TEGY Transact Energy Corporation (CE)

ITEM 2. PLAN OF OPERATIONS

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 to use sustainable technology to produce energy products. TransAct Energy Corp has transitioned from its original focus of developing raw energy resources to optimizing municipal solid waste into energy resources.

We formed TransAct Energy Corp. as a Nevada corporation on March 15, 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 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 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.

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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 completed a Business Plan for this division and entered a Joint Development Agreement with the owners of a small scale, proprietary, zero emissions waste optimization plant (“ZEWOP ^tm ”) 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 ZEWOP ^tm 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 ZEWOP ^tm 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 ZEWOP ^tm 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 ZEWOP ^tm 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 ZEWOP ^tm , 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 feed-stock and sales contracts we will seek to formalize the required equity.

Because of the specialized nature of many of the ZEWOP ^tm 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 ZEWOP ^tm 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 ZEWOP ^tm 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 feed-stock. 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 feed-stock per ZEWOP ^tm _.

2017 was Transacts breakthrough year as it finally secured the required feedstock under long-term contract for its first ZEWOP ^tm 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 ZEWOP ^tm .

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 ZEWOP ^tm . Due diligence was completed proving the site suitable for our proposed use and the land owners 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.

Figure 1: Concept Rendering of El Salto ZEWOP ^tm

Our focus throughout 2019 is to build the ZEWOP ^tm in El Salto, Jalisco, Mexico. We need to first sign off on 75-80% of our product sales under off-take agreements and finish the site-specific design work of the El Salto site. Then 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. When these steps are completed, we intend on finalizing the financing commitment for the debt and equity based on the ZEWOP ^tm construction agreement.

Once TransAct is confident the development of the first ZEWOP ^tm is well underway it will proceed with the scheduling and planning of a second plant in Guadalajara scheduled to open one year after the first ZEWOP ^tm _. This plant will be our opportunity to perfect the assembly, construction process and train additional project managers. The long-term strategy is to build twenty and more plants per year. Fulfilling our growth strategies for Europe and the Americas.

ZEWOP ^tm can demonstrate to Mexico and the World a municipal scale solution to managing waste without emissions and land filling. Although we have been approached to build in the other North American cities, we feel the market is best approached when the first ZEWOP ^tm is fully operational to garner government agency support. This will insure a smoother entry into the other North American markets, once we break ground, we will make sure major waste generators throughout the US and Canada are aware of our process, so we get on the technology review lists.

Besides finding capital for individual projects, 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 this year and plan to raise additional capital as required. The first $4 Million of this budgeted capital is being raised now.

For the 2019 year the Company’s focus is to:

1) Secure working capital for the Company significant enough to maintain accounts payable at a current status and fund day to day corporate costs through to cash-flow from first operations, including expansion of corporate management team in order facilitate global dissemination of ZEWOP ^tm ; 

2) Secure pre-development capital in order to facilitate items 3) a. through 3) e. which meets requirements for balance of funding commitments; 

3) Complete the development of the ZEWOP ^tm in El Salto (Guadalajara), Mexico as follows; 

a. Complete purchase of lands; 

b. Secure C-suite executives and Mexico support team; 

c. Finalize Product Off-take Agreements; 

d. Complete working drawings for El Salto ZEWOPtm; 

e. Secure all required permits and permissions;  

f. Complete EPC contracts and supplier agreements; 

g. Site development, construction and assembly of plant. 

4) Initiate second Mexico ZEWOP ^tm contracts to launch development in 2020. 

5) Continue with other market entrance towards end of 2019  

SUBSEQUENT EVENTS

A $15,000 convertible note dated May 8, 2019 is unsecured and bears interest of 12% per annum. The note is due May 7, 2020 unless converted to common stock.

A $10,000 short-term loan dated April 26, 2019 is unsecured and bears interest of $71.43 per day and is due July 25, 2019.

On May 7th, 2019 the Company received a letter of intent from SJ Global Investments for a $500 Million Dollar Bank Guarantee to support the letter of Intent from Native Fuel Inc dated April 13, 2018 for a $320 Million Dollar non-recourse funding from the global funding group from Zurich. The Company is now working to finalize terms and conditions.

RESULTS OF OPERATIONS

Results of Operations for Three Months Ending March 31, 2019 Compared to Three Months Ending March 31, 2018

We did not generate any material revenue from January 1, 2019 to March 31, 2019 as was the same for the three-month period in 2018. For the three months ended March 31, 2019 our general and administrative expenses were $132,935 compared to $254,473 for the same period in 2018. Expenses consisted primarily of compensation of $119,341 and Consulting $9,000. Compensation was $202,112 and Consulting $49,000 for the same period ending March 31, 2018.

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Interest Expense for the three months ending March 31, 2019 was $364,470 compared to $80,615 for the same period in 2018. As a result, we have reported a net loss before taxes of ($497,404) for the Three Months ended March 31, 2019 compared to a loss of ($336,089) for the same period last year.

Stock-Based Compensation Costs

There was $0 stock-based compensation recorded during the period ended March 31,2019. Any shares issued are a part of our executive compensation plan, and are issued to obtain, retain and motivate our directors, executives and employees.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2019, our current assets are $ 399,201 made up of prepaid expenses of $292,160, receivables of $106,370 and $670 cash on hand. Our current liabilities consist of accounts payable in the amount of $ 415,235, accrued interest of $3,438,479 compensation payable of $ 2,346,178 and Notes payable, net of any discount of $ 347,145.

NEED FOR ADDITIONAL FINANCING

We estimate our upcoming operating expenses to increase substantially as we transcend from development stage to operating stage and could be as much as $4,000,000.00 per year or more. We have conditional commitments through our subsidiaries for capital expenditures related to the first plant in Mexico and anticipate entering into further commitments to secure additional plants going forwards. We believe we will need additional funds to cover our expenses and commitments for the next twelve months. Our need for capital may change dramatically as we pursue our business plan during that period. 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.