10-K 1 form10k.htm QUARTERLY REPORT FOR YEAR ENDED DECEMBER 31, 2009 Eurogas, Inc.: Form 10-K - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2009

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

For the transition period from _______________to _______________

EUROGAS, INC.
(Exact name of registrant as specified in its charter)

Utah 000-24781 87-0427676
(State or other (Commission File (IRS Employer
jurisdiction No.) Identification No.)
of incorporation or    
organization)    

14 Wall Street 22nd Floor
New York, NY
10005
(Address of principal executive offices, including Zip Code)

Registrant's telephone number, including area code: (212) 618-1274

Securities registered pursuant to Section 12(b) of the Act: None
   
Name of each exchange on which registered: None
   
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
   
  (Title of Class)

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 [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S–K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10–K or any amendment to this Form 10–K. [X]

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
[ ] Yes [X] 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.

[ ] Large accelerated filer [ ] Accelerated filer
[ ] Non-accelerated filer (Do not check if a smaller reporting company) [X] Smaller reporting company

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

On May 7, 2010, the registrant had 322.220.436 shares of common stock outstanding. The aggregate market value of the common stock based upon the closing bid price for the common stock of $ 0.19 per share on May 7, 2010 was approximately $ 61,000,000.


TABLE OF CONTENTS TO FORM 10-K

    PAGE
 PART I 
Item 1. Business 3
Item 2. Property 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 13
     
 PART II 
Item 5 Market for Registrant's Common Stock and Related Stockholder Matters 13
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 17
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 18
     
 PART III 
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 23
Item 13. Certain Relationships and Related Transactions 25
Item 14. Controls and Procedures 25
     
 PART IV 
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 26
     
  Documents Filed  
  1. Financial Statements  
  2. Financial Statement Schedule  
  3. Exhibit List  
  Reports on Form 8-K  
  Exhibits  
  Financial Statement Schedules  
SIGNATURES   32

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PART I

This Annual Report on Form 10-K for the year ended December 31, 2009 contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties. The reader is cautioned that the actual results of EuroGas, Inc. and its consolidated subsidiaries will differ (and may differ materially) from the results discussed in these forward-looking statements. Statements considered to be forward-looking by the Company include statements in which the Company discloses its beliefs, expectations or anticipations, and statements using the words “may,” “should,” “might,” “could,” “might,” “would,” “expect,” “believe” and “anticipate.” Factors that could cause or contribute to such differences include those factors discussed herein under “Factors That May Affect Future Results” and elsewhere in this Form 10-K generally. The reader is also encouraged to review other filings made by the Company with the Securities and Exchange Commission (the “SEC”) describing other factors that may affect future results of the Company.

Item 1. Business

General

We are primarily engaged in the acquisition of rights to explore for and exploit natural gas, unconventional gas, coal bed methane gas, crude oil and minerals. We have acquired interests in several large exploration concessions and are in various stages of identifying industry partners, farming out exploration rights, undertaking exploration drilling, and seeking to develop production. Unless otherwise indicated, all dollar amounts in this Form 10-K are reflected in United States dollars.

Summary Description of Current Activities

Activities in Arizona, USA

Tombstone Exploration Corporation

On June 30, 2008 the company signed a non- brokered private placement with Tombstone Exploration Corporation for the sale of 2,000,000 shares of common stock for $ 0.20 per share with a total amount of $ 400,000. Attached was a three year warrant for the purchase of an additional 1,000,000 shares of common stock at $ 0.40 per share.

In April 2010 the company signed another private placement for 25 Million shares of common stock for $ 0.04 per share with an attached warrant for additional 25 million shares of common stock for $ 0.10 per share. EuroGas has the right to nominate two members of the board of directors, including the position of the Chief Executive Officer.

Tombstone “Sandwich” Claims

On January 10, 2008, the company entered into a letter of intent with Rio Plata Exploration and Mining Inc. pursuant to which the company was granted an option to acquire a 60% interest in and to 56 mining claims, covering approximately 2,000 acres (809 ha.) and known as the Tombstone “Sandwich” Property, a gold and silver base metals property, located in the Tombstone Mining District of Arizona. On April 2, 2009, a formal option agreement having retroactive effect to January, 2008, was subsequently entered into between Rio Plata and the company covering this acquisition. Under the terms of this agreement, the company earned the 60% interest by the payment of $ 250,000 and the issuance of 12,000,000 restricted common shares.

On April 2, 2009, the registrant entered into another option agreement with Rio Plata to acquire the remaining 40% interest in the Tombstone “Sandwich” claims, plus a $3,000 reclamation bond, in exchange for the payment of $ 5,500 and the issuance of 8,000,000 restricted common shares.

Although 5,500,000 shares of common stock are not allotted yet, both parties agreed, that the company owns all rights, title and a 100% interest in the Tombstone “Sandwich” claims.

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TEI Open Pit Mine

Effective April 2, 2009, the company entered into an assignment agreement with Henry & Munroe, LLC, pursuant to which Henry & Munroe assigned to the company all rights and obligations in and to an option to purchase real estate agreement dated March 3, 2009 between Henry & Munroe (as Optionee) and Dale Turner, Tombstone Development Co. and Tombstone Hills LLC (as Optionors). This agreement covers approximately 485 acres (196 ha.) in three parcels of land, and is known as the TEI Open Pit Mine located in the Tombstone Mining District of southeast Arizona.

The consideration paid to Henry & Munro consisted of $ 10,000 and the issuance of 2,000,000 restricted common shares of the company.

In the event the company wishes to exercise the option to acquire the TEI Open Pit Mine, it must pay the Optionors $ 600,000 for Parcel A of the lands (approximately 200 acres), $ 400,000 for Parcel B of the lands (approximately 150 acres), and $ 540,000 for Parcel C of the lands (approximately 135 acres). The company paid an amount of approx. $ 55,000 cash as down payment in order to exercise the options.

Rosemount Claims

On April 2, 2009, the company entered into an option agreement with Rio Plata and Piejo Partners, Inc., pursuant to which the company was granted the right to purchase 58 BLM claims located in Section 3, Township 18s, Range 17e, Gila Salt River Basin and Meridian, Arizona from Rio Plata and Piejo, each as to 50%. Consideration for the option consists of the issuance to Rio Plata and Piejo of 500,000 restricted common shares of the registrant. In order to exercise the option and acquire these claims, the company must issue an aggregate of 8,000,000 restricted shares to Rio Plata and Piejo, each as to one-half, on or before September 30, 2009.

After reviewing the company decided not to exercise the option and to concentrate on the above mentioned three other investments in Arizona.

Activities in Canada

The companies 100 % wholly owned subsidiary Beaver River Ltd. has royalty rights in the Beaver River natural gas project, which is operated by Questerre Energy, a Calgary based oil & gas company. The company had farmed out its original working interest held by Beaver River Resources Ltd. to Questerre Energy for a royalty interest in the Beaver River Pool. Questerre Energy has spent during the last 10 Years in excess of 20 Million Can $ and has tried to re-establish natural gas production. In the last two years Questerre Energy was successful in bringing back some of the former producing wells to production. The company has received minor royalties from production.

Activities in United Kingdom

McCallan Oil & GAS (UK) Limited (“McCallan”)

McCallan is a private UK Company previously owned by Regent Ventures Ltd. Canada as to 45 % and by Mr. Hans D. Dietmann as to 55 %.

McCallan's main assets are its wholly-owned subsidiaries EuroGas Polska sp.zo.o ("EuroGas Polska"), a Polish company, and Vienna, Austria based EuroGas GmbH ("EuroGas Austria").

Regent Ventures Ltd.

On May 1, 2008 the company signed a Share Option Agreement with Regent Ventures Ltd. (Regent), a Canadian public company, to acquire Regent's 45% interest in McCallan Oil & Gas (UK) Ltd..

Under the terms and conditions of the agreement, Regent has granted EuroGas the Option to purchase Regent's entire interest in McCallan Oil & Gas (UK) Ltd in exchange for the issuance of 10 million restricted common shares of EuroGas and a cash-payment of CDN $ 3 million payable in three stages.

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The company has issued the 10 Million Common Shares of Euro Gas during 2008.

The date of the final cash-payment of 3 Million Can $ was postponed by 2 amendment agreements until March 31, 2010. For the first amendment the company issued a signing bonus of 2 Million shares of restricted common stock of EuroGas in 2009 and for the second amendment 1 Million shares of non-restricted common stock of EuroGas have to be issued.

During April 2010, the Company entered into a further amending agreement with Regent, where Regent has extended the due date of the $ 3,000,000 cash payments to June 30, 2010. In consideration for the extension, the company agreed to issue an additional signing fee of 1,000,000 shares to Regent, free of restriction from trading. In addition Regent exercised the option to elect to receive up to $ 1,500,000 of the cash payment due on closing in shares in the capital of the company at the lower of the then market price or $0.25 per share. Regent still may elect to convert also on the balance of the cash payment at the then market price of the shares.

Hans D. Dietmann

On May 28, 2008 the company entered into an agreement to acquire a 30% interest in McCallan Oil & Gas (U.K.) Ltd. (McCallan), from Mr. Hans D. Dietmann, McCallan's controlling shareholder and Managing Director, and secured an option to purchase an additional 25% interest in McCallan from Mr. Dietmann.

The company purchased Mr. Dietmann's 30% interest by issuing 20,000,000 restricted EuroGas, Inc. common shares, 1 Million Preferred Shares of the Company and by cash payments totalling 750,000 US $. Any stock issued to Mr. Dietmann was subject to a three year lock-up agreement which prohibited the sale or transfer of these shares without EuroGas' consent. The lock-up agreement was cancelled in 2009 in combination with Mr. Dietmann providing working capital to the company in the amount of approx. $ 1,600,000.

On April 1, 2010 the company and Mr. Dietman entered into a final agreement enabling the company to purchase the remaining 25 % interest in McCallan for issuing 15 Million restricted common shares of the company as per the terms & conditions of the May 28, 2008 agreement and by Mr. Dietmann foregoing ownership of the 1 Million preferred shares.

Activities in Poland

McCallan owns 100 % of EuroGas Polska Sp.z.o.o. (EuroGas Polska)

EuroGas Polska owns a 24% interest in a large Joint Operating Agreement (JOA) operated by Poland's national oil & gas concern Polish Oil & Gas ("PGNiG"), which itself owns 51% in the JOA. The balance of 25% is held by Aurelian Oil & Gas Plc, a U.K. public company listed on the London Stock Exchange. The JOA comprises approximately 3,200 square kilometers with 10 oil and gas concessions in the Polish Carpathian Mountains originally owned by Eurogas Polska and farmed out to PGNIG in the fall of 2006. PGNiG and the Polish Ministry of Environment and Natural Resources have publicly stated in the Annual Reports on Poland's hydrocarbon reserves in the last couple of years the existence of a potential 300,000,000 Barrels of Oil in Place in the southern portion of the concession area. PGNIG has recently informed the JOA Partners Aurelian and EuroGas Polska that based on the 2008/ 2009 seismic works conducted on the Bieszcady lead within a small portion of the concession area the updated prospect inventory amounts now to a high estimate of approx. 1,7 Billion Barrels of Oil in Place (low estimate 440,000,000 Barrels of Oil in Place). PGNIG estimated that “recoverable reserves” may exist in this area with a high estimate of approx. 350 million bbls “recoverable reserves” (80 million bbls as low estimate). PGNIG has suggested to the company to commence drilling the first of 3 wells in the fall of 2010.

In 2008 the JOA Partners decided to commence a large seismic program in the southern portion of the JOA’s approximately 3,200 square kilometre (km) concession blocks near the City of Sanok in South-East Poland. After having formally informed the European Commission in Brussels and after having received all necessary approvals from the Polish Ministry of Environment, Forestry and Natural Resources in Warsaw, the Seismic Programm started in 2009 with a total budget of appr. 8 Million US $ of which EuroGas Polska has paid approx. $ 2,000,000. EuroGas Polska is in good standing under the terms and conditions of the JOA.

In December 2009 EuroGas Polska Sp. z o.o entered into a Confidentiality & Secrecy Agreement with Total E&P Activites Petrolieres (Total), a wholly owned subsidiary of Total S.A., one of the world's largest oil companies, which has expressed an interest in evaluating and possibly acquiring certain EuroGas Polska oil and gas assets. With the permission of the JOA EuroGas Polska is currently disclosing and submitting to Total all relevant geological and technical data.

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Activities in Austria

McCallan is the 100 % owner of EuroGas GmbH, a private company based in Vienna, Austria (“EuroGas Austria”). EuroGas Austria is handling all European administrative activities of McCallan and of the company.

Activities in Slovakia

EuroGas Austria owns a 33% shareholding in Rozmin s.r.o. (Rozmin), a Slovakian mining company. Together with the company’s 57% shareholding in Rozmin, which was purchased by the company from Belmont Resources Ltd. on March 27, 2001 (see details of the Belmont transaction Item 15 Note 5), EuroGas Austria and the company together will own an undivided 90% shareholding interest in Rozmin s.r.o. subject to a final payment by the Company to Belmont. The remaining 10% interest in Rozmin is owned by Mr. Heinz Schernikau, the owner of a Berlin based large German coal-trading company.

Rozmin plans to place the huge Germerska Poloma talc (soapstone) deposit into production after the Supreme Court of the Slovak Republic in a non-appealable landmark decision, published on April 26, 2008, has ruled that the cancellation of Rozmin’s mining concession at Gemerska Poloma in January 2005 by the Ministry of Economy’s Mining Office at Spisska Nova Ves was considered a severe violation of Rozmin’s civil and constitutional rights under the laws of the Slovak Republic. Ownership of the Gemerska Poloma concession was taken away illegally from Rozmin by the Ministry of Economy’s Mining Office at Spisska Nova Ves in January 2005 and was subsequently transferred by the Ministry of Economy’s Mining Office at Spisska Nova Ves and the Supreme Mining Office at Banska Stiavna in a dubious and - in the opinion of the Company – corrupt transaction – to a small Slovak accounting service company owned and controlled by Peter Corej and his wife. See further details about Peter Corej et al and his involvement in this matter in the Company’s 10 K per December 31, 2007.

