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, 2001

 [ ]     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]

         State  the  issuer's  revenues  for its  most  recent  fiscal  year.  $
1,278,227

         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. $2,515,749 (Based on price of $0.013 on April 8, 2002)

         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 December 31, 2001
   ------------------------                -----------------------------------
   Common Stock, Par Value                           176,683,189
       $.001 per share

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE

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

                                        1

<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........................................................        8

Item 3.           Legal Proceedings..............................................................       10

Item 4.           Submission of Matter to a Vote of Security Holders.............................       12

                                                      PART II

Item 5.           Market for Common Equity and Related Stockholder Matters.......................       12

Item 6.           Management's Discussion and Analysis or Plan of Operation......................       13

Item 7.           Financial Statements...........................................................       16

Item 8.           Changes in and Disagreements with Accountants on Accounting and
                  Financial Disclosure...........................................................       16

                                                     PART III

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

Item 10.          Executive Compensation.........................................................       17

Item 11.          Security Ownership of Certain Beneficial Owners and Management.................       18

Item 12.          Certain Relationships and Related Transactions.................................       18

                                                      PART IV

Item 13.          Exhibits and Reports on Form 8-K...............................................       20

                  Signatures.....................................................................      S-1
</TABLE>


                                      -2-
<PAGE>

                                     PART I

Item 1.           Description of Business

History

         Trans Energy,  Inc., a Nevada corporation (the "Company" or "TSRG"), is
primarily engaged in the transportation, marketing and production of natural gas
and oil, and also conducts exploration and development  activities.  The Company
owns an interest in seven oil and gas wells in West Virginia,  owns and operates
one oil well in Wyoming, and owns an interest in seven oil wells in Wyoming that
it does not operate. It also owns and operates an aggregate of over 100 miles of
three-inch,  four-inch and six-inch gas  transmission  lines located within West
Virginia in the Counties of Ritchie,  Tyler and Pleasants.  This pipeline system
gathers the natural gas produced  from these wells and from wells owned by third
parties.  TSRG also has  approximately  16,500  gross  acres  under lease in the
Powder River Basin in Campbell, Crook and Weston Counties, Wyoming. In 2001, the
Company  participated in the drilling of three drill downs to the Benson Sand in
West Virginia.

         On March 6, 1998,  the Company  entered  into an  agreement to purchase
from GCRL Energy, Ltd. ("GCRL") all of GCRL's 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.  The  Company  made  an  initial  payment  for  the
properties of $332,500 and the balance of $2,987,962  was paid for with proceeds
from the sale of Convertible  Debentures.  During 1999, the Sagebrush 3 well was
drilled in the Sagebrush field in Campbell County Wyoming.  It will be used as a
water  disposal  well for the  Sagebrush #1 and #2. It is  anticipated  that the
Sagebrush #3 will be put into  operation as a disposal well during the summer of
2002.

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

Business Development

         In 2001, management continued its interest in the Trenton - Black River
deep gas field in the Appalachian  Basin in West Virginia.  Management  believes
that this area may become active in the counties in which the Company  operates.
The  Company  continues  to  focus  much of its  efforts  in  this  area to take
advantage of the situation if the opportunity  becomes  available.  In 1999, the
Company  sold  many of its  Appalachian  Basin  assets  and  purchased  51% of a
producing  well in the Powder  River Basin in Wyoming.  The Company then focused
its attention toward developing its acreage in the Powder River Basin in Wyoming
and drilling for deep gas in the Trenton-Black River area.

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

         In  September  1993,  the Company  acquired  certain oil and gas assets
including  wells and pipelines,  in exchange  solely for shares of the Company's
authorized  but  previously   unissued  common  stock.  These  acquisitions  are
summarized below:

                                       -3-

<PAGE>


         Tyler Construction Company, Inc.

         In September 1993, the Company acquired an interest equal to 65% of the
total outstanding  shares of Tyler Construction  Company ("Tyler  Construction")
from Loren E. Bagley and William F. Woodburn,  both of whom are directors of the
Company. Tyler Construction owns and operates a natural gas gathering


pipeline system serving the industrialized Ohio Valley.  Tyler Construction also
owns and  operates  27  miles of  six-inch  pipeline  and 10 miles of  four-inch
pipeline.

         Tyler  Construction's trunk line system consists of a six-inch pipeline
that begins at the town of St. Marys,  West Virginia,  located on the Ohio River
in the County of Pleasants in western West Virginia,  and proceeds  twenty-seven
miles due east to Bradden  Station,  West Virginia.  Near Bradden  Station,  the
pipeline  intercepts major transmission lines of Equitable Natural Gas, Dominion
Transmission,  Inc. and Eastern American Energy. An intercepting line consisting
of ten miles of  four-inch  pipeline  begins at a point  eight miles east of St.
Marys and proceeds  north 10 miles to an  industrial  park  located  seven miles
south of  Sistersville,  West Virginia.  At this point,  gas is delivered to OSI
Specialties  (formerly Union Carbide) and Consolidated  Aluminum  Corporation of
America under a marketing agreement with Sancho.  Pursuant to its agreement 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 Hope
Gas, Inc. ("Hope") in 1988. This agreement is a flexible volume supply agreement
whereby the Company  receives 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 residential gas index and the Inside F.E.R.C. CNG Index.

         Spencer Wells

         Also in September 1993, the Company acquired from Dennis L. Spencer all
rights,  title and interest to six  producing  oil and gas wells located in West
Virginia,  in exchange for the Company shares.  Five of the wells  identified as
"Fowler," "Goff," "Locke," "McGill" and "Workman" are situated in Ritchie County
in a proven  reservoir  field.  The remaining  well  identified as "Spencer," is
located  in Tyler  County.  All six wells were  completed  in 1991 and have been
producing oil and gas through the date hereof. In 1999, five of these wells were
sold to an  unaffiliated  third party and in 2000, the sixth well was sold to an
unaffiliated third party.

         The Pipeline, Ltd.

         Also in September 1993, the Company acquired from Tyler Pipeline,  Inc.
("Tyler  Pipeline") all rights,  title and interest in the natural gas gathering
pipeline  system known as The Pipeline,  Ltd.  (the name of the pipeline,  not a
legal entity), a four-inch pipeline that begins at Twiggs,  West Virginia,  nine
miles east of St. Marys, West Virginia where it intercepts Tyler  Construction's
trunk  line  system and  proceeds  due south for a  distance  of six miles.  The
Pipeline, Ltd. system is used for purchasing gas from third party producers. Mr.
Woodburn, Secretary / Treasurer and a director of the Company, is also President
and owns 50% of Tyler Pipeline. Mr. Bagley, Vice President and a director of the
Company, also owns 50% of Tyler Pipeline.

         Ritchie County Gathering Systems, Inc.

         In September 1993, the Company  acquired all the issued and outstanding
capital  stock of  Ritchie  County  Gathering  Systems,  Inc.,  a West  Virginia
corporation  ("Ritchie  County  Gathering").  Ritchie County  Gathering owns and
operates a four-inch natural gas gathering line which begins five miles south of
Cairo,  West  Virginia  at  Rutherford,  and  proceeds  due south for 4.6 miles,
crossing Mellon Ridge and ending at Macfarlan Creek approximately 1/2 mile north
of the South Fork of the Hughes River. The Ritchie County Gathering  pipeline is
used for  purchasing gas from third party  producers and delivering  such gas to
Hope.
                                       -4-

<PAGE>

         Powder River Basin Wyoming

         On March 6, 1998,  the Company  entered  into an  agreement to purchase
from GCRL Energy, Ltd. ("GCRL") all of GCRL's 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.  The  Company  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 the Company's Debentures.


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

<TABLE>
<CAPTION>

                                     Gross Bbls.
Name of Well                         Oil Per Day              Net % to TSRG                       Net Bbls. to TSRG
------------                        ------------              -------------                       -----------------
<S>            <C>                          <C>                       <C>                               <C>
Sagebrush Fed #1                            51                        48.8%                             25
Sagebrush Fed #2                            37                        47.5%                             18
Pinon Fee #1                                28                        51.2%                             14
Sandbar Boley 31-36                         11                        27.8%                              3
 includes Sandbar State
 1-36 and 2-36
Wolff 1-35                                   6                          68%                              4
                                            --                        -----                             --
        TOTAL                              133                                                          64
</TABLE>

Current Business Activities

         The  Company  is  operates  its  oil and  natural  gas  properties  and
transports  and markets  natural gas  through its  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 the  Company  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.

         Although the Company will continue to transport and market  natural gas
through its various  pipelines,  there are no current plans to acquire or to lay
any  additional  pipeline  systems in 2002.  Apart from one well  drilled in the
Powder River basin in Wyoming (Sagebrush #3) and the seven re-entry Benson wells
drilled in West Virginia,  the Company has not  participated in any new wells in
the last three years.

         Powder River Basin Wyoming - Prima

         On December 28,  1996,  the Company  purchased  420 acres in the Powder
River  basin in the State of Wyoming  for  $50,000  from an  unaffiliated  third
party.  Included in the purchase price was a condition that the previous  owners
would provide all of the geologic and  geophysical  work as part of the purchase
price.  On  February  3, 1997 the Company  leased an  additional  480 acres that
joined with its acreage  position.  The target  formation is the Minnelusa  "B1"
sand.  There  presently  are no  producing  wells on such  acreage and no proved
reserves located on the acreage owned by the Company.

         Five  two-dimensional   ("2-D")  seismic  lines  and  a  6-square  mile
three-dimensional  ("3-D") seismic program have been shot across the acreage now
held by the Company. Unlike 2-D seismic testing which provides a cross-sectional
view  of  the   subsurface   of  the  Earth,   3-D  testing   provided  a  full,
three-dimensional view of the subsurface. Such views allow for greater precision
in the  location of  potential  drilling  sites.  3-D testing  allows  potential
drillers  to  obtain  accurate  estimates  of the  size of oil  and gas  bearing
structures  and the  profile of the  structure.  2-D  testing  only  informs the
driller that an oil and gas bearing  structure is in a particular area,  without
giving  information  as to size and shape.  Without an accurate  estimate of the
size of the oil  and gas  bearing  structures,  it is  difficult  to  accurately

                                       -5-

<PAGE>

estimate the reserves in the structure,  and,  thus,  the economic  viability of
drilling  into a  particular  structure.  Without  an  accurate  profile  of the
structure, a driller may not hit the most economic portion of the structure.

         Water pressure  primarily is responsible for the movement of oil within
the area of the  Company's  acreage.  Where  water  pressure is the cause of oil
movement,  finding the apex of the oil bearing  structure is critical.  Drilling
into the apex of such a structure  usually assures that a maximum amount of oil,
and a minimal  amount of water,  will be recovered  from a well.  Hitting such a
zone  elsewhere  than at the apex will  result in a lower  proportion  of oil to
water and reduced rates of recovery.

         The Company  completed  the drilling of the Fowler 22-8 in January 1998
and  determined  the well to be a dry hole and was plugged.  The Company did not
drill additional wells on this acreage during 1999, 2000, or 2001.

         Powder River Basin Wyoming - Wolffe Prospect

         On May 27, 1997,  the Company  purchased a 30% working  interest in the
Wolffe  Prospect  in the Powder  River  Basin in  Campbell  County,  Wyoming for
$65,000 from an unaffiliated  third party.  Included in the purchase price was a
30% working  interest in the Wolffe #1-35 well and 30% interest in 240 acres. In
October  1997,  the  Company  participated  in its share of the  drilling of the
Horizon 32-35 well.  The target  formation was the Minnelusa "B1" sand. The well
was  determined to be a dry hole and plugged.  On November 15, 1999, the Company
purchased for $16,000 an additional 51% working  interest in the Wolff 1-35 well
from Renor Exploration Limited.

         Sistersville

         Effective June 1, 1995, the Company purchased approximately 2,200 acres
in a  known  producing  field  located  near  Sistersville,  West  Virginia  for
$100,000.  The  Sistersville  field  has been in  operation  since  the  1890's,
although  at a very low  level  for the past ten  years.  To date the  field has
produced over 13 million barrels of oil. The field contains  portions of the Big
Injun  and  Keener  sands  formations,  both  well  known  oil and  gas  bearing
formations, which are the zones the Company intends to explore. These formations
are approximately 1,700 feet deep.  Recoverable reserves of oil in the field are
estimated  at  several  million  barrels.  The  Company  drilled  a well  on its
Sistersville  acreage in April 1997.  On December 3, 1999,  the Company sold the
Sistersville field for $125,000 to an unaffiliated third party.

         Vulcan Energy Corporation.

         During  March 1997,  the Company  ceased  operations  of Vulcan  Energy
Corporation ("Vulcan"), its 80% owned subsidiary, engaged in the lease crude oil
gathering and marketing in Southeast Texas.

Research and Development

         The  Company  has not  allocated  funds  for  conducting  research  and
development  activities and, due to the nature of the Company's business,  it is
not anticipated that funds will be allocated for research and development in the
immediate future.

