UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
FORM 10-K
X.ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20102013
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 number333-139746
TRANSACT ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada |
| 98-0515445 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
105-5119 Beckwith Blvd., SanSuite 207 - 23705 IH 10 WestSan Antonio, TX, USA 7824978257 United States
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code 210-561-6015210-888-0785
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock, par value $0.001
(Title(Title of each class)
None
(Name of each exchange on which registered)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes . YesNo X. No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes . YesNo X. No
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. YesNo . No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | . | Accelerated filer | . |
Non-accelerated filer | . (Do not check if a smaller reporting company) | Smaller reporting company | X. |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes . YesNo X. No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. On June 30th, 20102013 the aggregate market value of the voting stock of Transact Energy Corp. held by non-affiliates of the registrant was -$12,350,402.40$$987,186.92
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of MarchDecember 31, 20112013 we had issued and outstanding 20,956,93030,074,508 shares common stock, $.001 par value
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. .Yes . No.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None
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PART I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K that aremay not be historical facts areand may be "forward-looking statements." Such forward-looking statements maycan be identified by, among other things, the use of forward-looking terminology such as "believes," "intends," "plan" "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-looking statements appear in Item 1 - "Business" and Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as elsewhere in this Annual Report and include statements regarding the following: the expected development and potential benefits from our products to consumers, progress in our efforts to develop our facilities and our products and to achieve and maintain regulatory approvals, the potential market demand for our products, our expectations regarding our short- and long-term capital requirements, our outlook for the coming months and information with respect to any other plans and strategies for our business.
The factors discussed herein, including those risks described in Item 1A, and expressed from time to time in our filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed in or implied by such statements. The forward-looking statements are made only as of the date of this filing, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
INTRODUCTION
Unless otherwise specified or required by context, as used in this annual report, the terms "we," "our," "us" and the "Company" refer collectively to (i) TransAct Energy Corp., a Nevada corporation ("TransAct").
The Company's current corporate structure results from the issuance of founding shares equal to nine million four hundred thousand (9,400,000), an initial public offering (IPO) of one million one hundred and two thousand shares (1,102,000) at twenty-five cents ($0.25), the acquisition of a technology asset of two million six hundred thousand shares (2,600,000) and ninesixteen million fournine hundred and sixty twoseventy-two thousand, sixfive hundred and fifty three shares (9,462,653)eight (16,972,508) shares for operations (including consulting, management and debt settlement). .
The Company was originally formed to manage energy related assets and has expandedchanged its scope to power production.sustainable energy development. The Company incorporates new technologies to provide sustainablesustainable/green energy atsources and power production cost parity.production.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP). by management.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.
Item 1. Business.
Our History and Business
We formed TransAct Energy Corp. as a Nevada corporation on March 15, 2006 as TransAct Energy Corp.2006. Although our business plan called for the securing and managing of any energy leasehold, the Company focused on securing producing and non-producing oil and gas leases in Alberta, Canada. On September 7, 2006 we acquired a one hundred percent (100%) interest in a Petroleum and Natural Gas Lease, from the province of Alberta, Canada for twelve thousand and fifty-one dollars ($12,051), the MedHat Project. We did not develop this resource. We looked to expand our holdings in Alberta through acquisitions and joint ventures for the following two years. We have since allowed this lease to lapse.lapse and moved away from this focus.
A distinct trend appeared in the energy sector supporting sustainable energies. About the same time in late 2008 the Company was introduced to Dr. Mory Gomshei one of the world’s leading geothermal experts and two of his geothermal power (using superheated water from the earth to turn turbines) projects in British Columbia, Canada. The acquisition, resource evaluation, exploration process and administration for geothermal are very similar and in many jurisdictions come under the petroleum sector. We worked with independent companies Aqua Terra Power and Aqua Terra Geothermal through the balance of 2009 on the two geothermal power projects in British Columbia. Other than lending Aqua Terra funds no formal arrangement was entered into pending them securing drill permits on the two projects. These licenses lapsed under their original owners and were re-posted by the government for public tender; an Ontario corporation associated with Dr. Ghomshei acquired most of the original licences and have initiated drilling applications. We entered discussions with this entity in the latter half of 2011 to form a Farm-in relationship. We have put these discussions on hold pending the completion of our first operating plants in the Energy from Waste Division although we are maintaining dialogue with Dr. Gomshei as it relates to utilizing Geothermal in the plants themselves.
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TransAct in mid-2009 started introducing the concept of geothermal power to markets in Western and South Asia with the plan to enter joint venture relationships to develop geothermal power projects in these areas. To enter these markets as a power producer the Company found it strategic to develop traditional carbon fuelled power projects in additionaddition. After discussions with the Republic of Iraq regarding geothermal opportunities in Northern Iraq, the Company, together with Spectrum Energy Project Investments (a UAE power company), submitted applications to the Basra Investment Commission to develop/manage three natural gas power plants. These multi-billion dollar projects come with long-term power purchase agreements (PPA) and sovereign guarantees and our application through Spectrum was shortlisted. We were unsuccessful in completing our acquisition of 50% of Spectrum and the initial offering lapsed.
On August 31, 2009, TransAct Energy completed and closed its initial public offering at twenty-five cents ($0.25) per share selling one million one hundred and two thousand shares (1,102,000) for a total capital raise of two-hundred and seventy four thousand three hundred and ninety-eight dollars ($274,398 USD). The majority of these funds were placed with Aqua Terra Power as convertible notes to secure and develop 4the four (4) geothermal leaseslicenses in British Columbia, Canada; the balance was used to pay the costs of the offering and a small amount went to working capital.
The Company was approved for listing on the OTCBB in December 2009 and received the trading symbol “TEGY.”
Throughout 2010 we laid the ground work for large power projects in South Europe, Asia and Africa; smaller projects for solar, waste to energy and hydrogen fuel cells specifically in India. We worked to secure markets for geothermal, new solar photo-voltaic, waste to energy and hydrogen fuel cell generators.
Joint development agreement negotiations took place in December 2010 clearing the way for Transact to enter into one major project in South East Asia in 2011;2011. This project was stalled throughout 2011 because TransAct was unable to secure the Company concluded the year negotiating capitalfunds it required to fund its first quarter operating budget.
Business Strategyproceed.
The Company works2011 year was frustrated with the company’s inability to secure long term powercollect raised or earned funds into the company’s bank account. Thus projects, under build own operatejoint ventures and previous efforts were postponed or lost permanently. While we did maintain the company’s trading status the year was taken up with collection efforts and supporting business relationships while in limbo. We did initiate discussions on new waste to energy technologies to leverage the work we had done previously in this sector.