The company, EuroGas Austria and Rozmin have separately informed the European Commission at Brussels, Belgium, about the final non-appealable outcome of the litigation as the Slovak Republic is a full Member of the European Union which has just introduced on Jan.1, 2009, the EU’s common currency, the Euro, as its own currency, and which has to fully abide by the law and the constitution of the European Commission. In addition the company, EuroGas Austria and Rozmin have demanded the immediate full reinstatement of Rozmin’s concession rights from the Minister of Economy of the the Slovak Republic.

After receipt of the non-appealable final decision by the Supreme Court of the Slovak Republic, the company and EuroGas Austria have instructed its US and European solicitors to initiate civil and criminal legal procedures seeking damage from all parties and individuals involved in the illegal cancellation scheme of Rozmin’s mining concession at Gemerska Poloma. The company’s solicitors are currently in a process to prepare the legal proceedings in Europe and in the US.

In addition to the legal remedies described above the company, EuroGas Austria and Rozmin have also submitted to the Attorney General’s Office of the Slovak Republic as well as to the Tax Authorities and the Anti-Corruption Police Force of the Slovak Republic relevant information of the matter and have requested an investigation into the illegal – and in the opinion of the company, EuroGas Austria and Rozmin – corrupt practices by Slovak government officials.

In March 2009 EuroGas Austria signed a Long-Term Talc Supply Agreement with Mondo Minerals to go into effect once the concession will be given back to the rightful owner Rozmin by the Slovak courts. The Agreement calls for Rozmin to supply a minimum of 60,000 tons of Gemerska Poloma talc per year for a period of 10 years with Mondo Minerals holding the option to extend the agreement for another 10 years. Mondo Minerals has also been granted a right of first refusal to acquire Rozmin in the event that the Company opts to sell a 51% or greater interest in Rozmin.

At this moment Rozmin is still involved in several court cases to reinstate Rozmin’s concession.

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Activities in Ukraine

Eastern Ukraine

After signing a Memorandum of Understanding (MOU) in mid 2008 with OJSC ZNVKIF New Technologies (ZNT) of Kiev, Ukraine, a corporative Ukrainian investment fund, EuroGas Austria became a 50 % shareholder in the newly established OOO (TOB) EuroGas Ukraine, a private Kiev based company in December 2008.

The acquisition of three additional unconventional gas concessions in January 2010 completed the acquisition program for a total of five unconventional gas (Coal Bed Methane [CBM] and shale gas) concessions for TOB EuroGas Ukraine. The five unconventional gas concessions held by EuroGas Ukraine under a Joint Activity Agreement with Nadra Luganshchiny Ltd., a wholly-owned subsidiary of NT, cover an area of 512 square kilometres. The largest concession (Marijewvskogo Poligon) encompasses 251 square kilometres. According to a report prepared for the World Bank by Montan Consulting GmbH of Germany, there are at least 533 bcf (0,5 TCF) of methane gas resources in coal seams on the Maijewvskogo license area. Preparations for drilling the concessions are underway and discussions are currently being held with a Toronto based Canadian oil & gas company to commence a drilling program in the fall of 2010 with state-of-the-art horizontal drilling and modern fracking equipment.

Western Ukraine

In September 2009 EuroGas Austria signed a Memorandum of Understanding with the Ukrainian Government to explore for unconventional gas, such as shale and CBM gas, in the Lublin Basin in Western Ukraine. EuroGas was the first foreign company to successfully drill a coalbed methane well in the Ukrainian part of the Lublin Basin in the late 1990s before former management of EuroGas opted to withdraw from Western Ukraine, a move which current management has reversed several years ago, because of the hydrocarbon potential of Western Ukraine in general, and of the Lublin Basin in particular.

In April 2010 EuroGas Polska sp.z o.o. entered into a confidentiality agreement with Total E&P Activites Petrolieres (Total), a wholly owned subsidiary of Total S.A., one of the world's largest oil companies. The agreement was entered into in connection with the evaluation and possible acquisition by Total of certain rights held by EuroGas Polska's wholly-owned West Ukrainian subsidiary OOO (TOB) Zahid EuroGas in an onshore region in Western Ukraine.

The properties under evaluation by Total are situated on the company’s former coal bed methane (CBM) concession near the Ukrainian/Polish border. This area within the Ukrainian part of the Lublin trough is offsetting recently acquired shale gas concessions by ExxonMobil, Chevron, Marathon Oil and Polish Oil & Gas (PGNiG) within the Polish part of the Lublin trough on the Polish side of the Polish/Ukrainian border.

Disclosure of Oil and Gas Operations

Reserves Reported to Other Agencies. No reserves were reported to any other federal agency or authority for the years ended December 31, 2009 or December 31, 2008.

Competition

In the business of exploration, development, and production of oil and gas resources, we compete with some of the largest corporations in the world, in addition to many smaller entities. Many of the entities we compete with have access to far greater financial and managerial resources than those available to EuroGas. As a result of the exclusive nature of certain concessions that we hold, to the extent that we are able to successfully find, develop, and produce hydrocarbon resources, we will be able to exclude any competitor from production of the resources located on the concessions, but we cannot exclude competitors from providing natural gas or other energy sources at prices or on terms that purchasers deem more beneficial.

7


Employees

     As of December 31, 2009, we had 22 administrative employees in our company. None of our employees is represented by a collective bargaining organization, and we consider our relationship with our employees to be satisfactory. In addition to our employees, we regularly engage technical and other consultants to provide specific geological, geophysical, and other professional services on an as-needed basis.

Operational Hazards and Insurance

     We are engaged in the exploration for unconventional, methane and natural gas and the drilling of wells and, as such, our operations are subject to the usual hazards incident to the industry. These hazards include blowouts, cratering, explosions, uncontrollable flows of gas or well fluids, fires, pollution, releases of toxic gas, and other environmental hazards and risks. These hazards can cause personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage, and suspension of activities. We do not have any hazard insurance. The occurrence of a significant adverse event that is not covered by insurance would have a material adverse effect on EuroGas.

Financial Information about Foreign and Domestic Operations

     The information set forth as “Note 8 – Geographic Information” of our consolidated financial statements included in this Form 10-K contains information regarding financial information about foreign and domestic operations of the Company.

Factors That May Affect Future Results

     This report on Form 10-K contains forward-looking statements. You can identify forward-looking statements by their use of the forward-looking words “anticipate,” “estimate,” “project,” “likely,” “believe,” “intend,” “expect,” or similar words. These statements discuss future expectations, contain projections regarding future developments, operations, or financial conditions, or state other forward-looking information. When considering the forward-looking statements made in this report, you should keep in mind the risks noted in “Factors That May Affect Future Results” below and other cautionary statements throughout this report. You should also keep in mind that all forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If one or more risks identified in this report or other filing materializes, or any other underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected, or intended.

     Our consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

We have incurred significant losses since inception, which have resulted in an accumulated deficit of $159,699,975 at December 31, 2009. These losses and this significant deficit raise substantial doubt about our ability to continue as a going concern. The accompanying audited consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

     We are dependent upon financing activities to fund our operations and will continue to require significant funds to meet our obligations and to pursue our business plan.

     EuroGas has historically been undercapitalized. Actually we have no source of revenues, do not anticipate any revenues in the near term and expect to continue to incur operating losses in the foreseeable future. As a result, we are entirely dependent on financing from the sale of securities or loans in the future and/or amounts made available by industry partners in the future. We expect to continue to incur significant costs as part of our ongoing and planned projects and do not anticipate that these costs will be offset fully, if at all, by revenues for the foreseeable future. If we are unable to raise capital from the sale of securities, loans, or industry partnerships in the future, we will have to scale back our operations and may, at some point, become insolvent.

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Our projects are highly speculative and generally only at the exploration stage.

     Our assets and interests are primarily in methane gas, natural gas, unconventional gas and crude oil exploration and mineral development projects. These projects are highly speculative, whether we are still at the exploratory stage or have commenced development. We can provide no assurance that any drilling, testing, or other exploration project will locate recoverable gases or other fuels in sufficient quantities to be economically extracted. Several test wells are typically required to explore each concession or field. We may continue to incur significant exploration costs in specific fields.

     Some of our projects are in countries that have fragile and unpredictable political and socio-economic systems.

     Our operations in Eastern Europe, especially in the Eastern and Western Ukraine carry with them certain risks in addition to the risks normally associated with the exploration for, and development of, natural gas and other fuels. Although recent political and socio-economic trends in these countries have been toward the development of market economies that encourage foreign investment, these countries continue to be subject to the risks of political instability, a change of government, unilateral renegotiation of concessions or contracts, nationalization, foreign exchange restrictions, and other uncertainties. The terms of the agreements governing our projects are subject to administration by the various governments and are, therefore, subject to changes in the government itself, changes in government personnel, the development of new administrative policies or practices, the adoption of new laws, and many other factors.

     Moreover, we may be required to obtain and renew licenses and permits on an ongoing basis in connection with further exploration, the drilling of wells, the construction of transportation facilities and pipelines, the marketing of any fuel that may be produced, and financial transactions necessary for all of the foregoing. The rules, regulations, and laws governing all such matters are subject to change by the various governmental agencies involved. We can provide no assurance that the laws, regulations, and policies applicable to our interests in various countries in which our projects are located will not be radically and adversely altered at some future date.

     The continuance, completion or renewal of many of our licenses may be subject to the discretion of government authorities and we cannot therefore predict with certainty whether they will be continued or renewed or whether we will be successful in obtaining all permits and licenses required to fully exploit our interests in those countries.

     In general, we have had the right to conduct basic exploration on all concessions or fields in which we have an interest. However, in order to drill for, recover, transport or sell any gas or other hydrocarbons, we will generally be required to obtain additional licenses and permits and enter into agreements with various landowners and/or government authorities. The issuance of most such permits and licenses will be contingent upon the consent of national and local governments having jurisdiction over the production area, which entities have broad discretion in determining whether or not to grant permits and licenses. Moreover, even if obtained, such licenses, permits, and agreements will generally contain numerous restrictions and require payment by us of a development/exploration fee, typically based on the market value of the economically recoverable reserves. The amount of a fee and other terms of any such license, permit, or agreement will affect the commercial viability of any extraction project. We can provide no assurance that we will be able to obtain the necessary licenses, permits, and agreements. Even if we do obtain such items, the associated costs, delays and restrictions may significantly affect our ability to develop the affected project.

     Our projects may never begin producing valuable hydrocarbons.

     None of the projects in which we own an interest is presently producing gas or other hydrocarbons. We can provide no assurance that any of our projects will at any time commence production of any valuable resource.

     We are dependent upon certain officers, key employees, and consultants, the loss of which would adversely affect our ability to continue in business.

     We are dependent on the services of Wolfgang Rauball, Chairman and Chief Executive Officer of the company, who had personally guaranteed substantial investments by various creditors as well as solving the company’s bankruptcy proceedings over the last couple of years. We do not maintain key-man life insurance on any of EuroGas employees.

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     Subsequent evaluation may reveal that our unproved properties are not valuable, and we may need to record an impairment of the value of those properties, which would adversely affect our financial condition.

     We capitalize costs related to unproved gas and mineral properties under the full cost method. We review our unproved properties periodically to assess whether an impairment allowance should be recorded. On December 31, 2009, we had capitalized costs related to the acquisition of mineral properties not subject to amortization in the amount of $ 2,050,000.

     Severe weather will interrupt, and may adversely affect, our activities in various parts of the world.

     Severe weather conditions frequently interrupt much of our exploratory and testing work. Heavy precipitation sometimes makes travel to exploration sites or drilling locations difficult or impossible. Extremely cold temperatures may delay or interrupt drilling, well servicing, and production (if commenced, of which we can give no assurance). The temperatures in all of the regions in which we have exploratory or other operations are extremely cold. Even if recoverable reserves are discovered in regions prone to severe weather, the above-described adverse weather conditions may limit production volumes, increase production costs, or otherwise prohibit production during extended portions of the year.

     The prices of the various hydrocarbons we produce or may produce are volatile and unstable.

     The prices of oil, natural gas, methane gas and other fuels have been, and are likely to continue to be, volatile and subject to wide fluctuations in response to numerous factors, including the following:

  • changes in the supply and demand for such fuels;
  • political conditions in oil, natural gas, and other fuel-producing and fuel-consuming areas;
  • the extent of domestic production and importation of such fuels and substitute fuels in relevant markets;
  • weather conditions;
  • the competitive position of each such fuel as a source of energy as compared to other energy sources;
  • the refining capacity of crude purchasers;
  • the effect of governmental regulation on the production, transportation, and sale of oil, natural gas, and other fuels.

     Low prices or highly volatile prices for any fuel being explored or produced at one of our projects will adversely affect our ability to secure financing or enter into suitable joint ventures or other arrangements with industry participants. In addition, if we commence recovery of fuel at any of our projects, a low or volatile price for the fuel being recovered will adversely affect revenue and other operations.

     Our operations involve numerous hazards, and we maintain no insurance against such risks.

     Exploring for fuel, drilling wells, and producing fuel involves numerous hazards, including the following:

  • fire,
  • explosions,
  • blowouts,
  • pipe failures,
  • casing collapses,
  • unusual or unexpected formations and pressures, and
  • Environmental hazards such as spills, leaks, ruptures, and discharges of toxic substances.

