MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENT NOTICE
This Form 10-Q contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. For this purpose, any
statements contained in this Form 10-Q that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within our control. These factors
include but are not limited to economic conditions generally and in the
industries in which we may participate; competition within our chosen industry,
including competition from much larger competitors; technological advances and
failure to successfully develop business relationships.
OUR BUSINESS
Our business is using sustainable energy in emissions-free processing of
municipal solid waste into globally traded commodities.
We formed TransAct Energy Corp. as a Nevada corporation on March 15, 2006.
Although our original 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 and moved away from this
focus.
In 2008, the Company was introduced to Dr. Mory Ghomshei one of the world's
leading geothermal experts and two of his geothermal power projects in British
Columbia, Canada. We worked with 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 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 licenses and has received drilling
permits. 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 waste optimization plant although we are maintaining
dialogue with Dr. Ghomshei as it relates to utilizing Geothermal in the plants
themselves.
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 fueled power projects in addition. After discussions 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 came 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 the four (4) geothermal licenses 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 groundwork 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.
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Joint development agreement negotiations took place in December 2010 clearing
the way for Transact to enter one major project in South East Asia in 2011. The
2011 year was frustrated with the company's inability to collect raised or
earned funds into the company's bank account. Thus projects, joint 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 a Waste Optimization
division. We modified our Business Plan for this focus and entered a Joint
Development Agreement with the owners of a small scale, proprietary, zero
emissions waste optimization plant ("ZEWOPtm") that had been operating a 20
tonne per day plant for two years. We reconnected with clients in India and
Brazil for future waste optimization opportunities. From the second quarter,
through to the end of 2012 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 Waste
Optimization division. We completed the acquisition of the ZEWOPtm 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 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 Mexico plant.
Throughout 2014 TransAct worked to finalize the engineering review and
agreements necessary to develop the first ZEWOPtm in Puebla, Mexico. The plant
under design is capable of processing 1320 metric tons per day of Municipal
Solid Waste ("MSW") and is estimated to cost approximately three hundred million
dollars. In late November Fichtner Consulting Engineers reported they believed
the ZEWOPtm could process the MSW 100% into useable products without emissions.
The Fichtner report provided TransAct the opportunity to submit the Waste Supply
Agreement to the Municipality of Puebla, prepare off-take agreements for
interested buyers of the ZEWOPtm products and formalize the share purchase
agreement with the Puebla Waste Consortium ("PWC"). PWC intended on providing
30% of the capital required to build the ZEWOPtm, while TransAct negotiates
third party lenders for the remaining 70% of the cost through debt instruments.
The Company delivered the results of the Fichtner Report to the Puebla City
Staff in December of 2014. The cost of the plant was more than originally
discussed because it included garbage pre-processing and their waste contained
more water. This affected the required equity and although it was never stated
appears to be cause of the PWC hesitation. We also found out subsequently there
was legal wrangling and back room negotiations between the existing MSW
concession holders and the municipal/state government, affecting their ability
to sign with us. After 6 months with no movement forward for the MSW feedstock
from the City of Puebla, Management set out in 2015 to secure an alternate
source of MSW. The agreement we had with the Puebla Waste Consortium was
terminated however the sales efforts were all to National/International
companies whose interest in our products will not change with a change in
location. The one hundred-million-dollar equity for the plant in Puebla
disappeared with the termination of the consortium contract. An alternative
source of the plant equity is being sought during 2015/16 with a variety of
investors coming forward during this period. As soon as we finalize the
feedstock and sales contracts we will seek to formalize the required equity.
Because of the specialized nature of many of the ZEWOPtm components, we
initiated some of the equipment procurement; thus, we entered a design/supply
agreement for our proprietary reactors with a specialized engineering firm.
2014 saw the Company form subsidiary corporations in Ireland and Mexico. In
Ireland we established the wholly owned subsidiary "TransAct Energy Global
Limited", this company will in turn wholly own each national subsidiary. The
first national subsidiary of TransAct Global is "TransAct Energy Mexico S.DE
R.L. DE C.V." which will own a majority shareholding of each holding company
that owns a ZEWOPtm like the Mexican corporation "Puebla ZEWOP 1, S. DE R.L. DE
C.V.".
At the beginning of 2015 we focused on finalizing the sale of the anticipated
ZEWOPtm products. These efforts included getting signed letters of intent from
qualified buyers and preparing formal legal agreements for the same. We now have
letters of intent from multiple qualified buyers for all the expected product
and agreements ready to be signed subject to us finalizing our feed-stock
agreement (Waste Supply Agreement) for the first plant.
