UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997
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 0-23530
TRANS ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 93-0997412
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
210 Second Street, P.O. Box 393, St. Marys, West Virginia 26170
(Address of principal executive offices)
Registrant's telephone no., including area code: (304) 684-7053
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding as of April 30, 1997
Common Stock, $.001 par value 3,849,043
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . 1
Consolidated Balance Sheets -- March 31,
1997 and December 31, 1996 . . . . . . . . . . 2
Consolidated Statements of Operations -- three
months ended March 31, 1997 and 1996 . . . . . 4
Consolidated Statements of Stockholders'
Equity . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows --
three months ended March 31, 1997 and 1996 . . 7
Notes to Consolidated Financial Statements . . 9
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 12
Item 2. Changes In Securities. . . . . . . . . . . . . 12
Item 3. Defaults Upon Senior Securities. . . . . . . . 13
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . 13
Item 5. Other Information. . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . 14
-i-
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Consolidated Financial Statements for
the period ended March 31, 1997 and December 31, 1996, have been
prepared by the Company.
TRANS ENERGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996
<PAGE>
TRANS ENERGY, INC.
Consolidated Balance Sheets
ASSETS
March 31, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS
Cash $1,187,038 $ 481,846
Accounts receivable 157,844 235,757
Prepaid 59,601 59,601
Total Current Assets 1,404,483 777,204
PROPERTY AND EQUIPMENT
Office equipment 318 -
Vehicles 48,382 44,552
Machinery and equipment 62,206 62,206
Pipeline 2,192,001 2,192,001
Well equipment 374,972 358,471
Wells 3,214,527 3,177,416
Leasehold acreage 263,500 263,500
Accumulated depreciation (1,401,470) (1,381,129)
Total Fixed Assets 4,754,436 4,717,017
OTHER ASSETS
Loan acquisition costs 222,959 6,122
Total Other Assets 222,959 6,122
TOTAL ASSETS $6,381,878 $5,500,343
<PAGE>
TRANS ENERGY, INC.
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1997 1996
(Unaudited)
CURRENT LIABILITIES
Accounts payable - trade $ 582,710 $ 685,711
Accrued expenses 20,231 29,385
Notes payable - current portion 605,250 645,348
Total Current Liabilities 1,208,191 1,360,444
NET LIABILITIES IN EXCESS OF ASSETS OF
DISCONTINUED OPERATIONS 602,074 668,717
LONG-TERM LIABILITIES
Convertible debt (Note 2) 1,430,000 -
Advances from related parties 296,611 605,190
Notes payable 646,246 646,246
Total Long-Term Liabilities 2,372,857 1,251,436
Total Liabilities 4,183,122 3,280,597
COMMITMENTS AND CONTINGENCIES - -
MINORITY INTERESTS - -
STOCKHOLDERS' EQUITY
Common Stock: 30,000,000 shares
authorized at $0.001 par value;
3,824,043 shares issued and
outstanding 3,824 3,824
Capital in excess of par value 8,926,633 8,926,633
Accumulated deficit (6,731,701) (6,710,711)
Total Stockholders' Equity 2,198,756 2,219,746
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $6,381,878 $5,500,343
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Operations
(Unaudited)
For the Three Months
Ended March 31,
1997 1996
REVENUES
Oil and gas sales $270,716 $279,020
Total Revenues 270,716 279,020
COSTS AND EXPENSES
Cost of oil and gas 91,170 174,629
Salaries and wages 30,751 28,376
Depreciation and amortization 33,564 34,668
Selling, general and administrative 101,551 78,989
Total Costs and Expenses 257,036 316,662
Net Income (Loss) from Operations 13,680 (37,642)
OTHER INCOME (EXPENSE)
Interest income 1,645 -
Interest expense (36,315) (155,224)
Total Other Income (Expense) (34,670) (155,224)
NET INCOME (LOSS) BEFORE INCOME
TAXES AND MINORITY INTERESTS AND
EXTRAORDINARY INCOME (LOSS) (20,990) (192,866)
INCOME TAXES - -
NET INCOME (LOSS) BEFORE MINORITY
INTERESTS AND EXTRAORDINARY INCOME (LOSS) (20,990) (192,866)
MINORITY INTERESTS - 15,960
