UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM            10-Q

 

|   | (X) | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                            SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----|--------------------------------------------------------------------------------------------------------------------|

 

For the Quarter Ended March 31, 2008

 

OR

 

|   | ( ) | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                            SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----|---------------------------------------------------------------------------------------------------------------------|

             

For the transition period from to

             

Commission File Number 0-23530

             

TRANS ENERGY, INC.

             

(Exact name of registrant as specified 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)

             

Registrant’s telephone no., including area code: (304)            684-7053

             

Check whether the issuer (1) filed all reports required to be filed by            Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months            (or for such shorter period that the registrant was required to file such reports), and            (2) has been subject to such filing requirements for the past 90 days. Yes (X) No (            )

 

Indicate by check mark whether the registrant is a large accelerated            filer, and accelerated filer, or a smaller reporting company. See definitions of            “large accelerated filer” and “small reporting company” in Rule            12b-2 of the Exchange Act.

 

| Large accelerated filer ( | ) | Accelerated filer | (   ) |
|---------------------------|---|-------------------|-----------------|

| Non-accelerated filer | (   ) (Do not check if smaller reporting                            company) | Smaller reporting company (X) |
|-----------------------|----------------------------------------------------------------------------------------|-------------------------------|

 

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

 

State the number of shares outstanding of each of the issuer’s            classes of common equity, as of the latest practicable date.

 

| _________Class_____________ | ___Outstanding as of April 30,                            2008___ |
|-----------------------------|-------------------------------------------------------------------|

| Common Stock, $.001 par value | 10,410,065 |
|-------------------------------|------------|

----

Table            of Contents

 

| Heading | Page |
|---------|------|

 

PART            I. FINANCIAL INFORMATION

 

| Item 1. | Financial Statements | 3 |
|---------|----------------------|---|

             

Consolidated Balance Sheets – March 31, 2008 and

|   | December 31, 2007 (Unaudited) | 3 |
|--------|-------------------------------|---|

             

Consolidated Statements of Operations – three months            ended

|   | March 31, 2008 and 2007 (Unaudited) | 5 |
|--------|-------------------------------------|---|

             

Consolidated Statement of Stockholders’ Deficit - three            months

|   | ended March 31, 2008 (Unaudited) | 6 |
|--------|----------------------------------|---|

             

Consolidated Statements of Cash Flows – three months            ended

|   | March 31, 2008 and 2007 (Unaudited) | 7 |
|--------|-------------------------------------|---|

             

|   | Notes to Consolidated Financial Statements                            (Unaudited) | 8 |
|--------|-----------------------------------------------------------------------------------|---|

             

| Item 2. | Management’s Discussion and Analysis or Plan of                            Operation | 11 |
|---------|--------------------------------------------------------------------------------------------|----|

             

| Item 3. | Quantitative and Qualitative Disclosures About Market                            Risk | 13 |
|---------|---------------------------------------------------------------------------------------|----|

             

| Item 4. | Controls and Procedures | 13 |
|---------|-------------------------|----|

             

PART II OTHER INFORMATION

             

| Item 1. | Legal Proceedings | 14 |
|---------|-------------------|----|

             

| Item 2. | Unregistered Sales of Equity Securities and Use of                            Proceeds | 14 |
|---------|----------------------------------------------------------------------------------------|----|

             

| Item 3. | Defaults Upon Senior Securities | 14 |
|---------|---------------------------------|----|

             

| Item 4. | Submission of Matters to a Vote of Securities                            Holders | 14 |
|---------|----------------------------------------------------------------------------------|----|

             

| Item 5. | Other Information | 15 |
|---------|-------------------|----|

             

| Item 6. | Exhibits | 15 |
|---------|----------|----|

             
|   | Signatures | 15 |
|--------|------------|----|

 

 

2

 

----

 

**PART I**

 

**Item 1. Financial Statements**

 

 