Marketing

         The Company operates  exclusively in the oil and gas industry.  Natural
gas  production  from wells  owned by the Company is  generally  sold to various
intrastate  and  interstate   pipeline   companies  and  natural  gas  marketing

                                       -6-

<PAGE>


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 the Company's  pipeline  network is sold
through the Sancho Oil and Gas Corporation ("Sancho") contract to the industrial
facilities near Sistersville,  West Virginia,  or to Hope, 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 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 Hope 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 $.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 and published  Inside  F.E.R.C.  Index, at the
Company's  option,  for the  first  1,500  Mcf  purchased  per  day by Hope  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 the Company there
can be no assurance  that prices paid by the Company to suppliers  will be lower
than the price which the Company would receive under the Hope arrangement. Prior
to June 1, 1996, the price was the  residential gas commodity index and when the
market price of gas rose above such index, the Company's ability to purchase gas
from third parties was adversely effected.

         The Company sells its 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 the Company is not dependent upon any
one customer,  its  marketing  arrangement  with Sancho Oil and Gas  Corporation
accounted  for  approximately  49% of the  Company's  revenue for the year ended
December 31, 2001, and  approximately  30% for the year ended December 31, 2000.
This marketing agreement is in effect until September 1, 2008.

         In addition to the natural gas produced by the Company's wells, it also
purchased approximately 250 Mcf of natural gas per day in 2001.

Competition

         TSRG  is in  direct  competition  with  numerous  oil and  natural  gas
companies, drilling and income programs and partnerships exploring various areas
of the  Appalachian  and Powder River Basins and  elsewhere,  and  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 TSRG's
competitors  possess greater financial and personnel  resources enabling them to
identify and acquire more economically desirable energy producing properties and
drilling prospects than TSRG. 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.

         Under its contract with Sancho,  TSRG 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 Hope in 1988.  This  agreement  is a flexible  volume
supply agreement whereby TSRG receives 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 indices that include the residential gas commodity charge of Hope and
the Inside F.E.R.C. CNG Index. Were it not for the relationship between Hope and
Sancho,  Hope would  compete  directly  with TSRG for the sale of gas to certain
customers, specifically OSI Specialities, Inc. and Ormet Aluminum Company.

                                       -7-

<PAGE>

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 the Company's  capital
expenditures, earnings or competitive position.

         Legislation  and  implementing  regulations  adopted or  proposed to be
adopted by the  Environmental  Protection Agency ("EPA") and by comparable state
agencies,  directly and indirectly affect the Company's operations.  The Company
is required to operate in 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.

         TSRG 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 the Company to comply with all  environmental  regulations.  It is
conceivable that future  legislation or regulations may  significantly  increase
environmental  protection requirements and, as a consequence,  TSRG's 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
the  Company  is in  compliance  with  all  present  environmental  regulations.
Further,  the Company  believes that its oil and gas  explorations do not pose a
threat of introducing  hazardous substances into the environment.  If such event
should occur, the Company could be liable under certain environmental protection
statutes and laws. The Company does presently carry insurance for  environmental
liability.

         TSRG's  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.

         The Company is 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 the  Company's  aggregate  production
expenses.  Nevertheless,  the Company is 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 the Company,  may have an
indirect effect on the cost of, or the demand for, natural gas and oil.

Employees

         As of the date  hereof the  Company  employs  eight  people  full-time,
consisting of three executives,  two marketing and clerical  persons,  and three
production persons. Management presently anticipates hiring additional employees
as the business warrants and as funds are available.

                                       -8-

<PAGE>

Facilities

         The Company's  operations  currently occupy  approximately 4,000 square
feet of office  space in St.  Marys,  West  Virginia,  which it shares  with its
subsidiary  Tyler  Construction  Company,  Inc.  and  Ritchie  County  Gathering
Systems, Inc. The Company leases 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.  Management  believes  that its present  office
facilities are adequate for the Company's current business operations.

Industry Segments

         No  information  is presented as to industry  segments.  The Company is
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  Company's  financial
statements  included  herewith  for a statement  of the  Company's  revenues and
operating profit (loss) for the past two fiscal years.

Item 2.           Description of Property

         The Company's properties consist essentially of the working and royalty
interests  owned by the Company in various oil and gas wells and leases  located
in West Virginia. The Company's proved reserves for the years ended December 31,
2001, 2000 and 1999 are set forth below:
                                       -9-

<PAGE>

<TABLE>
<CAPTION>

                                                                      December 31,
                                             ----------------------------------------------------
                                              2001                  2000                  1999
                                             --------           -----------           -----------
<S>                                         <C>                   <C>                 <C>
Natural Gas (MMcf)
    Developed                               1,133,839                -                    -
    Undeveloped                               -                      -                    -
     Total Proved                           1,133,839               356,196               -
Crude Oil (MBbl)
    Developed                                 147,876             1,138,144             1,225,648
    Undeveloped                               -                     210,610               210,610
     Total Proved                             147,876             1,348,754             1,436,258

</TABLE>

         These  estimates  are  bases  primarily  on the  reports  of  Donald C.
Kasterson,  Certified  Petroleum  Geologist  for  natural  gas,  and  Robert  L.
Richards, Geologist for oil. 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 Securities  and Exchange  Commission.  See
SFAS 69 Supplemental  Disclosures included as part of the Consolidated Financial
Statements of the Company.

         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 the Company for the past three fiscal years.

<TABLE>
<CAPTION>

                                                                   Years ended December 31,
                                               ------------------------------------------------------------
Average sales price:                            2001                       2000                      1999
-------------------                            ------                     ------                    ------
<S>                                           <C>                     <C>                          <C>
    Gas (per mcf)                             $  5.22                 $    -                       $  3.04
    Oil (per bbl)                               16.22                      24.67                     13.83
Average cost of production:
    Gas (per mcf)                               -                      $   -                          1.31
    Oil (per bbl)                                4.05                       3.38                      7.52
</TABLE>

         The Company has not filed any  estimates  of total,  proved net oil and
gas reserves  with any federal  authority  or agency since the  beginning of the
Company's last fiscal year.

         The following schedule sets forth the capitalized costs relating to oil
and gas producing activities by the Company for the past three fiscal years.

<TABLE>
<CAPTION>

                                                                         Years ended December 31,
                                                     ---------------------------------------------------------
                                                        2001                   2000                  1999
                                                   -------------         -------------        ----------------
<S>                                                  <C>                   <C>                    <C>
Proved oil and gas
  producing properties
  and related lease
  and well equipment                                 $ 3,617,505           $ 3,372,880            $ 4,730,577
Unproved oil and gas
  properties                                             114,426               180,000                180,000
Accumulated depreciation
  and depletion                                       (1,009,429)             (269,365)               (25,930)
                                                     -----------           ------------           -----------
Net Capitalized Costs                                $ 2,722,502           $ 3,283,515            $ 4,884,647
                                                     ===========           ============           ===========
</TABLE>

         The following schedule  summarizes changes in the standardized  measure
of discounted future net cash flows relating to the Company's proved oil and gas
reserves.

                                      -10-

<PAGE>

<TABLE>
<CAPTION>

                                                                             Years ended December 31,
                                                       -----------------------------------------------------------
                                                            2001                 2000                    1999
                                                       --------------      ---------------         ---------------
<S>                                                       <C>                  <C>                      <C>
Standardized measure,
  beginning of year                                       $4,425,778           $5,216,987               $9,495,694
Oil and gas sales, net
  of production costs                                          -                      -                   (313,619)
Sales of mineral in place                                 (1,039,658)          (1,611,730)              (3,965,088
Purchases                                                                         820,521                      -
Net change due to revisions
  in quantity estimates                                      263,874               -                       -
                                                        ------------   -------------------       ------------------
Standardized measure,
  end of year                                             $3,649,994           $4,425,778               $5,216,987
                                                          ==========           ===========              ===========
</TABLE>

         The Company  does not  anticipate  investing  in or  purchasing  assets
and/or property for the purpose of capital gains. It is the Company's  intention
to purchase  assets  and/or  property for the purpose of  enhancing  its primary
business  operations.  The Company is not limited as to the percentage amount of
the Company's assets it may use to purchase any additional assets or properties.

Item 3.           Legal Proceedings

         Certain  material  pending legal  proceedings to which the Company is a
party or to which any of its property is subject is set forth below.

         (a) On February 7, 2001, the United States Bankruptcy  Court,  Southern
         District of Texas,  entered an Order Granting Motion to Dismiss Chapter
         7 Case in the action  entitled  In Re:  Trans  Energy,  Inc.,  Case No.
         00-39496-H4-7.  The Order dismissed the involuntary  bankruptcy  action
         instituted   against  the  Company  on  October  16,  2000.   The  sole
         petitioning  creditor  named in the  Involuntary  Petition  was Western
         Atlas  International,  Inc.  ("Western").  An Order  for  Relief  Under
         Chapter 7 was entered by the Court on November 22, 2000.

                  On April 23, 2000,  the 189th District Court of Harris County,
         Texas entered an Agreed Final Judgment in favor of Western  against the
         Company  in the  amount of  $600,665.36,  together  with post  judgment
         interest  at 10% per annum.  Following  the  judgment,  Western and the
         Company entered into settlement  negotiations  concerning the Company's
         satisfaction of the judgment through payments over a four to five month
         period  together with the pledge of collateral on certain  unencumbered
         assets.  Previously,  on or about  July 9, 1998,  a  judgment  had been
         entered in the 152nd District Court of Harris County, Texas against the
         Company in favor of Baker Hughes Oilfield Operations, Inc. d/b/a/ Baker
         Hughes  Inteq.  Western  Geophysical  ("Baker"),  a division of Western
         Atlas International,  Inc., in the amount of $41,142.00,  together with
         interest and attorney fees.  This judgment was  outstanding at the time
         of the filing of the Involuntary Petition.

                  During its  negotiations  with Western for  settlement  of the
         Judgment, the Company made a $200,000 "good faith payment" to Western's
         counsel on October 23, 2000.  On December 12, 2000,  Joe Hill was named
         as the Chapter 7 Trustee. Subsequently, Western's counsel delivered the
         $200,000 to the Trustee.

                  On January 19,  2001,  the Company  filed with the  Bankruptcy
         Court the Motion to Dismiss  Chapter 7 Case.  The reasons  cited by the
         Company in support  of its  Motion to  Dismiss  included,  but were not
         limited to, (i) the Texas Court being an improper venue for the action,
         and (ii) the Company  never  receiving  the  Involuntary  Petition  and
         Summons  notifying it of the action.  In anticipation of the Bankruptcy
         Court  dismissing the  Involuntary  Petition,  on February 2, 2001, the


                                      -11-

<PAGE>


         Company entered into a Settlement  Agreement with Baker Hughes Oilfield
         Operation,  Inc.,  d/b/a/ Baker Hughes Inteq.  Western  Geophysical,  a
         division of Western Atlas  International,  Inc. (the "Baker Entities").
         In entering  its order on  February 7, 2001 to dismiss the action,  the
         Court  ordered the Trustee to retain  $17,694.80  for  satisfaction  of
         administrative  fees and expenses,  and to pay to Western and Baker the
         sum of $182,736.66,  on behalf of the Company and pursuant to the terms
         of the Settlement Agreement.

                  The  Settlement   Agreement  provided  that,  subject  to  the
         approval of the  Bankruptcy  Court,  the  Company  agreed to pay to the
         Baker  Entities  $759,664.31,  plus interest at 10%. In addition to the
         $200,000  payable from the escrow,  the Company  pledged as  collateral
         certain  properties,  personal  property and fixtures and two directors
         each pledged  750,000  shares of the Company's  common stock which they
         personally own.  Subsequently,  the Company  assigned the income stream
         from the sale of oil in the Pinon Fee #1, Sagebrush #1 and Sagebrush #2
         to the Baker Entities as payments  toward the amounts owed.  Management
         believes  that this payment will satisfy the Baker  Entities  until the
         obligation can be paid in full.

         (b) On April 10, 2000, Bellevue  Resources,  Inc. recorded and served a
         Notice and Statement of Lien in the Sixth Judicial  District,  Campbell
         County, Wyoming,  against the Company for non- payment of services. The
         Company  recorded a liability  of $78,651 in its  financial  statements
         under accounts  payable for the year ended December 31, 2000 to reflect
         this claim. Bellevue Resources has agreed to take certain lease acreage
         in  Campbell  County,  Wyoming  held by the Company as payment for this
         liability.  The Company has agreed to this  settlement  and  management
         anticipates the transaction will be finalized during the second quarter
         of 2002.

         (c) 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.
         The  Company  has accrued  $47,741  which is included in the  Company's
         financial  statements  for the  year  ended  December  31,  2000  under
         accounts  payable.  Management  has  represented  that the  Company has
         reached a negotiated  payment schedule with Tioga. The Company has made
         the initial payment  pursuant to the settlement and management  expects
         the full amount will be paid by the third quarter 2002.

         (d) On April 16,  2001,  Ross  Forbus  obtained a judgment  of $428,018
         against the Company to satisfy a  promissory  note  previously  entered
         into by the Company with Mr.  Forbus on April 8, 1996.  The Company has
         agreed to payment  terms and has made  small  payments  to Mr.  Forbus.
         Management is currently attempting to extend the term of the payments.

