UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB
(Mark One)

[X]  Annual Report  Pursuant to Section 13 or 15(d) of The  Securities  Exchange
     Act of 1934

                   For the Fiscal Year Ended December 31, 2005

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of The  Securities
     Exchange Act of 1934

                         Commission File Number 0-23530

                               TRANS ENERGY, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

             Nevada                                            93-0997412
-------------------------------                            --------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

         210 Second Street, P.O. Box 393, St. Marys, West Virginia 26170
               (Address of principal executive offices) (Zip Code)

Issuer's telephone no.:  (304) 684-7053

Securities registered pursuant to Section 12(b) of the Exchange Act:   None

Securities registered pursuant to Section 12(g) of the Exchange Act:   Common

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act 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 [
]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the best of the  Registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     State the issuer's revenues for its most recent fiscal year. $ 4,797,201

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and ask  prices  of such  stock  as of a  specified  date  within  60  days.
$1,233,094 (Based on price of $0.61 per share on May 12, 2006)

     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, 2006
 -----------------------                        --------------------------------
 Common Stock, Par Value                                   4,707,515
     $.001 per share

                       DOCUMENTS INCORPORATED BY REFERENCE

                       A description of "Documents Incorporated by Reference" is
contained in Part III, Item 13.

Transitional Small Business Disclosure Format.   Yes [ ]  No [X]

<PAGE>

<TABLE>
<CAPTION>

                               TRANS ENERGY, INC.

                                TABLE OF CONTENTS

                                                                                                       Page

                                                         PART I

<S>               <C>                                                                              <C>
Item 1.           Description of Business .......................................................        3

Item 2.           Description of Property........................................................       15

Item 3.           Legal Proceedings..............................................................       17

Item 4.           Submission of Matter to a Vote of Security Holders.............................       17

                                                         PART II

Item 5.           Market for Common Equity and Related Stockholder Matters.......................       17

Item 6.           Management's Discussion and Analysis or Plan of Operation......................       18

Item 7.           Financial Statements...........................................................       21

Item 8.           Changes in and Disagreements with Accountants on Accounting and
                  Financial Disclosure...........................................................       21

Item 8A.          Controls and Procedures........................................................       21

Item  8B          Other Information..............................................................       21


                                                        PART III

Item 9.           Directors, Executive Officers, Promoters and Control persons;
                  Compliance with Section 16(a) of the Exchange Act..............................       22

Item 10.          Executive Compensation.........................................................       23

Item 11.          Security Ownership of Certain Beneficial Owners and Management.................       24

Item 12.          Certain Relationships and Related Transactions.................................       24

Item 13.          Exhibits.......................................................................       25

Item 14.          Principal Accountant Fees and Services.........................................       26

                  Signatures.....................................................................       27
</TABLE>


                                       -2-
<PAGE>
                                     PART I

Item 1.  Description of Business

History

     Trans  Energy,  Inc.  is  engaged  in  the  transportation,  marketing  and
production  of natural gas and oil,  and  certain  exploration  and  development
activities.  We own and  operate  approximately  93 oil and  gas  wells  in West
Virginia  We also own and  operate an  aggregate  of over 20 miles of 4-inch and
6-inch gas  transmission  lines located  within West Virginia in the Counties of
Ritchie and Tyler.  This pipeline system gathers natural gas produced from these
wells and from wells owned by third parties.  We also have approximately  10,000
gross acres under lease in West Virginia in the counties of Wetzel and Tyler.

     On November 29, 2004,  our board of directors  and  stockholders  holding a
majority of our  outstanding  common  stock  approved a one share for 150 shares
reverse split of our common stock. The reverse split was effected on January 28,
2005.

     Our principal  executive offices are located at 210 Second Street, P.O. Box
393, St. Marys, West Virginia 26170, and our telephone number is (304) 684-7053.

Recent Events

     Sale of Cobham Assets

     On September 1, 2005,  together with our wholly owned  subsidiary Prima Oil
Company,  Inc.,  we finalized  the sale of certain  assets to Texas Energy Trust
Company and its trustee,  George  Hillyer  ("Buyer").  These assets  include the
following:

     *   Certain  leases for the  production  of oil and  natural gas located in
         Marion County, West Virginia (the "Marion County Leases");

     *   Certain oil or natural gas wells  located on the Marion  County  Leases
         (the "Marion  County  Wells"),  together  with all of the equipment and
         other  tangible  personal  property  physically  attached to any of the
         wells,  including all pipelines,  rights of way,  easements,  well head
         equipment and leasehold estates;

         * Certain  vehicles and other  equipment,  parts,  inventories and hand
tools;

     *   Miscellaneous  well logs,  maps,  production  data,  sales  records and
         histories, royalty payment records and other information concerning the
         Marion County Leases and Marion County Wells;

     *   A $50,000  reclamation  bond pursuant to which all of the Marion County
         Wells, and others, are permitted;

     *   Certain cash and trade accounts receivable  generated by the operations
         and results of operations of the Marion County Leases and Marion County
         Wells, realized on or after August 1, 2005; and

     *   All the outstanding  capital common stock of Cobham Gas Industries held
         by Trans Energy, Inc. or any of our affiliates.

     The assets are a portion of those  total  Cobham Gas assets we  acquired in
November  2004. In  consideration  for the above  referenced  assets,  the Buyer
provided the following to us:

                                      -3-
<PAGE>

     *   The return to us of 244,633 shares of Trans Energy,  Inc.  common stock
         initially  issued to Buyer in January  2005 and which  shares are to be
         valued  at the  closing  price  per  share of our  common  stock on the
         closing date;

     *   The return to us of all of Buyer's options,  warrants and future rights
         to acquire any securities of Trans Energy or any of our affiliates;

     *   We retain  the  right to use  through  December  31,  2005 the  $50,000
         reclamation  bond in order to comply with certain West Virginia bonding
         requirements; and

     *   Buyer will assume  responsibility  for the payment of certain  loans in
         the amount of  $96,839,  the  liabilities  related to the  plugging  of
         certain of the Marion County Wells,  all expenses related to operation,
         maintenance  and  ownership of the Marion  County Leases and the Marion
         County Wells incurred on or after August 1, 2005.

     In addition to the above,  we have agreed to fulfill the remaining  payment
obligations to Buyer under that certain agreement dated November 5, 2004, and we
will retain  responsibility  for the payment of certain  debts related to Cobham
Gas Industries.

     Sale of Arvilla
     ---------------

     On April 7, 2006, we finalized the agreement to sell our well servicing and
maintenance  business  in  exchange  for shares of Trans  Energy  common  stock,
certain  natural gas properties and other  considerations,  which  agreement was
initially  entered into on January 3, 2006.  Part of the reason for the sale was
the  inability  of our board of  directors  to agree on the  direction  of Trans
Energy  with  Arvilla  as a  significant  subsidiary.  Under  the  terms  of the
definitive  agreement,  our  wholly  owned  subsidiary,  Arvilla,  Inc.  sold to
Clarence E. Smith and Rebecca L. Smith, both directors of Trans Energy,  100% of
the outstanding  membership interests of Arvilla Oilfield Services,  LLC, a West
Virginia limited liability company ("AOS").

     AOS provides well servicing,  workover and related transportation  services
to  independent  oil and natural gas  producers in the  northeast  region of the
United  States.  It  also  performs  ongoing  maintenance  and  major  overhauls
necessary to optimize the level of production  from existing oil and natural gas
wells and provides certain ancillary services during the drilling and completion
of new wells. AOS offers its services in Ohio, Pennsylvania, New York, Virginia,
Kentucky and West Virginia and also owns a fleet of well service equipment.

     We  originally  acquired AOS from Clarence and Rebecca Smith on January 31,
2005 through a merger of our  subsidiary,  Trans Energy  Acquisitions,  with and
into Arvilla,  Inc., with Arvilla being the surviving  entity. As consideration,
we issued  1,185,024  shares of our common stock, of which 1,042,821 shares were
issued to the Smiths,  both of whom became  directors of Trans Energy  following
the acquisition.  AOS's  operations were previously  conducted as Arrow Oilfield
Service  Company,  a division of Belden & Blake  Corporation,  a privately  held
company  engaged  in the  exploration,  development  and  production  of oil and
natural gas In June 2004, the Smiths  acquired Arrow  Oilfield  Service  Company
from Belden & Blake and created Arvilla Oilfield Services,  LLC as the operating
entity.  Subsequently,  the Smiths created  Arvilla,  Inc. that acquired all the
membership  interests of Arvilla  Oilfield  Services in order to facilitate  its
acquisition by Trans Energy.

     As a result of consummating the definitive agreement,  Clarence and Rebecca
Smith  returned to us 521,411  shares of their Trans Energy  common  stock.  The
Smiths have also  conveyed to Trans Energy all of their  interest in and to five
oil and gas wells located in Tyler County,  West Virginia.  Assignments  for the
wells  originally was to be held in escrow pending  satisfaction by Trans Energy
of two promissory  notes in the aggregate  amount of $763,000 payable to AOS and
to Arvilla Pipeline  Construction Co., Inc., a separate entity owned by Clarence
and Rebecca  Smith.  However,  pursuant  to the First  Amendment  to  Definitive
Agreement, the parties agreed that the wells would be transferred at the closing
and we agreed to pay AOS $176,239 on or before  April 30, 2006,  and pay Arvilla


                                      -4-
<PAGE>

Pipeline $115,000 on or before April 30, 2006. To secure these payments by Trans
Energy,  Clarence and Rebecca Smith will hold a lien on a certain Lyon Leasehold
Deed of Trust until the debt is satisfied.

     An  additional  term of the  definitive  agreement  provided  that  each of
Clarence and Rebecca Smith received  bonuses equal to approximately  $85,000.  A
further  condition of the closing  included the written  consent for the sale of
AOS from  certain  banks  and  lenders  having  the  right to call a loan on the
ownership transfer of AOS.

     Upon execution of the definitive agreement,  Clarence Smith resigned as our
Chief  Executive  Officer,  but  remained  on our board of  directors  until the
closing.  At the closing,  both Clarence and Rebecca Smith resigned as directors
of Trans Energy and Arvilla,  Inc.  Clarence and Rebecca  Smith have also agreed
not to sell an amount of their  remaining  Trans Energy common stock during each
calendar quarter on or after March 22, 2006, in an aggregate amount greater that
(i) 50,000  shares  (adjusted for stock splits or stock  dividends;  or (ii) one
percent of the total outstanding shares of Trans Energy common stock on the date
of any such sale.

     Finally,  the closing of the transaction  was expressly  conditioned on the
receipt of a fairness  opinion from a qualified  independent  party stating that
the  transactions  contemplated  by the  definitive  agreement are fair to Trans
Energy and our  stockholders.  That  opinion was issued and  delivered  to Trans
Energy on March 31, 2006.

Sale of Wyoming Wells and Properties
------------------------------------

     In April 2006, we finalized a definitive  Agreement for Sale of Oil and Gas
Properties  related  to the sale of all of our  holdings  in  Wyoming  including
certain wells,  overriding royalties and undeveloped acreage located in Campbell
County,  Wyoming.  The assets have been sold at public auction through the Oil &
Gas  Asset  Clearinghouse  in  Houston,  Texas.  The gross  sales  price for the
properties is $1,003,000.

     The wells sold by us, all located in Campbell County, Wyoming,  include the
Pinion Fee #1, Sagebrush  Federal #1, Sagebrush Federal #2, Sagebrush Federal #3
(injector),  Boley #31-36 Sandbar,  State #1-36 Sandbar and State #2-36 Sandbar.
Also  included in the sales were  overriding  royalties on two wells  (Sagebrush
Federal #1 and  Sagebrush  Federal #2) and Tract  TR4-B,  and 2,530  undeveloped
acres, also located in Campbell County.

Business History

     Our business strategy is to economically increase reserves,  production and
the sale of gas and oil from existing and acquired properties in the Appalachian
Basin and  elsewhere,  in order to maximize  shareholders'  return over the long
term. Our strategic  location in West Virginia enables us to actively pursue the
acquisition  and  development  of  producing  properties  in that area that will
enhance our revenue base without proportional increases in overhead costs.

     We operate oil and natural gas  properties and transport and market natural
gas through  our  transmission  systems in West  Virginia.  Although  management
desires to acquire  additional oil and natural gas properties and to become more
involved in exploration and development, this can only be accomplished if we can
secure future  funding.  Management  intends to continue to develop and increase
the  production  from oil and natural gas  properties  that we currently own. We
will continue to transport and market natural gas through our pipelines.  During
2004 we sold approximately 7.6 miles of our 6-inch pipeline and approximately 10
miles of our 4-inch pipeline for cash and other consideration.  In 2004, we sold
approximately 3 miles of 6-inch pipeline and  approximately  5.7 miles of 4-inch
pipeline.

     Cobham Gas Industries, Inc.
     ---------------------------

     On November 5, 2004,  we  finalized  an  agreement  with Texas Energy Trust
Company,  a Delaware  Business Trust with offices in Irving,  Texas,  whereby we
acquired  certain oil and gas leases and leasehold  interests  located in Wetzel
and Marion Counties,  West Virginia, and other assets. Our acquisition of Cobham
includes its two subsidiaries,  Penine Resources,  Inc. and Belmont Energy, Inc.


                                      -5-
<PAGE>

The  acquisition  was  accomplished  by our wholly owned  subsidiary,  Prima Oil
Company,  Inc.,  acquiring  from  Texas  Energy  Trust  100% of the  issued  and
outstanding  shares (2,100  shares) of Cobham Gas  Industries,  Inc., a Delaware
corporation.  Under the  terms of the  agreement,  we  acquired  certain  wells,
leases, pipelines, gas purchase agreements,  oil hauling agreements,  equipment,
right of ways and other  miscellaneous  items  related to the leases  located in
West Virginia.  A total of 229 wells were  acquired,  of which 98 are producing,
located on  approximately  15,000  leased acres.  Among the assets  acquired are
certain vehicles and heavy equipment and various other drilling equipment.

     In  consideration  for the acquired  property,  we paid a purchase price of
$892,344, of which approximately  $489,000 is payable in cash and the balance in
244,633 shares of restricted Trans Energy common stock, post-split, to be issued
following the  effectiveness of our one share for 150 shares reverse stock split
in January 2005. An initial payment of $250,000 was paid at the closing with the
remaining balance to be paid quarterly in equal  installments  beginning January
1, 2005, with the final payment due October 1, 2005.

     The wells are situated in well defined  fields  producing  from the shallow
Devonian formation.  Big Injun, Gordon and Thirty Foot are sands in the Devonian
foundation  that have produced  substantial  natural gas in West  Virginia.  The
field/acreage   positions   consist  of  three   specific   areas;   Mannington,
Smithfiled/Wallace  and Dents Run. The  Mannington  field  consists of 107 wells
encompassing  4,573  acres.  These wells are Big Injun wells,  at  approximately
2,900 - 3,000 feet in depth,  dependent  on  elevation.  The  Smithfield/Wallace
field consists of 92 wells  encompassing 9,223 acres. The preponderance of these
wells are Big Injun wells, although there are several Gordon wells in the field.
Management  believes  that future  development  can expand the Gordon and Bayard
play. The Dents Run field consists of 30 wells  encompassing  1,097 acres. These
wells are completed through the Thirty Foot sand.

     On September 1, 2005,  together with our wholly owned  subsidiary Prima Oil
Company,  Inc.,  we finalized  the sale of certain  assets to Texas Energy Trust
Company and its trustee,  George  Hillyer  ("Buyer").  These assets  include the
following:

     *   Certain  leases for the  production  of oil and  natural gas located in
         Marion County, West Virginia (the "Marion County Leases");

     *   Certain oil or natural gas wells  located on the Marion  County  Leases
         (the "Marion  County  Wells"),  together  with all of the equipment and
         other  tangible  personal  property  physically  attached to any of the
         wells,  including all pipelines,  rights of way,  easements,  well head
         equipment and leasehold estates;

     *   Certain  vehicles  and other  equipment,  parts,  inventories  and hand
         tools;

     *   Miscellaneous  well logs,  maps,  production  data,  sales  records and
         histories, royalty payment records and other information concerning the
         Marion County Leases and Marion County Wells;

     *   A $50,000  reclamation  bond pursuant to which all of the Marion County
         Wells, and others, are permitted;

     *   Certain cash and trade accounts receivable  generated by the operations
         and results of operations of the Marion County Leases and Marion County
         Wells, realized on or after August 1, 2005; and

     *   All the outstanding  capital common stock of Cobham Gas Industries held
         by Trans Energy, Inc. or any of our affiliates.

     In consideration  for the above referenced  assets,  the Buyer provided the
following to us:

                                      -6-
<PAGE>

     *   The return to us of 244,633 shares of Trans Energy,  Inc.  common stock
         initially  issued to Buyer in January  2005 and which  shares are to be
         valued  at the  closing  price  per  share of our  common  stock on the
         closing date;

     *   The return to us of all of Buyer's options,  warrants and future rights
         to acquire any securities of Trans Energy or any of our affiliates;

     *   We retain  the  right to use  through  December  31,  2005 the  $50,000
         reclamation  bond in order to comply with certain West Virginia bonding
         requirements; and

     *   Buyer will assume  responsibility  for the payment of certain  loans in
         the amount of  $96,839,  the  liabilities  related to the  plugging  of
         certain of the Marion County Wells,  all expenses related to operation,
         maintenance  and  ownership of the Marion  County Leases and the Marion
         County Wells incurred on or after August 1, 2005.

