UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended ~~March~~June 3130, 2015

[ ]	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 001-14665

	TransCoastal Corporation
	(Exact name of registrant as specified in its charter)

	Delaware	75-2649230
	(State or other jurisdiction of	(I.R.S. Employer
	incorporation or organization)	Identification No.)

	4975 Voyager Drive
	Dallas, Texas	75237
	(Address of principal executive offices)	(Zip Code)

972-818-0720

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Large accelerated filer [_]

Accelerated filer [_]

Non-accelerated filer [_]

Smaller Reporting Company [X]

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

State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.001 par value, 30,009,264 shares outstanding as of ~~May~~August 13, 2015.

TRANSCOASTAL CORPORATION AND SUBSIDIARY

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014	3
		Condensed Consolidated Balance Sheets as of June 30, 2015 (Unaudited) and December 31, 2014	3
		Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2015 and 2014	4
		Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2015 and 2014	4
		Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2015 (Unaudited)	5
		Condensed Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 2015 (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2015 and 2014	6
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2015 and 2014	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3.	Quantitative and qualitative disclosures about market risk	1617
	Item 4.	Controls and procedures	1617
PART II. OTHER INFORMATION			1719
	Item 1.	Legal proceedings	1719
	Item 1A.	Risk factors	1719
	Item 2	Unregistered sales of equity securities and use of proceeds	2427
	Item 3.	Defaults upon senior securities	2427
	Item 4.	(Removed and reserved)	2427
	Item 5.	Other information	2427
	Item 6.	Exhibits	2528
SIGNATURES			2629

PART I - FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

TRANSCOASTAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS SHOWN IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

	March 31, 2015			December 31, 2014
	June 30, 2015			December 31, 2014
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	-258		$	128
Accounts receivable		~~207~~188			225
Current derivative asset		~~481~~316			556
Total current assets		~~688~~762			909
Oil and natural gas properties and other property and equipment
Oil and natural gas properties, full cost method, net of accumulated depletion		23,~~379~~293			23,410
Other property and equipment, net of accumulated depreciation		~~389~~320			398
Total oil and natural gas properties and other equipment, net		23,768			23,808
Total oil and natural gas properties and other property and equipment, net		23,613			23,808
Other assets
Goodwill		485			485
Other non-current assets		~~298~~100			223
Total other assets		~~783~~585			708
Total assets	$	2524,~~239~~960		$	25,425
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	~~1,006~~608		$	944
Dividends payable		4797			47
Current asset retirement obligations		113			113
Current maturities of notes payable		1517,~~930~~438			15,829
Total current liabilities		1718,~~096~~256			16,933
Long-term liabilities
Notes payable		1,~~503~~474			1,477
Stock to be issued		~~845~~625			845
Asset retirement obligations		~~885~~891			877
Total long-term liabilities		32,~~233~~990			3,199
Commitments and contingencies
Shareholders' equity
Preferred stock, $.001 par value; 25,000,000 shares authorized: Series H, 1,125,000 and 1,125,000 respectively, preferred shares issued and outstanding		1			1
Common stock, $.001 par value; 250,000,000 shares authorized; 30,009,264 and 29,334,264 respectively, shares issued and outstanding		30			29
Additional paid-in-capital		49,~~680~~900			49,680
Accumulated deficit		(4446,~~801~~217	)		(44,417	)
Total shareholders' equity		43,~~910~~714			5,293
Total liabilities and shareholders' equity	$	2524,~~239~~960		$	25,425

See accompanying notes to the condensed consolidated financial statements.

TRANSCOASTAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS SHOWN IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

	Three months ended						Six months ended
	2015			2014			2015			2014
		(unaudited)
Revenues
Revenues
Oil, natural gas, and related product sales	$	353		$	1,062		$	756		$	2,171
Oil, natural gas, and related product sales	$	403		$	1,109
Derivative gain (loss)		(153	)		(279	)		73			(372	)
Derivative gain (loss)		226			(93	)
Other revenue		2			323			37			338
Other revenue		36			15
Total revenues		202			1,106			866			2,137
Total revenues		665			1,031
Expenses
Expenses
Lease operating		357			290			627			537
Lease operating		270			247
Depreciation, depletion and amortization		157			147			253			309
Depreciation, depletion and amortization		96			162
Accretion of discount on asset retirement obligations		6			8			14			16
Accretion of discount on asset retirement obligations		8			8
General and administrative		944			608			1,376			1,131
General and administrative		451			523
Total expenses		1,464			1,053			2,270			1,993
Total expenses		825			940
Operating income (loss)		(1,262	)		53			(1,414	)		144
Operating income (loss)		(160	)		91
Other income (expense)
Other expense
Other income		1,087			-			1,087			-
Interest expense		(~~223~~1,210	)		(~~197~~209	)		(1,433	)		(406	)
Total other expense		(~~223~~123	)		(~~197~~209	)		(346	)		(406	)
Net loss	$	(~~383~~1,385	)	$	(~~106~~156	)	$	(1,750	)	$	(262	)
Basic and diluted loss per share:
Less: dividend on preferred shares		(50	)		(68	)		(50	)		(68	)
Net loss per basic common share	$	(0.01	)	$	(0.00	)
Net loss attributable to common stockholders	$	(1,435	)	$	(156	)	$	(1,800	)	$	(330	)
Weighted average basic and diluted common shares outstanding		30,009,264			22,723,148
Basic and diluted earnings per share:
Net loss per common share	$	(0.05	)	$	(0.01	)	$	(0.06	)	$	(0.01	)
Weighted average common shares outstanding		30,009,264			22,982,338			30,009,264			22,775,948

See accompanying notes to the condensed consolidated financial statements.

TRANSCOASTAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(AMOUNTS SHOWN IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

	Common Stock				Series H Preferred Stock				Additional
	Shares		Amount		Shares		Amount		Paid-in Capital		Accumulated Deficit			Total
Balances, January 1, 2015		29,334,264	$	29		1,125,000	$	1	$	49,680	$	(44,417	)	$	5,293
Issuance of common stock to satisfy stock to be issued		675,000		1		-		-		-220		-			1219
Net loss		-		-		-		-		-		(383	)		(383	)
Dividends on Series H preferred stock		-		-		-		-		-		(50	)		(50	)
Balances, March 31, 2015		30,009,264	$	30		1,125,000	$	1	$	49,680	$	(44,801	)	$	4,910
Net loss		-		-		-		-		-		(1,750	)		(1,750	)
Balances, June 30, 2015		30,009,264	$	30		1,125,000	$	1	$	49,900	$	(46,217	)	$	3,714

See accompanying notes to the condensed consolidated financial statements.

TRANSCOASTAL CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS SHOWN IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

Three months ended March 31,	2015			2014
Six months ended June 30,	2015			2014
Cash flows from operating activities
Net Loss	$	(~~383~~1,750	)	$	(~~106~~262	)
Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation, depletion and amortization		96253			~~162~~309
Block based compensation		-			13
Stock based compensation		-			13
Accretion of discount on asset retirement obligations		814			816
Unrealized gain on derivative assets and liabilities		75240			38219
Paid in kind interest on note payable		1,272			-
Increase (decrease) in cash and cash equivalents attributable to changes in operating assets and liabilities
Accounts receivable		1837			54216
Other non-current assets		~~(75~~123	)		2(113	)
Accounts payable and accrued liabilities		60(339	)		(~~167~~1,587	)
Net cash and cash equivalents used in operating activities		(~~201~~150	)		4(1,189	)
Cash flows used in investing activities
Cash flows (used in) provided by investing activities
Development of oil and natural gas properties		(55	)		(~~124~~191	)
Net cash used in investing activities		(55	)		(124	)
Disposition of oil and natural gas properties		-			316
Net cash (used in) provided by investing activities		(55	)		125
Cash flows from financing activities
Borrowings under notes payable		~~132~~350			-
Repayments of notes payable		(515	)		(~~678~~1,256	)
Proceeds from issuance of Series G preferred stock		-			560
Proceeds from issuance of Series H preferred stock		-			1,398
Issuance of common stock		1			-
Net cash and cash equivalents provided by financing activities		335			1,642
Net cash and cash equivalents provided by financing activities		128			(118	)
Net increase in cash and cash equivalents		130			579
Net decrease in cash and cash equivalents		(128	)		(238	)
Cash and cash equivalents, beginning of period		128			432
Cash and cash equivalents, beginning of period		128			452
Cash and cash equivalents, end of period	$	258		$	1,011
Cash and cash equivalents, end of period	$	-		$	194
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	~~122~~161		$	~~197~~406
Supplemental disclosure of non-cash investing and financing transactions
Unpaid dividends for Series H preferred stock	$	50		$	-
Issuance of common stock with warrants in settlement of liability	$	-		$	397
Issuance of common stock in settlement of liability	$	-		$	8

See accompanying notes to the condensed consolidated financial statements.