     If any of these events were to occur we might be forced to cease any or all of our exploration, drilling, or production activities on a temporary or permanent basis. In addition, these events might lead to environmental damage, personal injury, and other harm resulting in substantial liabilities to third parties. We do not maintain insurance against these risks. Even if we were to obtain insurance, we might not be insured against all losses or liabilities that might arise from these hazards because the insurance may be unavailable at economic rates, due to limitations in the insurance policies, or other factors. Any uninsured loss would likely have a material adverse impact on our business and operations.

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     Our operations are subject to numerous environmental laws, compliance with which may be extremely costly.

     Our operations are subject to environmental laws and regulations in the various countries in which they are conducted. These laws and regulations frequently require completion of a costly environmental impact assessment and government review process prior to commencing exploratory and/or development activities. In addition, environmental laws and regulations may restrict, prohibit, or impose significant liability in connection with spills, releases, or emissions of various substances produced in association with fuel exploration and development.

     We can provide no assurance that we will be able to comply with applicable environmental laws and regulations or that those laws, regulations or administrative policies or practices will not be changed by the various governmental entities. The cost of compliance with current laws and regulations or changes in environmental laws and regulations could require significant expenditures. Moreover, if we violate any governing laws or regulations, we may be compelled to pay significant fines, penalties, or other payments. Costs associated with environmental compliance or noncompliance may have a material adverse impact on our financial condition or results of operations in the future.

     Most of our outstanding shares are free trading and, if sold in large quantities, may adversely affect the market price for our common stock.

     Most of the approximately 322,220,436 shares of common stock issued and outstanding as of December 31, 2009 are free trading or are eligible for resale under Rule 144 under the Securities Act. Although the resale of certain of these shares may be subject to the volume limitations and other restrictions under Rule 144, the possible resale of the remaining shares may have an adverse effect on the market price for our common stock.

     EuroGas has authorized capital of 325,000,000 shares of common stock, par value $0.001 per share, and 3,661,968 shares of preferred stock, par value $0.001 per share. As of December 31, 2009 there were 322,220,436 shares of common stock and 260 shares of preferred stock issued.

On or about March 2009 the company requested from the third Judicial District Court for the Salt Lake County, State of Utah, USA a court order to hold a special shareholders meeting. On April 10, 2009 the company received an order granting petition and ordering a special shareholders meeting by the third Judicial District Court for the Salt Lake County, State of Utah, USA. A special shareholders meeting is ordered by the court to increase the authorized capital of the company from 325,000,000 to 625,000,000 shares of common stock of the company. The company intends to follow the court ordered special shareholders meeting to be held as soon as practicable.

     We have not paid any dividends on our common stock and do not expect to pay dividends with respect to the common stock in the near future.

     We have not paid, and do not plan to pay, dividends on our common stock in the foreseeable future, even if we become profitable. Earnings, if any, are expected to be used to advance our activities and for general corporate purposes, rather than to make distributions to shareholders.

You should consider this cautionary warning concerning forward-looking statements in this report

     Certain statements in this report constitute "forward-looking statements" within the meaning of the rules and regulations promulgated by the SEC. Those forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed above, that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, among other things, our lack of revenue and our substantial net losses and accumulated deficit, as well as the continuing uncertainty of profitability, the highly competitive industry in which we operate, changes in or failure to comply with governmental regulation, the uncertainty of third party reimbursement for our products, general economic and business conditions and other factors referenced above.

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Item 2. Properties

We sublease and use office space in New York, N.Y. USA and in Vienna, Austria on a month to month base. In addition we use the office of the wholly owned Canadian subsidiary Beaver River Resources Ltd. in Vancouver, Canada.

Item 3 Legal Proceedings

Judgment EuroGas Texas Corp.

EuroGas, Inc. has been notified by Texas Euro Gas Corp., a Houston, Texas based private company (The “independent party”), that it has purchased the Judgment against EuroGas, Inc. and others in the original amount of $ 113 Million, plus accrued interest thereon. The Judgment against the Company et. al. was originally obtained in the South Texas Bankruptcy Court by the Bankruptcy Trustee of the McKenzie estate, Trustee Steve Smith of Houston, Texas in 2004. The independent party has received an assignment of the Judgment from Trustee Smith on September 24, 2007 after the Honorable Judge Brown of the South Texas Bankruptcy Court approved the sale of the Judgment on August 22, 2007 by Court Order. Trustee Smith had forced EuroGas, Inc. into involuntary bankruptcy (Chapter 7) in the fall of 2004 and EuroGas, Inc.’s remaining assets were sold at public auction in March 2006 in Salt Lake City, Utah. The involuntary bankruptcy of EuroGas, Inc. was closed and terminated by Court Order of the Utah Bankruptcy Court in February 2007.

The independent party, Texas EuroGas Corp., paid $1.6 million US cash to the McKenzie Bankruptcy Trustee as specified and approved by the August 22, 2007 Court Order of the South Texas Bankruptcy Court. The independent party has also informed the Company that it will not seek legal redress towards the Company and others after having obtained the Judgment and is prepared to negotiate with the Company and others to redeem the Judgment.

Texas EuroGas Corporation, a Texas corporation, was established in 2007 by Mr. David Sacks, a Houston solicitor, acting as Trustee on behalf of Mr Hans D. Dietmann, a non-affiliated shareholder of the Company.

The entire financing of the purchase of the Judgment by Texas EuroGas Corp. from the Bankruptcy Trustee Steve Smith, as well as all the costs involved related to the purchase of the judgment by Texas EuroGas Corporation, was entirely financed by Mr. Dietmann, who provided approx. $ 800,000 cash, and by the CEO of EuroGas Inc., Mr. Wolfgang Rauball, who provided approx. $ 1,125,000 cash.

Although Mr. Dietmann had indicated in writing to settle the judgment issue with the Company, the Trustee for Mr. Dietmann, Mr David Sacks, still has not transferred ownership of Texas EuroGas Corp. into Mr. Dietmann’s name, although agreed to in writing by Mr. Sacks in summer 2008, as Mr. Sacks was asking for further financial renumeration. Therefore the judgment could not have been settled with EuroGas Inc. yet.

In order to solve this problem Mr. Dietmann and Mr. Wolfgang Rauball have entered into an agreement with EuroGas Inc. in October 2009 and have transferred all their respective rights of ownership and their respective receivables in connection with their financing of Texas EuroGas Corporation and the purchase of the judgment from Trustee Smith, incl. accrued interest thereon, to the Company.

In addition to the financing of the purchase of the $ 113 million judgment from Trustee Smith in September 2007 by the Company’s CEO Mr. Wolfgang Rauball and Mr. Dietmann, Trustee Smith had obtained a second judgment against the company in early 2009 in a different case in the amount of appr. $ 125,000 plus accrued interest and had threatened to start again legal procedures to reopen Bankruptcy proceedings under Chapter 7 against the Company. On April 30, 2009 Mr. Dietmann has also bought this judgment from Trustee Smith and has also assigned his receivable for this second judgment to the Company.

For the transfer of the rights of ownership and the respective receivables, including accrued interest and costs since 2007, the company agreed to reimburse Mr. Dietmann $ 950,000 and Mr. Wolfgang Rauball $ 1,600,000. The loan accounts of Mr. Dietmann and Mr. Rauball were credited with these amounts in October 2009.

Mr. Wolfgang Rauball and Dr. Reinhard Rauball have paid a lump sum of $ 100,000 each in favor of the company to release both gentlemen from any claims under the Judgment to be held by the company.

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The formal transfer of the ownership of EuroGas Texas Ltd. to the company has not taken place as of December 31, 2009. The final payment for Mr.Sacks’ services is shown as an accrued liability in favour of Mr. Sacks with an estimated amount of $ 300,000. Mr. Sacks had already received $ 300,000 cash in May 2008 from Mr. Dietmann for his services in 2007/ 2008.

Spencer Clarke

Spencer Clarke, a New York based Investment House is claiming $ 375,000 in unpaid consulting fees from the company under a consulting agreement between Spencer Clarke and the company dated January 2, 2008.

The company has rejected the claim alleging that Spencer Clarke had not provided any services to the company since summer 2008 and is countersuing Spencer Clarke for a nominal amount of $ 1,000,000 for failure to provide services in the closing of a valuable Ukrainian CBM concession, which had been brought to the attention of the company earlier by a client of Spencer Clarke.

In addition Spencer Clarke has acted as investment consultant on the Regent transaction to purchase the 45 % interest in McCallan from Regent Ventures Ltd. (see ITEM 1 Activities in the United Kingdom) and the company has agreed to issue 1 Million restricted shares of common stock as consulting fee to Spencer Clarke on the closing of the acquisition. The shares are subject to an internal settlement between Spencer Clarke and its former employee Ira Rubenstein, who had arranged and negotiated the sale.

Spencer Clarke and the company had agreed to settle the lawsuit for a nominal $ 100,000 and to deposit the shares in Trust. However, Spencer Clarke’s solicitor rejected the settlement and demanded a higher cash amount and insisted on the delivery of the 1 Million shares of common stock of the company.

The company has advised its solicitor to go back to court.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the security holders of the Company during 2009.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters Market for Common Stock

Market Information and Holders

Our common stock is quoted on the US Pink Sheet trading organization under the symbol “EUGS.PK”. Since April 2010 the stock is trading on the newly launched OTCQB marketplace.

Our common stock is traded in Germany on the Frankfurt Stock Exchange, the Hamburg Stock Exchange, the Stuttgart Stock Exchange, the Berlin Stock Exchange and on the German XETRA computer trading system under the symbol EUG respectively.

As of December 31, 2009 there were 322,220,436 shares of common stock issued and outstanding, held by 343 holders of record with an estimated 31,000 beneficial owners, including shares of common stock held in street name.

     The following table sets forth the approximate range of high and low bids for the common stock during the periods indicated. These quotations reflect interdealer prices, without retail markup, markdown, commissions, or other adjustments and may not necessarily represent actual transactions in the common stock.

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    Low Bid $     High Bid $  
             
Year Ended December 31, 2008            
Quarter ended March 31, 2008   0.07     0.17  
Quarter ended June 30, 2008   0.09     0.85  
Quarter ended September 30, 2008   0.18     0.60  
Quarter ended December 31, 2008   0.11     0.29  
             
             
Year Ended December 31, 2009            
Quarter Ended March 31, 2009   0.09     0.25  
Quarter Ended June 30, 2009   0.06     0.13  
Quarter Ended September 30, 2009   0.06     0.13  
Quarter Ended December 31, 2009   0.08     0.31  

The reported price quotes may not be indicative of prices that could be obtained in actual transactions.

Dividends

     We have not paid dividends on our common stock, and we do not have retained earnings from which to pay dividends. We have accrued cumulative preferred dividends of $ 15,600 in 2009 and 2008, respectively. Of this amount, zero was paid in 2009 and in 2008. We must pay cumulative dividends with respect to our preferred stock before we can declare or pay any dividend on our common stock. Even if we were able to generate the necessary earnings, it is not anticipated that dividends will be paid in the foreseeable future, except to the extent required by the terms of the cumulative preferred stock currently issued and outstanding.

Recent Sales of Unregistered Securities

     During the year ended December 31, 2009, the Company issued the following securities without registration under the Securities Act of 1933, as amended.

On April 4, 2009 we issued 2 Million shares of restricted common stock to Regent Ventures LTD under the terms of an amending agreement dated November 3, 2008 in connection with the share option agreement to purchase 45 % of the shares of McCallan dated April 22, 2008. The Company expects that the holder of these shares may seek to sell them under Rule 144 of the Securities Act after the legal holding period expires.

On June 16, 2009 we issued 2 Million shares of restricted common stock to Henry and Munroe under the terms of an Assignment Agreement dated April 2, 2009 in connection with the option agreement to purchase three parcels of land located in the Tombstone Mining District in Southeast Arizona and known as “TEI Open Pit Mine”. The Company expects that the holder of these shares may seek to sell them under Rule 144 of the Securities Act after the legal holding period expires.

On June 16, 2009 we issued 14.5 Million shares of restricted common stock to Rio Plata Exploration and Mining Inc. under the terms of an option agreement dated April 2, 2009 to purchase 60 % plus 40 % of 56 Mining Claims located in the Tombstone Mining District and known as the Sandwich Property. The Company expects that the holder of these shares may seek to sell them under Rule 144 of the Securities Act after the legal holding period expires.

On June 16, 2009 we issued 250,000 shares of restricted common stock to Rio Plata Exploration and Mining Inc. under the terms of an option agreement dated April 2, 2009 to purchase 50 % of 58 BLM Claims located in Gila Salt River Basin and Meridian, Arizona. The Company expects that the holder of these shares may seek to sell them under Rule 144 of the Securities Act after the legal holding period expires.

On June 16, 2009 we issued 250,000 shares of restricted common stock to Piejo Partners Inc. under the terms of an option agreement dated April 2, 2009 to purchase 50 % of 58 BLM Claims located in Gila Salt River Basin and Meridian, Arizona. The Company expects that the holder of these shares may seek to sell them under Rule 144 of the Securities Act after the legal holding period expires.

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Item 6. Selected Financial Data

     The following statement of operations and balance sheet data were derived from our consolidated financial statements. The selected financial data below should be read in conjunction with our consolidated financial statements and the notes thereto included with this report and “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Statement of Operations Data

    Year Ended December 31,  
    2009     2008     2007     2006     2005  
                               
Net Sales $  0 -   $  0 -   $  0 -   $  0 -   $  0-  
Loss/Profit from   (982,000 ) $  (1,648,093 ) $ 15,357,898   $  (691,149 ) $  (875,973 )
Operations                              
                               
Loss/Profit per Common Share $  (0.003 ) $  (0.005 ) $  0.078   $  (0.0033 ) $  (0.004 )

Balance Sheet Data

    At December 31,  
    2009     2008     2007     2006     2005  
                               
Total Assets $  21,032,088   $  13,158,496   $  705,104   $  3,530,999   $  4,202,586  
                               
Long-Term Obligations $  0   $  0   $  0   $  0   $  0  
Cash Dividends per Common Share $  0   $  0   $  0   $  0   $  0  

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

General

     We are engaged primarily in the acquisition of rights to explore for and exploit oil, natural gas, coal bed methane gas, and mineral mining. We have acquired interests in a number of large exploration concessions, for oil, natural gas, and are in various stages of identifying industry partners, farming out exploration rights, undertaking exploration drilling, and seeking to develop production. We currently have several projects in various stages of development.

