EUROGAS INC, S-1/A, 1999-12-17

EUROGAS INC
S-1/A, 1999-12-17
INDUSTRIAL INORGANIC CHEMICALS

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As filed with the Securities and Exchange Commission December 17, 1999
SEC File No. 333-92009

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

AMENDMENT NO 1 TO FORM S-1
Registration Statement Under the Securities Act of 1933
________________

EuroGas, Inc.
(Exact name of registrant as specified in its charter)

______________________

942 East 7145 South, Suite 101-A
Midvale, Utah 84047
(801) 255-0862
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

Hank Blankenstein
Chief Financial Officer
EuroGas, Inc.
942 East 7145 South, Suite 101-A
Midvale, Utah 84047
(801) 255-0862
(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
______________________
Copies to:
Brian G. Lloyd, Esq.
Bryan T. Allen, Esq.
PARR WADDOUPS BROWN GEE & LOVELESS
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
(801) 532-7840
______________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective
______________________

If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the following box: [X]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration for the same offering: [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective statement for the
same offering: [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the securities
Act registration statement number of the earlier registration statement for
the same offering: [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
Proposed
Proposed Maximum
Maximum Aggregate
Amount to Offering Offering Amount of
Title of Each Class of be Price Per Price Per Registration
Securities to be Registered Registered(1) Share (2) Share (2) Fee
- --------------------------- ------------- --------- ---------- -------------
Common Stock 7,844,675 $.5625 $4,412,629 $1,165*

*Previously Paid

(1) Consists of 7,844,675 shares of Common Stock, which represents 200% of
the Registrant's estimate of a presently indeterminate number of shares
issuable upon conversion of 1,800 shares of the Registrant's 1999 Series C
6% Convertible Preferred Stock.

(2) Estimated solely for the purpose of calculating the registration fee
based upon the average of the high and low sales prices for the Common Stock
as reported on the Nasdaq Bulletin Board on December 10, 1999.
_________________________________

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.

<PAGE>

PROSPECTUS

7,844,675 Shares

EuroGas, Inc.

Common Stock

EuroGas, Inc. is engaged in acquiring rights to explore for and
exploit natural gas coal bed methane gas and other fuels in various
parts of the world. The selling shareholder identified in this
Prospectus is offering an indeterminate number of shares of EuroGas
Common Stock issuable upon conversion of 1,800 shares of EuroGas
1999 Series C 6% Convertible Preferred Stock issued to the selling
shareholder. For purposes of this Prospectus, EuroGas has
estimated that 3,922,338 shares of Common Stock will be issuable
upon conversion of the 1999 Series C 6% Convertible Preferred
Stock. This estimate has been computed assuming conversion of
1,800 shares of the 1999 Series C 6% Convertible Preferred Stock on
December 13, 1999 at the conversion rate of $.459 per share of
Common Stock. Because the number of shares of Common Stock to be
sold by the selling shareholder is subject to adjustment, this
Prospectus relates to a number of shares of Common Stock that is
equal to 200% of the estimated number of shares of Common Stock
issuable upon conversion of the 1999 Series C 6% Convertible
Preferred Stock.

The Common Stock is quoted on the Bulletin Board maintained by
NASD, Inc. (the "Bulletin Board") under the trading symbol "EUGS"
and is traded on various exchanges throughout Europe. The closing
sale price for the Common Stock as of December 10, 1999 was $.5625.

Per
Share Total
------ ----------
Estimated public offering price $.5625 $4,412,629
Underwriting discounts and
commissions - -
Proceeds to EuroGas - -
Estimated proceeds to the selling
shareholder (1) $.5625 $4,412,629

_________________________
(1) Based on 7,844,675 shares of Common Stock, which is
200% of EuroGas' estimate of a presently indeterminate number
of shares issuable upon conversion of the 1,800 shares of
outstanding 1999 Series C 6% Convertible Preferred Stock.

Consider carefully the Risk Factors beginning on page 1 of this
Prospectus before investing in the securities being sold with this
Prospectus.

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed on the adequacy or accuracy of this
Prospectus. Any representation to the contrary is a criminal offense.

The date of this Prospectus is December 17, 1999

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Selling Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . v
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EUROGAS ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Need for Significant Funds and Dilution. . . . . . . . . . . . . . . . . . 1
Absence of Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Exploration Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Lack of Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Political, Socio-Economic, and Other Location-Related Risks. . . . . . . . 2
Future Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SEC Investigation and Other Legal Matters. . . . . . . . . . . . . . . . . 3
No Assurance of Commercial Production from the Company's Projects. . . . . 3
Dependence on Officers, Key Employees and Consultants. . . . . . . . . . . 3
Risk of Impairment of Recorded Value of Unproved Properties. . . . . . . . 3
Risks of Adverse Weather . . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS RELATED TO THE OIL AND GAS INDUSTRY . . . . . . . . . . . . . 4
Volatility of Commodity Prices and Markets . . . . . . . . . . . . . . . . 4
Operating Hazards and Uninsured Risks. . . . . . . . . . . . . . . . . . . 4
Intense Competition in the Oil and Gas Industry. . . . . . . . . . . . . . 5
Environmental Regulations. . . . . . . . . . . . . . . . . . . . . . . . . 5
GENERAL RISKS RELATING TO OFFERING . . . . . . . . . . . . . . . . . . . . 5
Market Impact of Offering. . . . . . . . . . . . . . . . . . . . . . . . . 5
Lack of Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . 5
Shares Eligible for Future Sale. . . . . . . . . . . . . . . . . . . . . . 5
Substantial and Immediate Dilution . . . . . . . . . . . . . . . . . . . . 6
Substantial Warrants and Options Outstanding . . . . . . . . . . . . . . . 6
Issuance of Additional Common Stock. . . . . . . . . . . . . . . . . . . . 6
Determination of Purchase and Exercise Price . . . . . . . . . . . . . . . 6
No Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DETERMINATION OF OFFERING PRICE. . . . . . . . . . . . . . . . . . . . . . 7
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SELLING SHAREHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Source Of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DESCRIPTION OF SECURITIES TO BE REGISTERED . . . . . . . . . . . . . . . . 9
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