TransCoastal Corporation and Subsidiary

Notes to Condensed Consolidated Financial Statements

1. Basis of presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments (consisting of normal recurring adjustments) and present fairly the condensed consolidated financial position of TransCoastal Corporation and Subsidiary (the "Company" or “TransCoastal”) as of ~~March~~June 3130, 2015 and December 31, 2014 and the results of their operations for the three and six months ended ~~March~~June 3130, 2015 and 2014 in conformity with generally accepted accounting principles for interim financial information applied on a consistent basis. The results of operations for the ~~three~~six months ended ~~March~~June 3130, 2015 are not necessarily indicative of the results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2015.

2. Going concern consideration

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of ~~March~~June 3130, 2015 and December 31, 2014, the Company had a working capital deficit of approximately $1617,~~408~~494,000 and $16,024,000, respectively, and an accumulated deficit of approximately $4446,~~783~~217,000 and $44,417,000, respectively. For the three and six months ended ~~March~~June 3130, 2015, the Company had a net loss of approximately $~~365~~1,324,000 and $1,689,000 respectively. The working capital deficit at ~~March~~June 3130, 2015 and December 31, 2014 is primarily the result of the Company's debt with ~~Green~~Melody ~~Bank~~Business ~~maturing~~Finance inLLC ~~less~~that ~~than~~is 12currently ~~months~~in Forbearance and considered current. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. During the ~~period~~six months ended ~~March~~June 3130, 2015, the Company entered into a Forbearance Agreement with Melody Business Finance, LLC as the new lender of, the debt formerly with Green Bank,. ~~that~~The ~~waives~~continuance ~~all~~of ~~existing~~the Forbearance Agreement by Melody is conditioned upon a restructuring of the Company agreeable to Melody. Currently the Company is in discussions with Melody regarding the restructuring and ~~anticipated~~as ~~events~~of the date of ~~default~~this ~~under~~Form 10-Q the ~~loan~~components ~~until~~of ~~June~~the 1,restructuring ~~2015~~have not been agreed upon. The restructuring will likely have a substantial negative impact on the stockholders of the Company.

3. Summary of significant accounting policies

Fair Value Measurements

The Company measures and discloses information about the fair value of its financial instruments by establishing a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy are:

Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, other assets, and accounts payable, the fair values approximate carrying values due to the short-term maturities of these instruments. The carrying values of other assets and accrued expenses are also not recorded at fair value, but approximate fair values primarily due to their short-term nature. The carrying value of the Company’s notes payable also approximate fair value since the instruments bear market rates of interest. None of these instruments are held for trading purposes.

Cash and Cash Equivalents

The Company considers all highly-liquid debt instruments with original maturities of three and three months or less to be cash equivalents.

The Company maintains its cash balances in financial institutions which are insured by the Federal Deposit Insurance Corporation (“FDIC”). All accounts maintain FDIC coverage of up to $250,000 per institution. As of ~~March~~June 3130, 2015 and December 31, 2014, the Company had $08,000 and $0, respectively, of cash and cash equivalents in excess of its FDIC coverage.

Accounts Receivable

Accounts receivable consist of uncollateralized accrued revenues due under normal trade terms, generally requiring payment within 30 to 60 days of production and amounts owed from interest owners of the Company’s operated wells. No interest is charged on past-due balances. Payments made on all accounts receivable are applied to the earliest unpaid items. The Company reviews accounts receivable periodically and reduces the carrying amount by a valuation allowance that reflects its best estimate of the amount that may not be collectible. There was no reserve for bad debts as of ~~March~~June 3130, 2015 or December 31, 2014.

Derivative Activities

The Company utilized oil and natural gas derivative contracts to mitigate its exposure to commodity price risk associated with its future oil and natural gas production. These derivative contracts are valued using level 2 inputs and have historically consisted of options, in the form of price floors or collars. The Company’s derivative financial instruments are recorded on the consolidated balance sheets as either an asset or a liability measured at fair value. The Company does not apply hedge accounting to its oil and natural gas derivative contracts and accordingly the changes in the fair value of these instruments are recognized in the consolidated statements of operations in the period of change.

The Company’s derivative instruments are issued to manage the price risk attributable to our expected natural gas and oil production. While there is risk that the financial benefit of rising natural gas and oil prices may not be captured, Company management believes the benefits of stable and predictable cash flow are more important. Among these benefits are more efficient utilization of existing personnel and planning for future staff additions, the flexibility to enter into long-term projects requiring substantial committed capital, smoother and more efficient execution of our ongoing development drilling and production enhancement programs, more consistent returns on invested capital and better access to bank and other capital markets. Every unsettled derivative instrument is recorded on the accompanying consolidated balance sheets as either an asset or a liability measured at its fair value. Changes in a derivative’s fair value are recognized in earnings unless specific hedge accounting criteria are met. Cash flows from natural gas and oil derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows.

Realized and unrealized gains and losses on derivatives are accounted for using the mark-to-market accounting method. We recognize all unrealized and realized gains and losses related to these contracts in each period in derivative gains or (losses) in the accompanying condensed consolidated statements of operations.

Oil and Natural Gas Properties

The Company uses the full-cost method of accounting for its oil and natural gas producing activities whereby all costs incurred for both successful and unsuccessful exploration and development activities, including salaries, benefits and other internal costs directly identified with these activities, and oil and natural gas property acquisitions are capitalized. All costs related to production, general corporate overhead or similar activities are expensed as incurred.

Proved properties are amortized using the units of production method (“UOP”). The UOP calculation, in its simplest terms, multiplies the percentage of estimated proved reserves produced at year end by the cost of those reserves.

The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (“DD&A”), estimated future development costs (future costs to access and develop reserves) and asset retirement costs that are not already included in oil and natural gas property, less related salvage value.

The cost of unproved properties and properties under development are excluded from the amortization calculation until it is determined whether or not proved reserves can be assigned to such properties or until development projects are placed in service. Geological and geophysical costs not associated with specific properties are recorded to proved properties. Unproved properties and properties under development are reviewed for impairment at least quarterly. In countries where proved reserves exist, exploratory drilling costs associated with dry holes are transferred to proved properties immediately upon determination that a well is dry and amortized accordingly. As of ~~March~~June 3130, 2015 and December 31, 2014, no unproved properties or properties under development were included in the oil and natural gas properties of the accompanying condensed consolidated financial statements.

Proceeds from the sale or disposition of oil and natural gas properties are accounted for as a reduction to capitalized costs unless a significant portion (greater than 25 percent) of the Company’s reserve quantities in a particular country are sold, in which case a gain or loss is recognized in income. For the three and six months ended ~~March~~June 3130, 2015 ~~and 2014~~ no gain or loss from the sale or disposition of oil and natural gas properties occurred, this is a decrease of $316,000 compared to the same time period in 2014.