     In addition to the above,  we have agreed to fulfill the remaining  payment
obligations to Buyer under that certain agreement dated November 5, 2004, and we
will retain  responsibility  for the payment of certain  debts related to Cobham
Gas Industries.

     Powder River Basin Wyoming
     --------------------------

     On March 6, 1998,  we  entered  into an  agreement  to  purchase  from GCRL
Energy, Ltd. all of its interest in the Powder River Basin in Campbell and Crook
Counties,  Wyoming, consisting of interests in five (5) wells, four (4) of which
are  producing,   interests  in  30,000   leasehold   acres,  and  interests  in
approximately  seventy-three  miles of 3-D seismic data. The properties  include
three  producing  fields from  Minnelusa  Sandstone  and were  discovered on 3-D
seismic.  We made an initial  payment  for the  properties  of  $50,000  and the
balance of $2,987,962 was paid for with proceeds from the sale of debentures.

     The  following  table sets forth  information  concerning  the existing oil
production per day of the producing wells located on the GCRL property.

                               Gross Bbls.       Net %              Net Bbls.
Name of Well                 Oil Per Day        to TENG            to TENG
------------                 -----------        -------            -------
Sagebrush Flat (one unit)          61              42.15%           26
Pinon Fee #1                       19              51.2%             9
Swartz Draw                        27              27.7%             7
                               ------                             ----
        Total                     107                               42

In April 2006,  we  finalized  a  definitive  Agreement  for Sale of Oil and Gas
Properties  related  to the sale of  certain  wells,  overriding  royalties  and
undeveloped  acreage located in Campbell County,  Wyoming.  The assets have been
sold at public  auction  through the Oil & Gas Asset  Clearinghouse  in Houston,
Texas. The gross sales price for the properties is $1,003,000.

The wells sold by us, all  located in  Campbell  County,  Wyoming,  include  the
Pinion Fee #1, Sagebrush  Federal #1, Sagebrush Federal #2, Sagebrush Federal #3
(injector),  Boley #31-36 Sandbar,  State #1-36 Sandbar and State #2-36 Sandbar.
Also  included in the sales were  overriding  royalties on two wells  (Sagebrush
Federal #1 and  Sagebrush  Federal #2) and Tract  TR4-B,  and 2,530  undeveloped
acres, also located in Campbell County.

Current Business Activities

     We operate our oil and  natural gas  properties  and  transport  and market
natural  gas  through  our  transmission  systems  in  West  Virginia.  Although
management  desires to acquire  additional oil and natural gas properties and to
become  more  involved  in  exploration  and  development,   this  can  only  be
accomplished if we can secure future funding.  Management intends to continue to
develop and increase the production from the oil and natural gas properties that
it currently owns.

                                      -7-
<PAGE>

     We will  continue to transport  and market  natural gas through our various
pipelines in 2006.  During 2005, we purchased a 5% working interest in 14 Benson
wells in Tyler County,  West Virginia and drilled one well in Doddridge  County,
West Virginia, of which we own a 100% working interest.

     Arvilla Oilfield Services

     On January 31,  2005,  we finalized  the  acquisition  of Arvilla  Oilfield
Services,  LLC through a merger of our  subsidiary,  Trans Energy  Acquisitions,
with and into  Arvilla,  Inc.,  with  Arvilla,  Inc.  being the  survivor of the
merger.  Previously  in June 2004,  Clarence  E. Smith and  Rebecca L. Smith had
acquired  Arrow  Oilfield  Services  Company  from  Belden  & Blake  Corporation
("B&B"),  a privately held company engaged in the  exploration,  development and
production  of oil and natural gas  reserves.  Mr. and Mrs.  Smith  subsequently
created Arvilla Oilfield Services,  LLC as the operating entity and then created
Arvilla,  Inc., that acquired all the membership  interests of Arvilla  Oilfield
Services,  LLC.  Thus,  by  acquiring  Arvilla,  Inc.,  we  assumed  all  of the
operations, assets and liabilities of Arvilla Oilfield Services.

     In order to consummate the acquisition of Arvilla, on November 29, 2004 our
board of directors and stockholders holding a majority of our outstanding common
stock,  approved a one share for 150 shares  reverse  split of our common stock.
The reverse split was effected on January 28, 2005.

     In  consideration  for  Arvilla,   Inc.,  we  issued  1,185,024  shares  of
post-split  Trans Energy  common stock to the  following  Arvilla  stockholders:
Clarence E. Smith, 531,437 shares; Rebecca L. Smith 531,437 shares and Howell B.
Williams,  122,150 shares. These shares represent approximately 25% of our total
outstanding shares (post-split)  following the transaction,  including shares to
be  issued  in  connection  with the  separate  acquisition  of the  Cobham  Gas
Industries assets. Arvilla, Inc. will operate as a separate business entity 100%
owned by Trans Energy.

     Business of Arvilla
     -------------------

     Arvilla  is engaged in  providing  well  servicing,  workover  and  related
transportation  services to  independent  oil and natural gas  producers  in the
northeast region of the United States.  Arvilla performs ongoing maintenance and
major overhauls  necessary to optimize the level of production from existing oil
and  natural  gas wells and  provides  certain  ancillary  services  during  the
drilling  and  completion  of new wells.  Arvilla  offers its  services in Ohio,
Pennsylvania, New York, Virginia, Kentucky and West Virginia.

     Typically,  Arvilla will provide a well  servicing or swab rig, the crew to
operate the rig, and such other specialized equipment as may be needed to meet a
customer's requirements. Arvilla also owns a fleet of equipment that provides:

     *   brine hauling and disposal;
     *   pipeline and facility construction;
     *   well location preparation and lease road construction;
     *   oil hauling; and
     *   trucking of oilfield equipment, such as rigs, casings, tubing and rods.

     Arvilla's service area is located within 500 miles of major gas markets for
the United States. This strategic location is important as oil and gas companies
develop  natural gas  reserves  for future  markets.  Arvilla  provides  various
services to the oil and gas industry that include:

     Trucking  services.  Arvilla  owns a  fleet  of  trucks  that  can  provide
     customers with the ability to move equipment,  tanks, drill pipe, and other
     types of trucking needs necessary in the oil and gas business.  Each time a
     well is drilled,  all drilling  equipment  must be moved by trucks from one
     site to the next. This equipment  includes  generators,  water pumps, drill
     pipe, air compressors,  drilling rigs, and many other associated items used
     in drilling.

                                      -8-
<PAGE>

     Excavating equipment. Arvilla provides dozers, excavators, and loaders that
     are used to build  access  roads,  cut  drill  sites for  wells,  dig pits,
     reclaim drill sites after drilling is completed,  reclaim access roads, and
     seed, fertilize, lime, and mulch disturbed areas.

     Service and swab rigs.  Arvilla  maintains  a fleet of 14 service  rigs and
     swab rigs  capable  of  servicing  wells up to 6,000  feet in  depth.  This
     service includes running pipe, tubing, rods, and swabbing capabilities. All
     wells drilled require services of this type.

     Brine and  water  hauling.  Arvilla  provides  a fleet of 20 vacuum  trucks
     designed to deliver  water to drilling  rigs and fracs.  Arvilla also hauls
     and disposes of brine water from producing  wells and disposes of pit water
     used in well completions.

     Disposal  wells.  Arvilla has 14 brine  disposal  wells  located at various
     locations  in Ohio.  These wells are used for the disposal of brine and pit
     water.

     Oil  hauling.  Arvilla  maintains a fleet of 6 oil tankers that pick up oil
     from  producers at the well site and delivers  the oil to  terminals,  from
     which it is shipped to refineries.

     Pipelines.  Arvilla has the  capability of  constructing  pipelines for the
     delivery of natural gas or oil. Most wells drilled require  construction of
     a natural  gas line to  deliver  gas from the well to a  gathering  system,
     which will ultimately take the gas to market.

     On April 7, 2006, we finalized the agreement to sell our well servicing and
maintenance  business  in  exchange  for shares of Trans  Energy  common  stock,
certain  natural gas properties and other  considerations,  which  agreement was
initially  entered into on January 3, 2006.  Part of the reason for the sale was
the  inability  of our board of  directors  to agree on the  direction  of Trans
Energy  with  Arvilla  as a  significant  subsidiary.  Under  the  terms  of the
definitive  agreement,  our  wholly  owned  subsidiary,  Arvilla,  Inc.  sold to
Clarence E. Smith and Rebecca L. Smith, both directors of Trans Energy,  100% of
the outstanding  membership interests of Arvilla Oilfield Services,  LLC, a West
Virginia limited liability company ("AOS").

     As a result of consummating the definitive agreement,  Clarence and Rebecca
Smith  returned to us 521,411  shares of their Trans Energy  common  stock.  The
Smiths have also  conveyed to Trans Energy all of their  interest in and to five
oil and gas wells located in Tyler County,  West Virginia.  Assignments  for the
wells  originally was to be held in escrow pending  satisfaction by Trans Energy
of two promissory  notes in the aggregate  amount of $763,000 payable to AOS and
to Arvilla Pipeline  Construction Co., Inc., a separate entity owned by Clarence
and Rebecca  Smith.  However,  pursuant  to the First  Amendment  to  Definitive
Agreement, the parties agreed that the wells would be transferred at the closing
and we agreed to pay AOS $176,239 on or before  April 30, 2006,  and pay Arvilla
Pipeline $115,000 on or before April 30, 2006. To secure these payments by Trans
Energy,  Clarence and Rebecca Smith will hold a lien on a certain Lyon Leasehold
Deed of Trust  until the debt is  satisfied.  These notes have been paid and the
lien released.

     An  additional  term of the  definitive  agreement  provided  that  each of
Clarence and Rebecca Smith received  bonuses equal to approximately  $85,000.  A
further  condition of the closing  included the written  consent for the sale of
AOS from  certain  banks  and  lenders  having  the  right to call a loan on the
ownership transfer of AOS.

     Upon execution of the definitive agreement,  Clarence Smith resigned as our
Chief  Executive  Officer,  but  remained  on our board of  directors  until the
closing.  At the closing,  both Clarence and Rebecca Smith resigned as directors
of Trans Energy and Arvilla,  Inc.  Clarence and Rebecca  Smith have also agreed
not to sell an amount of their  remaining  Trans Energy common stock during each
calendar quarter on or after March 22, 2006, in an aggregate amount greater that
(i) 50,000  shares  (adjusted for stock splits or stock  dividends;  or (ii) one
percent of the total outstanding shares of Trans Energy common stock on the date
of any such sale.

     Finally,  the closing of the transaction  was expressly  conditioned on the
receipt of a fairness  opinion from a qualified  independent  party stating that


                                      -9-
<PAGE>

the  transactions  contemplated  by the  definitive  agreement are fair to Trans
Energy and our  stockholders.  That  opinion was issued and  delivered  to Trans
Energy on March 31, 2006.

Research and Development

     We have  not  allocated  funds  for  conducting  research  and  development
activities.  We do not anticipate  allocating funds for research and development
in the immediate future.

Marketing

     We operate exclusively in the oil and gas industry.  Natural gas production
from wells owned by us is generally  sold to various  intrastate  and interstate
pipeline companies and natural gas marketing companies. Sales are generally made
on the spot market or under  short-term  contracts (one year or less)  providing
for variable or market sensitive prices.  These prices often are tied to natural
gas futures contracts as posted in national publications.

     Natural  gas  delivered  through  our  pipeline  network is sold  through a
contract  with  Sancho Oil and Gas  Corporation  to  Dominion  Hope Gas, a local
utility.  Some of the gas is sold at a fixed price on a year long basis and some
at a variable price per month per Mcf.  Under our contract with Sancho,  we have
the right to sell natural gas subject to the terms and  conditions  of a 20-year
contract,  as amended,  that  Sancho  entered  into with Hope Gas in 1988.  This
agreement  is a flexible  volume  supply  agreement  whereby we receive the full
price which Sancho  charges the end user less a $.05 per Mcf  marketing fee paid
to Sancho.  In  addition  to the  natural  gas  produced  by our wells,  we also
purchased approximately 876 Mcf of natural gas per day in 2005.

     The natural gas from our Wetzel  County wells is sold to East  Resources or
Equitable Gas. The gas from our Doddridge  County wells is sold to Dominion Hope
through a Trans Energy, Inc. contract.

     We sell our oil production to third party  purchasers  under  agreements at
posted  field  prices.  These  third  parties  purchase  the oil at the  various
locations where the oil is produced.

     Although  management  believes  that  we are  not  dependent  upon  any one
customer,  our marketing arrangement with Sancho accounted for approximately 77%
of our revenue for the year ended December 31, 2005, and  approximately  78% for
2004. This marketing agreement is in effect until September 1, 2008.

Competition

     We are in direct  competition  with numerous oil and natural gas companies,
drilling and income  programs and  partnerships  exploring  various areas of the
Appalachian  Basin and elsewhere  competing for customers.  Many competitors are
large, well-known oil and gas and/or energy companies, although no single entity
dominates the industry.  Many of our competitors  possess greater  financial and
personnel  resources  enabling  them to identify and acquire  more  economically
desirable   energy  producing   properties  and  drilling   prospects  than  us.
Additionally,  there is competition from other fuel choices to supply the energy
needs of consumers and industry.  Management believes that there exists a viable
market place for smaller  producers of natural gas and oil and for  operators of
smaller natural gas transmission systems.

Government Regulation

     The oil and gas industry is  extensively  regulated  by federal,  state and
local  authorities.  The scope and  applicability  of  legislation is constantly
monitored for change and expansion.  Numerous agencies,  both federal and state,
have issued  rules and  regulations  binding on the oil and gas industry and its
individual members, some of which carry substantial penalties for noncompliance.
To date, these mandates have had no material effect on our capital expenditures,
earnings or competitive position.

     Legislation and implementing  regulations adopted or proposed to be adopted
by the  Environmental  Protection  Agency  and  by  comparable  state  agencies,
directly and indirectly,  affect our  operations.  We are required to operate in


                                      -10-
<PAGE>

compliance  with certain air quality  standards,  water  pollution  limitations,
solid  waste  regulations  and other  controls  related  to the  discharging  of
materials into, and otherwise protecting the environment. These regulations also
relate to the  rights of  adjoining  property  owners  and to the  drilling  and
production  operations  and  activities  in  connection  with  the  storage  and
transportation of natural gas and oil.

     We may be  required  to  prepare  and  present to  federal,  state or local
authorities data pertaining to the effect or impact that any proposed operations
may have upon the environment. Requirements imposed by such authorities could be
costly, time-consuming and could delay continuation of production or exploration
activities.  Further,  the  cooperation  of other  persons  or  entities  may be
required for us to comply with all environmental regulations.  It is conceivable
that future legislation or regulations may significantly  increase environmental
protection  requirements  and,  as a  consequence,  our  activities  may be more
closely regulated which could significantly  increase operating costs.  However,
management is unable to predict the cost of future compliance with environmental
legislation.  As of  the  date  hereof,  management  believes  that  we  are  in
compliance with all present environmental regulations.  Further, we believe that
our oil and gas  explorations  do not pose a  threat  of  introducing  hazardous
substances into the environment.  If such event should occur, we could be liable
under certain  environmental  protection  statutes and laws. We presently  carry
insurance for environmental liability.

     Our exploration and development  operations are subject to various types of
regulation at the federal,  state and local levels. Such regulation includes the
requirement of permits for the drilling of wells, the regulation of the location
and density of wells,  limitations on the methods of casing wells,  requirements
for surface use and restoration of properties upon which wells are drilled,  and
governing the abandonment and plugging of wells.  Exploration and production are
also subject to property rights and other laws governing the correlative  rights
of surface and subsurface owners.

     We are subject to the  requirements of the  Occupational  Safety and Health
Act, as well as other state and local labor  laws,  rules and  regulations.  The
cost of compliance  with the health and safety  requirements  is not expected to
have a material impact on our aggregate  production expenses.  Nevertheless,  we
are unable to predict the ultimate cost of compliance.

     Although  past sales of natural gas and oil were  subject to maximum  price
controls,  such controls are no longer in effect. Other federal, state and local
legislation, while not directly applicable to us, may have an indirect effect on
the cost of, or the demand for, natural gas and oil.

Employees

     As of the end of our fiscal year on December  31, 2005,  we employed  eight
full-time employees,  consisting of three executives, two marketing and clerical
persons,  and  three  production  persons.  Our  subsidiary,   Arvilla  Oilfield
Services, had approximately 103 full time employees consisting of the following:

     *   43 rig hands that  operate or work  directly  on a service  rig or swab
         rig;
     *   25 truck drivers who drive various types of trucks that haul oil, brine
         or oilfield equipment;
     *   2  equipment   operators  who  operate   various  types  of  excavating
         equipment;
     *   11 roustabouts  who perform various types of labor work associated with
         oil and gas production such as setting tank  batteries,  meter runs and
         laying or repairing gas lines;
     *   10 mechanics  that repair and  maintain  all types of trucks,  rigs and
         equipment;
     *   4 clerical employees;  6 managerial persons; and
     *   2 executives.