<PAGE> ii

Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1999 Series C 6% Convertible Preferred Stock . . . . . . . . . . . . . . . 9
1998 Series B Convertible Preferred Stock. . . . . . . . . . . . . . . . .10
1995 Series Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . .11
Other Preferred Stock Designations . . . . . . . . . . . . . . . . . . . .11
Selected Provisions of the Articles of Incorporation . . . . . . . . . . .11
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
LEGAL MATTERS AND EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . .12
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
DESCRIPTION OF BUSINESS AND PROPERTIES OF THE COMPANY. . . . . . . . . . .13
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Activities in Poland . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Activities in Ukraine. . . . . . . . . . . . . . . . . . . . . . . . . . .17
Activities in Slovakia . . . . . . . . . . . . . . . . . . . . . . . . . .18
Activities in the Sakha Republic . . . . . . . . . . . . . . . . . . . . .21
Activities in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Activities in Slovenia . . . . . . . . . . . . . . . . . . . . . . . . . .23
Activities in Germany. . . . . . . . . . . . . . . . . . . . . . . . . . .23
Activities in the United States. . . . . . . . . . . . . . . . . . . . . .23
Disclosure of Oil and Gas Operations . . . . . . . . . . . . . . . . . . .24
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Employees and Consultants. . . . . . . . . . . . . . . . . . . . . . . . .25
Operational Hazards and Insurance. . . . . . . . . . . . . . . . . . . . .26
Office Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
History. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Financial Information About Foreign and Domestic Operations. . . . . . . .28
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Market for Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . .30
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Certain Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . .31
Where You Can Find More Information. . . . . . . . . . . . . . . . . . . .31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .32
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Recent Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Results of Operations Nine Month Ended September 30, 1999 and 1998 . . . .31
Results of Operations 1998, 1997, and 1996 Fiscal Years. . . . . . . . . .35
Capital and Liquidity. . . . . . . . . . . . . . . . . . . . . . . . . . .36
Inflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Year 2000 Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . .38
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Directors and Executive Officers of the Registrant . . . . . . . . . . . .39
Biographical Information . . . . . . . . . . . . . . . . . . . . . . . . .39
Key Consultants and Employees. . . . . . . . . . . . . . . . . . . . . . .40
Family Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . .41
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . .41
Option Grants in Last Fiscal Year. . . . . . . . . . . . . . . . . . . . .41
Aggregated Option Exercises in the Last Fiscal Year and Year End
Option Values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Executive Employment and Consulting Arrangements . . . . . . . . . . . . .42
Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . . . .42
Compensation Report of the Board of Directors. . . . . . . . . . . . . . .42
Performance Graph. . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Security Ownership of Certain Beneficial Owners and Management . . . . . .46
Disclosure Of Commission Position On Indemnification For Securities
Act Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
INDEX TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . .47

<PAGE> iii

PROSPECTUS SUMMARY

This summary may not contain all of the information that you
should consider before investing in the Common Stock. You should
read the following summary together with the more detailed
information regarding EuroGas and the Common Stock being sold in
this offering, "Risk Factors," and our financial statements and
notes to those statements appearing elsewhere in this Prospectus.

THE COMPANY

We are engaged in the acquisition of rights to explore for and
exploit natural gas, coal bed methane gas, and other fuels in
various parts of the world. We currently have a partial or
complete interest in several projects, including the following:

. an exploratory-stage coal bed methane gas project
in Poland
. a majority equity interest in the capital stock
of a Canadian full-service oil and gas producer
. an exploratory-stage natural gas project in Slovakia
. an exploratory-stage natural gas project in Canada
. an exploratory-stage natural gas project in the
Sakha Republic
. an exploratory-stage talc deposit in Slovakia.

In addition, we have an exclusive right to negotiate the terms of
a joint venture arrangement with the Polish Oil & Gas Company
concerning a separate natural gas project in Poland, have recently
entered into agreements with respect to two natural gas projects
in Ukraine and have entered into a cooperation agreement with
National Power International Limited, a United Kingdom-based power
company, to submit a bid on the construction of a power plant in
Poland.

We had a working deficit of $(7,782,125) as of September 30, 1999,
and most of our partially- or wholly-owned projects require
significantly more capital than is currently available to us.
Accordingly, we expect to continue to seek equity and debt
financing from various sources and participation in our projects
by industry partners in order to obtain the necessary financial
resources and expertise for the long-term development of our
numerous projects. (See "DESCRIPTION OF BUSINESS AND PROPERTIES
OF THE COMPANY.")

Our principal executive offices are located at 942 East 7145
South, #101A, Midvale, Utah 84047. Our telephone number at that
location is (801) 255-0862. As used in this Prospectus, the terms
"we," "us," "EuroGas" and "the Company" refer to EuroGas, Inc. and
its subsidiaries.

THE OFFERING

The offering described in this Prospectus relates to the sale by
the selling shareholder of an indeterminate number of shares of
Common Stock (the "Shares"), presently estimated at 3,922,338 shares,
issuable upon the conversion (including shares of Common Stock
issuable in lieu of dividends) of 1,800 shares of our 1999 Series
C 6% Convertible Preferred Stock (the "Series C Preferred Stock")
issued to the selling shareholder.

