Stockholders' Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 11 - STOCKHOLDERS’ EQUITY

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

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

On April 8, 2009, Trans Energy granted 375,000 common stock options to four key employees under the long term incentive bonus program. These options are being amortized to share-based compensation expense quarterly over the vesting period, for which $70,534 of the share-based compensation expense was recorded during the three month period ended March 31, 2010. As of March 31, 2010, these options have been fully expensed. 50,000 of the options were exercised in June 2011.

On May 14, 2009, Trans Energy granted 50,000 shares of common stock and 50,000 common stock options to one key employee under the long term incentive bonus program. The 50,000 shares are not performance based and vest quarterly over one year, subject to ongoing employment. These shares were valued at $57,500 using the fair market value of the common stock at the date of grant and will be amortized to compensation expense quarterly over one year. During the year ended December 31, 2010, Trans Energy recorded $14,375 of share-based compensation related to these shares. As of March 31, 2010, this award has been fully expensed. These options are being amortized to share-based compensation expense quarterly over the vesting period, for which $9,405 of share-based compensation expense was recorded during the year ended December 31, 2010. These options have been fully expensed in 2010.

On October 6, 2009, our Board of Directors approved a plan to satisfy an immediate cash need of $1,250,000 to settle a disputed invoice for drilling services. The invoice had been held without payment for several months due to a dispute over its amount. Management negotiated a settlement at what it considered a reasonable level and less than the amount previously accrued on October 8, 2009. In order to raise the necessary funds to immediately settle the dispute, the company sold for $321,192 an interest in five shallow wells, which management determined to be non-strategic to the company, to Sancho Oil & Gas Corporation that is principally owned by Loren E. Bagley, a director. In addition, three members of the Board of Directors extended 60-day bridge loans to the company in the aggregate amount of $928,858, evidenced by three secured convertible promissory notes.

The promissory notes, payable on demand, were issued to James K. Abcouwer ($350,000), Robert L. Richards ($100,000), and Loren E. Bagley in the name of Sancho Oil & Gas ($478,858). Each note was secured by shares of the Company’s common stock equal to the value of the principle of the note based on the price of $0.65 per share. Interest on each note would be paid at the rate of 1.5% per month if the note were not paid within five days of demand. Each note is also convertible into shares of the Company’s common stock, commencing 30 days after issuance, entitling the holder to convert the note into shares of the Company’s common stock at the conversion price of $0.65 per share, based on the closing price of $0.60 for the Company’s shares in the public market on the date the notes were issued. As provided by the terms of the promissory notes, Mr. Abcouwer converted his note for 538,462 shares of common stock on December 30, 2009, Mr. Richards converted his note for 153,846 shares on January 29, 2010 and Sancho Oil & Gas converted its note for 736,705 shares on February 16, 2010.

On June 23, 2010, Trans Energy issued 125,000 shares to one officer under an employment agreement. These shares vested immediately and were valued at $343,750.

On June 23, 2010, Trans Energy granted 125,000 common stock options to one officer under an employment agreement. These options vested immediately and were valued at $237,488. The stock options were granted at an exercise price of $2.75 per common share, which was equal to the fair market value of the common stock at the date of the grant. The following are the assumptions made in computing the option fair value:

Average risk-free interest rate	1.0%
Dividend yield	0%
Expected term	5 years
Average expected volatility	89.46%

In December 2010, Trans Energy issued 8,500 shares of common stock for employee bonuses valued at $24,480. These shares vested immediately and were expensed in 2010.

In December 2010, Trans Energy issued 50,000 shares of common stock to outside board members valued at $49,000. These shares vested immediately and were expensed in 2010.

In December 2010, Trans Energy granted 136,500 shares of common stock to nine employees under the long-term incentive bonus program. The 136,500 shares are not performance based and vest semi-annually over three years, subject to ongoing employment. These shares were valued at $409,500 using the fair market value of the common stock at the date of grant and will be amortized to compensation expense semi-annually over three years. During 2011 and 2010, we recorded $100,500 and $68,250, respectively, of share-based compensation expense related to these shares.

