UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended March 31, 2007
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-23530
TRANS ENERGY, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 93-0997412
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
210 Second Street, P.O. Box 393, St. Marys, West Virginia 26170
(Address of principal executive offices)
Registrant's telephone no., including area code: (304) 684-7053
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as
defined by Rule 12b-2) of the Exchange Act. Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding as of March 31, 2007
------------------------------------ --------------------------------
Common Stock, $.001 par value 9,450,565
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Table of Contents
Heading Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...................................................................3
Consolidated Balance Sheets - March 31, 2007 and
December 31, 2006 (Unaudited)......................................................4
Consolidated Statements of Operations - three months ended
March 31, 2007 and 2006 (Unaudited)................................................6
Consolidated Statements of Stockholders' Equity - three months ended
March 31, 2007 (Unaudited).........................................................7
Consolidated Statements of Cash Flows - three months ended
March 31, 2007 and 2006 (Unaudited)................................................8
Notes to Consolidated Financial Statements (Unaudited).................................9
Item 2. Management's Discussion and Analysis or Plan of Operation.............................12
Item 3. Controls and Procedures...............................................................15
PART II OTHER INFORMATION
Item 1. Legal Proceedings.....................................................................16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...........................16
Item 3. Defaults Upon Senior Securities.......................................................16
Item 4. Submission of Matters to a Vote of Securities Holders.................................16
Item 5. Other Information.....................................................................17
Item 6. Exhibits..............................................................................17
Signatures............................................................................18
-2-
PART I
Item 1. Financial Statements
The accompanying consolidated balance sheets of Trans Energy, Inc. at March
31, 2007 and December 31, 2006, related unaudited consolidated statements of
operations, stockholders' equity and cash flows for the three months ended March
31, 2007 and 2006, have been prepared by our management in conformity with
accounting principles generally accepted in the United States of America. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the consolidated results of operations and consolidated
financial position have been included and all such adjustments are of a normal
recurring nature. Operating results for the quarter ended March 31, 2007 are not
necessarily indicative of the results that can be expected for the fiscal year
ending December 31, 2007.
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TRANS ENERGY, INC.
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2007 2006
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 251,905 $ 208,815
Accounts Receivable, net of allowance for doubtful
accounts of $25,076 and $25,076, respectively 215,995 275,272
Accounts Receivable, related parties 588,000 569,600
Prepaid Expenses 1,875 22,500
----------- -----------
Total Current Assets 1,057,775 1,076,187
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $99,934 and $84,510, respectively 489,611 490,753
----------- -----------
OIL AND GAS PROPERTIES, USING SUCCESSFUL EFFORTS ACCOUNTING
Proved Properties 4,156,821 4,816,138
Unproved Properties 162,955 10,156
Pipelines 1,392,648 1,392,648
Accumulated depreciation, depletion
and amortization (1,614,717) (1,569,997)
----------- -----------
Net oil and gas properties 4,097,707 4,648,945
----------- -----------
OTHER ASSETS 99,193 35,524
----------- -----------
TOTAL ASSETS $ 5,744,286 $ 6,251,409
=========== ===========
See notes to consolidated financial statements.
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TRANS ENERGY, INC.
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2007 2006
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable, trade $ 1,152,715 $ 1,165,846
Related Party Payables 229,303 237,347
Accrued Expenses 363,368 357,781
Judgments Payable -- 118,046
Notes Payable - Related Parties 276,984 549,739
Notes Payable - Current Portion 1,008,375 1,258,381
------------ ------------
Total Current Liabilities 3,030,745 3,687,140
------------ ------------
LONG-TERM LIABILITIES
Notes Payable, net 2,259,999 1,663,509
Asset Retirement Obligation 189,973 190,364
------------ ------------
Total Long - Term Liabilities 2,449,972 1,853,873
------------ ------------
Total Liabilities 5,480,717 5,541,013
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock; 10,000,000 shares authorized
at $0.001 par value; -0- shares issued
and outstanding -- --
Common stock; 500,000,000 shares authorized
at $0.001 par value; 9,450,565 shares
issued and outstanding 9,451 9,451
Additional paid-in capital 33,858,448 33,727,680
Accumulated deficit (33,604,330) (33,026,735)
------------ ------------
Total Stockholders' Equity 263,569 710,396
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,744,286 $ 6,251,409
============ ============
See notes to consolidated financial statements.