The Company’s 2012 efforts were focused on building out its Energy from Waste (“BOO”EfW”) schemesdivision, TransAct Energy from Waste. We completed a Business Plan for this division and entered a Joint Development Agreement with the owners of a proprietary emissions free EfW technology that have guaranteed revenues. These long term projects will provide the foundationhas been operating a 20 tonne per day plant for the Company’spast two years. We reconnected with clients in India and Brazil for future earnings. To secure these projects we have been building relationships in high power deficit countries where projects can attract international funding and underwriting. Joint Venture relationships are formed with local partners, international contractors and engineers to facilitate a sustainable project with limited environmental impact.
To further enhance the Company’s ability to access markets the Company identifies and secures technologies that are used in sustainable power generation. By incorporating technologies that utilize energy more efficiently we are able to generate more power with less energy impact and with potentially greater profit (see Figure 1 for current levelized costs). TransAct’s relationships with three different companies in solar, wind, geothermal and thermal power production technologies could provide us with lower levelized costs across the board providing significant competitive advantages.
To execute our strategy the Company continues to broaden its team bringing on key individuals and consultants. January 1, 2011 the Company brought on our new CFO, Simon Thomas a specialist in Project Financing. Anticipating the need byEfW opportunities. From the second quarter through to the end of 20112012 we worked to raise the necessary funds to build a municipal scale plant (500 tonnes per day) in Scotland.
2013 continued as a building year for both the company and its EfW division. We completed the acquisition of our EfW technology from the Scottish Inventor and brought him on as a long term member of our team. We successfully negotiated a relationship with the international firm Fichtner Consulting Engineers in order to complete the certification of our plants going forward. We identified suppliers of waste for the proposed United Kingdom plants, initiated the relationships for the uptake of the Natural Gas and Electricity in the United Kingdom and tentatively sourced the capital required for the first plant in the United Kingdom. Globally we negotiated the intent to build a plant in Mexico that includes the required equity and waste. In Brazil we initiated a relationship to create a green energy fund in order to grow both the market in Brazil and the other strategic areas of South America. Initial talks have taken place with potential development partners for a few of the major Brazil markets pending the success of the UK or Mexico plant. In the USA and China we are in talks with potential development partners that can deliver significant capital/waste and see our technology as the best solution going forward.
Business Strategy
We see 2014 as our breakout year where the efforts to bring our technology forward as the best system in the waste management/energy from waste sector pays off. Funding the engineering team through the feasibility analysis of utilizing our technology to process five hundred tonnes per day of refined municipal solid waste (“RDF”) is our number one priority. The cost of this piece of engineering is approximately two hundred and fifty thousand dollars ($250,000 USD) and needs to be tied back to a specific plant. Whether the first plant analysed is the UK or Mexico does not matter but it opens the doors to further money and markets.
We intend on completing the funding of the plant in the United Kingdom by first securing the predevelopment capital (approximately $3 Million USD) that will pay to deliver the project as “Shovel Ready”. Shovel ready status will include securing the plant site (in our case this means using an existing industrial building), uptake agreements for the feedstock waste, a positive feasibility analysis from the engineers, off-take agreements for the plants products (gas, fuel, carbon black and recyclables), permits and permissions from all governments. With the shovel ready status in hand we should be able to finalize the balance of the required capital ($100 Million USD) that was identified a suitable comptroller. Dr. Mory Ghomshei, who heads up our Power Development, has selected several Projectas available to us in 2013. Based on current verbal commitments for the pre-development capital and Operating Managers to oversee specific projects in concert with international engineering firmssubsequent financings we have signed working memorandums with.anticipate the first UK plant could be operational by the first quarter of 2015.
In terms of project financingmarkets where the Company has conditional expressions of interest to finance its first projects and will continuewaste supply is already controlled, we intend on partnering to develop project financing relationships with key banks, individualsthe required processing capacity by having the local stakeholders form a consortium at a minimum to deliver the feedstock waste and underwriters. The Company is also developing funding sourcesin some cases equity, permits/permissions and off-take agreements; collectively the consortium can earn up to 45% ownership in the company that will take outown the plant with us owning the balance. This is the arrangement we have negotiated for the first of several plants in Mexico, we intend on meeting with the stakeholders to finalize this long term arrangement in the first quarter of 2014, with a construction debt/equity structures upon power plant commissioning;start planned in order that the funder may secure ten to fifteen year guaranteed revenue streams. This will allow TransAct and its joint venture partners to move their funds into other projects on an ongoing basis. 4th quarter of 2014.
As each proposed plant obtains shovel ready status the ability to raise the build out capital increases substantially. The volumes and operating capabilities of the proposed plant are certified by the engineers to a lateral extensionratio in excess of 80%. With these certifications and tentative start dates we can make contractual commitments to the Company’s core business of producing electricity, the Company intends on establishing joint venture relationships to manufacture its secured technologies. By controlling the supply chainbuyers of our own technologies we are able to secure joint venture relationshipsproducts for solarour future revenue and wind farms that are already throughin turn finance the licensing process.required development capital.
Markets and Customers
Greece: AsThe markets for the complete processing of waste without emissions or land-filling are global. We currently have discussions and or contract negotiations for Brazil, China, Europe, Mexico and USA. Europe is the most advanced market with legislation in place targeting zero landfills, zero emissions within a memberfew short years. The current design for mass production scales up from 300 metric tons per day of raw MSW (based on 2 Kgs per day per person, approximately 140,000 people in North America slightly less in Europe) with the ideal plant size processing approximately 900 tonnes per day of raw MSW (around a 420,000 person population) .
Our target service customers are corporations or municipalities with pre-sorted municipal waste, plastic, tires or medical waste as these are the most profitable waste streams. However we can process any carbon based waste stream including sewage and agricultural.
Our target product customers are airlines, bus companies, trucking companies or fuel retailers requiring green direct blend fuels to meet legislated targets. TEFW customers are power companies requiring green Natural Gas and electricity to meet imposed targets. TEFW customers are tire manufacturers, lithographers and printers requiring high quality carbon black for their products.
In Europe the first EFW plant is planned in the United Kingdom. The European Union has legislation in place requiring a 20% green fuel blend by 2020 which creates customers needing a green fuel that can blend with existing refined fuels. The fuels produced by the EfW process meet these criteria and have sales of the EU Greece is requiredproduced fuels ready to have a certain amount of its energy derived from renewable sources. There are significant opportunities in geothermal, wind and solar power. Current estimates exceed 500MW of geothermal power with 25% capital costs subsidies from the government. Transact has entered preliminary discussions with one of Greece’s main power producers to develop a geothermal power project in Greece. A smaller Greek solar panel producer is prepared to incorporate the TransAct low-cost solar thin film into their projects.
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India;Backup power has historically been provided by diesel generators in India. In recent years the government of India has mandated a serious reduction in carbon emissions and users of diesel gen-sets are being forced to look at alternatives. Emergency backup power is used in hospitals, law enforcement, military, perishable food processors and telecommunications as well as in many other industries. In 2010 we introduced hydrogen fuel cell generators as a solution to the cell-phone tower industry and this has been endorsed by the Ministry of Energy in India where we are supplying the Altergy Freedom Power system in India for initial beta site testing. Arrangements are under way to ship the first unit.go.