|   | **TRANS ENERGY, INC. AND SUBSIDIARIES**                                                |
|--------|----------------------------------------------------------------------------------------|
|   | **Consolidated Balance Sheets**                                                        |
|   | **(Unaudited)**                                                                        |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   |   |   |   |   |   |   |   | March 31, |   | December 31, |
|   |                                                                                   |   |   |   |   |   |   |   | 2008 |   | 2007 |
|   |                                                                                   |
|   | ASSETS                                                                                 |
|   |                                                                                   |
|   | CURRENT ASSETS                                                                         |   |   |   |   |   |   |   |   |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   | Cash |   |   |   |   |   |   | $ 421,923 |   | $ 1,702,373 |
|   |                                                                                   | Accounts receivable |   |   | 282,939 |   | 285,204 |
|   | Accounts receivable – related parties                                            |   |   |   | 584,945 |   | 478,160 |
|   |                                                                                   | Advances to non-operator, net |   |   |   | 346,996 |   | 243,666 |
|   |                                                                                   | Deferred financing costs |   |   |   | 167,429 |   | 167,429 |
|   |                                                                                   | Derivative – current |   |   |   | 8,457 |   | 43,095 |
|   |                                                                                   | Prepaid expenses |   |   |   |   |   | - |   | 8,000 |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   | Total Current Assets |   |   |   |   |   | 1,812,689 |   | 2,927,927 |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   | PROPERTY AND EQUIPMENT, net of accumulated                            depreciation     |   |   |   |   |
|   |                                                                                   | of $206,207 and $174,311, respectively |   |   |   | 674,894 |   | 664,942 |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   | OIL AND GAS PROPERTIES, USING SUCCESSFUL EFFORTS                            ACCOUNTING |   |   |   |
|   |                                                                                   | Proved properties |   |   |   |   |   | 13,965,727 |   | 10,764,411 |
|   |                                                                                   | Unproved properties |   |   |   |   |   | 279,094 |   | 250,670 |
|   |                                                                                   | Pipelines |   |   |   |   |   |   | 3,225,715 |   | 2,764,797 |
|   |                                                                                   | Accumulated depreciation, depletion and                            amortization |   |   | (1,899,883) |   | (1,801,262) |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   | Net oil and gas properties |   |   |   |   | 15,570,653 |   | 11,978,616 |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   | OTHER ASSETS                                                                           |   |   |   |   |   |   |   |   |   |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   | Deferred financing costs, net of amortization of                            $160,872 and $119,136, respectively | 200,731 |   | 242,467 |
|   |                                                                                   | Derivative – non-current |   |   |   |   |   | 102,242 |   | 135,369 |
|   |                                                                                   | Advances to operator |   |   |   |   |   | 557,715 |   | 557,715 |
|   |                                                                                   | Other assets |   |   |   |   |   | 68,334 |   | 58,334 |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   | Total Other Assets |   |   |   |   |   | 929,022 |   | 993,885 |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   | TOTAL ASSETS |   |   |   |   |   | $ 18,987,258 |   | $ 16,565,370 |
|   |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                   |
|        |                                                                                        |  |  |  |  |  |  |  |  |  |  |

 

 

See            notes to consolidated financial statements

3

 

----

 

| **TRANS ENERGY, INC. AND SUBSIDIARIES**                                |
|------------------------------------------------------------------------|
| **Consolidated Balance Sheets                            (continued)** |
| **(Unaudited)**                                                        |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   | March 31, |   | December 31, |
|                                                                   |   |   |   |   |   |   |   | 2008 |   | 2007 |
|                                                                   |
| LIABILITIES AND STOCKHOLDERS' DEFICIT                                  |
|                                                                   |
| CURRENT LIABILITIES                                                    |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
|                                                                   | Accounts payable,                            trade |   |   |   |   | $ 2,100,166 |   | $ 2,318,852 |
|                                                                   | Accounts payable – related                            party |   |   |   |   | 242,592 |   | 248,364 |
|                                                                   | Accrued expenses |   |   |   |   |   | 649,722 |   | 929,288 |
|                                                                   | Accrued expenses – related                            party |   |   |   |   | 31,000 |   | 31,000 |
|                                                                   | Notes payable |   |   |   |   | 84,543 |   | 86,972 |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
|                                                                   | Total Current                            Liabilities |   |   |   |   | 3,108,023 |   | 3,614,476 |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
| LONG-TERM LIABILITIES                                                  |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
|                                                                   | Notes payable, net of unamortized discount of $710,727                            and $791,070, respectively |   |   |   | 17,381,434 |   | 14,033,528 |
|                                                                   | Asset retirement                            obligations |   |   |   |   | 178,953 |   | 166,895 |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
|                                                                   | Total Long-Term                            Liabilities |   |   |   |   | 17,560,387 |   | 14,200,423 |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
|                                                                   | Total                            Liabilities |   |   |   |   |   | 20,668,410 |   | 17,814,899 |
|                                                                   |   |   |   |   |   |   |   |   |   |   |
| STOCKHOLDERS' DEFICIT                                                  |   |   |   |   |   |   |   |

 

 

|   |                                                                                                                                                                                                                          |   |         |   |         |        |         |        |         |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------------|-------------|--------------|-------------|--------------|--------|
|   | Preferred stock; 10,000,000 shares authorized at $0.001                            par value; -0- shares issued and outstanding                                                                                               |   |         |   | -            |        | -            |
|   | Common stock; 500,000,000 shares authorized at $0.001                            par value; 10,410,065 and 9,530,065

shares issued, and 10,490,065 and 9,529,065 shares                            outstanding, respectively | 10,410 |         | 9,530  |
|   | Additional paid-in                            capital                                                                                                                                                                         |   |         |   |         | 34,898,649  |         | 34,117,443  |
|   | Treasury stock, at cost, 1,000                            shares                                                                                                                                                              |   |         |   |         | (750)       |         | (750)       |
|   | Accumulated                            deficit                                                                                                                                                                                |   |         |   |         |        | (36,589,461) |        | (35,375,752) |
|   |                                                                                                                                                                                                                          |   |         |   |         |        |         |        |         |   |
|   | Total Stockholders'                            Deficit                                                                                                                                                                        |   |         |   |         | (1,681,152) |         | (1,249,529) |
|   |                                                                                                                                                                                                                          |   |         |   |         |        |         |        |         |   |
|   | TOTAL LIABILITIES AND                            STOCKHOLDERS' DEFICIT                                                                                                                                                        |   | $ 18,987,258 |   | $ 16,565,370 |
|   |                                                                                                                                                                                                                          |   |         |   |         |        |         |        |         |   |
|   |

 

See notes            to consolidated financial statements

 

4

 

 

