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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, 2003

[   ]

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

For the transition period from _______________ to  _______________

Registrant's telephone number, including area code:  (604) 913-1462

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 [X]  NO [  ]     

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]

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based upon the last sale price of the common stock as of the last business day of the registrant’s most recently completed second quarter was approximately $13,500,000, or $0.115 per share.

As of April 30, 2004, the registrant had  171,712, 635 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

#

TABLE OF CONTENTS TO FORM 10-K

PAGE

PART I

Item 1.

Business

3

Item 2.

Property

11

Item 3.

Legal Proceedings

11

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

14

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operation

15

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

18

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

19

Item 11.

Executive Compensation

20

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

25

Documents Filed

1. Financial Statements

2. Financial Statement Schedule

3. Exhibit List

Reports on Form 8-K

Exhibits

Financial Statement Schedules

SIGNATURES

32

CERTIFICATIONS.

33

2

PART I

This Annual Report on Form 10-K for the year ended December 31, 2003 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 “an ticipate.”  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, coal bed methane gas, crude oil, talc and other 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.

When used herein, “we”, the “Company” and “EuroGas” includes EuroGas, Inc., and its wholly owned subsidiaries, EuroGas (UK) Limited, Danube International Petroleum Company, EuroGas GmbH Austria, EuroGas Polska Sp. zo.o., and Energy Global A.G., and the subsidiaries of each of these subsidiaries, including GlobeGas B.V., Pol-Tex Methane, Sp. zo.o., McKenzie Methane Jastrzebie Sp. zo.o., Energetyka Lubuska and Danube International Petroleum Holding B.V.

Activities in Slovakia

On January 1, 1993, the Czech Republic and Slovakia emerged as separate independent nations.  Slovakia is bordered on the north by Poland, on the east by Ukraine, on the south by Hungary, and on the west by Austria and the Czech Republic.  Slovakia has an area of approximately 19,000 square miles and a population of approximately 5.5 million people.  Slovakia has not been as quick to adopt free market reforms as Poland and the Czech Republic and the former communist party remains a major political force.  Slovakia is a member of the International Monetary Fund, the European Bank for reconstruction and development, and an associate member of the European Union.  Bratislava is the capital of Slovakia and its largest city.

Gemerska Talc Deposit.  During 1998, we acquired a 24% interest in an undeveloped talc deposit located near Roznava in Eastern Slovakia through an indirect investment in Rozmin s.r.o.  Oxbridge Ltd., a related party, paid $879,000 on behalf of the Company in 1998 as part of the purchase of the 24% interest in the talc deposit. On March 19, 1998, we reimbursed Oxbridge Ltd. for its payment and accounted for the payment to Oxbridge Ltd. as a reduction of a separate promissory note payable to Oxbridge Ltd.  In 2000, Oxbridge Ltd. made a demand for payment of the promissory note.  EuroGas reclassified the payment to Oxbridge Ltd. as an increase in the cost of the 24% interest in the talc deposit and recorded the principal and $272,490 of accrued interest due under the promissory note payable to Oxbridge Ltd.  In November 2000, EuroGas issued 2,391,162 shares of common stock, valued at $1,151,490, or $0.48 per share, to Oxbridge Ltd. in satisfaction of the principal and accrued interest due on the promissory note. Through December 31, 2000 and 1999, EuroGas had invested $2,376,682 (including the $879,000 paid to Oxbridge Ltd.) and $915,913 (excluding the payment to Oxbridge Ltd.), respectively, in the acquisition and development of the talc deposit and related equipment.

On April 17, 2001, EuroGas entered into an agreement to purchase an additional 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 cash, 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 April 2002, EuroGas was obligated to issue 3,830,000 common shares to Belmont under the terms of the agreement. 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 provided notice of the deficiency, to compensate Belmo nt for the shortfall based on the ten-day average trading price on the date of the notice of shortfall from Belmont. Because Belmont has not provided notice of the sale of the shares and the resulting deficiency, EuroGas is not able to calculate the shares that may be issuable, but estimates it may be obligated to issue approximately 12,000,000 additional common shares, based on recent market prices for the Company's common stock, to Belmont under this provision of the agreement.

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. EuroGas agreed to pay Belmont a $100,000 non-refundable advanced royalty payment and agreed to arrange the necessary financing to place the talc deposit into commercial production by April 17, 2002. If the talc deposit was not in commercial production by then, EuroGas agreed to pay Belmont additional advanced royalties of $10,000 per month for each month of delay in achieving commercial production. As of December 31, 2002 EuroGas has accrued $85,000 in advance royalty due to Belmont because the talc deposit was not in commercial production. EuroGas granted Belmont the right to appoint one member of the EuroGas, Inc., board of directors for not less than one year.