We introduced a low-cost to manufacture solar photovoltaic technology to several solar farm license holders inFor both products and services the Indian marketplace in 2010. Now we are working to establish manufacturing of these panels in Indiaimpact our technology/process makes on CO2emissions, carbon capture and overall carbon footprints is significant enough for the Indian market andany waste managers responsible for export out of India. The Indian government has mandated very significant power production (20,000 MW) from solar by 2020.
Significant percentages of the rural population of India are off the grid and in need of economical localized power generation. We have met with agencies that have made arrangements for capitalizing these localized power sources. We are currently working with our science and engineering groups to develop a standardized, serviceable and affordable solution combining technologies available to us.
Pakistan: Pakistan’s Vision 2025 targets a long-term capacity increase of around 35,000 MW by the year 2025. A proposed 15,000 MW joint venture over 15 years is in discussion with the resource owners as part of our long-term development strategy provided we are able to incorporate our clean coal technologies.
Mozambique: Many of its neighbouring countries have power deficits and Mozambique has become a net exporter although many of its own rural citizens are off the grid. Through our consultants we were invited to submit on a 3000MW power-plant and have been invited to meet with government to further this mission.
South Africa: South Africa has a huge need for more base power (2000 MW Deficit). Through a South African consultant and a strategic power infrastructure partner we have submitted on and been requested to meet with government on a specific 1500MW project.
South East Asia: We have contracted with a Singapore consulting group to secure a power project (1000MW or larger) in SE Asia and have been introduced to a potential joint venture project in the area. Negotiations have been underway since the middle of last year and we have developed the framework for the joint development of a significant power plant subject to TransAct raising the funding.
Tanzania: Tanzania is one of the fastest growing economies in Africa hampered only by the lack of power caused by recent droughts. The country has great power opportunities in geothermal, solar and wind and with our relationships on the ground in Tanzania we expect to develop projects there in the near-term.their carbon impact.
Employees
At December 31, 2010,2013, the Company has a CEO, combined CEO/CFO and VP Power Engineeringa SVP Technology under contract with one administrator as a salaried employee. All others are employed aseveryone else required by the company being fulfilled by consultants on a demand basis. Going forward we have pending agreements for a COO, SVP Business Development, VP Operations South America, VP Operations Mexico & Central America, VP Operations Europe and a VP Operations USA.
The Company did not experience any labour disputes or labour stoppages during the current fiscal year.
Principal Products
The Company’s product is cleanproposed products will be electricity, carbon credits, natural gas, green direct-blend fuels, carbon black, recycled steel and nylon from a proprietary waste processing plant. These will be the technologies that go into it. The powerfirst emissions free EFW plants that produce the electricity range from individual hydrogen fuel cell generators to large scale thousandcapable of megawatt carbon fuelled boilers.
Altergy “Freedom Power”TM : We are representing the Altergy “Freedom PowerTM” hydrogen fuel cell generator designed for back-up/uninterrupted power into India. The Freedom Power TM isprocessing waste in a fully scalable system that’s combined capital and operating costs are lower than any other existing systems using diesel, wind or solar generators in combination with battery storage. It is a perfect solution to provide electricity to essential services during power outages and to remote locations off the grid.
Solar One Solutions (Indigo Solar): TransAct is working with Solar One to promote the Indigo thin film photovoltaic solar technology into India and surrounding area. The key benefit being it’s less than $0.70 per watt manufacturing system. The Company is in the process of packaging the manufacturing equipment for a plant in India.
Geothermal: Our head of power engineering Dr. Mory Ghomshei is a global specialist in geothermal power generation with several proprietary geothermal technologies to his credit. We directly promote geothermal power as a product. Most countries that have this resource within their borders wish to develop it, as in the case of India, Greece and Tanzania.
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Thermal power from traditional sources of energy such as coal, oil, biomass (garbage, plant material) or bio-fuel all burn carbon molecules to produce electricity, creating the most efficient burn of the energy source with the least amount of non-usable by-products. TransAct is selling thermal power plants that incorporate clean technologies that enhance the fuel, burn more efficiently, isolate and strip out potential toxins for other uses.
Wind: TransAct has stayed out of wind power generation in anticipation of a non-subsidized technology. If the technology we have identified turns out to be commercially viable we expect to sell electricity from wind turbines at parity within the next year.cost effective manner.
Sources and Availability of Raw Materials
The power projects contemplated by TransAct relywaste required to be processed comes from local sources. They pay TEFW to take their waste under long-term (5 years or greater) contracts. The supplies of waste are ever growing with the restrictions on a variety of materials. Where possible we look to ensure that the supply chain of raw materials required in the project will be available over the life of the project. Where the raw material is the fuel source, such as in the case of a geothermal or coal power plant, we look to ensure the required supply is under domestic control and good supply.land-filling forcing processing solutions.
Seasonality of Business
Base power production is not supposed to be seasonal. InThe EFW plants run 351 days a year with two scheduled maintenance shutdowns summer and winter. The supply of waste and the case of power generated by wind or solar, partsale of the feasibility study identifies the annual supply of either the sun or wind. Ideal locations are not affected by seasonality.
In many of the markets we intend to operate in, seasonally heavy rains can affect the roads and therefore the ability to bring theresulting products have no seasonality; however fuel to the plant can be difficult. Anticipating these conditions and stockpiling the fuel can help eliminate any supply chain issues.prices may have some seasonal influence.
Industry Practices/Needs for Working Capital
Power projects are capital intensive requiring funds upfrontA 510 tonne TEfW plant with operating subsidy to cash flow is approximately $105 Million USD. Each plant developed can support a significant portion of debt; however the first plants without a corporate operating history require at least thirty (30%) per cent equity and long term off-take agreements from creditworthy buyers. Each proposed plant requires a feasibility analysis that incorporates the candidate waste stream, our technology and the specific location. The feasibility analysis along with other elements that provide for feasibility, engineering, legal and site acquisition. Provided thea shovel ready plant secures a guaranteed power purchase agreement for the electricity that will be produced, the project can be financed to the extent the sale of electricity will support debt. An eighty percent debt to equity ratio is common in the industry where power can be produced in the $0.05 per kilowatt range.typically cost an estimated $3 Million USD.
Dependence on Few Customers
TransAct does not intend to rely onThere is the possibility that a few customers.
Besides plans for several regional power plants, the CompanyTEfW plant will have a variety of customers from direct salesone supplier of its technologies.feed-stock making it vulnerable until the supply is replaced. The products produced will be taken up by large creditworthy organizations, we expect one main buyer for each product as in the case of selling produced electricity and natural gas into the UK national grid.