Under the full-cost method of accounting, the net book value of oil and natural gas properties, less related deferred income taxes, may not exceed a calculated “ceiling.” The ceiling limitation is the estimated after-tax future net cash flows from proved oil and natural gas reserves, discounted at 10 percent per annum based on industry standards and adjusted for cash flow hedges. Estimated future net cash flows exclude future cash outflows associated with settling accrued asset retirement obligations. Any excess of the net book value of proved oil and gas properties, less related deferred income taxes, over the ceiling is charged to expense and reflected as additional DD&A in the accompanying condensed consolidated statements of operations. For the three and six months ended ~~March~~June 3130, 2015 and 2014 no impairment charge occurred.

Other Property and Equipment

Other property and equipment, which includes buildings, field equipment, vehicles, and office equipment, is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Vehicles and office equipment are generally depreciated over a useful life of five or six years, field equipment is generally depreciated over a useful life of ten years and buildings are generally depreciated over a useful life of twenty years.

Impairment of Long-Lived Assets

The Company assesses the impairment of long-lived assets when circumstances indicate that the carrying value may not be recoverable. The Company determines if impairment has occurred through adverse changes. When it is determined that the estimated future net cash flows of an asset will not be sufficient to recover its carrying amount, an impairment loss must be recorded to reduce the carrying amount to its estimated fair value. For the three and six months ended ~~March~~June 3130, 2015, and 2014 no circumstances indicated an unrecoverable carrying value of the long-lived assets.

Goodwill

Goodwill was generated as part of the CTO (CoreTerra Operating LLC) acquisition during the year ended December 31, 2011 and represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition. Goodwill is not amortized; rather, it is tested for impairment annually and when events or changes in circumstances indicate that fair value of a reporting unit with goodwill has been reduced below carrying value. To assess impairment, the Company has the option to qualitatively assess if it is more likely than not that the fair value of the reporting unit is less than the book value. Absent a qualitative assessment, or, through the qualitative assessment, if the Company determines it is more likely than not that the fair value of the reporting unit is less than the book value, a quantitative assessment is prepared to calculate the fair market value of the reporting unit. If it is determined that the fair value of the reporting unit is less than the book value, the recorded goodwill is impaired to its implied fair value with a charge to operating expenses. For the three and six months ended ~~March~~June 3130, 2015, and 2014 no impairment charge occurred.

Asset Retirement Obligations

The Company records the fair value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. When the liability is initially recorded, the Company capitalizes a cost by increasing 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 depleted as part of the oil and natural gas property. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The Company’s asset retirement obligations are valued using level 3 inputs and relate to the plugging, dismantlement, removal, site reclamation and similar activities of its oil and natural gas properties.

Asset retirement obligations are estimated at the present value of expected future net cash flows and are discounted using the Company’s credit adjusted risk free rate. The Company uses unobservable inputs in the estimation of asset retirement obligations that include, but are not limited to, costs of labor, costs of materials, profits on costs of labor and materials, the effect of inflation on estimated costs, and the discount rate. Accordingly, asset retirement obligations are considered a Level 3 measurement. Additionally, because of the subjectivity of assumptions and the relatively long lives of the Company’s wells, the costs to ultimately retire the Company’s wells may vary significantly from prior estimates.

Revenue Recognition and Natural Gas Imbalances

The Company utilizes the accrual method of accounting for natural gas and crude oil revenues, whereby revenues are recognized based on the Company’s net revenue interest in the wells. The Company will also enter into physical contract sale agreements through its normal operations. These contracts are not considered derivative contracts by the Company in accordance with the normal purchases and normal sales provision of ASC 815-10-15.

Gas imbalances are accounted for using the sales method. Under this method, revenues are recognized based on actual volumes of oil and gas sold to purchasers. However, the Company has no history of significant gas imbalances.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss attributable to shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is calculated in the same manner, but also considers the impact to net loss and common shares for the potential dilution from convertible preferred stock and warrants. For the ~~three~~six months ended ~~March~~June 3130, 2015, there were 4,898,940 of potentially dilutive shares that were not included in the diluted weighted average common shares as the Company had a net loss for the period. For the ~~three~~six months ended ~~March~~June 3130, 2014, there were 4,319,500 potentially dilutive shares and no outstanding potentially antidilutive shares considered in the diluted weighted average common shares.

Stock-Based Compensation

The Company measures and recognizes compensation expense in the Company’s consolidated statements of operations for all share-based payment awards made to the Company’s employees, directors and consultants including employee stock options, non-vested equity stock and equity stock units, and employee stock purchase grants. Stock-based compensation expense is measured at the grant date, based on the estimated fair value of the award, reduced by an estimate of the annualized rate of expected forfeitures, and is recognized as an expense over the employees’ expected requisite service period, generally using the straight-line method. In addition, the benefits of tax deductions in excess of recognized compensation expense are reported as a financing cash flow.

The Company’s forfeiture rate represents the historical rate at which the Company’s stock-based awards were surrendered prior to vesting. Forfeitures are estimated at the time of grant and revised on a cumulative basis, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

During the three and six months ended ~~March~~June 31 30, 2015 and 2014, the Company incurred a stock based compensation expense, of ~~approximately~~ $0 and $13,000 respectively, related to stock grant issuances and is included in the accompanying consolidated statement of operations in general and administrative expenses.

4. Oil and natural gas properties

The Company has invested in proved properties:

(in thousands)	Acquisition and Development Costs		Accumulated Depletion			Total
Balances at December 31, 2014	$	26,202	$	(2,792	)	$	23,410
Activity from January 1, 2015 through March 31, 2015		55		(86	)		(31	)
Activity from January 1, 2015 through June 30, 2015		55		(172	)		(117	)
	$	26,257	$	(2,~~878~~964	)	$	23,~~379~~293

5. Shareholders' equity

During the ~~three~~six months ended ~~March~~June 3130, 2015 the Company issued 675,000 shares of common stock to satisfy stock to be issued.

6. Notes payable

On May 19, 2011, as amended from time to time through February 12, 2014, the Company entered into a loan agreement (the “Loan Agreement”) with Green Bank with an initial borrowing base of $15,000,000 and amended to $16,950,000 on February 12, 2014. The Loan Agreement bears interest at the prime rate minus 0.5%, but not less than 4.5%. Interest payments ~~are~~were due monthly with all principal and any unpaid interest being due on June 1, 2015. ~~The interest rate was 4.5% at March 31, 2015 and 2014.~~

The Company has entered into a Forbearance Agreement with Melody Business Finance, LLC (the “New Lender” or “Melody”) pursuant to the New Lender assuming the Loan Agreement dated May 2011 with Green Bank N.A. and was originally disclosed in the Company's Form 8-K filed with the SEC on February 24, 2015. The principal amount of the note is $15,750,000 ~~with~~which amatured ~~maturity~~on ~~date of~~ June 1, 2015 and PIK interest of 15%. The New Lender has agreed to forebear all “Existing Events of Default” as well as agreed upon “Anticipated Events of Default” pursuant to the default provisions of the Loan Agreement. The Forbearance Agreement alters or adds several material terms to the Loan Agreement and stockholders are strongly urged to read the Forbearance Agreement attached as an exhibit to the above described Form 8-K.

The continuance of the Forbearance Agreement by Melody is conditioned upon a restructuring of the Company agreeable to Melody. Currently the Company is in discussions with Melody regarding the restructuring and as of the date of this Form 10-Q the components of the restructuring have not been agreed upon. The restructuring will likely have a substantial negative impact on the stockholders of the Company.

Should the Company fail to come to an agreement with Melody then Melody will have the option to foreclose on the Loan Agreement or continue the forbearance. It should be noted that in the event that the Company and Melody fail to come to an agreement on the restructuring the Forbearance Agreement requires the Company to pay Melody a non-refundable closing fee in the amount of $2,000,000. In such an event it is likely that the Company will have no choice but to seek the protection of the United States Bankruptcy Court.

