Stockholders' Equity

9 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 7 — STOCKHOLDERS’ EQUITY

On April 8, 2009, Trans Energy granted 375,000 common stock options to four key employees under the long term incentive bonus program. As of March 31, 2010, these options have been fully expensed. In June 2011, 50,000 of these options were exercised.

On May 14, 2009, Trans Energy granted 50,000 shares of common stock to one key employee under the long term incentive bonus program. As of March 31, 2010, this award has been fully expensed. In addition, Trans Energy also granted 50,000 common stock option to this employee under the long term incentive bonus program. These options have been fully expenses as of March 31, 2010.

In December 2010, Trans Energy granted 136,500 shares of 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 fair market value of the common stock at the date of grant and will be amortized to compensation expense over three years. During the nine months ended September 30, 2012 and 2011, we recorded $61,875 and $75,375, respectively, of share based compensation related to these shares. During the three months ended September 30, 2012 and 2011, we recorded $11,625 and $25,125, respectively of share based compensation related to these shares.

In December 2010, Trans Energy granted 368,000 common stock options to eight 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 over the vesting period. During the nine months ended September 30, 2012 and 2011, we recorded $144,459 and $159,009 of share based compensation related to these options, and for the three months ended September 30, 2012 and 2011, we recorded $30,213 and $57,123 related to these options. 36,000 of the options were cancelled in June 2011.

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 over three years. During the nine months ended September 30, 2012 and 2011, we recorded $247,900 and $281,400 of share-based compensation expense related to these shares, and for the three months ended September 30, 2012 and 2011, we expensed $60,300 and $93,800, respectively.

In May 2011, Trans Energy also granted 378,000 common stock options to eight employees and four outside board members. These options vest semi-annually over five 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 over the vesting period. During the nine months ended September 30, 2012 and 2011, we recorded $145,745 and $97,796, respectively, of share-based compensation expense related to these options. During the three months ended September 30, 2012 and 2011, we recorded $37,083 and $32,599, respectively, of share-based compensation expense related to these options. As of August, 2012, 5,000 of these options were cancelled.

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 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 Black Scholes valuation model and similar assumptions as the May 2011 options. During the nine months ended September 30, 2012, we recorded $8,040 and $15,523 of share based compensation for these common shares and stock options, respectively. During the three months ended September 30, 2012, we recorded $2,680 and $5,174 of share-based compensation for these common shares and stock options, respectively.

Effective April 26, 2012, Trans Energy granted 804,000 common stock options to nine employees and four outside board members. These options vest semi-annually over five years and have a five year term. The stock options were granted at an exercise price of $2.30 per common share which was equal to the fair market value of the common stock at the date of the grant and were valued using the Black Scholes valuation model. The model uses key estimates such as estimated useful lives of the options and the estimated volatility of our stock price. The options are being amortized to share-based compensation expense over the vesting period. For the nine and three months ended September 30, 2012, we have recorded $267,300 and $149,820, respectively, of share-based compensation expense related to these options. 15,000 of the options were cancelled in August 2012.

The following are 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	77.09	%

Effective April 26, 2012, Trans Energy granted 60,000 shares of stock to three employees under the long-term incentive bonus. The 60,000 shares are not performance based and vest semi-annually over a three year period, subject to ongoing employment. These shares were valued at $138,000 using fair market value of the common stock at the date of grant and will be amortized to compensation expense over three years. During the third quarter of 2012, we recorded $11,500 of share-based compensation expense related to these shares. For the nine months ended September 30, 2012, we recorded $34,500 related to these shares.

In June 2012, Trans Energy, due to a severance agreement, granted 150,000 common stock options. These options vested immediately. These options were granted at an exercise price of $2.30 per common share and were valued using the Black Scholes valuation model and similar assumptions as the April, 2012 options. The Company recorded $198,000 of stock compensation expense in the third quarter related to these additional stock options. See Note 9

In August 2012, Trans Energy granted 30,000 of common stock and 60,000 common stock options to an outside board member with the vesting terms the same as the April 26 issuances. These shares were valued using fair market value of common stock at the date of grant. The stock options were granted at an exercise price of $2.30 per common share and were valued using the Black Scholes valuation model and similar assumptions as the April options. During the three and nine months ended September 30, 2012, we recorded $4,375 and $6,600 of share based compensation for these common shares and stock options.

In August 2006, Trans Energy granted 800,000 common stock options to two employees with an expiration date of August 16, 2011. Trans Energy extended those options in September 2011 to August 16, 2012. Trans Energy recorded $11,831 of additional stock-based compensation in September 2011 related to the one year extension.

Due to severance agreements, effective in April 2012, certain employees became vested 100% on their stock options and stock awards, we recorded an additional $597,536 of share-based compensation expense for accelerating the vesting of these stock options and stock awards. (See Note 9.)

As a result of the above stock and option transactions, Trans Energy recorded total share-based compensation of $1,533,855 and $625,411 for the nine months ended September 30, 2012 and 2011, respectively.