         (e) On December  26,  2001,  George  Hillyer  filed a suit  against the
         Company and William F.  Wooburn and Loren E. Bagley  individually.  The
         action seeks $250,750 in connection with certain services performed for
         the Company.  Management  has indicated  that the suit is not justified
         and that the Company and the individual defendants intend to vigorously
         defend the  action.  The  Company has not accrued any amounts for these
         claims as of December 31, 2001 because the Company feels that the based
         on  its  defenses  against  the  claims  it  will  have  no  additional
         liability. Due to the early stage of the litigation, it is not possible
         to evaluate the  likelihood of an  unfavorable  outcome or estimate the
         extent of potential loss.

         (f) In September 2001, the Securities and Exchange  Commission  filed a
         civil action in the United  States  District  Court for the District of
         Columbia  (Civil Action No.  1:01CV020060)  against Trans Energy,  Inc.
         (the  "Company") and two of its directors,  Loren E. Bagley and William
         F.  Woodburn.  The complaint  alleged  violations of the anti-fraud and
         reporting  provisions of the federal securities laws in connection with
         press  releases,   wesbite  postings,   and  Commission  filings.   The
         Commission's complaint sought injunctive relief and civil penalties.

                                      -12-

<PAGE>

                  On February 26, 2002,  the District  Court entered a permanent
         injunction   against  the  Company,   Mr.  Bagley,  and  Mr.  Woodburn,
         permanently  enjoining  them from future  violations of the  Securities
         Exchange  Act of 1934 and certain  rules  promulgated  thereunder.  The
         Court also  ordered  Messrs.  Bagley and Woodburn to each pay a $20,000
         civil penalty.  The Company,  Mr. Bagley and Mr. Woodburn  consented to
         entry of the permanent injunction and the imposition of civil penalties
         without  admitting  or denying the  Commission's  allegations.  Messrs.
         Bagley and Woodburn have each paid their civil penalty.

         (g) In January  2002,  a suit  entitled  Dennis L.  Spencer  vs.  Trans
         Energy,  Inc. and Messrs.  Woodburn and Bagley was filed in the Circuit
         Court of Ritchie County, West Virginia ( Civil Action No. 02-C-02). The
         complaint  alleges  that the  Company  sold  certain  assets  which Mr.
         Spencer  claims  to  be  the  beneficial  owner.  The  complaint  seeks
         $1,000,000  in damages.  Management  believes the suit is without merit
         and  intends to  vigorously  defend the  action.  The  Company  has not
         accrued any amounts for these  claims as of December  31, 2001  because
         the Company feels that the based on its defenses  against the claims it
         will  have no  additional  liability.  Due to the  early  stage  of the
         litigation,  it is  not  possible  to  evaluate  the  likelihood  of an
         unfavorable outcome or estimate the extent of potential loss.

Item 4.           Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of the Company's Securities Holders
during the fourth quarter of the Company's fiscal year ending December 31, 2001.

                                     PART II

Item 5.           Market for Common Equity and Related Stockholder Matters

         The  Company's  common stock is quoted on the OTC Bulletin  Board under
the symbol  "TSRG." Set forth in the table below are the quarterly  high and low
prices of the  Company's  common  stock as  obtained  from the Nasdaq  Small-Cap
Market and the OTC Bulletin  Board for the past two fiscal years  obtained  from
published quotations.

                                            High              Low
                                            ----              ---
        2001
                First Quarter              $   .07          $   .043
                Second Quarter             $   .051             .023
                Third Quarter              $   .03          $   .01
                Fourth Quarter             $   .02          $   .007
        2000
                First Quarter              $   .35          $   .065
                Second Quarter             $   .22          $   .10
                Third Quarter              $    .155        $   .0156
                Fourth Quarter             $   .31          $   .04


         As of December 31, 2001, there were approximately 290 holders of record
of the 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.
                                      -13-

<PAGE>


Dividend Policy

         The  Company  has  not   declared  or  paid  cash   dividends  or  made
distributions  in the past, and the Company does not anticipate that it will pay
cash dividends or make  distributions  in the  foreseeable  future.  The Company
currently  intends  to retain  and  reinvest  future  earnings  to  finance  its
operations.

Recent Sales of Unregistered Securities

         During 1999,  the Company  issued 440,000 shares of its common stock in
exchange for services  rendered to the Company  valued at an average of $.59 per
share,  or an aggregate of $260,000.  The Company also issued  94,000 shares for
services and  conversion  of debt valued at an average of $.98 per share,  or an
aggregate  of  $92,200.   The  Company  further  issued  4,398,929  shares  upon
conversion of convertible  debentures valued at $529,166,  or an average of $.12
per share.

         In 2000,  the Company  issued  1,691,287  share of its common stock for
cash at $.05 per share,  or an  aggregate  of $83,000.  The Company  also issued
11,722,383  shares for services and  conversion  of debt valued at an average of
$.12 per share,  or an  aggregate  of  $1,422,923.  The Company  further  issued
151,930,606   shares  upon  conversion  of  convertible   debentures  valued  at
$5,653,991, or an average of $.04 per share.

         In 2001,  the Company issued  4,655,000  shares of its common stock for
services and  conversion  of debt valued at an average of $.03 per share,  or an
aggregate of $141,305.  All of these shares were issued pursuant to registration
statements on Form S-8.

         Except  for the  conversion  of  debentures  pursuant  to  registration
statements,  issuances of  securities  by the Company were made in reliance upon
the exemption  from  registration  under the Securities Act of 1933, as amended,
provided  by  Section  4(2)  thereunder.   Issuances  of  shares  conversion  of
debentures  was pursuant to the  exemption  provided by Section  3(a)(9) of said
Act.

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 Company's  Statements of Operations
for the two most recent  fiscal  years ended  December 31,  2001,  and 2000.  It
should be noted that percentages  discussed  throughout this analysis are stated
on an approximate basis.

<TABLE>
<CAPTION>
                                                                                   Fiscal Years Ended
                                                                                         December 31,
                                                                                   2001            2000
                                                                                   ----            ----
<S>                                                                                <C>              <C>
Total revenues........................................................             100%             100%
Total costs and expenses..............................................             192              335
Total other income (expenses).........................................             (26)            (127)
Loss before taxes and extraordinary item .............................            (118)            (362)
Extraordinary item - gain on disposal of debt.........................               3               24
Income taxes..........................................................               -                -
Net (loss)............................................................             115              338
</TABLE>

                                      -14-
<PAGE>


For the Year Ended  December  31, 2001  Compared to the Year Ended  December 31,
2000

         Total  revenues  of  $1,278,227  for the year ended  December  31, 2001
("2001")  increased 14% when compared to $1,125,257  for the year ended December
31, 2000 ("2000"). In 2001, oil made up 30% of total revenues compared to 70% in
2000. Accordingly, gas sales increased from 30% of sales in 2000 to 70% in 2001.
This  increase  in gas  revenues  was due to higher  gas  prices  and four wells
drilled in 2000 and three wells in 2001.

         The Company  had a net loss of  $1,473,744  for 2001  compared to a net
loss of $3,807,071 in 2000. The Company's total costs and expenses decreased 35%
in 2001 and, as a percentage of revenues, decreased from 335% in 2000 to 192% in
2001. The cost of oil and gas increased 96% in 2001 due to increased  production
costs and the  addition  of wells.  As a  percentage  of  revenues,  cost of oil
increased  from  30% in 2000 to 52% in 2001,  due to  higher  production  costs.
Selling, general and administrative expenses decreased 77% in 2001 when compared
to 2000,  primarily due to fewer stock issuances for services in 2001.  Salaries
and  wages  decreased  29% in  2001  due to the  elimination  of one  full  time
employee.  Depreciation,  depletion and amortization increased 171% in 2001 from
2000 due to the  re-evaluation  of reserves.  Interest expense in 2001 decreased
18% from 2000 due to the pay-off of certain  notes and the reduction of interest
rates.

Net Operating Losses

         The Company has accumulated  approximately $18,246,000 of net operating
loss  carryforwards  as of December 31, 2001, which may be offset against future
taxable  income  through  2021.  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 of the  Company,  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, 2001
because  the  potential  tax  benefits  of the loss  carryforward  is  offset by
valuation allowance of the same amount.

                         Liquidity and Capital Resources

         Historically,  the Company's  working capital needs have been satisfied
through its  operating  revenues and from  borrowed  funds.  Working  capital at
December 31, 2001 was a negative  $5,470,698 compared with a negative $4,550,117
at December  31,  2000.  This change was  primarily  attributed  to increases in
accrued  interest  and accounts  payable.  The Company  anticipates  meeting its
working  capital needs during the 2002 fiscal year with revenues from operations
and  possibly  from  capital  raised  through the sale of either  equity or debt
securities.  The Company has no other  current  agreements or  arrangements  for
additional  funding and there can be no assurance such funding will be available
to the Company or, if available,  it will be on acceptable or favorable terms to
the Company.

         As of December 31, 2001, the Company had total assets of $3,641,470 and
stockholders'  deficit of $2,305,796  compared to total assets of $4,299,654 and
total stockholders' deficit of $974,095 at December 31, 2000.

         In 1998,  the  Company  issued  $4,625,400  face  value  of 8%  Secured
Convertible  Debentures  Due March 31, 1999. A portion of the proceeds were used
to acquire the GCRL properties and interest in Wyoming. During 2000, all but one
of the remaining  outstanding  debentures  were converted into commons stock. At
December 31, 2001,  the Company owed $331,462 in connection  with the debentures
consisting of $50,000 for a debenture and $281,462 in penalties and interest.


                                      -15-
<PAGE>

         Because the Company has generated  significant  losses from  operations
through  December 31, 2001,  and has a working  capital  deficit at December 31,
2001,  there exists  substantial  doubt about its ability to continue as a going
concern. Revenues have not been sufficient to cover operating costs and to allow
the Company 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 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.  If these  endeavors are
not  successful,  management is committed to meeting the  operational  cash flow
needs of the Company.

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

Forward-looking and Cautionary Statements

         Forward-looking  statements  in this  report are made  pursuant  to the
"safe harbor"  provisions  of the Private  Securities  Litigation  Reform Act of
1995.  The  Company  wishes to advise  readers  that  actual  results may differ
substantially from such forward-looking  statements.  Forward-looking statements
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those expressed in or implied by the statements,  including, but
not limited to, the following:  the ability of the Company to secure  additional
financing,  the  possibility  of success in the  Company's  drilling  endeavors,
competitive  factors,  and other risks detailed in the Company's periodic report
filings with the Securities and Exchange Commission.

Recent Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement  of  Financial   Accounting   Standards  (SFAS)  133,  Accounting  for
Derivative  Instruments  and Hedging  Activities.  The new standard  establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and for hedging activities.
It requires  companies to record  derivatives  on the balance sheet as assets or
liabilities,  measured  at fair value.  Accounting  for changes in the values of
those  derivatives  depends on the intended use of the  derivatives  and whether
they  qualify  for hedge  accounting.  SFAS 133, as amended by SFAS 137 and SFAS
138, was adopted as of April 1, 2001.  Management  believes the adoption of this
statement will have no material impact on the Company's financial statements.

         In June 2001, the FASB issued SFAS 141, Business Combinations, and SFAS
142, Goodwill and Other Intangible  Assets.  SFAS 141 requires that the purchase
method of accounting be used for all business combinations  initiated after June
30, 2001 as well as all purchase  method business  combinations  completed after
June 30, 2001. SFAS 141 also specifies criteria  intangible assets acquired in a
purchase  method  business  combination  must meet to be recognized and reported
apart from goodwill,  noting that any purchase price allocatable to an assembled
workforce may not be accounted for  separately.  SFAS 142 requires that goodwill
and intangible  assets with indefinite  useful lives no longer be amortize,  but
instead  tested  for  impairment  at  least  annually  in  accordance  with  the
provisions  of SFAS 142.  SFAS 142 also  requires  that  intangible  assets with
estimatable  useful lives be amortized over their  respective  estimated  useful
lives to their  estimated  residual  values,  and  reviewed  for  impairment  in
accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived  Assets to be Disposed Of. The Company  adopted SFAS 141 upon
issuance and SFAS 142 effective  April 1, 2001. The adoption of SFAS 141 and 142
did not affect the Company's consolidated financial statements.

                                      -16-
<PAGE>

         On August 16, 2001, the FASB issued SFAS No. 143,  Accounting for Asset
Retirement  Obligations,"  which is effective for fiscal years  beginning  after
June 15, 2002. It requires that obligations  associated with the retirement of a
tangible  long-lived asset be recorded as a liability when those obligations are
incurred,  with the amount of the  liability  initially  measured at fair value.
Upon initially  recognizing  an accrued  retirement  obligation,  an entity must
capitalize  the cost by  recognizing  an increase in the carrying  amount of the
related  long-lived  asset.  Over time, the liability is accreted to its present
value each period,  and the capitalized cost is depreciated over the useful life
of the related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon settlement.
Although  management has not completed the process of determining  the effect of
this new accounting pronouncement,  it currently expects that the effect of SFAS
No. 143 on the Company's financial statements,  when it becomes effective,  will
not be significant.