<PAGE> iv

Securities Offered Indeterminate, estimated at 7,844,675
(1) (See "PLAN OF DISTRIBUTION")

Common Stock outstanding
before offering 86,830,838 shares(2)

Common Stock outstanding
after offering 94,675,513 shares(2)

Net Proceeds EuroGas will not receive any proceeds
from the sale of the Common Stock by the
Selling Shareholder. (See "USE OF PROCEEDS")

Trading Symbol The Common Stock is quoted on the Bulletin
Board (symbol EUGS)and is traded on the
Frankfurt Exchange (symbol EUGS.F),
the Berlin Exchange (symbol UGS.BE), the
Stuttgart Exchange (symbol EUGS.S), and the
Hamburg Stock Exchange (symbol EUGS.H.).
________________________

(1) This is an estimate of an indeterminate number of Shares
subject to this Prospectus. The estimate represents 200%
of the number of shares of Common Stock that would be issued
if the 1,800 shares of Series C Preferred Stock currently
outstanding were converted on December 13, 1999 at the rate
of one share of Common Stock per $.459 of liquidation preference
converted and assuming the Registration Statement of which this
Prospectus is a part (the "Registration Statement") becomes
effective prior to December 19, 1999. The number of Shares
available for resale hereunder is subject to adjustment and could
materially differ from the estimated amount depending upon the
future market price of the Common Stock and the occurrence of
a stock split, stock dividend, or other transaction resulting
in an adjustment in the number of Shares issuable upon conversion
of the Series C Preferred Stock. (See "DESCRIPTION OF SECURITIES
TO BE REGISTERED--1999 Series C 6% Convertible Preferred Stock.")

(2) This number does not include up to 14,750,000 shares of
Common Stock issuable upon the exercise of outstanding
options and warrants or the shares of Common Stock issuable
upon the conversion of currently outstanding Series C
Preferred Stock.

RISK FACTORS

You should read the "Risk Factors" beginning on page 1, as well as
other cautionary statements throughout this Prospectus, before
investing in the shares of Common Stock offered hereunder.

SELLING SHAREHOLDER

Arkledun Drive LLC (the "Selling Shareholder") is the registered
and beneficial owner of the 1,800 shares of Series C Preferred
Stock issued and outstanding. The Shares subject to this
Prospectus are the indeterminate number of shares of Common Stock
issuable upon conversion of the 1,800 shares of Series C Preferred
Stock.

PLAN OF DISTRIBUTION

The Shares may be sold by the Selling Shareholder from time to
time in one or more transactions at a fixed price, which may be
changed, or at varying prices determined at the time of sale, or
at negotiated prices. We will pay the expenses incident to the
registration of the offer and sale of the Shares to the public,
other than commissions and discounts of broker-dealers through
which such Shares may be sold. We do not intend to enter into any
agreement with any securities dealer concerning solicitation of
offers to purchase the Shares.

<PAGE> v

RISK FACTORS

This Prospectus contains various forward-looking statements. These
statements can be identified by the 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 such
forward-looking statements, you should keep in mind the risk
factors noted in this section and other cautionary statements
throughout this Prospectus, any prospectus supplement, and our
periodic filings with the SEC. 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 Prospectus, a prospectus
supplement, or any applicable filings materializes, or any other
underlying assumptions prove incorrect, our actual results may
vary materially from those anticipated, estimated, projected, or
intended.

Among the key factors that may have a direct bearing on our
operating results are risks and uncertainties described under
"Risk Factors," including those attributable to the lack of
significant operating revenues, exploration risks, the location of
many of our interests in politically unstable countries, and
uncertainties regarding our ability to obtain capital sufficient
to continue our operations and pursue proposed business strategy.
We do not intend to update any forward-looking statements, except
as may occur as part of our ongoing periodic reports filed with
the SEC.

EUROGAS ACTIVITIES

NEED FOR SIGNIFICANT FUNDS AND DILUTION

EuroGas has historically been undercapitalized. We had a working
deficit of approximately $(7,782,125) on September 30, 1999, but
most of our partially- or wholly-owned projects require
significantly more capital than is currently available to us.
Although we are unable to determine at this time the additional
amount of outside capital we will need or be able to raise in the
future, the interest of our shareholders will continue to be
diluted as we seek funding through the sale of additional
securities or through joint venture or industry partnering
arrangements. We have entered into a Subscription Agreement dated
May 29, 1998 (the "Series B Subscription Agreement") with Thomson
Kernaghan & Co., Ltd. (the "Series B Purchaser") to which it, as
agent for itself and certain beneficial holders, has agreed to
purchase an additional 6,500 shares of our 1998 Series B
Convertible Preferred Stock at the rate of $1,000 per share for a
total of $6,500,000, assuming certain market conditions are met.
One such condition precedent to the Series B Purchaser's
obligation to purchase additional shares of our 1998 Series B
Convertible Preferred Stock is that the market price of the Common
Stock be at least $3.00 per share. The closing sale price for a
share of the Common Stock on December 10, 1999 was $.5625.
Accordingly, the Series B Purchaser is presently under no
obligation to purchase any additional shares of 1998 Series B
Convertible Preferred Stock. We have not entered into other
arrangements under which any person is required, subject to
conditions precedent or otherwise, to purchase any of our securities.

Even if all conditions to the Series B Purchaser's obligations to
purchase the 1998 Series B Convertible Preferred Stock are
satisfied in the near future, and the Series B Purchaser elects to
purchase such 6,500 shares of 1998 Series B Convertible Preferred
Stock, such funding will likely be inadequate to meet our
projected needs. We can provide no assurance that we will be able
to raise through any means the funds necessary to fulfill our
current corporate plans or maintain our current operations.

ABSENCE OF REVENUES

Prior to our acquisition of an approximately 50% interest in a
Canadian gas production entity in 1998, we had not earned any
revenues since our incorporation, other than a one-time $500,000
payment received in 1997 in connection with transferring certain
interests to Texaco. Because revenues earned by the recently
acquired Canadian entity will probably

<PAGE> 2

not be distributed toEuroGas in the immediate future, 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 our existing working capital, 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.

