UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended June 30, 2010

     .     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 0-32593

Wentworth Energy, Inc.

(Name of small business issuer in its charter)

Oklahoma, United States

73-1599600

(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)

800 N. Church Street, Suite #C, Palestine, Texas 75801

(Address of principal executive offices)

(903) 723-0395

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 (§232.405 of this chapter) 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 196,212,160 shares of common stock as of August 16, 2010.

EXPLANATORY NOTE: As reported in our Form 8-K filed November 10, 2010, the Board of Directors, based upon a recommendation from management, determined that the Company’s financial statements for the quarterly periods ended March 31, 2010 and June 30, 2010 should no longer be relied upon and should be restated.  This determination was made based on management’s conclusion that interest expense on the Senior Notes for the above periods were understated as a result of non-accrual of the additional 5.85% default interest amounting to $786,482 and  $1,572,964 for the three months ended March 31, 2010 and for the six months ended June 30, 2010, respectively.  As a result, we are filing this Amendment No. 1 on Form 10-Q/A to amend and restate in their entirety the following items of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 as originally filed with the Securities and Exchange Commission on August 16, 2010 (the “Original Form 10-Q”): (i) Item 1 of Part I “Financial Information,” and (ii) Item 3. Defaults upon Senior Securities, and we have also updated the signature page, the certifications of our Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2, 32.1 and 32.2. No other sections were affected, but for the convenience of the reader, this report on Form 10-Q/A restates in its entirety, as amended, our Original Form 10-Q. This report on Form 10-Q/A is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement described below.

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Table of Contents

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Wentworth Energy, Inc.

Consolidated Balance Sheets

(Unaudited)

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Wentworth Energy, Inc,

Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these financial statements

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Wentworth Energy, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

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Wentworth Energy, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

June 30, 2010

1. Nature of Operations and Basis of Presentation

Wentworth Energy, Inc. (“Wentworth” or the “Company”) is an exploration and production company engaged in oil and gas exploration and production primarily in the East Texas area. The Company’s strategy is to lease all of its property in exchange for royalty interests and working interest participation in shallow zones.

The accompanying unaudited interim consolidated financial statements of Wentworth Energy, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the SEC and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in Wentworth Energy’s Annual Report on Form 10-K for the year ended December 31, 2009 filed on April 15, 2010. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2009, as reported in the Form 10-K have been omitted.

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued revised authoritative guidance that requires more robust disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2 and 3. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009 (which is January 1, 2010 for the Company) except for the disclosures about purchases, sales, issuances, and settlements in the roll forward activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years (which is January 1, 2011 for the Company). The revised guidance was adopted as of January 1, 2010. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

No other accounting standards or interpretations issued recently are expected to a have a material impact on our consolidated financial position, operations or cash flows.

2. Going Concern

The accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore be required to realize its assets and retire its liabilities in other than the normal course of business and at amounts different from those in the accompanying financial statements. However, the Company has incurred significant, recurring losses from operations, has a working capital deficiency, and is in default of the terms of its senior secured convertible notes and convertible debentures. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon achieving profitable operations, receiving deferrals of the interest payments due and a waiver of its defaults of the amended debt agreements from its senior secured convertible note holders and convertible debenture holder, and injection of additional capital. The outcome of these matters cannot be predicted at this time. Management of the Company is actively seeking potential partners who possess the necessary resources to assist the Company in developing its remaining properties in order to secure additional funds through lease bonuses and overriding royalty interests.

3. Restatement of Previously Issued Financial Statements

The financial statements for the three and six months ended June 30, 2010 and related disclosures in this Amendment No. 1 to the Quarterly Report on Form 10-Q have been restated in accordance with the changes described below.

On November 10, 2010, the Board of Directors, based upon a recommendation from management, determined that the Company’s financial statements for the quarterly period ended June 30, 2010 should no longer be relied upon and should be restated.  This determination was made based on management’s conclusion that interest expense on the Senior Notes for the above period was understated as a result of non-accrual of the additional 5.85% default interest amounting to $786,482 and  $1,572,964 for the three and six months ended June 30, 2010, respectively.   

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The financial statements and other financial information in this Amendment No. 1 to the June 30, 2010 Form 10-Q have been restated accordingly.

A summary of the effects of this restatement is shown in the following table:

3. Embedded Derivative Contract Liabilities

As of June 30, 2010, the Company had the following embedded derivative contract liabilities outstanding:

Each reporting period, the above derivative liabilities are fair valued with the non-cash gain or loss recorded in the period as a gain or loss on derivatives. The above derivative instruments are not designated as hedging instruments.