3

The purchase of the interest in Rozmin s.r.o. was recorded at $3,843,560, based on the market value of the common shares issued (including the guarantee of the future stock value), the increase in the fair value from the modification of the stock options, and the cash advance royalty to be paid. The issuance of additional common shares under the guarantee of the future market value of the Company's common shares will not result in additional cost when issued. EuroGas accounted for the acquisition as a purchase and allocated the purchase price to the assets acquired, primarily the interest in talc mineral properties. No goodwill was recognized in the purchase transaction. The operations of Rozmin s.r.o. have been included in the consolidated results of operations from its purchase.

On April 2, 2002, EuroGas exchanged its 55% interest in RimaMuran for the 43% investment in Rozmin held by RimaMuran. As part of the exchange, EuroGas paid approximately $105,000 to the former minority owners of RimaMuran to pay liabilities of RimaMuran and to compensate the former minority owners. RimaMuran agreed to transfer title to two pieces of heavy equipment, which EuroGas had previously financed, to Rozmin. As a result of the exchange, EuroGas has a direct 43% ownership in Rozmin free of encumbrances, and will acquire direct ownership of the remaining 57% interest in Rozmin if the contingency for additional stock issuances to Belmont is resolved. By virtue of its ownership of Rozmin and the talc deposit, EuroGas bears the full responsibility to fund the development costs necessary to bring the deposit to commercial production.  The Company is currently in negotiations with several interested parties to sell a minority interest in Rozmin s.r.o to raise these development funds. In addition the Company is also negotiating a long-term delivery contract for talc from Rozmin.  There is no assurance that these negotiations will be successful.

The Gemerska Talc Deposit is considered to be one of the richest and largest talc deposits in the world. The deposit, according to the Ministry of Environment of the Slovak Republic, contains 146.6 million tons of high-purity talc reserves.  Mine construction, which began in August 2000, is scheduled for completion in 2004, at which time talc production is scheduled to commence. Production is expected to reach 130,000 tons of talc annually.  This would represent approximately 12% of the annual European talc consumption.  We believe the exploitation of the Gemerska Talc Deposit will be particularly favorable due to strong global demand for talc.

Envigeo-Carpathian Flysch Concession.  In September 1998, we acquired a 51% interest in Envigeo s.r.o., a Slovakian private company that owns a 2,300 square kilometer appraisal and survey concession, known as the Medzilaborce concession, in the northeast corner of Slovakia, referred to as the Carpathian Flysch region, is in good standing. Subsequently the Company sold some of its interest and now EuroGas presently holds a 45% interest in Envigeo, McCallan owns 45% and the Envigeo s.r.o. owns the other 10% There are three concessions, all held by Envigeo.  This region extends into Poland and Ukraine and is geologically on trend with extensive major discoveries of oil and gas found in the neighboring countries.  Since 1998 we have undertaken geological reconnaissance work on the Medzilaborce concession to meet the concession requirements.  As we have evaluated the investment we have determined that there is no poten tial for returns in the near future.  Therefore we have decided to impair this project.  Accordingly, the Company recognized a $1,703,000 charge for impairment, which was the carrying value of the Company's investment in the project, during the fourth quarter of 2002.

Slovakian Oil & Gas Joint Venture.  In July 1996, as part of our effort to diversify and expand our interests in Europe, we acquired Danube International Petroleum Company (“Danube”), which held participation rights for natural gas exploration in Slovakia and the Czech Republic.  Since the acquisition, we have focused our efforts on the development of the Slovakian project and abandoned our interest in the Czech Republic.  Danube was a partner in a joint venture agreement (the “Slovakian Oil & Gas Joint Venture”) with NAFTA Gbely A.S. (“NAFTA”).  The principal focus of the Slovakian Oil & Gas Joint Venture is natural gas exploration and development under a license covering 128,000 acres located in the East Slovakian Basin, a northeastern extension of the Pannonian Basin that covers large parts of Hungary and the southeastern part of Slovakia. < /P>

Under the terms of the joint venture agreement, EuroGas was obligated to provide 75% ($4.98 million) of the projected initial test phase (including seismic testing) funding of $6.64 million and 60% ($4.08 million) of the projected capital investment cost for the initial production phase of $6.8 million.  All funds required for the initial test phase were expended.  However, the Company has decided to withdraw from the NAFTA-Danube association and discontinue our involvement in any further exploration in the Trebisov gas field in eastern Slovakia.   In exchange for the Company’s withdrawal, Nafta Gbely a.s. agreed to pay all outstanding obligations and liabilities totaling approximately $750,000 owing to Geophysical Services Ltd. of Hungary.  

4

Activities in Poland

 EuroGas Polska has several oil and gas concessions and projects in Poland, including:

–

a 112 sq. kilometer coal bed methane concession located in the Upper Silesian Coal Basin,

–

a project with Polish Oil and Gas to undertake appraisal and development activities for a large area located in the Carpathian Flysch and Tectonic ForeDeep areas of Poland,

–

exclusive rights to explore for and develop hydrocarbons in an area of over 1,100,000 acres in Southeastern Poland, and

–

a concession to explore and develop oil and gas on over 1,000,000 acres in the Carpathian oil fairway.