----

 

| **TRANS ENERGY, INC. AND SUBSIDIARIES**   |
|-------------------------------------------|
| **Consolidated Statements of Operations** |
| **(Unaudited)**                           |
|                                      |   |   |   |   |
|                                      |   | For the Three Months Ended |
|                                      |   | March 31, |
|                                      |   | 2008 |   | 2007 |
|                                      |   |   |   |   |
| REVENUES                                  | $ 427,646 |   | $ 285,520 |
|                                      |   |   |   |   |
| COSTS AND EXPENSES                        |   |   |   |
|                                      |   |   |   |   |
|                                      | Production costs | 257,064 |   | 108,934 |
|                                      | Depreciation, depletion, amortization and                            accretion | 151,864 |   | 71,848 |
|                                      | Exploration costs | - |   | 138,750 |
|                                      | Selling, general and administrative | 694,574 |   | 494,306 |
|                                      | Loss on sale of assets | 1,286 |   | - |
|                                      |   |   |   |   |
|                                      | Total Costs and Expenses | 1,104,788 |   | 813,838 |
|                                      |   |   |   |   |
| LOSS FROM OPERATIONS                      | (677,142) |   | (528,318) |
|                                      |   |   |   |   |
| OTHER INCOME (EXPENSES)                   |   |   |   |
|                                      |   |   |   |   |
|                                      | Interest income | 7,391 |   | - |
|                                      | Gain on extinguishment of debt | - |   | 45,783 |
|                                      | Interest expense | (476,193) |   | (95,059) |
|                                      | Loss on derivative instruments | (67,765) |   | - |
|                                      |   |   |   |   |
|                                      | Total Other Income (Expenses) | (536,567) |   | (49,276) |
|                                      |   |   |   |   |
| NET LOSS BEFORE INCOME TAXES              | (1,213,709) |   | (577,594) |
|                                      |   |   |   |   |
| INCOME TAXES                              | - |   | - |
|                                      |   |   |   |   |
| NET LOSS                                  | $ (1,213,709) |   | $ (577,594) |
|                                      |   |   |   |   |
| LOSS PER SHARE - BASIC AND DILUTED        | $ (0.12) |   | $ (0.06) |
|                                      |   |   |   |   |
| BASIC AND DILUTED WEIGHTED AVERAGE        |   |   |   |
| NUMBER OF COMMON SHARES OUTSTANDING       | 10,042,592 |   | 9,450,565 |
|                                      |   |   |   |   |

 

 

See            notes to consolidated financial statements

5

 

----

 

| **TRANS ENERGY, INC. AND SUBSIDIARIES**                                        |
|--------------------------------------------------------------------------------|
| **Consolidated Statement of Stockholders'                            Deficit** |
| **For the Three Months Ended March 31,                            2008**       |
|                                                                           |   |   |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |
|                                                                           |   |   |   | **Common Stock** | **Additional** |   |   |   |
|                                                                           |   |   |   |   |   | **Paid in** | **Treasury** | **Accumulated** |   |
|                                                                           |   |   |   | **Shares** | **Amount** | **Capital** | **Stock** | **Deficit** | **Total** |
| Balance, December 31, 2007                                                     | 9,530,065 | $ 9,530 | $ 34,117,443 | $ (750) | $ (35,375,752) | $ (1,249,529) |
|                                                                           |   |   |   |   |   |   |   |   |   |
| Fair value of options granted                                                  |   |   |   | 39,486 |   |   | 39,486 |
|                                                                           |   |   |   |   |   |   |   |   |   |
| Shares issued for stock compensation payable                                   |   | 630,000 | 630 | 515,970 |   |   | 516,600 |
|                                                                           |   |   |   |   |   |   |   |
| Shares issued for services                                                     |   | 250,000 | 250 | 225,750 |   |   | 226,000 |
|                                                                           |   |   |   |   |   |   |   |   |   |
| Net loss                                                                       |   |   |   |   |   | (1,213,709) | (1,213,709) |
|                                                                           |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2008                                                        |   | 10,410,065 | $ 10,410 | $ 34,898,649 | $ (750) | $ (36,589,461) | $ (1,681,152) |
|                                                                           |   |   |   |   |   |   |   |   |   |
|                                                                                |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

See            notes to consolidated financial statements

6

 

----

 