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The valuation of the Company’s embedded derivatives and warrant derivatives are determined primarily using the Black-Scholes option pricing model. To determine the fair value of the derivatives, the Company evaluates assumptions regarding the probability of certain future events. No dividends were assumed due to the nature of the Company’s current business strategy. The fair values of the derivatives as of June 30, 2010 were estimated using the Black-Sholes model with the following assumption: $0.0024 quoted stock price; $0.001 to $8.00 exercise price; 168.74% to 194.32% volatility; .97 to 4.34 years estimated life; zero dividends and a 0.32 to 1.53% discount rate.

4. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is used which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are described as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 – Unobservable inputs reflect the Company’s judgments about the assumptions market participants would use in pricing the asset of liability since limited market data exists. These inputs are developed based on the best information available, using internal and external data.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of June 30, 2010.

5. Debt

For the six months ended June 30, 2010, convertible debentures amounting to $132,659 were converted into 90,971,816 shares of common stock. This conversion resulted in $90,973 of additional common stock and $41,686 of additional paid in capital.

6. Related Party Transactions

The Company paid management and consulting fees to its Directors, persons related to Directors or entities controlled by Directors. The total expense for these fees during the six months ended June 30, 2010 was $63,000. As of June 30, 2010, the outstanding balance owed related to these fees was $60,000.

Also, as of June 30, 2010, the Company had an account receivable of $13,050 due from an entity owned by a former President and director of the Company. The Company determined that it was overpaying overriding royalties to Roboco Energy, Inc., a corporation owned by Mike Studdard, the Company’s former President and former director, and the Barnes family. As a result, the Company recorded an account receivable for the overpayment. This overpayment will be deducted from future royalties.

7. Warrants and Stock-Based Compensation

There were no warrants issued, exercised or that expired during the six months ended March 31, 2010. Warrants outstanding at June 30, 2010 totaling 73,169,125 have a weighted average remaining life of 4.17 years and have an intrinsic value of $72,101.

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The Company utilizes stock options to compensate key employees, directors, officers and consultants. There were no options granted, exercised, forfeited or that expired during the six months ended June 30, 2010. Total stock based compensation expense was $0 and $4,222 for the six months ended June 30, 2010 and June 30, 2009 respectively. There was no unrecognized stock-based compensation as of June 30, 2010. Options outstanding as of June 30, 2010 totaling 15,096,000 have a weighted average remaining life of 1.86 years and have an intrinsic value of zero.

8. Asset Retirement Obligation

The following table summarizes the changes in the Company’s asset retirement obligation during the periods ended:

9. Subsequent Events

On July 26, 2010, the Company entered into a settlement agreement with Mike Studdard and Roboco Energy for release and conveyance of 3% Overriding Royalty Interest in mineral properties in Anderson and Freestone Counties, TX.

On various dates in July 2010, convertible debentures amounting to $28,800 were converted into 17,856,209 shares of common stock.

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

The following discussion should be read in conjunction with Item 6 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and the Notes to the Financial Statements contained in this report. Our financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q contain additional information that should be referred to when reviewing this material. Certain statements in this discussion may be forward-looking. These forward-looking statements involve risks and uncertainties, which could cause actual results to differ from those expressed in this report.

Cautionary statement regarding forward-looking statements

Various statements in this report, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future reserves, production, revenues, income and capital spending. When we use the words “will,” “believe,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project” or their negatives, other similar expressions or the statements that include those words, it usually is a forward-looking statement.

The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. We caution all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors detailed below and discussed in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on April 15, 2010. All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us, or persons acting on our behalf. The risks, contingencies and uncertainties relate to, among other matters, the following:

·

our business strategy,

·

estimated quantities of gas and oil reserves,

·

uncertainty of commodity prices in oil and gas,

·

our financial position,

·

our cash flow and liquidity,

·

replacing our gas and oil reserves,

·

our ability or inability to retain and attract key personnel,

·

uncertainty regarding our future operating results,

·

our ability or inability to obtain additional financing necessary to fund our operations and capital expenditures and to meet our other obligations,

·

competition in the oil and gas industry,

·

the effects of government regulation, permitting and other legal requirements,

·

plans, objectives, expectations and intentions contained in this report that are not historical, and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2009 and filed with the SEC on April 15, 2010.