Polish Methane Gas Concessions.  Coal bed methane gas production has taken place in the United States for some time, and has drawn attention in Poland due to a study funded by the United States Government.  Methane is a component of natural gas that is used as a fuel in various industries and as a source of residential heating.  Before natural gas is used as a fuel, heavy hydrocarbons such as butane, propane, and natural gasoline are separated to meet pipeline specifications.  The heavy hydrocarbons are typically sold separately. The remaining gas constitutes dry gas, composed of methane and ethane.  Once produced and separated, there is no substantial difference between natural gas and methane.  The demand in Europe for both natural and methane gas has been traditionally high and the price generally runs significantly higher than prices in the United States, although the pri ce for natural gas in Poland is generally lower than in the rest of the European market.  Gas production typically competes with coal and oil but is generally considered to be a preferred product because of recent environmental concerns expressed by governments in Europe.

On October 13, 1997, EuroGas received a concession from the Polish Ministry of Environmental Protection of Natural Resources and Forestry to explore and potentially develop a 112 square kilometer coal bed methane concession located in the Upper Silesian Coal Basin.  We conducted a feasibility study to explore the possibilities of drilling gas wells for a combined heat and power plant project or other uses.  The results of the study suggest that the volume of gas in place can exceed 30 billion cubic meters.  Additional work connected with evaluation of the productivity of the wells is under way.  Although the property is carried in the books at zero value there is a possibility for success if a proper funding of the project can be obtained.  

Carpathian Flysch and Tectonic ForeDeep Oil & Gas Fields.  On October 23, 1997, EuroGas Polska completed an agreement with Polish Oil to undertake appraisal and development activities for a large area located in the Carpathian Flysch and Tectonic ForeDeep areas of Poland.  The agreement contemplates total expenditures by EuroGas of $15 million.  To date, EuroGas Polska and Polish Oil have conducted and interpreted a $1.5 million, wide-line seismic work and geological exploration program in the Rymanow-Lesko area of the Carpathian Mountains in southeastern Poland.  Polish Oil has produced a report based on this program, which suggests the potential for substantial oil and gas reserves in the Rymanow-Lesko area.  If subsequent feasibility studies indicate that oil or gas can economically be recovered from this concession, of which there is no assurance, further testing, r egulatory approvals and construction will be required before commercial production can commence, which would take at least two years, and cost at least $2,000,000.  We do not currently have the funds necessary to complete a feasibility study, drill test wells, or develop this concession and will need to bring in a joint venture partner or raise additional capital before such process can commence.

Carpathian New Concession.  On December 20, 1999, we executed a usufruct agreement with the Ministry of Environmental Protection, Natural Resources and Forestry of the Republic of Poland.  This agreement tentatively secured for EuroGas the exclusive rights to explore for and develop hydrocarbons in an area of over 1,100,000 acres in Southeastern Poland.

On September 7, 2000, the Ministry of Environmental Protection, Natural Resources and Forestry of the Republic of Poland granted EuroGas Polska a concession to explore and develop oil and gas on more than one million acres in the Carpathian oil fairway.  In May 2000, a report conducted by independent Polish oil and gas experts indicated potentially producing deposits in 12 exploration leads within this area, with the largest one potentially containing 300 million barrels of oil equivalent.  On October 27, 2000, EuroGas Polska entered into a Joint Operation Agreement with Polish Oil. The agreement calls for Polish Oil to become the operator in the Carpathian Project.  Separately, Polish Oil and the Company have entered into a tentative agreement whereby Polish Oil will acquire 30% of EuroGas Polska.

Our work on the Carpathian Project is at an early exploratory stage.  If subsequent exploration and testing indicates that oil or gas can economically be recovered from this concession, of which there is no assurance, an estimated two years of further testing, obtaining regulatory approvals and construction will be required before commercial production could commence, at an estimated minimum cost of $3,000,000.  We are currently negotiating the possibility of forming partnerships with a few major international oil and gas companies.  

5

Activities in Kazakhstan

By an amended agreement dated November 22, 2001, EuroGas agreed to acquire all of the issued and outstanding shares of Falcon Energy Overseas Inc., a subsidiary of Falcon Energy Holding Corp. (“Falcon  The   venture holds the license to explore and develop proven shallow oil fields in Kazakhstan on an area of approximately 3.2 million acres known as the Sagiski Block. Falcon also holds other oil and gas interests in Kazakhstan outside the joint venture with FIOC. Under the agreement EuroGas was to issue 30,000,000 shares of EuroGas common stock and pay staged cash commitments of $10,000,000.  The Company issued 10,000,000 shares and the parties terminated the relationship as the acquisition was unwound.