| **TRANS ENERGY, INC. AND SUBSIDIARIES**   |
|-------------------------------------------|
| **Consolidated Statements of Cash Flows** |
| **(Unaudited)**                           |
|                                      |   |   |   |   |   |   |   | For the Three Months Ended |
|                                      |   |   |   |   |   |   |   | March 31, |
|                                      |   |   |   |   |   |   |   | 2008 |   | 2007 |
| CASH FLOWS FROM OPERATING ACTIVITIES:     |   |   |   |   |   |   |
|                                      | Net loss |   |   |   |   |   |   | $ (1,213,709) |   | $ (577,594) |
|                                      | Adjustments to reconcile net loss |   |   |   |   |   |   |   |
|                                      | to net cash from operating activities: |   |   |   |   |   |   |
|                                      | Depreciation, depletion, amortization and                            accretion |   |   |   | 151,864 |   | 71,848 |
|                                      | Amortization of financing cost and debt                            discount |   |   |   |   | 122,079 |   | - |
|                                      | Share-based compensation |   |   |   |   | 265,486 |   | 130,768 |
|                                      | Gain on debt extinguishment |   |   |   |   | - |   | (45,783) |
|                                      | Loss on sale of assets |   |   |   |   | 1,286 |   | - |
|                                      | Unrealized loss on derivative contract |   |   |   | 67,765 |   | - |
|                                      | Changes in operating assets and liabilities: |   |   |   |   |   |   |
|                                      | Accounts receivable |   |   |   |   | 2,264 |   | 40,877 |
|                                      | Accounts receivable – related parties |   |   |   | (106,785) |   | - |
|                                      | Advances to non-operator, net |   |   |   | (103,330) |   | - |
|                                      | Prepaid and other assets |   |   |   |   |   | 8,000 |   | (44,375) |
|                                      | Accounts payable and accrued expenses |   |   |   |   |   | 18,347 |   | (79,806) |
|                                      | Accounts payable – related party |   |   |   |   | (5,772) |   | (8,045) |
|                                      | Net cash used in operating activities |   |   |   | (792,505) |   | (512,110) |
|                                      |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:     |   |   |   |   |   |   |
|                                      | Proceeds from sale of assets |   |   |   | 5,000 |   | 667,001 |
|                                      | Expenditures for oil and gas properties |   |   |   | (3,708,230) |   | (164,226) |
|                                      | Expenditures for property and equipment |   |   |   | (49,850) |   | (21,204) |
|                                      | Net cash (used) provided by investing                            activities |   |   |   | (3,753,080) |   | 481,571 |
|                                      |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:     |   |   |   |   |   |   |
|                                      | Proceeds from notes payable, net of financing costs and                            cash |   |   |   |   |
|                                      | discount of $0 and $100, respectively |   | 3,286,852 |   | 374,280 |
|                                      | Payments on notes payable |   |   |   |   | (21,717) |   | (27,896) |
|                                      | Payments on related party debt |   |   |   |   | - |   | (272,755) |
|                                      | Net cash provided by financing activities |   |   |   | 3,265,135 |   | 73,629 |
|                                      |   |   |   |   |   |   |   |   |   |   |
| NET CHANGE IN CASH                        |   |   |   |   |   | (1,280,450) |   | 43,090 |
|                                      |   |   |   |   |   |   |   |   |   |   |
| CASH, BEGINNING OF PERIOD                 |   |   |   |   | 1,702,373 |   | 208,815 |
|                                      |   |   |   |   |   |   |   |   |   |   |
| CASH, END OF PERIOD                       |   |   |   |   |   | $ 421,923 |   | $ 251,905 |

 

| SUPPLEMENTAL DISCLOSURES FOR CASH FLOW                            INFORMATION: |                                                                           |   |   |
|--------------------------------------------------------------------------------|--------------------------------------------------------------------------------|--------|--------|
|                                                                           | Cash paid for interest                                                         |   |   |   |   |   |   | $ 122,749 |   | $ 95,059 |
|                                                                           | Cash paid for income taxes                                                     |   |   |   |   |   | $ - |   | $ - |
|                                                                           |                                                                           |   |   |   |   |   |   |   |   |
| Non-cash investing and financing activities:                                   |                                                                           |   |   |   |   |   |   |   |
|                                                                           | Increase in asset retirement obligation                                        |   |   |   |   |   | $ 6,711 |   | $ - |
|                                                                           | Revision of asset retirement obligation                                        |   |   |   |   |   | $ 14,282 |   | $ - |
|                                                                           | Common shares issued for stock compensation                            payable |   |   |   |   |   | $ 516,600 |   | $ - |

 

 

See            notes to consolidated financial statements

7

 

----

 

**TRANS ENERGY, INC. AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements**

**(Unaudited)**

 

**NOTE 1 – BASIS OF FINANCIAL STATEMENT            PRESENTATION**

 

The accompanying unaudited interim consolidated financial statements            have been prepared by Trans Energy, Inc. pursuant to the rules and regulations of the            Securities and Exchange Commission. Certain information and footnote disclosures            normally included in financial statements prepared in accordance with accounting            principles generally accepted in the United States of America have been omitted in            accordance with such rules and regulations. The information furnished in the interim            consolidated financial statements includes normal recurring adjustments and reflects            all adjustments, which, in the opinion of management, are necessary for a fair            presentation of such financial statements. Although management believes the disclosures            and information presented are adequate to make the information not misleading, it is            suggested that these interim consolidated financial statements be read in conjunction            with Trans Energy’s most recent audited consolidated financial statements and            notes thereto included in its December 31, 2007 Annual Report on Form 10-KSB. Operating            results for the three months ended March 31, 2008 are not necessarily indicative of the            results that may be expected for the year ending December 31, 2008.

 

Certain reclassifications have been made to amounts in prior periods to            conform with the current period presentation.

 

**NOTE 2 – GOING CONCERN**

 

Trans Energy’s unaudited interim consolidated financial statements            are prepared using accounting principles generally accepted in the United States of            America applicable to a going concern, which contemplates the realization of assets and            liquidation of liabilities in the normal course of business. Trans Energy has incurred            cumulative operating losses through March 31, 2008 of $36,589,461 and had a working            capital deficit of $1,295,334 at March 31, 2008. Revenues have not been sufficient to            cover its operating costs and to allow it to continue as a going concern. The potential            proceeds from the sale of common stock, sale of assets, other contemplated debt and            equity financings, and increases in operating revenues from new development and            business acquisitions would enable Trans Energy to continue as a going concern. There            can be no assurance that Trans Energy can or will be able to complete any debt or            equity financing. Trans Energy’s consolidated financial statements do not include            any adjustments that might result from the outcome of this uncertainty.

