As filed with the Securities and Exchange Commission on May 16, 2003
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 16, 2003
TRANSMERIDIAN EXPLORATION, INC.
(Exact name of Registrant as specified in its charter)
Delaware | | 333-60960 | | 76-0644935 |
(State or other jurisdiction
of incorporation) | | (Commission
File Number) | | (IRS Employer
Identification No.) |
397 N. Sam Houston Parkway E., Suite 300
Houston, Texas 77060
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (281) 999-9091
Not Applicable
(Former name or former address, if changed since last report)
TRANSMERIDIAN EXPLORATION, INC.
TABLE OF CONTENTS
FOR
CURRENT REPORT ON FORM 8-K
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Item 5. Other Events
Yearend Accounting Adjustments Which Affect 2002 Interim Periods
In connection with the preparation of the December 31, 2002 annual financial statements, the Company identified several accounting adjustments which were recorded at yearend. Such adjustments also affect the interim periods in 2002. These adjustments did not affect any periods prior to 2002. The nature and amount of these adjustments is presented below.
1) Capitalized interest – During the fourth quarter of 2002, the Company recorded capitalized interest of $1,060,000 on undeveloped oil and gas properties, of which $615,560 related to the first three quarters of 2002.
2) Amortization of prepaid investment advisory contract – During the first quarter of 2002, the Company executed an investment advisory contract in exchange for common stock. This contract, which was valued at $735,000, was not recorded until the fourth quarter of 2002. The investment advisory contract covers a two year period ending in February 2004 and will be amortized over that term. During the fourth quarter of 2002, the Company recorded amortization expense related to this contract totaling $306,250, of which $214,375 related to the first three quarters of 2002.
3) Adjustment to Investment in Emba Trans Ltd. – During the fourth quarter of 2002, the Company made an adjustment to correct the accounting for an issuance of common stock which occurred during the second quarter of 2002. This adjustment reduced the amount reflected as an investment in Emba Trans Ltd. by $1,400,000, with a corresponding reduction in stockholders’ equity. This adjustment did not affect the statements of operations for the interim periods of 2002.
4) Amortization of deferred financing costs – During 2001, the Company recorded $400,000 in deferred financing costs associated with its $20 million credit facility with a Kazakhstan bank. These deferred financing costs should have been amortized over a 36 month period beginning in February 2002. In the fourth quarter of 2002, the Company recorded amortization of deferred financing cost totaling $122,222, of which $88,888 related to the first three quarters of 2002.
5) Beneficial conversion feature on convertible debentures – The Company issued convertible debentures in August 2002 which contained a beneficial conversion feature as defined in EITF 98-5. The value of this beneficial conversion feature should have resulted in a charge to earnings of $35,924 on the date of issuance. This amount was recorded in the fourth quarter of 2002. In connection with the debentures, the Company also issued warrants which were valued at $20,000 and will be amortized as additional interest expense over the twenty four month life of the debentures. Additional expense of $37,591 attributable to these two items should have been recorded in the third quarter of 2002.
The Company previously filed a Current Report on Form 8-K on February 20, 2003 to report a change in its accounting policies for carried working interests and drilling rig operations. Reference is made to that filing for further discussion of this change in accounting policy. The previous filing included financial statements which reflected the effect of the new accounting
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policies on the interim periods ended June 30, 2002 and September 30, 2002. Since the Company is restating the results of operations for all of its interim periods for this filing, the effect of these accounting changes on the interim period ended March 31, 2002 are included, as follows:
6) Depreciation of drilling rig – The Company recorded $220,833 of depreciation expense on its drilling rig during the first quarter ended March 31, 2002. The rig should not have been depreciated during this period as it was undergoing refurbishment and modification activities to get it ready for its intended use.
7) Adjustment for carried working interest – The Current Report on Form 8-K filed February 20, 2003 described a change in accounting policy for carried working interests. This change in accounting policy resulted in an increase in operating expenses of $43,619 for the first quarter ended March 31, 2002. This amount had previously been recorded as a receivable.