EuroGas expected to obtain funding for this project through Oxbridge Ltd., but terms of that funding were never finalized due to the Company’s delisting from the NASD OTC Bulletin Board on December 28, 2001 and Falcon’s inability to provide financial statements to the Company. On February 12, 2002, Falcon notified EuroGas that all agreements between Falcon and EuroGas, both written or verbal were null and void as of February 6, 2002. The Company and Falcon are currently in discussions to negotiate a new agreement; however, any new agreement will contemplate potential properties other than the Sagiski Block.

Activities in Canada

Beaver River Natural Gas Field.  EuroGas owns a 7.5% interest in the Beaver River natural gas project.   The objective of this project is to reestablish commercial production in an abandoned natural gas field in the northeast corner of British Columbia, Canada.  Beaver River is the largest existing gas pool in British Columbia. The prior owners shut down the project because of heavy water influx.  Before shutting down the project, the prior owner produced substantial amounts of natural gas and reported that peak production reached 350 million cubic feet per day from five wells. Independent reservoir studies and government reports show substantial natural gas reserves at Beaver River, ranging between 1.5 and 3 trillion cubic feet.

EuroGas originally held a 15% interest in the Beaver River natural gas project, through a wholly owned subsidiary, Beaver River Resources Ltd. (“BRRL”).  This interest was reduced to 7.5% in the settlement of a lawsuit with the former owners.  In the settlement, the former owners returned 1,200,000 shares of EuroGas common stock to EuroGas in exchange for one-half of BRRL’s interest in the Bear River project.

According to the current operator of the Beaver River project, Questerre Energy ("Questerre"), the A5 re-entry well was reaching gas production levels as high as 17 million cubic feet per day in March of 2001. The well was in production from March through April 2001, when it was shut in.  Due to drilling of a new well and lower pressure in the field pipeline, enhancement of the field pipeline pressure through installation of additional compressor pumping and gas lift systems was necessary.

  The compressor pumping and gas lift systems were installed and operational in early 2002 after which extensive testing of the experimental process upon which the recovery effort is based.

Since mid-March of 2001, BRRL received one-sixth of a 4% overriding royalty from gas production, under its agreement with Questerre. The property owners including BRRL are receiving an overriding royalty of 4% until Questerre has recovered its investment. The total royalties received are expected to substantially increase until Questerre has received up to 600% of its investment. Thereafter the ownership interest will change to a 6.7% working interest.  

During the second quarter of 2002, the Company evaluated its investment in the Beaver River Gas project in British Columbia, Canada. The terms of the related farmout agreement provide that the operator of the project will receive payout of all of its investment prior to any payments to the other interest holders and then the Company would receive 3.33% of the net cash flows, if any. The operator has invested in excess of $16,000,000 in the project at September 30, 2002. Due to the low production from the Beaver River Project and gas prices currently being paid for the production, management has determined that it is unlikely that the Company will receive any cash flows from the project, except for nominal overriding royalty payments.  Accordingly, the Company recognized a $3,937,500 charge for impairment, which was equal to the carrying value of the Company's investment in the project.

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, 2003 or December 31, 2002.

Oil and Gas Production and Production Costs.  Effective with the sale of our interest in Big Horn Resources, Ltd. in January 2001, we have no proven oil and gas reserves.  Accordingly, we are not required to present disclosure of oil and gas operations.

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 that 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.

6

Employees

As of December 31, 2003, we had four administrative employees.  In addition, we use the services of consultants to the Company, who also serve as officers of the Company and its subsidiaries.  These consultants include Wolfgang Rauball, Hank Blankenstein, Michael J. Slater, and Mr. Andrew Andraczke.  Messrs. Rauball, Slater and Andraczke work out of Europe, and Mr. Blankenstein works out of the United States.  None of our employees are 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 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 and its subsidiaries.

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 an d 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 $156,838,059 at December 31, 2003.  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.  Prior to our acquisition of an approximately 50% interest in a Canadian gas production entity (Big Horn) in 1998 (which was fully divested in 2002), we had not earned any significant cash revenues since our incorporation.  Because we divested our interest in Big Horn, we do not currently have a 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.

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

Our assets and interests are primarily in methane gas, natural gas, and crude oil exploration and 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, even if initial test wells are plugged and abandoned or, if completed for production, do not result in production of commercial quantities of natural gas or other fuel.  

7

Many of our projects are in locations where the infrastructure is inadequate to support our needs.

Many of the projects in which we have invested are located in areas of the world, primarily Eastern Europe. In most of these areas the necessary infrastructure for transporting, delivering, and marketing any natural gas, methane gas or other fuels that may be recovered is significantly underdeveloped or, in some cases, nonexistent.  Even if we are able to locate natural gas, methane gas, or other valuable fuels in commercial quantities, we may be required to invest significant amounts in developing the infrastructure necessary to support the transportation and delivery of such fuels.  We do not currently have a source of funding available to meet these costs.