The Loan Agreement is collateralized by essentially all of the oil and natural gas related assets of the Company, contains personal guarantees from the principal officers, and requires compliance with certain financial covenants including, among others: (1) a requirement to maintain a current ratio of not less than 1.0 to 1.0; (2) a maximum permitted ratio of total liabilities to tangible net worth of not more than 2.0 to 1.0; and (3) a requirement to maintain a ratio of EBITDAX, as defined by the Agreement, to interest expense of not less than (a) 3.00 to 1.00 for all fiscal quarters prior to December 31, 2011, (b) 3.25 to 1.00 for the fiscal quarter ending June 30, 2012, and (c) 3.50 to 1.00 for all fiscal quarters ending on or after June 30, 2012. As of ~~March~~June 3130, 2015 the Company is in compliance with all covenants by way of the aforementioned forbearance agreement.

As of ~~March~~June 3130, 2015 and December 31, 2014, the Company had an outstanding principal balance due to Melody of approximately $1517,~~851~~371,000 and ~~to Green Bank~~ $15,750,000 to Green Bank, respectively. As of ~~March~~June 3130, 2015 and December 31, 2014, the current maturities of the outstanding principal balance were approximately $1517,~~851~~371,000 and $15,750,000, respectively.

Additionally, on October 21, 2013, the Company entered into a vehicle loan agreement (“Car Note”) with Western Equipment Finance, Inc. for a total borrowing base of $74,000. The Car Note bears interest at an approximate rate of 9%. Interest and principal payments are due monthly with any unpaid principal and interest due on August 18, 2018. As of ~~March~~June 3130, 2015 and December 31, 2014, the Company had an outstanding principal balance due to Western Equipment Finance, Inc. of approximately $5146,000 and $5556,000, respectively. As of ~~March~~June 3130, 2015 and December 31, 2014, the current maturities of the outstanding principal balance were approximately $13,000.

7. Related party transactions

On June 30, 2014 the Company entered into a loan agreement with Dalton Lott, an individual. Mr. Lott is the father-in-law of Stuart Hagler our Chief Executive Officer. The principal of the note is $1,500,000 with 5.5% simple annual interest for a term of six years. The Company ~~will~~was ~~pay~~not norequired to pay interest or principal on the note until January 1, 2015. The Company will make interest only payments of $6,875 monthly, due on the first day of each month, beginning January 1, 2015 and each month thereafter until ~~March~~June 3130, 2015. Beginning October 1, 2015 the Company will begin to pay principal and interest on the note in 60 consecutive monthly payments of $28,651.74 each and due on the first of each month thereafter. The note can be prepaid at any time with no penalty. The note is personally guaranteed by three directors and officers of the Company, Stuart Hagler, David May and Wilbur Westmoreland. The Loan Agreement and Promissory Note are attached as exhibits to a form 8-K filed July 10, 2014.

8. Commitments and contingencies

In January 2015, the Company settled outstanding litigation with a third party. The settlement calls for the Company to make a payment of $15,000 on January 6, 2015 and subsequent payments of $5,000 due on the first of each month from February through November 2015. The total balance of the settlement has been expensed and accrued as of December 31, 2014.

In June 2015, the Company settled outstanding litigation with a third party. The settlement called for the Company to make a one-time payment of $65,000 on June 12, 2015.

Enexco, Inc., et al. v. Cabot Oil & Gas Corporation v. Palace Exploration, Co., Cause No. 10CV31,293 consolidated with Cause No. 11CV31,487, pending in the 123rd/273rd District Court of Shelby County, Texas. The Company along with other interest owners, filed this suit in July 2011 to recover damages to certain wells located in Shelby County, Texas. The Company alleges that Defendant Cabot Oil & Gas Corporation (“Cabot”) damaged those wells during the course of its drilling activities and has brought claims for gross negligence, nuisance, negligence, declaratory judgment, breach of contract, and exemplary damages. A settlement was reached on June 10, 2015 resulting in the plaintiffs, including the Company receiving a settlement. The Company received $1,087,369 as its share of the settlement. This settlement is included in other income in the accompanying consolidated statements of operations.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form 10-Q are not statements of historical fact and constitute forward-looking statements within the meaning of the various provisions of the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, the statements specifically identified as forward-looking statements within this report. Many of these statements contain risk factors as well. In addition, certain statements in our future filings with the SEC, in press releases, and in oral and written statements made by or with our approvals which are not statements of historical fact constitute forward-looking statements within the meaning of the Securities Act and the Exchange Act. Examples of forward-looking statements, include, but are not limited to: (i) projections of capital expenditures, revenues, income or loss, earnings or loss per share, capital structure, and other financial items, (ii) statements about the plans and objectives of our management or board of directors including those relating to planned development of our oil and gas properties, (iii) statements of future economic performance and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “may,” “will” “might,” “should,” “plan,” “predict,” “project,” “envision,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Important factors that could cause actual results to differ materially from the forward looking statements include, but are not limited to:

	•		changes in production volumes, worldwide demand and commodity prices for oil and natural gas;
	•		changes in estimates of proved reserves;
	•		declines in the values of our oil and natural gas properties resulting in impairments;
	•		the timing and extent of our success in discovering, acquiring, developing and producing oil and natural gas reserves;
	•		our ability to acquire leases, drilling rigs, supplies and services on a timely basis and at reasonable prices;
	•		risks incident to the drilling and operation of oil and natural gas wells;
	•		future unanticipated production and development costs;
	•		the availability of sufficient pipeline and other transportation facilities to carry our production and the impact of these facilities on prices or costs;
	•		the effect of existing and future laws, governmental regulations and the political and economic climate of the United States of America and its individual states;
	•		changes in environmental laws and the regulation and enforcement related to those laws;
	•		the identification of and severity of environmental events and governmental responses to the events;
	•		legislative or regulatory changes, including retroactive royalty or production tax regimes, hydraulic-fracturing regulation, derivatives reform, and changes in state, federal and foreign income taxes;
	•		the effect of oil and natural gas derivatives activities; and
	•		conditions in the capital markets.

Such forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events.

See also “Risk Factors.”

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with all of our reports to the SEC and the related notes included elsewhere in this report.

RESULTS OF OPERATIONS

Three months ended ~~March~~June 3130, 2015 compared to the three months ended ~~March~~June 3130, 2014

Revenue. During the three months ended ~~March~~June 3130, 2015, the Company generated revenues of $~~665~~202,000, a decrease of $~~366~~904,000 or 3582%, compared to the same period in 2014. The Company’s annual revenues have decreased as a result of the precipitous decline in commodity prices. during the last 12 months.

During the three months ended ~~March~~June 3130, 2015, the Company generated revenues from oil and gas sales of $~~403~~353,000, a decrease of $~~706~~709,000 or 6367%, compared to the same period in 2014. The Company’s revenues decreased as a result of the precipitous decline in commodity prices, as well as a decline in oil and natural gas production due to the lack of capital available to perform routine maintenance on existing wells. The Company sold 34,~~887~~021 net BBL at an average price of $4753.2275 during the quarter ended ~~March~~June 3130, 2015 compared to 75,~~111~~436 net BBL at an average price of 9599.1581 during the same time period in 2014. The Company sold 1130,~~192~~359 net MCF of natural gas liquids at an average price of $65.5375 during the quarter ended ~~March~~June 3130, 2015 compared to 3133,~~075~~836 net MCF of natural gas liquids at an average price of $911.9231 during the same time period in 2014.

Total Expenses. During the three months ended ~~March~~June 3130, 2015, total expenses, which are comprised of depreciation, operating costs and general and administrative expenses, were $~~807~~1,464,000, aan ~~decrease~~increase of $~~133~~411,000 or 1439% compared to the same period in 2014. The ~~decrease~~increase is primarily due to aenhanced ~~reduction~~legal ofexpenditures ~~General~~for ~~and~~the ~~Administrative~~Company’s ~~Expenses~~ongoing search for ~~payroll and legal fees~~financing.