Results of Operations

Overview

We experienced net losses of $2.0 million and $1.5 million for the three-months ended June 30, 2010 and 2009 respectively. The increase in the net loss of $0.5 million was due to a decrease in the net loss from discontinued operations ($1.2 million) offset by a reduction in the unrealized gain on derivatives ($1.7 million).

We also experienced net losses of $3.2 million and $5.3 million for the six-months ended June 30, 2010 and 2009 respectively. The decrease in the net loss of $2.1 million was due principally to a decrease in the net loss from discontinued operations ($1.5 million), a decrease in operating expenses ($0.3 million) and by an increase in the unrealized gain on derivatives ($.3 million).

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Three Months Ended June 30, 2010, Compared to Three Months Ended June 30, 2009

Revenues

Revenue from oil and gas sales was $0.08 million for the three months ended June 30, 2010 compared to $0.1 million for the three months ended June 30, 2009. The decrease in production revenue was primarily due to a decrease in production volumes due to the natural decline in the wells offset by slightly higher prices.

Operating Expenses

Our operating costs totaled $0.2 million for the three months ended June 30, 2010, compared to $0.4 million for the three months ended June 30, 2009. The $0.2 million decrease in expenses was primarily due to the decrease of $0.2 million in general and administrative expenses.

General and Administrative

Total general and administrative costs were $0.2 million for the three months ended June 30, 2010, versus $0.3 million for the three months ended June 30, 2009, a net decrease of $0.2 million. The $0.2 million decrease was due to lower legal and accounting fees because of lower activity.

Finance and Interest Costs

Finance and interest costs were $1.9 million for the three months ended June 30, 2010, compared to $1.9 million for the three months ended June 30, 2009. Finance and interest costs relate primarily to interest accrued on our senior secured convertible notes and our convertible debentures.

Other (Income) Expense

We had $1.1 million of other expenses for the three months ended June 30, 2010, versus $0.04 million for the three months ended June 30, 2009. The finance and interest costs have been discussed above. In addition to the interest and finance costs discussed above, unrealized gains related to the change in the fair value of the derivative contract liability went from $1.7 million at June 30, 2009 to a gain of $0.01 million at June 30, 2010. The derivative liabilities relate to the fair value of the beneficial conversion feature of our convertible debentures and senior secured convertible notes issued in 2006, and the fair value of the related warrants. Under guidance from ASC 815, the Company is required to report the liability at fair value and record the fluctuation in the fair value to current operations.

Loss from Discontinued Operations

The loss from discontinued operations went from $1.2 million for the three months ended June 30, 2009 to zero in for the three months ended June 30, 2010. The loss in 2009 relates to the sale of drilling equipment which we repossessed from CamTex Energy in March 2009.

Six Months Ended June 30, 2010, Compared to Six Months Ended June 30, 2009

Revenues

Revenue from oil and gas sales was $0.25 million for the six months ended June 30, 2010 compared to $0.33 million for the six months ended June 30, 2009. The decrease in production revenue was primarily due to a decrease in production volumes due to the natural decline in the wells offset by slightly higher prices.

Operating Expenses

Our operating costs totaled $0.5 million for the six months ended June 30, 2010, compared to $0.9 million for the six months ended June 30, 2009. The $0.4 million decrease in expenses was primarily due to the decrease of $0. million in general and administrative expenses.

General and Administrative

Total general and administrative costs were $0.4 million for the six months ended June 30, 2010, versus $0.8 million for the six months ended June 30, 2009, a net decrease of $0.4 million. The $0.4 million decrease was due to lower legal and accounting fees because of lower activity.

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Finance and Interest Costs

Finance and interest costs were $3.8 million for the six months ended June 30, 2010, compared to $3.8 million for the six months ended June 30, 2009. Finance and interest costs relate primarily to interest accrued on our senior secured convertible notes and our convertible debentures.

Other (Income) Expense

We had $1.4 million other expenses for the six months ended June 30, 2010, versus $3.1 million for the six months ended June 30, 2009. The finance and interest costs have been discussed above. In addition to the interest and finance costs discussed above, unrealized gains related to the change in the fair value of the derivative contract liability went from $0.5 million for the six months ended June 30, 2009 to $0.8 million for the six months ended June 30, 2010. The derivative liabilities relate to the fair value of the beneficial conversion feature of our convertible debentures and senior secured convertible notes issued in 2006, and the fair value of the related warrants. Under guidance from ASC 815, the Company is required to report the liability at fair value and record the fluctuation in the fair value to current operations.