EXPLORATION RISKS

Our assets and interests are primarily in methane gas, natural
gas, and fuel exploration and development projects. All such
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.

LACK OF INFRASTRUCTURE

The projects in which we have invested are located in areas of the
world, primarily eastern Europe and the former Soviet Union, in
which we believe there are significant reserves of natural gas,
methane gas, or other valuable hydrocarbons. These areas are
also locations in which 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.

POLITICAL, SOCIO-ECONOMIC, AND OTHER LOCATION-RELATED RISKS

Our operations in Poland, Slovakia, Ukraine, and the Sakha
Republic 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,
the risks of political instability, a change of government,
unilateral renegotiation of concessions or contracts,
nationalization, foreign exchange restrictions, and other
uncertainties must be taken into account when operating in these
areas of the world. 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 will be required to obtain licenses and permits on an
ongoing basis in connection with 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.

FUTURE LICENSES

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 land
owners and/or government

<PAGE> 2

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. 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 any such
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.

SEC INVESTIGATION AND OTHER LEGAL MATTERS

We are presently subject to a formal order of investigation issued
by the SEC on August 1, 1995 to investigate whether violations of
applicable law may have occurred. In connection with such
investigation, we have produced numerous documents for the SEC,
and the SEC has questioned our current and past officers,
directors, former accountants, and other agents. We have not
been contacted by the SEC with respect to this matter for more
than two and one-half years, however, we cannot currently predict
the duration or outcome of this investigation.

If the SEC concludes that we or our representatives have violated
the securities laws, it has available a large range of civil and
criminal remedies. Such remedies include the suspension of
trading in the Common Stock, the levying of substantial fines, and
the exclusion of the current officers and directors of the Company
from participating in a public company. In addition, we are
subject to certain other pending or threatened legal claims. (See
"DESCRIPTION OF BUSINESS AND PROPERTIES OF THE COMPANY-Legal
Proceedings.") The adverse resolution of the SEC investigation or
any pending litigation affecting the Company would have a material
adverse effect on our operations and proposed business.

NO ASSURANCE OF COMMERCIAL PRODUCTION FROM THE COMPANY'S PROJECTS

Other than the production of an average of approximately 1,200
barrels of oil equivalent per day by Big Horn Resources Ltd., a
Canadian company in which we have an approximate 50% ownership
interest, 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.

DEPENDENCE ON OFFICERS, KEY EMPLOYEES, AND CONSULTANTS

We are dependent on the services of Mr. Karl Arleth, the President
of the Company, and Mr. Hank Blankenstein, the Vice-President and
Chief Financial Officer of the Company. We are also dependent on
certain key employees, including Andrew J. Andraczke and J. Tony
Preuss, in connection with our business activities. Mr. Andraczke
has been instrumental in establishing our operations in Poland.
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 other than Mr. Arleth, and do not maintain key-man
life insurance on any EuroGas officers or employees. (See
"MANAGEMENT-Executive Officers and Directors.")

RISK OF IMPAIRMENT OF RECORDED VALUE OF UNPROVED PROPERTIES

We capitalize costs related to unproved gas properties and
recognize the expenses for drilling and other exploration costs
that do not result in proved reserves at the time the well is
plugged and abandoned. We review our unproved properties
periodically to assess whether an impairment allowance should be
recorded. At September 30, 1999, we had capitalized costs related
to the acquisition of oil and gas properties not subject to
amortizing in the amount of approximately $33,946,386. Should
authorities. The issuance of most such future events, such as the
drilling of dry holes, evidence that an impairment of recorded
value has taken place, the adverse impact on our results of
operations for the period in which the impairment is recognized
could be

3
<PAGE>

significant. (See "DESCRIPTION
OF BUSINESS AND PROPERTIES OF THE COMPANY" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.")

RISKS OF ADVERSE WEATHER

Severe weather conditions frequently interrupt much of our
exploratory and testing work. Heavy precipitation sometimes make
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 the Sakha Republic
are especially extreme and include some of the coldest areas of
the northern hemisphere. The average temperature of the entire
region from October to April is below freezing with winter
temperatures dipping to minus 70 to 80 degrees Fahrenheit. Even
if recoverable reserves are discovered in the Sakha Republic or
other 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.

RISK FACTORS RELATED TO THE OIL AND GAS INDUSTRY

Volatility of Commodity Prices and Markets

The prices of oil, natural gas, methane gas and other fuels have
been, and are like 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 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 and/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, in the event 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.

OPERATING HAZARDS AND UNINSURED RISKS

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

. hazards such as fire, explosions, blowouts, pipe
failures, casing collapses, unusual or unexpected
formations and pressures

. environmental hazards such as spills, leaks,
ruptures, and discharges of toxic substances.

If any such event occurs, we may be forced to cease any or all of
our exploration, drilling, or production activities on a temporary
or permanent basis. In addition, such events may 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 obtain insurance, we
may not be insured against all losses or liabilities which may
arise from such hazards because such insurance may be unavailable
at economic rates, because of limitations in the insurance
policies, or because of other factors. Any uninsured loss may
have a material adverse impact on our business and operations.

<PAGE> 4

INTENSE COMPETITION IN THE OIL AND GAS INDUSTRY

The oil and gas industry is highly competitive. Most of our
current and potential competitors have far greater financial
resources and a greater number of experienced and trained
managerial and technical personnel than we do. We can provide no
assurance that we will be able to compete with, or enter into
cooperative relationships with, any such firms.

ENVIRONMENTAL REGULATIONS

Our operations are subject to environmental laws and regulations
in the various countries in which they are conducted. Such 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, such 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 believe that we are currently in material compliance with
applicable laws and regulations. However, we can provide no
assurance of such compliance or that applicable 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 breach 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.