Six months ended June 30, 2015 compared to the six months ended June 30, 2014

Revenue. During the six months ended June 30, 2015, the Company generated revenues of $866,000, a decrease of $1,271,000 or 59%, compared to the same period in 2014. The Company’s annual revenues have decreased as a result of the precipitous decline in commodity prices during the last 12 months.

During the six months ended June 30, 2015, the Company generated revenues from oil and gas sales of $756,000, a decrease of $1,415,000 or 65%, compared to the same period in 2014. The Company’s revenues decreased as a result of the precipitous decline in commodity prices, as well as a decline in oil and natural gas production due to the lack of capital available to perform routine maintenance on existing wells . The Company sold 8,782 net BBL at an average price of $49.68 during the six months ended June 30, 2015 compared to 12,547 net BBL at an average price of 97.16 during the same time period in 2014. The Company sold 59,244 net MCF of natural gas liquids at an average price of $4.34 during the six months ended June 30, 2015 compared to 64,911 net MCF of natural gas liquids at an average price of $10.64 during the same time period in 2014.

Total Expenses. During the six months ended June 30 2015, total expenses, which are comprised of depreciation, operating costs and general and administrative expenses, were $2,270,000, an increase of $277,000 or 14% compared to the same period in 2014. The increase is primarily due to enhanced legal expenditures for the Company’s ongoing search for financing.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $~~201~~150,000 for the first ~~three~~six months of 2015, ana ~~increase~~decrease of $~~205~~1,039, 000 compared to the same time period in 2014. due to proceeds of $316,000 from the sale of oil and gas properties in the six months ended June 30, 2014.

Net cash used in investing activities of $55,000 was used to develop our oil and natural gas properties during the first ~~three~~six months of 2015. This is aan ~~decrease~~increase of $69180,000 compared to 2014, due to proceeds of $316,000 from the ~~first~~sale ~~three~~of oil and gas properties in the six months ofended June 30, 2014.

Net cash provided by financing activities in the first ~~three~~six months of 2015 ofwas $~~128~~335,000 ~~is due to the payment in kind on interest of the debt in relation to the forbearance agreement~~.. This ~~was~~is ana ~~increase~~decrease of ~~246~~$1,307,000 from our net cash provided by financing activities during the first ~~three~~six months of 2014 when the Company received proceeds from the Series H equity issuance.

As of ~~March~~June 3130, 2015, the Company currently has no material agreements for capital expenditures.

As of March 31, 2015, the current terms of the Company’s credit facility with Melody are $15,851,000 that matures on June 1, 2015 with a 4-4.5% annual floating interest rate which requires an approximate monthly payment of $61,000. The note is current and in compliance with the requirements and covenants by way of a forbearance agreement executed on February 24, 2015 and filed with the SEC on the Company's Form 8-K. The forbearance applies to all existing and anticipated events of default in regards to the loan until June 1, 2015. The note matures June 1, 2015. Stuart G. Hagler, A.W. Westmoreland, and David J. May, are officers and directors of the Company and all three provide personal guarantees on our debt. Please see subsequent events section for notes relating to this Debt Instrument.

As of June 30, 2015, the current terms of the Company’s credit facility with Melody are $17,371,000 that matured on June 1, 2015 with a 15% annual floating interest rate which requires an approximate monthly payment of $270,000. The note is current and in compliance with the requirements and covenants by way of a forbearance agreement executed on February 24, 2015 and filed with the SEC on the Company's Form 8-K. The forbearance applies to all existing and anticipated events of default in regards to the loan until June 1, 2015. The note matured June 1, 2015. Stuart G. Hagler, A.W. Westmoreland, and David J. May, are officers and directors of the Company and all three provide personal guarantees on our debt. Please see “Notes payable” Note 6 for more information relating to this Debt Instrument.

OFF-BALANCE SHEET ARRANGEMENTS

From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of ~~March~~June 31 30, 2015, the off-balance sheet arrangements and transactions that we had entered into included operating lease agreements, personal guarantees of our line of credit with Green Bank by three of the Officers and majority stockholders and gas transportation commitments. The Company does not believe that these arrangements are reasonably likely to materially affect its liquidity or availability of, or requirements for, capital resources currently or in the future.

IMPAIRMENT

As part of its current efforts to financially reorganize the company, management has been in discussions with a hired consultant who is evaluating the valuation of the company’s oil and gas assets. While no specific valuation has been quantified as of the issuance of this 10-Q based on our discussions with the consultant an impairment of the Company’s oil and gas assets or goodwill could result once the valuation is complete.

ITEM 3. Quantitative and Qualitative disclosures about Market Risk

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that 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 specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collision or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with established policies or procedures may deteriorate.

A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As a result of our management’s assessment of the effectiveness of internal control over financial reporting, we have identified the following material weaknesses that existed as of ~~March~~June 3130, 2015:

1. Inadequate and ineffective controls over the financial statement close process.

In conjunction with the year-end financial close, our procedures and controls to ensure that accurate financial statements in accordance with generally accepted accounting principles could be prepared and reviewed on timely basis were not operating effectively. Such ineffective procedures and controls include (a) ineffective segregation of duties; (b) insufficient documentation of accounting policies and procedures and retention of historical accounting portions.

2. Inadequate staffing within the accounting organization.

During 2014, there were numerous changes in our accounting personnel, both on staff and third party support. This has led to our not having a sufficient number of experienced personnel in the accounting organization to provide reasonable assurance that transactions are being recorded as necessary to ensure timely preparation of financial statements in accordance with generally accepted accounting principles, including the preparation of our Quarterly Report on Form 10-Q. We consider this weakness to be a material weakness in the operation of entity-level controls and operation level controls. The ineffectiveness of such controls can result in misstatement to assets, liabilities, revenues, and expenses.

3. Remedial actions

In an effort to remediate the identified deficiencies, we have commenced, and are continuing to implement, a number of changes to our internal control over financial reporting. We are attempting to make the following changes before the end of 2015:

	•	Proper accounting procedures in place
	•	Monthly reconciliation of the financials

Additionally, in response to the identified deficiencies, we intend to implement additional remedial measures, including but not limited to the following:

	•	Hiring additional accounting personnel; and
	•	Improving our documentation and training related to policies and procedures for the controls related to our significant accounts and processes.

Under the supervision and with the participation of our management, including our chief executive, we evaluated the effectiveness of our disclosure controls and procedures as of ~~March~~June 3130, 2015. Based on that evaluation we have concluded that our disclosure controls and procedures were ineffective.

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Changes in Internal Controls over Financial Reporting

During the ~~three~~six months ended ~~March~~June 31 30,2015, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

InAside ~~January~~from ~~2015~~the aforementioned legal proceedings in footnote #8, the Company ~~settled~~is ~~outstanding~~not ~~litigation~~a ~~with~~party ato ~~third~~any ~~party.~~material ~~The~~pending ~~settlement~~legal ~~calls~~or ~~for~~governmental ~~the~~proceedings, ~~Company~~other tothan ~~make~~ordinary aroutine ~~payment~~litigation ofincidental ~~$15,000~~to onthe ~~January~~industry. 6,While ~~2015~~the ~~and~~ultimate ~~subsequent~~outcome ~~payments~~and impact of ~~$5,000~~any ~~due~~proceeding oncannot ~~the~~be ~~first~~predicted ofwith ~~each~~certainty, ~~month~~management ~~from~~believes ~~February~~that ~~through~~the ~~November~~resolution ~~2015.~~of ~~The~~any ~~total~~proceeding ~~balance~~will ofnot ~~the~~have ~~settlement~~a ~~has~~material ~~been~~adverse ~~expensed~~effect ~~and~~on ~~accrued~~the asfinancial ofcondition ~~December~~or ~~31,~~results ~~2014~~of operations.