         In  October  2001,  the  FASB  issued  SFAS  144,  Accounting  for  the
Impairment  or  Disposal  of  Long-  Lived  Assets,  which  addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
Although  SFAS 144  supersedes  SFAS 121,  it  retains  many of the  fundamental
provisions of SFAS 121. SFAS 144 also  supersedes  the  accounting and reporting
provisions of Accounting  Principles Board Opinion No. 30, Reporting-the Results
of Operations-Reporting  the Effects of Disposal of a Segment of a Business, and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions,  for
the disposal of a segment of a business.  However, it retains the requirement in
APB 30 to report separately  discontinued  operations and extends that reporting
to a  component  of an  entity  that  either  has  been  disposed  of,  by sale,
abandonment,  or in a distribution to owners, or is classified as held for sale.
SFAS 144 is effective  for fiscal years  beginning  after  December 15, 2001 and
interim periods within those fiscal years.  Management  believes the adoption of
SFAS  144  will  not  have  a  significant  effect  on the  Company's  financial
statements.


                                      -17-
<PAGE>

Item 7.           Financial Statements

         The Company's financial statements as of and for the fiscal years ended
December  31, 2001 and 2000 have all 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.

                                    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 with
the Company by it's directors and executive officers:

         Name                 Position             Director Since           Age
         ----                 --------             --------------           ---
Robert L. Richards        President, C.E.O.        September 2001            56
                            and Director
Loren E. Bagley           Vice President           August 1991               59
                            and Director
William F. Woodburn       Secretary / Treasurer    August 1991               60
                            and Director
John B. Sims              Director                 January 1988              76

         On July 2, 2001, Gary F. Lawyer tendered his resignation as a director,
effective June 29, 2001, for personal reasons and to pursue other ventures.  Mr.
Lawyer  agreed to continue to work with Trans  Energy on a  consulting  basis as
needed. Mr. Lawyer served as a director of Trans Energy since February 1998.

         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.  The  Company has not
compensated its 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 of Directors  and any committee of the Board of Directors.
Executive  officers are  appointed  annually by the Board of Directors  and each
executive  officer  serves  at the  discretion  of the Board of  Directors.  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 of Directors
in the management of the business and affairs of the Company between meetings of
the Board of Directors.

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

         Robert L. Richards  became a director and was  appointed  President and
C.E.O. of the Company in September  2001. From 1982 to the present,  he has been
President of Robert L.  Richards,  Inc. as a consulting  geologist 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.

                                      -18-
<PAGE>

         Loren E. Bagley  served as  President  and C.E.O.  of the Company  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 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.

         William F.  Woodburn  has served as Vice  President of the Company from
August 1991 to September  2001, at which time he resigned as Vice  President and
was appointed  Secretary / Treasurer.  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.

         John B. Sims served as President,  C.E.O. and a director of the Company
from 1988 to September,  1993 and currently is a director.  Prior to joining the
Company and from 1984 to 1988, Mr. Sims was the General Partner of Ben's Run Oil
Company  which was acquired by the Company in January,  1988.  Mr. Sims has also
been the general  partner for fourteen  limited  partnerships  from 1977 to 1984
drilling a total of twenty eight wells.  Prior to his involvement in the oil and
gas business,  Mr. Sims was a real estate  developer for twenty years as well as
an exclusive real estate broker for Ednam Forrest in Charlottesville,  Virginia.
During 1994, Mr. Sims  voluntarily  initiated a personal  bankruptcy  proceeding
pursuant  to Chapter 7 of the United  States  Bankruptcy  Code.  Pursuant to the
terms of such proceeding,  Mr. Sims was discharged of certain of his debts which
were incurred as a consequence  of his personal  guarantees of certain  business
related  debts,  not  related to the  Company,  upon which the  primary  obligor
defaulted.

Item 10.          Executive Compensation

         The  Company  does  not  have a  bonus,  profit  sharing,  or  deferred
compensation plan for the benefit of its employees,  officers or directors,  nor
has the Company entered into employment contracts with any of the aforementioned
persons.

Cash Compensation

         The  following  table  sets  forth  all cash  compensation  paid by the
Company for  services  rendered to the Company for the years ended  December 31,
2001,  2000 and 1999, to the Company's  Chief  Executive  Officer.  No executive
officer of the Company has earned a salary  greater than  $100,000  annually for
any of the periods depicted.


                                      -19-
<PAGE>

                           Summary Compensation Table
                                                              Other        All
                                                             Annual       Other
Name and                                                      Compen-    Compen-
Principal Position           Year      Salary       Bonus     sation     sation
------------------          ------    -------       -----     ------     ------
Robert L. Richards            2001    $   -0-      $  -0-     $  -0-     $  -0-
  President and C.E.O.
Loren E. Bagley,              2001    $   -0-      $  -0-     $  -0-     $  -0-
  President and C.E.O.        2000    $   -0-      $  -0-     $  -0-     $  -0-
                              1999    $   -0-      $  -0-     $  -0-     $  -0-


Item 11.          Security Ownership of Certain Beneficial Owners and Management

         The following  table sets forth  information,  to the best knowledge of
the Company as  December  31,  2001,  with  respect to each person  known by the
Company to own  beneficially  more than 5% of the Company's  outstanding  common
stock, each director and all directors and officers as a group.

Name and Address              Amount and Nature of          Percent
of Beneficial Owner           Beneficial Ownership        of Class(1)
-------------------           --------------------        -----------
Robert L. Richards                     1,691,287(2)              1.0%
  210 Second Street
  St. Marys, WV 26170
Loren E. Bagley *                      2,074,527(3)              1.2%
  210 Second Street
  St. Marys, WV 26170
William F. Woodburn *                  2,067,394(4)              1.2%
  210 Second Street
  St. Marys, WV 26170
John B. Sims *                           302,614(5)              0.2%
  210 Second Street
  St. Marys, WV 26170
All directors and executive            6,135,822(6)              3.5%
  officers as a group
  (4 persons in group)
-----------------------
*  Director and/or executive officer
 Note:   Unless  otherwise  indicated  in the  footnotes  below,  TSRG  has been
         advised  that each person  above has sole voting  power over the shares
         indicated above.

(1)      Based upon 176,683,189  shares of common stock  outstanding on December
         31,  2001,but does not take into  consideration  stock options owned by
         certain  officers and  directors  entitling  the holders to purchase an
         aggregate  of 650,000  shares of common  stock and which are  currently
         exercisable.  Therefore,  for purposes of the table above,  177,333,189
         shares of common  stock are  deemed  to be issued  and  outstanding  in
         accordance  with Rule 13d-3  adopted  by the  Securities  and  Exchange
         Commission  under the  Securities  Exchange  Act of 1934,  as  amended.
         Percentage  ownership is calculated  separately  for each person on the
         basis of the actual  number of  outstanding  shares as of December  31,
         2001 and assumes the exercise of stock options held by such person (but
         not by anyone else) exercisable within sixty days.
(2)      Includes 1,012,670 shares held in the name of Argene Richards,  wife of
         Mr. Richards.

                                      -20-
<PAGE>

(3)      Includes  312,500 shares that may be acquired by Mr. Bagley pursuant to
         stock options exercisable at $.50 per share and 50,000 shares of common
         stock held in the name of Carolyn S. Bagley,  wife of Mr. Bagley,  over
         which Ms. Bagley retains voting power.
(4)      Includes  312,500 shares that may be acquired by Mr. Woodburn  pursuant
         to stock  options  exercisable  at $.50 per share and 31,250  shares of
         common stock in the name of Janet L.  Woodburn,  wife of Mr.  Woodburn,
         over which  shares Ms.  Woodburn  retains  voting  power.
(5)      Includes  25,000  shares that may be  acquired by Mr. Sims  pursuant to
         stock options exercisable at $.50 per share and 13,807 shares of common
         stock held jointly with Virginia Sims, wife of Mr. Sims.
(6)      Includes  650,000  shares  that may be  acquired  by certain  directors
         pursuant to stock options exercisable at $.50 per share.

Item 12.          Certain Relationships and Related Transactions

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

         (a) Loren E. Bagley is  President of Sancho,  a principal  purchaser of
The Company's  natural gas. Mr.  Bagley's wife,  Carolyn S. Bagley is a director
and owner of 33% of the outstanding capital stock of Sancho.  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
Hope in 1988. This agreement is a flexible volume supply  agreement  whereby the
Company  receives  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 The  Company's  option,  for the first 1,500 Mcf purchased per day by
Hope 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 the
Company  there can be no assurance  that prices paid by the Company to suppliers
will be lower than the price  which the  Company  would  receive  under the Hope
arrangement.  During 2001, the Company paid Sancho an aggregate of approximately
$3,180 pursuant to such contract.

         (b) On  May  7,  1996,  the  Company  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 the Company 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  loan  remains
outstanding.

         The Company occupies approximately 4,000 square feet of office space in
St.  Marys,  West  Virginia,   which  it  shares  with  its  subsidiaries  Tyler
Construction  Company,  Inc. and Ritchie County Gathering Systems, Inc. Prior to
1997,  the office  space was paid for by Sancho and the Company  used the office
space rent free.  The Company  believes  that the  foregoing  transactions  with
Sancho were made on terms no less favorable to the Company than those  available
from unaffiliated third parties.

         It is the  Company's  policy  that  any  future  material  transactions
between it and members of its management or their  affiliates  shall be on terms
no less favorable than those available from unaffiliated third parties.


                                      -21-
<PAGE>



                                     PART IV

Item 13.          Exhibits and Reports on Form 8-K

         (a)      Exhibits

Exhibit No.                                        Exhibit Name
-----------                              --------------------------------
    *2.1      Stock  Acquisition  Agreement  between  the  Company  and Loren E.
              Bagley and William F. Woodburn
    *2.2      Asset  Acquisition  Agreement  between  the  Company and Dennis L.
              Spencer
    *2.3      Asset   Acquisition   Agreement  between  the  Company  and  Tyler
              Pipeline, Inc.
    *2.4      Stock  Exchange  Agreement  between the Company and Ritchie County
              Gathering Systems, Inc.
    *2.5      Plan and Agreement of Merger between Trans Energy,  Inc.  (Nevada)
              and Apple Corp. (Idaho), to facilitate the change of the Company's
              corporate domicile to Nevada
   **2.6      Agreements related to acquisition of Vulcan Energy Corporation
    *3.1      Articles of Incorporation and all amendments  pertaining  thereto,
              for Apple Corp., an Idaho corporation
    *3.2      Articles  of  Incorporation  for  Trans  Energy,  Inc.,  a  Nevada
              corporation
    *3.3      Articles of Merger for the States of Nevada and Idaho
    *3.4      By-Laws
    *4.1      Specimen Stock Certificate
   *10.1      Marketing Agreement with Sancho Oil and Gas Corporation
   *10.2      Gas Purchase Agreement with Central Trading Company
   *10.3      Price Agreement with Key Oil Company
   *21.1      Subsidiaries Schedule
   *99.1      Reserve Estimate and Evaluation of oil and gas properties
   *99.2      Reserve Estimate and Evaluation for Dennis L. Spencer wells

 * Previously  filed as Exhibit to Form 10-SB. ** Previously filed as Exhibit to
Form 8-K dated August 7, 1995.

         (b)      Reports on Form 8-K

         On October 11,  2001,  the Company  filed a Current  Report on Form 8-K
         reporting  under Item 5 that on September 28, 2001 the  Securities  and
         Exchange  Commission  filed a complaint  against the Company and two of
         its directors. The Report also disclosed that on September 10, 2001 the
         Company's  President and Chief  Executive  Officer  resigned as did the
         Company's Vice President, and Robert I. Richards was elected as the new
         President, Chief Executive Officer and a director.

                                      -22-
<PAGE>



                               TRANS ENERGY, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2001

                                       F-1

<PAGE>




                                 C O N T E N T S


Independent Auditors' Report ........................................... F-3

Consolidated Balance Sheet ............................................. F-4

Consolidated Statements of Operations .................................. F-6

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

Consolidated Statements of Cash Flows .................................. F-8

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




















                                       F-2

<PAGE>



         McGLADREY NETWORK                             American Institute of
         -----------------                              Certified Public
An Independently Owned Member                             Accountants
         Worldwide Services
  Through RSM International                            Utah Association of
                                                        Certified Public
                                                           Accountants

                                                       SEC Practice Section
                                                        Private Companies
                                                        Practice Section


                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Trans Energy, Inc. and Subsidiaries
St. Marys, West Virginia

We have audited the  accompanying  consolidated  balance  sheet of Trans Energy,
Inc.  and  Subsidiaries  as of December  31,  2001 and the related  consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
years ended December 31, 2001 and 2000. 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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit 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 consolidated  financial position of Trans
Energy,  Inc.  and  Subsidiaries  as of December  31, 2001 and the  consolidated
results of their  operations  and their cash flows for the years ended  December
31, 2001 and 2000, in conformity with accounting  principles  generally accepted
in the United States of America.