 

**NOTE            3 – OIL AND GAS PROPERTIES**

 

During the three months ended March 31, 2008, we drilled thirteen new            wells in Wetzel and Marion Counties, West Virginia to various formations, including the            Gordon, Bayard and Fourth Sand, of which we own a 100% working interest in each            well.

 

On February 23, 2008, Trans Energy completed the drilling of its second            joint venture well with Republic Partners in Wetzel County, West Virginia to an            approximate total depth of 7,500 feet, with the primary target being the Marcellus            Shale. Republic Partners elected to obtain a 50% paid working interest in this well as            permitted by the terms in the joint venture contract. This well, in addition to the            first joint venture well of which drilling was completed on November 14, 2007 to an            approximate total depth of 7,500 feet with the primary target also being the Marcellus            Shale, are expected by management to be completed and begin flow in June            2008.

             

8

 

----

 

**NOTE            4 – DERIVATIVE FINANCIAL INSTRUMENTS**

 

Trans Energy entered into a derivative contract to provide a measure of            stability in the cash flows associated with Trans Energy’s gas production and to            manage exposure to commodity prices. None of the derivative contracts Trans Energy            entered into have been designated as cash flow hedges or fair value hedges. Trans            Energy recorded a total unrealized loss of $67,765 related to its derivative            instruments for the three months ended March 31, 2008.

 

***Natural Gas Derivatives***

 

Trans Energy entered into participating commodity put options on natural            gas whereby Trans Energy receives a floor price. The following table shows the monthly            volumes and the floor price.

             

|           |          |        | Average |
|----------------|---------------|-------------|---------|
| Start          | End           | Volume      | Floor   |
| Month          | Month         | MMBTU/Month | $/MMBTU |
| July ‘07 | Dec ‘07 | 8,241       | $ 7.350 |
| Jan ‘08  | Dec ‘08 | 6,915       | $ 7.350 |
| Jan ‘09  | Nov ‘09 | 6,370       | $ 7.350 |
| Jan ‘10  | Dec ‘10 | 5,560       | $ 7.350 |
| Jan ‘11  | Dec ‘11 | 5,244       | $ 7.350 |

 

**NOTE            5 – NOTES PAYABLE**

 

On June 22, 2007 Trans Energy finalized a financing agreement with CIT            Capital USA Inc. Under the terms of the agreement, CIT will lend up to $18,000,000 to            Trans Energy in the form of a senior secured revolving credit facility. Trans Energy            has the ability, at additional cost, to increase the credit facility to $30,000,000 in            the future, with increases in its reserves. For the three months ended March 31, 2008,            Trans Energy borrowed an additional $3,286,852 from CIT which increased the total            outstanding credit balance to $18,000,000, leaving no unused available credit            facility.

             

**NOTE 6 – EQUITY**

 

During the three months ended March 31, 2008, Trans Energy issued            630,000 shares of common stock as settlement of the December 31, 2007 stock            compensation payable of $516,600 related to the 2007 Long-Term Incentive and Bonus            Program.

 

On January 1, 2008, Trans Energy granted 450,000 common stock options to            an officer and an employee as part of their two year employment agreements. The options            vest quarterly over two years and have a five year term. The stock options were granted            at an exercise price of $0.80 per common stock, which was equal to the fair market            value of the common stock at the date of grant and were valued at $315,886 using the            Black Scholes valuation model. The options are being amortized to share-based            compensation expense quarterly over the vesting period, for which $39,486 of            share-based compensation expense was recorded during the three months ended March 31,            2008. The following are the assumptions made in computing the option fair            value:

 

| Average risk-free interest rate |   | 3.3%    |
|---------------------------------|--------|---------|
| Dividend yield                  |   | 0%      |
| Expected term                   |   | 5 years |
| Average expected volatility     |   | 126.19% |

 

On January 1, 2008, Trans Energy granted 250,000 common shares to one            officer under the terms of his employment agreement. The 250,000 shares vested            immediately and were valued at $200,000 using the fair market value of the common stock            at the date of grant. The $200,000 was recorded in the current period as share-based            compensation expense.

 

9

 

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On January 1, 2008, Trans Energy granted 260,000 shares of common stock            to three employees under employment agreements. The 260,000 shares are not performance            based and vest quarterly over two years, subject to ongoing employment. These shares            were valued at $208,000 using the fair market value of the common stock at the date of            grant and will be amortized to compensation expense quarterly over two years. During            the three months ended March 31, 2008, we recorded $26,000 of share-based compensation            related to these shares.

 

As a result of the above stock transactions, Trans Energy recorded total            share-based compensation expense of $265,486 for the three months ended March 31,            2008.

 

**NOTE 7 – BUSINESS SEGMENTS**

 

Trans Energy’s principal operations consist of oil and gas sales            with Trans Energy and Prima Oil Company, and pipeline transmission with Ritchie County            Gathering Systems and Tyler Construction Company.