     Following  our sale of Arvilla in January  2006 and the  departure of their
employees,  we have added three new employees in our land-lease  department.  We
anticipate  adding an account  manager  during 2006 and such other  employees as
business warrants.

                                      -11-
<PAGE>

     None of our employees are members of any union,  nor have they entered into
any collective bargaining agreements. We believes that our relationship with our
employees is good. With the successful  implementation  of our business plan, we
may seek additional  employees in the next year to handle anticipated  potential
growth.

Facilities

     We currently occupy  approximately 4,000 square feet of office space in St.
Marys, West Virginia,  which we share with our subsidiaries,  Tyler Construction
Company  and  Ritchie  County  Gathering  Systems.  We  lease  an  aggregate  of
approximately  4,000 square feet from an unaffiliated third party under a verbal
arrangement for $1,400 per month, inclusive of utilities.

Industry Segments

     No  information  is presented  as to industry  segments.  We are  presently
engaged in the principal business of the exploration,  development,  production,
transportation  and  marketing of natural gas and oil.  Reference is made to the
statements of operations contained in the financial statements included herewith
for a  statement  of our  revenues  and  operating  loss for the past two fiscal
years.

Risk Factors

     You should carefully  consider the risks and uncertainties  described below
and  other  information  in  this  report.  If  any of the  following  risks  or
uncertainties  actually occur, our business,  financial  condition and operating
results,  would likely suffer.  Additional  risks and  uncertainties,  including
those that are not yet identified or that we currently  believe are  immaterial,
may also  adversely  affect  our  business,  financial  condition  or  operating
results.

     We have a history of losses and may realize future losses.
     ---------------------------------------------------------------------------
     Although our revenues  increased  approximately 115% during the fiscal year
ended  December  31,  2005,  we  may  not  achieve,  or  subsequently   maintain
profitability  if  anticipated  revenues do not increase in the future.  We have
experienced operating losses,  negative cash flow from operations and net losses
in each quarterly and annual period for the past several  years.  As of December
31, 2005, our net operating loss  carryforward was approximately $25 million and
our accumulated  deficit was  approximately $30 million We expect to continue to
incur significant expenses in connection with

     *   exploration  and development of new and existing  properties;
     *   costs of sales and marketing efforts;
     *   construction of gathering system infrastructure;
     *   additional personnel; and
     *   increased general and administrative expenses.

     Accordingly,  we will need to generate  significant revenues to achieve and
attain, and eventually sustain  profitability.  If revenues do not increase,  we
may be unable to attain or sustain profitability on a quarterly or annual basis.
Any of these factors could cause the price of our stock to decline.

     We have a significant  working capital deficit that makes it more difficult
     to  obtain  capital  necessary  for our  operations  and  which may have an
     adverse effect on our future business.
     ---------------------------------------------------------------------------

     As of December 31, 2005, we had a working capital  deficit of $919,187.  If
our  business  does not produce  positive  working  capital in the  future,  our
business and financial  condition would most likely be materially and negatively
impacted.

                                      -12-
<PAGE>

     It may be necessary  for us to seek  additional  funding,  which may not be
     available on terms favorable to us, or at all.
     ---------------------------------------------------------------------------

     Management  believes  that we may need to seek  additional  funding  in the
future to provide sufficient working capital and funds for capital expenditures.
If we cannot meet future capital requirements through realized revenues from our
ongoing  business,  we may have to raise  additional  capital by borrowing or by
selling  equity or  equity-linked  securities,  which would dilute the ownership
percentage of our existing stockholders.  Also, these securities could also have
rights,  preferences  or  privileges  senior  to  those  of  our  common  stock.
Similarly,  if we raise  additional  capital by issuing debt  securities,  those
securities may contain covenants that restrict us in terms of how we operate our
business,  which could also affect the value of our common  stock.  If we borrow
more  money,  we will  have  to pay  interest  and may  also  have to  agree  to
restrictions  that  limit  operating  flexibility.  We may not be able to obtain
funds needed to finance  operations  at all, or may be able to obtain funds only
on very unattractive terms.  Management may also explore other alternatives such
as a joint venture with other oil and gas companies. There can be no assurances,
however, that we will conclude any such transaction.

     There are many competitors in the oil and gas industry.
     ---------------------------------------------------------------------------

     We encounter many competitors in the oil and gas industry  including in the
exploration  and  development  of  properties  and  the  sale  of oil  and  gas.
Management  expects  competition  to continue to intensify  in the future.  Many
existing and potential  competitors  have greater  financial  resources,  larger
market  share and more  customers  than us, which may enable them to establish a
stronger  competitive  position than we have. If we fail to address  competitive
developments  quickly  and  effectively,  we will  not be  able to grow  and our
business will be adversely affected.

     Our operating  results are likely to fluctuate  significantly and cause our
     stock price to be volatile  which could cause the value of your  investment
     in our shares to decline.
     ---------------------------------------------------------------------------

     Quarterly   and  annual   operating   results   are  likely  to   fluctuate
significantly  in the  future  due to a variety  of  factors,  many of which are
outside of our control.  If operating  results do not meet the  expectations  of
securities  analysts and investors,  the trading price of our common stock could
significantly  decline which may cause the value of your  investment to decline.
Some of the factors that could affect quarterly or annual  operating  results or
impact the market price of our common stock include:

     *   our ability to develop properties and to market our oil and gas;
     *   the timing and amount of, or cancellation  or  rescheduling  of, orders
         for our oil and gas;
     *   our  ability  to  retain  key  management,   sales  and  marketing  and
         engineering personnel;
     *   a decrease in the prices of oil and gas; and
     *   changes in costs of exploration or marketing oil and gas.

     Due to these and other factors, quarterly and annual revenues, expenses and
results  of   operations   could  vary   significantly   in  the   future,   and
period-to-period  comparisons should not be relied upon as indications of future
performance.

     Our  business  could  be  adversely   affected  by  any  adverse   economic
     developments in the oil and gas industry and/or the economy in general.
     ---------------------------------------------------------------------------

     The oil and gas  industry is  susceptible  to  significant  change that may
influence our business  development  due to a variety of factors,  many of which
are outside our control. Some of these factors include:

     * varying  demand for oil and gas;
     *   fluctuations in price;
     *   competitive factors that affect pricing;
     *   attempts to expand into new markets;
     *   the  timing and  magnitude  of capital  expenditures,  including  costs
         relating to the expansion of operations;
     *   hiring and retention of key personnel;


                                      -13-
<PAGE>

     *   changes in generally  accepted  accounting  policies,  especially those
         related to the oil and gas industry; and
     *   new government legislation or regulation.

Any of the above factors or a  significant  downturn in the oil and gas industry
or with  economic  conditions  generally,  could have a  negative  effect on our
business and on the price of our common stock.

     Our future success  depends on retaining  existing key employees and hiring
     and  assimilating  new key  employees.  The  loss of key  employees  or the
     inability to attract new key  employees  could limit our ability to execute
     our growth strategy,  resulting in lost  profitability and a slower rate of
     growth.
     ---------------------------------------------------------------------------

     Our  future  success  depends,  in part,  on the  ability to retain our key
employees  including  executive  officers.  Also,  we do  not  carry,  nor do we
anticipate  obtaining,  "key  man"  insurance  on our  executives.  It  would be
difficult  for us to replace any one of these  individuals.  In addition,  as we
grow  we may  need  to  hire  additional  key  personnel.  We may not be able to
identify and attract  high quality  employees  or  successfully  assimilate  new
employees into our existing management structure.

     If we are unable to manage  our  growth  effectively,  our  operations  and
     financial performance could be adversely affected.
     ---------------------------------------------------------------------------

     The  ability  to  manage  and  operate  our  business  as  we  execute  our
anticipated  growth will require effective  planning.  Significant future growth
could strain our internal  resources,  leading to a lower quality of service and
other  problems  that could  adversely  affect our  financial  performance.  Our
ability to manage future growth effectively will also require us to successfully
attract, train, motivate, retain and manage new employees and continue to update
and improve our operational,  financial and management  controls and procedures.
If we do not manage our growth  effectively,  our operations  could be adversely
affected,  resulting  in slower  growth  and a failure  to  achieve  or  sustain
profitability.

     Going concern issue.
     ---------------------------------------------------------------------------

     Our independent  auditors have expressed a going concern issue. Our ability
to  continue  as a going  concern  is  dependant  upon our  ability to achieve a
profitable  level of  operations.  We may need,  among other things,  additional
capital  resources which we will seek through loans from banks or other forms of
financing.

Risks relating to ownership of our common stock

     The price of our common stock is extremely  volatile and  investors may not
     be able to sell their shares at or above their purchase price, or at all.
     ---------------------------------------------------------------------------

     Our common stock is presently  traded on the OTC Bulletin  Board,  although
there is no  assurance  that a viable  market  will  continue.  The price of our
shares in the public market is highly  volatile and may fluctuate  substantially
because of:

     * actual or anticipated fluctuations in our operating results;
     *   changes in or failure to meet market expectations;
     *   conditions and trends in the oil and gas industry; and
     *   fluctuations in stock market price and volume, which are particularly
         common among securities of small capitalization companies.

     Future sales or the potential for sale of a substantial number of shares of
     our common  stock could cause the market  value to decline and could impair
     our ability to raise capital through subsequent equity offerings.
     ---------------------------------------------------------------------------

     If we do not generate  necessary cash from our operations to finance future
business,  we may need to raise  additional  funds  through  public  or  private
financing  opportunities.  The  issuance of a  substantial  number of our common


                                      -14-
<PAGE>

shares to individuals  or in the public  markets,  or the perception  that these
sales may occur, could cause the market price of our common stock to decline and
could  materially  impair  our  ability  to raise  capital  through  the sale of
additional  equity  securities.  Any such  issuances  would  dilute  the  equity
interests of existing stockholders.

     We do not intend to pay dividends.
     ---------------------------------------------------------------------------

     To date,  we have never  declared or paid a cash  dividend on shares of our
common stock.  We currently  intend to retain any future earnings for growth and
development of business and,  therefore,  do not anticipate paying any dividends
in the foreseeable future.


     Possible "Penny Stock" Regulation.
     ---------------------------------------------------------------------------

     Trading of our  common  stock on the OTC  Bulletin  Board may be subject to
certain provisions of the Securities  Exchange Act of 1934, commonly referred to
as the "penny  stock" rule. A penny stock is generally  defined to be any equity
security  that has a market price less than $5.00 per share,  subject to certain
exceptions.  If our stock is deemed to be a penny  stock,  trading  in our stock
will be subject to additional  sales practice  requirements  on  broker-dealers.
These may require a broker dealer to:

     *   make a  special  suitability  determination  for  purchasers  of  penny
         stocks;
     *   receive the purchaser's written consent to the transaction prior to the
         purchase; and
     *   deliver to a prospective purchaser of a penny stock, prior to the first
         transaction,  a risk  disclosure  document  relating to the penny stock
         market.

     Consequently,  penny stock rules may restrict the ability of broker-dealers
to trade and/or maintain a market in our common stock.  Also,  many  prospective
investors  may not  want to get  involved  with  the  additional  administrative
requirements,  which may have a material  adverse  effect on the  trading of our
shares.

Item 2.       Description of Property

     Our properties  consist  essentially of working and royalty interests owned
by us in various  oil and gas wells and leases  located  in West  Virginia.  Our
proved  reserves for the years ended  December  31, 2005,  2004 and 2003 are set
forth below:

<TABLE>
<CAPTION>

                                                               December 31,
                                          -------------------------------------------------------
                                              2005                  2004                  2003
                                          -----------           -----------           -----------
<S>                                             <C>                 <C>
Natural Gas (mmcf)
    Developed                                   4,263               542,955                -
    Undeveloped                                     -                     -                -
                                              -------             ---------          ------------
     Total Proved                               4,263               542,955                -
                                                =====             =========          ============
Crude Oil (Bbl)
    Developed                                 215,844               106,649                99,880
    Undeveloped                                     -                     -                -
                                             --------             ---------          -----------
     Total Proved                             215,844               106,649                99,880
                                              =======             =========              ========
</TABLE>

     These  estimates  are bases  primarily on the reports of Robert L. Richards
(Wyoming),  Geologist and presently an officer and director of Trans Energy, and
Mark V. Schumacher,  PE (West Virginia). Such reports are, by their very nature,
inexact and subject to changes and  revisions.  Proved  developed  reserves  are
reserves  expected to be recovered from existing  wells with existing  equipment
and operating methods.  Proved undeveloped reserves are expected to be recovered
from new wells  drilled  to known  reservoirs  on  undrilled  acreage  for which
existence and  recoverability  of such reserves can be estimated with reasonable
certainty,  or from  existing  wells where a  relatively  major  expenditure  is
required to establish production. No estimates of reserves have been included in
any reports to any federal  agency other than the SEC. See SFAS 69  Supplemental
Disclosures included as part of our consolidated financial statements.

                                      -15-
<PAGE>

     Set forth in the following  schedule is the average sales price per unit of
oil,  expressed in barrels  ("bbl"),  and of natural gas,  expressed in thousand
cubic feet ("mcf"), produced by us for the past three fiscal years. The increase
in the cost of oil production in 2005 is attributed to expenses incurred putting
water flood into operation.
<TABLE>
<CAPTION>

                                                                Years ended December 31,
                                            -----------------------------------------------------------------
Average sales price:
--------------------
                                                 2005                      2004                    2003
                                            ---------------             ------------           --------------

<S>                                           <C>                        <C>                        <C>
    Gas (per mcf)                             $ 10.28                    $  7.40                    $ 7.04
    Oil (per bbl)                               56.20                      30.24                     23.38
Average cost of production:
    Gas (per mcf)                                   -                       -                         -
    Oil (per bbl)                              $16.19                     $14.19                      4.58
</TABLE>

     We have not filed any  estimates of total,  proved net oil and gas reserves
with any federal  authority  or agency  since the  beginning  of our last fiscal
year.

     The following schedule sets forth the capitalized costs relating to oil and
gas producing activities by us for the past three fiscal years.
<TABLE>
<CAPTION>

                                                                Years ended December 31,
                                            -------------------------------------------------------------
                                                 2005                      2004                 2003
                                            ---------------          ---------------       --------------
<S>                                          <C>                      <C>                  <C>
Proved oil and gas
  producing properties
  and related lease
  and well equipment                         $ 3,403,421              $ 7,093,676          $ 3,171,426
Unproved oil and gas
  properties                                      64,004                   95,945               99,945
Accumulated depreciation
  and depletion                               (1,394,403)             (3,870,874)           (2,555,878)
                                             -----------              -----------          -----------
Net Capitalized Costs                        $ 2,073,022              $ 3,318,747          $   715,493
                                             ===========              ===========          ============
</TABLE>

     The following schedule  summarizes  changes in the standardized  measure of
discounted future net cash flows relating to our proved oil and gas reserves.
<TABLE>
<CAPTION>

                                                                Years ended December 31,
                                            -------------------------------------------------------------
                                                 2005                      2004                 2003
                                            ---------------          ---------------       --------------
<S>                                          <C>                      <C>                  <C>
Standardized measure,
  beginning of year                          $ 4,438,836                $1,864,377          $ 4,314,941
Oil and gas sales, net
  of production costs                        (7,990,879)                (1,539,222)          (2,411,293)
Sales of mineral in place                              -                   -                    -
Purchases                                     31,883,344                 5,132,087              -
Net change due to revisions
  in quantity estimates                      (5,287,060)                (1,018,406)             (39,271)
                                             -----------               -----------         ------------
Standardized measure,
  end of year                               $ 23,044,241                $ 4,438,836         $ 1,864,377
                                            ============               ============         ===========
</TABLE>

     We do not anticipate  investing in or purchasing assets and/or property for
the purpose of capital  gains.  It is our  intention to purchase  assets  and/or


                                      -16-
<PAGE>

property for the purpose of enhancing our primary  business  operations.  We are
not limited as to the percentage amount of our assets we may use to purchase any
additional assets or properties.

Item 3.       Legal Proceedings

     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 us
     for  non-payment  of an accounts  payable.  The judgment  calls for monthly
     payments of $351 and is bearing  interest at 10% per annum. At December 31,
     2005 we  accrued a  balance  including  interest  of  $19,983  as a current
     liability. We are currently in default on this judgment.

         On July 1,  1998,  RR  Donnelly  obtained  a  judgment  against  us for
     non-payment of accounts payable. The judgment calls for monthly payments of
     $3,244 and is bearing  interest at 10% per annum.  At December 31, 2005, we
     accrued a balance including interest of $90,286 as a current liability.  We
     are currently in default on this judgment.

     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 4.       Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our securities  holders during the fourth
quarter of the fiscal year ended December 31, 2005.

                                     PART II

Item 5.       Market for Common Equity and Related Stockholder Matters

     Our common stock is quoted on the OTC Bulletin Board under the symbol TENG.
Prior to the  effectiveness  of our reverse stock split on January 28, 2005, our
stock  traded  under the  symbol of TSRG.  Set forth in the table  below are the
quarterly  high and low  prices of our  common  stock as  obtained  from the OTC
Bulletin  Board for the past two fiscal years and adjusted for the one share for
150 shares reverse stock split.
                                     High         Low
                                     ----         ---


         2005
                  First Quarter     $   2.55     $   1.55
                  Second Quarter    $   1.97     $   0.70
                  Third Quarter     $   1.85     $   1.10
                  Fourth Quarter    $   1.75     $   0.71

                                      -17-
<PAGE>

         2004
                  First Quarter     $   2.70     $   1.05
                  Second Quarter    $   4.50     $   0.75
                  Third Quarter     $   4.35     $   1.50
                  Fourth Quarter    $   2.55     $   1.35

     As of May 15, 2006, there were  approximately  388 holders of record of our
common stock,  which figure does not take into account those  shareholders whose
certificates are held in the name of broker-dealers or other nominee accounts.