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
financial  statements,   the  Company  has  generated  significant  losses  from
operations,  has an accumulated deficit of $25,251,849 and has a working capital
deficit of $5,471,698 at December 31, 2001,  which together  raises  substantial
doubt  about its 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 these uncertainties.



/s/HJ & Associates, LLC
-----------------------
   HJ & Associates, LLC
   Salt Lake City, Utah
   March 15, 2002

         50 South Main Street, Suite 1450 * Salt Lake City, Utah 84144 *
               Telephone (801) 328-4408 * Facsimile (801) 328-4461

                                       F-3

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet

                                     ASSETS

                                                        December 31,
                                                            2001
                                                    -------------------

CURRENT ASSETS

   Cash                                             $             1,491
   Accounts receivable, net (Note 1)                            186,478
                                                    -------------------

     Total Current Assets                                       187,969
                                                    -------------------

PROPERTY AND EQUIPMENT (Note 2)

  Vehicles                                                       59,013
  Machinery and equipment                                        10,092
  Pipelines                                                   2,254,908
  Well equipment                                                 49,155
  Wells                                                       3,559,644
  Leasehold acreage                                             114,426
  Accumulated depreciation                                   (2,602,528)
                                                    -------------------

     Total Fixed Assets                                       3,444,710
                                                    -------------------

OTHER ASSETS

  Cash surrender value - life insurance (net)                     8,791
                                                    -------------------

     Total Other Assets                                           8,791
                                                    -------------------

     TOTAL ASSETS                                   $         3,641,470
                                                    ===================

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


                                       F-4

<PAGE>


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

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                                December 31,
                                                                    2001
                                                            -------------------

CURRENT LIABILITIES

   Accounts payable - trade                                 $           754,552
   Notes payable - convertible (Note 12)                                 41,575
   Accrued expenses                                                     619,678
   Salaries payable                                                     642,662
   Notes payable - current portion (Note 3)                           1,311,695
   Judgments payable (Note 7)                                         1,228,964
   Related party payables (Note 4)                                      704,829
   Debentures payable (Note 9)                                          331,462
   Dividends payable (Note 1)                                            23,250
                                                            -------------------

     Total Current Liabilities                                        5,658,667
                                                            -------------------

LONG-TERM LIABILITIES

   Judgments payable (Note 7)                                             6,434
   Notes payable (Note 3)                                               282,165
                                                            -------------------

     Total Long-Term Liabilities                                        288,599
                                                            -------------------

     Total Liabilities                                                5,947,266
                                                            -------------------

COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS' EQUITY (DEFICIT) (Note 6)

   Preferred stock; 10,000,000 shares authorized
    at $0.001 par value; 300 shares issued
    and outstanding                                                    --
   Common stock; 500,000,000 shares authorized
    at $0.001 par value; 176,683,189 shares issued
    and outstanding                                                     176,682
   Capital in excess of par value                                    22,769,371
   Accumulated deficit                                              (25,251,849)
                                                            -------------------

     Total Stockholders' Equity (Deficit)                            (2,305,796)
                                                            -------------------

     TOTAL LIABILITIES
     AND STOCKHOLDERS' EQUITY (DEFICIT)                     $         3,641,470
                                                            ===================

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


                                       F-5

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>


                                                            For the Years Ended
                                                                  December 31,
                                                       -----------------------------------
                                                            2001                2000
                                                       ---------------   -----------------
                                                                  (Restated)

<S>                                                    <C>              <C>
 REVENUES                                              $   1,278,227    $   1,125,257
                                                         --------------    -----------


Cost of oil and gas                                          668,893          340,950
 Salaries and wages                                          275,931          383,142
 Depreciation, depletion and amortization                    895,884          330,469
 Selling, general and administrative                         617,120        2,712,591
                                                         --------------    -----------
   Total Costs and Expenses                                2,457,828        3,767,152

LOSS FROM OPERATIONS                                      (1,179,601)      (2,641,895)
                                                         --------------    -----------

OTHER INCOME (EXPENSE)
 Other income                                                 16,026           14,850
 Interest expense                                           (348,920)        (425,930)
 Loss on sale and valuation of assets (Note 1 and 2)          (2,151)      (1,020,188)
                                                         --------------    -----------

Total Other Income (Expense)                                (335,045)      (1,431,268)
                                                         -------------     -----------

LOSS FROM OPERATIONS BEFORE INCOME TAXES,
 EXTRAORDINARY ITEM AND MINORITY INTERESTS                (1,514,646)      (4,073,163)
                                                         --------------    -----------

INCOME TAXES (Note 1)                                           --               --
                                                         --------------    -----------

EXTRAORDINARY ITEM

 Gain on disposition of debt                                  40,902          266,092
                                                         --------------    -----------
MINORITY INTERESTS                                              --               --
                                                         --------------    -----------

NET LOSS - attributed to common shareholders           $  (1,473,744)   $  (3,807,071)
                                                         ==============    ===========


DIVIDEND ON PREFERRED STOCK                            $      23,250             --
                                                         ==============    ===========
BASIC LOSS PER SHARE

  Operations                                           $       (0.01)   $     (0.05)
  Gain on disposition of debt                          $        --      $      0.00

      Total Basic Loss Per Share                       $       (0.01)   $     (0/05)
                                                         ==============    ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING                                            175,981,559       77,197,928
                                                         ==============    ===========
</TABLE>


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


                                       F-6

<PAGE>


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

<TABLE>
<CAPTION>


                                                                                                    Capital in
                                           Preferred Stock                 Common Stock             Excess of           Accumulated
                                       Shares          Amount         Shares         Amount         Par Value            Deficit
                                       ------          ------         ------         ------         ---------            -------

<S>                                     <C>           <C>             <C>          <C>             <C>            <C>
Balance, December 31, 1999                      --     $     --        7,107,746    $      7,107    $ 15,250,242   $(19,887,784)

Common stock issued for cash
  at $0.05 per share                            --           --        1,691,287           1.691          81,309           --

Common stock issued for services
  and conversion of debt to equity
  at $0.12 per share                            --           --       11,722,383          11,722       1,411,201           --

Common stock issued for conversion
  of debentures, penalty and interest
  at $0.04 per share                            --           --      151,930,806         151,931       5,502,060           --

Cancellation of common stock                    --           --         (423,833)           (424)            424           --

Preferred stock issued for
  acquisition                                    300         --             --              --           300,000           --

Discount for beneficial conversion
  feature of preferred stock                    --           --             --              --            60,000        (60,000)

Warrants granted below
  market value                                  --           --             --              --             3,497           --

Net loss for the year ended
  Decemger 31, 2000 (Restated)                  --           --             --              --              --       (3,807,071)
                                        ------------   ----------   ------------    ------------    ------------   ------------

Balance, December 1, 2000                        300   $     --      172,028,189    $    172,027    $ 22,608,733   $(23,754,855)

Common stock issued for
  services at $0.03 per share                   --           --        4,655,000           6,655         136,650           --

Discount on beneficial conversion
  feature of notes payable                      --           --             --              --            23,988           --

Dividend on preferred stock
  at 7.75%                                      --           --             --              --              --          (23,250)

Net loss for the year ended
  December 31, 2001                             --           --             --              --              --       (1,473,744)
                                        ------------   ----------   ------------    ------------    ------------   ------------

Balance, December 31, 2001                       300   $     --      176,683,189    $    176,682    $ 22,769,371   $(25,251,849)
                                        ============   ==========   ============    ============    ============    ============
</TABLE>


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


                                       F-7

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                  SPLIT TABLE

<TABLE>
<CAPTION>

                                                                                                  For the Years Ended
                                                                                                       December 31,
                                                                                    --------------------------------------------
                                                                                            2001                      2000
                                                                                    ------------------          ----------------
                                                                                                                   (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                                 <C>                         <C>
Net loss                                                                            $   (1,473,744)             $   (3,807,071)
Adjustments to reconcile net loss to net cash (used) by
  operating activities:
    Depreciation, depletion and amortization                                               895,884                     330,469
    Loss on valuation of wells                                                              36,577                   1,022,287
    Loss on impairment of leases                                                            60,756                        -
    Loss (gain) on disposition of assets                                                   (95,182)                     (2,199)
    Common stock issued for services
      and beneficial conversion features                                                   165,293                   1,274,579
    Gain on disposition of debt                                                            (40,902)                   (266,092)
Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable                                            (115,472)                     56,148
    Decrease in erstricted cash                                                             65,689                     196,400

    Decrease in prepaid and other current assets                                             1,420                       2,372
    Increase in accounts payable and accrued expenses                                      472,927                     852,693
    (Decrease) in judgments payable                                                       (154,625)                       -
                                                                                    ------------------          ----------------
      Net Cash (Used) by Operating Activities                                             (181,379)                   (340,314)
                                                                                    ------------------          ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:

  Proceeds from sale of property and equipment                                             100,000                      12,000
  Expenditures for property and equipment                                                 (281,203)                   (269,520)
                                                                                    ------------------          ----------------
      Net Cash (Used) by Investing Activities                                             (181,203)                   (257,520)
                                                                                    ------------------          ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:

  Increase (decrease) in cash overdraft                                                    (11,608)                     11,608)
  Common stock issued for cash                                                                 -                        83,000
  Proceeds from related parties                                                            401,692                      126.572
  Principal payments on notes payable                                                     (110,871)                    (116,715)
  Proceeds from notes payable                                                               43,285                      479,892
  Proceeds from convertible notes payable                                                   41,575                          -
                                                                                    ------------------          ----------------
      Net Cash Provided by Financing Activities                                     $      364,073              $       584,357

</TABLE>


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



                                       F-8
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                                  For the Years Ended
                                                                                                       December 31,
                                                                                    --------------------------------------------
                                                                                            2001                      2000
                                                                                    ------------------          ----------------
                                                                                                                   (Restated)

<S>                                                                                 <C>                         <C>
NET INCREASE IN CASH                                                                $        1,491              $      (13,477)

CASH AND CSH EQUIVALENTS, BEGINNING OF YEAR                                                     -                       13,477
                                                                                    ------------------          ----------------
CASH AND CASH EQUIVALENTS, DNE OF YEAR                                              $         1,491             $          -
                                                                                    ==================          ================
CASH PAID FOR:
  Interest                                                                          $        87,939             $          -
  Income taxes                                                                      $           -               $          -

NON-CASH FINANCING ACTIVITIES:
  Common stock issued for services
    and beneficial conversion features                                              $       165,293             $    1,334,579
  Common stock issued for debt                                                      $       597,666             $    5,742,335
  Note payable issued for vehicle                                                   $           -               $        6,532

</TABLE>

              T6he 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, 2001 and 2000



NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              a. Organization

              The Company was originally  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. 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.

              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.


                                      F-10

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000



NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              b.  Accounting Method (Continued)

              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.  During the year ended  December 31,  2001,  the Company
              sold 100% of a tract of leasehold  acreage for $100,000.  The sale
              resulted in a gain of $95,182.  During the year ended December 31,
              2001,  the  Company  recognized  a loss  of  $60,756  relating  to
              leasehold acreage for which the leases had expired.

              The Company has elected a calendar year end.

              c. 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.

              All  references  to shares  have been  retroactively  restated  to
              reflect a 1-for-4 reverse stock split.

<TABLE>
<CAPTION>

                                                                                 2001                   2000
                                                                         --------------------    -------------------

              Numerator:
<S>                                                                      <C>                     <C>
                Loss from operations                                     $    (1,514,646)        $    (4,073,163)

                Gain on disposition of debt                              $        40,902         $       266,092

              Denominator - wedighted average shares                         175,981,559              77,197,928

              Net loss per share:
                Loss from Operations                                     $        (0.01)         $         (0.05)
                Gain on disposition of debt                                          --                     0.00

                  Total Basic Loss Per Share                             $        (0.01)         $         (0.05)

</TABLE>

              d. Provision for Taxes

              At  December  31,  2001,   the  Company  had  net  operating  loss
              carryforwards  of  approximately  $18,246,000  that may be  offset
              against  future  taxable  income  through 2021. No tax benefit has
              been  reported in the  consolidated  financial  statements  as the
              Company  believes  that  the  carryforwards  will  expire  unused.
              Accordingly,  the potential tax benefits of the net operating loss
              carryforwards  are  offset by a  valuation  allowance  of the same
              amount.




                                      F-11

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000



NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              d.  Provision for Taxes (Continued)

              The income tax benefit differs from the amount computed at federal
              statutory rates of approximately 38% as follows:
<TABLE>
<CAPTION>

                                                                  For the Years Ended
                                                                       December 31,
                                                             ----------------------------
                                                                  2001            2000
                                                             ------------    ------------

<S>                                                          <C>                <C>
              Income tax benefit at statutory rate           $    515,161       $ 384,508
              Change in valuation allowance                      (515,161)      ( 384,508)
                                                             ------------    -------------
                                                             $      --       $      --
                                                             ============    =============
</TABLE>

              Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>

                                                                  For the Years Ended
                                                                       December 31,
                                                             ------------------------------
                                                                  2001            2000
                                                             ------------    --------------

<S>                                                          <C>             <C>
Income tax benefit at statutory rate                         $  6,933,470    $  6,418,309
Change in valuation allowance                                  (6,933,470)     (6,418,309)
                                                             ------------    --------------
                                                             $      --       $      --
                                                             ============    ==============
</TABLE>

              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.

              e. Cash Equivalents

              The  Company  considers  all  highly  liquid  investments  with  a
              maturity  of  three  months  or  less  when  purchased  to be cash
              equivalents.

              f. Principles of Consolidation

              The consolidated  financial statements include the Company and its
              wholly owned subsidiaries, Prima Oil Company, Inc., Ritchie County
              Gathering  Systems,  Inc.  and its  65%  owned  subsidiary,  Tyler
              Construction Company,  Inc. All significant  intercompany accounts
              and transactions have been eliminated.

              g. Presentation

              Certain 2000  balances  have been  reclassified  to conform to the
              presentation of the 2001 consolidated financial statements.