Loss from Discontinued Operations

The loss from discontinued operations went from $1.5 million for the six months ended June 30, 2009 to zero in for the six months ended June 30, 2010. The loss in 2009 relates to the sale of drilling equipment which we repossessed from CamTex Energy in March 2009.

Liquidity and Capital Resources

We have incurred significant losses from operations and we are in default on the terms of our senior secured convertible notes and convertible debentures as of October 1, 2008. These factors have raised substantial doubt about the Company’s ability to continue as a going concern. Our financial position is critically dependent upon the following: (1) successful discovery and economical recovery of adequate hydrocarbons on our properties; (2) access to additional equity and/or other forms of funding; (3) finding a joint venture partner to farm-in and develop our properties; and (4) obtaining a forbearance and deferral of interest and principal payments from the holders of our senior secured convertible notes and convertible debentures. There can be no assurance that we will be successful in any of these matters. As the Company has no debt or equity funding commitments, we will need to rely upon best efforts financings. There can be no assurance that the Company will be successful in raising the required capital. The failure to raise sufficient capital through future debt or equity financings or otherwise may force us to curtail operations, sell assets, or it may result in the failure of our business.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company is collected and communicated to management to allow timely decisions regarding required disclosures. The Chief Executive Officer and the Chief Financial Officer have concluded, based on their evaluation as of June 30, 2010 that, as a result of the following material weaknesses in internal control over financial reporting as described further in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2010, disclosure controls and procedures were ineffective in providing reasonable assurance that material information is made known to them by others within the Company:

a) We do not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of generally accepted accounting principles commensurate with our complexity and our financial accounting and reporting requirements. We have limited experience in the areas of financial reporting and disclosure controls and procedures. Also, we do not have an independent audit committee. As a result, there is a lack of monitoring of the financial reporting process and there is a reasonable possibility that material misstatements of the consolidated financial statements, including disclosures, will not be prevented or detected on a timely basis; and

b) Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.

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Changes in internal control over financial reporting

Our internal control over financial reporting has been modified during our most recent year by adding additional advisors to address deficiencies in the financial closing, review and analysis process, which has improved our internal control over financial reporting. On January 15, 2010 we hired a new Chief Financial Officer to further strengthen our internal controls.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is a party to various material proceedings, which are described in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2009 under the caption “Item 3. Legal Proceedings.” During the three month period covered by this Quarterly Report on Form 10-Q, the Company has not been named in any new material legal proceeding, and there have been no material developments in the previously reported legal proceedings except as set forth below:

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table describes all securities we issued during the period covered by this report without registering the securities under the Securities Act.

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(A) With respect to sales designated by “Sec. 4(2),” these shares were issued pursuant to the exemption from registration contained in to Section 4(2) of the Securities Act of 1933 as privately negotiated, isolated, non-recurring transactions not involving any public offer or solicitation. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.

Item 3. Defaults upon Senior Securities

The Company is in default of the terms of its senior secured convertible notes and convertible debentures. The default was effective on October 1, 2008 due to our inability to make interest payments on the senior secured convertible notes that were due October 1, 2008, January 1, 2009, April 1, 2009, July 1, 2009 and October 1, 2009. This resulted in a cross-default under the terms of our convertible debentures. The principal amount of the senior secured convertible notes and convertible debentures is $53.8 million and $1.0 million, respectively, as of June 30, 2010. Accrued interest on these amounts totaled approximately $15.9 million as of June 30, 2010. Upon an event of default, the note holders and debenture holders may require the Company to redeem all or a portion of the notes and debentures.

Item 4. (Removed and Reserved)

Item 5. Other Information

On July 26, 2010 Michael Studdard resigned as member of the Company’s board of directors. Mr. Studdard’s resignation was not the result of any disagreement with the Company on any matter relating to operations, policies or practices. Also on July 26, 2010, Roboco Energy, an entity owned by Mr. Studdard and others, returned to the Company its 3.00% overriding royalty interests in the Company’s mineral properties in Anderson and Freestone Counties.

Item 6. Exhibits

The following exhibits are attached hereto or are incorporated by reference:

* Filed herewith

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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.

WENTWORTH ENERGY, INC.

Date: January 4, 2011

/s/ DAVID W. STEWARD                            

David W. Steward, duly authorized officer

and Principal Executive Officer

Date: January 4, 2011

/s/ ALLEN MCGEE                                     

Allen McGee, Principal Financial Officer

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