Dividend Policy

     We have not declared or paid cash  dividends or made  distributions  in the
past,  and we do not  anticipate  that  we  will  pay  cash  dividends  or  make
distributions  in the  foreseeable  future.  We  currently  intend to retain and
reinvest future earnings to finance operations.



Item 6.       Management's Discussion and Analysis or Plan of Operation

     The  following   information   should  be  read  in  conjunction  with  the
consolidated  financial statements and notes thereto appearing elsewhere in this
Form 10-KSB.

Results of Operations

     The  following  table  sets  forth  the  percentage  relationship  to total
revenues of principal  items  contained in the  statements  of operations of the
consolidated  financial  statements  included  herewith  for the two most recent
fiscal  years  ended  December  31,  2005 and  2004.  It  should  be noted  that
percentages  discussed  throughout  this  analysis are stated on an  approximate
basis.
<TABLE>
<CAPTION>
                                                                                Fiscal Years Ended December 31,
                                                                                    2005             2004
                                                                                   -----            ------
<S>                                                                               <C>                <C>
Total revenues........................................................            100%               100%
Total costs and expenses..............................................             116               112
Total other income (expenses).........................................              (6)               (9)
Loss before income  taxes and change in accounting principal .........             (23)              (21)
Income taxes..........................................................               -                 -
Net (loss)............................................................             (26)              (21)
</TABLE>

     For the Year Ended  December 31, 2005  Compared to the Year Ended  December
     31, 2004
     ---------------------------------------------------------------------------

     Total  revenues of $4,797,201 for the year ended December 31, 2005 ("2005")
increased  100%  compared to  $2,390,099  for the year ended  December  31, 2004
("2004"),  due  primarily to the increase of oil and gas prices and the addition
of the Cobham revenues for the last two months of 2004. In 2005, oil made up 23%
of total revenues  compared to 22% in 2004, and gas  represented 77% of revenues
in 2005 compared to 76% in 2004 The changes were considered minimal representing
only a slight difference in percentage points.

     We had an  operating  loss  of  $814,345  for  2005  compared  to a loss of
$284,127 in 2004. Total costs and expenses  increased 110% in 2005 primarily due
to the 163% increase in the cost of oil and gas. Salaries and wages decreased by



                                      -18-
<PAGE>

21%  in  2005.   Additionally,   the  106%  increase  in  selling,  general  and
administrative  expenses was primarily  due to increases in insurance  premiums,
travel expenses and additional  labor costs. As a percentage of revenues,  total
costs and expenses increased to 116% in 2005 from 112% in 2004.

     Other expenses as a percentage of revenues  decreased from 9% in 2004 to 6%
in 2005, attributed to the decrease in interest expense from $193,683 in 2004 to
$129,034  in 2005 due to the  paying off  certain  debt.  We  realized a gain on
disposition of debt of $416,560 in 2004, compared to $7,306 in 2005. We realized
a loss on the  extinguishment  of debt of $653,257 in 2004 compared to a loss of
$0 in 2005.

     Our net  loss for 2005 was  $1,456,593  versus a net loss of  $502,848  for
2004.  The increase in net loss in 2005 is primarily  attributed to increases in
cost of oil and gas, selling, general and administrative expenses.

     Net Operating Losses
     --------------------

     We  have  accumulated  approximately  $24  million  of net  operating  loss
carryforwards  as of  December  31,  2005,  which may be offset  against  future
taxable  income  through  2025.  The use of these losses to reduce future income
taxes will depend on the  generation of sufficient  taxable  income prior to the
expiration  of the net  operating  loss  carryforwards.  In the event of certain
changes  in  control,  there will be an annual  limitation  on the amount of net
operating loss carryforwards which can be used. No tax benefit has been reported
in the  financial  statements  for the year ended  December 31, 2005 because the
potential tax benefits of the loss carryforward is offset by valuation allowance
of the same amount.

Liquidity and Capital Resources

     Historically,  working  capital  needs  have  been  satisfied  through  our
operating  revenues and from  borrowed  funds.  Our working  capital  deficit at
December  31,  2005 was  $3,079,443  compared  with a deficit of  $2,980,431  at
December 31, 2004. We anticipate  meeting  working capital needs during the 2006
fiscal year with  revenues  from  operations  and possibly  from capital  raised
through the sale of either equity or debt  securities.  We have no other current
agreements or arrangements for additional  funding and there can be no assurance
such funding will be available to us, or if  available,  such funding will be on
acceptable or favorable terms to us.

     As  of  December  31,  2005,  we  had  total  assets  of  $11,672,307   and
stockholders' equity of $90,602 compared to total assets of $4,234,111 and total
stockholders'  deficit of $1,169,886 at December 31, 2004. The increase in total
assets and decrease in stockholders'  deficit at December 31, 2005 is attributed
to the  acquisition  of  Arvilla.  We have  recorded a  long-term  liability  of
$799,393  as an asset  retirement  obligation  that  relates  to,  in part,  the
estimated cost to plug wells in the event it becomes necessary.

     Because  we have  generated  significant  losses  from  operations  through
December 31, 2005 and have a working capital deficit at December 31, 2005, there
exists  substantial  doubt about our  ability to  continue  as a going  concern.
Revenues have not been  sufficient to cover  operating  costs and to allow us to
continue as a going concern.  Potential  proceeds from the future sale of common
stock, other contemplated debt and equity financing,  and increases in operating
revenues from new  development  would enable 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.

     In the opinion of  management,  inflation has not had a material  effect on
the operations of Trans Energy.

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


                                      -19-
<PAGE>

statements  regarding events,  conditions,  and financial trends that may affect
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:

     *   the sufficiency of existing capital  resources and our ability to raise
         additional capital to fund cash requirements for future operations;
     *   uncertainties  involved  in the  rate of  growth  of our  business  and
         acceptance of any products or services;
     *   volatility  of the stock  market,  particularly  within the  technology
         sector; and
     *   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.

Recent Accounting Pronouncements

     In May 2005, the Financial  Accounting Standards Board, issued Statement of
Financial Accounting Standards ("SFAS, No. 154"),  "Accounting Changes and Error
Corrections,"  which  replaces  Accounting  Principles  Board  Opinion  No.  20,
"Accounting  Changes," and SFAS No. 3, "Reporting  Accounting Changes in Interim
Financial  Statements  -- An  Amendment  of APB Opinion  No.  28".  SFAS No. 154
provides  guidance  on  accounting  for  and  reporting  changes  in  accounting
principle  and  error  corrections.  SFAS  No.  154  requires  that  changes  in
accounting  principle  be  applied  retrospectively  to prior  period  financial
statements and is effective for fiscal years  beginning after December 15, 2005.
Management  believes the adoption of this  statement  will have no impact on the
financial statements of the Company.

     In December 2004, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  153.  This  statement  addresses  the
measurement of exchanges of nonmonetary  assets. The guidance in APB Opinion No.
29,  "Accounting for Nonmonetary  Transactions,"  is based on the principle that
exchanges of  nonmonetary  assets should be measured  based on the fair value of
the assets exchanged.  The guidance in that opinion;  however,  included certain
exceptions to that principle.  This statement amends Opinion 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general  exception for exchanges of  nonmonetary  assets that do not have
commercial  substance.  A nonmonetary  exchange has commercial  substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. This statement is effective for financial statements for fiscal
years  beginning  after June 15, 2005.  Earlier  application  is  permitted  for
nonmonetary  asset  exchanges  incurred  during fiscal years beginning after the
date of this  statement  is issued.  Management  believes  the  adoption of this
statement will have no impact on the financial statements of the Company.

     In  December  2004,  the  Financial  Accounting  Standards  Board  issued a
revision to Statement of Financial  Accounting  Standards No. 123R,  "Accounting
for Stock Based  Compensations."  This statement  supersedes APB Opinion No. 25,
"Accounting  for Stock  Issued to  Employees,"  and its  related  implementation
guidance.   This  statement   establishes   standards  for  the  accounting  for
transactions in which an entity  exchanges its equity  instruments for goods and
services.  It also addresses  transactions in which an entity incurs liabilities
in  exchange  for  goods or  services  that are  based on the fair  value of the
entity's  equity  instruments  or that may be settled by the  issuance  of those
equity   instruments.   This  statement  focuses  primarily  on  accounting  for
transactions in which an entity obtains employee services in share-based payment
transactions.  This statement does not change the accounting  guidance for share
based  payment  transactions  with  parties  other than  employees  provided  in
Statement of Financial  Accounting  Standards No. 123. This  statement  does not
address the accounting for employee share ownership plans,  which are subject to
AICPA  Statement of Position  93-6,  "Employers'  Accounting  for Employee Stock
Ownership Plans."  Management  believes the adoption of this statement will have
no impact on the financial statements of the Company.

     In November 2004, the Financial  Accounting  Standards  Board (FASB) issued
Statement of  Financial  Accounting  Standards  No. 151,  "Inventory  Costs-- an
amendment of ARB No. 43, Chapter 4". This  statement  amends the guidance in ARB
No. 43, Chapter 4,  "Inventory  Pricing," to clarify the accounting for abnormal


                                      -20-
<PAGE>

amounts of idle facility expense,  freight,  handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that " . . under
some  circumstances,  items such as idle facility expense,  excessive  spoilage,
double freight,  and rehandling costs may be so abnormal as to require treatment
as current period  charges.  . . ." This statement  requires that those items be
recognized  as  current-period  charges  regardless  of  whether  they  meet the
criterion of "so abnormal." In addition, this Statement requires that allocation
of fixed production  overheads to the costs of conversion be based on the normal
capacity of the production facilities. This statement is effective for inventory
costs incurred  during fiscal years  beginning  after June 15, 2005.  Management
believes the  adoption of this  statement  will have no impact on the  financial
statements of the Company.

Item 7.       Financial Statements

     Our financial  statements as of and for the fiscal years ended December 31,
2005 and 2004 have been examined to the extent  indicated in their report by H J
& Associates,  LLC,  independent  certified  public  accountants,  and have been
prepared  in  accordance  with  generally  accepted  accounting  principles  and
pursuant  to  Regulation  S-B as  promulgated  by the  SEC.  The  aforementioned
financial statements are included herein starting with page F-1.

Item 8.      Changes in and Disagreements with  Accountants  on  Accounting  and
             Financial Disclosure

     This Item is not Applicable.

Item 8A.     Controls and Procedures

     As of the end of the period covered by this annual  report,  we carried out
an evaluation,  under the supervision and with the  participation of management,
including  our chief  executive  officer  and chief  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  Securities
Exchange Act of 1934. In designing and evaluating  the  disclosure  controls and
procedures,  management  recognizes  that there are inherent  limitations to the
effectiveness of any system of disclosure controls and procedures, including the
possibility of human error and the  circumvention  or overriding of the controls
and procedures.  Accordingly,  even effective disclosure controls and procedures
can only  provide  reasonable  assurance  of  achieving  their  desired  control
objectives.  Additionally,  in evaluating and implementing possible controls and
procedures, management is required to apply its reasonable judgment.

     Based upon the required  evaluation,  our chief executive officer and chief
financial officer concluded as of December 31, 2005, our disclosure controls and
procedures  are  effective  in  timely  alerting  them to  material  information
relating to the company  required to be  disclosed  by us in the reports that we
file or submit under the Exchange Act to be recorded, processed,  summarized and
reported within the time periods  specified in the SEC's rules and forms.  There
have  been no  significant  changes  in our  internal  controls  over  financial
reporting or in other factors that could significantly  affect internal controls
over financial reporting subsequent to the date we carried out our evaluation.

Item  8B.     Other Information

Reports on Form 8-K

     Since the beginning of our fiscal fourth quarter commencing October 1, 2005
through  the date of this  report,  we have  filed  current  reports on Form 8-K
reporting the following:

         January  9, 2006 -  reporting  under  Item 1.01 that  Trans  Energy has
         entered into an agreement to sell  certain  assets,  including  Arvilla
         Oilfield  Services,  LLC  held  by  Arvilla,  Inc.,  our  wholly  owned
         subsidiary,  and reporting  under Item 502 the resignation of our Chief
         Executive  Officer,  Clarence E. Smith, and the appointment of James K.
         Abcouwer as our new President and Chief Executive Officer.

                                      -21-
<PAGE>

         April 13, 2006 - reporting  under Item 2.01 the  completion of the sale
         of Arvilla,  Inc. and reporting under Item 502 the  resignations of two
         directors, Clarence E. Smith and Rebecca Smith.

         April 27,  2006 - reporting  under Item 1.01 the sale of certain  wells
and properties located in Campbell County Wyoming.

                                    PART III

Item 9.   Directors,   Executive   Officers,   Promoters  and  Control  Persons;
          Compliance with Section 16(a) of the Exchange Act

     The  following  table sets forth the names,  ages,  and offices held by our
directors and executive officers:
<TABLE>
<CAPTION>

     Name                       Position                        Director Since                Age
     ----                       --------                        --------------                ---
<S>                             <C>                                <C>                  <C>
     James K. Abcouwer          President and C.E.O                April 2006                 52
     Loren E. Bagley            Vice President and Director        August 1991                64
     John G. Corp               Director                           February 2005              46
     William F. Woodburn        Secretary / Treasurer              August 1991                64
                                 Chief Operating Officer
                                 and Director
     Robert L. Richards         Director                           September 2001             59
</TABLE>

     On January 3, 2006 and in connection  with the execution of the  definitive
agreement to sell  Arvilla,  Clarence E. Smith  resigned as our Chief  Executive
Officer,  which  resignation  has been accepted by the board of  directors.  Mr.
Smith remained as a director until the closing of the definitive agreement.  Mr.
Smith was  appointed as a director  immediately  following  the  acquisition  of
Arvilla in January  2005 and became our CEO on February  28,  2005.  On April 7,
2006,  Mr.  Smith  resigned as a director,  as did Rebecca L. Smith.  Ms.  Smith
joined the board of directors  following the  acquisition  of Arvilla in January
2005.  Both  resignations  were the result of the terms of the agreement to sell
Arvilla.

     On January 6, 2006, our board of directors elected James K. Abcouwer as our
new President and Chief  Executive  Officer.  On April 27, 2006 Mr. Abcouwer was
elected as a member of the board of directors.

     All directors hold office until the next annual meeting of stockholders and
until  their  successors  have been duly  elected  and  qualified.  There are no
agreements  with respect to the election of directors.  We have not  compensated
our directors  for service on the Board of Directors or any  committee  thereof,
but directors are reimbursed for expenses incurred for attendance at meetings of
the Board and any committee  thereof.  Executive officers are appointed annually
by the Board and each  executive  officer serves at the discretion of the Board.
The Executive Committee of the Board of Directors, to the extent permitted under
Nevada  law,  exercises  all of the  power  and  authority  of the  Board in the
management of the business and affairs of Trans Energy  between  meetings of the
Board.

     The business experience of each of the persons listed above during the past
five years is as follows:

     James K. Abcouwer became President and C.E.O. in January 2006. Mr. Abcouwer
has 25 years of  experience in the energy  industry and is the former C.E.O.  of
Columbia  Natural  Resources,  Inc., an independent  natural gas producer in the
Appalachian  Basin. He has also served as President and C.E.O.  of EnergyUSA,  a
unit of  NiSource  Inc.  Mr.  Abcouwer is a 1975  graduate of the United  States
Military   Academy  at  West   Point,   and   received  a  Masters  in  Business
Administration degree from Harvard Business School in 1982. Additionally,  he is
co-owner of Northstar Energy Corp. of Charleston,  W Va., an independent oil and
gas development company.

     Loren E. Bagley served as our President and C.E.O.  from  September 1993 to
September  2001, at which time he resigned as President  and was appointed  Vice
President.  From 1979 to the present,  Mr. Bagley has been self -employed in the
oil  and  gas  industry  as  president,  C.E.O.  or vice  president  of  various


                                      -22-
<PAGE>

corporations which he has either started or purchased,  including Ritchie County
Gathering  Systems,  Inc. Mr.  Bagley's  experience  in the oil and gas industry
includes  acting as a lease  agent,  funding and  drilling of oil and gas wells,
supervising  production of over 175 existing wells,  contract  negotiations  for
purchasing  and  marketing of natural gas  contracts,  and owning a well logging
company specializing in analysis of wells. Prior to becoming involved in the oil
and gas industry,  Mr. Bagley was employed by the United States  government with
the  Agriculture  Department.  Mr.  Bagley  attended Ohio  University  and Salem
College and earned a B.S. Degree.

     John G. Corp became a director on February 28, 2005. Mr. Corp has more than
25 years of extensive  experience in drilling,  production and oilfield  service
operations in the  Appalachian  Basin.  Prior to joining Trans Energy,  Inc., he
held various management  positions with Belden & Blake Corp. from 1987-2004.  He
has a BS degree in Petroleum  Engineering  from Marietta (Ohio) College and is a
member of the Society of Petroleum Engineers, the Ohio Oil & Gas Association and
is  chairman of the  Technical  Advisory  Committee  or the Ohio  Department  of
Natural Resources.