The table below presents the effect of the adjustments described above for each of the three month periods ended March 31, 2002, June 30, 2002 and September 30, 2002 as follows:
| | Three Month Periods Ended | |
| | March 31,
2002 | | June 30,
2002 | | September 30, 2002 | |
Decrease (increase) in net loss: | | | | | | | |
Capitalization of interest | | $ | 141,482 | | $ | 236,241 | | $ | 317,209 | |
Amortization of prepaid investment advisory contract | | (30,625 | ) | (91,875 | ) | (91,875 | ) |
Amortization of deferred financing costs | | (22,222 | ) | (33,333 | ) | (33,333 | ) |
Beneficial conversion feature and warrants on convertible debentures | | — | | — | | (37,591 | ) |
Depreciation of drilling rig | | 220,833 | | — | | — | |
Adjustment for carried working interest | | (43,619 | ) | — | | — | |
Net reduction to net loss | | $ | 265,849 | | $ | 111,033 | | $ | 154,410 | |
Additionally, certain reclassifications have been made to the financial statements of the previously reported interim periods to conform to the presentation of the December 31, 2002 financial statements.
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Item 7. Financial Statements and Exhibits
(a) Financial Statements
The following financial statements are attached to this Current Report on Form 8-K:
Consolidated Statements of Operations for the Three Month Periods Ended March 31, 2002, June 30, 2002 and September 30, 2002
Consolidated Statements of Operations for the Three, Six and Nine Month Periods Ended March 31, 2002, June 30, 2002 and September 30, 2002, respectively
Consolidated Statements of Cash Flows for the Three, Six, and Nine Month Periods Ended March 31, 2002, June 30, 2002, and September 30, 2002, respectively
(b) Pro Forma Financial Information
None.
(c) Exhibits
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TRANSMERIDIAN EXPLORATION, INC. |
| |
| | |
Date: | May 16, 2003 | By: | /s/ Lorrie T. Olivier | |
| | Lorrie T. Olivier |
| | Chairman and Chief Executive Officer |
| | | | |
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Transmeridian Exploration, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Operations
For the Three Month Periods Ended March 31, 2002, June 30, 2002 and September 30, 2002
(Unaudited)
| | Three Month Periods Ended | |
| | March 31,
2002 | | June 30,
2002 | | September 30,
2002 | |
| | (Restated) | | (Restated) | | (Restated) | |
| | | | | | | |
Oil revenues | | $ | — | | $ | — | | $ | — | |
| | | | | | | |
Operating and administrative expenses | | 509,678 | | 533,141 | | 721,826 | |
| | | | | | | |
Operating loss | | (509,678 | ) | (533,141 | ) | (721,826 | ) |
| | | | | | | |
Other income (expense): | | | | | | | |
Interest income | | 3,582 | | 103 | | 226 | |
Interest expense, net of capitalized interest | | (61,251 | ) | (50,886 | ) | (84,355 | ) |
Total other income (expense) | | (57,669 | ) | (50,783 | ) | (84,129 | ) |
| | | | | | | |
Net loss | | (567,347 | ) | (583,924 | ) | (805,955 | ) |
| | | | | | | |
Preferred dividends | | (9,303 | ) | (9,303 | ) | (9,456 | ) |
| | | | | | | |
Net loss attributable to common stockholders | | $ | (576.650 | ) | $ | (593,227 | ) | $ | (815,411 | ) |
| | | | | | | |
Basic and diluted loss per share | | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) |
| | | | | | | |
Weighted average common shares outstanding | | 56,063,753 | | 58,666,909 | | 59,613,433 | |
These financial statements should be read in conjunction with the Company’s Quarterly Reports on Form 10-QSB for the quarterly periods ended March 31, 2002, June 30, 2002 and September 30, 2002, the Company’s Current Report on Form 8-K dated February 20, 2003 and the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2002.
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Transmeridian Exploration, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Operations
For the Three, Six and Nine Month Periods Ended March 31, 2002, June 30, 2002 and September 30, 2002
(Unaudited)
| | Three Month
Period
Ended
March 31,
2002 | | Six Month
Period
Ended
June 30,
2002 | | Nine Month
Period
Ended
September 30,
2002 | |
| | (Restated) | | (Restated) | | (Restated) | |
| | | | | | | |
Oil revenues | | $ | — | | $ | — | | $ | — | |
| | | | | | | |
Operating and administrative expenses | | 509,678 | | 1,042,819 | | 1,764,645 | |
| | | | | | | |
Operating loss | | (509,678 | ) | (1,042,819 | ) | (1,764,645 | ) |
| | | | | | | |
Other income (expense): | | | | | | | |
Interest income | | 3,582 | | 3,685 | | 3,911 | |
Interest expense, net of capitalized interest | | (61,251 | ) | (112,137 | ) | (196,492 | ) |
Total other income (expense) | | (57,669 | ) | (108,452 | ) | (192,581 | ) |
| | | | | | | |
Net loss | | (567,347 | ) | (1,151,271 | ) | (1,957,226 | ) |
| | | | | | | |
Preferred dividends | | (9,303 | ) | (18,606 | ) | (28,062 | ) |
| | | | | | | |
Net loss attributable to common stockholders | | $ | (576,650 | ) | $ | (1,169,877 | ) | $ | (1,985,288 | ) |
| | | | | | | |
Basic and diluted loss per share | | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.03 | ) |
| | | | | | | |
Weighted average common shares outstanding | | 56,063,753 | | 57,372,522 | | 57,803,892 | |
These financial statements should be read in conjunction with the Company’s Quarterly Reports on Form 10-QSB for the quarterly periods ended March 31, 2002, June 30, 2002 and September 30, 2002, the Company’s Current Report on Form 8-K dated February 20, 2003 and the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2002.