     Our principal assets consist both of proven and developed properties, as well as unproven and undeveloped properties. All costs incidental to the acquisition, exploration, and development of such properties are capitalized, including costs of drilling and equipping wells and directly-related overhead costs, which include the costs of equipment we own. Because we have limited proven reserves and established production, most of our holdings have not been amortized. If we are ultimately unable to establish production or sufficient reserves on some of these properties to justify the carrying costs, the value of the assets will need to be written down and the related costs charged to operations, resulting in additional losses. We periodically evaluate our properties for impairment and if a property is determined to be impaired, the carrying value of the property is reduced to its net realizable amount.

Outlook

     In the past, we have focused our resources on pre-exploration or early-exploration stage of mining, natural gas, coal bed methane gas, and other hydrocarbon projects with little short-term revenue potential. We believe that our investment in these early-stage projects will prove profitable in the long run, and we may invest in additional early-stage projects from time to time in the future. Nonetheless, management believes that, in order to balance our holdings, the focus of our acquisition, investment and development strategy should be on hydrocarbon projects that have the potential to generate revenues within one to five years of the date of investment. We are actively seeking investments of that type. Specifically, we intend to take the following actions over the coming months:

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  • Focus our efforts on projects in Central and Eastern Europe and in Arizona, USA. We will concentrate our financial and management resources in these areas. We will continue to manage the Company from our North American Headquarters and our Central European Headquarter.

     In summary, the outlook, based on our strategic approach, is simple. We intend to fund development of the oil and gas projects in Central and Eastern Europe. Further we will focus on the development of our mineral interests in North America and the Slovak Republic and we will closely monitor the Beaver River gas project in British Columbia. The ultimate goal is to transform the company from an exploration concern to a significant cash flow-producing resource company.

Results of Operations—Fiscal Years 2009, 2008 and 2007

     The following table sets forth consolidated income statement data and other selected operating data for the years ended December 31, 2009, 2008 and 2007.

    For the Years Ended  
    December 31,  
    2009     2008     2007  
Oil and Gas Sales $  -   $  -     -  
    -     -     -  
Depreciation, depletion and amortization   3,983     284     189  
General and administrative   1,392,518     1,176,883     621,975  
                   
Total Costs and Operating Expenses $  1,396,501   $  1,177,167   $  622,164  
                   
Other Income (Expenses)                  
Interest Income   80,000     1,147        
Other Income   5,000     3,070     -  
Interest expense   (307,583 )   (78,619 )      
Income from Accrued Liability/Tax/settlement reduction         (128,248 )   18,804,667  
Gain/Loss on sale of securities available for sale   637,084     (268,276 )   (2,824,734 )
Total Other Income (Expense)   414,501     (470,926 )   15,979,933  
Net Profit/Loss   (982,000 )   (1,648,093 )   15,357,898  
Preferred Dividends   (15,600 )   (15,600 )   (135,198 )
Net Profit/Loss $  (997,600 ) $  (1,663,693 ) $  15,222,700  
Basic and Diluted Profit/Loss Per Common Share $  (0.003 )   (0.005 )   0.078  
Weighted Average Number of
Common Shares Used in Per Share
Calculation
  322,220,436     303,220,436     196,212,635  

Revenues The Company had no sales in 2009, 2008 and 2007.

     Operating Expenses Operating expenses include general and administrative expenses, depreciation, depletion and amortization, settlement costs, cost of mineral interests and equipment and impairment of mineral interests and equipment.

     General and administrative expenses were $ 1,396,501 for 2009, compared with $ 1,177,167 in 2008 and $ 621,975 in 2007. Depreciation, depletion and amortization expenses were $ 3,983 for 2009 compared to $ 284 for 2008 and $ 189 in 2007.

     Income Taxes Historically, we have not been required to pay income taxes, due to our absence of net profits. For future years, we anticipate being able to utilize a substantial portion of our accumulated deficit, which was approximately $160,000,000 at December 31, 2009, to offset profits, if and when achieved, resulting in a reduction in income taxes payable at such time.

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     Net Profit/Loss. We incurred profit/ losses from operations of ($982,000), ($ 1,648,093) and $ 15,357,898 for the years ended December 31, 2009, 2008 and 2007, respectively. After preferred dividends, the profit/loss applicable to common shares was approximately $(0,997) million, ($1,679) million and $15,222 million for the years ended December 31, 2009, 2008 and 2007, respectively.

We do not currently employ any hedging techniques to protect against the risk of currency fluctuations.

Capital and Liquidity

     We had an accumulated deficit of $ 159,699,975 as of December 31, 2009, substantially all of which has been funded out of proceeds received from the issuance of stock and the incurrence of payables. As of December 31, 2009, we had total current assets of $ 3,351,087 and total current liabilities of $ 15,254,424 resulting in negative working capital of $ 11,903,337. As of December 31, 2009, our balance sheet reflected $ 2,050,000 in mineral interests in properties not subject to amortization, net of valuation allowance. These properties are held under licenses or concessions that contain specific drilling or other exploration commitments. If we are unable to establish production or resources on these properties, obtain any necessary future licenses or extensions, or meet our financial commitments with respect to these properties, we could be forced to write off the carrying value of the applicable property.

     Throughout our existence, we have relied on cash from financing activities to provide the funds required for acquisitions and operating activities. Our financing activities provided net cash of approximately $ 6,531 million during the year ended December 31, 2009. Our operating activities used $(4,483,243) of net cash during the year ended December 31, 2009. A portion of our cash was used in acquiring mineral interests with approximately $ 2,050 million. While we had no cash on hand as of December 31, 2009, we have short-term and long-term financial commitments with respect to exploration and drilling obligations related to our interests in mineral properties and potential litigation liabilities. Many of our projects are long-term and will require the expenditure of substantial amounts over a number of years before the establishment, if ever, of production and ongoing revenues. As noted above, we have relied principally on cash provided from equity and debt transactions to meet our cash requirements. We do not have sufficient cash to meet our short-term or long-term needs and we will require additional cash, either from financing transactions or operating activities, to meet our immediate and long-term obligations. There can be no assurance that we will be able to obtain additional financing, either in the form of debt or equity, or that, if such financing is obtained, it will be available to us on reasonable terms. If we are able to obtain additional financing or structure strategic relationships in order to fund existing or future projects, existing shareholders will likely experience further dilution of their percentage ownership of the Company.

     If we are unable to establish production or reserves sufficient to justify the carrying value of our assets or to obtain the necessary funding to meet our short and long-term obligations or to fund our exploration and development program, all or a portion of the mineral interests in unproven properties will be charged to operations, leading to significant additional losses.

Inflation

     The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or our financial position. Amounts shown for property, plant and equipment and for costs and expenses reflect historical costs and do not necessarily represent replacement costs or charges to operations based on replacement costs. Our operations, together with other sources, are intended to provide funds to replace property, plant and equipment as necessary. Net income would be lower than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     We conduct business in many foreign currencies. As a result, we are subject to foreign currency exchange rate risk due to effects that foreign exchange rate movements of those currencies have on our costs and on the cash flows that we receive from foreign operations. We believe that we currently have no other material market risk exposure. To date, we have addressed our foreign currency exchange rate risks principally by maintaining our liquid assets in interest-bearing accounts in U.S. dollars, until payments in foreign currency are required, but we do not reduce this risk by hedging.

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Item 8. Financial Statements and Supplementary Data

     The financial statements of the Company together with note and supplementary data related thereto are set forth following pages F-1 of this Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The company’s auditors Hansen Barnett & Maxwell, PC, which had signed an engagement letter to act again as auditors for the company in December 2007, have informed the company on January 25, 2010 that for the time being they have to cease as auditors for the company as the PCAOB (Public Company Accounting Oversight Board) has asked audit firms to cease acting for companies that are issuers preparing their own financial statements without audit and where the auditors are not providing services. Accordingly Hansen Barnett & Maxwell has asked the company’s approval to write a letter to the SEC stating the auditor-client relationship has ceased. Hansen Barnett & Maxwell went on stating to audit the company’s financial statements again and being most happy to be engaged as auditors again. The company intends to mandate Hansen Barnett as auditors again once the negotiations with David Sacks, the solicitor for EuroGas Texas Corp., are finalized (see Item 3).

PART III

Item 10. Directors and Executive Officers of the Registrant

Certain Information Regarding Executive Officers, Directors and Control Persons

     The following table contains information about each individual who was a director or executive officer of EuroGas as of December 31, 2009 together with all positions and offices of the Company held by each and the terms of office and the period during which each has served.

                     Name Age Positions with the Term of Office
    Company  
       
Wolfgang Rauball 64 Director, Chief Executive Officer November 2000 - Present
       
Roger Agyagos 38 Director October 2007 - Present
       
Hank Blankenstein 68 Director, Chief Financial Officer May 2002 - October 2009
       
Ed Müller 72 Director April 2008- April 2009
       
Harald Schmidt
68 Director, Executive Vice President
Interim Financial Officer
October 2009 - Present

Biographical Information

     The following paragraphs set forth brief biographical information for each of the aforementioned directors and executive officer:

     Wolfgang Rauball. Mr. Rauball was appointed director of the Company in November 2000 and President/Chairman in July 2001. He is also Managing Director of EuroGas GmbH Austria and of Mc Callan OIL & GAS (UK) Limited, UK. Mr. Rauball has worked for the Company in various functions since 1994. Mr. Rauball attended Darmstadt University of Technology in Germany from 1967 through 1971. During the period 1976-1994, his geological consulting activities were primarily for companies conducting exploration for gold and base metal ore bodies in Canada, the United States and South America. Wolfgang Rauball arranges financing for business enterprises, primarily public companies engaged in the resource industry.

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     Hank Blankenstein. Mr. Blankenstein was appointed a director and chief financial officer of the Company in May of 2002. Mr. Blankenstein served as a director and financial vice president of the Company from 1995 until 2000. Mr. Blankenstein has more than 30 years experience at various levels of management. From April 2000 until his appointment to the board and CFO, Mr. Blankenstein was involved in several real estate development projects. Mr. Blankenstein holds a Bachelor of Science degree in Finance and Banking from Brigham Young University. Mr. Blankenstein resigned in October 2009 citing personal and health related reasons.

     Roger Agyagos. Roger Agyagos of Vancouver BC Canada was appointed to the Board of Directors of EuroGas, Inc. in October 2007. Mr. Agyagos has extensive experience as a director and officer of several public mining resource companies, in Canada. Mr. Agyagos has a degree in Management systems from BCIT in Vancouver, Canada.

     Harald Schmidt. Mr. Schmidt was appointed a director and executive vice-president. Mr. Schmidt will direct the company's operations in North America, and will also assist in managing the company's operations in Europe. Mr. Schmidt is based in North America and Germany. Since 1987, Mr. Schmidt has been a management consultant, serving well known industrial clients. In addition, he has been a lecturer for corporate audit systems at the Austrian Academy for Business Executives and at the Bavarian College in Munich. Mr. Schmidt is an industrial engineer and holds a Master of Arts (MA in economics and informatics) and Master of Science (MSc in mechanical engineering) degree of the Darmstadt University of Technology, Germany.

     Ed Mueller Mr. Ed Mueller of Vancouver BC Canada has been appointed to the Board of Directors of EuroGas, Inc. in April 2008. Mr. Mueller has extensive experience in the mining industry and has served for more than 40 years as a director and officer of several mining resource companies in the US and Canada. Mr. Ed Mueller resigned in April 2009 due to a possible conflict of interest arising from his directorship in Regent Ventures Ltd. Mr. Mueller has informed the company to rejoin the board of directors of the company once the company has finalized its transaction with Regent Ventures Ltd.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Exchange Act requires our officers, directors and certain shareholders to file reports concerning their ownership of our common stock with the SEC and to furnish to us copies of such reports. Based solely upon our review of the reports required by Section 16 and amendments thereto furnished to us, we believe that all reports required to be filed pursuant to Section 16(a) of the Exchange Act were filed with the SEC on a timely basis.

Audit Committee and Code of Ethics Disclosure

     The Company's Board of Directors has not yet appointed an audit committee. The Company expects to form an audit committee in 2010.

     Effective April 27, 2009, the company's board of directors adopted a Code of Ethics.

Item 11. Executive Compensation

     The following table sets forth information relating to the compensation of all persons who served as the Chief Executive Officer of EuroGas during the year ended December 31, 2009, and other persons serving as executive officers of EuroGas as of December 31, 2009, (collectively, the “Named Officers”).

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Summary Compensation Table

            Long-Term Compensation
      Annual Compensation   Awards    Payouts  
Name and   Salary Bonus Other Annual Restricted Securities LTIP All Other
        Compensation Stock Underlying Payouts Compensation
          Awards Options    
            SARs(#)    
Principal Year ($)    ($) ($)              ($)                  ($)
Position                
Wolfgang Rauball
President, CEO (1)
2009
2008
2007
2006
300,000
300,000
300,000
300,000


















Harald Schmidt
Executive Vice President (2)
2009

72,000













Hank Blankenstein
Chief Financial Officer (3)
2009
2008
2007
2006
135,000
180,000
180,000
180,000


















Roger Agyagos
Director (4)
2008
2009
24,000
24,000







  (1)

Mr. Rauball was appointed as President and CEO on July 6, 2001. He also serves as Managing Director of EuroGas GmbH Austria and of Mc Callan OIL & GAS (UK) Limited.