GENERAL RISKS RELATING TO OFFERING

MARKET IMPACT OF OFFERING

This Prospectus relates to the sale of an indeterminate number of
shares of Common Stock by the Selling Shareholder. Such
indeterminate number includes the shares of Common Stock issuable
upon conversion (including shares issuable in lieu of dividends)
of 1,800 shares of Series C Preferred Stock issued to date. For
purposes of preparing this Prospectus, we have estimated
that 3,922,338 shares will be issuable upon conversion of the
Series C Preferred Stock. This estimate represents the
number of shares that would be issued if the 1,800 shares of
Series C Preferred Stock currently outstanding were converted on
December 13, 1999 at the rate of one share of Common Stock per
$.459 of liquidation preference converted and assuming the
Registration Statement becomes effective prior to December
19, 1999. The actual number of shares issued to the Selling
Shareholder and sold under this Prospectus may differ materially
depending upon the market price of the Common Stock on the date
of conversion and/or the occurrence of dilutive transactions. The
sale of such a significant block of stock, or even the possibility
of its sale, may adversely affect the market price for the Common Stock.

LACK OF DUE DILIGENCE REVIEW

The Selling Shareholder reviewed certain information concerning
the Company, its business, and its proposed activities in
connection with its initial acquisition of shares of Series C
Preferred Stock. No securities broker-dealer or any other person
has been engaged to perform any due diligence or a similar review
of this offering or of the Company on behalf of any person who may
purchase the Shares from the Selling Shareholder or any other
person.

SHARES ELIGIBLE FOR FUTURE SALE

Substantially all of the approximately 86,830,838 shares of the
Common Stock currently issued and outstanding: (i) are
free-trading; (ii) have been held for in excess of one year and
are eligible for resale under Rule 144 promulgated under the
Securities Act; or (iii) will be registered for resale in a
registration statement that the Company is contractually

<PAGE> 5

obligated to file. Although the resale of certain of these shares
are 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 the Common Stock.

SUBSTANTIAL AND IMMEDIATE DILUTIONA

Persons purchasing the Common Stock will suffer a substantial and
immediate dilution based on the net tangible book value of their
shares. (See "DILUTION.")

SUBSTANTIAL WARRANTS AND OPTIONS OUTSTANDING

As of the date of this Prospectus, there are outstanding warrants
and options to purchase up to 14,750,000 shares of Common Stock at
exercise prices ranging from $1.50 to $11.79 with a weighted
average exercise price of $3.43 per share. The existence of such
warrants and options may hinder future equity offerings by the
Company, and the exercise of such Warrants and Options may further
dilute the interests of all EuroGas shareholders. Future resale
of the shares of Common Stock issuable on the exercise of such
warrants and options may have an adverse effect on the prevailing
market price of the Common Stock. Furthermore, the holders of
warrants and options may exercise them at a time when the Company
would otherwise be able to obtain additional equity capital on
terms more favorable to the Company.

ISSUANCE OF ADDITIONAL COMMON STOCK

The Company has authorized capital of 325,000,000 shares of Common
Stock, par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.001 per share (the "Preferred
Stock"). As of December 13, 1999, 86,830,838 shares of Common
Stock and 2,393,768 shares of Preferred Stock were issued and
outstanding, with an additional 14,750,000 shares of Common Stock
reserved for issuance on the exercise or conversion of the
warrants, options, and similar outstanding rights to acquire
Common Stock and 10,000,000 shares of Common Stock currently
reserved for issuance upon the exercise of Series C Preferred
Stock. In addition, the Company has no means to control the
timing of the conversion of convertible securities. The Company's
board of directors has authority, without action or vote of the
Company's shareholders, to issue all or part of the authorized but
unissued shares. Any such issuance will dilute the percentage
ownership of the Company's shareholders and may dilute the book
value of the Common Stock.

DETERMINATION OF PURCHASE AND EXERCISE PRICE

The terms of the Series C Preferred Stock were determined by
negotiations between the Company and the Selling Shareholder.
These negotiations took into account the history of, and recent
prices for, the Common Stock as quoted on the Bulletin Board, the
business history and prospects of the Company, an assessment of
the Company's management, the Company's need for capital, the
number of securities to be offered, and the general condition of
the securities market. The prices at which the Selling
Shareholder may sell shares of Common Stock will be individually
negotiated or based on the market price for the Common Stock at
the time of the transactions. Such prices do not necessarily bear
a relationship to the assets, earnings, or book value of the
Company or any other traditional criteria of value.

NO DIVIDENDS

The Company has not paid, and does not plan to pay, dividends on
its Common Stock in the foreseeable future, even if it becomes
profitable. Earnings, if any, are expected to be used to advance
the Company's activities and for general corporate purposes,
rather than to make distributions to shareholders.

<PAGE> 6

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of the
Shares by the Selling Shareholder. The Company anticipates that
it will incur costs of approximately $57,000 in connection with
this Prospectus and the Registration Statement(s) of which it is a
part (the "Registration Statement"), including filing fees,
transfer agent costs, printing costs, listing fees, and legal and
accounting fees.

DETERMINATION OF OFFERING PRICE

The Shares subject to this Prospectus may be sold from time to
time at such prices as the Selling Shareholder shall determine may
be in their best interests and at which a willing buyer can be
found. Such prices may not be related to the book or market value
of the Company's assets, its earnings, or any other recognized
criteria of value. We can provide no assurance that the Selling
Shareholder will sell any or all of the Common Stock subject to
this Prospectus.

DILUTION

The Shares subject to this Prospectus may be sold from time to
time at such prices as the Selling Shareholder shall determine may
be in their best interests and at which a willing buyer can be
found. The offering and/or purchase price for any of the Shares
you may purchase will be substantially in excess of the per-share
book value. In the event that the Company is unable to continue
as an operating business for any reason, it is unlikely that there
will be significant assets available for distribution to the
holders of Common Stock in connection with any liquidation.