Competitive Conditions
The interest in the waste to energy sector has continued to grow as have the amounts of garbage. Every government on the planet is faced with these growing amounts of garbage and the mandate to use it as a resource rather than bury or burn it. The demand for sustainable energy continues to increase almost everywhere on the planet.planet at the same time. Climate changes affect the demand for heating and cooling and the lack of rain in certain areas impacts on the ability to produce hydro-electricity. Political instability or the threat there of, in oil producing regions sends countries that have petroleum based economies scrambling for alternatives. Economic instability impacts on many countries abilities to import energy causing them to look within their own borders for energy that provides autonomy. Finally the pressure is on all nations to look at and change the environmental impact of their power production.
ItAny technology that can produce clean energy from waste in a cost effective manner has become a global trendcompetitive advantage in orderthe complex matrix of sustainable energy production. There have been no emissions free and cost effective energy from waste technologies to meethandle the ever growing demandwaste. So governments have settled for power generation and infrastructureincineration with scrubbers that remove the pollutants to look to independent power producers. Independent power producers comeestablished levels. The new emission targets being established for waste going forward, limits the competition. TransAct’s Energy from Waste technology at present will be the only technology capable of meeting the future conditions of competition in all shapes and sizes from the homeowner selling surplus solar power into the grid to international EPC (Engineering, Procurement, and Construction) companies building and operating mega-projects. Many companies are specialized, focused only in one sector e.g. wind, solar or biomass.
The levalized costs of the various forms of power range from $0.06 (advanced combined cycle natural gas) to $0.31(solar thermal) per kilowatt as analysed by the USA Department of Energy.
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Availability of resources, upfront capital and customers willing to pay for the resulting power,energy, determine the generation resource. In markets where they have resources but not expertise or upfront capital the field of competition opens up for those able to build, own, and operate the facility at a profit over the long-term.
The Company believes that the combination of greater reliability and base load generation from geothermal, accessthe technologies emissions free status, low operating costs, ability to infrastructure for deliverabilityprocess all waste streams into useable energy with full carbon capture and a low "full life" cost will allow it to successfully compete for long-term power purchasewaste processing and green energy supply agreements globally.
Factors that can influence the overall market for our product include some of the following:
·
number of market participants buying and selling electricity;green energy;
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availability and cost of transmission;
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amount of electricity normally available in the market;
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fluctuations in electricity supply due to planned and unplanned outages of competitors’ generators;
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fluctuations in electricity demand due to weather and other factors;
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cost of fuel used by generators, which could be impacted by efficiency of generation technology and fluctuations in fuel supply;
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environmental regulations that impact us and our competitors;
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availability of production tax credits and other benefits allowed by tax law;
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relative ease or difficulty of developing and constructing new facilities; and
·
credit worthiness and risk associated with buyers.
Environmental Compliance
The future TransAct Energy from Waste technology already meets the European Union Environmental Site AssessmentsProtection Agency emission free standards. The plants do not incinerate so there are required beforeno flue gases and no ash, all waste delivered to the development of any resource. Geotechnical and environmental consultants are engagedplant is converted to identify any and all environmental issues and develop mitigation strategies.useable products.
The Company has identifiedincoming waste is maintained in-doors under cover, at three-day processing levels, to avoid any possible nuisance.
The storage systems for fuels produced on site pending shipment meet or exceed regional standards for safety and environmental impact.
All known environmental issues in certain types of power productionEFW plants have been identified and has sought out technologiessolutions obtained that will mitigate these issues beyond established compliance.
Available Information
We will be making available in the near term, through our Internet website at http://www.transactenergy.com,www.transactenergycorp.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Information on our website is not incorporated into this report and is not a part of this report.
Governmental Regulation
Although we intend to comply with all applicable laws and regulations, we cannot assure you that we are in compliance or that we will be able to comply with all future laws and regulations. Additional federalnational or stateregional legislation, or changes in regulatory implementation, may limit our activities in the future or significantly increase the cost of regulatory compliance. If we fail to comply with applicable laws and regulations, criminal sanctions or civil remedies, including fines, injunctions, or seizures, could be imposed on us. This could have a material adverse effect on our operations.
The business of powerindustrial plant development and operation is subject to substantial regulation under governmental laws relating to the development, upgrading, marketing, pricing, taxation, and transmission of electricityour products and other matters. Amendments to current laws and regulations governing development and operations of powerindustrial plants could have a material adverse impact on our business. In addition, there can be no assurance that income tax laws, royalty regulations and government incentive programs related to the powerour industry generally, will not be changed in a manner which may adversely affect our progress and cause delays, inability to develop or abandonment of these interests.
Permits, leases, licenses, and approvals are required from a variety of regulatory authorities at various stages of development and operation of powerindustrial projects. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted in respect of our activities or, if granted, will not be cancelled or will be renewed upon expiry. There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions which may adversely affect our development and operating activities.
The development and operations of our proposed projects are or will be subject to stringent federal, state, provincial and local laws and regulations relating to improving or maintaining environmental quality. Environmental laws often require parties to pay for remedial action or to pay damages regardless of fault. Environmental laws also often impose liability with respect to divested or terminated operations, even if the operations were terminated or divested many years ago.
The development activities and operating programs on our proposed and future projects are or will be subject to extensive laws and regulations governing, development, production, imports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, plant safety, toxic substances and other matters. Power development and operations are also subject to risks and liabilities associated with pollution of the environment and disposal of waste products. Compliance with these laws and regulations will impose substantial costs on us and will subject us to significant potential liabilities.
Our business is subject to various federal, provincial, state and local laws and governmental regulations that may be changed from time to time in response to economic or political conditions. TransAct Energy Corp. in each jurisdiction is subject to regulation in respect of the production, sale and distribution of energy in the form of fuel or electricity. In many jurisdictions regulated utilities are required to purchase electricity on an avoided cost basis from renewable energy facilities, or they may acquire purchased power through bids or negotiated procedures.
TransAct will be required to obtain various government approvals for construction of future powerenergy producing facilities.
For project development TransAct will hire consulting and engineering services for transmission and interconnection issues, power plant siting,site development, design, air quality, cooling water reuse, permitting, environmental engineering and regulatory compliance.
Environmental Credits
As a future “green” powerenergy producer, environmental-related credits, such as renewable energy credits or carbon credits may become available for sale to power companies (to allow them to meet their “green” power requirements) or to businesses which produce carbon based pollution. If available, these credits will belong exclusively to us or our joint venture, and may provide an additional source of revenue.
Item 1A. Risk Factors.