 

Certain financial information concerning Trans Energy’s operations            in different segments is as follows:

 

|                                        | For the Three Months EndedMarch 31, | Oil and GasSales | PipelineTransmission | Corporate | Total       |
|---------------------------------------------|-------------------------------------|------------------|----------------------|-----------|-------------|
|                                        |                                |             |                 |      |        |
| Revenue                                     | 2008                                | $ 319,504        | $ 103,487            | $ 4,655   | $ 427,646   |
|                                        | 2007                                | 215,366          | 70,154               | --        | 285,520     |
|                                        |                                |             |                 |      |        |
| Income (loss) from                          | 2008                                | 46,665           | (53,485)             | (670,322) | (677,142)   |
| operations                                  | 2007                                | (106,063)        | 62,989               | (485,244) | (528,318)   |
|                                        |                                |             |                 |      |        |
| Interest expense                            | 2008                                | 476,193          | --                   | --        | 476,193     |
|                                        | 2007                                | 88,472           | 6,587                | --        | 95,059      |
|                                        |                                |             |                 |      |        |
| Depreciation, depletion,                    | 2008                                | 133,504          | 18,360               | --        | 151,864     |
| amortization and accretion                  | 2007                                | 65,088           | 6,760                | --        | 71,848      |
|                                        |                                |             |                 |      |        |
| Property and equipment                      | 2008                                | 3,322,162        | 435,918              | --        | 3,758,080   |
| acquisitions, including                     | 2007                                | 181,930          | 3,500                | --        | 185,430     |
| oil and gas properties                      |                                |             |                 |      |        |
|                                        |                                |             |                 |
| Total assets, net of intercompany accounts: |                                |             |                 |
| March 31, 2008                              |                                | $16,367,558      | $ 2,619,700          | $ --      | $18,987,258 |
| December 31, 2007                           |                                | 14,502,036       | 2,063,334            | --        | 16,565,370  |

             

 

10

 

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| **Item 2.** | **Management’s Discussion and Analysis or Plan of                            Operation** |
|-------------|------------------------------------------------------------------------------------------------|

 

***Results of Operations***

 

Three months ended March 31, 2008 compared to March 31, 2007

 

The following table sets forth the percentage relationship to total            revenues of principal items contained in our unaudited consolidated statements of            operations for the three months ended March 31, 2008 and 2007. It should be noted that            percentages discussed throughout this analysis are stated on an approximate            basis.

 

|   | Three Months Ended |
|--------|--------------------|

|   | March 31, |
|--------|-----------|

|   | 2008___________2007 |
|--------|---------------------|

 

| Total revenues | 100% | 100% |
|----------------|------|------|

| Total costs and expenses | (259%) | (286%) |
|--------------------------|--------|--------|

| Income (loss) from operations | (159%) | (186%) |
|-------------------------------|--------|--------|

| Other income (expense) | (126%) | (18%) |
|------------------------|--------|-------|

| Net income (loss) | (284%) | (204%) |
|-------------------|--------|--------|

 

Total revenues of $427,646 for the three months ended March 31, 2008            increased 50% compared to $285,520 for the three months ended March 31, 2007, primarily            due to new drilling, acquisitions, and increased production from the efforts of the            work over program. We focused our efforts during the first quarter of 2008 on the            implementation of our drilling program in Wetzel County and on a workover program on            our wells located in Wetzel and Marion Counties, West Virginia and the implementation            of our drilling program. We expect  production increases from the drilling            program, the workover program and from new pipeline connections throughout            2008.

 

Production costs increased 132% in the three months ended March 31, 2008            as compared to the same period for 2007, primarily due to workovers and expenses            associated with our field production.

 

Depreciation, depletion, amortization and accretion expense increased            122% in the three months ended March 31, 2008 as compared to the same period for 2007,            due to the increase in production and additions of oil and gas properties.

 

Interest expense increased 384% in the three months ended March 31, 2008            as compared to the same period for 2007, primarily due to increased borrowings for our            drilling program.

 

Our loss from operations for the first quarter of 2008 was $677,142            compared to a loss from operations of $528,318 for the first quarter of 2007. This            increase is primarily due to an increase in selling, general and administrative            expenses. This increase in selling, general and administrative expenses is related to            the value of shares issued as part of our Long-term Incentive Bonus Program for our            officers, directors, and senior managers during the quarter and employee stock            compensation under employment agreements.

 

***Liquidity and Capital Resources***

 

Historically, we have satisfied our working capital needs with operating            revenues and from borrowed funds. At March 31, 2008, we had a working capital deficit            of $1,295,334 compared to a deficit of $686,549 at December 31, 2007. This increase in            working capital deficit is primarily attributed to the increased efforts of the            drilling program and the completion of the pipeline construction.

 

11

 

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During the first three months of 2008, net cash used by operating            activities was $792,505 compared to $512,110 for the same period of 2007. This            increased negative cash flow from operating activities is primarily attributable to an            increase in depreciation, depletion, and amortization, as well as an increase in            share-based compensation and unrealized losses on our derivative contract.

 

We expect our cash flow provided by operations for 2008 to increase            because of higher projected production from the drilling program, workovers and            acquisitions, combined with oil and gas prices consistent with 2007 and steady            operating, general and administrative, interest and financing costs per            Mcfe.