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

Our operations in Poland, Slovakia, and other parts of Eastern Europe 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 oth er 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 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 an y 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.  Texaco drilled and abandoned test wells on the concession in Poland in which we own an interest, and we have drilled test wells on our Slovakia concessions.  None of these wells has been developed or commenced production, and 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), Hank Blankenstein (Chief Financial Officer), Michael Slater (President), and Andrew K. Andraczke (Vice President and Treasurer of EuroGas Polska).  We are also dependent on certain key employees in connection with our business activities. The loss of one or more of these individuals could materially and adversely impact our operations.  We have not entered into employment agreements with any of these individuals, and do not maintain key-man life insurance on any EuroGas officers or employees.

We are thinly staffed.

We have numerous projects throughout the world, which we attempt to direct and manage with only a few employees.  Unless and until additional employees are hired, our attempt to manage our numerous projects and obligations with such a limited staff could have serious adverse consequences, including without limitation, a possible failure to meet a material contractual, court, or SEC deadline, or a possible failure to consummate investment or acquisition opportunities.  

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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.

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:

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changes in the supply and demand for such fuels;

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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;

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the competitive position of each such fuel as a source of energy as compared to other energy sources;

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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:

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fire,

–

explosions,

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blowouts,

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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 171,712,635 shares of common stock issued and outstanding as of April 30, 2004 are free trading or are eligible for resale under Rule 144 under the Securities Act.  In addition, we have agreed to file a registration statement to register a significant number of shares for resale.  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.

We have a substantial number of warrants, options and debentures outstanding, the exercise of which would result in substantial dilution to existing shareholders and the existence of which adversely affects the public market price of our common stock.

As of December 31, 2003, there are outstanding warrants and options to purchase up to 39,342,858 shares of common stock at exercise prices ranging from $0.15 to $0.55 per share.  The existence of these outstanding warrants and options may hinder our future equity offerings, and the exercise of these warrants and options would further dilute the interests of all of our shareholders.  Future resale of the shares of common stock issuable on the exercise of warrants and options may have an adverse effect on the prevailing market price of our common stock.  Furthermore, the holders of warrants and options may exercise them at a time when we would otherwise be able to obtain additional equity capital on terms more favorable to us.

We have the right to, and expect to, issue additional shares of common stock without shareholder approval.

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, 2003, there were 171,212,635 shares of common stock and 2,392,228 shares of preferred stock issued and outstanding.  Also at December 31, 2003, there were 39,342,858 shares of common stock reserved for issuance upon the exercise or conversion of outstanding warrants, options, and similar rights to acquire common stock. The timing of the exercise of conversion rights or the purchase rights under options, warrants or similar agreements is outside the control of the Company.  Our board of directors has authority, without action or vote of our shareholders, to issue all or part of the authorized but unissued shares.  Any issuance of shares described in this paragraph will dilute the percentage ownership of our ex isting shareholders and may dilute the book value of the common stock.

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 co nditions and other factors referenced above.

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Item 2.  Properties

The Company has a month-to-month lease for approximately 2,230 square feet of office space in Warsaw and Prszczyna, Poland.  The rental amount is approximately $800 per month.  We sublease office space in Vienna, Austria and West Vancouver, Canada, for use by our administrative officers.  Our subsidiary, GlobeGas, maintains office space under an agreement with First Alliance Trust, at Herengracht 466, Amsterdam, The Netherlands.  Under this agreement, First Alliance provides office space, accounting and legal functions for GlobeGas. The agreement calls for payment for these services on an as-needed basis.

Item 3.

Legal Proceedings

  The principal portion of the Company’s active litigation, as described in the following six paragraphs, involves matters relating to the Company’s acquisition of GlobeGas (which indirectly controlled the Pol-Tex Concession in Poland). This litigation is being brought by Steve Smith, Chapter 7 Trustee (the “Trustee”) for the bankruptcy estates of Harven Michael McKenzie, Debtor; Timothy Stewart McKenzie, Debtor; Steven Darryl McKenzie, Debtor (case no. 95-48397-H2-7, Chapter 7; case no. 95-48474-H2-7, Chapter 7; and case no. 95-50153-H2-7, Chapter 7, respectively), pending in the United States Bankruptcy Court, for the Southern District of Texas, Houston Division.

McKenzie Bankruptcy Claim. This litigation is being brought by Steve Smith, Chapter 7 Trustee (the “Trustee”) for the bankruptcy estates of Harven Michael McKenzie, Debtor; Timothy Stewart McKenzie, Debtor; Steven Darryl McKenzie, Debtor (case no. 95-48397-H2-7, Chapter 7; case no. 95-48474-H2-7, Chapter 7; and case no. 95-50153-H2-7, Chapter 7, respectively), pending in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.