General Business Risks
We are a new business with limited operating history and making an investment in TransAct is risky. If we are unable to successfully identify and secure powerenergy projects or powerenergy conservation projects, then we will not be successful as a business. It will be difficult for you to evaluate an investment in our stock since our operating history is limited to developing our business plan, obtaining 100% interest in a petroleum and natural gas lease in Alberta, Canada referred to as the MedHat Projectand bidding on multiple powerenergy projects in Canada, Iraq, Bangladesh and Brazil.globally. As a young Company, we are especially vulnerable to any problems, delays, expenses and difficulties we may encounter while implementing our business plan. We have not proven the essential elements of profitable operations and you will bear the risk of complete loss of your investment if we are not successful.
Our future performance may depend on our ability to establish that a geothermal, wind or solar resourceparticular energy technology is economically sustainable. Geothermal resource explorationSustainable energy technology development and development involvesoperations involve a high degree of risk. The execution of our business plan is generally, dependent upon the existence of economically usable resources. Expansion of the production of powerenergy from our geothermaltechnology interests is not certain and depends on successful drilling and discovery of additional geothermal hydrothermal resourcesproduction in quantities and containing sufficient heat necessary tomarketable energy economically fuelfor future plants.
We have a need for substantial additional financing and will have to significantly delay, curtail or cease operations if we are unable to secure such financing. The Company requires substantial additional financing to fund the cost of acquiring and developing powerenergy projects. The Company also requires funds for other operating activities and to finance the growth of our business, including the construction and commissioning of power generationsustainable energy facilities. We may not be able to obtain the needed funds on terms acceptable to us or at all. Further, if additional funds are raised by issuing equity securities, significant dilution to our current shareholders may occur and new investors may get rights that are preferential to current shareholders. Alternatively, we may have to bring in joint venture partners to fund further development work, which would result in reducing our interests in the projects.
We may be unable to obtain the financing we need to pursue our growth strategy in powerenergy production, which may adversely affect our ability to expand our operations. When we identify a poweran energy project that we may seek to acquire or to develop, a substantial capital investment will be required. Our continued access to capital, through project financing or through a partnership or other arrangements with acceptable terms, is necessary for the success of our growth strategy. Our attempts to secure the necessary capital may not be successful on favorable terms, or at all.
Market conditions and other factors may not permit future project and acquisition financing on terms favorable to us. Our ability to arrange for financing on favorable terms, and the costs of such financing, are dependent on numerous factors, including general economic and capital market conditions, investor confidence, the continued success of current projects, the credit quality of the projects being financed, the political situation in the jurisdiction in which the project is located and the continued existence of tax laws which are conducive to raising capital. If we are unable to secure capital through partnership or other arrangements, we may have to finance the projects using equity financing which will have a dilutive effect on our common stock. Also, in the absence of favorable financing or other capital options, we may decide not to build new plants or acquire facilities from third parties. Any of these alternatives could have a material adverse effect on our growth prospects and financial condition.
It is very costly to place power resourcesplants into commercial production. Before the sale of any powerenergy can occur, it will be necessary to construct a gathering and disposalseparating system, a power plant and a transmission linedelivery system and considerable administrative costs would be incurred To fund expenditures of this magnitude, we may have to find a joint venture participant with substantial financial resources. There can be no assurance that a participant can be found and, if found, it would result in us having to substantially reduce our interest in the project.
We may be unable to realize our strategy of utilizing the tax and other incentives available for developing sustainable powerenergy projects to attract strategic alliance partners, which may adversely affect our ability to complete these projects. Part of our business strategy is to utilize tax and other incentives available to developers of sustainable power generatingenergy plants to attract strategic alliance partners with the capital sufficient to complete these projects. Many of the incentives available for these projects are new and highly complex. There can be no assurance that we will be successful in structuring agreements that are attractive to potential strategic alliance partners. If we are unable to do so, we may be unable to complete the development of our geothermal powerenergy projects and our business could be harmed.
We may not be able to manage our growth due to the commencement of operations which could negatively impact our operations and financial condition. Significant growth in our operations will place demands on our operational, administrative and financial resources, and the increased scope of our operations will present challenges to us due to increased management time and resources required and our existing limited staff. Our future performance and profitability will depend in part on our ability to successfully integrate the operational, financial and administrative functions of our projects and other acquired properties into our operations, to hire additional personnel and to implement necessary enhancements to our management systems to respond to changes in our business. There can be no assurance that we will be successful in these efforts. Our inability to manage the increased scope of operations, to integrate acquired properties, to hire additional personnel or to enhance our management systems could have a material adverse effect on our results of operations.
If we incur material debt to fund our business, we could face significant risks associated with such debt levels. We will need to procure significant additional financing to construct, commission and operate our power plants in order to generate and sell electricity.energy. If this financing includes the issuance of material amounts of debt, this would expose the Company to risks including, among others, the following:
·
a portion of our cash flow from operations would be used for the payment of principal and interest on such indebtedness and would not be available for financing capital expenditures or other purposes;
·
a significant level of indebtedness and the covenants governing such indebtedness could limit our flexibility in planning for, or reacting to, changes in our business because certain activities or financing options may be limited or prohibited under the terms of agreements relating to such indebtedness;
·
a significant level of indebtedness may make us more vulnerable to defaults by the purchasers of electricity or in the event of a downturn in our business because of fixed debt service obligations; and
·
the terms of agreements may require us to make interest and principal payments and to remain in compliance with stated financial covenants and ratios. If the requirements of such agreements were not satisfied, the lenders could be entitled to accelerate the payment of all outstanding indebtedness and foreclose on the collateral securing payment of that indebtedness, which would likely include our interest in the project.
In such event, we cannot assure you that we would have sufficient funds available or could obtain the financing required to meet our obligations, including the repayment of outstanding principal and interest on such indebtedness.
We may not be able to successfully integrate companies that we may acquire in the future, which could materially and adversely affect our business, financial condition, future results and cash flow. Our strategy is to continue to expand in the future, including through acquisitions. Integrating acquisitions is often costly, and we may not be able to successfully integrate our acquired companies with our existing operations without substantial costs, delays or other adverse operational or financial consequences. Integrating our acquired companies involves a number of risks that could materially and adversely affect our business, including:
·
failure of the acquired companies to achieve the results we expect;
·
inability to retain key personnel of the acquired companies;
·
risks associated with unanticipated events or liabilities; and
·
the difficulty of establishing and maintaining uniform standards, controls, procedures and policies, including accounting controls and procedures.
If any of our acquired companies suffer performance problems, the same could adversely affect the reputation of our group of companies and could materially and adversely affect our business, financial condition, future results and cash flow.
The success of our business relies on retaining our key personnel. We are dependent upon the services of our President and Chief Executive Officer, Roderick C. Bartlett, our Chief Financial Officer, Simon Thomas, our Director Joe F. Dickson, our Director Des Biali, and Dr. Mory Gomshei, our Vice President –Advisor– Sustainable Power Engineering. The loss of any of their services could have a material adverse effect upon us. As of the date of this report, the Company has executed compensation agreements with some of these persons but does not hold key-man insurance on any of them.