     William F.  Woodburn has served as our Vice  President  from August 1991 to
September  2001,  at which time he resigned as Vice  President and was appointed
Secretary /  Treasurer.  In January  2006,  Mr.  Woodburn was named as our Chief
Operating  Officer.  Mr.  Woodburn has been actively  engaged in the oil and gas
business in various  capacities  for the past twenty  years.  For several  years
prior to 1991, Mr. Woodburn supervised the production of oil and natural gas and
managed the pipeline  operations of Tyler Construction  Company,  Inc. and Tyler
Pipeline,  Inc. Mr.  Woodburn is a stockholder  and serves as President of Tyler
Construction  Company,  Inc., and is also a stockholder of Tyler Pipeline,  Inc.
which owns and operates oil and gas wells in addition to natural gas  pipelines,
and Ohio  Valley  Welding,  Inc.  which  owns a fleet of  heavy  equipment  that
services the oil and gas industry.  Prior to his  involvement in the oil and gas
industry, Mr. Woodburn was employed by the United States Army Corps of Engineers
for  twenty  four  years  and was  Resident  Engineer  on  several  construction
projects.  Mr. Woodburn  graduated from West Virginia  University with a B.S. in
civil engineering.

     Robert L. Richards became a director and was appointed President and C.E.O.
in September 2001. On February 28, 2004, Mr. Richards  relinquished his position
as C.E.O.,  but remained as a director.  From 1982 to the  present,  he has been
President of Robert L. Richards,  Inc. a consulting geologist firm with 27 years
experience in the  petroleum  industry.  He has also served as a geologist  with
Exxon,   exploration   geologist  with  Union  Texas  Petroleum,   and  regional
exploration manager for Carbonit Exploration,  Inc. From 2000 to the present, he
has been President and C.E.O.  of Derma - Rx, Inc., a formulator and marketer of
skin care products.  Also,  from 1992 to August 2000, Mr. Richards was C.E.O. of
Kaire  Nutraceuticals,  Inc., a developer and marketer of health and nutritional
products.  Mr.  Richards served as Vice President of Continental Tax Corporation
from March 1989 to August 1992. He has five and one-half years experience in the
United States Air Force as an Instructor Pilot. Mr. Richards holds a B.S. degree
in geology from Brigham Young University.


Item 10. Executive Compensation

     We do not have a bonus, profit sharing,  or deferred  compensation plan for
the benefit of employees, officers or directors.  Management is presently in the
process  of   developing   an  executive   compensation   program  and  deferred
compensation program for officers of the company, which will be presented to the
board of directors later in 2006. We currently have an employment  contract with
Mr.  Abcouwer  with  a two  year  term  that  includes  bonus  compensation  for
accomplishment of certain objectives related to value creation and enhancement.

     For the past  three  fiscal  years  ended  December  31,  2005,  our  Chief
Executive  Officers  were not paid any  cash  compensation.  No other  executive
officers  received  cash  compensation  greater  than $60,000 in any of the past
three fiscal years.

                                      -23-
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth information, to the best of our knowledge as
December 31, 2005,  with respect to each person known by us to own  beneficially
more than 5% of our  outstanding  common stock,  each director and all directors
and  officers as a group.  Unless  otherwise  noted,  the address of each person
listed below is that of Trans Energy, 210 Second Street, St. Marys, West Virgina
26170.

Name and Address                         Amount and Nature of      Percent
of Beneficial Owner                      Beneficial Ownership      of Class(1)
-------------------                      --------------------      -----------
Robert L. Richards *                            86,754(2)              1.8 %
Loren E. Bagley *                              239,610(3)              5.1 %
William F. Woodburn *                          600,396(4)             12.8 %
Clarence E. Smith *                            696,469(5)             14.8 %
Rebecca L. Smith *                             521,410(6)             11.1 %
John G. Corp.*                                  20,000                 0.4 %
All directors and executive officers
  a group (5 persons)                        2,164,639                46.0 %
----------------------
     *   Indicates director and/or executive officer at December 31, 2005

     (1) Based upon 4,707,515 shares of common stock  outstanding.
     (2) Includes 80,087 shares held in the name of Argene Richards, wife of Mr.
         Richards.
     (3) Includes  33,543 shares held in the name of Carolyn S. Bagley,  wife of
         Mr. Bagley, over which Mrs. Bagley retains voting power.
     (4) Includes  133,670 shares in the name of Janet L. Woodburn,  wife of Mr.
         Woodburn,  over which shares Mrs.  Woodburn  retains voting power,  and
         314,070  in the  name of a  corporation  in  which  William  and  Janet
         Woodburn are officers and shareholders.
     (5) Includes  663,080 shares held in the name of Clarence E. Smith,  13,334
         shares  held in the  names of two minor  children  of  Clarence  E. and
         Rebecca L. Smith and 20,055  shares held in the name of Clarence E. and
         Rebecca L. Smith but does not include  521,410  shares held in the name
         of Rebecca L. Smith.
     (6) Includes  521,410  shares held in the name of Rebecca L. Smith but does
         not include  663,080  held in the name of  Clarence  E.  Smith,  13,334
         shares  held in the  names of two  minor  children  of  Clarence  E and
         Rebecca L. Smith, and 20,055 shares held in the name of Clarence E. and
         Rebecca L. Smith.

Item 12.      Certain Relationships and Related Transactions

     During the past two fiscal years,  there have been no transactions  between
us  and  any  officer,  director,  nominee  for  election  as  director,  or any
shareholder owning greater than five percent (5%) of our outstanding shares, nor
any member of the above referenced  individuals' immediate family, except as set
forth below.

     Loren E.  Bagley is  President  of Sancho,  a  principal  purchaser  of our
natural gas. Mr. Bagley's wife, Carolyn S. Bagley is a director and owner of 33%
of the outstanding  capital stock of Sancho.  Under our contract with Sancho, we
have the right to sell  natural  gas  subject to the terms and  conditions  of a
20-year  contract,  as amended,  that Sancho entered into with Hope Gas in 1988.
This agreement is a flexible volume supply agreement whereby we receive the full
price which Sancho  receives  less a $.05 per Mcf  marketing fee paid to Sancho.
The price of the natural gas is based upon the  greater of the  residential  gas
commodity index or the published Inside F.E.R.C.  Index, at our option,  for the
first 1,500 Mcf  purchased per day by Hope Gas and  thereafter  the price is the
Inside  F.E.R.C.  Index.  The  residential gas commodity index does not directly
fluctuate  with the overall  price of natural  gas.  The Inside  F.E.R.C.  Index
fluctuates  monthly  with the  change in the price of  natural  gas.  While such
option provides  certain price  protection for us there can be no assurance that
prices  paid by us to  suppliers  will be lower  than the  price  which we would
receive under the Hope Gas arrangement. During 2005, we paid Sancho an aggregate
of approximately $18,400 pursuant to such contract.

                                      -24-
<PAGE>

     On May 7, 1996, we borrowed $100,000 from William Stevenson. Such amount is
repayable in one  installment  of principal and interest of $110,000 on November
7, 1996.  Messrs.  Bagley,  William F. Woodburn and John B. Sims are jointly and
severally liable with us for the repayment of such  obligation.  Such obligation
is  secured  by the  pledge  of  50,000  shares  of  common  stock  owned by Mr.
Woodburn's  wife, Janet L. Woodburn.  The note was subsequently  purchased by an
entity  in which  Mr.  and Mrs.  Woodburn  are  officers  and  shareholders  and
converted to 173,333 shares of Trans Energy common stock on October 4, 2004.

     We occupy  approximately  4,000 square feet of office  space in St.  Marys,
West  Virginia,  which we share  with  Tyler  Construction  and  Ritchie  County
Gathering Systems. Prior to 1997, the office space was paid for by Sancho and we
used the office space rent free. We believe that the foregoing transactions with
Sancho  were made on terms no less  favorable  to us than those  available  from
unaffiliated third parties.

     It is our  policy  that any  future  material  transactions  between us and
members of management or their  affiliates  shall be on terms no less  favorable
than those available from unaffiliated third parties.

Item 13.      Exhibits

     Exhibits

Exhibit No.                                         Exhibit Name

   2.1(1)  Stock Acquisition  Agreement between Trans Energy and Loren E. Bagley
           and William F. Woodburn
   2.2(1)  Asset  Acquisition  Agreement  between  Trans  Energy  and  Dennis L.
           Spencer
   2.3(1)  Asset Acquisition  Agreement between Trans Energy and Tyler Pipeline,
           Inc.
   2.4(1)  Stock  Exchange  Agreement  between  Trans Energy and Ritchie  County
           Gathering Systems, Inc.
   2.5(1)  Plan and Agreement of Merger between Trans Energy,  Inc. (Nevada) and
           Apple  Corp.  (Idaho),  to  facilitate  the  change of our  corporate
           domicile to Nevada
   2.6(2) Agreements  related to acquisition of Vulcan Energy Corporation
   2.7(5)  Agreement and Plan of Reorganization with Arvilla, Inc.
   3.1(1)  Articles of Incorporation and all amendments  pertaining thereto, for
           Apple Corp., an Idaho corporation
   3.2(1)  Articles of Incorporation for Trans Energy, Inc., a Nevada
           corporation
   3.3(1)  Articles of Merger for the States of Nevada and Idaho
   3.4(1)  By-Laws
   4.1(1)  Specimen Stock Certificate
  10.1(1)  Marketing  Agreement with Sancho Oil and Gas Corporation
  10.2(1)  Gas Purchase Agreement with Central Trading Company
  10.3(1)  Price Agreement with Key Oil Company
  10.4(3)  Settlement Agreement and Mutual Release
  10.5(4)  Agreement with Texas Energy Trust Company
  10.6(4)  Assignment  and Agreement  with Texas Energy Trust Company and Cobham
           Gas Industries, Inc.
  10.7(7)  Asset Purchase Agreement with Texas Energy Trust Company.
  10.8(8)  Definitive Agreement to sell Arvilla Oilfield Services, LLC
  10.9(9)  First Amendment to Definitive Agreement
  21.1(6)  Subsidiaries of Registrant (Revised)
  31.1     Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley
           Act of 2002
  31.2     Certification of Principal Accounting Officer Pursuant to Section 302
           of the Sarbanes-Oxley Act of 2002
  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
  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
  99.1(1)  Reserve  Estimate and  Evaluation of oil and gas  properties  99.2(1)
           Reserve Estimate and Evaluation for Dennis L. Spencer wells

  (1)      Previously filed as exhibit to Form 10-SB.
  (2)      Previously filed as exhibit to Form 8-K dated August 7, 1995.
  (3)      Previously filed as exhibit to Form 8-K file January 23, 2004.


                                      -25-
<PAGE>

  (4)      Previously filed as exhibit to Form 8-K filed November 11, 2004.
  (5)      Previously filed as exhibit to the Preliminary  Information Statement
           pursuant to Section 14C filed with the SEC on December 8, 2004.
  (6)      Previously  filed as exhibit to Form  10-KSB for year ended  December
           31, 2004 filed April 27, 2005.
  (7)      Previously filed as exhibit to Form 8-K dated September 1, 2005.
  (8)      Previously  filed as exhibit to Form 8-K dated  January 3, 2006.  (9)
           Previously filed as exhibit to Form 8-K filed April 13, 2006

Item 14. Principal Accountants Fees and Services

     We do not  have an audit  committee  and as a result  our  entire  board of
directors performs the duties of an audit committee. Our board of directors will
approve in advance the scope and cost of the engagement of an auditor before the
auditor  renders audit and non-audit  services.  As a result,  we do not rely on
pre-approval policies and procedures.

     Audit Fees
     ----------

     The aggregate fees billed by our  independent  auditors,  H J & Associates,
for  professional  services  rendered  for the  audit  of our  annual  financial
statements  included  in our Annual  Reports on Form  10-KSB for the years ended
December 31, 2005 and 2004, and for the review of quarterly financial statements
included in our Quarterly  Reports on Form 10-QSB for the quarters  ending March
31, June 30 and September  30, 2005 and 2004,  were $91,312 for 2005 and $24,119
for 2004.

     Audit Related Fees
     ------------------

     For the years ended  December 31, 2005 and 2004,  there were no fees billed
for  assurance  and  related  services  by  H J &  Associates  relating  to  the
performance  of the audit of our  financial  statements  which are not  reported
under the caption "Audit Fees" above.

     Tax Fees
     --------

     For the  years  ended  December  31,  2005 and 2004,  fees  billed by H J &
Associates  for tax  compliance,  tax advice and tax  planning  were  $2,300 and
$1,101, respectively.

     We do not use H J & Associates for financial  information system design and
implementation. These services, which include designing or implementing a system
that  aggregates  source data  underlying the financial  statements or generates
information  that is  significant  to our  financial  statements,  are  provided
internally or by other service  providers.  We do not engage H J & Associates to
provide compliance outsourcing services.

     The board of directors has  considered the nature and amount of fees billed
by H J & Associates  and believes that the provision of services for  activities
unrelated  to  the  audit  is  compatible  with  maintaining  H J &  Associates'
independence.



                                      -26-
<PAGE>


                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

     TRANS ENERGY, INC.



          BY:     /S/ JAMES K. ABCOUWER
             --------------------------------------------
                  James K. Abcouwer,
                  President and C.E.O.

Dated: May 22, 2006

     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  Registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>

         Signature                                       Title                                          Date
         ---------                                       -----                                          ----



<S>                                                       <C>                                         <C>
/S/ JAMES K. ABCOUWER                                     President, C.E.O. and Director              May 22, 2006
----------------------------------
    James K. Abcouwer



/S/ LOREN E. BAGLEY                                       Vice President and Director                 May 22, 2006
------------------------------------
    Loren E. Bagley  Principal Financial Officer


                                                                                                      May 22, 2006
/S/  JOHN G. CORP                                         Director
-----------------------------------------
     John G. Corp



/S/  WILLIAM F. WOODBURN                                  Secretary ,Treasurer,                       May 22, 2006
------------------------------                            C.O.O. and Director
     William F. Woodburn                                  Principal Accounting Officer




/S/ ROBERT L. RICHARDS                                    Director                                    May 22, 2006
----------------------------------
    Robert L. Richards
</TABLE>





                                      -27-
<PAGE>




                       TRANS ENERGY, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2005


                       TRANS ENERGY, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2005







                                      F-1
<PAGE>



                                 C O N T E N T S


Report of Independent Registered Public Accounting Firm ................... 3

Consolidated Balance Sheet ................................................ 4

Consolidated Statements of Operations ..................................... 6

Consolidated Statements of Stockholders' Equity (Deficit).................. 7

Consolidated Statements of Cash Flows ..................................... 8

Notes to the Consolidated Financial Statements ............................10



                                      F-2
<PAGE>





             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors
Trans Energy, Inc. and Subsidiaries
St. Mary's, West Virginia

We have audited the  accompanying  consolidated  balance  sheet of Trans Energy,
Inc.  and  Subsidiaries  (the  Company) as of December  31, 2005 and the related
consolidated  statements of operations,  stockholders' equity (deficit) and cash
flows  for the years  ended  December  31,  2005 and  2004.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 2005 and the results of their  operations  and their cash flows for
the years ended  December 31, 2005 and 2004,  in  conformity  with United States
generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 8 to the
consolidated financial statements,  the Company has generated significant losses
from  operations,  has an accumulated  deficit of $30,684,681  and has a working
capital  deficit of  $3,079,443  at December 31,  2005,  which  together  raises
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's plans in regards to these matters are also described in Note 8. The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.