In March 1997, the Trustee commenced the following cause of action:  W. Steve Smith, Trustee, v. McKenzie Methane Poland Co., Francis Wood McKenzie, EuroGas, Inc. GlobeGas, B.V. and Pol-Tex Methane, (Adv. No. 97-4114 in the United States Bankruptcy Court for the Southern District of Texas, Houston Division) (hereafter “97-4114”).  The Trustee’s initial claim appears to allege that the Company may have paid inadequate consideration for its acquisition of GlobeGas from persons or entities acting as nominees for the McKenzies, and therefore McKenzies’ creditors are the true owners of the proceeds received from the development of the Pol-Tex Concession in Poland.  The Company has contested the jurisdiction of the Court, and the Trustee’s claim against a Polish corporation (Pol-Tex), and the ownership of Polish mining rights. The Company further contends that it paid substantial consideration for GlobeG as (Pol-Tex’s parent), and that there is no evidence that the creditors of the McKenzies invested any money in the Pol-Tex Concession.

In March of 1997, the Trustee brought a related suit W. Steve Smith, Trustee v. Bertil Nordling, Rolf Schlegal, MCK Development B.V. Claron N.V., Jeffrey Ltd., Okibi N.V., McKenzie Methane Poland Co., Harven Michael McKenzie, Timothy Stewart McKenzie, Steven Darryl McKenzie and EuroGas, Inc.,  (Adv. No. 97-4155) in each of the three McKenzie individual bankruptcy cases.  In general, the action asserts that the defendants, other than the Company, who acquired an interest in the Polish Project, received a fraudulent transfer of assets belonging to the individual McKenzie bankruptcy estates, or are alter egos or the strawmen for the McKenzies.  As a result, the Trustee asserts that any EuroGas stock or cash received by these defendants should be accounted for and turned over to the Trustee.  As to the Company, the Trustee asserts that as transfer agent, the Company should turn over the preferred stock presently outstandi ng to the defendants or reserve such shares in the name of the Trustee and that any special considerations afforded these defendants should be canceled. It appears the Company was named to this litigation only because of its relationship as transfer agent to the stock in question.  This suit has been administratively consolidated with 97-4114, and is currently pending before the Houston bankruptcy court.  

In October 1999, the Trustee filed a Motion for Leave to Amend and Supplement Pleadings and Join Additional Parties in the consolidated adversary proceedings, seeking to add new parties, including Wolfgang and Reinhard Rauball and assert additional causes of action against EuroGas and the other defendants in this action.  These new causes of action include claims for damages based on fraud, conversion, breach of fiduciary duties, concealment and perjury.  These causes of action claim that the Company and certain of its officers, directors or consultants cooperated or conspired with the McKenzies to secret or conceal the proceeds from the sale of the Polish Concession from the Trustee.  In January 2000, this motion was granted by the bankruptcy court.  The Company is vigorously defending this suit.  On March 18, 2002, the court considered motions to dismiss filed by EuroGas and the Rauballs (other named defendants). Thes e motions are currently pending before the Court. No trial date has been set.

In June 1999, the Trustee filed another suit in the same bankruptcy cases styled Steve Smith, Trustee, vs. EuroGas, Inc., GlobeGas, B.V., Pol-Tex Methane, SP. Z.O.O., et al (Adv. No. 99-3287).  That suit sought sanctions against the defendants for actions allegedly taken by the defendants during the bankruptcy cases which the Trustee considered improper.  The defendants filed a motion to dismiss the lawsuit, which was granted in August 1999.  In July 1999, the Trustee also filed a suit in the same bankruptcy cases styled Steve Smith, Trustee, vs. EuroGas, Inc., GlobeGas, B.V., Pol-Tex Methane, SP. Z.O.O. (Adv. No. 99-3444).  This suit seeks damages in excess of $170,000 for the defendants’ alleged violation of an agreement with the Trustee executed in March 1997.  EuroGas disputes the allegations and has filed a motion to dismiss or alternatively, to abate this suit, which motion is currently pending before the court. On March 18, 2002, the court considered motions to dismiss filed by EuroGas and the Rauballs (other named defendants).  On September 10, 2002, the Court entered an Order which required the Trustee to specify the causes of action asserted against each Defendant.  A few days prior to this Order, the Trustee filed his Second Motion for Leave to Amend and

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Supplement Pleadings and to Drop Certain Defendants (the “Second Motion”).  On October 21, 2002, EuroGas and other Defendants filed their Response to the Second Motion.  On November 11, 2002, the Trustee filed his Motion and Reply to this Response under which, in part, Trustee sought court approval to file a Third Amended Complaint. On March 13, 2003 the Court entered and Order Granting Trustee’s Motion for Leave to Amend.  On March 13, 2003 the Trustee filed his Third Amended Complaint, which is now styled Steve Smith, Trustee v. Harven Michael McKenzie, McKenzie Methane Poland, Inc., EuroGas, Inc., Wolfgang Rauball, Reinhard Rauball, MCK Development, B.V., Claron, N.V., Jeffrey, Ltd. and Okibi N.V. (Adv. No. 97-4114 and 97-4115). As to EuroGas, the Third Amended Complaint asserts claims for breach of contract, fraud in the inducement, conspiracy, aiding and abetting civil conspiracy, fraudulent transfer and punit ive damages. As to Wolfgang and Reinhard Rauball, the Third Amended Complaint asserts claims for turnover under Sections 542 and 543 (Reinhard Rauball only) of the Bankruptcy Code, conversion, post-petition avoidable transfers, civil conspiracy, aiding and abetting civil conspiracy and punitive damages. The Company has recently filed a Motion to Dismiss the Third Amended Complaint. At present, no trial date has been set.