Our geothermal development activities are inherently very risky. The high risks involved in the development of a geothermal resource cannot be over-stated. Exploration costs are high and are not fixed. The geothermal resource cannot be relied upon until substantial development, including drilling, has taken place. The costs of development drilling are subject to numerous variables such as unforeseen geologic conditions underground which could result in substantial cost overruns.
Our future drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, many of which are beyond our control, including economic conditions, mechanical problems, title problems, weather conditions, compliance with governmental requirements and shortages or delays of equipment and services. If our drilling activities are not successful, we could experience a material adverse effect on our future results of operations and financial condition.
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In addition to the substantial risk that wells drilled will not be productive, or may decline in productivity after commencement of production, hazards such as unusual or unexpected geologic formations, pressures, downhole conditions, mechanical failures, blowouts, cratering, explosions, uncontrollable flows of well fluids, pollution and other physical and environmental risks are inherent in geothermal exploration and production. These hazards could result in substantial losses to us due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations.
The impact of governmental regulation could adversely affect our business by increasing costs for financing or development of powerenergy plants. Our business is subject to certain jurisdictional laws and regulations, including laws and regulations on taxation, the exploration for and development, production and distribution of electricity,energy, and environmental and safety matters. Most land management requires competitive auction of all geothermal leases on Government lands. Competitive leasing significantly increases the cost of obtaining leases on Government land, is adding to the capital costs needed to develop geothermal projects, is increasing the total electrical power prices needed to make a geothermal project viable and is making it more difficult to acquire additional adjacent lands for reservoir protection and exploration.
If Federal land or any Federal involvement is included in any geothermal development, requirements of the National Environmental legislation is evolving in a manner that means stricter standards, and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.
The drilling for geothermal resources is governed by specific rules. These rules typically require drilling permits and govern the spacing of wells, rates of production, prevention of waste and other matters, and, may not allow or may restrict drilling activity, or may require that a geothermal resource be unitized (shared) with adjoining land owners. Such laws and regulations may increase the costs of planning, designing, drilling, installing, operating and abandoning our geothermal wells, the power plant and other facilities. Many environmental requirements and permits, include public disclosure and comment. It is possible that a legal protest could be triggered through one of the permitting processes that would delay construction and increase cost for one of our projects.
Because of these jurisdictional regulations, we could incur liability to governments or third parties for any unlawful discharge of pollutants into the air, soil or water, including responsibility for remediation costs. We could potentially discharge such materials into the environment:environment via:
·
from a well or drilling equipment at a drill site;
·
leakage of fluids or airborne pollutants from gathering systems, pipelines, power plant and storage tanks;
·
damage to geothermal wells resulting from accidents during normal operations; and
·
blowouts, cratering and explosions.
Because the requirements imposed by such laws and regulations are frequently changed, we cannot assure you that laws and regulations enacted in the future, including changes to existing laws and regulations, will not adversely affect our business by increasing cost and the time required to explore and develop geothermal projects.
Any development project of our resource assets will be directly affected by the royalty regime applicable. The economic benefit of future capital expenditures for projects is, in many cases, dependent on a satisfactory royalty regime. There can be no assurance that the provincial/state governments will not adopt a new royalty regime that will make capital expenditures uneconomic or that the royalty regime currently in place will remain unchanged.
Industry competition may impede our growth and ability to enter into powerenergy purchase agreements on terms favorable to us, or at all, which would negatively impact our revenue. The electrical power generation and fuel production industry is highly competitive and we may not be able to compete successfully or grow our business. We compete in areas of pricing, grid access and markets. The industry in many jurisdictions is complex as it is composed of public utility districts, cooperatives and investor-owned powerenergy companies. Many of the participants produce and distribute electricity.electricity and fuels. Their willingness to purchase electricity or fuel from an independent producer may be based on a number of factors and not solely on pricing and surety of supply. If we cannot enter into powerenergy purchase agreements on terms favorable to us, or at all, it would negatively impact our revenue and our decisions regarding development of additional properties.plants.
Actual costs of construction or operation of a power plant may exceed estimates used in negotiation of powerenergy purchase and powerenergy financing agreements.If the actual costs of construction or operations exceed the model costs, the Company may not be able to build the contemplated powerenergy plants, or if constructed, may not be able to operate profitably. The Company’s financing agreements will typically provide for a priority payback to our partner. If the actual costs of construction or operations exceed the model costs, we may not be able to operate profitably or receive the planned share of cash flow and proceeds from the project.
There are some risks for which we do not or cannot carry insurance. Because our current operations are limited in scope, the Company carries property and, public liability insurance coverage as needed, but does not currently insure against any other risks.
As its operations progress, the Company will acquire additional coverage consistent with its operational needs, but the Company may become subject to liability for pollution or other hazards against which it cannot insure or cannot insure at sufficient levels or against which it may elect not to insure because of high premium costs or other reasons. In particular, coverage is not available for environmental liability or earthquake damage.
Our officers and directors may have conflicts of interests arising out of their relationships with other companies. Several of our directors and officers serve (or may agree to serve) as directors or officers of other companies or have significant shareholdings in other companies. To the extent that such other companies may participate in ventures in which the Company may participate, the directors may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. From time to time, several companies may participate in the acquisition exploration and development of natural resource properties thereby allowing for their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment.
Risks Relating To the Market for Our Securities
A significant number of shares of our common stock are eligible for public resale. If a significant number of shares are resold on the public market, the share price could be reduced and could adversely affect our ability to raise needed capital. The market price for our common stock could decrease significantly and our ability to raise capital through the issuance of additional equity could be adversely affected by the availability and resale of such a large number of shares in a short period of time. If we cannot raise additional capital on terms favorable to us, or at all, it may delay our exploration or development of existing properties or limit our ability to acquire new properties, which would be detrimental to our business.
Because the public market for shares of our common stock is limited, investors may be unable to resell their shares of common stock. There is currently only a limited public market for our common stock on the OTCBB in the United States, and investors may be unable to resell their shares of common stock. The development of an active public trading market depends upon the existence of willing buyers and sellers that are able to sell their shares and market makers that are willing to make a market in the shares. Under these circumstances, the market bid and ask prices for the shares may be significantly influenced by the decisions of the market makers to buy or sell the shares for their own account, which may be critical for the establishment and maintenance of a liquid public market in our common stock. We cannot give you any assurance that an active public trading market for the shares will develop or be sustained.
The price of our common stock is volatile, which may cause investment losses for our shareholders. The market for our common stock although newly initiated is assumed to be highly volatile. The trading price of our common stock on the OTCBB is subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, and general economic and market conditions. In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to our market or relating to our Company could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of our stock price may cause investment losses for our shareholders.
We do not intend to pay any cash dividends in the foreseeable future. We intend to reinvest any earnings in the development of our projects. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash.