Enexco, Inc., et al. v. Cabot Oil & Gas Corporation v. Palace Exploration, Co., Cause No. 10CV31,293 consolidated with Cause No. 11CV31,487, pending in the 123rd/273rd District Court of Shelby County, Texas. The Company along with other interest owners, filed this suit in July 2011 to recover damages to certain wells located in Shelby County, Texas. The Company alleges that Defendant Cabot Oil & Gas Corporation (“Cabot”) damaged those wells during the course of its drilling activities and has brought claims for gross negligence, nuisance, negligence, declaratory judgment, breach of contract, and exemplary damages. Cabot filed a counterclaim against the Company alleging breach of contract. Cabot seeks approximately $119,202.38 in damages, which Cabot contends the Company owes for Cabot’s drilling activities.

Aside from the aforementioned, the Company is not a party to any material pending legal or governmental proceedings, other than ordinary routine litigation incidental to the industry. While the ultimate outcome and impact of any proceeding cannot be predicted with certainty, management believes that the resolution of any proceeding will not have a material adverse effect on the financial condition or results of operations.

Item 1A.Risk Factors.

Our Current Financial Condition Places All Our Equity Holders at Significant Risk of Losing All of Their Investment in the Company. Due to the current low prices for oil and gas, we are currently having significant problems generating sufficient revenues from our oil and gas operations to meet the payments on our debt obligations and payment of our accounts payable. Our major lender has currently given us a forbearance agreement that protects us from any default on our loan; however, the forbearance agreement ~~expires~~expired on June 1, 2015. If we are unable to get an extension of the forbearance until prices recover or otherwise refinance the loan, it is likely we would need to seek the protection of the United States Bankruptcy Court.

Oil and Gas Drilling Is A High-Risk Activity. Our future success will depend on the success of TransCoastal's drilling programs. In addition to the numerous operating risks described in more detail below, these activities involve the risk that no commercially productive oil or gas reservoirs will be discovered. In addition, we are often uncertain as to the future cost or timing of drilling, completing and producing wells. Furthermore, our drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including, but not limited to, the following:

- unexpected drilling conditions;

- pressure or irregularities in formations;

- equipment failures or accidents;

- adverse weather conditions;

- inability to comply with governmental requirements; and

- shortage or delays in the availability of drilling rigs and the delivery of equipment.

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If TransCoastal experiences any of these problems, our ability to conduct operations could be adversely affected.

Factors Beyond Our Control Affect Our Ability To Market Oil And Gas. Our ability to market oil and gas from our TransCoastal subsidiary wells depends upon numerous factors beyond our control. These factors include, but are not limited to, the following:

- the level of domestic production and imports of oil and gas;

- the proximity of gas production to gas pipelines;

- the availability of pipeline capacity;

- the demand for oil and gas by utilities and other end users;

- the availability of alternate fuel sources;

- the effect of inclement weather;

- state and federal regulation of oil and gas marketing; and

- federal regulation of gas sold or transported in interstate commerce.

If these factors were to change dramatically, our ability to market oil and gas or obtain favorable prices for our oil and gas could be adversely affected.

The Marketability Of Our Production May Be Dependent Upon Transportation Facilities Over Which We Have No Control. The marketability of our production depends in part upon the availability, proximity, and capacity of pipelines, natural gas gathering systems and processing facilities. Any significant change in market factors affecting these infrastructure facilities could harm our business. TransCoastal delivers some of their oil and natural gas through gathering systems and pipelines that we do not own. These facilities may not be available to us in the future.

Oil and natural gas prices are volatile. A substantial decrease in oil and natural gas prices could adversely affect our financial results. Our future financial condition, results of operations and the carrying value of our oil and natural gas properties depend primarily upon the prices we receive for our oil and natural gas production. Oil and natural gas prices historically have been volatile and likely will continue to be volatile in the future, especially given world geopolitical conditions. Our cash flow from operations is highly dependent on the prices that we receive for oil and natural gas. This price volatility also affects the amount of our cash flow available for capital expenditures and our ability to borrow money or raise additional capital. The amount we can borrow or have outstanding under or bank credit facility is subject to semi-annual redeterminations. Oil prices are likely to affect us more than natural gas prices because approximately 70% of our proved reserves are oil. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include:

- the level of consumer demand for oil and natural gas;

- the domestic and foreign supply of oil and natural gas;

- the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

- the price of foreign oil and natural gas;

- domestic governmental regulations and taxes;

- the price and availability of alternative fuel sources;

- weather conditions, including hurricanes and tropical storms in and around the Gulf of Mexico;

- market uncertainty;

- political conditions in oil and natural gas producing regions, including the Middle East; and

- worldwide economic conditions.

These factors and the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Also, oil and natural gas prices do not necessarily move in tandem. Declines in oil and natural gas prices would not only reduce revenue, but could reduce the amount of oil and natural gas that we can produce economically and, as a result, could have a material adverse effect upon our financial condition, results of operations, oil and natural gas reserves and the carrying values of our oil and natural gas properties. If the oil and natural gas industry experiences significant price declines, we may, among other things, be unable to meet our financial obligations or make planned expenditures.

Significant capital expenditures are required to conduct our business. The development of our subsidiary TransCoastal's business and operations, excluding acquisition activities, requires substantial capital expenditures. We will fund our future capital expenditures through a combination of cash flows from operations and borrowings under our bank credit facilities and, to the extent those sources are not sufficient, we may fund capital expenditures from the proceeds of debt and equity issuances. Future cash flows from operations are subject to a number of risks and variables, such as the level of production of our customers, prices of natural gas and oil, and the other risk factors discussed herein. Our ability to obtain capital from other sources, such as the capital markets, is dependent upon many of those same factors as well as the orderly functioning of credit and capital markets. To the extent we fail to have adequate funds, we could be required to reduce our capital spending, or pursue other funding alternatives, which in turn could adversely affect our business and results of operations.

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We Face Strong Competition From Other Energy Companies That May Negatively Affect Our Ability To Carry On Operations. TransCoastal operates in the highly competitive areas of oil and gas exploration, development and production. Factors that affect our subsidiary's ability to successfully compete in the marketplace include, but are not limited to, the following:

- the availability of funds and information relating to a property;

- the standards established by us for the minimum projected return on investment;

- the availability of alternate fuel sources; and

- the intermediate transportation of gas.

Competitors include major integrated oil companies, substantial independent energy companies, affiliates of major interstate and intrastate pipelines and national and local gas gatherers. Many of these competitors possess greater financial and other resources than we do.

The inability to control other associated entities could adversely affect our business. To the extent that TransCoastal does not operate all of its properties, our success depends in part upon operations on certain properties in which TransCoastal may have an interest along with other business entities. Because we have no control over such entities, we are able to neither direct their operations, nor ensure that their operations on our behalf will be completed in a timely and efficient manner. Any delay in such business entities’ operations could adversely affect our operations.

There Are Risks In Acquiring Producing Properties. Through our subsidiary TransCoastal we constantly evaluate opportunities to acquire oil and natural gas properties and frequently engage in bidding and negotiating for these acquisitions. If successful in this process, we may alter or increase our capitalization through the issuance of additional debt or equity securities, the sale of production payments or other measures. Any change in capitalization affects our risk profile.

A change in capitalization, however, is not the only way acquisitions affect our risk profile. Acquisitions may alter the nature of our business. This could occur when the character of acquired properties is substantially different from our existing properties in terms of operating or geologic characteristics.

Operating Hazards May Adversely Affect Our Ability To Conduct Business. TransCoastal’s operations are subject to risks inherent in the oil and gas industry, including but not limited to the following:

- blowouts;

- cratering;

- explosions;

- uncontrollable flows of oil, gas or well fluids;

- fires;

- pollution; and

- other environmental risks.

These risks could result in substantial losses to us from injury and loss of life, damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. Governmental regulations may impose liability for pollution damage or result in the interruption or termination of operations.

Losses And Liabilities From Uninsured Or Underinsured Drilling And Operating Activities Could Have A Material Adverse Effect On Our Financial Condition And Operations. Although we intend to maintain several types of insurance to cover TransCoastal's operations, we may not be able to maintain adequate insurance in the future at rates we consider reasonable, or losses may exceed the maximum limits under our insurance policies. If a significant event that is not fully insured or indemnified occurs, it could materially affect our financial condition and results of operations.

