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, 2000
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, 2000
Common Stock, $.001 par value 23,987,063
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets -- March 31, 2000
and December 31, 1999. . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations --
three months ended March 31, 2000
and March 31, 2000 . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Stockholders'
Equity (Deficit) . . . . . . . . . . . . . . . . . . . 7
Consolidated Statements of Cash Flows --
three months ended March 31, 2000
and March 31, 2000 . . . . . . . . . . . . . . . . . . 9
Notes to Consolidated Financial Statements . . . . . . . 10
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 13
Item 2. Changes In Securities and Use of Proceeds. . . . . . . . 14
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . . . . . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 16
PART I
Item 1. Financial Statements
The following unaudited Consolidated Financial Statements for
the period ended March 31, 2000 and December 31, 1999, have been
prepared by the Company.
TRANS ENERGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
March 31, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash $ - $ 13,477
Accounts receivable, net 89,896 127,154
Total Current Assets 89,896 140,631
PROPERTY AND EQUIPMENT
Vehicles 94,589 94,589
Machinery and equipment 10,092 10,092
Pipelines 2,254,908 2,254,908
Well equipment 49,155 49,155
Wells 3,704,389 3,704,389
Leasehold acreage 180,000 180,000
Accumulated depreciation (1,486,169) (1,408,486)
Total Fixed Assets 4,806,964 4,884,647
OTHER ASSETS
Restricted cash 148,761 262,089
Deposits 1,508 3,792
Other assets 11,426 -
Total Other Assets 161,695 265,881
TOTAL ASSETS $ 5,058,555 $ 5,291,159
TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, December 31,
2000 1999
(Unaudited)
CURRENT LIABILITIES
Accounts payable - trade $ 1,257,925 $ 1,181,945
Accrued expenses 1,130,584 1,182,754
Cash overdraft 15,988 -
Salaries payable 432,600 412,262
Notes payable - current portion 1,224,300 1,228,566
Related party payables 161,470 161,470
Debentures payable 3,860,615 5,090,496
Total Current Liabilities 8,083,482 9,257,493
NET LIABILITIES IN EXCESS OF THE ASSETS OF
DISCONTINUED OPERATIONS 104,911 104,911
LONG-TERM LIABILITIES
Notes payable 541,380 559,190
Total Long-Term Liabilities 541,380 559,190
Total Liabilities 8,729,773 9,921,594
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; 30,000,000 shares
authorized at $0.001 par value;
23,987,063 and 7,107,746 shares
issued and outstanding, respectively 23,986 7,107
Capital in excess of par value 16,857,367 15,250,242
Accumulated deficit (20,552,571) (19,887,784)
Total Stockholders' Equity (Deficit) (3,671,218) (4,630,435)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 5,058,555 $ 5,291,159
TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the
Three Months Ended
March 31,
2000 1999
REVENUES $ 187,707 $ 266,860
COSTS AND EXPENSES
Cost of oil and gas 104,700 183,137
Salaries and wages 21,192 25,801
Depreciation, depletion and amortization 77,684 862,088
Selling, general and administrative 516,962 223,932
Total Costs and Expenses 720,538 1,294,958
LOSS FROM OPERATIONS (532,831) (1,028,098)
OTHER INCOME (EXPENSE)
Other income 2,672 -
Interest expense (134,628) (264,728)
Total Other Income (Expense) (131,956) (264,728)
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTERESTS (664,787) (1,292,826)
INCOME TAXES - -
MINORITY INTERESTS - -
NET LOSS $ (664,787) $ (1,292,826)
BASIC LOSS PER SHARE $ (0.08) $ (0.51)
TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
Capital in
Common Shares Excess of Accumulated
Shares Amount Par Value Deficit
Balance, December 31, 1997 1,415,808 $ 1,415 $ 10,751,227 $ (8,740,161)
Contribution of capital by
shareholders - - 208,210 -
Common stock issued for services
at $1.45 per share 248,812 249 360,501 -
Common stock issued for debt
conversion at $1.65 per share 36,364 36 59,964 -
Common stock issued for prepaid
closing fees at $3.27 per share 473,833 474 1,548,427 -
Contributed capital from discount on
debentures - - 1,445,480 -
Net loss for the year ended
December 31, 1998 - - - (4,849,290)
Balance, December 31, 1998 2,174,817 2,174 14,373,809 (13,589,451)
Common stock issued for services
at $0.59 per share 440,000 440 259,560 -
Common stock issued for services
and conversion of debt to equity