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TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
March 31,
2007 2006
----------- -----------
REVENUES $ 285,520 $ 329,721
----------- -----------
COSTS AND EXPENSES
Production Costs 108,934 137,806
Depreciation, Depletion, and Amortization 68,495 139,750
Exploration Costs 138,750 --
Selling, General and Administrative 494,306 193,598
----------- -----------
Total Opeerating Expenses 810,485 471,154
----------- -----------
LOSS FROM OPERATIONS (524,965) (141,433)
----------- -----------
OTHER INCOME (EXPENSE)
Gain on Extinguishment of Debt 45,783 --
Interest Expense (98,412) (31,370)
----------- -----------
Total Other Income (Expense) (52,629) (31,370)
----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (577,594) (172,803)
INCOME TAXES -- --
----------- -----------
LOSS FROM CONTINUING OPERATIONS (577,594) (172,803)
INCOME FROM DISCONTINUED OPERATIONS -- 183,776
LOSS FROM DISPOSAL OF DISCONTINUED OPERATIONS -- (1,866,082)
----------- -----------
NET (LOSS) $ (577,594) $(1,855,109)
=========== ===========
LOSS PER SHARE - BASIC AND DILUTED
Continuing Operations $ (0.06) $ (0.04)
Discontinued Operations -- (0.36)
----------- -----------
Total $ (0.06) $ (0.40)
=========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 9,450,565 4,707,515
=========== ===========
See notes to consolidated financial statements.
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TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Three months ended March 31, 2007
(Unaudited)
Common Stock
---------------------------- Additional
Paid in Accumulated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
Balance, December 31,2006 9,450,565 $ 9,451 $ 33,727,680 $(33,026,736) $ 710,395
Value of options granted -- -- 130,768 -- 130,768
Net loss for the three months
ended March 31, 2007 -- -- -- (577,594) (577,594)
------------ ------------ ------------ ------------ ------------
Balance, March 31, 2007 9,450,565 $ 9,451 $ 33,858,448 (33,604,330) $ 263,569
============ ============ ============ ============ ============
See notes to consolidated financial statements.
-7-
TRANS ENERGY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
2007 2006
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (577,594) $(1,855,109)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation, depletion and amortization 68,495 139,750
Share-based compensation 130,768 --
Gain on debt extinguishment (45,783) --
Accretion expense 3,353 --
Changes in operating assets and liabilities:
Accounts receivable 40,877 169,545
Prepaid and other assets (44,375) 1,563
Accounts payable 32,652 127,535
Related party payables (8,045) --
Accrued expenses (112,458) 23,212
----------- -----------
Net cash provided (used) in operating activities
Continuing operations (512,110) (1,393,504)
Discontinued operations -- 1,430,606
----------- -----------
Net cash provided (used) in operating activities (512,110) 37,102
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of oil and gas properties 667,001 --
Expenditures for oil and gas properties (164,226) --
Expenditures for property and equipment (21,204) (18,705)
----------- -----------
Net cash provided (used) in investing activities 481,571 (18,705)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 374,380 14,540
Payments on notes payable (27,896) (22,092)
Loan fees paid (100) --
Payments on related party debt (272,755) (5,431)
----------- -----------
Net cash provided (used) by financing activities 73,629 (12,983)
----------- -----------
NET INCREASE (DECREASE) IN CASH 43,090 5,414
CASH, BEGINNING OF PERIOD 208,815 439,258
----------- -----------
CASH, END OF PERIOD $ 251,905 $ 444,672
=========== ===========
CASH PAID FOR:
Interest $ 95,060 $ 18,915
=========== ===========
Income taxes $ -- $ --
=========== ===========
See notes to consolidated financial statements.
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TRANS ENERGY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited interim condensed consolidated financial
statements have been prepared by Trans Energy, Inc. pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed
or omitted in accordance with such rules and regulations. The
information furnished in the interim condensed consolidated financial
statements includes normal recurring adjustments and reflects all
adjustments, which, in the opinion of management, are necessary for a
fair presentation of such financial statements. Although management
believes the disclosures and information presented are adequate to make
the information not misleading, it is suggested that these interim
condensed consolidated financial statements be read in conjunction with
Trans Energy's most recent audited financial statements and notes
thereto included in its December 31, 2006 Annual Report on Form 10-KSB.
Operating results for the three months ended March 31, 2007 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2007.