HJ & Associates, LLC
-------------------------
Salt Lake City, Utah
May 17, 2006


                                      F-3
<PAGE>

<TABLE>
<CAPTION>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet

                                     ASSETS

                                                                   December 31,
                                                                       2005

CURRENT ASSETS

<S>                                                            <C>
   Cash                                                        $           439,258
Accounts receivable, net (Note 1)                                        1,396,696
   Other current assets                                                      9,617
                                                               -------------------

     Total Current Assets                                                1,845,571
                                                               -------------------

PROPERTY AND EQUIPMENT, NET (Note 2)                                     2,160,256
                                                               -------------------

OTHER ASSETS

   Assets of discontinued operations (Note 13)                           7,410,571
   Deposits                                                                  4,914
   Investments                                                             175,000
   Life insurance, cash surrender value                                     75,995
                                                               -------------------

     Total Other Assets                                                  7,666,480
                                                               -------------------

       TOTAL ASSETS                                            $        11,672,307
                                                               ===================
</TABLE>




                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-4
<PAGE>
<TABLE>
<CAPTION>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                     Consolidated Balance Sheet (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                                      December 31,
                                                                          2005
CURRENT LIABILITIES

<S>                                                               <C>
   Accounts payable - trade                                       $         2,607,130
   Related party payables (Note 4)                                            855,502
   Accrued expenses                                                           860,368
   Judgments payable (Note 7)                                                  77,767
   Debentures payable (Note 9)                                                 50,000
   Notes payable - current portion (Note 3)                                   474,247
                                                                  -------------------

     Total Current Liabilities                                              4,925,014
                                                                  -------------------

LONG-TERM LIABILITIES

   Notes payable (Note 3)                                                     191,830
   Liabilities of discontinued operations (Note 13)                         5,665,468
   Asset retirement obligation (Note 1)                                       799,393
                                                                  -------------------

     Total Long-Term Liabilities                                            6,656,691
                                                                  -------------------

       Total Liabilities                                                   11,581,705
                                                                  -------------------

COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS' EQUITY (DEFICIT) (Note 6)

   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; 4,952,148 shares issued and 4,707,515 outstanding                    4,952
   Capital in excess of par value                                          30,856,798
   Treasury stock                                                            (286,467)
   Accumulated deficit                                                    (30,484,681)
                                                                  -------------------

     Total Stockholders' Equity (Deficit)                                      90,602
                                                                  -------------------


     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)         $        11,602,307
                                                                  ===================
</TABLE>


                   The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                                                                    For the Years Ended
                                                                                          December 31,
                                                                                    2005                2004
                                                                              ----------------   -----------------

<S>                                                                           <C>                <C>
REVENUES                                                                      $      4,797,201   $       2,390,099
                                                                              ----------------   -----------------

COSTS AND EXPENSES

  Cost of oil and gas                                                                4,553,758           1,736,444
  Salaries and wages                                                                   295,164             375,539
  Depreciation, depletion and amortization                                             265,866             321,115
  Selling, general and administrative                                                  496,758             241,128
                                                                              ----------------   -----------------

    Total Costs and Expenses                                                         5,611,546           2,674,226
                                                                              ----------------   -----------------

LOSS FROM OPERATIONS                                                                  (814,345)          (284,127)
                                                                              ----------------   -----------------

OTHER INCOME (EXPENSE)

  Other income                                                                             721              12,891
  Gain on disposition of debt                                                            7,306             416,560
  Interest expense                                                                    (129,034)           (193,683)
  Loss on extinguishments of debt                                                         -               (653,257)
  Gain (Loss) on disposition of assets                                                (176,037)            198,768
                                                                              ----------------   -----------------

  Total Other Income (Expense)                                                        (297,044)           (218,721)
                                                                              ----------------   -----------------

LOSS BEFORE INCOME TAXES                                                           (1,111,389)            (502,848)

INCOME TAXES                                                                                  -                  -
                                                                              -----------------  -----------------

LOSS FROM CONTINUING OPERATIONS                                                     (1,111,389)           (502,848)

LOSS FROM DISCONTINUED OPERATIONS                                                     (345,204)                  -
                                                                              ----------------   -----------------

NET LOSS - attributed to common shareholders                                  $     (1,456,593)  $        (502,848)
                                                                              ================   =================

BASIC LOSS PER SHARE

  Continuing operations                                                       $          (0.24)  $           (0.22)
  Discontinued operations                                                                (0.07)                  -
                                                                              ----------------   -----------------

    Total Basic Loss Per Share                                                $          (0.31)  $           (0.22)
                                                                              ================   =================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING                                                                         4,678,294           2,277,486
                                                                              ================   =================
</TABLE>

                   The accompanying notes are an integral part
                  of these consolidated financial statements.


                                      F-6
<PAGE>
<TABLE>
<CAPTION>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
            Consolidated Statements of Stockholders' Equity (Deficit)

                                        Preferred Stock              Common Stock        Capital in
                                ---------------------------  --------------------------   Excess of   Treasury        Accumulated
                                   Shares        Amount         Shares        Amount      Par Value     Stock           Deficit
                                ------------  -------------  ------------  ------------ ------------ ------------     ------------
<S>                             <C>         <C>                <C>        <C>           <C>           <C>             <C>
Balance, December 31, 2003             --   $        --        1,793,405  $       1,793 $  23,372,376           --    $ (28,525,240)

Common stock issued for
  debt and interest
  January 2004                         --            --          163,704            164       297,695           --             --


Common stock issued for
  debt and interest
  October 2004                         --            --        1,353,332          1,353     2,434,647           --             --

Common stock issued for
  Acquisition, December 2004           --            --          344,633            245       403,400           --             --

Contributed capital,
  December 2004                        --            --             --             --       1,346,529           --             --

Net loss for the year ended
  December 31, 2004                    --            --             --             --            --             --         (502,848)
                              ------------- -------------  -------------  ------------- -------------  -------------  -------------

Balance, December 31, 2004             --   $        --        3,555,074  $       3,555 $   2,854,647           --    $ (29,028,088)

Common stock issued for
  services, January 2005               --            --           50,000             50        92,450           --             --

Fractional shares issued in
  reverse stock split                  --            --              382           --            --             --             --

Common stock issued for
  Acquisition, January 2005            --            --        1,185,024          1,185     2,368,863           --             --

Contributed services                   --            --             --             --         250,000           --             --

Common stock issued for
  debt, July 2005                      --            --          141,668            142       254,858           --             --

Treasury shares,  August 2005          --            --             --             --            --         (286,467)          --

Common stock issued for
  services, December 2005              --            --           20,000             20        35,980           --             --

Net loss for the year ended
  December 31, 2005                    --            --             --             --            --             --       (1,456,593)
                              ------------- -------------  -------------  ------------- -------------  -------------  -------------

Balance, December 31, 2005             --   $        --        4,952,148  $       4,952 $  30,856,798  $    (286,467) $ (30,384,691)
                              ============= =============  =============  ============= =============  =============  =============
</TABLE>

                    The accompanying notes are aintegral part
                   of these consolidated financial statements

                                      F-7
<PAGE>
<TABLE>
<CAPTION>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                                                                          For the Years Ended
                                                                                             December 31,
                                                                                  ---------------------------------
                                                                                        2005             2004
                                                                                  ---------------  ----------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                               <C>              <C>
   Net loss                                                                       $    (1,313,687) $       (502,848)
    Adjustments to reconcile net loss to net cash used by
     operating activities:
    Depreciation, depletion and amortization                                              265,866           321,115
    Loss on extinguishments of debt                                                             -           653,257
    Gain (loss) on disposition of assets                                                (203,280)         (198,768)
    Common stock issued for services and
     beneficial conversion features                                                       761,750             --
    Gain on disposition of debt                                                              --           (416,560)
   Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable                                           (742,779)         (397,761)
    Decrease (increase) in other receivable                                                 8,825            49,627
    (Increase) decrease in prepaid and other assets                                        28,582             2,872
    (Decrease) increase in accounts payable                                             1,852,537           523,519
    (Decrease) increase in advances from related parties                                   75,081           416,591
    (Decrease) increase in accrued expenses                                                15,510           263,690
    Decrease in judgments payable                                                            --             (2,500)
    Increase in environmental remediation                                                  37,650         (103,138)
                                                                                  ---------------- ----------------

     Net Cash Provided (Used) by Operating Activities                                     605,392           609,096
                                                                                  ---------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Proceeds from sale of property and equipment                                           203,280           200,000
   Expenditures for property and equipment                                               (313,327)             --
   Proceeds from sale of life insurance cash value                                           --              53,367
   Payment on other non current assets                                                       --               (932)
                                                                                  ---------------- ----------------

    Net Cash Provided by Investing Activities                                            (110,047)          252,435
                                                                                  ---------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

   Change in cash overdraft                                                                 --             (49,120)
   Principal payments to related parties                                                    --           (280,000)
   Principal payments on notes payable                                                  (135,749)         (241,402)
   Principal payments on judgment payable                                                   --            (212,000)
                                                                                  ---------------- ----------------

   Net Cash (Used) by Financing Activities                                               (135,749)        (782,522)
                                                                                  ---------------  ---------------
</TABLE>


                   The accompanying notes are an integral part
                   of these consolidated financial statements.


                                      F-8
<PAGE>

<TABLE>
<CAPTION>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Continued)

                                                                                           For the Years Ended
                                                                                               December 31,
                                                                                  -------------------------------------
                                                                                          2005              2004
                                                                                  -----------------   -----------------

<S>                                                                               <C>                 <C>
Cash acquired in acquisition of subsidiary                                        $           --      $             470
                                                                                  -----------------   -----------------

NET INCREASE (DECREASE) IN CASH                                                             359,596              79,479

CASH, BEGINNING OF YEAR                                                                      79,662                 183
                                                                                  -----------------   -----------------

CASH, END OF YEAR                                                                 $         439,258   $          79,662
                                                                                  =================   =================

CASH PAID FOR:

  Interest                                                                        $         129,034   $         295,947
  Income taxes                                                                    $            --     $            --
</TABLE>

NON-CASH ACTIVITIES:

     The  Company  disposed  of a  portion  of  Cobham  Gas  Industries,  Penine
     Resources,  Inc., and Belmont  Energy,  Inc. The Company  received  244,633
     shares of its common stock valued at $286,467 for net assets of $857,100.

     The  Company  issued  141,668  shares  of common  stock for debt  relief of
     $255,000.

     Various key employees of the Company contributed $250,000 of services.

     The Company issued 1,185,024  shares of common stock for Arvilla,  Inc. for
     net assets of $2,370,048.

     The Company  issued  70,000  shares of common stock for services  valued at
     $128,500.





                   The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      F-9
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          a. Organization

          The  Company  was  incorporated  in the State of Idaho on January  16,
          1964.  On January  11,  1988,  the  Company  changed its name to Apple
          Corporation.  In 1988,  the  Company  acquired  oil and gas leases and
          other   assets  from  Ben's  Run  Oil  Company  (a  Virginia   limited
          partnership)  and has since  engaged  in the  business  of oil and gas
          production.

          On November 5, 1993, the Board of Directors  caused to be incorporated
          in the State of Nevada, a new corporation by the name of Trans Energy,
          Inc.,  with the specific  intent of effecting a merger  between  Trans
          Energy,  Inc. of Nevada and Apple Corp. of Idaho, for the sole purpose
          of changing  the  domicile  of the Company to the State of Nevada.  On
          November 15, 1993, Apple Corp. and the newly formed Trans Energy, Inc.
          executed a merger  agreement  whereby the  shareholders of Apple Corp.
          exchanged all of their issued and  outstanding  shares of common stock
          for an equal  number of shares of Trans  Energy,  Inc.  common  stock.
          Trans Energy,  Inc. was the surviving  corporation and Apple Corp. was
          dissolved.

          b. Principles of Consolidation

          The  consolidated  financial  statements  include  the Company and its
          wholly-owned  subsidiaries,  Prima Oil Company,  Inc.,  Ritchie County
          Gathering Systems,  Inc., Tyler Construction  Company,  Inc, and Tyler
          Energy,  Inc.  In  addition,  the  consolidated  financial  statements
          include two of the  Company's  other  subsidiaries,  Arvilla  Oilfield
          Services,  LLC which was disposed of  subsequent  to December 31, 2005
          and  has  been  presented  as   "discontinued   operations"  in  these
          consolidated  financial  statements.   All  significant   intercompany
          accounts and transactions have been eliminated.

          c. Accounting Method

          The Company uses the  successful  efforts method of accounting for oil
          and gas producing  activities.  Costs to acquire mineral  interests in
          oil and gas properties, to drill and equip exploratory wells that find
          proved  reserves,  and  to  drill  and  equip  development  wells  are
          capitalized.  Costs to drill exploratory wells that do not find proved
          reserves,  geological and geophysical costs, and costs of carrying and
          retaining unproved properties are expensed.

          Unproved oil and gas properties that are individually  significant are
          periodically   assessed  for  impairment  of  value,  and  a  loss  is
          recognized  at the  time of  impairment  by  providing  an  impairment
          allowance.  Other  unproved  properties  are  amortized  based  on the
          Company's  experience  of  successful  drilling  and  average  holding
          period.  Capitalized costs of producing oil and gas properties,  after
          considering   estimated   dismantlement   and  abandonment  costs  and
          estimated  salvage  values,   are  depreciated  and  depleted  by  the
          unit-of-production  method.  Support  equipment and other property and
          equipment are depreciated over their estimated useful lives.

          On the sale or retirement of a complete unit of a proved property, the
          cost and related accumulated depreciation, depletion, and amortization
          are eliminated from the property  accounts,  and the resultant gain or
          loss is  recognized.  On the  retirement  or sale of a partial unit of
          proved  property,  the cost is  charged to  accumulated  depreciation,
          depletion,  and amortization  with a resulting gain or loss recognized
          in income.



                                      F-10
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          c. Accounting Method (Continued)

          On the sale of an entire interest in an unproved  property for cash or
          cash equivalent,  gain or loss on the sale is recognized,  taking into
          consideration  the amount of any recorded  impairment  if the property
          had been assessed individually.

          If a partial  interest  in an unproved  property  is sold,  the amount
          received  is  treated  as a  reduction  of the  cost  of the  interest
          retained.

          The Company has elected a December 31 year-end.

          d. Basic Loss per Share of Common Stock

          The  basic  loss per share of  common  stock is based on the  weighted
          average  number of shares  issued and  outstanding  at the date of the
          consolidated  financial  statements.  Fully  diluted loss per share of
          common  stock is not  disclosed as the common  stock  equivalents  are
          antidilutive  in nature.  For the Years Ended  December  31, 2005 2004
<TABLE>
<CAPTION>
<S>                                                                      <C>                   <C>
              Numerator:
               Loss from operations                                      $     (1,111,389)     $          (502,848)
               Discontinued Operations                                           (345,204)                       -
                                                                         -----------------     -------------------

                  Net Loss                                               $     (1,456,593)     $          (502,848)
                                                                         ===================   ===================

              Denominator - weighted average shares                              4,678,294               2,277,486
                                                                         ===================   ===================

              Net loss per share:
               Continuing operations                                     $          (0.24)     $             (0.22)
               Discontinued operations                                              (0.07)                   (0.00)
                                                                         -------------------   -------------------

                  Total Basic Loss Per Share                             $          (0.31)     $             (0.22)
                                                                         ===================   ===================
</TABLE>

          At December  31, 2005,  the Company had a  convertible  debenture  and
          accrued  interest which could have been  converted into  approximately
          33,000 shares of common stock,  which have been excluded from loss per
          share because the effect would be anti-dilutive.

          d. Provision for Taxes

          Deferred taxes are provided on a liability method whereby deferred tax
          assets  are  recognized  for  deductible  temporary   differences  and
          operating  loss  and  tax  credit   carryforwards   and  deferred  tax
          liabilities   are  recognized  for  taxable   temporary   differences.
          Temporary differences are the differences between the reported amounts
          of assets and liabilities and their tax bases. Deferred tax assets are
          reduced by a valuation  allowance  when, in the opinion of management,
          it is more  likely than not that some  portion or all of the  deferred
          tax assets will not be realized.


                                      F-11
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          d. Provision for Taxes (Continued)

          Deferred  tax assets and  liabilities  are adjusted for the effects of
          changes in tax laws and rates on the date of enactment.

          Net  deferred tax assets  consist of the  following  components  as of
          December 31, 2005 and 2004:
<TABLE>
<CAPTION>

                                                               2005                2004
                                                        ------------------  ----------------
              Deferred tax assets:
<S>                                                     <C>                 <C>
                NOL carryover                           $        9,966,065  $        9,747,505
                Accrued expenses                                   252,250             246,200

              Valuation allowance                             (10,218,315)          (9,993,705)
                                                        ------------------- ------------------

              Net deferred tax asset                    $            --     $             --
                                                        =================== ==================
</TABLE>

          The  income  tax  provision  differs  from the  amount of  income  tax
          determined by applying the U.S.  federal and state income tax rates of
          39% to pretax income from  continuing  operations  for the years ended
          December 31, 2005 and 2004 due to the following:
<TABLE>
<CAPTION>

                                                                  2005                2004
                                                           ------------------  ------------------
<S>                                                        <C>                 <C>
              Book income                                  $        (512,338)  $         (196,110)
              Other                                                      --                    50
              Discontinued operations                                  60,836                   -
              Officer insurance                                          --                 1,460
              Stock for services                                       50,115                --
              Contributed services                                     97,500                --
              Loss on debt                                               --               299,490
              Loss on disposal of assets                               79,279                --
              Accrued expenses                                          6,049               2,198
              Valuation allowance                                     218,559           (107,088)
                                                           ------------------- ------------------

                                                           $             --    $            --  -
                                                           =================== ==================
</TABLE>

          At December 31, 2005, the Company had net operating loss carryforwards
          of approximately $24,560,000 that may be offset against future taxable
          income  from the year  2005  through  2025.  No tax  benefit  has been
          reported in the December 31, 2005  consolidated  financial  statements
          since the potential tax benefit is offset by a valuation  allowance of
          the same amount.

          Due to the  change in  ownership  provisions  of the Tax Reform Act of
          1986,  net  operating  loss   carryforwards  for  Federal  income  tax
          reporting purposes are subject to annual limitations.  Should a change
          in ownership occur, net operating loss carryforwards may be limited as
          to use in future years.