at $0.98 per share 94,000 94 92,106 -
Common stock issued for conversion
of debentures, penalty and
interest at $0.12 per share 4,398,929 4,399 524,767 -
Net loss for the year ended
December 31, 1999 - - - (6,298,333)
Balance, December 31, 1999 7,107,746 $ 7,107 $15,250,242 $(19,887,784)
TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Capital in
Common Shares Excess of Accumulated
Shares Amount Par Value Deficit
Balance, December 31, 1999 7,107,746 $ 7,107 $15,250,242 $(19,887,784)
Common stock issued for
conversion of debentures,
penalty and interest at
$0.10 per share (unaudited) 13,356,934 13,357 1,368,422 -
Common stock issued for services
at $0.07 per share (unaudited) 3,372,383 3,372 221,903 -
Common stock issued for services
at $0.11 per share (unaudited) 150,000 150 16,800 -
Net loss for the three months ended
March 31, 2000 (unaudited) - - - (664,787)
Balance, March 31, 2000
(unaudited) 23,987,063 $ 23,986 $16,857,367 $(20,552,571)
TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (664,787) $ (1,292,826)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Depreciation, depletion and amortization 77,683 967,624
Common stock issued for services 242,225 200,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 37,258 26,337
(Increase) decrease in restricted cash 113,328 -
Decrease (increase) in prepaid and other
current assets (9,142) -
Increase in accounts payable and accrued expenses 196,046 130,335
Increase in cash overdraft 15,988 -
Net Cash (Used) by Operating Activities 8,599 31,470
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment - (327)
Net Cash Provided (Used) by Investing Activities - (327)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (22,076) (31,143)
Net Cash Provided (Used) by Financing Activities (22,076) (31,143)
NET INCREASE (DECREASE) IN CASH (13,477) -
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 13,477 -
CASH AND CASH EQUIVALENTS, END OF YEAR $ - $ -
CASH PAID FOR:
Interest $ 46,397 $ 56,438
Income taxes $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for debt $ 1,381,779 $ 67,500
Common stock issued for services $ 242,225 $ 200,000
TRANS ENERGY, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
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, result of operations and cash flows at
March 31, 2000 and for all periods presented have been
made.
Certain information and footnote disclosures normally
included in consolidated financial statements prepared in
accordance with generally 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, 1999 audited
consolidated financial statements. The results of
operations for the periods ended March 31, 2000 and 1999
are not necessarily indicative of the operating results for
the full years.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are
prepared using generally accepted accounting principles
applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred
cumulative operating losses through March 31, 2000, and has
a working capital deficit at March 31, 2000. Revenues have
not been sufficient to cover its operating costs and to
allow it to continue as a going concern. The potential
proceeds from the sale of common stock, other contemplated
debt and equity financing, and increases in operating
revenues from new development would enable the Company to
continue as a going concern. There can be no assurance
that the Company can or will be able to complete any debt
or equity financing. If these are not successful,
management is committed to meeting the operational cash
flow needs of the Company.
Item 2. Management's Discussion and Analysis or Plan
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, 2000 and 1999. It should be noted that percentages
discussed throughout this analysis are stated on an approximate
basis.
Three Months Ended
March 31,
2000 1999
(Unaudited)
Total revenues. . . . . . . . . . . . . . . . . 100% 100%
Total costs and expenses. . . . . . . . . . . . 384 485
Net (loss) from operations. . . . . . . . . . . 284 (385)
Other income (expense). . . . . . . . . . . . . 70 (99)
Net (loss) before income taxes. . . . . . . . . 354 (484)
Income taxes. . . . . . . . . . . . . . . . . . - -
Net income (loss) . . . . . . . . . . . . . . . 354 (484)
Total revenues for the three months ("first quarter") and nine
ended March 31, 2000 decreased 30% when compared with the first
quarter of 1999, primarily attributed to the sale of certain wells.