NOTE 2 - GOING CONCERN
Trans Energy's unaudited interim condensed consolidated financial
statements are prepared using accounting principles generally accepted
in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. Trans Energy has incurred cumulative
operating losses through March 31, 2007 of $33,604,330 and has a
working capital deficit at March 31, 2007 of $1,927,970. Revenues have
not been sufficient to cover its operating costs and to allow it to
continue as a going concern. The potential proceeds from the sale of
common stock, sale of drilling programs, and other contemplated debt
and equity financing, and increases in operating revenues from new
development and business acquisitions would enable Trans Energy to
continue as a going concern. There can be no assurance that Trans
Energy can or will be able to complete any debt or equity financing.
Trans Energy's consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 3 - CONTINGENCIES AND COMMITMENTS
On July 28, 1999, Core Laboratories, Inc. obtained a judgment against
Trans Energy for non-payment of an account payable. As of March 31,
2007, Trans Energy has satisfied this obligation in full.
On July 1, 1998, RR Donnelly obtained a judgment against Trans Energy
for non-payment of accounts payable. As of March 31, 2007, Trans Energy
has satisfied this obligation in full.
We may be engaged in various other lawsuits and claims, either as
plaintiff or defendant, in the normal course of business. In the
opinion of management, based upon advice of counsel, the ultimate
outcome of these lawsuits will not have a material impact on our
financial position or results of operations.
-9-
TRANS ENERGY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 4 - SIGNIFICANT EVENTS
Effective January 9, 2007, Trans Energy completed the sale to
Leatherwood Inc. for net cash proceeds of $667,001 of six oil and/or
gas wells located in West Virginia. Trans Energy assigned all of its
right, title, operating rights and interest including the absolute
right to produce, operate and maintain the wells.
Effective January 10, 2007, Trans Energy acquired from National Gulf
Production, Inc. 75% of National Gulf's rights and interest in and to
certain oil and gas leases covering the oil and gas in and under
certain tracts of land containing approximately 3,120 acres located in
Trego County, Kansas for cash of $146,250. In addition, cash of
$138,750 was paid in advance for our proportionate 75% share of the
seismic acquisition, processing and interpretation cost, which was
subsequently expensed. Total cash paid during the quarter for this
transaction was $285,000.
Effective February 7, 2007, Trans Energy entered into an agreement with
P.D. Farr to purchase all rights, title and interests in the 384 acre
Ezra Hays Lease in West Virginia including oil and gas wells,
associated well equipment, interest in the natural gas sales pipeline,
all rights to Dominion Gas sales meter and all pertinent rights-of-way
for $138,000. On December 16, 2006, Trans Energy paid the sum of
$10,000 as a down payment to be applied against the purchase price,
with the unpaid balance of $128,000 due in installments, to be paid in
full by July 10, 2007. During the quarter ended March 31, 2007, $15,000
in cash payments had been made and the unpaid balance at March 31, 2007
was $113,000.
NOTE 5 - RELATED PARTIES
Marketing Agreement - Sancho
Natural gas delivered through Trans Energy's pipeline network is sold
either to Sancho Oil and Gas Corporation ("Sancho"); a company
controlled by the Vice President of Trans Energy, to Dominion Gas, a
local utility, on an on-going basis at a variable price per month per
Mcf.
Under its contract with Sancho, Trans Energy has the right to sell
natural gas subject to the terms and conditions of a 20-year contract,
as amended, that Sancho entered into with Dominion Gas in 1988. This
agreement is a flexible volume supply agreement whereby Trans Energy
receives the full price which Sancho charges the end user less a $0.05
per Mcf marketing fee paid to Sancho.
NOTE 6 -NOTES PAYABLE
On January 10, 2007, Trans Energy repaid a short term related party
note, dated September 11, 2006, bearing interest at the rate of 10% per
annum, with cash in the amount of $270,000 plus accrued interest, for a
total paid of $278,951.
Trans Energy maintains a credit facility that provides for aggregate
borrowings of $3,000,000 of which funds are designated for our workover
program in Wetzel County, West Virginia, and is secured by those wells.
Any borrowings under this facility will bear interest at 7.5%. During
the quarter ended March 31, 2007, Trans Energy received additional
borrowings in the amount of $360,000, leaving an unused credit facility
of $2,187,745.
-10-
TRANS ENERGY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 7 - BUSINESS SEGMENTS
The Company conducts its operations principally as oil and gas sales
with Trans Energy and Prima Oil Company, and pipeline transmission with
Ritchie County Gathering Systems and Tyler Construction Company.