     
 

Mr. Rauballs accrued salaries from 2003 – 2009 amounted to $ 2,100,000 at Dec. 31, 2009. Mr. Rauball has waived receipt of cash and has asked the company to apply his receivables against Mr. Rauballs outstanding warrants to purchase common restricted shares of the company in March 2010.

     
  (2)

Mr. Schmidt became a director, Executive Vice President and Interim CFO of the Company in October 2009. Mr. Schmidt converted the outstanding 2009 salary with a total amount of $ 42,000 into restricted common shares of the company.

     
  (3)

Mr. Blankenstein became an officer and Director of the Company in May 2002 and resigned in October 2009. Due to the financial situation of the company Mr. Blankensteins salaries from 2003 till 2007 have not been paid. Mr. Blankenstein, however, received partial cash payment on his outstanding salary in 2008 and 2009 for a total amount of $ 287,312. There is still an amount of approx. $ 927,688 outstanding and Mr. Blankenstein had agreed to convert the outstanding payment into restricted common shares of the company.

     
  (4)

Mr. Agyagos became a director of the company in October 2007.

Option Grants in Last Fiscal Year

     On April 27, 2009 the company adopted a new stock option plan, having effect from January 19, 2006 and replacing the company's 1996 stock option and award plan. The new plan reserves a maximum of 19,635,549 common shares of the Company for issuance to Participants (as defined in the Plan) upon the exercise of stock options granted under the Plan. No options under this Plan have been issued yet. See Item 12 for additional information about options and warrants granted in 2009.

20


Compensation Committee Interlocks and Insider Participation in Compensation Decisions

     As of December 31, 2009 the Compensation Committee consisted of the Board of Directors. The Board of Directors as of December 31, 2009, included:

Wolfgang Rauball, Harald Schmidt, Roger Agyagos

Compensation Committee Report

     Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act or the Exchange Act that incorporates by reference, in whole or in part, subsequent filings, including, without limitation, this Annual Report on Form 10-K, the Compensation Committee Report and the Performance Graph set forth below shall not be deemed to be incorporated by reference in any such filings.

     As required by rules promulgated by the SEC, this Compensation Committee Report describes the overall compensation goal and policies applicable to our executive officers, including the basis for determining the compensation of executive officers for the 2009 fiscal year.

     General. Management compensation is overseen by the Board of Directors.

     Compensation Objectives. In determining the amount of compensation for our executive officers, the Board is guided by several factors. Compensation practices are flexible in response to the needs and talents of the individual officer and are geared toward rewarding contributions that enhance stockholder value. Historically, we have compensated senior management based on the perceived contribution to the development of our operations, consisting principally of salaries believed to reflect their contributions. Although the members of the Board are also executive officers, none participates in the determination of his own compensation.

     Compensation Components. The compensation of our executive officers consists of three components: base salary, bonuses and long-term incentive awards in the form of stock options. The Board establishes base salaries based primarily on its objective judgment, taking into consideration both qualitative and quantitative factors. Among the factors considered by the Board are:

  (i)

the qualifications and performance of each executive officer;

     
  (ii)

the performance of EuroGas as measured by such factors as development activities and increased shareholder value;

     
  (iii)

salaries provided by other companies inside and outside the industry that are of comparable size and at a similar stage of development, to the extent known; and

     
  (iv)

our capital position and needs. The Board does not assign any specific weight to these factors in determining salaries.

     From time to time, we also compensate our executive officers in the form of bonuses. Because we are presently in an early stage of development and do not have a history of earnings per share, net income, or other conventional data to use as a benchmark for determining the amount or existence of bonus awards, any bonuses granted by the Board in the near term will be based upon its subjective evaluation of each individual’s contribution to EuroGas. In some cases, however, bonuses payable to executive officers may be tied to specific criteria identified at the time of engagement. For the years ended December 31, 2008 and 2009, the Board did not pay bonuses to any executive officers. The Board’s action was based on its conclusion that, despite the superior personal performance of the executive officers, no cash incentive bonuses should be awarded, due to the Board’s desire to preserve capital for future growth and development.

     The third component of our compensation structure consists of the grant of stock options to compensate executive officers and other key employees and consultants.

Chief Executive Compensation. The company has agreed to pay Mr. Rauball a salary of $300,000 per year as a director and CEO and to pay Mr. Hank Blankenstein a salary of $180,000 per year as a Director and FO. Both gentlemen have not been remunerated for several years due to the financial situation of the Company and they have agreed to have their salaries to be accrued with the specific approval by the company foregoing any rights it may have by law against accruing the salaries of the management under the appropriate statute of limitation.

21


     Use of Consultants. We anticipate continuing to rely on executive management and outside consultants in connection with the acquisition of additional projects and the initial development of existing projects. However, we anticipate that, if able to establish ongoing revenues from production, we will retain management personnel as employees of EuroGas and compensate them on a salary basis, based on comparable compensation packages offered by employers within our general industry and geographical area.

Performance Graph

     The following graph shows a comparison of cumulative shareholder return for our common stock for the period beginning December 31, 2004 and ending December 31, 2009, as well as the cumulative total return for the NASDAQ Industrial Index.

     The performance graph assumes that $100 was invested at the market close on December 31, 2004 and that dividends, if any, were reinvested for all companies, including those on the NASDAQ Industrial Index.

Total Return Analysis

    12.31.2004 12.30.2005 12.31.2006 12.31.2007 12.31.2008 12.31.2009
EuroGas Inc.   $ 100.00 $ 76.25 $ 75.00 $ 300.00 $ 500.00 $ 427.50
  Stock Price $ 0.040 $ 0.0305 $ 0.030 $ 0.120 $ 0.200 $ 0.171
NASDAQ
Industrial
Index
  $ 100.00 $ 100.12 $ 112.53 $ 117.28 $ 64.12 $ 94.08
Value 1,857.73  1,859.87 2,090.34  2,178.64 1,191.06 1,747.52

22



Item 12. Security Ownership of Certain Beneficial Owners and Management

     The following beneficial ownership table sets forth information regarding beneficial ownership of our common stock as of December 31.2009 by:

  • each person or entity that is known by us to own beneficially 5% or more of the outstanding shares of our common stock;
  • each of our directors;
  • each of the Named Executive Officers; and
  • all of our executive officers and directors as a group.

     Under relevant provisions of the Exchange Act, a person is deemed to be a “beneficial owner” of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership in 60 days. More than one person may be deemed to be a beneficial owner of the same securities. The percentage ownership of each stockholder is calculated based on the total number of outstanding shares of our common stock as of December 31, 2009, plus those shares of our common stock that the stockholder has the right to acquire within 60 days. Consequently, the denominator for calculating the percentage ownership may be different for each stockholder. Unless otherwise indicated, the address of these individuals is the same as the Company’s principal executive offices.

The table is based upon information provided by our directors and executive officers.

    Amount and Nature of Beneficial  
    Ownership as of December 31, 2009 (1)
                         
Name and Address of   Common     Exercisable     Total        
Beneficial Owner   Shares (1)     Options &     Ownership     Percent(3)
          Warrants(2)   in        
Wolfgang Rauball (4)
CEO, Chairman & Director
  16,939,671

  103,821,000

  120,760,671

  27%

                         
Roger Agyagos
Director
  Nil

  2,000,000

  2,000,000

  *

                         
Harald Schmidt,
Director
  Nil

  2,000,000

  2,000,000

  *

                         
All officers and directors
as a group (3 persons)
  16,939,671     107,821,000     124,760,671     27%  

* Less than one percent.

  (1)

Unless otherwise indicated, to our best knowledge, all stock is owned beneficially by the listed shareholder, and each shareholder has sole voting and investment power with respect to our common stock beneficially owned by such person.

     
  (2)

Represents options or warrants exercisable within 60 days as of December 31, 2009, held by the individual or entity

     
 

2000 Warrants

     
 

On or about January 12, 2000, the company issued a convertible debenture to Wolfgang Rauball in the principal amount of $ 2,000,000. On March 30, 2000, the convertible debenture was converted into common shares of the company and the company issued a warrant with anti- dilution provisions for the purchase of common shares of the company. The period of time within which these warrants may be exercised at a price of $ 0.05 per common share has been extended several times until March 31, 2010.

23



 

2002 Warrants

     
 

On June 10, 2002, the registrant issued a warrant with anti-dilution provisions to Wolfgang Rauball for the purchase of up to 10,000,000 common shares of the registrant. The period of time within which this warrant may be exercised has been extended until June 10, 2010, and the exercise price was reduced to $0.05 per share. The number of shares from both warrant agreements was calculated upon exercise on the basis of the anti-dilution clause in the specific agreements to 58,821,000 shares of common stock of the company.

     
 

On March 11, 2010 Wolfgang Rauball gave notice to the company to exercise both warrants to purchase 58,821,000 shares at the exercise price of $ 0.05 per common share.

     
 

2009 Options and Warrants

     
 

The following Options and warrants were also granted:

     
 

On October 7, 2009 the company granted incentive stock options to Roger Agyagos to purchase up to an aggregate of 2,000,000 restricted common shares of the company at a price of $ 0.05 per share exercisable until October 31, 2012.

     
 

On October 7, 2009 the company granted incentive stock options to Harald Schmidt to purchase up to an aggregate of 2,000,000 restricted common shares of the company at a price of $ 0.05 per share exercisable until October 31, 2012.

     
 

On October 12, 2009 the company granted incentive stock options to Wolfgang Rauball for providing personal guarantees and collateral ( including the pledge of 10 Million shares of the company owned by Mr. Rauball personally)to secure the Storm/Forstgarten loan agreement of October 2009, to purchase up to an aggregate of 10,000,000 common shares of the company at a price of $ 0.10 per share exercisable until October 13, 2011 with warrants attached to purchase additional 10,000,000 restricted common shares of the company at a price of $ 0.15 per share. The closing price for EuroGas common shares on October 12, 2009 was $ 0.09 per share.

     
 

On October 12, 2009 the company granted additional incentive stock options to Wolfgang Rauball for having provided substantial personal funds and personal guarantees preventing further bankruptcy proceedings by the Bankruptcy Trustee Steve Smith during 2007, after the company was cleared from bankruptcy proceedings under chapter 7 by order of the Utah bankruptcy Court in February 2007. Wolfgang Rauball’s personal guarantees and substantial personal funds enabled a friendly Party to buy the Judgment against the company in the amount of appr. $ 113 Million from the Bankruptcy Trustee Steve Smith. The company has therefore granted stock options at prevailing market prices to Wolfgang Rauball to purchase up to an aggregate of 25,000,000 restricted common shares of the company at a price of $ 0.10 per share exercisable until October 13, 2011. There are no warrants attached to these options. The closing price for EuroGas common shares on October 12, 2009 was $ 0.09 per share.

     
  (3)

The percentage indicated represents the number of shares of our common stock, warrants and options exercisable within 60 days held by the indicated stockholder divided by the sum of (a) the number of shares subject to options exercisable by this shareholder within 60 days and (b) which is the number of shares of our common stock calculated under the assumption of the completed increase of the authorized capital to 650,000,000 shares of common stock of the company.

     
  (4)

Includes 2,342,811 shares owned by Sonanini Holdings Ltd. a private company wholly owned by Mr. Wolfgang Rauball.

24



Item 13. Certain Relationships and Related Transactions

Wolfgang Rauball currently serves as our Chairman and CEO and is a director and a significant shareholder of the company. Over the past three years, we have entered into several transactions with Mr. Rauball or with entities controlled by him, as follows:

In August 2008 the company entered into a Consulting Agreement with Goette Financial Consulting Ltd., a company wholly owned by Sonanini Holdings Ltd., a private company wholly owned by Wolfgang Rauball, director and officer of the company. Goette provided corporate development and corporate financial services to the company. The contract was terminated by both parties in October 2008. During the three months August 2008 till October 2008 Goette received US $ 29,000 under this contract.

From 2003 till 2007 Mr. Wolfgang Rauball arranged and provided the entire business expenses of the company for rent, office equipment, salaries for office staff and travel expenses as a loan to the company totaling approx. $ 700,000 until the end of 2007 to keep the company operational and solvent. The company and Mr. Wolfgang Rauball agreed to extend this unsecured loan with an interest rate of 10 % p.a. until 2009.

In 2009 Wolfgang Rauball provided business expenses on behalf of the company with a total amount of $ 350,614.

On October 10, 2009 Wolfgang Rauball transferred his financing rights against EuroGas Texas Corp. to the company in the amount of $ 1.6 Million cash ( see Item 6 Judgment).

On October 10, 2009 Mr. Wolfgang Rauball and Dr. Reinhard Rauball agreed to pay a lump sum of $ 100,000 each in favour of the company to release both gentlemen from any claims under the Judgment to be held by the company. The total amount of $ 200,000 (including $ 100,000 on behalf of Dr.Reinhard Rauball) was debited to Mr. Wolfgang Rauball’s loan account.

Item 14. Controls and Procedures

     We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and are communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

     (a) Evaluation of Disclosure Controls and Procedures. Within 90 days prior to the date of this report, our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended). Based on the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective.

     (b) Changes in Internal Controls. There were no significant changes in our internal controls or in other factors that could significantly affect those internal controls subsequent to the date of the evaluation, nor were there any significant deficiencies or material weaknesses in our internal controls. As a result, no corrective actions were required or undertaken.

14.A Other Information

25


PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

  (a) Documents Filed

     1. Financial Statements. The following Consolidated Financial Statements of the Company are included immediately following the signature page of this Report.

  A.

Consolidated Balance Sheets at December 31, 2009 and 2008

     
  B.

Consolidated Statements of Income for the years ended December 31, 2009 and 2008

     
  C.

Consolidated Statements of Cash Flows for the year ended December 31, 2009

     
  D.