NET INCOME (LOSS) BEFORE
EXTRAORDINARY INCOME (LOSS) AND
DISCONTINUED OPERATIONS (20,990) (176,906)
LOSS FROM DISCONTINUED OPERATIONS - (195,611)
NET INCOME (LOSS) BEFORE EXTRAORDINARY
INCOME (LOSS) (20,990) (372,517)
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Operations
(Unaudited)
For the Three Months
Ended March 31,
1997 1996
EXTRAORDINARY INCOME (LOSS)
Forgiveness of debt $ - $ 20,000
Early payoff of debt - (10,444)
TOTAL EXTRAORDINARY INCOME (LOSS) - 9,556
NET INCOME (LOSS) $ (20,990) $(362,961)
PRIMARY EARNINGS (LOSS) PER SHARE
NET INCOME (LOSS) BEFORE
EXTRAORDINARY INCOME $ (0.01) $ (0.11)
EXTRAORDINARY INCOME - NIL
NET INCOME (LOSS) $ (0.01) $ (0.11)
FULLY DILUTED EARNINGS
(LOSS) PER SHARE
NET INCOME (LOSS) BEFORE
EXTRAORDINARY INCOME $ (0.00) $ (0.11)
EXTRAORDINARY INCOME - NIL
NET INCOME (LOSS) $ (0.00) $ (0.11)
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Stockholders' Equity
Capital in
Common Shares Excess of Accumulated
Shares Amount Par Value Deficit
Balance, December 31, 1995 3,174,122 $ 3,174 $5,629,734 $(3,071,721)
Common stock issued for
debenture at $0.90 per share 55,555 56 49,944 -
Common stock issued for
services at $2.67 per share 9,000 9 23,991 -
Common stock warrants issued - - 774,000 -
Cancellation of common stock
options issued services - - (275,000) -
Shareholder loans contributed
to capital - - 250,000 -
Issuance of common stock for
cash at $5.36 per share 585,366 585 3,137,415 -
Common stock offering costs - - (663,451) -
Net loss for the year ended
December 31, 1996 - - - (3,638,990)
Balance, December 31, 1996 3,824,043 3,824 8,926,633 (6,710,711)
Net loss for the three months
ended March 31, 1997 (Unaudited) - - - (20,990)
Balance, March 31, 1997
(Unaudited) 3,824,043 $ 3,824 $8,926,633 $(6,731,701)
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months
Ended March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(20,990) $(362,961)
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation, depletion and amortization 33,564 163,948
Minority interest - (15,960)
Common stock issued for services - 24,000
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 77,913 (91,047)
Decrease (increase) in inventory - (24,805)
Decrease (increase) in deposits - (136)
Decrease (increase) in loan acquisition costs - (19,413)
Increase (decrease) in accounts payable
and accrued expenses (103,001) 179,453
Increase (decrease) in interest payable (9,154) (13,357)
Cash Provided (Used) by Operating Activities (21,668) (160,278)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (70,520) (22,732)
Cash Provided (Used) by Investing Activities $(70,520) $(22,732)
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months
Ended March 31,
1997 1996
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt $ 1,212,700 $ 337,379
Repayment to related parties (308,579) (438)
Borrowings from related parties - 38,415
Principal payments on long-term debt (106,741) (154,325)
Cash Provided (Used) by Financing Activities 797,380 221,031
NET INCREASE (DECREASE) IN CASH 705,192 38,021
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 481,846 -
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,187,038 $ 38,021
CASH PAID FOR:
Interest $ 36,315 $ 75,717
Income taxes $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $ - $ 24,000
Conversion of debentures to equity $ - $ 50,000
Warrants issued for loan acquisition costs $ - $ 774,000
<PAGE>
TRANS ENERGY, INC.
Notes to the Consolidated Financial Statements
March 31, 1997 and December 31, 1996
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated 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 March 31, 1997 and for
all periods presented have been made.
Certain information and footnote disclosures normally included
in consolidated financial statements prepared in accordance with
general accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December
31, 1996 audited consolidated financial statements. The results
of operations for the periods ended March 31, 1997 and 1996 are
not necessarily indicative of the operating results for the full
year.