In December 2010, Trans Energy granted 368,000 common stock options to nine employees and one outside board member. These options vest semi-annually over three years and have a five year term. These stock options were granted at an exercise price of $3.00 per common share, which was equal to the fair market value of the common stock at the date of grant and were valued using the Black Scholes valuation model. The options are being amortized to share-based compensation expense semi-annually over the vesting period. During 2011 and 2010, we recorded $228,494 and $126,635, respectively, of share-based compensation expense related to these options. 36,000 of the options were cancelled in June 2011. The following are the assumptions made in computing the option fair value:

Average risk-free interest rate	1.0%
Dividend yield	0%
Expected term	5 years
Average expected volatility	89.96%

In May 2011, Trans Energy granted 420,000 shares of stock to eight employees and three outside board members under the long-term incentive bonus program. The 420,000 shares are not performance based and vest semi-annually over a three year period, subject to ongoing employment. These shares were valued at $1,125,600 using fair market value of the common stock at the date of grant and will be amortized to compensation expense semi-annually over three years. During 2011, we recorded $375,200 of share-based compensation expense related to these shares.

In May 2011, Trans Energy granted 378,000 common stock options to eight employees and four outside board members. These options vest semi-annually over three years and have a five year term. These stock options were granted at an exercise price of $2.68 per common share, which was equal to the fair market value of the common stock at the date of grant and were valued using the Black Scholes valuation model. The options are being amortized to share-based compensation expense semi-annually over the vesting period. During 2011, we recorded $217,324 of share-based compensation expense related to these options. The following are the assumptions made in computing the option fair value:

Average risk-free interest rate	1.72%
Dividend yield	0%
Expected term	5 years
Average expected volatility	89.96%

In December, 2011, Trans Energy granted 12,000 shares of common stock and 36,000 common stock options to an employee with the same vesting and terms as the May 2011 issuances. These shares were valued at $5,360 using fair market value of common stock at the date of grant. The stock options were granted at an exercise price of $2.68 per common share and were valued using the stock holders valuation model and similar assumptions as the May 2011 options. During 2011, $5,360 and $10,349 were expensed for these common shares and stock options, respectively. Another employee purchased 10,000 shares of common stock at $2 per common share. The discount of $2,100 was rewarded as stock-based compensation.

Also in December 2011, Trans Energy granted 9,000 shares of stock to 1 employee, these shares were valued at $23,940 using the fair market value of the common stock at the date of grant, which was all included in 2011.

In August 2006, Trans Energy granted 800,000 common stock options to two employees with an expiration date of August 16, 2011. Trans Energy has extended those options to August 16, 2012. Trans Energy recorded $11,831 of additional share-based compensation during 2011 related to the one year extension. The following are the assumptions made in computing the option fair value:

Average risk-free interest rate	5.0%
Dividend yield	0%
Expected term	1 year
Average expected volatility	68.35%

As a result of the above stock and option transactions, Trans Energy recorded total share-based compensation of $975,099 and $943,916 for the twelve months ended December 31, 2011 and 2010, respectively.

A summary of the status of the options granted under various agreements at December 31, 2011 and 2010, and changes during the years then ended is presented below:

	December 31, 2011					December 31, 2010
	Weighted					Weighted
	Average Exercise					Average Exercise
	Shares			Price		Shares			Price
Outstanding at beginning of year		2,318,000			1.23		2,378,324		$	1.03
Granted		414,000			2.68		493,000			2.94
Exercised		(50,000	)		0.98		—			—
Forfeited		(411,000	)		1.06		—			—
Expired		(150,000	)		0.65		(533,324	)		1.95
Outstanding at end of year		2,121,000			1.59		2,318,000		$	1.23

A summary of the status of the options granted under various agreements at December 31, 2011 is presented below:

		Options Outstanding			Options Exercisable
		Weighted-	Weighted-		Weighted-
		Average	Average		Average
Range of	Number	Remaining	Exercise	Number	Exercise
Exercise Prices	Outstanding	Contractual Life	Price	Exercisable	Price
$3.00	332,000	3.77 years	$3.00	166,000	$3.00
$2.75	125,000	3.48 years	$2.75	125,000	$2.75
$0.98	250,000	2.27 years	$0.98	200,000	$0.98
$0.82	200,000	1.01 years	$0.82	200,000	$0.82

$0.65	800,000	0.62 years	$0.65	800,000	$	0.65
$2.68	414,000	4.50 years	$2.68	132,000	$	2.86
	2,121,000			1,673,000