UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1998
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 March 31, 1998
Common Stock, $.001 par value 5,713,215
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . 3
Consolidated Balance Sheets -- March 31, 1998
and December 31, 1997. . . . . . . . . . . . . 4
Consolidated Statements of Operations --
three months ended March 31, 1998 and 1997 . . 6
Consolidated Statements of Stockholders' Equity 7
Consolidated Statements of Cash Flows --
three months ended March 31, 1998 and 1997 . . 8
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. . . . . . . . . . . . . . . 13
Item 2. Changes In Securities. . . . . . . . . . . . . 13
Item 3. Defaults Upon Senior Securities. . . . . . . . 13
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . 14
Item 5. Other Information. . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . 15
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Consolidated Financial Statements for
the period ended March 31, 1998 and December 31, 1997, have been
prepared by the Company.
TRANS ENERGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 and December 31, 1997
<PAGE>
TRANS ENERGY, INC.
Consolidated Balance Sheets
ASSETS
March 31, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash $ - $ 185,881
Accounts receivable 141,375 175,161
Prepaid and other current assets 7,041 1,441
Total Current Assets 148,416 362,483
PROPERTY AND EQUIPMENT
Vehicles 94,589 94,589
Machinery and equipment 10,092 10,092
Pipelines 2,231,308 2,231,308
Well equipment 271,750 271,882
Wells 4,927,217 3,850,429
Leasehold acreage 597,221 597,221
Accumulated depreciation (1,782,767) (1,742,136)
Total Fixed Assets 6,349,410 5,313,385
OTHER ASSETS
Loan acquisition costs 4,733 4,733
Total Other Assets 4,733 4,733
TOTAL ASSETS $6,502,559 $5,680,601
<PAGE>
TRANS ENERGY, INC.
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS EQUITY
March 31, December 31,
1998 1997
(Unaudited)
CURRENT LIABILITIES
Cash overdraft $ 72,309 $ -
Accounts payable - trade 1,398,808 1,250,017
Accrued expenses 254,395 72,195
Salaries payable - 64,602
Notes payable - current portion 814,478 898,098
Total Current Liabilities 2,539,990 2,284,912
NET LIABILITIES IN EXCESS OF ASSETS OF
DISCONTINUED OPERATIONS 340,821 340,821
LONG-TERM LIABILITIES
Notes payable 1,315,430 792,387
Total Long-Term Liabilities 1,315,430 792,387
Total Liabilities 4,196,241 3,418,120
MINORITY INTERESTS 250,000 250,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY
Common stock: 30,000,000 shares authorized
at $0.001 par value; 5,713,215 and
5,663,215 shares issued and outstanding,
respectively 5,713 5,663
Capital in excess of par value 11,005,139 10,746,979
Accumulated deficit (8,954,534) (8,740,161)
Total Stockholders Equity 2,056,318 2,012,481
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY $6,502,559 $5,680,601
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Operations
(Unaudited)
For the Three Months
Ended March 31,
1998 1997
REVENUES
Oil and gas sales $ 206,238 $ 270,716
Total Revenues 206,238 270,716
COSTS AND EXPENSES
Cost of oil and gas 142,643 91,170
Salaries and wages 31,794 30,751
Depreciation and amortization 40,632 33,564
Selling, general and administrative 140,617 101,551
Total Costs and Expenses 355,686 257,036
Net Income (Loss) from Operations (149,448) 13,680
OTHER INCOME (EXPENSE)
Interest income 400 1,645
Interest expense (65,325) (36,315)
Total Other Income (Expense) (64,925) (34,670)
NET LOSS BEFORE INCOME TAXES AND
MINORITY INTERESTS (214,373) (20,990)
INCOME TAXES - -
NET LOSS BEFORE MINORITY INTERESTS (214,373) (20,990)
MINORITY INTERESTS - -
NET LOSS $ (214,373) $ (20,990)
PRIMARY LOSS PER SHARE $ (0.04) $ (0.01)
FULLY DILUTED LOSS PER SHARE $ (0.04) $ (0.00)
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Stockholders' Equity
Capital in
Common Shares Excess of Accumulated
Shares Amount Par Value Deficit
Balance, December 31, 1996 3,824,043 $ 3,824 $ 8,926,633 $(6,710,711)
Common stock issued for services
at $1.41 per share 350,000 350 491,837 -
Common stock issued for cash
at $0.96 per share 1,489,172 1,489 1,428,511 -
Contribution of capital by
shareholders - - 49,998 -
Common stock offering costs - - (150,000) -
Net loss for the year ended
December 31, 1997 - - - (2,029,450)
Balance, December 31, 1997 5,663,215 5,663 10,746,979 (8,740,161)
Common stock issued for well costs
at $1.00 per share (unaudited) 50,000 50 49,950 -
Contribution of capital by
shareholders (unaudited) - - 208,210 -
Net loss for the three months ended
March 31, 1998 (unaudited) - - - (214,373)
Balance, March 31, 1998
(unaudited) 5,713,215 $ 5,713 $11,005,139 $(8,954,534)
<PAGE>
TRANS ENERGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months
Ended March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (214,373) $ (20,990)
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation, depletion and amortization 40,632 33,564
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts receivable 33,786 77,913
Increase (decrease) in accounts payable
and accrued expenses 436,060 (112,155)
Cash Provided (Used) by Operating Activities 296,105 (21,668)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (921,409) (70,520)
Cash Provided (Used) by Investing
Activities (921,409) (70,520)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 528,875 1,212,700
Repayment to related parties - (308,579)
Principal payments on long-term debt (89,452) (106,741)
Cash Provided (Used) by Financing Activities 439,423 797,380
NET INCREASE (DECREASE) IN CASH (185,881) 705,192
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 185,881 481,846
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ - $1,187,038
CASH PAID FOR:
Interest $ 65,325 $ 36,315
Income taxes $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for well costs $ 50,000 -
<PAGE>
TRANS ENERGY, INC.