Kukui, Inc. Claim In November 1996, the Company entered into a settlement agreement with Kukui, Inc. ("Kukui"), a principal creditor in the McKenzie bankruptcy case, whereby the Company issued 100,000 common shares and an option to purchase 2,000,000 additional common shares, which option expired on December 31, 1998. The Company granted registration rights with respect to the 100,000 common shares issued. On August 21, 1997, Kukui asserted a claim against EuroGas, which was based upon an alleged breach of the 1996 settlement agreement as a result of the Company's failure to file and obtain the effectiveness of a registration statement for the resale by Kukui of the 100,000 shares delivered to Kukui in connection with the 1996 settlement. In addition, the Estate of Bernice Pauahi Bishop (the “Bishop Estate”), Kukui's parent company, entered a claim for failure to register the resale of common shares subject to its option to purchase up to 2,000,000 common shares of EuroGas. EuroGas denied any liability and filed a counterclaim against Kukui and the Bishop Estate for breach of contract concerning their activities with the McKenzie Bankruptcy Trustee.

In December 1999, EuroGas signed a settlement agreement with the bankruptcy Trustee, and other parties, including Kukui, Inc., and the Trustees of the Bishop Estate , which had pursued separate claims against EuroGas (the “Settlement Agreement”).  The Settlement Agreement, in part, required EuroGas to pay $900,000 over 12 months and issue 100,000 shares of registered common stock to the Bishop Estate by June 30, 2000.  The bankruptcy court approved the Settlement Agreement on May 23, 2000.  The claims of Kukui, Inc. and the Trustees of the Bishop Estate have been dismissed pursuant to the terms of the Settlement Agreement.  Under the terms of the Settlement Agreement, EuroGas recorded an accrued settlement obligation and litigation settlement expense of $1,000,000 during 1999, paid Kukui $782,232 of the settlement obligation in 2000 and accrued an additional settlement obligation liability and expense of $251,741 d uring 2000. During 2000, EuroGas issued the Bishop Estate 100,000 registered common shares, which were valued at $100,000, or $1.00 per share. The resulting accrued settlement obligation of $369,509 for the estimated cost of settling the claim included an estimated default penalty and interest. The Company contends that it has fully performed under the Settlement Agreement and that the Settlement Agreement additionally entitles the Company to a complete release and dismissal of all suits filed by the Bankruptcy Trustee.  The Bankruptcy Trustee contends that EuroGas defaulted under the Settlement Agreement and is not entitled to a release or dismissal.  

Holbrook Claim  On February 9, 2001, James R. Holbrook, a documents escrow agent appointed under the Settlement Agreement, filed his Complaint of Escrow Agent for Interpleader and for Declaratory Relief against EuroGas, the Trustee and the other parties to the settlement in an action styled James R. Holbrook v. W. Steve Smith, Trustee, Kukui, Inc., Eurogas, Inc. and Kruse Landa & Maycock, L.L.C., (Adv. No. 01-3064) in the McKenzie bankruptcy cases.  Under this complaint, Holbrook sought a determination of the defendants’ rights in certain EuroGas files that he had received from Kruse Landa and Maycock, former attorneys for EuroGas.  Through this litigation, the Trustee sought turnover of all these files pursuit to the Settlement Agreement.  EuroGas has opposed turnover of privileged materials and filed a cross-claim in the suit asking for a declaratory judg ment that the Settlement Agreement is enforceable and that the Trustee be ordered to specifically perform his obligations under the Settlement Agreement.  The Trustee filed a counterclaim requesting specific performance by EuroGas and other relief.  At the direction of the court, both parties filed motions for summary judgment.  On December 17, 2001, the court entered an order granting Trustee’s Motion for Summary Judgment and denying a related Motion to Strike Affidavit, which EuroGas had filed.  EuroGas has appealed this order to the United States District Court for the Southern District of Texas. On September 25, 2002 the District Court entered its Opinion and Order affirming the Bankruptcy Court’s orders. On October 25, 2002 EuroGas filed a notice of appeal of the District Court’s order to the Fifth Circuit Court of Appeals. The appeal is currently pending before this Court. EuroGas cannot predict the outcome of these appeals, but intends to vigorously pursue the appeal s to completion.

