroll plus a percentage. The success of the Company's business is dependent
upon its ability to generate sufficient revenue to enable it to cover its fixed
costs and other operating expenses and to reduce its variable costs. Under its
agreements with its clients, the Company is required to pay its employees and
pay all applicable federal and state withholding and payroll taxes prior to the
receipt of payment from the clients. Furthermore, the Company's payments from
its clients are based upon the hourly rate paid to the employee, without regard
to when payroll taxes are payable with respect to the employee. Accordingly, the
company's cost of services are greater during the first part of the year, when
Federal Social Security taxes and state unemployment and related taxes, which
are based on a specific level of compensation are due. Thus until the Company
satisfies its payroll tax obligations, it will have a lower gross margin than
after such obligations are satisfied. Furthermore, to the extent that the
Company experiences turnover in employees, its gross margin will be adversely
affected. For example, in 2000, Social Security taxes are payable on the first
$76,200 of compensation. Once that level of compensation is paid with respect to
any employee, there is no further requirement for the Company to pay Social
Security tax for such employee. Since most of the Company's employees receive
compensation in excess of that amount, the Company's costs with respect to any
employee are significantly higher during the period when it is required to pay
Social Security taxes than it is after such taxes have been paid.
Three Months Ended September 30, 2000 and 1999
The Company's revenues, which are derived principally from the aircraft and
aerospace industry, during the three month period ended September 30, 2000
totaled $5.5 million, a decrease of 35% from the revenue earned in the
comparable quarter of 1999 which was $8.4 million. Approximately 71% of the
total revenue generated by the Company for the three months ended September 30,
2000 was attributed to its five largest customers, Lockheed-Martin, Bell
Helicopter, Boeing, Gulfstream and Cablevision. The overall decrease for the
period is attributed to the continuing delay of requests for personnel by the
Company's multi-national Fortune 500 clients its serves, principally in the
aircraft and aerospace industry.
The Company's gross margins for the quarters ended September 30, 2000 and
September 30, 1999 were 9.4% and 8.9% respectively. The increased gross margin
during the current year is attributed to the reduction in business with some of
the Company's lower margin aircraft and aerospace clients combined with a slight
increase in revenue attributed to those clients in other industries.
Selling, general and administrative expenses decreased by $262,000, or 25.6%, to
$ 759,000 in the 2000 period. The decline reflects principally the effects of
our continued cost reduction program.
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations (Continued)
As a result of the decrease in revenue, the Company's gross profit was not
sufficient to cover its selling, general and administrative expenses, resulting
in an operating loss of $316,000 for the three months ended September 30, 2000.
However, due to the cost reduction program the operating loss for the September
30, 2000 quarter was $34,000 less than the operating loss for the same period in
1999.
Interest expense during the three month period ended September 30, 2000
increased by $144,000 or 198% from the three months ended September 30, 1999.
$139,000 of this increase is attributable to the amortization of non cash debt
finance costs associated with the issuance of warrants to purchase 575,000
shares of common stock which were issued in conjunction with the $1,000,000
notes in January, 2000.
As a result of the foregoing, the Company incurred a loss of approximately
$444,000, or $.15 per share (basic and diluted), for the three months ended
September 30, 2000, compared to a loss of $415,000 or $.16 per share (basic and
diluted), for the three months ended September 30, 1999.
Nine Months ended September 30, 2000 and 1999
The Company had revenues of $17.5 million for the nine months ended September
30, 2000, reflecting a 39.9% decrease from the revenues of $29 million for the
same period one year earlier. During the nine months ended September 30, 2000
the Company's five largest customers, Lockheed-Martin, Bell Helicopter, Boeing,
Gulfstream Aerospace and Cablevision accounted for approximately 70% of the
overall revenue of the Company compared to the nine months ended September 30,
1999 when the five largest customers, Lockheed-Martin, Boeing, Bell Helicopter,
Northrop Grumman and Gulfstream Aerospace accounted for approximately 65% of the
Company's overall revenue. The gross margin increased to 10.0% in the nine
months ended September 30, 2000 from 7.7% for the nine months ended September
30, 1999. This increase is attributed to the reduction in business with some of
the Company's lower margin aircraft and aerospace clients combined with a slight
increase in revenue attributed to those clients in other industries as well as
additional revenues generated from the permanent placement of technical
personnel which had no material associated cost of revenue.
Selling, general and administrative expenses decreased by $402,000, or 14.2%, in
the nine months ended September 30, 2000 compared to the nine months ended
September 30, 1999. During the 1999 period, we collected $324,000 as the result
of our successful contesting of tax penalties paid in prior years. This
collection is reflected as a reduction in selling, general and administrative
expenses. Thus, if the effect of the refund of the tax penalties in 1999 were
excluded from selling, general and administrative expenses in the 1999 period
the Company would show a decrease in the 2000 period of 23% from the level of
these expenses in the 1999 period. The decline reflects principally the effects
of our cost reduction program.