 

Excluding the effects of significant unforeseen expenses or other            income, our cash flow from operations fluctuates primarily because of variations in oil            and gas production and prices, or changes in working capital accounts and actual well            performance. In addition, our oil and gas production may be curtailed due to factors            beyond our control, such as downstream activities on major pipelines causing us to            shut-in production for various lengths of time.

 

During the first three months of 2008, net cash used by investing            activities was $3,753,080 compared to net cash provided of $481,571 in 2007. We used            $3,708,230 for the purchase of oil and gas properties and $49,850 to purchase property            and equipment for the three month period ended March 31, 2008 compared to $164,226 for            the purchase of oil and gas properties and $21,204 to purchase property and equipment            for the three month period ended March 31, 2007.

 

During the first three months of 2008, net cash provided by financing            activities was $3,265,135 compared to $73,629 in the same period of 2007. In 2007, we            borrowed $3,286,852, net of financing cost and cash discount, and repaid $21,717 in            notes payable.

 

We anticipate meeting our working capital needs with revenues from our            ongoing operations, particularly from our wells in Wetzel, Marion and Doddridge            Counties, West Virginia and new transportation of gas for third parties in our 6-inch            pipeline located in West Virginia. In the event revenues are not sufficient to meet our            working capital needs, we will explore the possibility of additional funding from            either the sale of debt or equity securities or through an increase in the available            credit facility with CIT Capital, as described in detail in Note 5 - Notes            Payable. There can be no assurance such funding will be available to us or, if            available, it will be on acceptable or favorable terms.

 

Because of our continued losses, working capital deficit, and need for            additional funding, there exists substantial doubt about our ability to continue as a            going concern. Historically, our revenues have not been sufficient to cover operating            costs. We will need to rely on increased operating revenues from new development or            proceeds from debt or equity financings to allow us to continue as a going concern.            There can be no assurance that we can or will be able to complete any debt or equity            financing.

 

***Inflation***

 

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

 

***Recent Events***

 

During the three months ended March 31, 2008, we drilled thirteen new            wells in Wetzel and Marion Counties, West Virginia to various formations, including the            Gordon, Bayard and Fourth Sand, of which we own a 100% working interest in each            well.

 

On February 23, 2008, Trans Energy completed the drilling of its second            joint venture well with Republic Partners in Wetzel County, West Virginia to an            approximate total depth of 7,500 feet, with the primary target being the Marcellus            Shale. Republic Partners elected to obtain a 50% paid working interest in this well as            permitted by the terms in the joint venture contract. This well, in addition to            the

 

12

 

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first joint venture well of which drilling was completed on November 14,            2007 to an approximate total depth of 7,500 feet with the primary target also being the            Marcellus Shale, are expected to be completed and begin flow in June 2008.

 

***Forward-looking and Cautionary Statements***

 

This report includes “forward-looking statements” within the            meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities            Exchange Act of 1934. These forward-looking statements may relate to such matters as            anticipated financial performance, future revenues or earnings, business prospects,            projected ventures, new products and services, anticipated market performance and            similar matters. When used in this report, the words “may,”            “will,” “expect,” “anticipate,”            “continue,” “estimate,” “project,”            “intend,” and similar expressions are intended to identify forward-looking            statements regarding events, conditions, and financial trends that may affect our            future plans of operations, business strategy, operating results, and our future plans            of operations, business strategy, operating results, and financial position. We caution            readers that a variety of factors could cause our actual results to differ materially            from the anticipated results or other matters expressed in forward-looking statements.            These risks and uncertainties, many of which are beyond our control,            include:

 

|   | **•** | the sufficiency of existing capital resources and our                            ability to raise additional capital to fund cash requirements for                            future operations; |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

|   | **•** | uncertainties involved in the rate of growth of our                            business and acceptance of any products or services; |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------|

             

|   | **•** | success of our drilling activities; |
|--------|------------|-------------------------------------|

 

|   | **•** | volatility of the stock market, particularly within the                            energy sector; and |
|--------|------------|-------------------------------------------------------------------------------------------------------|

 

|   | **•** | general economic conditions. |
|--------|------------|------------------------------|

 

Although we believe the expectations reflected in these forward-looking            statements are reasonable, such expectations cannot guarantee future results, levels of            activity, performance or achievements.

 

| **Item 3.** | **Quantitative and Qualitative Disclosures About Market                            Risk** |
|-------------|-------------------------------------------------------------------------------------------|

 

Trans Energy is exposed to market risk, including adverse changes in            commodity prices. Trans Energy produces and sells natural gas and crude oil. As a            result, Trans Energy’s financial results can be significantly affected if these            commodity prices fluctuate widely in response to changing market forces.

 

Trans Energy uses derivative contracts to minimize the risk of commodity            prices. These contracts are entered into with a major financial institution. These            derivative contracts are explained in detail in Note 5 – Derivative Financial            Instruments.

 

| **Item 4.** | **Controls and Procedures** |
|-------------|-----------------------------|

 

We maintain disclosure controls and procedures that are designed to be            effective in providing reasonable assurance that information required to be disclosed            in our reports under the Securities Exchange Act of 1934 is recorded, processed,            summarized and reported within the time periods specified in the rules and forms of the            SEC, and that such information is accumulated and communicated to our management to            allow timely decisions regarding required disclosure.