Certain financial information concerning our operations in different
industries is as follows:
For the
Quarter Ended Oil and Gas Pipeline
March 31, Sales Transmission
------------- ----------- -------------
Oil and gas revenue 2007 $ 215,366 $ 70,154
2006 245,747 83,974
Loss from operations applicable 2007 325,329 199,636
to industry segment 2006 117,160 24,273
Interest Expense 2007 91,825 6,587
2006 31,003 367
Gain on extinguishment of debt 2007 45,783 --
2006 -- --
Assets (net of intercompany accounts) 2007 5,030,925 713,361
2006 2,516,498 1,458,499
Depreciation, depletion and 2007 61,735 6,760
amortization 2006 136,490 3,260
Property and equipment 2007 181,930 3,500
acquisitions 2006 18,705 --
-11-
Item 2. Management's Discussion and Analysis or Plan of Operation
Recent Developments
Sale of Leatherwood Assets
--------------------------
On January 9, 2007 Trans Energy, Inc. completed the assignment for cash
of $667,001 to Leatherwood, Inc., a Pennsylvania corporation, of six oil and/or
gas wells located in Mannington District, Marion County, West Virginia. The
assigned wells are designated as follows: O.N. Koen No. 1, Moffett No. 2, Simon
Moore No. 3, Simon Moore No. 1, Simon Moore No. 2 and W.T. Morris No. 2.
Trans Energy assigned all of its right, title, operating rights and
interest in and to the aforementioned wells, including the absolute right to
produce, operate and maintain the wells. The assignment is by good and
sufficient general warranty assignment, free and clear of all liens and
encumbrances and includes the entire working interest, all wells, equipment,
personal property, gathering and distribution pipelines and other fixtures and
improvements located on the property.
Leatherwood becomes responsible for the plugging and abandoning of the
acquired wells, as necessary, and for any reclamation of the lands after
plugging and abandoning operations are completed. All plugging and abandoning
operations will be done in accordance with the applicable rules and regulations
of the State of West Virginia or other jurisdictional authorities.
Upon effectiveness of the assignment of the lease, all production,
revenue, costs, expenses and other liabilities attributable to the assigned
wells will belong to Leatherwood. For a period of one year following the
effective date, Trans Energy will have the right, at its sole cost and expense,
to permit and drill one or more oil and gas wells located on tow of the assigned
properties.
Purchase of Acreage in Kansas
-----------------------------
On January 10, 2007, Trans Energy acquired from National Gulf
Production, Inc. of Giddings, Texas, 75% of National Gulf's rights and interest
in and to certain oil and gas leases covering the oil and gas in and under
certain tracts of land containing approximately 3,120 acres located in Trego
county, Kansas. National Gulf originally acquired the leases pursuant to a
farmout agreement with Wevco Production, Inc. In connection with the agreement,
Trans Energy and National Gulf will acquire certain 3-D seismic data on the
subject leases.
In consideration for the leases Trans Energy paid its proportionate 75%
of the farmout fee for cash of $146,250. In addition, cash of $138,750 was paid
in advance for our proportionate 75% share of the seismic acquisition,
processing and interpretation cost, which was subsequently expensed. Total cash
paid during the quarter for this transaction was $285,000.
The lease has a reservation by Wevco of an overriding royalty interest
of 3.5% and the right, but not the obligation, to participate up to 25% at cost,
in the wells drilled by National Gulf and Trans Energy. There will also be an
overriding royalty interest of 1% to the Project Geophysicist and National Gulf
will retain an overriding royalty interest of 2%, resulting in an 81% working
interest. National Gulf will also earn a 6.15% carried working interest.
Upon completion of each well capable of commercial production, Trans
Energy will be entitled to receive an assignment of its proportionate share of
the 20 acre producing unit, or other unit size as may be directed or allowed by
the State. This assignment will be made without warranty of title, express or
implied.
From the date of the agreement Trans Energy and National Gulf will have
one year to drill the first well and will also have an option for six months
-12-
after completion of any well to drill another well, until all drillable 20 acre
units in the leases are drilled. In the event Trans Energy and National Gulf do
not drill the first well within one year, or do not drill subsequent wells
within the prescribed six month periods, then this agreement terminates with
respect to all undrilled areas, unless such failure to perform is due to an act
of God, labor disputes, riots, or any other cause beyond the control of the
parties. In such an event, the required time to perform would be extended for
the period of the interruption.
Trans Energy and National Gulf will enter into a mutually acceptable
participation and operating agreement, whereby National Gulf will be the
Operator and will drill and operate the wells that are drilled on the leases.