Interest expense during the current nine month period increased by approximately
$214,000 or 106% compared to the nine months ended September 30, 1999. $210,000
of that increase is attributable to the amortization of non cash debt finance
costs associated with the 575,000 warrants issued in conjunction with the funds
raised in January 2000.
<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations (Continued)
As a result of the foregoing, the Company incurred a loss of approximately
$1,075,000 or .37 per share (basic and diluted), for the nine months ended
September 30, 2000, compared to the loss of $989,000, or $.31 per share (basic
and diluted), for the nine months ended September 30, 1999.
Liquidity and Capital Resources
As of September 30, 2000, the Company had working capital of approximately
$386,000, an increase of $542,000 compared to the working capital at December
31, 1999. The most significant current asset at September 30, 2000 was the
Company's accounts receivables, which were $2.0 million. the accounts
receivables were offset by (i) accounts payable and accrued expenses of
$229,000, (ii) payroll and related expenses of $ 698,000, (iii) $959,000 due to
the Company's asset-based lender and (iv) $264,000 due to the holders of the
Company's 10% promissory notes, which were issued in January 2000 and on which
the Company was in default at September 30, 2000. The note receivable from
i-engineering.com described below is included in working capital.
The payroll and related taxes and expenses relate primarily to compensation to
the Company's contract employees and related taxes, which were paid during the
first week of October 2000. During the nine months ended September 30, 2000,
operations generated cash flow of $144,000. The Company's principal source of
cash during the nine-month period was its credit facility with its asset-based
lender as well as the proceeds of the notes described in the following
paragraph.
At December 31, 1999, the Company held the promissory note from Arc Networks in
the principal amount of $1.2 million. In January 2000, the Company issued its
10% promissory notes in the principal amount of $1,000,000, which were due July
2001, but became payable earlier upon receipt of the proceeds of the Arc
Networks note. The Company used $500,000 of the proceeds of the 10% promissory
notes to make a loan to i-engineering.com. The i-engineering loan was payable in
May and June 2000. In September 2000, the Company received payment of the Arc
Networks note, and used a portion of the proceeds to pay principal and interest
on 10% promissory notes in the principal amount of $750,000. As of September 30,
2000, (i) i-engineering.com was in default with respect to principal and
interest in the total amount of $320,000 and (ii) the Company was in default on
payment of promissory notes in the principal amount of $250,000. Subsequent to
September 30, 2000, i-engineering.com made payments of $100,000 on account of
its note and the Company paid principal and interest on 10% promissory notes in
the principal amount of $100,000. At November 10, 2000, the amount due from
i-engineering was $223,174.46, and the amount due to the holders of the
remaining 10% promissory notes was $162,667. The Company cannot give assurance
that the i-engineering.com note will be paid.
On June 7, 2000 the Company entered into a one-year revolving credit agreement
with its asset-based lender. Pursuant to the credit agreement, the Company can
borrow up to 85% of its qualified accounts receivables at an interest rate of
prime plus 2% with a minimum monthly interest of $12,000. The maximum
availability on the credit agreement is $2.5 million. the Company terminated its
agreement with its previous asset-based lender.
The Company anticipates that it will incur losses during the fourth quarter of
2000, and it cannot give any assurance that losses will not continue beyond the
fourth quarter and into 2001. If the Company is not able to either operate
profitably or find additional financing sources, the Company may have to further
reduce or cease its operations.
<PAGE> 17
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations (Continued)
In view of the Company's anticipated cash requirements, the Company continues to
review various capital raising initiatives, merger opportunities and other
alliances which may improve the Company's financial condition and stockholders'
value. However, the Company cannot give any assurance that it will be successful
in these efforts.
Forward Looking Statements
The statements in this Form 10-Q that are not descriptions of historical facts
may be forward-looking statements that are subject to risks and uncertainties.
In particular, statements in this Form 10-Q that state our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our
future activities or other future events or conditions are "forward-looking
statements." Forward-looking statements are subject to risks, uncertainties and
other factors, including, but not limited to, those identified under "Risk
Factors", those described in Management's Discussion and Analysis of Financial
Conditions and Results of Operations in this Form 10-Q, and those described in
any other filings by the Company with the Securities and Exchange Commission, as
well as general economic conditions, any one or more of which could cause actual
results to differ materially from those stated in such statements.
<PAGE> 18
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended September 30, 2000.
<PAGE> 19
SIGNATURES
Pursuant to the requirements 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.
Trans Global Services, Inc.
(Registrant)
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Date: November 14, 2000 Joseph G. Sicinski
(Chief Executive Officer)
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Date: November 14, 2000 Glen R. Charles
(Chief Financial Officer)