Notes to the Consolidated Financial Statements
March 31, 1998 and December 31, 1997
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, 1998 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, 1997 audited consolidated
financial statements. The results of operations for the periods ended
March 31, 1998 and 1997 are not necessarily indicative of the operating
results for the full year.
<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, 1998 and 1997. It should be noted that percentages
discussed throughout this analysis are stated on an approximate
basis.
Three Months Ended
March 31,
1998 1997
(Unaudited)
Total revenues. . . . . . . . . . . . 100% 100%
Total costs and expenses. . . . . . 173 95
Other income (expense). . . . . . . . (31) (13)
Net (loss) before income taxes,
minority interest and extraordinary
income (loss). . . . . . . . . . . . (104) (8)
Income taxes. . . . . . . . . . . . . - -
Minority interest . . . . . . . . . . - -
Net (loss) before extraordinary
income and discontinued operations . (104) (8)
Loss from discontinued Operations . . - -
Extraordinary income. . . . . . . . . - -
Net income (loss) . . . . . . . . . . (104) (8)
Results of Operations
Total revenues for the three months ended March 31, 1998
("first quarter of 1998") decreased 24% when compared with the
three months ended March 31, 1997 ("first quarter of 1997"). 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 also a decline in the
prices received for both oil and natural gas. Total costs and
expenses as a percentage of total revenues increased from 95% in
the first quarter of 1997 to 173% for the first quarter of 1998,
and actual costs and expenses for the first quarter of 1998
increased 72% compared to the 1997 period. This increase is
primarily attributed to the 56% increase in cost of oil and gas
produced due to a decrease in the gross profit margin of purchased
gas from the Company's suppliers. Salaries and wages increased
$1,043 (3%) to $31,794 in the first quarter of 1998 compared to the
first quarter of 1997. Depreciation and depletion increased $7,068
(21%) to $40,632 in the first quarter of 1998 compared to the first
quarter of 1997. Selling, general and administrative expenses
increased $39,066 (38%) to $140,617 in the first quarter of 1998
compared to the first quarter of 1997. Interest expense increased
$29,010 (80%) to $65,325 for the first quarter of 1998 due to
increased borrowings.
The Company's net loss for the first quarter of 1998 was
$214,373 compared to $20,990 for the first quarter of 1997. This
increase in the Company's net loss is attributed primarily to the
80% increase in interest expense and the 38% increase in selling,
general and administrative expense.
For the remainder of fiscal year 1998, management expects
salaries and wages to remain at approximately the same rate as for
the first quarter of 1998. 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 1998.
Net Operating Losses
The Company has accumulated approximately $8,954,534 of net
operating loss carryforwards as of March 31, 1998, which may be
offset against future taxable income through the year 2012 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, 1998 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, 1998 was a negative $2,391,574
compared to a negative $1,922,429 at December 31, 1997. This
change is primarily attributed to the decrease in cash from
$185,881 at December 31, 1997 to a cash overdraft of $72,309 at
March 31, 1998, and an increase in accounts payable from $1,250,017
as of December 31, 1997 to $1,398,808 as of March 31, 1998. The
Company anticipates meeting its working capital needs during the
remainder of the current fiscal year with revenues from operations.