Our stock is subject to the Penny Stock rules, which impose significant restrictions on broker-dealers and may affect the resale of our stock.A penny stock is generally a stock that:
·
is not listed on a national securities exchange or NASDAQ,
·
is listed in the "pink sheets" or on the NASD OTC Bulletin Board,
·
has a price per share of less than $5.00 and
·
is issued by a company with net tangible assets less than $5 million.
The penny stock trading rules impose additional duties and responsibilities upon broker-dealers and salespersons effecting purchase and sale transactions in common stock and other equity securities, including:
·
determination of the purchaser's investment suitability,
·
delivery of certain information and disclosures to the purchaser, and
·
receipt of a specific purchase agreement before effecting the purchase transaction.
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Many broker-dealers will not effect transactions in penny stocks, except on an unsolicited basis, in order to avoid compliance with the penny stock trading rules. In the event our common stock becomes subject to the penny stock trading rules,
·
such rules may materially limit or restrict the ability to resell our common stock, and
·
the liquidity typically associated with other publicly traded equity securities may not exist.
Because of the significant restrictions on trading penny stocks, a public market may never emerge for our securities. If this happens, you may never be able to publicly sell your shares.
Item 2. Properties.
Our principal executive offices and mailing address is #105-5119 Beckwith,Suite 207 - 23705 IH 10 West, San Antonio, TX, USA 78249.78257 United States. Our telephone number is 210-561-6015. We have a dedicated office in Canada at #258-5489 Byrne Rd, Burnaby, BC.210-888-0785.
In September 2006, we purchased a 100% interest in a Petroleum and Natural Gas Lease from the province of Alberta, Canada for $12,051 cash. The lease is for a five year term and calls for annual rental and royalty payments in accordance with the Mines and Mineral Act of Alberta. The land consists of a one ¼ section Crown lease of Petroleum and Natural Gas rights. We allowed this lease to lapse in the last quarter of 2010.
Item 3. Legal Proceedings.
Our Company is not a party to any bankruptcy, receivership or other legal proceeding.
Terra Energy Corp. who’s President Chris van Vliet is a shareholder of TransAct through his legal council Palkowski & Company threatened in October 2010 to take legal action against TransAct Energy Corp. in regards to a $10,000 convertible promissory note. Terra Energy demanded conversion of the note to which TransAct Energy decided under the terms of the note they were not entitled to and instead issued them a cheque for payment in full which was promptly refused by Terra Energy. Since this time their legal council Mr. Robert J. Palkowski is no longer practising law and no further action has been taken. Terra Energy has verbally represented that they will only be satisfied with an issuance of common stock as demanded. We have had a legal review of the note in question and will defend the Company vigorously from any further claim.
Aqua Terra Power Corp. who’s president is Chris van Vliet a shareholder of TransAct Energy Corp. borrowed money from TransAct Energy in regards to geothermal projects in British Columbia, Canada. At the time TransAct was contemplating acquiring Aqua Terra Power if they were successful in their geothermal exploration. Aqua Terra was not successful and any contemplated relationship was terminated. Since that time the Aqua Terra notes payable to TransAct Energy, now totalling $306,766.86 (no further interest is accrued on this loan because of its status) matured and were demanded. No payment has been made and to the best of our understanding they have no ability to repay this debt. We will take legal action if the cost of said action can be justified.
Mr. Shahhid Vohra was under a two year contract with TransAct Energy Corp. this relationship was terminated by Vohra and accepted effective the end of September 2010. Vohra threatened legal action after making a claim against the Company of $44,263.66 through his council Robert J. Palkowski. The Company disagreed with the claim and instead claimed back that Vohra owed them $26,052.80. The Company intends on pursuing these funds. Vohra to date has taken no further action other than disparaging the Company to clients Vohra was aware of. The Company is assessing if any material damage has occurred.
Apollo Financial Management Group, LLC and their attorney Robert Cook accepted escrow funds from TransAct Energy in the amount of $15,000. The terms of the agreement with Apollo were never met and TransAct terminated the agreement and demanded repayment of the escrow funds. To date there has been no return of the funds nor any response to our claims so the Company will evaluate its next legal steps in collecting its money.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Company first traded on February 24, 2010 on the Over-The-Counter Bulletin Board (the “OTCBB”) under the trading symbol “TEGY”. Future trading prices of our common shares will depend on many factors, including, among others, our operating results and the market for similar securities.
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As of March 31, 2011,January 7, 2014, there are 4446 active shareholders of record holding 12,560,94917,150,133 restricted shares of the CompanyCompany’s common stock that have not deposited theirand 13,174,375 unrestricted shares into a clearing house, 8,395,981eligible for trading of which 11,708,853 are on deposit and able to be traded.considered active shares. The total issued and outstanding is 20,956,93030,074,508 shares of common stock. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no pre-emptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.
We have not paid, nor declared, any dividends since our inception and do not intend to declare any such dividends in the foreseeable future. Our ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that a corporation’s assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business.
Item 6. Selected Financial Data.
Not Applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
TransAct Energy Corp. is a Nevada corporation. The Company’s shares of common stock trade on the over the counter bulletin board under the symbol “TEGY”. TEGY is a development stage company and has not started receiving revenues from operating activities.
DuringThe company has been focused on securing the EfW technology and bringing the same to market. To that end it acquired the technology utilizing its common stock which is reflected on the Balance Sheet under Intellectual Property at $130,520. The value reflected is the shares issued for the technology multiplied by the closing price on the day the transaction took place as per US GAAP rather than the $2.6 Million dollar price agreed to for the EfW Technology in the contract. Funding efforts for plants in the UnitedKingdom, USA, Brazil AND Mexicoalthough progressing did notto the end of the year the Company entered into memorandums of understanding for distributionresult in material commitments or impact on our financial results. Market development efforts will not be material and manufacturing rights of a solar technology represented by Solution One Solar (on behalf of Indigo Solar) which initially it promotedreflected in India, Vietnam and Greece. The Company is now working to secure manufacturing of the solar technology in India in order to provide solar panels to a variety of projects in India and Greece under joint venture relationships. Provided the plant is ready in the near term, the Company also has a multi-million dollar purchase order available for fulfillment.our financial statements until bonafide’ agreements are monetized.
The Company entered an MOUcompany had minimal working capital through 2013; however we maintained a relationship with Altergy Systems providing potential distributionour suppliers and manufacturing rights of its Freedom PowerTM(scalable hydrogen fuel cell power generator) in India. The original MOU was extended into 2011 but expired before meeting its criteria. However the Company has agreed with Altergy to honour specific terms while proceeding with tests through theMinistry of Energy in India and one of the larger telecommunication tower providers.
During the year the Company entered consulting agreements to develop market share with consulting firms in Australia (for Pakistan), Greece, India and Singapore (for south east Asia). our reporting status.