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Settlement of McKenzie Claims — On November 4, 2003, EuroGas signed a settlement agreement with the Bankruptcy Trustee, Kukui, and other parties.  Under the terms of the settlement agreement, EuroGas agreed to make payments totaling $2,800,000, to be paid in installments, with an initial payment of $250,000 paid November 5, 2003, $250,000 to be paid by December 6, 2003 and the terms for payment of the remaining balance will be negotiated between EuroGas, Kukui and the Bankruptcy Trustee in December 2003.  Upon completion of the payments all the cases relating to the McKenzie bankruptcy claim, including the Kukui, claim and the Holbrook claim will be dismissed. Under this settlement EuroGas, its subsidiaries, Wolfgang Rauball and Reinhard Rauball will be released from any further claim by Kukui and the Bankruptcy Trustee.  Since the initial payments were made EuroGas has not been able to make further payments and is in default of the settl ement agreement.  Subsequently EuroGas management has met with the Bankruptcy Trustee, on March 27, 2004 in Houston, Texas.  The discussion centered on revival of the settlement agreement, this discussion is ongoing.

Netherlands Tax Assessment.  For the 1992 tax year, the Kingdom of the Netherlands assessed a tax against GlobeGas in the amount of approximately $911,000, even though Globe Gas had significant operating losses.  On December 17, 2001, the Netherlands issued its final tax assessment, including interest charged from 1998, in the amount of approximately $753,000.  The Company had until December 19, 2001 to make payment of this amount or face possible additional proceedings against the assets of GlobeGas in satisfaction of the assessment.  The tax assessment is payable in Euro, and as a result fluctuates on the Company’s financial statements due to adjustments in exchange rates. However, GlobeGas does not have the ability to pay the assessed obligation and as a result may face forced liquidation and dissolution by the Netherlands tax authority.

Dissolution of Energy Global A.G.  During 2002, the Company’s Liechtenstein Subsidiary, Energy Global A.G., was statutorily liquidated and dissolved by the Principality of Liechtenstein. As a result, the Company lost $615,904 in net assets of that subsidiary and may be subject to additional losses in net assets of Energy Global’s subsidiaries.

In November 2001, Borre Dahl, a former employee of the Company, filed a complaint against the Company and Wolfgang Rauball, the Company’s Chairman and Chief Executive Officer, claiming breach of contract, breach of employment contract, and misrepresentation.  Both Mr. Rauball and the Company have filed answers to the complaint, and intend to defend vigorously the suit.  No trial date has been set.

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 the forth quarter of 2003.  

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 OTC Bulletin Board market maintained by the National Association of Securities Dealers under the symbol “EUGS” and is traded on the Frankfurt and Berlin stock exchanges under the symbols EUG.F and EUG.B respectively.  As of April 30, 2003, there were 168,212,635 shares of common stock issued and outstanding, held by approximately 317 holders of record and an estimated 2,100 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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The liquidity of our common stock may be limited, and the reported price quotes may not be indicative of prices that could be obtained in actual transactions.  On April 30, 2004, the high and low bids for our common stock on the OTC Bulletin Board were $0.12 and $0.12 respectively.

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 $135,198, $135,199 and $139,932 in 2003, 2002 and 2001, respectively.  Of this amount, zero was paid in 2003, zero was paid in 2002, $21,599 was paid in 2001, by the issuance of shares of common stock in connection with the conversion of a portion of the preferred stock.  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, 2003, the Company issued the following securities without registration under the Securities Act of 1933, as amended, not previously reported on the quarterly reports on Form 10-Q filed by the Company during 2003. In June 2003 the Company sold 3,000,000 shares of unregistered securities to private investor. These securities were sold for $300,000 or $0.10 per share.  During July 2002 EuroGas reached a verbal settlement with a group of stockholders and agreed to issue 1,417,847 common shares and warrants to purchase 6,000,000 common shares within two years at $0.25 per share. The value of the common stock to be issued was estimated to be $141,785, or $0.10 per share, based upon quoted market prices of the Company's common stock on the day of the verbal agreement. The value of the warrants to be issued were estimated to be $388,939 using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 3.5%; expected volatility of 166%; dividend yield of 0%; and expected life of two years. The value of the estimated settlement of $530,724 and was included in accrued settlement obligations and was charged against operations during the current quarter.

These private issuances of securities were affected in reliance upon the exemption for sales of securities not involving a public offering, under Section 4(2) of the Securities Act of 1933, as amended.  In each transaction, the Company observed the following practice:

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the investors confirmed that they were “accredited investors,” as defined in Rule 501 of Regulation D under the Securities Act,

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each investor had the background, education, and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities,

–

there was no public offering or general solicitation with respect to the offering,

–

the investors were provided with any and all other information requested by them with respect to the Company,

–

the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act, and the investors also agreed to transfer the securities only in a transaction registered with the SEC under the Securities Act or exempt from registration under the Securities Act, and

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a legend was placed on the certificates and other documents representing each security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

Item 6.

Selected Financial Data

The following statement of operations and balance sheet data were derived from our audited consolidated financial statements.  Our consolidated financial statements have been audited by our independent certified public accountants.  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.”

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Statement of Operations Data

Balance Sheet Data