                                      F-12
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          e. Asset Retirement Obligation

          The following is a description  of the changes to the Company's  asset
          retirement obligation from January 1 through December 31, 2005:
<TABLE>
<CAPTION>
<S>                                                                           <C>
                 Reclamation obligation (asset retirement obligation)
                  as reported at December 31, 2004                            $        1,571,749
                 Disposition of subsidiary                                             (810,006)
                 Accretion expense:
                   Revision in reclamation cost estimates                                      -
                   Accretion expense - January 1, 2005 through
                    December 31, 2005                                                     37,650
                                                                              ------------------

                 Reclamation obligation at December 31, 2005                  $          799,393
                                                                              ==================
</TABLE>

          f. Depreciation

          Fixed assets are stated at cost.  Depreciation on vehicles,  machinery
          and equipment is provided using the straight line method over expected
          useful  lives  of five  years.  Depreciation  on  pipelines  and  well
          equipment is provided using the straight-line method over the expected
          useful lives of fifteen years.  Wells are being  depreciated using the
          units-of-production  method on the basis of total  estimated  units of
          proved reserves.

          g. Estimates

          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and  liabilities  at the  date  of the  financial  statements  and the
          reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates.

          h. Long Lived Assets

          The Company reviews  long-lived  assets and  identifiable  intangibles
          whenever events or circumstances indicate that the carrying amounts of
          such assets may not be fully  recoverable.  The Company  evaluates the
          recoverability  of long-lived assets by measuring the carrying amounts
          of the assets against the estimated undiscounted cash flows associated
          with these  assets.  At the time such  evaluation  indicates  that the
          future  undiscounted  cash flows of certain  long-lived assets are not
          sufficient  to recover  the  assets'  carrying  value,  the assets are
          adjusted to their fair values (based upon discounted cash flows).


                                      F-13
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          i. Accounts Receivable

          Accounts  receivable are carried at the expected net realizable value.
          The  allowance  for  doubtful   accounts  is  based  on   management's
          assessment of the collectibility of specific customer accounts and the
          aging of the accounts receivables.  If there were a deterioration of a
          major customer's creditworthiness, or actual defaults were higher than
          historical  experience,  our  estimates of the  recoverability  of the
          amounts  due to us could be  overstated,  which  could have a negative
          impact on operations.

          j. New Accounting Pronouncements

          In  May  2005,  the  Financial   Accounting  Standards  Board,  issued
          Statement  of  Financial   Accounting  Standards  ("SFAS,  No.  154"),
          "Accounting  Changes and Error Corrections," which replaces Accounting
          Principles Board Opinion No. 20, "Accounting Changes," and SFAS No. 3,
          "Reporting  Accounting  Changes in Interim Financial  Statements -- An
          Amendment of APB Opinion No. 28".  SFAS No. 154  provides  guidance on
          accounting for and reporting changes in accounting principle and error
          corrections.   SFAS  No.  154  requires  that  changes  in  accounting
          principle  be  applied   retrospectively  to  prior  period  financial
          statements and is effective for fiscal years  beginning after December
          15, 2005.  The Company does not expect SFAS No. 154 to have a material
          impact on our consolidated financial position,  results of operations,
          or cash flows.

          In December  2004,  the Financial  Accounting  Standards  Board issued
          Statement of Financial  Accounting  Standards No. 153. This  statement
          addresses the  measurement  of exchanges of  nonmonetary  assets.  The
          guidance  in  APB  Opinion  No.  29,   "Accounting   for   Nonmonetary
          Transactions," is based on the principle that exchanges of nonmonetary
          assets  should  be  measured  based  on the fair  value of the  assets
          exchanged.  The guidance in that opinion;  however,  included  certain
          exceptions to that  principle.  This  statement  amends  Opinion 29 to
          eliminate  the  exception   for   nonmonetary   exchanges  of  similar
          productive  assets  and  replaces  it  with a  general  exception  for
          exchanges of nonmonetary assets that do not have commercial substance.
          A  nonmonetary  exchange has  commercial  substance if the future cash
          flows of the entity are expected to change  significantly  as a result
          of the exchange.  This statement is effective for financial statements
          for fiscal years beginning after June 15, 2005. Earlier application is
          permitted for nonmonetary asset exchanges incurred during fiscal years
          beginning  after  the date of this  statement  is  issued.  Management
          believes  the  adoption of this  statement  will have no impact on the
          financial statements of the Company.

          In December 2004, the Financial  Accounting  Standards  Board issued a
          revision to  Statement  of Financial  Accounting  Standards  No. 123R,
          "Accounting for Stock Based  Compensations." This statement supersedes
          APB Opinion No. 25,  "Accounting  for Stock Issued to Employees,"  and
          its  related  implementation   guidance.  This  statement  establishes
          standards  for the  accounting  for  transactions  in which an  entity
          exchanges  its  equity  instruments  for goods and  services.  It also
          addresses  transactions  in  which an  entity  incurs  liabilities  in
          exchange for goods or services that are based on the fair value of the
          entity's equity  instruments or that may be settled by the issuance of
          those  equity   instruments.   This  statement  focuses  primarily  on
          accounting for transactions in which an

                                      F-14
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          j. New Accounting Pronouncements (Continued)

          entity obtains employee services in share-based payment  transactions.
          This statement does not change the accounting guidance for share based
          payment  transactions  with parties other than  employees  provided in
          Statement of Financial  Accounting  Standards No. 123. This  statement
          does not address the accounting for employee  share  ownership  plans,
          which are subject to AICPA  Statement  of Position  93-6,  "Employers'
          Accounting for Employee Stock Ownership  Plans."  Management  believes
          the adoption of this  statement  will have no impact on the  financial
          statements of the Company.

          In November  2004,  the Financial  Accounting  Standards  Board (FASB)
          issued Statement of Financial Accounting Standards No. 151, "Inventory
          Costs-- an amendment of ARB No. 43, Chapter 4". This statement  amends
          the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify
          the accounting for abnormal amounts of idle facility expense, freight,
          handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43,
          Chapter 4,  previously  stated  that ". . . under some  circumstances,
          items  such as  idle  facility  expense,  excessive  spoilage,  double
          freight,  and  rehandling  costs  may  be so  abnormal  as to  require
          treatment as current period  charges.  . . ." This statement  requires
          that those items be recognized as current-period charges regardless of
          whether they meet the criterion of "so  abnormal."  In addition,  this
          Statement  requires that allocation of fixed  production  overheads to
          the  costs  of  conversion  be  based on the  normal  capacity  of the
          production facilities. This statement is effective for inventory costs
          incurred during fiscal years beginning after June 15, 2005. Management
          believes the adoption of this statement had no material  impact on the
          Company.

          The  implementation  of the provisions of these  pronouncements is not
          expected to have a significant  effect on the  Company's  consolidated
          financial statement presentation.

          k. Stock Split

          On November 29, 2004 the board of directors and stockholders holding a
          majority of  outstanding  common  stock of the Company  approved a one
          share for 150 shares reverse split of the common stock. All references
          to per share data and common  stock have been  restated to reflect the
          effect of this reverse split.


                                      F-15
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 2 -  PROPERTY AND EQUIPMENT

          At December 31, 2005, property and equipment consisted of:

                Vehicles                               $            60,724
                Machinery and equipment                              1,600
                Furniture and Fixtures                               1,847
                Pipelines                                        1,392,648
                Well equipment                                      87,009
                Leasehold acreage                                   64,004
                Accumulated depreciation                       (1,370,199)
                                                       ------------------

                  Total Fixed Assets                   $           237,633
                                                       ===================

              Depreciation expense was $239,595 and $195,150 for the years ended
              December 31, 2005 and 2004, respectively.

          At December 31, 2005 the Company's proved properties  consist of costs
          in the following:

                Wells, Wyoming                            $        3,079,481
                Wells, West Virginia                               1,575,345
                Less: accumulated depletion                      (2,732,203)
                                                          -----------------

                                                          $       1,922,623

          Depletion  expense  was  $113,390  and  $125,965  for the years  ended
          December 31, 2005 and 2004.

          Productive Gas Wells

          The following summarizes the Company's productive oil and gas wells as
          of December 31, 2005.  Productive  wells are producing wells and wells
          capable of  production.  Gross wells are the total  number of wells in
          which  the  Company  has an  interest.  Net  wells  are the sum of the
          Company's fractional interests owned in the gross wells.
<TABLE>
<CAPTION>

                                                               Gross                Net
                                                        ------------------  ------------------

<S>                                                                      <C>                 <C>
                Productive oil wells, Wyoming                            6                   2
                Oil and gas wells, West Virginia                        93                  93
                                                        ------------------  ------------------

                                                                        99                  95
                                                        ==================  ==================
</TABLE>

          The Company  operates its West Virginia wells and does not operate its
          Wyoming wells.



                                      F-16
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 2 -  PROPERTY AND EQUIPMENT (Continued)

          Oil and Gas Acreage

     The following table sets forth the undeveloped  leasehold acreage, by area,
     held by the Company as of December 31, 2005. Undeveloped acres are acres on
     which wells have not been drilled or completed to a point that would permit
     the  production  of  commercial  quantities  of oil and gas,  regardless of
     whether or not such acreage contains proved  reserves.  Gross acres are the
     total  number of acres in which the  Company  has a working  interest.  Net
     acres are the sum of the Company's  fractional interests owned in the gross
     acres.  In certain  leases,  the  Company's  ownership  varies at different
     depths;  therefore,  the net acres in these leases are calculated using the
     lowest  ownership  interest  at any  depth.
<TABLE>
<CAPTION>
                                                              Gross                 Net
                                                        ------------------  ------------------
<S>                                                                  <C>                 <C>
                Wyoming, approximately                               2,800               2,530
                West Virginia, approximately                        10,000               8,750
                                                        ------------------  ------------------

                                                                    12,800              11,280
                                                        ==================  ==================
</TABLE>

NOTE 3 -  LONG-TERM DEBT

          The Company had the following debt obligations at December 31, 2005:
<TABLE>
<CAPTION>
<S>                                                                                              <C>
              Note payable to an individual,  due on demand, bearing interest at
               9.25%, interest payments due monthly, secured by
               equipment.                                                                     $      292,078

              Union Bank of Tyler County, principal and interest payments
                of $1,740 due monthly with interest at 9.5%, unsecured                               16,658

              New York Life, 5.87% interest rate, due upon demand,
               secured by life insurance cash value.                                                 69,311

              Note payable to a Company, due on demand, unsecured,
               non interest bearing.                                                                 61,222

              Wesbanco,  principal and interest  payments of $3,500 due monthly,
                  interest at prime +1%, secured by officers' personal
              assets. 267,229

              Union Bank of Tyler County, principal and interest payments of
               $326 due monthly, interest at 5.0%, secured by a vehicle.                             10,028

              Note due to a individual, unsecured with interest
               at 7.00%, due upon demand.                                                            10,774
                                                                                              -------------

                          Total                                                                     727,300

                          Less Current Portion                                                     (474,247)
                                                                                              -------------

              Total Long-Term Debt                                                            $    253,053
                                                                                              ==============
</TABLE>

                                      F-17
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 3 -  LONG-TERM DEBT (Continued)

          Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>

<S>                       <C>                                                                 <C>
                          2006                                                                $            474,247
                          2007                                                                              29,158
                          2008                                                                              27,323
                          2009                                                                              26,523
                          2010                                                                              28,796
                          2011 and thereafter                                                              141,253
                                                                                              --------------------

                              Total                                                           $            727,300
                                                                                              ====================
</TABLE>

          At  December  31,  2005,   total  interest   accrued  for  these  debt
          obligations was $0.

NOTE 4 -  RELATED PARTY TRANSACTIONS

          a. Marketing Agreement - Sancho

          Natural gas delivered  through the Company's  pipeline network is sold
          either  to  Sancho  Oil  and Gas  Corporation  ("Sancho"),  a  company
          controlled  by the Vice  President of the Company,  at the  industrial
          facilities  near  Sistersville,  West Virginia,  or to Dominion Gas, a
          local utility,  on an on-going basis at a variable price per month per
          Mcf.

          Under its  contract  with  Sancho,  the  Company 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 the Company
          receives the full price which Sancho charges the end user less a $0.05
          per Mcf marketing fee paid to Sancho.

          b. Well Drilling and Operating Agreement

          In June 2000,  the Company  entered into a well drilling and operating
          agreement with Sancho Oil and Gas  Corporation  ("Sancho"),  a company
          controlled by the Vice President of the Company, on an on-going basis.
          Sancho provided seven drill-down  wells located in Tyler County,  West
          Virginia  and the Company was to pay 100% of the cost of drilling  and
          completing the well including any topside  equipment  needed and other
          related  equipment.  The  Company  will  receive  75% of  the  working
          interest in each of the wells competed.

          c. Receivables and Payables

          The Company has various  payables to the officers and companies of the
          officers.  These amounts have been grouped together with a net payable
          of $794,280 and receivable of $0 at December 31, 2005. At December 31,
          2005,  total  interest  accrued in the net related  party  payable was
          $16,024, which is included in the total owed to the related parties.


                                      F-18
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 5 -  ECONOMIC DEPENDENCE AND MAJOR CUSTOMERS

          The  Company's   marketing   arrangement  with  Sancho  accounted  for
          approximately  100% and 82% of the  Company's  revenue  for the  years
          ended December 31, 2005 and 2004,  respectively in Tyler  Construction
          Company. This marketing agreement is in effect until December 1, 2008.
          Another  customer  also  generated  sales of 100%  and 99% of  Ritchie
          County total sales in 2005 and 2004, respectively.

NOTE 6 -  STOCKHOLDERS' EQUITY

          Preferred Stock -The Company has authorized 10,000,000 shares of $.001
          par value preferred  stock.  The preferred stock shall have preference
          as to dividends and to liquidation of the Company.

          Common Stock - The Company has authorized  500,000,000 shares of $.001
          par value common stock.

          In January 2004, the Company issued 163,704 shares of common stock for
          debt relief of $297,859.

          In December 2004, the Company issued 1,353,332 shares of commons stock
          for debt relief of $2,436,000.

          In December 2004, key employees of the Company contributed  $1,346,529
          of accrued payroll and services.

          In December  2004,  the Company  issued 244,633 shares of common stock
          for an acquisition of a subsidiary valued at $403,645.

          In January 2005,  the Company issued 50,000 shares of common stock for
          services valued at $92,500.

          In January 2005, the Company issued  1,185,024  shares of common stock
          for an acquisition of a subsidiary valued at $ 2,370,048.

          In 2005, key employees of the Company  contributed  services valued at
          $250,000.

          In July 2005,  the Company  issued  141,668 shares of the common stock
          for debt relief of $255,000.

          In August  2005,  the Company  received  244,633  shares of the common
          stock of the  Company in return for the sale of certain  assets of the
          Company. These shares have been accounted for as treasury stock.

          In December 2005, the Company issued 20,000 shares of common stock for
          consulting services valued at $36,000.

                                      F-19
<PAGE>

                     TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 7 -  JUDGMENTS PAYABLE

          Core Laboratories, Inc.

          On July 28, 1999, Core  Laboratories,  Inc. (Core) obtained a judgment
          against  the  Company  for  non-payment  of an  account  payable.  The
          judgment calls for monthly payments of $351 and is bearing interest at
          10.00% per annum.  At  December  31,  2005,  the Company had accrued a
          balance  of  $19,983  including  interest  of  $8,348(5,932)  which is
          included in judgments payable and accrued expenses, respectively.

          RR Donnelly

          On July 1, 1998,  RR  Donnelly  (RR)  obtained a judgment  against the
          Company for  non-payment of accounts  payable.  The judgment calls for
          monthly  payments  of $3,244  and is  bearing  interest  at 10.00% per
          annum.  At  December  31,  2005,  the Company has accrued a balance of
          $90,286  including  interest of  $26,581which  is included in judgment
          payable and accrued expenses, respectively.

          Tioga Lumber Company

          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.

          Arvilla Debt Doventants

          Arvilla Oilfield  Services was required under a certain loan agreement
          to maintain specific financial ratios under covenants contained in the
          loan  agreement.  At December 31, 2005 Arvilla was in compliance  with
          those covenants.

NOTE 8 -  GOING CONCERN

          The Company's  consolidated  financial  statements  are prepared using
          United States generally accepted accounting principles applicable to a
          going  concern  which  contemplates  the  realization  of  assets  and
          liquidation  of  liabilities  in the normal  course of  business.  The
          Company has incurred cumulative  operating losses through December 31,
          2005 of $30,341,775, and has a working capital deficit at December 31,
          2005 of $3,018,221.

          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
          the Company to continue as a going concern.  There can be no assurance
          that the Company  can or will be able to  complete  any debt or equity
          financing.  The  Company's  consolidated  financial  statements do not
          include  any  adjustments  that might  result from the outcome of this
          uncertainty.

                                      F-20
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 9 -  CONVERTIBLE DEBENTURES

          On September  10,  1998,  the Company  completed a debenture  issue of
          $4,625,400 face value, 8% Secured Convertible Debentures due March 31,
          1999 (the "Debentures").  Pursuant to the terms of the Debentures, the
          Company  had  agreed  to  file  a  registration   statement  with  the
          Commission to register the shares of the  Company's  Common Stock into
          which the  Debentures  may be  converted.  Upon  effectiveness  of the
          registration  statement,  the  shares of the  Company's  Common  Stock
          underlying  the  Debentures,  when issued,  will be deemed  registered
          securities  and  will  not be  restricted  as to the  resale  of  such
          securities.

          Because the Company failed to file its  registration  statement within
          forty-five (45) days from the closing of the Debenture  offering,  the
          Company was  obligated to increase by up to fifteen  percent (15%) the
          number of shares issuable upon conversion to each holder.