Plan of Operation
For the 20112014 year the Company’s focus is to:
1.)
Complete its entry into the Indian power market with solar technologySecure working capital significant enough to maintain accounts payable at a current status and the Altergy fuel cell technology;fund day to day operations through 2014;
2.)
Complete a joint venture agreement and initiate the development of a major powerthe energy from waste plant in South East Asia;the UK as follows;
a.
Secure the pre-development capital estimated at $3 Million USD through debt or equity or combination of the two;
b.
Contract the UK location and feed-stock , complete a Phase 1 engineering review of the same, complete the Phase 2 engineering permits and permissions of the same and contract the off-take agreements for all products;
c.
Secure debt financing for the plant build out to cash-flow;
3.)
Complete joint venture agreements and initiate the development of new technologies for wind, thermal, batteries and generators.
an energy from waste plant in Mexico;
Results of Operations
Period from January 1, 20102013 to December 31, 20102013
We did not generate anygenerated zero ($”0” USD) in revenue from January 1, 20102013 to December 31, 2010.2013. For the year ended December 31, 20102013 our general expenses were ($38,520). Currently our expenses were $757,564. Expenses consistedconsist primarily of professional fees, administrative and management fees and miscellaneous expenses. The professional fees incurredwhich were reduced drastically by the recapture of $457,500 that had been previously accrued. This resulted in 2010 were, to a large extent, to our auditors and legal counselthe negative general expense balance for continued SEC reporting requirements.2013. During 20102013 we recorded non-cash interest expense of $29,189$320,351 as a result of beneficial conversion on notes payable issued during 2010 and recorded a write-off of an unsuccessful lease purchase in the amount of $12,684.payable. As a result, we have reported a net loss of $(1,086,561)$(281,831) for the period ended December 31, 2010.2013. Our total net loss from inception on March 15, 2006 through December 31, 20102013 was $(1,366,715)$(4,123,911).
Stock-Based Compensation Costs
Stock-based compensation represents 27.83%4.9% of the Company’s operating expenses for the fiscal year ended December 31, 2010.2013. The stocks are a part of our annual executive compensation plan, and are issued to obtain, retain and motivate our directors, executives and employees.
Liquidity and Capital Resources
At December 31, 20102013 we had total assets of $5,624.$216,112. Our Current assets are $3,401 consisting of $2,498 in cash and $903 in prepaid expenses. Further we$85,592. We have $2,223 incompletely written down our software. Current liabilities at December 31, 20102013 totalled $552,548$2,478,635 they consisted of accounts payable in the amount of $62,276,$187,164, accrued interest of $17,691,$873,558, compensation payable in the amount of $289,949,$1,112,247, notes payable net in the amount of $142,632, and deposit on stock purchase of $40,000.$305,666.
We filed a registration statement on Form S-1 with the Securities and Exchange Commission to register up to 2,000,000 shares of common stock for sale at a price of $.25 per share for a total of up to $500,000. The registration statement was declared effective on December 12, 2008. We exceeded the minimum of our offering of $250,000 on or before August 31, 2009 and subsequently closed the offering. We issued a total of 1,102,000 shares under our offering of $0.25 per share to raise a total of $275,500.$274,398. The funds were used as per the prospectus to cover the offering costs and to secure additional business for our operations.
Potential Acquisitions
The Company intends to grow through the acquisition of ownership or leasehold interests in properties and/or propertytechnology rights that it believes will create value as the Company’s geothermalenergy resources, and through possible mergers with or acquisitions of operating powerenergy plants and geothermal or other renewable energy properties.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been made. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for the financial statements.
Cash and Cash Equivalents
The Company considers cash deposits and highly liquid investments to be cash and cash equivalents for financial reporting presentation on the balance sheet and statement of cash flows. The Company subscribes to the accounting standards that define cash equivalents as highly liquid, short-term instruments that are readily convertible to known amounts of cash, which are generally defined investments that have original maturity dates of less than three months.
Contractual Obligations
We have material commitments for the next twelve months that include the office facilities, a consulting agreement with the engineering firm SNC-Lavelin, support staff, supporting professionals (including our accountants, lawyers and auditors) and the management compensation agreements. We will require additional capital to meet our liquidity needs. As a result, our independent auditors have expressed substantial doubt about our ability to continue as a going concern. In the past, we have relied on capital contributions from shareholders to supplement operating capital when necessary. We anticipate that we will receive sufficient contributions from shareholders to continue operations for at least the next twelve months. However, there are no agreements or understandings to this effect. We may sell common stock, take loans from officers, directors or shareholders or enter into debt financing agreements.
Need for Additional Financing
We estimate our upcoming operating expenses to be $4,000,000increase substantially as we transcend from development satge to operating stage and maybe as much as $4,000,000.00 per year. We do not have any commitments for capital expenditures however we do anticipate entering into commitments to secure acquisitions. We believe we will need additional funds to cover our expenses and acquisitions for the next twelve months. Our need for capital may change dramatically as we pursue our business plan during that period. At present, we have no material understandings, commitments or agreements with respect to the acquisition of any business venture or capital commitments. Further, we cannot assure that we will be successful in consummating business opportunities on favourable terms or we will be able to profitably manage any business opportunities. Should we require additional capital, we may seek additional advances from officers, sell common stock or find other forms of debt financing.
We intend to raise $15,000,000 in order to satisfy our immediate ongoing expenses and planned business strategy. The likelihood is that we will have to secure a private placement or convertible debt to affect the raise of capital. Either scenario will result in the sale of equity and add to the dilution of existing shareholders.
Off Balance Sheet Arrangements
As of December 31, 2010,2013, the Company does not have any off balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 8. Financial Statements and Supplementary Data.
See Financial Statements following the signature page of this report.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and Procedures.
None.
Item 9A(T). Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). We are committed to maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures and implementing controls and procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act and based on the criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2010,2013, the end of the period covered by this Report. However anticipating greater levels of business activity in the near term we expect that we will require a financial controller in order to maintain our disclosure controls and procedures. Steps have been taken to bring on this person in a timely manner.
Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management, with the participation of the President, evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010.2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our management, with the participation of the President, concluded that, as of December 31, 2010,2013, our internal control over financial reporting was effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
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(b)Changes in Internal Control over Financial Reporting. There were no changes in the Company's internal controls or procedures over financial reporting, known to the chief executive officer or the chief financial officer that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other Information.
There are no further disclosures. All information that was required to be disclosed in a Form 8-K during the fourth quarter, 20102013 has been disclosed.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Identification of Directors, Executive Officers and Significant Employees
The following sets forth certain information concerning the current directors, executive officers and significant employees of our company. Each director has been elected to serve until our next annual meeting of stockholders and until his successor has been elected and qualified. Each executive officer serves at the discretion of the board of directors of our Company, and each has been elected for a 1 year term.