As of March 31, 1998, the Company had total assets of
$6,502,559 and total stockholders' equity of $2,056,318, compared
to total assets of $5,680,601 and total stockholders' equity of
$2,012,481 at December 31, 1997. This represents a $821,958
(14%)increase in total assets and a $43,837 (2%) increase in total
stockholders equity for the period. For this same period, cash
decreased from $185,881 to a cash overdraft of $72,309 and total
current assets decreased 59% due to decreased cash. Total current
liabilities increased 11% primarily attributed to an increase in
the Company's accounts payable.
At March 31, 1998, the Company's current portion of its long
term debt was $814,478. The Company currently anticipates that it
will be able to provide for its debt obligations and repayments
coming due during the remainder of 1998 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.
Recent Business Developments - Proposed Merger With Natural Gas
Technologies, Inc.
On March 24, 1998, the Company entered into a Plan and
Agreement of Merger with National Gas Technologies, Inc. ("NGT"),
a Dallas, Texas based exploration company, pursuant to which NGT
will be merged with and into the Company with the Company being the
surviving corporate entity. The merger will be accomplished by way
of the exchange of 100% of the issued and outstanding shares of NGT
common stock and preferred stock for shares of the Company's common
stock. The exchange ratio will result in the present NGT
shareholders owning at least 75% of the total number of issued and
outstanding shares of the Company's common stock immediately after
the completion of the merger. The merger is subject to shareholder
approval of both corporations and the effectiveness of the
Company's registration statement on Form S-4.
Upon completion of the merger, NGT's Vice President, Michael
Stewart, shall serve as President, Chief Operating Officer and a
director of the Company. The Board of Directors shall consist of
seven directors after completion of the merger. The Company's
current President, Loren E. Bagley, shall continue to serve as
Chairman of the Board. In addition to Mr. Bagley and Mr. Stewart,
additional directors to be appointed by the Company shall be
William F. Woodburn and John Sims and the additional directors to
be appointed by NGT shall be Warren Donohoe and Sonja Fletcher.
The seventh director has not yet been determined, however, such
director will be appointed prior to completion of the merger by the
mutual agreement of NGT and the Company. Until the merger is
completed, both corporations are being managed pursuant to a joint
committee consisting of Mr. Bagley and Mr. Stewart.
On March 6, 1998, the Company entered into an agreement with
GCRL Energy, Ltd. ("GCRL") to purchase all of GCRL's interest in
the Powder River Basin in Wyoming, consisting of interests in
five (5) producing wells, interests in 30,000 leasehold acres, and
interests in seventy-two miles of 3-D seismic.
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 May 14, 1997, a complaint entitled R&K Oil Company, Inc.
vs. Vulcan Energy Corporation and Trans Energy, Inc. was filed in
District Court, Andrews County, Texas, 109th Judicial District
(File #14,430). The complaint alleges the Company owes R&K Oil
Company, Inc. $126,978 as a result of business transacted by Vulcan
Energy Corporation. The complaint also seeks $500,000 for breach
of contract. Trans Energy denies all allegations.
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. Walker s 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. On February 17, 1998 the Company
and the above named defendants filed a countersuit against F.
Worthy Walker alleging breach of contract, fraud and fraudulent
inducement, conversion, and breach of fiduciary duty and seeks
punitive damages.
Item 2. Changes In Securities
During the first quarter of 1998, the Company agreed to issue
50,000 shares of its common stock to Brent Wagman in connection
with certain well costs. The stock was valued at $1.00 per share.
The issuances of shares was made in a private transaction in reliance
on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended (the "Act").
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
During the three month period ended March 31, 1998, the
Company filed two reports on Form 8-K on February 20, 1998 and
March 3, 1998. Both reports were related to the Company's proposed
merger with Natural Gas Technologies, Inc.
<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: June 5, 1998 By /S/ Loren E. Bagley
(Signature)
LOREN E. BAGLEY, President
and Chief Executive Officer
(Chief Financial Officer)
Date: June 5, 1998 By /S/ 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, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 141,375
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 148,416
<PP&E> 8,132,177
<DEPRECIATION> 1,782,767
<TOTAL-ASSETS> 6,502,559
<CURRENT-LIABILITIES> 2,539,990
<BONDS> 1,315,430
0
0
<COMMON> 5,713
<OTHER-SE> 11,005,137
<TOTAL-LIABILITY-AND-EQUITY> 6,502,559
<SALES> 206,238
<TOTAL-REVENUES> 206,238
<CGS> 142,643
<TOTAL-COSTS> 355,686
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,325
<INCOME-PRETAX> (214,373)
<INCOME-TAX> 0
<INCOME-CONTINUING> (214,373)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (214,373)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