SELLING SHAREHOLDER

Common Stock Beneficially Owned by Selling Shareholder
------------------------------------------------------
As of December 13, 1999 After Offering
-------------------------- ---------------
Shareholder Number Percent(1) Sold Number Percent
------------------ ------------- ---------- ----------- ------ -------

Arkledun Drive LLC 3,922,338 (2) 4.4% 3,922,338(2) 0 %
Commercial Centre
Grand Cayman
Cayman Islands, BWI

____________________
(1) Denominator includes the sum of 86,830,838 shares of
Common Stock outstanding as of December 13,1999 and 3,922,338
shares, which is EuroGas' current estimate of the number of
shares issuable to the Selling Shareholder upon conversion of
the 1,800 issued and outstanding shares of Series C Preferred
Stock.

(2) This is an estimate of the indeterminate number Shares
owned by the Selling Shareholder. Such estimate has been
computed assuming conversion of 1,800 shares of Series C
Preferred Stock on December 13, 1999 at the rate of one share of
Common Stock per $.459 of liquidation preference converted and
assuming the Registration Statement becomes effective prior to
December 19, 1999. The election to convert is at the discretion
of the Selling Shareholder for the first two years following
issuance, after which it is mandatory. (See "DESCRIPTION OF SECURITIES
TO BE REIGSTERED: 1999 Series C 6% Convertible Preferred Stock").
Arkledun Drive LLC is the registered and beneficial owner of the
1,800 issued and outstanding shares of Series C Preferred Stock.

<PAGE> 7

PLAN OF DISTRIBUTION

Source Of Shares

The Shares being offered by the Selling Shareholder may be
acquired from time to time upon conversion of the 1,800 shares of
Series C Preferred Stock held by the Selling Shareholder.

The Selling Shareholder represented to the Company that it
acquired the shares of Series C Preferred Stock without any
present intention of effecting a distribution of the shares of
Common Stock issuable on conversion. However, in accordance with
the Registration Rights Agreement dated November 4, 1999, between
the Company and the Selling Shareholder (the "Registration Rights
Agreement"), the Company agreed to file this Registration
Statement registering the resale of the shares of Common Stock
issuable upon conversion of the Series C Preferred Stock by the
Selling Shareholder to permit such resales from time to time in
the market or in privately-negotiated transactions. The Company
is committed, and will prepare and file, such amendments and
supplements to the Registration Statement as may be necessary in
accordance with the rules and regulations of the Securities Act to
cause the Registration Statement to cover the shares of Common
Stock issuable upon conversion of the Series C Preferred Stock and
to keep the Registration Statement effective until all such shares
have all been sold or are available for sale without registration.
The Company will bear all expenses (other than broker discounts
and commissions, if any), in connection with the filing of a
post-effective amendment to the Registration Statement, obtaining
its effectiveness, and filing any necessary amendments or
supplements to keep it effective.

The number of shares of Common Stock issuable on conversion of the
shares of the Series C Preferred Stock is indeterminate, since it
is in part based on the future market price of the Common Stock.
(See description under "DESCRIPTION OF SECURITIES TO BE
REGISTERED-1999 Series C 6% Convertible Preferred Stock.") In
addition, the conversion ratio is subject to adjustment by reason
of any stock split, stock dividend, or similar transaction with
respect to the Common Stock, in order to prevent dilution to the
Selling Shareholder.

SALE OF COMMON STOCK

The Shares may be sold from time to time by the Selling
Shareholder or by pledgees, transferees, or other successors in
interest. The Shares may be sold by various methods, including,
but not limited to, (a) directly to a purchaser in a privately
negotiated transaction; (b) to securities brokers or dealers as
principals; (c) in market transactions through broker-dealers that
may receive compensation in the form of discounts, concessions, or
commissions from the Selling Shareholder and/or the purchasers of
the Common Stock for whom they may act as agents; (d) on the
closing of a put position held by the Selling Shareholder or a
call position granted by the Selling Shareholder; (e) in block
transactions in which a broker or dealer may act as an agent of
the Selling Shareholder or may position and resale all or a
portion of the block as a principal in order to facilitate the
transaction; (f) in connection with a foreclosure or other
transaction by the holder of a security interest in the stock; or
(g) in transactions exempt from the registration requirements of
the Securities Act, including transactions made in reliance on
Rule 144. The Selling Shareholder, and any dealers or brokers
that participate in the distribution of the Common Stock, may be
deemed to be "underwriters" as that term is defined in the
Securities Act, and any profit on the sale of the Common Stock by
them and any discounts, commissions, or concessions received by
any such dealers or brokers, may be deemed to be underwriting
discounts and commissions under the Securities Act. The Company
has no understandings or arrangements with broker-dealers in
connection with such sales.

<PAGE> 8

advised the Company that it has not entered into any agreement
regarding the resale of the Shares. The Company will pay the
expenses of this offering incident to the registration of the
offer and sale of the Common Stock to the public, other than
commissions and discounts of broker-dealers through which such
Common Stock may be sold. The Company does not intend to enter
into any agreement with any securities dealer concerning
solicitation of offers to purchase the Shares.

DESCRIPTION OF SECURITIES TO BE REGISTERED

General

The Articles of Incorporation of the Company currently
authorize the issuance of up to 325,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock. The Common Stock is
currently listed on the Bulletin Board. The board of directors of
the Company can authorize the issuance of additional shares of any
class of capital stock, up to the amount of the authorized capital
set forth in the articles of incorporation, without further action
by or approval of EuroGas shareholders.

This Prospectus relates solely to the sales of Common Stock
issuable to the Selling Shareholder upon conversion of the 1,800
shares of Series C Preferred Stock purchased by the Selling
Shareholder. A description of various rights of the Preferred
Stock is provided below to facilitate your understanding of the
relative rights of the Common Stock.