In summary 2015's efforts focused on completing the due-diligence for the
Mexican candidate feed-stocks including matching equity partners and buyers of
the resulting products. To that end we now have several feed-stock agreements to
negotiate through to a final agreement or dismiss depending on the outcome of
the negotiations. The potential equity partners have been identified subject to
finalizing the feed-stock agreement and pre-sales of the future products. The
clients that signed letters of intent for the products have also been briefed on
the potential feed-stock cities to re-confirm their commitment. Every effort was
made during the year to keep the candidate banks for debt financing informed of
our progress and they appear to be continuing with their support.
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2016 we focused on finalizing contracts for the required MSW feedstock. The
results were a signed memorandum of understanding (MOU) with a private
contractor in Mexico City and a municipality outside of Asuncion, Paraguay; a
letter of invitation from the Republic of Panama; and a formal proposal to a
municipality in the State of Jalisco, Mexico now awaiting the formal request for
proposal coming in 2017. The Mexico City MOU was followed in December 2016 with
a Waste Supply Agreement. Each opportunity was negotiated to satisfy our need
for thirteen-hundred and twenty metric tons per day of MSW feedstock per
ZEWOPtm.
2017 was Transacts breakthrough year as it finally secured the required
feedstock under long-term contract for its first ZEWOPtm to be in Mexico's
second largest city Guadalajara. We immediately secured a strategically located
industrial site in El Salto and have proceeded to pre-sell the products from the
future ZEWOPtm.
In 2018 we focused on completing the due diligence for the El Salto site, the
pre-development capital required to pay for the building-site and the completion
of all preliminary design work required to secure an EPC Contractor
(Engineering, Procurement and Construction) through the tender process to build
the ZEWOPtm. Due diligence was completed proving the site suitable for our
proposed use and the landowners have so far continued to wait for us to close on
the site.
The pre-development capital was committed to as a bridge-loan, but to date has
not been received.
[[Image Removed: Picture 1]]
Figure 1: Concept Rendering of El Salto ZEWOPtm
Plant is estimated at 31,355 sq. meters. Using approximately 7.2 hectares.
2019 was dominated with closing the funds to build the El Salto ZEWOPtm and
preparing the Company for operating status. This included continued meetings
with members of the new Mexican government to forward our waste management
approach in Mexico and renegotiating the purchase of the El Salto lands
anticipating a closing. We started the process of acquiring a sustainable
geothermal technology that will provide most of the energy required to operate
the ZEWOPtm. Our incoming COO and CPO started working through the people
requirements for Mexico.
We acquired another Irish corporation to hold our physical assets in Ireland as
we start the search for facilities to house our global accounting, human
resources and research/development offices in Dublin. To that end Christina
Kenny officially came on as our Chief People Officer starting the process of
identifying our first hires for both the global administration and the El Salto
ZEWOPtm.
2020 had two focuses: We continued raising the predevelopment capital for El
Salto, Mexico and new business development initiatives that could result in cash
flow. Raising the pre-development capital for El Salto during COVID-19 Pandemic
led to the loss of several funders, however, as companies adjusted it created
new opportunities. We reduced our initial capital requirements by $10 Million
through negotiating a lease/purchase agreement on the El Salto lands. Then after
many single-family office contacts we negotiated the balance of the funds
required. We have secured a $14 Million loan expected in April 2021with an
office that owns an EPC Contractor and we have agreed to their preferred vendor
status, provided they are competitive through the tender process. In terms of
business development, we contracted to develop a retail business using our core
reactor technology. The retail opportunity is now in the business planning
stage.
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The first half of 2021 has been focused on planning and team building in
anticipation of starting the predevelopment phase of the El Salto ZEWOPtm. In
that process we clearly identified our purpose "To Help humanity restore its
balance with nature" and our Mission "To utilize latent energies and human off
casts to create resources that enhance the Economy, the Environment and
Communities we operate in." All corporate activity undertaken will work towards
our vision of "a world where all energy and resources used to sustain humanity,
have no impact on the biosphere." To that end we spent time examining our future
risk and resilience strategies, examining our supply-mesh and creating a
detailed plan for the first ninety-days after launch. We continued to work on
finalizing the required predevelopment funds both with the original commitment
from the beginning of 2021that has not yet completed and with several others in
progress for the third quarter.
PLAN OF OPERATION
TransAct Energy Corp. has elected to focus entirely on the global development
and dissemination of its ZEWOPtm. The ZEWOPtm makes ecological, economic,
cultural, and social sense. Becoming an engine that supports the circular
economy in any community it enters, sustainably; Municipalities can now be paid
instead of paying to manage their MSW. In the process, TransAct is able to
incorporate many of the energy technologies it has worked on including,
geothermal and solar.
It is our intent during the eighteen-months that it should take to construct the
first municipal scale ZEWOPtm; to debug any mechanical/operational issues of the
design. After the first building is complete (approximately one-year in), we
will secure the second site in Guadalajara and start its construction as soon as
the first plant is certified operational. We will complete the assembly of the
second ZEWOPtm to perfect the project management process, creating a cookie
cutter approach to ZEWOPtm erection.