1922

Compliance with environmental and other government regulations could be costly and could negatively impact production. TransCoastal's operations are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Without limiting the generality of the foregoing, these laws and regulations may:

- require the acquisition of a permit before drilling commences;

- restrict the types, quantities and concentration of various substances that can be released into the environment from drilling and production activities;

- limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and other protected areas;

- require remedial measures to mitigate pollution from former operations, such as plugging abandoned wells; and

- impose substantial liabilities for pollution resulting from our operations.

The recent trend toward stricter standards in environmental legislation and regulation is likely to continue. The enactment of stricter legislation or the adoption of stricter regulation could have a significant impact on our operating costs, as well as on the oil and gas industry in general.

TransCoastal's operations could result in liability for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages. We could also be liable for environmental damages caused by previous property owners. As a result, substantial liabilities to third parties or governmental entities may be incurred which could have a material adverse effect on our financial condition and results of operations. We intend to continue to maintain insurance coverage for TransCoastal's operations, but we do not believe that insurance coverage for environmental damages that occur over time or complete coverage for sudden and accidental environmental damages is available at a reasonable cost. Accordingly, we may be subject to liability or may lose the privilege to continue exploration or production activities upon substantial portions of our subsidiary's properties if certain environmental damages occur.

TransCoastal's operations are subject to United States federal, state and local laws and regulations relating to health, safety, transportation and protection of natural resources and the environment, including those relating to waste management and transportation and disposal of salt-water and other materials. For example, TransCoastal is subject to environmental regulation relating to the operation of their wells, which can pose some risks of environmental liability, including leakage from the wells to surface or subsurface soils, surface water or groundwater. Liability under these laws and regulations could result in cancellation of well operations, fines and penalties, expenditures for remediation, and liability for property damage and personal injuries.

Failure to comply with these laws and regulations could result in the assessment of significant administrative, civil or criminal penalties, imposition of cleanup and site restoration costs and liens, revocation of permits, and orders to limit or cease certain operations. In addition, certain environmental laws impose strict and/or joint and several liability, which could cause us to become liable for the conduct of others or for consequences of our own actions that were in compliance with all applicable laws at the time of those actions. Future events, such as the discovery of currently unknown matters, spills caused by future pipeline ruptures, changes in existing environmental laws and regulations or their interpretation, and more vigorous enforcement policies by regulatory agencies, may give rise to additional expenditures or liabilities, which could impair our operations and adversely affect our business and results of operations.

Improvements in or new discoveries of alternative energy technologies could have a material adverse effect on our financial condition and results of operations. Because a significant part our business now depends on the level of activity in the oil and natural gas industry, any improvement in or new discoveries of alternative energy technologies (such as wind, solar, geothermal, fuel cells and biofuels) that increase the use of alternative forms of energy and reduce the demand for oil and natural gas could have a material adverse impact on our business, financial condition and results of operations. In addition, technological changes could decrease the quantities of water required for hydro fracturing operations or otherwise affect demand for our services.

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Increased regulation of hydraulic fracturing, including regulation of the quantities, sources and methods of water use and disposal, could result in reduction in drilling and completing new oil and natural gas wells or minimize water use or disposal, which could adversely impact the demand for our services.

TransCoastal's success and thus our success depend, in large part, on our level of exploration and production of oil and gas. TransCoastal's operations use hydraulic fracturing to drill new oil and gas wells. Hydraulic fracturing is a process that is used to release hydrocarbons, particularly natural gas, from certain geological formations. The process involves the injection of water (typically mixed with significant quantities of sand and small quantities of chemical additives) under pressure into the formation to fracture the surrounding rock and stimulate movement of hydrocarbons through the formation. The process is typically regulated by state oil and gas commissions and has been exempt (except when the fracturing fluids or propping agents contain diesel fuels) since 2005 from United States federal regulation pursuant to the Safe Drinking Water Act.

The EPA is conducting a comprehensive study of the potential environmental impacts of hydraulic fracturing activities, and a committee of the United States House of Representatives is also conducting an investigation of hydraulic fracturing practices. The results of the EPA study and House investigation could lead to restrictions on hydraulic fracturing. The EPA is currently working on new guidance for application of the Safe Drinking Water Act permits for drilling or completing processes that use fracturing fluids or propping agents containing diesel fuels. In addition, the EPA proposed regulations under the federal Clean Air Act in July 2011 regarding certain criteria and hazardous air pollutant emissions from hydraulic fracturing wells and, in October 2011, announced its intention to propose regulations by 2014 under the federal Clean Water Act to regulate wastewater discharges from hydraulic fracturing and other gas production. Legislation has been introduced before Congress to provide for federal regulation of hydraulic fracturing, including, for example, requiring disclosure of chemicals used in the fracturing process or seeking to repeal the exemption from the Safe Drinking Water Act. If adopted, such legislation would add an additional level of regulation and necessary permitting at the federal level and could make it more difficult to complete wells using hydraulic fracturing. Similar laws and regulations with respect to chemical disclosure also exist or are being considered by the United States Department of Interior and in several states, including certain states in which we operate, that could restrict hydraulic fracturing.

Future United States federal, state or local laws or regulations could significantly restrict, or increase costs associated with hydraulic fracturing and make it more difficult or costly for producers to conduct hydraulic fracturing operations, which could result in a decline of our exploration and production. New laws and regulations, and new enforcement policies by regulatory agencies, could also expressly restrict the quantities, sources and methods of water use and disposal in hydraulic fracturing and otherwise increase our costs and our customers’ cost of compliance, which could minimize water use and disposal needs even if other limits on drilling and completing new wells were not imposed. Any decline in exploration and production or any restrictions on water use and disposal could result in a decline in our drilling and rework activity and have a material adverse effect on our business, financial condition, results of operations and cash flows.

You Should Not Place Undue Reliance On Reserve Information Because Reserve Information Represents Estimates. While estimates of the gas reserves, and future net cash flows attributable to those reserves, were prepared for our subsidiary TransCoastal by independent petroleum engineers, there are numerous uncertainties inherent in estimating quantities of proved reserves and cash flows from such reserves, including factors beyond our control and the control of engineers. Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact manner. The accuracy of an estimate of quantities of reserves, or of cash flows attributable to these reserves, is a function of many factors, including but not limited to, the following:

- the available data;

- assumptions regarding future oil and gas prices;

- expenditures for future development and exploitation activities; and

- engineering and geological interpretation and judgment.

Reserves and future cash flows may also be subject to material downward or upward revisions based upon production history, development and exploitation activities and oil and gas prices. Actual future production, revenue, taxes, development expenditures, operating expenses, quantities of recoverable reserves and value of cash flows from those reserves may vary significantly from the estimates. In addition, reserve engineers may make different estimates of reserves and cash flows based on the same available data. For the reserve calculations, oil was converted to gas equivalent at six mcf of gas for one bbl. of oil. This ration approximates the energy equivalency of gas to oil on a Btu basis. However, it may not represent the relative prices received from the sale of our oil and gas production.

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The estimated quantities of proved reserves and the discounted present value of future net cash flows attributable to those reserves included in this document were prepared by independent petroleum engineers in accordance with the rules of the SFA69 and the SEC. These estimates are not intended to represent the fair market value of our reserves.

There are risks inherent in reworking, completing and operating hydrocarbon wells. Reworking and completing hydrocarbon wells involves a degree of risk, and sometimes results in unsuccessful efforts, for a variety of reasons. TransCoastal cannot control the outcome of operations entirely, and there can be no assurance that any operation will be successful. The results of any well operations cannot be determined in advance. A well may also be ruined or rendered unusable during operations due to technical or mechanical difficulties. Should a well be successfully completed or perforated, there is still no assurance that the zone in which the well is completed or perforated will produce hydrocarbons at a rate that will support profitable operations. All wells can encounter problems that render the well unusable, even after a period of successful operation. There can be no assurance that TransCoastal will be able to successfully rework, complete or operate any specific well, or will be able to operate sufficient wells to achieve a consistent positive cash flow or to achieve profitability.