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Transmeridian Exploration, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Three, Six and Nine Month Periods Ended March 31, 2002, June 30, 2002 and September 30, 2002
(Unaudited)
| | Three Month
Period
Ended
March 31,
2002 | | Six Month
Period
Ended
June 30,
2002 | | Nine Month
Period
Ended
September 30,
2002 | |
| | (Restated) | | (Restated) | | (Restated) | |
Cash flows from operating activities: | | | | | | | |
Net loss | | $ | (567,347 | ) | $ | (1,151,271 | ) | $ | (1,957,226 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | |
Depreciation and amortization | | 4,275 | | 14,584 | | 30,867 | |
Amortization of debt financing costs | | 22,222 | | 55,555 | | 90,555 | |
Amortization of prepaid contracts | | 30,625 | | 122,500 | | 214,375 | |
Stock issued for services | | — | | 35,000 | | 35,000 | |
Imputed interest expense | | — | | — | | 35,924 | |
Increase in receivables | | (97,578 | ) | (3,454 | ) | (10,693 | ) |
Increase in prepaid expenses | | — | | (10,000 | ) | (10,000 | ) |
Increase (decrease) in accounts payable and accrued liabilities | | (300,155 | ) | 296,905 | | 667,508 | |
Net cash used in operating activities | | (907,958 | ) | (640,181 | ) | (903,690 | ) |
| | | | | | | |
Cash flows from investing activities: | | | | | | | |
Capital expenditures | | (439,337 | ) | (5,155,767 | ) | (7,291,182 | ) |
Non-cash portion of capital expenditures | | 62,110 | | 298,351 | | 615,560 | |
Depreciation of support equipment | | — | | — | | — | |
Advances to Emba Trans Ltd. | | — | | (7,313 | ) | (15,536 | ) |
Net cash used in investing activities | | (377,227 | ) | (4,864,729 | ) | (6,691,158 | ) |
| | | | | | | |
Cash flows from financing activities: | | | | | | | |
Proceeds from long-term debt | | 4,083,000 | | 7,563,179 | | 9,523,128 | |
Repayments of long-term debt | | (1,500,000 | ) | (1,876,936 | ) | (1,837,423 | ) |
Proceeds from notes payable to related parties | | — | | 50,000 | | 230,000 | |
Payment of deferred financing costs | | (200,000 | ) | (200,000 | ) | (200,000 | ) |
Payment of dividends on preferred stock | | (70,302 | ) | (70,302 | ) | (70,302 | ) |
Purchase of treasury stock | | — | | — | | — | |
Proceeds from sale of treasury stock, net | | — | | — | | — | |
Proceeds from sale of common stock, net | | 200 | | 200 | | 100,200 | |
Repayment of amounts due to third parties | | — | | — | | — | |
Net cash provided by financing activities | | 2,312,898 | | 5,466,141 | | 7,745,603 | |
| | | | | | | |
Net increase (decrease) in cash and cash equivalents | | 1,027,713 | | (38,769 | ) | 150,755 | |
| | | | | | | |
Cash and cash equivalents, beginning of period | | 107,276 | | 107,276 | | 107,276 | |
| | | | | | | |
Cash and cash equivalents, end of period | | $ | 1,134,989 | | $ | 68,507 | | $ | 258,031 | |
These financial statements should be read in conjunction with the Company’s Quarterly Reports on Form 10-QSB for the quarterly periods ended March 31, 2002, June 30, 2002 and September 30, 2002, the Company’s Current Report on Form 8-K dated February 20, 2003 and the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2002.
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