                                      F-12

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000

NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              h. 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.

              i. Estimates

              The  preparation  of  financial   statements  in  conformity  with
              generally accepted  accounting  principles  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.

              j.  Long Lived Assets

              All long lived assets are evaluated yearly for impairment per SFAS
              121. Any  impairment  in value is  recognized as an expense in the
              period when the impairment occurs.

              k.  Changes in Accounting Principles

              The Company has adopted the  provisions of FASB  Statement No. 140
              "Accounting  for Transfers  and Servicing of Financial  Assets and
              Extinguishments  of  Liabilities  (a replacement of FASB Statement
              No.  125.)@  This  statement  provides  accounting  and  reporting
              standard for  transfers  and  servicing  of  financial  assets and
              extinguishments  of  liabilities.  Those  standards  are  based on
              consistent  application of a financial-  components  approach that
              focuses on control. Under that approach, the transfer of financial
              assets,  the Company recognized the financial and servicing assets
              it controls  and the  liabilities  it has  incurred,  derecognizes
              financial   assets  when   control  has  been   surrendered,   and
              derecognizes   liabilities  when   extinguished.   This  statement
              provides  consistent  standards  for  distinguishing  transfers of
              financial  assets that are sales from  transfers  that are secured
              borrowings.   This   statement  is  effective  for  transfers  and
              servicing of financial assets and  extinguishments  of liabilities
              occurring after March 31, 2001.

              This statement is effective for recognition  and  reclassification
              of  collateral  and for  disclosures  relating  to  securitization
              transactions and collateral for fiscal years ending after December
              15, 2000. The adoption of this principle had no material effect on
              the Company's consolidated financial statements.



                                      F-13

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000



NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

k. Changes in Accounting Principles
(Continued)

              The Company has adopted the provisions of FIN 44  "Accounting  for
              Certain    Transactions    Involving   Stock    Compensation   (an
              interpretation  of APB Opinion No.  25.)" This  interpretation  is
              effective  July 1,  2000.  FIN 44  clarifies  the  application  of
              Opinion No. 25 for only  certain  issues.  It does not address any
              issues  related to the  application  of the fair  value  method in
              Statement  No.  123.  Among other  issues,  FIN 44  clarifies  the
              definition  of employee for  purposes of applying  Opinion 25, the
              criteria   for   determining   whether  a  plan   qualifies  as  a
              noncompensatory  plan,  the  accounting   consequence  of  various
              modifications  to the terms of a previously  fixed stock option or
              award, and accounting for an exchange of stock compensation awards
              in a business  combination.  he adoption of this  principle had no
              material   effect   on  the   Company's   consolidated   financial
              statements.

              SFAS No.'s 141 and 142 -- In June 2001,  the Financial  Accounting
              Standards Board (FASB) adopted  Statement of Financial  Accounting
              Standards SFAS No. 141, "Business Combinations," and SFAS No. 142,
              "Goodwill and Other Intangible  Assets." SFAS No. 141 is effective
              as to any business  combination  occurring after June 30, 2001 and
              certain transition  provisions that affect accounting for business
              combinations  prior to June 30, 2001 are  effective as of the date
              that  SFAS No.  142 is  applied  in its  entirety,  which  will be
              January  1,  2002  for the  Company.  SFAS No.  142 is  effective,
              generally,  in fiscal  years  beginning  after  December 15, 2001,
              which will be the fiscal  year  ending  December  31, 2002 for the
              Company.

              SFAS No.  141  provides  standards  for  accounting  for  business
              combinations.  Among  other  things,  it  requires  that  only the
              purchase method of accounting be used and that certain  intangible
              assets acquired in a business  combination (i.e. those that result
              from  contractual  or other  legal  rights  or are  separable)  be
              recorded  as  an  asset  apart  from   goodwill.   The  transition
              provisions require that an assessment be made of previous business
              combinations and, if appropriate,  reclassifications be made to or
              from goodwill to adjust the  recording of  intangible  assets such
              that the  criteria  for  recording  intangible  assets  apart from
              goodwill is applied to the previous business combinations.

              SFAS No. 142  provides,  among other  things,  that  goodwill  and
              intangible assets with indeterminate lives shall not be amortized.
              Goodwill  shall be  assigned  to a  reporting  unit  and  annually
              assessed for impairment.  Intangible assets with determinate lives
              shall be amortized  over their  estimated  useful lives,  with the
              useful lives  reassessed  continuously,  and shall be assessed for
              impairment  under the provisions of SFAS No. 121,  "Accounting for
              the Impairment of Long-Lived  Assets and for Long-Lived  Assets to
              be Disposed Of."  Goodwill is also  assessed for  impairment on an
              interim basis when events and circumstances warrant. Upon adoption
              of SFAS No. 142,  the Company  will assess  whether an  impairment
              loss should be recognized and measured by comparing the fair value
              of the "reporting unit" to the carrying value, including goodwill.

                                      F-14

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000



NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              k.  Changes in Accounting Principles (Continued)

              If the carrying  value  exceeds fair value,  then the Company will
              compare the  implied  fair value of the  goodwill"  (as defined in
              SFAS No.  142) to the  carrying  amount  of the  goodwill.  If the
              carrying  amount of the  goodwill  exceeds the implied fair value,
              then the goodwill will be adjusted to the implied fair value.

              While the Company has not completed the process of determining the
              effect of these new accounting  pronouncements on its consolidated
              financial  statements,  the Company  currently  expects that there
              will be no  reclassification  in  connection  with the  transition
              provisions  of  SFAS  No.  141  based  on  clarifications  of  the
              transition   provisions  issued  by  the  FASB  in  October  2001.
              Accordingly,  the Company expects that,  after  implementation  of
              SFAS No. 142, all intangible  assets will be  amortizable  and the
              goodwill will not be amortizable.

              SFAS No. 143 -- On August 16, 2001,  the FASB issued SFAS No. 143,
              "Accounting for Asset Retirement  Obligations," which is effective
              for fiscal years  beginning  after June 15, 2002. It requires that
              obligations   associated   with  the   retirement  of  a  tangible
              long-lived asset be recorded as a liability when those obligations
              are incurred,  with the amount of the liability initially measured
              at fair value.  Upon  initially  recognizing  a  liability  for an
              accrued retirement obligation,  an entity must capitalize the cost
              by recognizing  an increase in the carrying  amount of the related
              long-lived  asset.  Over time,  the  liability  is accreted to its
              present value each period, and the capitalized cost is depreciated
              over the useful life of the related asset.  Upon settlement of the
              liability,  an  entity  either  settles  the  obligation  for  its
              recorded  amount or incurs a gain or loss upon  settlement.  While
              the  Company has not  completed  the  process of  determining  the
              effect of this new accounting  pronouncement  on its  consolidated
              financial  statements,  the  Company  currently  expects  that the
              effect of SFAS No.  143 on the  Company's  consolidated  financial
              statements, when it becomes effective, will not be significant.

              SFAS No.  144 - On  October  3,  2001,  the  Financial  Accounting
              Standards   Board  issued  SFAS  No.  144,   "Accounting  for  the
              Impairment  or Disposal of  Long-Lived  Assets" which is effective
              for financial  statements  issued for fiscal years beginning after
              December 15, 2001 and, generally, its provisions are to be applied
              prospectively.  SFAS 144  supercedes  SFAS  Statement No. 121 (FAS
              121),  "Accounting for the Impairment of Long-Lived Assets and for
              Long-Lived  Assets to Be  Disposed  Of." SFAS 144  applies  to all
              long-lived   assets   (including   discontinued   operations)  and
              consequently  amends  Accounting  Principles  Board Opinion No. 30
              (APB 30),  "Reporting Results of Operations  Reporting the Effects
              of Disposal of a Segment of a Business."

              SFAS 144 develops one accounting model (based on the model in SFAS
              121) for long- lived assets that are to be disposed of by sale, as
              well as addresses the principal implementation issues.


                                      F-15

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

              k.  Changes in Accounting Principles (Continued)

              SFAS 144 requires that  long-lived  assets that are to be disposed
              of by sale be  measured  at the lower of book  value or fair value
              less cost to sell. That requirement  eliminates the requirement of
              APB 30 that discontinued  operations be measured at net realizable
              value or that entities include under "discontinued  operations" in
              the financial  statements  amounts for operating  losses that have
              not yet occurred.

              Additionally, FAS 144 expands the scope of discontinued operations
              to include all  components of an entity with  operations  that (1)
              can be  distinguished  from the rest of the entity and (2) will be
              eliminated from the ongoing operations of the entity in a disposal
              transaction.

              While the Company has not completed the process of determining the
              effect of this new accounting  pronouncement  on its  consolidated
              financial  statements,  the  Company  currently  expects  that the
              effect of SFAS No.  144 on the  Company's  consolidated  financial
              statements, when it becomes effective, will not be significant.

              l.  Accounts Receivable

              Accounts  receivable are shown net of an allowance for bad debt of
              $1,800 at December 31, 2000.

              m.  Preferred Stock

              The Company has authorized  10,000,000  shares of $0.001 par value
              preferred  stock.  The preferred stock shall have preference as to
              dividends  and  to  liquidation  of  the  Company.  The  board  of
              directors has determined that the 300 preferred shares outstanding
              at  December  31, 2000 valued at  $300,000  are  convertible  into
              common  stock  at a 20%  discount  from the  closing  price of the
              common stock on the date of conversion and bears interest at prime
              plus 1% (9% at December  31,  2000).  The  conversion  discount of
              $60,000 has been  recorded and is included in retained  deficit at
              December 31, 2000.  During the year ended  December 31, 2001,  the
              Company  declared a dividend  of $23,250 on the  preferred  stock.
              Subsequent to year end, the Company  converted the preferred stock
              and accrued  dividend  payable  into  16,835,938  shares of common
              stock.  The common stock was valued at 80% of the closing price on
              August 31, 2001 which was the dividend declaration date.

NOTE 2 -      OIL AND GAS PROPERTY

              At December 31, the Company's proved  properties  consist of costs
              in the following areas net of accumulated depletion of $995,661

                                                           2001
                                                    -----------------
              Wyoming                               $       2,050,167
              West Virginia                                   513,816
                                                    -----------------
                                                    $       2,563,983



                                      F-16

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 2 -      OIL AND GAS PROPERTY (Continued)

              Productive Gas Wells

              The  following  summarizes  the Company's  productive  oil and gas
              wells as of December  31,  2001.  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.

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

              Productive oil wells                       6               1.93
              Productive gas wells                       7               5.25
                                        ------------------  -----------------
                                                        13               7.18
                                        ==================  =================

              The Company does not operate any of these wells.

              Oil and Gas Acreage

              The following table sets forth the undeveloped  leasehold acreage,
              by area, held by the Company as of December 31, 2001.  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.

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

              Wyoming                             16,678             13,687
              West Virginia                          424                424
                                      ------------------  -----------------

                  Total acres                     17,102             14,111
                                      ==================  =================

NOTE 3 -      LONG-TERM DEBT

              The Company had the  following  debt  obligations  at December 31,
2001:
<TABLE>
<CAPTION>
<S>                                                                            <C>
              First National Bank of St. Marys, $9,244 payable monthly,
                12.5% interest rate, secured by equipment and personal
                guarantee of officers.                                         $         430,167

              Union Bank of Tyler County, interest at 11.5% due quarterly,
                renewable, due on demand, secured by equipment and
                personal guarantee of officers.                                           19,733
                                                                               -----------------

              Balance forward                                                  $         449,900
                                                                               -----------------
</TABLE>

                                      F-17

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000

<TABLE>
<CAPTION>

NOTE 3 -      LONG-TERM DEBT (Continued)

<S>                                                                                              <C>
              Balance forward                                                                    $         449,900

              Union Bank of Tyler  County,  principal  and interest  payments of
                $799 due monthly, interest rate of 14%, due September 25, 2004,
                secured by vehicle and personal guarantee of officers.                                      21,746

              Wesbanco, interest payable quarterly, prime +2%, due on demand,
                secured by officers' personal assets.                                                      300,000

              Note payable to an individual, due on demand, bearing interest at
                9.75%, interest payments due monthly, unsecured.                                           292,078

              Union Bank of Tyler County, principal and interest payments of
                $230 due monthly, interest at 16.0%, secured by vehicle of the
                Company.                                                                                     4,217

              Note due to a private individual, due on demand with interest
                at 20%, secured by personal guarantee of officers.                                         200,919

              Note payable to Raven Group, interest imputed at 10%, due on
                demand, unsecured.                                                                         325,000
                                                                                                 -----------------

                          Total                                                                          1,593,860

                          Less Current Portion                                                          (1,311,695)
                                                                                                 -----------------

                          Total Long-Term Debt                                                   $         282,165
                                                                                                 =================

              Future maturities of long-term debt are as follows:

                          2002                                                                $          1,311,695
                          2003                                                                              89,234
                          2004                                                                              96,668
                          2005                                                                              96,263
                          2006                                                                                   -
                          2007 and thereafter                                                                    -
                                                                                              --------------------

                               Total                                                          $          1,593,860
                                                                                              ====================
</TABLE>

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 owned by the President of the Company,  at the  industrial
              facilities near Sistersville,  West Virginia,  or to Hope, a local
              utility,  on a year  long  basis  ending  January  31,  2002  at a
              variable price per month per Mcf.