Notes to Consolidated Financial Statements


  2. Exhibits.

Exhibit      
Number Title of Document   Location
       
2.1

Exchange Agreement between Northampton, Inc., and Energy Global, A.G.

Report on Form 8-K dated August 3, 1994, Exhibit No. 1*

 

 

2.2

Agreement and Plan of Merger between EuroGas, Inc., and Danube International Petroleum Company, Inc., dated July 3, 1996, as amended

Report on Form 8-K dated July 12, 1996, Exhibit No. 5*

 

 

2.3

English translation of Transfer Agreement between EuroGas and OMV, Inc. for the Acquisition of OMV (Yakut) Exploration GmbH dated June 11, 1997

Report on Form 8-K dated June 11, 1997 Exhibit No. 1*

 

 

2.4

Asset Exchange Agreement between EuroGas, Inc., and Beaver River Resources, Ltd., dated April 1, 1988

Report on Form S-1 dated July, 23, 1998 Exhibit No. 2.03*

 

 

3.1

Articles of Incorporation

Registration Statement on Form S-18, File No. 33-1381-D Exhibit No. 1*

 

 

3.2

Amended Bylaws

Annual Report on Form 10-K for the fiscal year ended September 30, 1990, Exhibit No. 1*

 

 

3.3

Designation of Rights, Privileges, and Preferences of 1995 Series Preferred Stock

Quarterly Report on Form 10-QSB dated March 31, 1995, Exhibit No. 1*

 

 

3.4

Designation of Rights, Privileges, and Preferences of 1996 Series Preferred Stock

Report on Form 8-K dated July 12, 1996, Exhibit No. 1*

26



Exhibit      
Number                                      Title of Document   Location
       
3.5

Designation of Rights, Privileges, and Preferences 1997 Series A Convertible Preferred Stock

Report on Form 8-K dated May 30, 1997 Exhibit No. 1*

 

 

3.6

Designation of Rights, Privileges, and Preferences of 1998 Series B Convertible Preferred Stock

Report on Form S-1 Dated July 23, 1998 Exhibit No. 3.06*

 

 

3.7

Articles of Share Exchange

Report on Form 8-K dated August 3, 1994, Exhibit No. 6*

 

 

3.8

Designation of Rights, Privileges, and Preferences of 1999 Series C 6% Convertible Preferred Stock

Registration Statement on Form S-1, File No. 333- 92009, filed on December 2, 1999

 

 

4.1

Subscription Agreement between EuroGas, Inc., and Thomson Kernaghan & Co., Ltd., dated May 29, 1998

Report on Form S-1 dated July 23, 1998 Exhibit No. 4.01*

 

 

4.2

Warrant Agreement dated July 12, 1996, with Danube Shareholder

Report on Form 8-K dated July 12, 1996, Exhibit No. 2*

 

 

4.3

Registration Rights Agreement Between EuroGas, Inc., and Thomson Kernaghan & Co., Ltd., dated May 29, 1998

Report on Form S-1 dated July 23, 1998 Exhibit No. 4.02*

 

 

4.4

Registration Rights Agreement dated July 12, 1996, with Danube Shareholder

Report on Form 8-K dated July 12, 1996 Exhibit No. 3*

 

 

4.5

Registration Rights Agreement by and among EuroGas, Inc., and Finance Credit & Development Corporation, Ltd., dated June 30, 1997

Report on Form S-1 dated July 23, 1998 Exhibit No. 4.06*

 

 

4.6

Option granted to the Trustees of the Estate of Bernice Pauahi Bishop

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 10*

 

 

4.7

Registration Rights Agreement by and among EuroGas, Inc., and Kukui, Inc., and the Trustees of the Estate of Bernice Pauahi Bishop

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 11*

 

 

4.8

Option issued to OMV Aktiengesellschaft to acquire up to 2,000,000 shares of restricted common stock

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996, Exhibit No. 13*

 

 

4.9

Form of Convertible Debenture issued on January 12, 2000.

Quarterly report on Form 10-Q dated March 31, 2000.

 

 

10.1

English translation of Mining Usufruct Contract between The Minister of Environmental Protection, Natural Resources and Forestry of the Republic of Poland and Pol-Tex Methane, dated October 3, 1997

Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 1*

27



Exhibit      
Number Title of Document   Location
       
10.2

Agreement between Polish Oil Gas Mining Joint Stock Company and EuroGas,Inc., dated October 23, 1997

Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 2

 

 

10.3

1996 Stock Option and Award Plan

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 14*

 

 

10.4

Settlement Agreement by and among Kukui, Inc., and Pol-Tex Methane, Sp. zo.o., McKenzie Methane Rybnik, McKenzie Methane Jastrzebie, GlobeGas, B.V. (formerly known as McKenzie Methane Poland, B.V.), and the Unsecured Creditors’ Trust of the Bankruptcy Estate of McKenzie Methane Corporation

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 15*

 

 

10.5

Acquisition Agreement between EuroGas, Inc., and Belmont Resources, Inc., dated July 22, 1998

Report on Form S-1 dated July 23, 1998 Exhibit No. 10.20*

 

 

10.6

General Agreement governing the operation of McKenzie Methane Poland, B.V.

Report on Form 8-K dated August 3, 1994, Exhibit No. 2*

 

 

10.7

Concession Agreement between Ministry of Environmental Protection, Natural Resources, and Forestry and Pol-Tex Methane Ltd.

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 18*

 

 

10.8

Association Agreement between NAFTA a.s. Gbely and Danube International Petroleum Company

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 19*

 

 

10.9

Agreement between Moravske’ Naftove’ Doly a.s. and Danube International Petroleum Company

Annual Report on Form 10-KSB for the Fiscal year Ended December 31, 1995, Exhibit No. 20*

 

 

10.10

Form of Convertible Debenture

Report on Form 8-K dated August 3, 1994, Exhibit No. 7*

 

 

10.11

Form of Promissory Note, as amended, with attached list of shareholders

Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 23*

 

 

10.12

Amendment #1 to the Association Agreement Entered on 13th July 1995, between NAFTA a.s. Gbely and Danube International Petroleum Company

Annual Report on Form 10-KSB for the Fiscal year ended December 31, 1996, Exhibit No. 25*

 

 

10.13

Acquisition Agreement by and among Belmont Resources, Inc., EuroGas Incorporated, dated October 9, 1998

Form 10-Q Dated September 30, 1998 Exhibit No. 1*

 

 

10.14

Letter of Intent by and between Polish Oil and Gas Company and Pol-Tex Methane, dated April 28, 1997

Annual Report on Form 10-KSB for the Fiscal year ended December 31, 1996, Exhibit No. 27*

 

 

 

 

10.15

Purchase and Sale Agreement between Texaco Slask Sp. Z.o.o., Pol-Tex Methane Sp. Z.o.o. and GlobeGas B.V.

Report on Form 8-K Dated March 24, 1997 Exhibit No. 1*

28



Exhibit      
Number Title of Document   Location
       
10.17

English translation of Proposed Exploration and Production Sharing Contract for Hydrocarbons between the Republic of Sakha (Yakutia) and the Russian Federation and the TAKT Joint Venture

Report on Form 8- K/A Dated June 11, 1997 Exhibit No. 4*

 

 

10.18

English translation of Agreement on Joint Investment and Production Activities between EuroGas, Inc., and Zahidukrgeologia, dated May 14, 1998

Registration Statement on Form S-1 dated July 23, 1998 Exhibit No. 10.21*

 

 

10.19

English translation of Statutory Agreement of Association of Limited Liability Company with Foreign Investments between EuroGas, Inc., and Makyivs’ke Girs’ke Tovarystvo, dated June 17, 1998

Registration Statement on Form S-1 dated July 23, 1998 Exhibit No. 10.22*

 

 

10.20

Partnership Agreement between EuroGas, Inc., and RWE-DEA Aktiengesellschaft for Mineraloel and Chemie AG, date July 22, 1998

Amendment No. 1 to Registration Statement on Form S-1 dated August 3, 1998 Exhibit No. 10.23

 

 

10.21

Mining Usufruct Contract between The Minister of Environmental Protection, Natural Resources and Forestry of the Republic of Poland and Pol- Tex Methane, dated October 3, 1997

Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 1*

 

 

10.22

Agreement between Polish Oil and Gas Mining JointStock Company and EuroGas, Inc., dated October 23, 1997

Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 2*

 

 

10.23

Agreement for Acquisition of 5% Interest in a Subsidiary by and between EuroGas, Inc., B. Grohe, and T. Koerfer, dated November 11, 1997

Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 3*

 

 

10.24

Option Agreement by and between EuroGas, Inc., and Beaver River Resources, Ltd., dated October 31, 1997

Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 4*

 

 

 

 

10.25

Lease Agreement dated September 3, 1996, between Potomac Corporation and the Company; Letter of Amendment dated September 30, 1999.

Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999

 

 

10.26

Sublease dated November 2, 1999, between Scotdean Limited and the Company

Registration Statement on Form S-1, File No. 333- 92009, filed on December 2, 1999

 

 

10.27

Securities Purchase Agreement dated November 4, 1999, between the Company and Arkledun Drive LLC

Registration Statement on Form S-1, File No. 333- 92009, filed on December 2, 1999

 

 

10.28

Registration Rights Agreement dated November 4, 1999, between the Company and Arkledun Drive LLC

Registration Statement on Form S-1, File No. 333- 92009, filed on December 2, 1999

 

 

10.29

Supplemental Agreement dated November 4, 1999, between the Company and Arkledun Drive LLC

Registration Statement on Form S-1, File No. 333- 92009, filed on December 2, 1999

29



 Exhibit      
Number Title of Document   Location
       
10.30

Executive Employment Agreement dated April 20, 1999 between the Company and Karl Arleth

Registration Statement on Form S-1, File No. 333- 92009, filed on December 2, 1999

 

 

 

10.31

Settlement Agreement dated June 16, 2000, between the Company and FCOC

Form 10-K for year ended December 31, 2000

 

 

 

10.32

Securities Purchase Agreement dated October 2, 2000, between the Company and Arkledun Drive LLC

Form 10-K for year ended December 31, 2000

 

 

 

10.33

Registration Rights Agreement dated October 2, 2000, between the Company and Arkledun Drive LLC

Form 10-K for year ended December 31, 2000

 

 

 

10.34

Settlement Agreement dated November 14, 2000, between the Company and Arkledun Drive LLC

Form 10-K for year ended December 31, 2000

 

 

 

10.35

Consulting Agreement dated September 18, 2000, between the Company and Spinneret Financial Systems, Ltd.

Form 10-K for year ended December 31, 2000

 

 

 

10.36

Securities Purchase Agreement dated March 27, 2001 between the Company and Belmont Resources Inc.

Form 10-K for year ended December 31, 2000

 

 

 

10.37

Agreement dated April 9, 2001 between the Company and Belmont Resources Inc.

Form 10-K for year ended December 31, 2000

 

 

 

 

10.38

Warrant Agreement dated September 8, 2000 with Oxbridge Limited

Form 10-K for year ended December 31, 2000

 

 

 

10.39

Warrant Agreement dated September 8, 2000 with Rockwell International Ltd.

Form 10-K for year ended December 31, 2000

 

 

 

10.40

Warrant Agreement dated September 8, 2000 with Conquest Financial Corporation

Form 10-K for year ended December 31, 2000

 

 

 

10.41

Termination and Transfer Agreement dated June 23, 2000 between the Company and Belmont Resources, Inc.

Form 10-K for year ended December 31, 2000

 

 

 

10.42

Loan Agreement dated March 3, 1999 between the Company and Pan Asia Mining Corp.

Form 10-K for year ended December 31, 2000

 

 

 

10.43

Agreement dated July 14, 2000 between the Company and Oxbridge Limited

Form 10-K for year ended December 31, 2000

 

 

 

10.44

Amended Agreement dated July 25, 2000 between the Company, Pan Asia Mining Corp., and Oxbridge Limited

Form 10-K for year ended December 31, 2000

 

 

 

10.45

Settlement Agreement dated November 20, 2000 between the Company and Beaver River Resources, Ltd.

Form 10-K for year ended December 31, 2000

 

 

 

10.46

Purchase of Judgment from Texas Bankruptcy Trustee on October 10. 2007/

Form 8-K filed on October 10,2007 *

 

 

 

 

10.47

EuroGas, Inc. address change December 31, 2007

Form 8-K filed on December 31,2007 *

30



Exhibit      
Number                                    Title of Document                                            Location
       
10.48

Amended and Restated Bylaws dated April 27,2009

Form 8- K filed on June 10,2009 Exhibit No. 3.1

 

 

 

 

10.49

Share Option agreement dated April 22, 2008,between the Registrant and Regent ventures Ltd.

Form 8- K filed on June 10,2009 Exhibit No. 10.1

 

 

 

 

10.50

Amending agreement dated November 3, 2008 between the registrant and Regent Ventures Ltd,

Form 8- K filed on June 10,2009 Exhibit No. 10.2

 

 

 

 

10.51

April 2,2009 Option Agreement between the registrant and Rio Plata Exploration & Mining Inc. with respect to the 60 % acquisition of the Tombstone Sandwich Claims.

Form 8- K filed on June 10,2009 Exhibit No. 10.3

 

 

 

 

10.52

April 2, 2009 Option Agreement between the registrant and Rio Plata Exploration & Mining Inc. with respect to the 40 % acquisition of the Tombstone Sandwich Claims.

Form 8- K filed on June 10,2009 Exhibit No. 10.4

 

 

 

 

10.53

April 2, 2009 Assignment Agreement between the registrant and Henry & Munroe, LLC.

Form 8- K filed on June 10,2009 Exhibit No. 10.5

 

 

 

 

10.54

April 2, 2009 Option Agreement between the registrant, Rio Plata Exploration & Mining Inc. and Piejo Partners, Inc.