Results of Operations
The following table sets forth the percentage relationship to total
revenues of principal items contained in our consolidated statements of
operations for the three month period ended March 31, 2007 and 2006. It should
be noted that percentages discussed throughout this analysis are stated on an
approximate basis.
Three Months Ended
March 31,
2007 2006
(Unaudited)
-----------
Total revenues................................... 100% 100%
Total costs and expenses......................... 286 146
Loss from operations ............................ (186) (46)
Other income (expense)........................... (18) (8)
Discontinued operations.......................... -0- (520)
Net loss......................................... (204) (574)
Total revenues from continuing operations for the three months ("first
quarter") ended March 31, 2007 decreased 15% compared to the first quarter of
2006, primarily due to decreased production and lower oil and gas prices, as
well as the sale of the Wyoming wells. We have focused our efforts during the
first quarter of 2007 on a workover program on our wells located in Wetzel
County, West Virginia. We expect production to increase from this workover
program during the second quarter of 2007.
Similarly, depreciation, depletion and amortization and accretion
expense decreased 30% due to the lower production levels from our existing
wells, as well as the increase in proved reserves at December 31, 2006.
Our loss from operations for the first quarter of 2007 was $577,594
compared to a loss of $172,803 for the first quarter of 2006. The increase is
related to higher general and administrative expenses due to the hiring of
additional employees and the seismic acquisition in Kansas, as well as an
increase in expenses related to the workover program.
Our net loss for the first quarter of 2007 was $577,594 compared to a
loss of $1,855,109 for the first quarter of 2006. We recorded a loss from
discontinued operations in 2006 of $1,682,306 due to the disposal of Arvilla.
For the remainder of fiscal year 2007, management expects selling,
general and administrative expenses to remain at approximately the same rate as
the first quarter of 2007. The cost of oil and gas produced is expected to
fluctuate with the amount produced and with prices of oil and gas, and
management anticipates that revenues are likely to increase during the remainder
of 2007. We do not expect to recognize a gain from the sale of properties during
the remainder of 2007.
-13-
Liquidity and Capital Resources
Historically, we have satisfied our working capital needs with
operating revenues and from borrowed funds. At March 31, 2007, we had a working
capital deficit of $1,972,970 compared to a deficit of $2,610,953 at December
31, 2006. This 24% decrease in working capital deficit is primarily attributed
to the sale of wells in Marion County from which we realized cash of $667,001.
During the first three months of 2007, operating activities used net
cash of $512,110 compared to net cash provided of $37,102 for the same period of
2006. This increased negative cash flow is primarily attributable to decreased
revenues and our decision to pay off the outstanding judgments, as well as
increased expenses related to the workover program and the seismic acquisition
in Kansas.
Net cash provided by investing activities for the first three months of
2007 was $481,571. $185,430 of cash was used for the purchase of oil and gas
properties and equipment and cash of $667,001 was received from the sale of
wells compared to net cash used of $18,705 to purchase equipment in 2006.
During the first three months of 2007, we were provided net cash in
financing activities of $73,629 compared to net cash used of $12,983 in the same
period of 2006. In 2007, we borrowed $374,380 and repaid $300,651 in notes
payable.
We anticipate meeting our working capital needs during the remainder of the
current fiscal year with revenues from our ongoing operations, particularly from
our wells in Wetzel, Marion and Doddridge Counties, West Virginia and new third
party natural gas wells drilled in West Virginia, which gas goes into our 6-inch
pipeline. In the event revenues are not sufficient to meet our working capital
needs, we will explore the possibility of additional funding from either the
sale of debt or equity securities. There can be no assurance such funding will
be available to us or, if available, it will be on acceptable or favorable
terms. In addition, we have an available credit facility of $2,187,745 which we
plan to use to complete our workover program on our wells in Wetzel County, West
Virginia.
As of March 31, 2007, we had total assets of $5,744,286 and total
stockholders' equity of $263,569 compared to total assets of $6,251,409 and
total stockholders' equity of $710,396 at December 31, 2006. The decrease in
total assets was primarily due to the sale of wells in Marion County. The
decrease in stockholders' equity was due to the operating losses during the
quarter.
Because we have incurred significant cumulative operating losses
through March 31, 2007 and have a working capital deficit at March 31, 2007 of
$1,972,970, there exists substantial doubt about our ability to continue as a
going concern. Historically, our revenues have not been sufficient to cover
operating costs. However, we may potentially need to rely on proceeds from the
sale of common stock, debt or equity financing, and increased operating revenues
from new developments to allow us to continue as a going concern. There can be
no assurance that we can or will be able to complete any debt or equity
financing.