Total costs and expenses as a percentage of total revenues
decreased from 485% in the first quarter of 1999 to 384% for the
first quarter of 2000, and actual costs and expenses decreased 44%
during the same period. This decrease is primarily attributed to
the 91% decrease in depreciation and amortization for the period
due to prepaid closing costs being fully amortized and prepaid
advertising being mostly exhausted. Also, the cost of oil and gas
decreased 43% for the first quarter of 2000 when compared to the
first quarter of 1999 due to lower purchases and a set price.
Partially offsetting the decrease in expenses was the 131% increase
in selling, general and administrative expenses due to additional
compensation to officers, directors and consultants.
The Company's net loss for the first quarter of 2000 $664,787
compared to a net loss of $1,292,826 for the 1999 periods. The
decrease in net loss is attributed to the reduction in operating
expenses and 49% decrease in interest expense during the period due
to the Company having recorded the discount on its convertible
debenture.
For the remainder of fiscal year 2000, management expects
selling, general and administrative expenses to remain at
approximately the same rate as for 1999. 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 2000.
The Company has included a footnote to its financial
statements for the periods ended March 31, 2000 stating that
because of the Company's continued losses, working capital deficit
and need for additional funding, there is substantial doubt as to
whether the Company can continue as a going concern. See Note 2 to
the consolidated financial statements.
Net Operating Losses
The Company has accumulated approximately $$19,800,000 of net
operating loss carryforwards as of December 31, 1999, which may be
offset against future taxable income through the year 2019 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 year ended
December 31, 1999 or three month period ended March 31, 2000
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.
At March 31, 2000, the Company had a negative working capital
$7,993,586 compared to a negative $9,116,862 at December 31, 1999.
This 12% improvement in working capital is primarily attributed to
the conversion to common stock of a portion of the outstanding
convertible debentures.
The Company anticipates meeting its working capital needs
during the remainder of the current fiscal year with revenues from
operations, particularly from its Gulf Canada interests in Wyoming.
In the event revenues are not sufficient to meet the Company's
working capital needs, it will explore the possibility of
additional funding from either the sale of debt or equity
securities. The Company has no current agreements or arrangements
for additional funding and there can be no assurance such funding
will be available to the Company or, if available, it will be on
acceptable or favorable terms to the Company.
As of March 31, 2000, the Company had total assets of
$5,058,555 and total stockholders' deficit of $3,671,218, compared
to total assets of $5,291,159 and total stockholders' deficit of
$4,630,435 at December 31, 1999.
At March 31, 2000, the Company had debentures payable of
$3,860,615, which represents certain convertible debentures that
matured during the first quarter of 1999. The Company currently
anticipates that either the debentures will be converted into
common stock or the Company will attempt to negotiate an extension
to the maturity date.
Inflation
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Year 2000
The Year 2000 issue results from a computer industry-wide
practice of representing years with only two digits instead of
four. Beginning in the year 2000, date code fields need to accept
four digit entries to distinguish twenty-first century dates from
twentieth century dates (2000 or 1900). As a result, computer
systems and/or software used by many companies needed to be
upgraded to comply with such Year 2000 requirements. Through March
31, 2000, the Company has not experienced any significant problems
associated with the Year 2000 issue nor has it been made aware of
or experienced date related problems with any third-party software.
Although it appears that the Year 2000 issue will not have a
significant adverse effect on the Company, it continues to monitor
the Year 2000 compliance of its internal systems. Undetected
errors in its internal systems that may be discovered in the future
could have a material adverse effect on its business, operating
results or financial condition.
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
secure additional financing, the possibility of success in the
Company's drilling endeavors, competitive factors, 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 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. The Company settled the suit for $15,000 in December
1998.
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 and intends to
vigorously defend its position. 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.