Form 8- K filed on June 10,2009 Exhibit No. 10.6

 

 

 

 

10.55

August 1, 2008 Consulting Agreement between the registrant and Goette Financial Consulting Ltd.

Form 8- K filed on June 10,2009 Exhibit No. 10.7

 

 

 

 

10.56

Warrant dated June 10, 2004 in favour of Wolfgang Rauball

Form 8- K filed on June 10,2009 Exhibit No. 10.8

 

 

 

 

10.57

Warrant dated March 39, 2009 in favour of Wolfgang Rauball

Form 8- K filed on June 10,2009 Exhibit No. 10.9

 

 

 

 

10.58

Warrant dated March 30, 2009 in favour of Herbert Zimmer

Form 8- K filed on June 10,2009 Exhibit No. 10.10

 

 

 

 

10.59

2006 Stock Option Plan

Form 8- K filed on June 10,2009 Exhibit No.10.11

 

 

 

 

10.60

Code of ethics and Business conduct dated April 27, 2009

Form 8- K filed on June 10,2009 Exhibit No. 14.1

 

 

 

 

10.61

News release dated April 23, 2009

Form 8- K filed on June 10,2009 Exhibit No. 99.1

 

 

21.1

Annual Report on Form 10-KSB for the Fiscal year ended December 31, 1995, Exhibit No. 24*

 

 

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed Herewith

 

 

 

 

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed Herewith

 

 

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed Herewith

 

 

 

 

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed Herewith

     Incorporated by reference

31


b) Reports on Form 8-K
During the last quarter of the fiscal year ended December 31, 2009, we did not file any reports on Form 8K.

(c) Exhibits

(d) Financial Statement Schedules
      None

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

  EUROGAS, INC.
  (Registrant)
     
     
  By /s/ Wolfgang Rauball
    Wolfgang Rauball  
    Chief Executive Officer
     
     
  By /s Harald Schmidt
    Harald Schmidt
    Interim Financial Officer

DATE: May 17, 2010

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature and Title   Date
     
/s/ Wolfgang Rauball   May 17, 2010
Wolfgang Rauball, Director    
     
     
     
     
/s/ Harald Schmidt   May 17, 2010
Harald Schmidt, Director    
     
     
     
     
/s/ Roger Agyagos    May 17, 2010
Roger Agyagos, Director    

32



Item 1. Financial Statements

EUROGAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(The following statements have only been reviewed by EuroGas, Inc. management)

    December     December  
    31,     31,  
    2009     2008  
             
ASSETS            
Current Assets            
Cash $  2520   $  1,010  
             
Investment in securities available for sale   -     217,880  
             
Other Receivables   3,348,567     885,622  
TOTAL Current Assets   3,351,087     1,104,512  
             
Mineral properties not subject to amortization   2,050,000        
          -  
Furniture and office equipment   3,983     4,267  
Total Property and Equipment   2,053,983     4,267  
Accumulated depletion, depreciation and amortization   ( 3,983 )   (284 )
Net Property and Equipment   2,050,000     3,983  
             
Investment, at cost   15,631,001     12,050,001  
Total Assets $  21,032,088   $  13,158,496  
             
LIABILITIES AND STOCKHOLDERS' DEFICIENCY            
Current Liabilities            
Accrued liabilities $  9,550,007   $  7,210,548  
Notes payable to related parties   2,721,566     882,684  
Shareholders Loan   2,982,851     -  
Total Current Liablities   15,254,424     8,093,232  
             
Stockholders' Capital/Deficiency            
Preferred stock, $0.001 par value; 3,661,968 shares authorized;
     260 shares outstanding; liquidation preference:$ 260,000
 
350,479
   
350,479
 
Common stock, $0.001 par value; 325,000,000 shares authorized;
     322,220,436 303,220,436 shares issued, respectively
 
322,220
   
303,220
 
Additional paid-in capital   164,806,302     163,115,302  
Accumulated deficit   ( 159,699,975 )   (158,702,375 )
Treasury stock, at cost; 5,028 shares   (1,362 )   (1,362 )
Total Stockholders' Capital/Deficiency   5,777,664     5,065,264  
Total Liabilities and Stockholders' Capital/Deficiency $  21,032,088   $  13,158,496  

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(The following statements have only been reviewed by EuroGas, Inc. management)

    For the Years Ended  
    December 31,  
    2009     2008     2007  
Oil and Gas Sales $  -   $  -     -  
    -     -     -  
Depreciation, depletion and amortization   3,983     284     189  
General and administrative   1,392,518     1,176,883     621,975  
                   
Total Costs and Operating Expenses $  1,396,501   $  1,177,167     622,164  
                   
Other Income (Expenses)                  
Interest Income   80,000     1,147        
Other Income   5,000     3,070        
Interest expense   (307,583 )   (78,619 )      
Income from Accrued Liability/Tax/settlement reduction         (128,248 )   18,804,667  
Gain/Loss on sale of securities available for sale   637,084     (268,276 )   (2,824,734 )
Total Other Income (Expense)   414,501     (470,926 )   15,979,933  
Net Profit/Loss   (982,000 )   (1,648,093 )   15,357,898  
Preferred Dividends   (15,600 )   (15,600 )   (135,198 )
Net Profit/Loss $  (997,600 ) $  (1,663,693 ) $  15,222,700  
Basic and Diluted Profit/Loss Per Common Share $  (0.003 ) $  (0.005 ) $  0.078  
Weighted Average Number of
Common Shares Used in Per Share
Calculation
  322,220,436     303,220,436     196,212,635  

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2



EUROGAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(The following statements have only been reviewed by EuroGas, Inc. management)

    For the Year  
    Ended  
    December 31, 2009  
       
Cash Flows From Operating Activities      
       
Net Profit /(Loss) $  (982,000 )
Adjustments to reconcile net loss to cash used by operating activities:      
Depreciation   3,983  
Gain on sale of property and equipment   -  
       
       
Impairment of mineral interests and equipment   -  
Unrealized Gain on sale of securities      
Changes in operating assets and liabilities:      
Other receivables / investment   (5,829,085 )
Accrued liabilities   2,323,859  
       
Net Cash Used in Operating Activities   (4,483,243 )
       
Cash Flows From Investing Activities   -  
Purchases of mineral interests, property and equipment   (2,050,000 )
Proceeds from sale of interest in gas property and equipment   -  
Proceeds from sale of investment in fixed-maturity securities   -  
Proceeds from sale of securities available for sale      
Net Cash Provided by (Used in) Investing Activities   (2,050,000 )
       
Cash Flows From Financing Activities      
Proceeds from issuance of common stock   1,710,000  
Shareholders Loan   2,982,851  
Proceeds of issuance of notes payable to related parties   1,838,882  
Acquisition of treasury stock   -  
Net Cash Provided by (Used in) Financing Activities   6,531,733  
       
Effect of Exchange Rate Changes on Cash   -  
       
Net Increase (Decrease) in Cash   1510  
       
Cash at Beginning of Period   1010  
       
Cash at End of Period $  2520  

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3



EUROGAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations EuroGas is primarily engaged in the acquisition of rights to explore for and exploit natural gas, unconventional gas, coal bed methane gas, crude oil and minerals. We have acquired interests in several large exploration concessions and are in various stages of identifying industry partners, farming out exploration rights, undertaking exploration drilling, and seeking to develop production. Unless otherwise indicated, all dollar amounts in this Form 10-K are reflected in United States dollars.

Business Condition - EuroGas has accumulated a deficit of ($ 159,699,975) through December 31, 2009. At December 31, 2009, the Company had a working capital of $ (11,903,337) and a capital of $ 5,777,664. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern. Realization of the investment in properties and equipment is dependent upon management obtaining financing for exploration, development and production of its properties. In addition, if exploration or evaluation of property and equipment is unsuccessful, all or a portion of the remaining recorded amount of those properties will be recognized as impairment losses. Payment of current liabilities will require substantial additional financing. Management of the Company plans to finance operations, explore and develop its properties and pay its liabilities through borrowing, through sale of interests in its properties, through advances received against future talc sales and through the issuance of additional equity securities. Although realization of any of these planned transactions is not assured, management of the Company still was able to raise new capital and acquire new assets through a combination of cash and the issuance of additional equity securities after the Chapter 7 bankruptcy proceedings were formally terminated by the Bankruptcy Court of Utah in February 2007. At the time of the formal termination of the Chapter 7 bankruptcy proceedings the Company had approx. 200,000,000 shares outstanding without any assets, while until December 31, 2009 the Company was able to accumulate new assets by issuing approx. 120,000,000 new shares bringing the total number of outstanding shares to 322,220,436.

Principles of Consolidation - The accompanying consolidated financial statements include the accounts of EuroGas, Inc.. The investment for the interest in McCallan was accounted at cost based upon the ownership percentage that was held by EuroGas during that period.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The critical accounting policies that require management's most significant estimates and judgments include the assessment of recoverability of property and equipment. The actual results experienced by the Company may differ materially from management's estimates.

NOTE 2 - INVESTMENT IN SECURITIES AVAILABLE FOR SALE

The Company's primary investment in securities consists of 419,100 shares of Enterra Energy Ltd. The Enterra shares were held as collateral by Oxbridge Limited under a claim. On March 12, 2008 the Company and Oxbridge have entered into a settlement agreement and under the terms and conditions of the settlement agreement Oxbridge has agreed to release the Enterra Shares which were held as collateral by Oxbridge under a claim against the Company. For further details of the settlement with Oxbridge see the Company’s 2008 Q1. At June 30, 2003, the Company changed its expectation of realizing proceeds from sale of the Enterra shares to more than one year and reclassified the investment in the Enterra shares as a long-term asset. The Company's investments in equity securities, including the Enterra shares, are accounted for as available for sale, as defined by SFAS No. 115, as they have readily determinable fair values and are not restricted other than in connection with being pledged as collateral. Accordingly, the investments in securities available for sale were carried at market value with unrealized gains and losses included in accumulated other comprehensive income (loss). On December 31, 2009 the Company sold the 419,100 Enterra shares for $ 2.16 per share, which was the highest stock price for Enterra shares in 2009. This transaction realized a profit of $ 637,084 for the company.

F-4


Note 3 Other Receivables

Other Receivables reflect a short term loan by EuroGas,Inc. to Mc Callan for working capital and advances to EuroGas Polska Sp.z.o.o. and EuroGas GmbH with a balance of US $ 2,915,707 as at December 31, 2009 including $ 80,000 interest.

Other Receivables reflect a short term loan by EuroGas,Inc. to Rozmin s.r.o. for working capital with a balance of $ 432,860 at December 31, 2009.

Note 4 Property and Equipment

Rio Plata “Sandwich” Properties

On January 10, 2008, the company entered into a letter of intent with Rio Plata Exploration and Mining Inc. pursuant to which the company was granted an option to acquire a 60% interest in and to 56 mining claims, covering approximately 2,000 acres (809 ha.) and known as the Tombstone “Sandwich” Property, a gold and silver base metals property, located in the Tombstone Mining District of Arizona. On April 2, 2009, a formal option agreement having retroactive effect to January, 2008, was subsequently entered into between Rio Plata and the company covering this acquisition. Under the terms of this agreement, the company earned the 60% interest by the payment of $250,000 and the issuance of 12,000,000 restricted common shares.

On April 2, 2009, the registrant entered into another option agreement with Rio Plata to acquire the remaining 40% interest in the Tombstone “Sandwich” claims, plus a $3,000 reclamation bond, in exchange for the payment of $5,500 and the issuance of 8,000,000 restricted common shares.

Although 5,500,000 shares of common stock are not allotted yet, both parties agreed, that the company owns all right, title and a 100% interest in the Tombstone “Sandwich” claims, which have been recorded at the US Government BLM( Bureau of Land Management) in the company’s name. The claims were recorded at cost with a total amount of $ 2,050,000.

Note 5 Investment at cost

Tombstone Exploration Corporation

On June 30, 2008 the company signed a non brokered private placement with Tombstone Exploration Corporation for the sale of 2,000,000 shares of common stock for $ 0.20 per share with a total amount of $ 400,000. Attached was a three year warrant for the purchase of an additional 1,000,000 shares of common stock at $ 0.40 per share. With respect to the strategic investment and the additional private placement in 2010 the Tombstone shares were recorded at cost with an amount of $ 400,000.

TEI Open Pit Mine

Effective April 2, 2009, the company entered into an assignment agreement with Henry & Munroe, LLC, pursuant to which Henry & Munroe assigned to the company all rights and obligations in and to an option to purchase real estate agreement dated March 3, 2009 between Henry & Munroe (as Optionee) and Dale Turner, Tombstone Development Co. and Tombstone Hills LLC (as Optionors). This agreement covers approximately 485 acres (196 ha.) in three parcels of land, and is known as the TEI Open Pit Mine located in the Tombstone Mining District of southeast Arizona.

The consideration paid to Henry & Munro consisted of $10,000 and the issuance of 2,000,000 restricted common shares of the company.

F-5


In the event the company wishes to exercise the option to acquire the TEI Open Pit Mine, it must pay the Optionors $600,000 for Parcel A of the lands (approximately 200 acres), $400,000 for Parcel B of the lands (approximately 150 acres), and $ 540,000 for Parcel C of the lands (approximately 135 acres).

The interest in the TEI Open Pit Mine was recorded with $ 230,000 as investment at cost.

McCallan

McCallan is a private UK Company previously owned by Regent Ventures Ltd. Canada as to 45 % and by Mr. Hans D. Dietmann as to 55 %.McCallan's main assets are its wholly-owned subsidiaries EuroGas Polska sp.zo.o ("EuroGas Polska"), a Polish company, and Vienna, Austria based EuroGas GmbH (“EuroGas Austria”).

Regent Ventures Ltd.

On May 1, 2008 the company signed a Share Option Agreement with Regent Ventures Ltd. (Regent), a Canadian public company, to acquire Regent's 45% interest in McCallan.