The first two ZEWOPtm gives us the opportunity to recruit and train the project
managers' expertise to effectively work with our EPC contractors in the
development of each new ZEWOPtm; with a focusing on streamlining the supply
chain of required materials and equipment.
During the estimated twenty-four to thirty months, it will take to get the first
two ZEWOPtm underway, we intend on imbedding a team in Europe to secure
feedstock and development sites for the next twenty ZEWOPtm. This approach will
be continued around the globe, selecting major markets that are politically and
economically ready to adopt our approach to sustainable manufacturing using
solid waste. Upon receipt (in the second quarter of 2021) of the loan funds
required for the predevelopment of the El Salto, ZEWOPtm; our pre-described
timeline will start.
With a firm start date and location of the first ZEWOPtm TransAct Energy Mexico
can proceed to finalize long-term offtake agreements. We will reengage Fichtner
Consulting Engineers to prepare working drawings, that while being approved
under permits and permissions will go to tender for a guaranteed procurement and
construction contract (EPC). We have selected a preferred vendor for this role,
however, they still have to compete in the EPC tender process. When these steps
are completed, we intend on finalizing the tentative financing commitments we
have in place with two international investment banks.
TransAct intends on establishing the manufacturing of our proprietary reactors
in Mexico in 2021. We have already initiated discussions for a joint venture
agreement with an ISO 9001 and ASME capable manufacturer. Our facility would
supply the demand for both Mexico, South America, Central America, Canada and
the USA.
ZEWOPtm can demonstrate to Mexico and the World a municipal scale solution to
manufacturing using solid waste without emissions. Although we have been
approached to build in other North American cities, we feel the market is best
approached when the first ZEWOPtm is fully operational to garner government
agency support. Once we break ground, we will make sure major municipalities
throughout the US and Canada are aware of our process, so we get on their
technology review lists. This will ensure a smoother entry into North American
markets,
Until the first revenues from operations come in, our corporate operations will
continue to be funded by raising money through private placements or public
offerings. We anticipate bringing on an expanded management team to oversee our
operational growth throughout the upcoming year and plan to raise additional
capital as required.
SUBSEQUENT EVENTS
None
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RESULTS OF OPERATIONS
Results of Operations for Three Months Ending June 30, 2021, Compared to Three
Months Ending June 30, 2020
We did not generate any material revenue from April 1, 2021, to June 30, 2021,
as was the same for the three-month period in 2020. For the three months ended
June 30, 2021, our general and administrative expenses were $78,931 compared to
$195,945 for the same period in 2020. Expenses consisted primarily of
compensation of $75,891. Compensation was $191,945 for the same period ending
June 30, 2020.
Interest Expense for the three months ending June 30, 2021, was $392,880
compared to $391,864 for the same period in 2020. As a result, we have reported
a net loss before taxes of ($471,811) for the Three Months ended June 30, 2021,
compared to a loss of ($587,809) for the same period last year.
Results of Operations for the Six Months Ended June 30, 2021, Compared to The
Six Months Ended June 30, 2020
We did not generate any revenue from January 1, 2021 to June 30, 2021 as was the
same for the six-month period in 2020. For the six months ended June 30, 2021,
our general and administrative expenses were $161,674 compared to $392,143 for
the same period in 2020. The main expense was compensation which was $154,071
for the period ending 2021 and $383,889 for the period ending June 2020.
Interest expense for the six-month period ending June 30, 2021 was $779,408
compared to $779,306 for the same period ending June 30, 2020. As a result, we
have reported a net loss of ($941,082) for the period ended June 30, 2021. Our
total net loss from January 1, 2020, through June 30, 2020 was ($1,171,449).
Stock-Based Compensation Costs There was $0 stock-based compensation recorded
during the period ended June 30, 2021.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2021, our current assets are $403,749 made up of prepaid expenses
of $294,763, receivables of $108,495 and $491 cash on hand. Our current
liabilities consist of accounts payable in the amount of $345,783, accrued
interest of $6,934,457 compensation payable of $3,255,524 and Notes payable, net
of any discount of $366,110.
NEED FOR ADDITIONAL FINANCING
We estimate our upcoming operating expenses to increase substantially as we
transcend from development stage to operating stage and maybe as much as
$24,000,000.00 this 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.
There is no guarantee the Company will not need to raise further significant
capital over the next year, some of which may need to be done by way of selling
equity in the Company or its subsidiaries. Depending on the market price and the
terms that can be negotiated this will result in the dilution of current
shareholders of the Company's stock or earnings from proposed plants.
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TRANSACT ENERGY CORP. 