The Company is also defending a lawsuit filed in 1998 in the
189th Judicial District Court of Harris County, Texas entitled
Baker Hughes Oilfield Operation, Inc. d/b/a Baker Hughes Inteq. vs.
Loren E. Bagley, Individually and Doing Business as Trans Energy,
Inc. (#98-48248). This action is premised on an alleged breach of
contract and fraud and seeks to recover monetary damages in the
amount of $41,142, plus attorneys' fees, exemplary damages, costs
and interest. The Company denies all allegations and intends to
vigorously defend its position. Presently, the action is in the
early discovery phase.
Also in 1998 an action was filed against the Company in the
234th Judicial District Court of Harris County, Texas entitled
Western Geophysical, a Division of Western Atlas international,
Inc. vs. Trans Energy, Inc. (#98-58146). In this action the
plaintiff alleges breach of contract and fraud and seeds to recover
monetary damages of $435,714, plus attorney's fees, exemplary
damages, costs of the suit and interest. The Company is presently
attempting to negotiate a settlement in the matter.
A foreign judgment has been filed with the circuit court in
Pleasants County, West Virginia for a judgment rendered by the
District Court in Harris County, Texas. The judgment is for
$41,142 plus prejudgment interest and attorney's fees of $13,500.
No action has been taken to collect on this judgment.
Item 2. Changes In Securities and Use of Proceeds
During the first quarter of 2000, the Company issued
(i) 3,372,383 shares of its common stock to five persons for
services rendered to the Company valued at $0.07 per share,
(ii) 150,000 shares to one persons for services rendered valued at
$0.12 per shares, and (iii) 13,356,934 shares to 29 persons upon
the conversion of certain debentures valued at $0.10 per share,
including penalty and interest.
The above issuances of shares were made in private
transactions to persons possessing knowledge of the Company and
its business operations. Accordingly, the Company relied upon the
exemption from registration under the Securities Act of 1933, as
amended, provided by Sections and 4(2) of such Act and, for
issuances upon conversion of debentures, Section 3(a)(9) of the
Act.
Item 3. Defaults Upon Senior Securities
In 1998, the Company issued $4,625,400 face value of 8%
Secured Convertible Debentures due March 31, 1999 (the
"Debentures") Interest is to accrue upon the date of issuance
until payment in full of the principal sum has been made or duly
provided for. Holders of the Debentures shall have the option, at
any time, until maturity, to convert the principal amount of their
Debenture, or any portion of the principal amount which is at least
$10,000 into shares of the Company's Common Stock at a conversion
price for each share equal to the lower of (a) seventy percent
(70%) of the market price of the Company's Common Stock averaged
over the five trading days prior to the date of conversion, or (b)
the market price on the issuance date of the Debentures. Any
accrued and unpaid interest shall be payable, at the option of the
Company, in cash or in shares of the Company's Common Stock valued
at the then effective conversion price.
The Company has not repaid the Debentures and has not
finalized a registration statement under which the Debentures can
be converted into common stock. The Company is attempting to
renegotiate the terms of the debenture or to extend their terms.
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
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
During the three month period ended March 31, 2000, the
Company did not file any reports on Form 8-K.
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 22, 2000 By /S/ Loren E. Bagley
LOREN E. BAGLEY, President
and Chief Executive Officer
Date: May 22, 2000 By /S/ William F. Woodburn
WILLIAM F. WOODBURN, Vice
President and Director
(Principal Accounting Officer)
<TABLE> <S> <C>
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<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE TRANS ENERGY, INC. FINANCIAL
STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2000 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
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<RECEIVABLES> 89,896
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<PP&E> 6,293,133
<DEPRECIATION> 4,806,964
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<BONDS> 541,380
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<COMMON> 23,986
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<TOTAL-LIABILITY-AND-EQUITY> 5,058,555
<SALES> 89,896
<TOTAL-REVENUES> 89,896
<CGS> 104,700
<TOTAL-COSTS> 720,538
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134,628
<INCOME-PRETAX> (664,787)
<INCOME-TAX> 0
<INCOME-CONTINUING> (664,787)
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<NET-INCOME> (664,787)
<EPS-BASIC> (.08)
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