Under the terms and conditions of the agreement, Regent has granted EuroGas the Option to purchase Regent's entire interest in McCallan in exchange for the issuance of 10 million common shares of EuroGas and a cash-payment of CDN $ 3 million payable in three stages.

The company has issued the 10 Million restricted common shares of Euro Gas during 2008.

The date of the final cash-payment of 3 Million Can $ was postponed by 2 amendment agreements until March 31, 2010. For the first amendment the company issued a signing bonus of 2 Million shares of restricted common stock of EuroGas in 2009 and for the second amendment 1 Million shares of non-restricted common stock of EuroGas have to be issued.

During April 2010, the Company entered into a further amending agreement with Regent, where Regent has extended the due date of the $ 3,000,000 cash payments to June 30, 2010. In consideration for the extension, the company agreed to issue an additional 1,000,000 shares to Regent, free of restriction from trading. In addition Regent exercised the option to elect to receive up to $1,500,000 of the cash payment due on closing in shares in the capital of the company at the lower of the then market price or $0.25 per share. Regent still may elect to convert also on the balance of the cash payment at the then market price of the shares.

Hans D. Dietmann

On May 28, 2008 the company entered into an agreement to acquire a 30% interest in McCallan from Mr. Hans D. Dietmann, McCallan's controlling shareholder and Managing Director, and secured an option to purchase an additional 25% interest in McCallan from Mr. Dietmann.

The company purchased Mr. Dietmann's 30% interest by issuing 20,000,000 restricted EuroGas, Inc. common shares, 1 Million preferred shares of the company and by cash payments totalling 750,000 US $.

Any stock issued to Mr. Dietmann was subject to a three year lock-up agreement which prohibited the sale or transfer of these shares without EuroGas' consent. The lock-up agreement was cancelled in 2009 in combination with Mr. Dietmann providing working capital to the company in the amount of approx. $ 1,600,000.

On April 1, 2010 the company and Mr. Dietman entered into a final agreement enabling the company to purchase the remaining 25 % interest in Mc Callan for issuing 15 Million restricted common shares of the company as per the terms & conditions of the May 28, 2008 agreement. Mr. Dietmann relinquished the rights to the 1 Million preferred shares of the company.

The interest in Mc Callan was recorded at cost with an amount of $ 15,001,000 as at December 31, 2009.

F-6


Rozmin s.r.o.

On April 17, 2001, EuroGas entered into an agreement to purchase 57% interest in Rozmin s.r.o. from Belmont Resources, Inc. ("Belmont"), in exchange for EuroGas issuing 12,000,000 common shares, paying Belmont $ 100,000 in advance royalties, and modifying the exercise price of existing stock options.

EuroGas further agreed to issue an additional 1,000,000 common shares for each $0.05 decrease in the ten-day average OTC Bulletin Board quoted trading price of the Company's common shares below $0.30 per share through April 17, 2002. During 2002 EuroGas issued 3,830,000 common shares to Belmont under the stock price guarantee. In connection with the purchase by EuroGas, Rozmin s.r.o. granted an overriding royalty to Belmont of two percent of gross revenues from any talc sold.

Additionally, EuroGas agreed to issue additional common shares to Belmont if Belmont did not realize approximately $1,218,000 from the resale of the original 12,000,000 common shares by April 17, 2002, and provide notice of such deficiency to EuroGas, to compensate Belmont for the shortfall based on the ten-day average trading price on the date of the notice of shortfall from Belmont.

In January 2005 the Company’s subsidiary Rozmin s.r.o. was notified that the concession regarding the talc deposit had been cancelled by the Slovakian Government for unspecified and dubious reasons. At this point therefore no further concession is held by Rozmin. This does not nullify the obligation to Belmont Resources as to the balance of the purchase price. The Company and Belmont, however, entered into an agreement for Belmont not to pursue legal proceedings against the Company as long as the situation in respect to Rozmin has not been cleared.

The purchase price of the 57 % interest in Rozmin is recorded with $1.

NOTE 6 Accrued Liabilities

Judgment EuroGas Texas Corp.

EuroGas, Inc. has been notified by Texas Euro Gas Corp., a Houston, Texas based private company (The “independent party”), that it has purchased the Judgment against EuroGas, Inc. and others in the original amount of $113 Million, plus accrued interest thereon. The Judgment against the Company et. al. was originally obtained in the South Texas Bankruptcy Court by the Bankruptcy Trustee of the McKenzie estate, Trustee Steve Smith of Houston, Texas in 2004. The independent party has received an assignment of the Judgment from Trustee Smith on September 24, 2007 after the Honorable Judge Brown of the South Texas Bankruptcy Court approved the sale of the Judgment on August 22, 2007 by Court Order. Trustee Smith had forced EuroGas, Inc. into involuntary bankruptcy (Chapter 7) in the fall of 2004 and EuroGas, Inc.’s remaining assets were sold at public auction in March 2006 in Salt Lake City, Utah. The involuntary bankruptcy of EuroGas, Inc. was closed and terminated by Court Order of the Utah Bankruptcy Court in February 2007.

The independent party, Texas EuroGas Corp., paid $1.6 million US cash to the McKenzie Bankruptcy Trustee as specified and approved by the August 22, 2007 Court Order of the South Texas Bankruptcy Court. The independent party has also informed the Company that it will not seek legal redress towards the Company and others after having obtained the Judgment and is prepared to negotiate with the Company and others to redeem the Judgment.

Texas EuroGas Corporation, a Texas corporation, was established in 2007 by Mr. David Sacks, a Houston solicitor, acting as Trustee on behalf of Mr Hans D. Dietmann, a non-affiliated shareholder of the Company.

The entire financing of the purchase of the Judgment by Texas EuroGas Corp. from the Bankruptcy Trustee Steve Smith, as well as all the costs involved related to the purchase of the judgment by Texas EuroGas Corporation, was entirely financed by Mr. Dietmann, who provided approx. $ 800,000 cash, and by the CEO of EuroGas Inc., Mr. Wolfgang Rauball, who provided approx. $ 1,125,000 cash.

Although Mr. Dietmann had indicated in writing to settle the Judgment issue with the Company, the Trustee for Mr. Dietmann, Mr David Sacks, still has not transferred ownership of Texas EuroGas Corp. into Mr. Dietmann’s name, although agreed to in writing by Mr. Sacks in summer 2008, as Mr. Sacks was asking for further financial renumeration. Therefore the Judgment could not have been settled with EuroGas Inc. yet.

F-7


In order to solve this problem Mr. Dietmann and Mr. Wolfgang Rauball have entered into an agreement with EuroGas Inc. in October 2009 and have transferred all their respective rights of ownership and their respective receivables in connection with their financing of Texas EuroGas Corporation and the purchase of the Judgment from Trustee Smith, incl. accrued interest thereon, to the Company.

In addition to the financing of the purchase of the $ 113 million Judgment from Trustee Smith in September 2007 by the Company’s CEO Mr. Wolfgang Rauball and Mr. Dietmann, Trustee Smith had obtained a second Judgment against the company in early 2009 in a different case in the amount of approx. $ 125,000 plus accrued interest and had threatened to start again legal procedures to reopen bankruptcy proceedings under Chapter 7 against the Company. On April 30, 2009 Mr. Dietmann has also bought this Judgment from Trustee Smith and has also assigned his receivable for this second judgment to the Company.

For the transfer of the rights of ownership and the respective receivables, including accrued interest and costs since 2007, the company agreed to reimburse Mr. Dietmann $ 950,000 and Mr. Wolfgang Rauball $ 1,600,000. The loan accounts of Mr. Dietmann and Mr. Rauball were credited with these amounts in October 2009.

Mr. Wolfgang Rauball and Dr. Reinhard Rauball have paid a lump sum of $ 100,000 each in favor of the company to release both gentlemen from any claims under the Judgment to be held by the company.

The formal transfer of the ownership of EuroGas Texas Ltd. to the company has not taken place as of December 31, 2009. The final payment for Mr.Sacks’services is shown as an accrued liability in favour of Mr. Sacks with an estimated amount of $ 300,000. Mr. Sacks had already received $ 300,000 cash in May 2008 from Mr. Dietmann for his services in 2007/ 2008.

Salaries

The agreed salaries for the directors of the company have not been paid for several years due to the bankruptcy proceedings and the general financial situation of the company and the financial commitments by the company to acquire and support its various assets after the release from chapter 7 bankruptcy proceedings in 2007. At December 31, 2009 a total amount of $ 3,069,688 is recorded as accrued liability for outstanding salaries of Mr. Hank Blankenstein, Mr. Harald Schmidt and Mr. Wolfgang Rauball. On March 10, 2010 an amount of $ 2,100,000 outstanding salaries was applied against the stock purchase with the exercise of warrants owned by Wolfgang Rauball. The full amount of $ 42,000 of outstanding salaries of Harald Schmidt was converted into restricted common shares of the company.

Rozmin

The company recorded an accrued liability of $ 1,500,000 at December 31, 2009 under the purchase agreement dated April 17, 2001 to purchase 57 % of Rozmin s.r.o. from Belmont Resources Ltd.

Rio Plata

5,500,000 common shares of the company are not allotted to Rio Plata at December 31, 2009 and were recorded as an accrued liability with an amount of $ 495,000.

Regent Ventures Ltd.

The signing bonus of 1,000,000 common shares of the company to extend the final deadline under the option agreement to purchase the 45 % interest in Mc Callan is not allotted yet in favor of Regent Ventures as at December 31, 2009 and is recorded as an accrued liability with an amount of $ 171,000 as well as the outstanding final payment of $ 3,000,000.

NOTE 7 Shareholders Loan

Mr. Hans D. Dietmann, a non-affiliated shareholder of EuroGas, has provided miscellaneous business expenses on behalf of EuroGas. The resulting payable is presented in the accompanying financial statements as part of the Shareholders Loan of $ 1,753,500. The loan has to be repaid by June 30, 2010. On October 7, 2009 the shareholder gave notice to EuroGas Inc. to convert the entire loan due to the loan agreement into common stock of EuroGas at the average price traded on the US Pink Sheet for 90 Days prior to the conversion request.

F-8


On October 13, 2009 the Company entered into a loan and option agreement with Mr. and Mrs. Walter Storm and Forstgarten International Holding GmbH (“the investors”). The investors, under the loan and option agreement, have forwarded EUR 680,000 (corresponding to approximately USD 1,010,000) to EuroGas. The loan is repayable on October 1, 2010 and will carry an interest rate of 8%. These funds were used for EuroGas Polskas JOA liabilities under the 2009 seismic program. The investors also demanded a signing bonus in the form of 2 Million free tradable common shares of the company under the October 13, 2009 agreement. These shares were provided by non-affiliated shareholders and the company has to reimburse those shareholders in 2010.

The investors have also been granted an option and a right of first refusal to earn a 60% working interest in future EuroGas projects. Furthermore, the investors intend to enter into a Master Financing Agreement, under which the investors are to inject further funds into EuroGas or its operations through a separate $ 7,000,000 convertible debenture. The investors would be able to convert their debenture into restricted EuroGas common stock at prices ranging from USD 0.25 to USD 0.50 per share over the next 3 years (USD 0.25 per share in the first year; USD 0.35 in the second year; and USD 0.50 in the third year).

On January 4, 2010 the company and Forstgarten agreed to terminate Forstgarten’s participation in the October 13, 2009 loan and option agreement and to repay Forstgarten’s portion of the $ 1,010,000 loan plus accrued interest under the terms and conditions of the convertible debenture.

Subsequently Mr. and Mrs. Walter Storm have informed the company that they are prepared to take over Forstgarten’s 50 % participation in the October 13, 2009 loan and option agreement and have provided the company already with a substantial down payment under the $ 7 Million convertible debenture.

NOTE 8 NOTES PAYABLE TO RELATED PARTIES

Notes payable to related parties are considered current and consist of:   December     December  
    31,     31,  
    2009     2008  
Loans from a key employee            
                                                                                                                                                                      $  882,684   $  1,018,752  
Interest at 10%, unsecured.   88,268     62,354  
Additional Loan for business expenses in 2009   350,614     (214,681 )
Transfer of Receivables against EuroGas Texas Corp. December 2009 (see Item 3)   1,600,000      
Debit for release of Wolfgang Rauball and Dr. Reinhard Rauball (see Item 3)   (200,000 )      
Total Notes Payable to Related Parties   2,721,566     882,684  

On March 10, 2010 an amount of approx. $ 1,800,000 was applied against the stock purchase with the exercise of the warrants owned by Wolfgang Rauball ( see Item 12).

NOTE 9PREFERRED AND COMMON STOCK

There are 260 shares of 1997 Series Preferred Stock (the “1997 Series preferred stock”). The 1997 Series preferred stock is non- voting and accrues dividends at $ 60.00 per share, or 6 % annually. The 1997 Series preferred stock has a liquidation preference of $ 1,000.00 per share, plus unpaid dividends before liquidation payments applicable to common shares. The 1997 Series preferred stock, along with unpaid dividends thereon, is convertible in common shares at the rate of $ 1,000.00 divided by the lesser of 125 % of the average closing bid price for five trading days prior to issuance or 82% of the closing bid price for five trading days prior to conversion. Annual dividend requirements of the 1995 Series preferred stock are $ 15,600. The following is a summary of the preferred stock outstanding at December 31, 2009:

          Liquidation Preference     Annual Dividend  
                      Requirement  
    Shares                          
    Outstanding     Per Share     Total     Per Share     Total  
Designation                              
1997 Series   260   $  1,000.00     260,000   $  60.00    $ 15,600  
Total   260         $  260,000         $  15,600  

Aggregate accrued dividends on preferred stock were $ 187,200 and $171,600 at December 31, 2009 and at December 31, 2008, respectively.

F-9