NOTE 2 - CONVERTIBLE DEBENTURES
In March 1997, the Company completed an offering of $1,430,000
of convertible debentures. The Company received net proceeds of
$1,212,700 after the costs of the offering. The costs of the
offering will be amortized over the life of the loan. The
convertible debentures bear interest at 8% per annum, payable on
a prorata basis at the earlier of the conversion date or the
maturity date (March 25, 2000). The convertible debentures are
convertible to common stock at the lesser of 80% of the 5 day
average daily closing bid price for the 5 trading days
immediately preceding the closing date or 75% of the 5 day
average daily closing bid price for the 5 trading days
immediately preceding the applicable conversion date. The
debentures are subject to a mandatory 36 months conversion
feature at the end of which all debentures outstanding will be
automatically converted upon the terms above.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth the percentage relationship to
total revenues of principal items contained in the Company's
Consolidated Statements of Operations for the three month periods
ended March 31, 1997 and 1996. It should be noted that percentages
discussed throughout this analysis are stated on an approximate
basis.
Three Months Ended
March 31,
1997 1996
(Unaudited)
Total revenues. . . . . . . . . . . . 100% 100%
Total costs and expenses. . . . . . 95 113
Other income (expense). . . . . . . . (13) (56)
Net (loss) before income taxes,
minority interest and extraordinary
income (loss). . . . . . . . . . . . (8) (69)
Income taxes. . . . . . . . . . . . . - -
Minority interest . . . . . . . . . . - 6
Net (loss) before extraordinary
income and discontinued operations . (8) (63)
Loss from discontinued Operations . . - (70)
Extraordinary income. . . . . . . . . - 3
Net income (loss) . . . . . . . . . . (8) (130)
Results of Operations
Total revenues for the three months ended March 31, 1997
("first quarter of 1997") decreased 3% when compared with the three
months ended March 31, 1996 ("first quarter of 1996"). This
decrease is attributed to the Company's decision not to purchase
gas from its suppliers at a price higher than management believed
it could profitably resell the gas, and was partially offset by
higher volumes of oil and gas produced from Company-owned wells.
Total costs and expenses as a percentage of total revenues
decreased from 113% in the first quarter of 1996 to 95% for the
first quarter of 1997, and actual costs and expenses for the first
quarter of 1997 decreased 19% compared to the 1996 period. This
decrease is primarily attributed to the 48% decrease in cost of oil
and gas produced due to the Company's decision not to purchase
higher-priced gas from its suppliers. Salaries and wages increased
$2,375 (8%) to $30,7551 in the first quarter of 1997 compared to
the first quarter of 1996. Depreciation and depletion decreased
$1,104 (3%) to $33,564 in the first quarter of 1997 compared to the
first quarter of 1996. Selling, general and administrative
expenses increased $22,562 (29%) to $101,551 in the first quarter
of 1997 compared to the first quarter of 1996. Interest expense
decreased $118,909 (77%) to $36,315 for the first quarter of 1997
due to decreased borrowings and the 1996 issuance of additional
shares of common stock to Debenture holders for consideration for
extending the due date of the debentures.
The Company's minority interests changed from $15,960 for the
first quarter of 1996 to $0 for the first quarter of 1997. The
Company's net loss for the first quarter of 1997 was $20,990
compared to $372,517 for the first quarter of 1996. This decrease
in the Company's net loss is attributed primarily to the 77%
decrease in interest expense and the discontinued operations of
Vulcan Energy Corporation as of December 31, 1996
For the remainder of fiscal year 1997, management expects
salaries and wages to increase and other general and administrative
expenses to remain at approximately the same rate as for the first
quarter of 1997. The cost of oil and gas produced is expected to
fluctuate with the amount produced and with prices of oil and gas,
and management anticipates that revenues are likely to increase
during the remainder of 1997.
Net Operating Losses
The Company has accumulated approximately $6,731,701 of net
operating loss carryforwards as of March 31, 1997, which may be
offset against future taxable income through the year 2011 when the
carryforwards expire. The use of these losses to reduce future
income taxes will depend on the generation of sufficient taxable
income prior to the expiration of the net operating loss
carryforwards. In the event of certain changes in control of the
Company, there will be an annual limitation on the amount of net
operating loss carryforwards which can be used. No tax benefit has
been reported in the financial statements for the period ended
March 31, 1997 because the potential tax benefits of the loss
carryforward is offset by valuation allowance of the same amount.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been
satisfied through its operating revenues and from borrowed funds.