                                      F-18

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000



NOTE 4 -      RELATED PARTY TRANSACTIONS (Continued)

              a. Marketing Agreement - Sancho (Continued)

              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 Hope 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.  Receivables

              The  Company  has  various  receivables  from and  payables to the
              officers and  companies of the  officers.  These amounts have been
              grouped  together  with a net payable of $704,829 at December  31,
              2001.  The net payable bears interest at 10%, is due on demand and
              is unsecured.

NOTE 5 -      ECONOMIC DEPENDENCE AND MAJOR CUSTOMERS

              The  Company's  marketing  arrangement  with Sancho  accounted for
              approximately  82% and 84% of the Company's  revenue for the years
              ended   December  31,  2001  and  2000,   respectively   in  Tyler
              Construction  Company. This marketing agreement is in effect until
              December 1, 2008. Another customer also generated sales of 99% and
              99% of Ritchie County total sales in 2001 and 2000, respectively.

NOTE 6 -      STOCKHOLDERS' EQUITY

              In 2000, the Company issued  1,691,287  shares of common stock for
              cash of $83,000.  The Company issued  11,722,383  shares of common
              stock for services and conversion of debt at  approximately  $0.12
              per share or a total of  $1,422,923.  The shares for services were
              issued after the services  had been  performed  and were valued at
              the closing prices on the dates of issue.  The Company also issued
              151,930,606 shares of common stock to convert debentures, interest
              and penalties at approximately  $0.04 per share or $5,653,991 (See
              Note 9).  Additionally,  the Company  canceled  423,833  shares of
              common stock that had been previously authorized but never issued,
              the Company does believe it has any further  obligation related to
              these shares.

              In 2001, the Company issued  4,655,000  shares of common stock for
              services  rendered.  The shares were valued at an average price of
              $0.03 per share for total  consideration  of $141,305.  The shares
              were issued  after the services  were  rendered and were valued at
              the closing price on the dates of issue.

              A  foreign  judgment  has been  filed  with the  circuit  court in
              Pleasants County, West Virginia for a judgment against the Company
              by Tioga Lumber Company (Tioga)  rendered by the District Court in
              Harris County,  Texas for non-payment of an accounts payable.  The
              judgment is for $46,375 plus prejudgment interest at 10.00%.

                                      F-19

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 7 - JUDGMENTS PAYABLE (Continued)

              On February 28, 2002,  the Company and Tioga  reached an agreement
              wherein the Company  would pay Tioga  $10,000 by March 5, 2002 and
              $8,000  per  month  thereafter.  The  court  appointed  a  special
              commissioner to act as an arbitrator if the Company defaults.  The
              special  commissioner  would  attach a lien if  property  is found
              which does not have a lien  attached.  At December 31,  2001,  the
              balance due to Tioga was  $47,234  and is  included  in  judgments
              payable and is classified as a current liability.

              In January 2002,  Dennis L. Spencer filed suit against the Company
              and William F.  Woodburn and Loren E. Bagley in the Circuit  Court
              of Ritchie County,  West Virginia (Civil Action No. 02-C-02).  The
              complaint  alleges that the Company  sold certain  assets that Mr.
              Spencer claims to be the  beneficial  owner.  The complaint  seeks
              $1,000,000  in damages.  Management  believes  the suit is without
              merit and intends to vigorously defend the action. The Company has
              not accrued any amounts for these  claims as of December  31, 2001
              because the Company  feels that based on its defenses  against the
              claims that the Company will have no additional liability.  Due to
              the early stage of litigation,  it is not possible to evaluate the
              likelihood  of an  unfavorable  outcome or estimate  the extent of
              potential loss.

              On December  26,  2001,  George  Hillyer  filed a suit against the
              Company and William F. Woodburn and Loren E. Bagley, individually.
              The action seeks  $250,750 in  connection  with  certain  services
              performed for the Company. The Company has indicated that the suit
              is  not  justified  and  that  the  Company  and  the   individual
              defendants intend to vigorously defend the action. The Company has
              not accrued any amounts for these  claims as of December  31, 2001
              because the Company  feels that based on its defenses  against the
              claims that the Company will have no additional liability.  Due to
              the early stage of litigation,  it is not possible to evaluate the
              likelihood  of an  unfavorable  outcome or estimate  the extent of
              potential loss.

              On April 16, 2001, Ross O. Forbus obtained a judgment  against the
              Company for  $428,018  plus post  judgment  interest at 10.00% per
              annum.  The  judgment  was  obtained  to satisfy a  previous  note
              payable.  The Company  has  accrued  the balance of $428,018  plus
              accrued  interest  of  $25,372.  The total  amount of  $453,390 is
              included  in  judgments  payable  and is  classified  as a current
              liability.

              On July 28,  1999,  Core  Laboratories,  Inc.  (Core)  obtained  a
              judgment  against  the  Company  for  non-payment  of an  accounts
              payable.  The judgment  calls for monthly  payments of $351 and is
              bearing  interest at 10.00% per annum.  At December 31, 2001,  the
              Company  had  accrued a balance of $14,669  which is  included  in
              judgments  payable.  $6,434  has been  classified  as a  long-term
              liability.

              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.  The Company has accrued a balance of $62,880  which is
              included in judgment payable as a current liability.


                                      F-20

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


NOTE 7 - JUDGMENTS PAYABLE (Continued)

              On April 10,  2000,  Bellevue  Resources  recorded  and served its
              Notice  and  Statement  of Lien in the  Sixth  Judicial  District,
              Campbell County,  Wyoming,  against the Company for non-payment of
              services.  The  Company  had  recorded a  liability  of $78,651 at
              December  31,  2000.  During  2001,  the  Company  entered  into a
              settlement  agreement wherein the Company transferred a portion of
              the Powder  River  Basin  leasehold  acreage in  Campbell  County,
              Wyoming.  At December  31,  2001,  the balance was $55,259 that is
              included judgments payable as a current liability.

              On February 7, 2001, the United States Bankruptcy Court,  Southern
              District  of Texas,  entered an Order  Granting  Motion to Dismiss
              Chapter 7 Case in the action  entitled In Re: Trans Energy,  Inc.,
              Case  No.  00-39496-H4-7.  The  Order  dismissed  the  involuntary
              bankruptcy  action  instituted  against the Company on October 16,
              2000.  The sole  petitioning  creditor  named  in the  Involuntary
              Petition was Western Atlas  International,  Inc.  ("Western").  An
              Order  for  Relief  Under  Chapter 7 was  entered  by the Court on
              November 22, 2000.

              On April 23,  2000,  the 189th  District  Court of Harris  County,
              Texas entered an Agreed Final Judgment in favor of Western against
              the Company in the amount of $600,665, together with post judgment
              interest at 10% per annum. Following the judgment, Western and the
              Company  entered  into  settlement   negotiations  concerning  the
              Company's  satisfaction  of the judgment  through  payments over a
              four to five month period  together  with the pledge of collateral
              on certain unencumbered assets.

              Previously,  on or about July 9, 1998, a judgment had been entered
              in the 152nd District  Court of Harris  County,  Texas against the
              Company in favor of Baker Hughes Oilfield Operations,  Inc. d/b/a/
              Baker Hughes Inteq. Western Geophysical  ("Baker"),  a division of
              Western  Atlas  International,  Inc.,  in the  amount of  $41,142,
              together  with  interest  and  attorney  fees.  This  judgment was
              outstanding at the time of the filing of the Involuntary Petition.

              During  its  negotiations  with  Western  for  settlement  of  the
              Judgment,  the Company  made a $200,000  "good  faith  payment" to
              Western's  counsel on October 23, 2000. On December 12, 2000,  Joe
              Hill was named as the Chapter 7 Trustee.  Subsequently,  Western's
              counsel delivered the $200,000 to the Trustee.

              On January 19, 2001, the Company filed with the  Bankruptcy  Court
              the Motion to Dismiss  Chapter 7 Case.  The  reasons  cited by the
              Company in support of its Motion to Dismiss included, but were not
              limited to, (i) the Texas  Court  being an improper  venue for the
              action,  and (ii) the  Company  never  receiving  the  Involuntary
              Petition and Summons notifying it of the action.

              In anticipation of the Bankruptcy Court dismissing the Involuntary
              Petition,  on  February  2,  2001,  the  Company  entered  into  a
              Settlement Agreement with Baker Hughes Oilfield  Operations,  Inc.
              d/b/a/  Baker Hughes  Inteq.  Western  Geophysical,  a division of
              Western  Atlas  International,  Inc.  (the "Baker  Entities").  In
              entering its order on February 7, 2001 to dismiss the action,  the
              Court ordered the Trustee to retain  $17,695 for  satisfaction  of
              administrative fees and expenses,  and to pay to Western and Baker
              the sum of $182,737,  on behalf of the Company and pursuant to the
              terms of the Settlement Agreement.


                                      F-21

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000
NOTE 7 - JUDGMENTS PAYABLE (Continued)

              The Settlement Agreement provided that, subject to the approval of
              the  Bankruptcy  Court,  the  Company  agreed  to pay to the Baker
              Entities  $759,664,  plus  interest  at 10%.  In  addition  to the
              $200,000 payable from the escrow, the Company agreed to pay to the
              Baker Entities an initial  payment of $117,261 within fifteen days
              from the date of the Dismissal Order (due February 21, 2001).

              The Company  also agreed to make  additional  payments of $100,000
              every thirty days  following the initial  payment,  with the first
              payment due  beginning  no later than March 23,  2001,  continuing
              until the total obligation plus interest is paid in full. Further,
              the Company  pledged as collateral  certain  properties,  personal
              property  and  fixtures and two  directors  each  pledged  750,000
              shares of the Company's common stock which they personally own. At
              December  31,  2001,  the  Company has a  remaining  liability  of
              $601,966  which is  included  in  judgments  payable  as a current
              liability.

              On September 28, 2001, the U.S.  Securities & Exchange  Commission
              ("SEC")  filed a civil action in the U.S.  District  Court for the
              District of Columbia  against the Company,  Loren E.  Bagley,  its
              President and William Woodburn, its Vice President.

              The SEC sought a judgment  against the Company  enjoining  it from
              future  violations of Sections  10(b) and 13(a) of the  Securities
              and Exchange Act of 1934 (Exchange  Act) and Rules 10b-5,  12B-20,
              13a-1,  and  13a-13.  Further,  the SEC sought a judgment  against
              Messrs.  Bagley and Woodburn enjoining them from future violations
              of Section  10(b) of the Exchange Act and Rule 10b-5,  from aiding
              and abetting  future  violations  of Section 13(a) of the Exchange
              Act and Rules  12b-20,  13a-1,  and 13a-13,  and  assessing  civil
              penalties against them.

              On February 26, 2002,  the United  States  District  Court for the
              District of Columbia  entered a permanent  injunction  against the
              Company,  its former  President,  Loren E. Bagley,  and its former
              Vice  President  and  principal  financial  officer,   William  F.
              Woodburn,  permanently  enjoining  them from future  violations of
              Sections  10(b) and 13(a) of the  Securities  Exchange Act of 1934
              (Exchange  Act)  and  Rules  10b-5,  12b-20,   13a-1,  and  13a-13
              thereunder.  The Court's order further enjoins Messrs.  Bagley and
              Woodburn  from aiding and abetting  violations of Section 13(a) of
              the Exchange Act and Rules 12b- 20, 13a-1,  and 13a-13  thereunder
              and orders Messrs. Bagley and Woodburn to each pay a $20,000 civil
              penalty. The Company and Messrs.  Bagley and Woodburn consented to
              entry of the  permanent  injunction  and the  imposition  of civil
              penalties without admitting or denying the SEC's allegations.

              The Company's consolidated financial statements are prepared using
              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,  2001 of  $25,251,849,  and has a working  capital  deficit at
              December 31, 2001 of $5,471,698.


                                      F-22

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000


              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,  other contemplated debt and equity
              financing,   and   increases  in  operating   revenues   from  new
              development  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.  If these are not
              successful,  management  is committed  to meeting the  operational
              cash flow needs of the Company. (See also Notes 10 and 11).