 

13

 

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In designing and evaluating disclosure controls and procedures,            management recognizes that any controls and procedures, no matter how well designed and            operated, can provide only reasonable, not absolute assurance of achieving the desired            objectives. Also, the design of a control system must reflect the fact that there are            resource constraints and the benefits of controls must be considered relative to their            costs. Because of the inherent limitations in all control systems, no evaluation of            controls can provide absolute assurance that all control issues and instances of fraud,            if any, have been detected. These inherent limitations include the realities that            judgments in decision-making can be faulty and that breakdowns can occur because of            simple error or mistake. The design of any system of controls is based, in part, upon            certain assumptions about the likelihood of future events and there can be no assurance            that any design will succeed in achieving its stated goals under all potential future            conditions.

 

As of the end of the period covered by this report, we carried out an            evaluation, under the supervision and with the participation of management, including            our chief executive officer and principal financial officer, of the effectiveness of            the design and operation of our disclosure controls and procedures as defined in Rules            13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, management            concluded that our disclosure controls and procedures were not effective to cause the            information required to be disclosed by us in reports that we file or submit under the            Exchange Act is recorded, processed, summarized and reported within the time periods            prescribed by SEC, and that such information is accumulated and communicated to            management, including our chief executive officer and principal financial officer, as            appropriate, to allow timely decisions regarding required disclosure.

 

In our December 31, 2007 10-KSB, we disclosed certain material            weaknesses in our internal control over financial reporting. We also disclosed certain            remediation measures that we planned to implement during fiscal year 2008 to address            those material weaknesses.

 

The Company's remediation plans included complete implementation and            execution of controls and procedures identified in management's assessment of the            entity level, financial reporting and other process level controls. As of March 31,            2008, some of these controls have been implemented, however these controls have not            been executed a sufficient number of times for management to fully assess their            effectiveness. Management will continue its efforts to implement and assess all of            these measures and will monitor and evaluate them for effectiveness.

 

There was no change in our internal controls over financial reporting            identified in connection with the requisite evaluation that occurred during our last            fiscal quarter that has materially affected, or is reasonably likely to materially            affect, our internal control over financial reporting.

 

**PART II**

 

**Item 1. Legal Proceedings**

 

Information concerning certain material pending legal proceedings to            which we are a party, or to which any of our property is subject, is set forth            below:

 

On September 22, 2000, Tioga Lumber Company obtained a judgment of            $43,300 plus interest in the Circuit Court of Pleasants County, West Virginia, against            Tyler construction Company for breach of contract. On February 28, 2002, we reached a            negotiated payment schedule with Tioga and made the initial payment. We believe that we            have satisfied the balance owed to Tioga of $26,233, although the judgment has not yet            been released. We are proceeding to secure the release of the judgment.

 

We may be engaged in various other lawsuits and claims, either as            plaintiff or defendant, in the normal course of business. In the opinion of management,            based upon advice of counsel, the ultimate outcome of these lawsuits will not have a            material impact on our financial position or results of operations.

 

14

 

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| **Item 2.** | **Unregistered Sales of Equity Securities and Use of                            Proceeds** |
|-------------|--------------------------------------------------------------------------------------------|

 

None.

 

| **Item 3.** | **Defaults Upon Senior Securities** |
|-------------|-------------------------------------|

 

None.

 

| **Item 4.** | **Submission of Matters to a Vote of Security                            Holders** |
|-------------|------------------------------------------------------------------------------------|

 

No            matters were submitted to a vote of our securities holders during the first quarter            ended March 31, 2008.

 

| **Item 5.** | **Other Information** |
|-------------|-----------------------|

 

None.

 

| **Item 6.** | **Exhibits** |
|-------------|--------------|

 

|   | Exhibit 31.1 | Certification of C.E.O. Pursuant to Section 302 of the                            Sarbanes-Oxley Act of |
|--------|--------------|---------------------------------------------------------------------------------------------------------|

|   | 2002. |
|--------|-------|

 

Exhibit 31.2  Certification of Principal Accounting Officer Pursuant to Section 302 of            theSarbanes-Oxley Act of 2002.

 

Exhibit 32.1  Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as Adopted            Pursuantto Section 906 of the Sarbanes-Oxley Act of            2002.

 

Exhibit 32.2 Certification of Principal Accounting Officer Pursuant to 18 U.S.C.            Section1350, as Adopted Pursuant to Section 906 of the            Sarbanes-Oxley Act of 2002.

 

SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of            1934, the Registrant caused this report to be signed on its behalf by the undersigned,            thereunto duly authorized.

 

|   | TRANS ENERGY, INC. |
|--------|--------------------|

 

| Date: May 15 ,                            2008 | By/S/ JAMES K.                            ABCOUWER______ |
|-----------------------------------------------------|----------------------------------------------------------|

|   | JAMES K. ABCOUWER |
|--------|-------------------|

|   | Chief Executive Officer and Director |
|--------|--------------------------------------|

 

 

| Date: May 15, 2008 | By/S/ LISA A.                            CORBITT___________ |
|--------------------|-------------------------------------------------------------|

|   | LISA A. CORBITT |
|--------|-----------------|

|   | Controller, Principal Financial Officer |
|--------|-----------------------------------------|

|   | (Principal Accounting Officer) |
|--------|--------------------------------|