Common Stock

As of December 13, 1999, the Company had 86,830,838
shares of Common Stock issued and outstanding. The holders of
Common Stock are entitled to one vote per share on each matter
submitted to a vote at any meeting of shareholders. The holders
of Common Stock do not have cumulative voting rights and,
therefore, a majority of the shares represented, in person or by
proxy, at a meeting of shareholders at which a quorum is present
are able to elect all members of the board of directors then
standing for election, and if they do so, minority shareholders
would not be able to elect any members to the board of directors.

The holders of the Common Stock have no preemptive rights to
acquire additional shares of Common Stock or other securities.
The Common Stock is not subject to redemption and carries no
subscription or conversion rights. In the event of liquidation of
the Company, the shares of Common Stock are entitled to share
equally in corporate assets after satisfaction of all liabilities
of the Company and the payment of any liquidation preferences.

The Common Stock is subject to any voting, dividend, or
liquidation preferences that may be established by the board of
directors of the Company in designating a class of preferred
stock. The Company currently has outstanding shares of Preferred
Stock with rights, privileges, and preferences superior to those
of the Common Stock.

The holders of Common Stock are entitled to receive such dividends
as the board of directors may from time to time declare out of
funds legally available for the payment of dividends, subject to
the preferential rights of the holder of outstanding Preferred
Stock. The Company has not paid dividends with respect to its
Common Stock. Management anticipates retaining any potential
earnings for working capital and investment in growth and
expansion of the business of the Company and does not anticipate
paying dividends on the Common Stock in the foreseeable future.

1999 Series C 6% Convertible Preferred Stock

The Company has designated 1,800 shares of Preferred Stock as
Series C Preferred Stock. The shares have a par value of $0.001
per share and a liquidation preference of $1,000 per share, plus
all accrued but unpaid dividends. The shares of

<PAGE> 9

Series C Preferred Stock bear a dividend of 6% per annum of the
liquidation preference, pro rated to the date of conversion. The
Company has the option to pay such dividends in cash or shares of
Common Stock at the time of conversion. The Company is prohibited
from paying dividends or making other distributions on any stock
ranking, as to dividends or liquidation, junior to the Series C
Preferred Stock so long as any shares of Series C Preferred Stock
are outstanding.

Each of the 1,800 shares of Series C Preferred Stock is
convertible into a number of shares of Common Stock determined by
dividing the liquidation preference ($1,000) by the product of (i)
the average closing bid price of a share of common stock on the
five trading days preceding November 4, 1999 or the date of
conversion, whichever average is lower, multiplied by Applicable
Percentage (as defined below). (Number of shares = $1,000/(average
5 day closing bid price x Applicable Percentage)). The
"Applicable Percentage" is determined based on the schedule
provided below, with the "Effective Date" being the effective date
of the Registration Statement covering all shares of Common Stock
issuable upon conversion of the outstanding Series C Preferred
Stock and the "Closing Date" being November 4. 1999.

If the Effective Date is x days
after the Closing Date The Applicable Percentage is

not more than 15 days 85.0%

between 16 and 45 days 82.5%

between 46 and 75 days 80.0%

more than 75 days 77.5%

The Series C Preferred Stock does not have voting rights, except
to the extent that the consent of the holders is specifically
required by the governing provisions of the corporate law of the
State of Utah as now existing or as they may hereafter be amended.

1998 Series B Convertible Preferred Stock

The Company has designated 30,000 shares of Preferred Stock as its
1998 Series B Convertible Preferred Stock. The shares have a par
value of $0.001 per share and a liquidation preference of $1,000
per share, plus all accrued but unpaid dividends. The shares of
1998 Series B Convertible Preferred Stock bear a dividend of 6%
per annum, pro rated to the date of conversion. The Company has
the option to pay such dividends in cash or shares of Common Stock
at the time of conversion. The Company is prohibited from paying
dividends or making other distributions on any stock ranking, as
to dividends or liquidation, junior to the 1998 Series B
Convertible Preferred Stock so long as any shares of the 1998
Series B Convertible Preferred Stock are outstanding.

Each of the 8,000 shares of 1998 Series B Convertible Preferred
Stock initially issued under the Series B Subscription Agreement
was converted into that number of shares of Common Stock
determined by taking the sum of $1,000 plus the amount of any
accrued but unpaid dividends through the conversion date, and
dividing such sum by the lesser of (i) 125% of the average closing
bid price of the Common Stock, as reported by Bloomberg L.P., for
the five trading days preceding the issuance of the shares of 1998
Series B Preferred Stock then being converted; or (ii) 80% of the
average closing bid price, as reported by Bloomberg, for the five
trading days preceding the conversion date.

All other shares of Series B Convertible Preferred Stock have been
converted, or shall be converted, if and when issued and
converted, into that number of shares of Common Stock determined
by taking the sum of $1,000 plus any accrued but unpaid dividends
to be paid in Common Stock, and dividing the sum by the lesser of
(i) 125% of the average closing bid price of the Common Stock, as
reported by Bloomberg L.P., for the five trading days preceding
the issuance of each respective block of 1998 Series B Convertible
Preferred Stock; or (ii) 85% of the average closing bid price of
the Common Stock, as reported by Bloomberg, for the five trading
days preceding the conversion date. All shares of 1998

<PAGE> 10

Series B Convertible Preferred Stock are subject to mandatory
conversion, at the respective rates set forth above, twenty-four
(24) months following the date of issuance.

The 1998 Series B Convertible Preferred Stock does not have voting
rights, except to the extent that the consent of the holders is
specifically required by the governing provisions of the corporate
law of the state of Utah as now existing or as they may hereafter
be amended.