NOTE 9 -      CONVERTIBLE DEBENTURES

              On September 10, 1998, the Company  completed a debenture issue of
              $4,625,400  face value of 8% Secured  Convertible  Debentures  due
              March 31, 1999 (the "Debentures").  Interest shall accrue from the
              date of issuance  until  payment in full of the  principal sum has
              been made or duly provided for.  Holders of the  Debentures  shall
              have the  option,  at any time,  until  maturity,  to convert  the
              principal  amount  of  their  Debenture,  or  any  portion  of the
              principal  amount  which is at least  $10,000  into  shares of the
              Company's  Common Stock at a conversion price for each share equal
              to the lower of (a) seventy  percent  (70%) of the market price of
              the  Company's  Common Stock  averaged  over the five trading days
              prior to the date of  conversion,  or (b) the market  price on the
              issuance date of the  Debentures.  Any accrued and unpaid interest
              shall be  payable,  at the  option of the  Company,  in cash or in
              shares of the Company's  Common Stock valued at the then effective
              conversion price.

              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.

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

              The Company failed to obtain an effective registration statement.

              The  Company  has  accrued  and fully  amortized a discount on the
              Debentures of $1,445,480  to  compensate  for the seventy  percent
              (70%)  market  price  conversion  and  contributed  this amount to
              additional  paid-in  capital.  The  Company  has also  accrued  an
              additional  amount of $963,653 as a penalty  payable to compensate
              for the non-filing of the  registration  statement  penalty of 15%
              and  for  the 5%  discount  on the  conversion  of the  debentures
              penalty and have added these amounts to the  debenture  payable as
              of December 31, 1999. In 1999, the Company  converted  $469,064 of
              the  debenture  and $60,102 of the  penalties  and  interest  into
              4,398,929 shares of common stock.

              In  2000,  the  Company  converted   $1,547,655  of  interest  and
              penalties   and   $4,106,337  of  the   debentures   payable  into
              151,930,606  shares of common  stock.  At December 31,  2001,  the
              Company owed $331,462 on the debentures  consisting of $50,000 for
              a debenture and $281,462 in penalties and interest.



                                      F-23

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000

NOTE 10 - BUSINESS SEGMENTS

              Effective  December  31, 1998,  the Company  adopted SFAS No. 131,
              "Disclosure   about   Segments  of  an   Enterprise   and  Related
              Information."  Prior period  amounts have been restated to conform
              to the  requirements of this statement.  The Company  conducts its
              operations  principally as oil and gas sales with Trans Energy and
              Prima Oil and pipeline  transmission with Ritchie County and Tyler
              Construction.

              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                                   2001         $   502,264    $   775,963    $          --
                                                      2000             796,390        328,867               --

Operating loss applicable to
  industry segment                                    2001           1,223,017        250,726               --
                                                      2000           3,429,277        449,336               --

General corporate expenses
 not allocated to industry
 segments                                             2001                --             --                 --
                                                      2000                --             --                 --

Interest expense                                      2001            (232,588)       (85,516)              --
                                                      2000            (380,165)       (57,305)              --

Other income (expenses)                               2001              16,026           --                 --
                                                      2000              14,850           --                 --

Assets
  (net of intercompany accounts)                      2001           3,630,556         10,914               --

Depreciation and amortization                         2001             787,142        108,742               --
                                                                          2000        221,705            108,764

Property and equipment
 acquisitions                                         2001         $   281,203           --                 --
</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.


                                      F-24

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000



NOTE 11 - OUTSTANDING STOCK OPTIONS (Continued)

              FASB  Statement 123,  "Accounting  for  Stock-Based  Compensation"
              ("SFAS  No.  123"),  requires  the  Company  to  provide  proforma
              information  regarding  net  income and net income per share as if
              compensation  costs for the Company's stock option plans and other
              stock awards had been determined in accordance with the fair value
              based method prescribed in SFAS No. 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 246%;  risk-free  interest  rates of 6.15
              percent and expected lives of 0.1 years.

              Under the accounting provisions of SFAS No. 123, the Company's net
              loss would have been  changed by the pro forma  amounts  indicated
              below:

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                            --------------------------------------
                                                                                   2001                2000
                                                                            -----------------  -------------------
              Net loss:
<S>                                                                          <C>                 <C>
                As reported                                                  $ (1,473,744)       $ (3,807,071)
                Pro forma                                                    $ (1,473,744)       $ (3,819,936)

              Basic loss per share:
                As reported                                                  $      (0.01)       $      (0.06)
                Pro forma                                                    $      (0.01)       $      (0.06)
</TABLE>

              A summary of the status of the Company's  stock option plans as of
              December 31, 2001 and changes during the year is presented below:
<TABLE>
<CAPTION>

                                                                                        December 31, 2000
                                                                                                     Weighted
                                                                                                     Average
                                                                                 Shares            Exercise Price
                                                                           ------------------  -------------------

<S>                                                                            <C>            <C>
Outstanding, December 31, 2000                                                  795,057        $              0.50

                  Granted                                                          --                     --
                  Canceled                                                         --                     --
                  Exercised                                                        --                     --
                                                                           ------------------  -------------------

              Outstanding, December 31, 2001                                          795,057  $              0.50
                                                                           ==================  ===================

Exercisable, December 31, 2001                                                        795,057 $               0.50
                                                                           ==================  ===================
</TABLE>


                                                          F-25

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000



NOTE 11 - OUTSTANDING STOCK OPTIONS (Continued)
<TABLE>
<CAPTION>

                                                        Outstanding                           Exercisable
                                           -----------------------------------------  -----------------------
                                                           Weighted
                                                           Average        Weighted                 Weighted
                                              Number       Remaining      Average      Number      Average
                                           Outstanding    Contractual     Exercise   Exercisable   Exercise
              Exercise Prices              at 12/31/00       Life          Price     at 12/31/01   Price
              ---------------              -----------    -----------     --------   -----------   --------

<S>           <C>                            <C>             <C>         <C>           <C>         <C>
              $ 0.50                         795,057         2.00         $   0.50     795,057     $  0.50
</TABLE>

              The  795,057  options  were  issued at $0.50 which is equal to the
              market price on the date of issuance. All options are fully vested
              and have a five year period to be exercised.  The options were not
              issued pursuant to an employee stock option plan.

NOTE 12 -       NOTES PAYABLE - CONVERTIBLE

              Nine (9) convertible  debentures  dated between  February 21, 2001
                and April 27, 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            $       41,575
                                                            --------------

              Less current portion                                 (41,575)
                                                            --------------

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

              The Company recognized an additional expense of $23,989 because of
              the additional beneficial feature offered to the debenture holders
              below the market value.  This  beneficial  conversion  feature was
              expensed  currently  pursuant  to the  EITF  96-18  and  has  been
              included  in  the  general  and  administrative   expense  in  the
              accompanying consolidated statement of operations.

NOTE 13 - PRIOR PERIOD ADJUSTMENT

              The Company has restated its consolidated financial statements for
              the year ended December 31, 2000 to reflect adjustments related to
              the  preferred  stock.  The  Company   inappropriately  accrued  a
              dividend payable, when in fact the dividend was not declared until
              August 2001, and the Company  expensed the  beneficial  conversion
              feature  instead of  recording  the  transaction  in the  retained
              deficit. The determination reduced the net loss for the year ended
              December  31,  2000 by  $71,540  and the  current  liabilities  by
              $11,540.  Correction of this error had the following effect on the
              December 31, 2000 consolidated financial statements:

<TABLE>
<CAPTION>
                                                             Originally             As
                                                              Reported           Restated           Difference
                                                           ---------------  ------------------  ------------------

<S>                                                        <C>                  <C>                 <C>
                  Net loss                                 $    (3,878,611)     $   (3,807,071)     $       71,540
                  Accumulated deficit                          (23,766,395)        (23,754,855)             11,540
                  Loss per share                           $         (0.05)     $        (0.05)                 --

</TABLE>

                                      F-26

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 2001 and 2000
                                   (Unaudited)



S.F.A.S. 69  SUPPLEMENTAL DISCLOSURES

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

                                                                                          December 31,
                                                                             -------------------------------------
                                                                                    2001                2000
                                                                             -----------------   -----------------
<S>                                                                          <C>                 <C>
         Proved oil and gas producing properties and related
           lease and well equipment                                          $      3,372,880    $      3,373,880
         Unproved oil and gas properties                                              114.426             180,000
                                                                                   (1,009,429)           (269,365)
                                                                             ----------------   -----------------
Net Capitalized Costs                                                        $      2,722,502    $      3,283,515
                                                                             ================    ================
</TABLE>


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

                                                                                       For the Years Ended
                                                                                          December 31,
                                                                             -------------------------------------
                                                                                    2001                2000
                                                                             -----------------   -----------------
         Acquisition of Properties
<S>                                                                          <C>                 <C>
            Proved                                                           $         281,203   $         269,520
            Unproved                                                                        --                  --
         Exploration Costs                                                                  --                  --
         Development Costs                                                                  --                  --
</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,
                                                                             -------------------------------------
                                                                                    2001                2000
                                                                             -----------------   -----------------

<S>                                                                          <C>                 <C>
Sales                                                                        $         502,264   $         788,224
Production costs                                                                        (9,518)            (18,623)
Depreciation and depletion                                                            (603,731)           (198,857)
Income tax expenses                                                                         --                  --
                                                                             -----------------   -----------------

         Results of operations for producing activities
          (excluding the activities of the pipeline transmission
          operations, corporate overhead and interest costs                  $        (110,985)  $        570,744
                                                                             =================   ================
</TABLE>

                                      F-27

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                           December 31, 2001 and 2000
                                   (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 2000                                                            1,348,754            356,196

Revisions of previous estimates                                                (1,154,569)                --
Improved recovery                                                                      --                 --
Purchases of minerals in place                                                         --            831,968
Extensions and discoveries                                                             --                 --
Production                                                                        (46,309)           (54,325)
Sales of minerals in place                                                             --                 --
                                                                           -------------------  ------------------
End of the year 2001                                                              147,876          1,133,839
                                                                           ===================  ==================
         Proved developed reserves:

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

           Beginning of the year 2001                                           1,348,754            356,196
           End of the year 2001                                                   147,876          1,133,839
</TABLE>

         During 2001,  2000,  1998, 1996, 1995, 1992, 1991 and 1990, 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-28

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                           December 31, 2001 and 2000
                                   (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

                              At December 31, 2001

<TABLE>
<CAPTION>
                                                                                                  Trans Energy
                                                                                                  and
                                                                                                  Subsidiaries
                                                                                               -----------------
<S>                                                                                            <C>
         Future cash inflows                                                                   $      6,582,335
         Future production and development costs                                                     (1,331,000)
         Future income tax expense                                                                            -
                                                                                               ----------------
         Future net cash flows                                                                        5,251,335
         10% annual discount for estimated timing of cash flows                                      (1,601,341)
                                                                                               ----------------

         Standardized measure of discounted future net cash flows                              $      3,649,994
                                                                                               ================

                                                At December 31, 2000
                                                                                                  Trans Energy
                                                                                                  and
                                                                                                  Subsidiaries
                                                                                               ----------------
         Future cash inflows                                                                   $     18,793,524
         Future production and development costs                                                     (6,768,854)
         Future income tax expense                                                                   (4,061,312)
                                                                                               ----------------
         Future net cash flows                                                                        7,963,358
         10% annual discount for estimated timing of cash flows                                      (3,537,580)
                                                                                               ----------------

         Standardized measure of discounted future net cash flows                              $      4,425,778
                                                                                               ================
</TABLE>

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

         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,
                                                                             -------------------------------------
                                                                                    2001                2000
                                                                             -----------------   -----------------

<S>                                                                          <C>                 <C>
         Standardized measure, beginning of year                             $       4,425,778   $       5,216,987
         Oil and gas sales, net of production costs                                         --                  --
         Sales of mineral in place                                                  (1,039,658)         (1,611,730)
         Purchases                                                                          --             820,521
         Net change due to revisions in quantity estimates                             263,874                  --
         Accretion of discount items                                                        --                  --

         Standardized measure, end of year                                   $       3,649,994   $       4,425,778
                                                                             =================   =================
</TABLE>

                                      F-29

<PAGE>


                       TRANS ENERGY, INC. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                           December 31, 2001 and 2000
                                   (Unaudited)



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

         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-30

<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/ ROBERT L. RICHARDS
                                          -------------------------------
                                                      Robert L. Richards,
                                                      President and C.E.O.

Dated:  April 12, 2002

             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>
                                     President, C.E.O. and              April 12, 2002
/S/ ROBERT L. RICHARDS               Director
---------------------------
    Robert L. Richards


                                     Vice President and                 April 12, 2002
/S/ LOREN E. BAGLEY                  Director
---------------------------
    Loren E. Bagley                  Principal Financial Officer


                                     Secretary Treasurer / Treasurer    April 12, 2002
/S/  WILLIAM F. WOODBURN             and Director
---------------------------
     William F. Woodburn             Chief Accounting Officer


                                                                        April 12, 2002
/S/  JOHN B. SIMS                    Director
---------------------------
     John B. Sims

</TABLE>

                                       S-1

<PAGE>