          At December  31,  2005,  the Company  owed a remaining  $50,000 on the
          debentures plus $24,853 in accrued interest and $2,500 in penalties.

          Convertible debenture dated 2001 bearing interest at 10% with interest
          and  principal  due  upon  demand;  unsecured;  convertible  into  the
          Company's common stock at $0.035 per share: $ 50,000

              Less current portion                             (50,000)
                                                        --------------

              Long-term portion                         $         --
                                                        ==============

NOTE 10 - BUSINESS SEGMENTS

          The Company has adopted SFAS No. 131, "Disclosure about Segments of an
          Enterprise  and  Related   Information."   The  Company  conducts  its
          operations  principally as oil and gas sales with Trans Energy,  Prima
          Oil, and Cobham Gas & Oil, Inc., Penine  Resources,  Inc., and Belmont
          Energy,  inc. and pipeline  transmission with Ritchie County and Tyler
          Construction.


                                      F-21
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 10 - BUSINESS SEGMENTS (Continued)

          Certain financial  information  concerning the Company's operations in
          different industries is as follows:
<TABLE>
<CAPTION>

                                 For the
                               Years Ended         Oil and Gas          Pipeline            Corporate
                               December 31,           Sales           Transmission          Unallocated
                               ------------           -----           ------------          -----------

<S>                                <C>           <C>                   <C>                   <C>
Oil and gas revenue                2005          $   271,165           $ 3,853,243           $      --
                                   2004              986,220             1,403,879                  --
Operating (loss) income
applicable to  industry segment    2005             (868,484)               35,076                  --
                                   2004              523,857                68,155                  --

Interest expense                   2005              (98,981)              (30,053)                 --
                                   2004             (156,277)              (37,407)                 --

Other income (expenses)            2005             (141,358)              (58,395)                 --
                                   2004                 --                    --                    --
Assets
  (net of intercompany accounts)   2005            2,569,239             1,605,263             1,975,244
                                   2004            2,033,346               680,956                  --

Depreciation and amortization      2005              161,824               191,161                  --
                                   2004              220,836                74,043                  --

Property and equipment
 acquisitions                      2005              313,327                  --               2,370,048
                                   2004            2,613,460                  --                    --
</TABLE>

NOTE 11 - OUTSTANDING STOCK OPTIONS

          The Company applies  Accounting  Principles  Board ("APB") Opinion 25,
          "Accounting    for   Stock   Issued   to   Employees,"   and   related
          Interpretations  in accounting  for all stock option plans.  Under APB
          Opinion 25,  compensation cost is recognized for stock options granted
          to  employees  when the option  price is less than the market price of
          the underlying common stock on the date of grant.

          Under FASB Statement 123, the Company estimates the fair value of each
          stock  award at the  grant  date by  using  the  Black-Scholes  option
          pricing model with the following weighted average assumptions used for
          grants,  respectively;  dividend  yield of zero percent for all years;
          expected  volatility  of 68.72%;  risk-free  interest rate of 4.08 and
          expected  lives of 10 years for the three  months ended March 31, 2006
          and 2005.


                                      F-22
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 11 - OUTSTANDING STOCK OPTIONS (Continued)

          Had  compensation  cost for the  Company's  stock  options  granted to
          directors and employees  been based on the fair value as determined by
          the  Black-Scholes  option  pricing  model at the grant date under the
          accounting provisions of SFAS No. 123, the Company would have recorded
          an additional expense of $837,416, pertaining to the vested portion of
          the options,  for the year ended  December 31, 2005.  Also under these
          same provisions, the Company's net loss would have been changed by the
          pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                                          For the Year Ended
                                                                              December 31,
                                                                ------------------------------------------
                                                                         2005                2004
                                                                --------------------  --------------------
              Net loss:
<S>                                                             <C>                    <C>
                As reported                                     $    (1,313,687)       $   (502,848)
                Pro forma                                       $    (2,151,103)       $   (502,848)
              Basic loss per share:
                As reported                                     $      (0.28)          $     (0.22)
                Pro forma                                       $      (0.46)          $     (0.22)
</TABLE>

          Stock  Options - A summary of the status of the options  granted under
          various  agreements at December 31, 2005 and 2004,  and changes during
          the years then ended is presented below:
<TABLE>
<CAPTION>

                                                  December 31, 2005              December 31, 2004
                                            -----------------------------   ---------------------------
                                              Weighted                       Weighted
                                              Average       Exercise          Average      Exercise
                                               Shares        Price            Shares         Price
                                            -----------   ---------------   -----------   -------------
<S>                                         <C>           <C>                             <C>
         Outstanding at beginning of year          --     $          --            --     $        --
         Granted                                553,324           1.95             --              --
         Exercised                                 --                --            --              --
         Forfeited                                 --                --            --              --
         Expired                                   --                              --              --
                                            -----------   ---------------   -----------   -------------


         Outstanding at end of year             553,324   $       1.95             --     $        --
                                            ===========   ===============   ===========   =============

Weighted average fair value of options
           granted during the year              553,324   $       1.95             --     $        --
                                            ===========   ===============   ===========   =============

Weighted average fair value of options
           granted during the year              553,324   $      1.95             --     $        --
                                            ===========   ===============   ===========   =============
</TABLE>


                                      F-23
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 11 -     OUTSTANDING STOCK OPTIONS (Continued)

              A summary of the status of the options  granted  under the various
              agreements at December 31, 2005, are presented in the table below:
<TABLE>
<CAPTION>

                                            Options Outstanding                            Options Exercisable
                                          -------------------------------------   -------------------------------------
                                          Weighted-Average     Weighted-Average   Weighted-Average
          Range of          Number            Remaining           Exercise             Number           Exercise
       Exercise Prices    Outstanding     Contractual Life         Price            Exercisable          Price
       ---------------    -----------     ----------------     ----------------   ----------------    -----------
<S>        <C>               <C>            <C>                    <C>               <C>                  <C>
           $1.95             553,324        8.75 years             $ 1.95            553,324              $1.95
                          ------------                                            ----------------

                             553,324                                                 553,324
                          ============                                            ================
</TABLE>

NOTE 12-  SUBSEQUENT EVENTS

          On January 3, 2006 the Company entered into a definitive  agreement to
          sell its well servicing and  maintenance  business,  Arvilla  Oilfield
          Services,  LLC, a West Virginia limited liability company, to Clarence
          E. Smith and Rebecca L. Smith,  both  directors of the  Company.  As a
          result of consummating the definitive agreement,  Clarence and Rebecca
          Smith  returned to the Company  521,411  shares of Trans Energy common
          stock.  Clarence and Rebecca Smith also conveyed to the Company all of
          their  interest  in and to five  oil and gas  wells  located  in Tyler
          County,  West Virginia.  Upon  execution of the definitive  agreement,
          Clarence Smith resigned as our Chief Executive  Officer,  but remained
          on our board of directors until the closing on April 7, 2006. On April
          7, 2006 both  Clarence and Rebecca  Smith  resigned  from the board of
          directors. The closing of the transaction was expressly conditioned on
          the receipt of a fairness opinion from a qualified  independent  party
          stating that the transactions contemplated by the definitive agreement
          were  fair  to the  Company  and its  stockholders.  The  Company  has
          accounted for the financial  statements of Arvilla Oilfield  Services,
          LLC as discontinued  operations and recorded a loss from  discontinued
          operations  of  $155,992,  which  is  included  in  the  statement  of
          operations for the year ended December 31, 2005.

          On January 6, 2006,  the board of directors  elected James K. Abcouwer
          as President and Chief Executive Officer of the Company.  On April 27,
          2006  Mr.  Abcouwer  was  elected  to the  board of  directors  of the
          Company.

          On April 12, 2006 the Company  finalized a  definitive  agreement  for
          sale of certain wells,  overriding  royalties and undeveloped  acreage
          located in Campbell  County,  Wyoming.  The assets were sold at public
          auction through the Oil & Gas Asset  Clearinghouse in Houston,  Texas.
          The gross sales price for the properties is $1,003,000.

          On April  21,  2006,  the  Company  received  a  letter  from the NASD
          notifying  the  Company  that it is not in  compliance  with NASD Rule
          6530,  which obligates  issuers to timely file those reports and other
          documents  required  to be filed  with  the  Securities  and  Exchange
          Commission. The Company has until May 23, 2006 to file its Form 10-KSB
          for  the  year  ended  December  31,  2005 or its  securities  will be
          delisted from the OTCBB.

                                      F-24
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2005 and 2004

NOTE 13 - DISCONTINUED OPERATIONS

          Arvilla Oil Field Services, LLC

          In 2006 the Company  discontinued  the  operations of its wholly owned
          subsidiary Arvilla Oil Field Services, LLC. The accompanying financial
          statements  have been  presented to reflect the  operations of Arvilla
          Oil Field Services, LLC as discontinued.
<TABLE>
<CAPTION>

  For the Years Ended
                                                                   December 31,
                                                              2005                  2004
                                                        ----------------       ----------------
<S>                                                   <C>                      <C>
               Revenues                               $      10,670,703        $        --
               Cost of sales                                 (7,425,123)                --
               General and administrative                    (3,108,699)                --
               Other income (expense)                          (292,873)                --
                                                       ----------------       -----------------

               Net loss before income taxes                    (155,992)                --
               Income tax expense                                  --                   --
                                                      -----------------       -----------------

                  Net loss                            $        (155,992       $         --
                                                      =================       =================

          The net assets of the  discontinued  operations  were  composed of the
          following:

               Cash                                   $         169,325        $        --
               Accounts receivable                              769,824                 --
               Other current assets                               5,346                 --
               Property and equipment                         5,319,101                 --
               Other assets                                     453,020                 --
               Accounts payable and accrued expenses           (525,257)                --
  -
               Notes payable                                 (4,216,115)                --
                                                      -----------------       -----------------

                Net assets                            $      1,975,244       $          --
                                                      ================       ==================
</TABLE>

          Cobham Gas Industries, Inc.

          In 2006 the Company  discontinued  the  operations of its wholly owned
          subsidiary  Cobham Gas Industries,  Inc.. The  accompanying  financial
          statements have been presented to reflect the operations of Cobham Gas
          Industries, Inc. as discontinued. Cobham Gas Industries.


                                      F-25
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                           December 31, 2005 and 2004
                                   (Unaudited)

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES

         (1)          Capitalized Costs Relating to
                     Oil and Gas Producing Activities
<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                                    2005                2004
                                                                             -----------------   -----------------
<S>                                                                          <C>                 <C>
         Proved oil and gas producing properties and related
          lease and well equipment                                           $       3,403,421   $       7,093,676
         Unproved oil and gas properties                                                64,004              95,945
         Accumulated depreciation and depletion                                     (1,394,403)         (3,870,874)
                                                                             -----------------   -----------------

         Net Capitalized Costs                                               $       2,073,022   $       3,318,747
                                                                             ==================  =================
</TABLE>


         (2)                    Costs Incurred in Oil and Gas Property
                         Acquisition, Exploration, and Development Activities
<TABLE>
<CAPTION>

                                                                                      For the Years Ended
                                                                                          December 31,
                                                                                    2005                2004
                                                                             -----------------   -----------------
<S>                                                                          <C>                 <C>
         Acquisition of Properties
           Proved                                                            $           --      $       2,346,600
           Unproved                                                                      --                   --
         Exploration Costs                                                               --                   --
         Development Costs                                                            313,327                 --
</TABLE>

     The  Company  does not have any  investments  accounted  for by the  equity
     method.

         (3)               Results of Operations for
                              Producing Activities
<TABLE>
<CAPTION>

                                                                                     For the Years Ended
                                                                                         December 31,
                                                                                   2005                2004
                                                                             -----------------   -----------------
<S>                                                                          <C>                 <C>
         Sales                                                               $       1,547,696   $         557,765
         Production costs                                                           (1,154,841)           (198,000)
         Depreciation and depletion                                                   (258,144)           (220,837)
         Income tax expenses                                                              --                  ---
                                                                             ------------------  -----------------

         Results of operations for producing activities
          (excluding the activities of the pipeline transmission
          operations, corporate overhead and interest costs)                 $         392,855   $         138,928
                                                                             ==================  =================
</TABLE>

                                      F-26
<PAGE>

                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                           December 31, 2005 and 2004
                                   (Unaudited)

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (CONTINUED)

         (4)                  Reserve Quantity Information
<TABLE>
<CAPTION>

                                                                                     Oil            Gas
                                                                                     BBL                MCF
                                                                             -----------------  ------------------

     Proved developed and undeveloped reserves

<S>                                                                                    <C>               <C>
         End of the year 2004                                                          106,649           542,955

         Revisions of previous estimates                                               121,926              --
         Improved recovery                                                                --                --
         Purchases of minerals in place                                                   --                --
         Extensions and discoveries                                                       --                --
         Production                                                                    (12,731)          (41,975)
         Sales of minerals in place                                                       --            (496,717)
                                                                             -----------------  ----------------

         End of the year 2005                                                          215,844             4,263
                                                                             =================  ================
         Proved developed reserves:
                                                                                   Oil                Gas
                                                                                      BBL                CF
                                                                             -----------------  ----------------

           End of the year 2004                                                        106,649           542,955
           End of the year 2005                                                        215,844             4,263
</TABLE>

     During the years ended  December 31, 2005 and 2004, the Company had reserve
     studies and estimates prepared on its various properties.  The difficulties
     and uncertainties  involved in estimating proved oil and gas reserves makes
     comparisons between companies  difficult.  Estimation of reserve quantities
     is  subject to wide  fluctuations  because it is  dependent  on  judgmental
     interpretation of geological and geophysical data.

                                      F-27
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                           December 31, 2005 and 2004
                                   (Unaudited)

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (CONTINUED)
<TABLE>
<CAPTION>

         (5)                             Standardized Measure of Discounted
                        Future Net Cash Flows Relating to
                           Proved Oil and Gas Reserves


                              At December 31, 2005
                                                                                                  Trans Energy
                                                                                                  and
                                                                                                  Subsidiaries

<S>                                                                                            <C>
         Future cash inflows                                                                   $     36,322,180
         Future production and development costs                                                     (7,990,879)
         Future income tax expense                                                                            -
                                                                                               ----------------
         Future net cash flows                                                                       28,331,301
         Discounted for estimated timing of cash flows                                               (5,287,060)
                                                                                               ----------------

         Standardized measure of discounted future net cash flows                             $      23,044,241
                                                                                              =================


                              At December 31, 2004
                                                                                                  Trans Energy
                                                                                                       and
                                                                                                  Subsidiaries

         Future cash inflows                                                                   $      6,996,464
         Future production and development costs                                                     (1,539,222)
         Future income tax expense                                                                            -
                                                                                               ----------------
         Future net cash flows                                                                        5,457,242
         10% annual discount for estimated timing of cash flows                                      (1,018,406)
                                                                                               ----------------

         Standardized measure of discounted future net cash flows                              $      4,438,836
                                                                                               ================
</TABLE>


     Future income taxes were  determined  by applying the statutory  income tax
     rate to future pre-tax net cash flow relating to proved reserves.

                                      F-28
<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                           December 31, 2005 and 2004
                                   (Unaudited)

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (CONTINUED)

         (5)            Standardized Measure of Discounted
                        Future Net Cash Flows Relating to
                     Proved Oil and Gas Reserves (Continued)

         The following schedule  summarizes changes in the standardized  measure
         of  discounted  future  net cash flow  relating  to proved  oil and gas
         reserves:
<TABLE>
<CAPTION>

                                                                                 For the Years Ended
                                                                                        December 31,
                                                                                  2005                 2004
--------------------------------------------------------------------------------------------   -----------------

<S>                                                                       <C>                  <C>
         Standardized measure, beginning of year                          $        4,438,836   $       1,864,377
         Oil and gas sales, net of production costs                                 (392,855)               --
         Sales of mineral in place                                                      --              (125,966)
         Purchases                                                                      --             2,375,205
         Net change due to revisions in quantity estimates                        18,998,260             325,220
         Accretion of discount items                                                    --                  --
                                                                          ------------------   -----------------

         Standardized measure, end of year                                $       23,044,241   $       4,438,836
                                                                          ==================   =================
</TABLE>

     The above schedules  relating to proved oil and gas reserves,  standardized
     measure of discounted future net cash flows and changes in the standardized
     measure of  discounted  future net cash  flows  have  their  foundation  in
     engineering  estimates of future net revenues  that are derived from proved
     reserves and  prepared  using the  prevailing  economic  conditions.  These
     reserve  estimates  are made  from  evaluations  conducted  by  independent
     geologists, of such properties and will be periodically reviewed based upon
     updated  geological and production  data.  Estimates of proved reserves are
     inherently  imprecise.  The above standardized measure does not include any
     restoration costs due to the fact the Company does not own the land.

     Subsequent  development  and  production  of the  Company's  reserves  will
     necessitate  revising  the  present  estimates.  In  addition,  information
     provided in the above schedules does not provide definitive  information as
     the  results  of  any  particular  year  but,  rather,  helps  explain  and
     demonstrate the impact of major factors affecting the Company's oil and gas
     producing  activities.  Therefore,  the  Company  suggests  that all of the
     aforementioned  factors concerning assumptions and concepts should be taken
     into consideration when reviewing and analyzing this information.


                                      F-29
<PAGE>