TransCoastal's exploration and development activities are subject to many risks which may affect its ability to profitably extract oil reserves or achieve targeted returns. In addition, continued growth requires that it acquire and successfully develop additional oil reserves. Oil and gas exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may negatively affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions. While diligent well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and can be expected to negatively affect revenue and cash flow levels to varying degrees.

TransCoastal's Future Success Depends Upon Our Ability To Find, Develop And Acquire Additional Oil And Gas Reserves That Are Economically Recoverable. The rate of production from oil and natural gas properties declines as reserves are depleted. As a result, TransCoastal must continually locate and develop or acquire new oil and gas reserves to replace those being depleted by production. TransCoastal must do this even during periods of low oil and gas prices when it is difficult to raise the capital necessary to finance activities. Without successful exploration or acquisition activities, our reserves and revenues will decline. A future increase in our reserves will depend not only on our ability to explore and develop any properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or prospects. TransCoastal cannot guaranty that it will be able to continue to locate satisfactory properties for acquisition or participation. Moreover, if such acquisitions or participations are identified, TransCoastal may determine that current markets, terms of acquisition and participation or pricing conditions make such acquisitions or participations economically disadvantageous. TransCoastal cannot guaranty that commercial quantities of oil will be discovered or acquired by them.

Risks Related to TransCoastal's Debt

TransCoastal is ~~may~~ not becurrently ~~able~~ available to generate sufficient cash flow to meet their debt service obligations. Our ability to make payments on our subsidiary's indebtedness, and to fund planned capital expenditures, will depend on our ability to generate cash in the future, which is also dependent on the price we receive for our oil and natural gas. We are currently receiving less than one half of the price we were receiving 12 months ago. This, to a certain extent, is subject to conditions in the oil and natural gas industry, general economic and financial conditions, competition in the markets where we operate, the impact of legislative and regulatory actions on how we conduct our business and other factors, all of which are beyond our control. This risk could be exacerbated by any economic downturn or instability in United States and global credit markets.

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We cannot assure you that our business will generate sufficient cash flow from operations to service our subsidiary's outstanding indebtedness, or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other capital needs. If our business does not generate sufficient cash flow from operations to service our outstanding indebtedness, we may have to undertake alternative financing plans, such as:

● refinancing or restructuring our debt;

● selling assets;

● reducing or delaying acquisitions or capital investments; or

● seeking to raise additional capital.

We may not be able to implement alternative financing plans, if necessary, on commercially reasonable terms or at all, and implementing any such alternative financing plans may not allow us to meet our debt obligations. Our inability to generate sufficient cash flow to satisfy TransCoastal's debt obligations, or to obtain alternative financings, could materially and adversely affect our business, financial condition, results of operations and future prospects for growth.

In addition, a downgrade in our credit rating would make it more difficult for us to raise additional debt financing in the future. However, such a credit downgrade would not have an effect on our currently outstanding senior secured credit facility.

The amount of our debt and the covenants in the agreements governing our debt could negatively impact our financial condition, results of operations and business prospects.

Our level of indebtedness, and the covenants contained in the agreements governing our debt, could have important consequences for our operations, including:

● making it more difficult for us to satisfy our obligations under our indebtedness and increasing the risk that we may default on our debt obligations;

● requiring us to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general business activities;

● limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate and other activities;

● limiting management’s flexibility in operating our business;

● limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

● diminishing our ability to withstand successfully a downturn in our business or the economy generally;

● placing us at a competitive disadvantage against less leveraged competitors; and

● making us vulnerable to increases in interest rates, because certain debt will vary with prevailing interest rates.

We may be required to repay all or a portion of TransCoastal's debt on an accelerated basis in certain circumstances. If we fail to comply with the covenants and other restrictions in the agreements governing our debt, it could lead to an event of default and the consequent acceleration of our obligation to repay outstanding debt. Our ability to comply with debt covenants and other restrictions may be affected by events beyond our control, including general economic and financial conditions.

In particular, under the terms of our indebtedness, we must comply with certain financial ratios and satisfy certain financial condition tests, several of which become more restrictive over time and could require us to take action to reduce our debt or take some other action in order to comply with them. Our ability to satisfy required financial ratios and tests can be affected by events beyond our control, including prevailing economic, financial and industry conditions, and we cannot assure you that we will continue to meet those ratios and tests in the future. A breach of any of these covenants, ratios or tests could result in a default under our indebtedness.

If we default, our credit facility lenders will no longer be obligated to extend credit to us and they could elect to declare all amounts outstanding under the indenture or senior secured credit facility, as applicable, together with accrued interest, to be immediately due and payable. The results of such actions would have a significant negative impact on our results of operations, financial position and cash flows.

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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. (Removed and Reserved).

None.

Item 5. Other Information

The Company has entered into a Forbearance Agreement with Melody Business Finance, LLC (the “New Lender”) pursuant to the New Lender assuming the Loan Agreement, which was originally disclosed in the Company's Form 8-K filed with the SEC on February 24, 2015. The principal amount of the note is $15,750,000 with a maturity date of June 1, 2015. The New Lender has agreed to forbear all “Existing Events of Default” as well as agreed upon “Anticipated Events of Default” pursuant to the default provisions of the Loan Agreement. The Forbearance Agreement alters or adds several material terms to the Loan Agreement and stockholders are strongly urged to read the Forbearance Agreement attached as an exhibit to the above described Form 8-K.

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Item 6. Exhibits.

EXHIBIT INDEX

Exhibit Number	Description
(3)	Articles of Incorporation and Bylaws
3.1* *	Certificate of Incorporation as amended (incorporated by reference to an exhibit to our Form 8-K filed on July 3, 2013 File No. 001-14665, Ex. 10.1)
3.1(a)**	Certificate of Designation of Series F Preferred Stock (incorporated by reference to an exhibit to our Form 8K filed on May 15, 2013 File No. 001-14665, Ex. 3(i))
3.1(b)**	Certificate of Designation of Series G Preferred Stock (incorporated by reference to an exhibit to our Form S-1 filed on October 4, 2013 File No. 001-14665, Ex. 3.1(b))
3.1(c)**	Certificate of Designation of Series H Preferred Stock (incorporated by reference to an exhibit to our Form S-1/A filed on May 9, 2014 File No. 001-14665, Ex. 3.1(c))
3.2**	Bylaws as amended (incorporated by reference to an Annex B to our Definitive 14A filed on August 9, 2013 File No. 001-14665)
(10)	Material Contracts
10.1**	Eighth Amendment to Loan Agreement and Forbearance Agreement with Melody Business Finance, LLC (incorporated by reference to an exhibit to our Form 8-K filed on February 20, 2015 File No. 001-14655, Ex. 10.1)
10.2**	Ninth Amendment to Loan Agreement and Forbearance Agreement with Melody Business Finance, LLC (incorporated by reference to an exhibit to our Form 8-K filed on April 6, 2015 File No. 001-14655, Ex. 10.1)
(31)	(i) Rule 13a-14(a)/15d-14(a) Certifications (ii) Rule 13a-14/15d-14 Certifications
31.1*	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)	Section 1350 Certifications
32.1*	Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101	101.1NS XBRL Instance Document
		101.SCH XBRL Taxonomy Schema
		101.CAL XBRL Taxonomy Calculation Linkbase
		101.LAB XBRL Taxonomy Label Linkbase
		101.PRE XBRL Taxonomy Presentation Linkbase
		101.DEF XBRL Taxonomy Definition Linkbase

* Filed herewith.
** Filed prior.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TransCoastal Corporation (Registrant) ~~May~~August 1514, 2015 By: /s/ Stuart G. Hagler Stuart G. Hagler Chief Executive Officer, (duly authorized Officer)

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