Working capital at March 31, 1997 of $196,292 increased from a
negative $583,240 at December 31, 1996. This change is primarily
attributed to the increase in cash from $481,846 at December 31,
1996 to $1,187,038 at March 31, 1997. The increase in cash is due
to the Company realizing $1,430,000 from the issuance of
convertible debentures and was partially offset by a reduction in
accounts receivable from $235,757 to $157,844. The Company
anticipates meeting its working capital needs during the remainder
of the current fiscal year with revenues from operations.
As of March 31, 1997, the Company had total assets of
$6,381,878 and total stockholders' equity of $2,198,756, compared
to total assets of $5,500,343 and total stockholders' equity of
$2,219,746 at December 31, 1996. This represents a $881,535
(16%)increase in total assets and a $20,990 (1%) increase in total
stockholders equity for the period. For this same period, cash
increased from $481,846 to $1,187,038 and total current assets
increased 81% due to increased cash. Total current liabilities
decreased 11% primarily attributed to a decrease in the Company's
accounts payable.
At March 31, 1997, the Company's current portion of its long
term debt was $605,250. In 1996, certain outstanding convertible
debentures having a face value of $50,000 plus accrued interest
were converted into common stock. The Company currently
anticipates that it will be able to provide for its debt
obligations and repayments coming due during the remainder of 1997
from operating revenues generated by the Company.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The Company wishes to advise readers that
actual results may differ substantially from such forward-looking
statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, including,
but not limited to, the following: the ability of the Company to
provide for its debt obligations and to provide for working capital
needs from operating revenues, and other risks detailed in the
Company's periodic report filings with the Securities and Exchange
Commission.
PART II
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the
Company is a party or to which any of its property is subject
except as set forth below.
On December 30, 1996, a complaint entitled R&K Oil Company,
Inc. vs. Trans Energy, Inc. was filed in the United States District
Court, Western District of Texas, Midland/Odessa Division
(# MO96CA197). The complaint alleges that the Company owes R&K Oil
Company, Inc. $131, 978 as a result of business transacted by the
Company's subsidiary, Vulcan Energy Corporation. Management
believes that the results of the proceedings will not have a
material adverse effect on the Company.
On March 12, 1997, a complaint entitled F. Worthy Walker vs.
Loren Bagley, William Woodburn, Mark Woodburn, Trans Energy, Inc.
and Vulcan Energy Corporation, was filed in the District Court of
Dallas, Texas (# 9702304C). The complaint alleges that the Company
breached certain contracts related to Mr. Walkers employment with
Vulcan Energy Corporation, and seeks punitive and exemplary
damages. The Company denies all allegations. Management believes
that the results of the proceedings will not have a material
adverse effect on the Company.
Item 2. Changes In Securities
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
On April 16, 1997, the Company filed a report on Form 8-K
disclosing the sale of 8% Cumulative Convertible Debentures due
March 25, 2000 in reliance upon the exemption from registration
provided by Rules 901 through 904, inclusive ("Regulation S"),
under the Securities Act of 1933, as amended.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TRANS ENERGY, INC.
Date: May 23, 1997 By Loren E. Bagley
(Signature)
LOREN E. BAGLEY, President
and Chief Executive Officer
(Chief Financial Officer)
Date: May 23, 1997 By William F. Woodburn
(Signature)
William F. Woodburn, Vice
President and Director
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE TRANS ENERGY, INC. FINANCIAL
STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,187,038
<SECURITIES> 0
<RECEIVABLES> 157,844
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,404,483
<PP&E> 6,155,906
<DEPRECIATION> 1,401,470
<TOTAL-ASSETS> 6,381,878
<CURRENT-LIABILITIES> 1,208,191
<BONDS> 2,372,857
0
0
<COMMON> 3,824
<OTHER-SE> 8,926,633
<TOTAL-LIABILITY-AND-EQUITY> 6,381,878
<SALES> 270,716
<TOTAL-REVENUES> 270,716
<CGS> 91,170
<TOTAL-COSTS> 257,036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,315
<INCOME-PRETAX> (20,990)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,990)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,990)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