We included a footnote to our financial statements for the period ended
December 31, 2006 stating that because of our continued losses, working capital
deficit, and need for additional funding, there is substantial doubt as to
whether we can continue as a going concern.
Inflation
In the opinion of our management, inflation has not had a material
effect on our operations.
-14-
Forward-looking and Cautionary Statements
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements may relate to such
matters as anticipated financial performance, future revenues or earnings,
business prospects, projected ventures, new products and services, anticipated
market performance and similar matters. When used in this report, the words
"may," "will," "expect," "anticipate," "continue," "estimate," "project,"
"intend," and similar expressions are intended to identify forward-looking
statements regarding events, conditions, and financial trends that may affect
our future plans of operations, business strategy, operating results, and our
future plans of operations, business strategy, operating results, and financial
position. We caution readers that a variety of factors could cause our actual
results to differ materially from the anticipated results or other matters
expressed in forward-looking statements. These risks and uncertainties, many of
which are beyond our control, include:
o the sufficiency of existing capital resources and our ability to raise
additional capital to fund cash requirements for future operations;
o uncertainties involved in the rate of growth of our business and
acceptance of any products or services;
o volatility of the stock market, particularly within the energy sector;
and
o general economic conditions.
Although we believe the expectations reflected in these forward-looking
statements are reasonable, such expectations cannot guarantee future results,
levels of activity, performance or achievements.
Item 3. Controls and Procedures
We maintain disclosure controls and procedures that are designed to be
effective in providing reasonable assurance that information required to be
disclosed in our reports under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC, and that such information is accumulated and
communicated to our management to allow timely decisions regarding required
disclosure.
In designing and evaluating disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable, not absolute assurance of
achieving the desired objectives. Also, the design of a control system must
reflect the fact that there are resource constraints and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, have
been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. The design of any system of controls is based, in part, upon
certain assumptions about the likelihood of future events and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of management,
including our chief executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
Based upon that evaluation, management concluded that our disclosure controls
and procedures are effective to cause the information required to be disclosed
by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods prescribed by SEC,
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and that such information is accumulated and communicated to management,
including our chief executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.
There was no change in our internal controls over financial reporting
identified in connection with the requisite evaluation that occurred during our
last fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II
Item 1. Legal Proceedings
Information concerning certain material pending legal proceedings to
which we are a party, or to which any of our property is subject, is set forth
below:
On September 22, 2000, Tioga Lumber Company obtained a judgment of
$43,300 plus interest in the Circuit Court of Pleasants County, West Virginia,
against Tyler construction Company for breach of contract. On February 28, 2002,
we reached a negotiated payment schedule with Tioga and made the initial
payment. We believe that we have satisfied the balance owed to Tioga of
$26,233.58, although the judgment has not yet been released. We are proceeding
to secure the release of the judgment.
On July 28, 1999, Core Laboratories, Inc. obtained a judgment against
the company for non-payment of an account payable. At March 31, 2007, the
Company has satisfied this obligation in full.
On July 1, 1998, RR Donnelly obtained a judgment against the Company
for non-payment of accounts payable. At March 31, 2007, the Company has
satisfied this obligation in full.
We may be engaged in various other lawsuits and claims, either as
plaintiff or defendant, in the normal course of business. In the opinion of
management, based upon advice of counsel, the ultimate outcome of these lawsuits
will not have a material impact on our financial position or results of
operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our securities holders during the first
quarter ended March 31, 2007.
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Item 5. Other Information
The following reports were filed with the SEC on Form 8-K during the
tree month period ended March 31, 2007.
January 9, 2007 - reporting under Item 2.01 the completion of
disposition of certain wells in Marion County, West
Virginia.
Item 6. Exhibits
Exhibit 31.1 Certification of C.E.O. Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Principal Accounting Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Exhibit 32.1 Certification of C.E.O. Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2 Certification of Principal Accounting Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS ENERGY, INC.
Date: May 15, 2007 By /S/ JAMES K. ABCOUWER
----------------------------------------
JAMES K. ABCOUWER
Chief Executive Officer and Director
Date: May 15, 2007 By /S/ LISA A. CORBITT
----------------------------------------
LISA A. CORBITT
Controller, Principal Financial Officer
(Principal Accounting Officer)
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