As of December 13, 1999, all of the 23,500 shares of 1998 Series B
Convertible Preferred Stock issued to date, together with accrued
dividends, had been converted into shares of Common Stock.

1995 Series Preferred Stock

The Company designated 2,391,968 shares of its Preferred Stock
as its 1995 Series Preferred Stock. Such shares have a
par value of $0.001 per share and a liquidation
preference of $0.10 per share plus all accrued but unpaid
dividends. The shares of 1995 Series Preferred Stock bear a
dividend of $0.05 per share per annum, payable 30 days after the
end of each calendar year, with the first payment to be made on
January 31, 1996. The Company is prohibited from paying dividends
or making other distributions on any stock ranking, as to
dividends or liquidations, junior to the 1995 Series Preferred
Stock so long as shares of such stock remain outstanding. The
1995 Series Preferred Stock is convertible into Common Stock at
the rate of two shares of Common Stock for each share of 1995
Series Preferred Stock. The 1995 Series Preferred Stock does not
have voting rights, except to the extent that the consent of the
holders is specifically required by the provisions of the
corporate laws of the state of Utah as now existing or as they may
hereafter be amended. The Company has the right to redeem the
1995 Preferred Stock, on not less than 30 days written notice, at
a price of $36.84 per share, plus any accrued but unpaid
dividends. As of December 13, 1999, there were 2,391,968 shares
of 1995 Series Preferred Stock issued and outstanding.

OTHER PREFERRED STOCK DESIGNATIONS

In 1996, the Company designated, authorized and issued 1,250,000
shares of 1996 Series Preferred Stock, all of which were converted
to an aggregate of 2,500,000 shares of Common Stock in 1997.

On May 29, 1997, the Company designated, authorized and issued
15,000 shares of 1997 Series A Convertible Preferred Stock. This
series of preferred stock is nonvoting and accrues dividends at 6%
annually. The 1997 Series A Convertible Preferred Stock has a
liquidation of preference of $1,000 per share plus unpaid
dividends previously issued and outstanding series of Preferred
Stock. Each share of 1997 Series Preferred Stock, along with
unpaid dividends thereon, is convertible into Common Stock at the
rate of $1,000 plus accrued dividends divided by the lessor of (i)
125% of the average closing bid price for five trading days prior
to issuance or (ii) 82% of the average closing bid price for five
trading days prior to conversion. At December 13, 1999, all but
260 of the shares of 1997 Preferred Stock issued to date, together
with accrued dividends, had been converted into shares of Common
Stock.

During 1998 and 1997, the Company accrued dividends of $311,301
and $423,530, respectively, with respect to the Preferred Stock
outstanding. Of this amount, $150,163 and $301,324 was paid in
1998 and 1997 respectively by the issuance of Common Stock and
$260,130 and none was paid in 1998 and 1997 respectively in cash.
The cash payment may have been inappropriate under Utah law due to
the existence of a shareholders' deficit, which could create a
right to recover the payment. The Company has not yet paid all of
the accrued dividends with respect to the Preferred Stock and,
until it does so, is prohibited from paying dividends on any other
class of security.

SELECTED PROVISIONS OF THE ARTICLES OF INCORPORATION

Under the Company's Articles of Incorporation, the Company's board
of directors is authorized, without shareholder action, to issue
shares of Common Stock and to designate shares of Preferred Stock
into one or more series and to fix the number of shares and
rights, preferences and limitations of each series. Among the
specific matters that may be determined by the board of directors
with respect to the Preferred Stock are the dividend rate, the
redemption price and

<PAGE> 11

terms of a sinking fund, if any, conversion rights, if any,
the amount payable in the event of any voluntary or involuntary
liquidation or dissolution of the Company, and voting rights, if
any.

TRANSFER AGENT

The transfer agent for the Company's Common Stock is Interwest
Transfer Company, 1981 East 4800 South, Suite 100, Salt Lake City,
Utah 84117, telephone (801) 277-1400.

LEGAL MATTERS AND EXPERTS

Legal Matters

The validity of the issuance of the Common Stock issuable to the
Selling Shareholder upon conversion of the Series C Preferred Stock
and offered hereby is being passed upon for the Company by Parr
Waddoups Brown Gee & Loveless, P.C.

Experts

The consolidated financial statements of the Company as of
December 31, 1998 and 1997, and for each of the three years in the
period ended December 31, 1998, included in this Prospectus have
been audited by Hansen, Barnett & Maxwell, independent certified
public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of
such firm as experts in accounting and auditing.

The consolidated financial statements of Big Horn Resources Ltd.
as of December 31, 1998 and 1997, and for the years then ended,
included in this Prospectus have been audited by KPMG LLP
independent chartered accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon the
authority of such firm as experts in accounting and auditing.

Certain information concerning proved reserves with respect to the
Company's Slovakian interests has been included based on a report
from Ryder Scott Company, Petroleum Engineers, and is included in
reliance on their report and the authority of such firm as experts
in petroleum reserves.

<PAGE> 12

DESCRIPTION OF BUSINESS AND PROPERTIES OF THE COMPANY

General

EuroGas is primarily engaged in the acquisition of rights
to explore for and exploit natural gas, coal bed methane gas, and
other hydrocarbons. The Company has acquired interests in several
large exploration concessions and is in various stages of
identifying industry partners, farming out exploration rights,
undertaking exploration drilling, and seeking to develop
production. The Company is also involved in co-generation and
several mineral reclamation projects. Unless otherwise indicated
in this Report, all dollar amounts are reflected in United States
dollars.

When used in this section, the "Company" includes EuroGas, Inc.,
and its wholly owned subsidiaries, EuroGas (UK) Limited, Danube
International Petroleum Company ("Danube"), EuroGas Austria GmbH
("EG," previously OMVJ), EuroGas Polska Sp. zo.o. ("EuroGas Polska")
and EnergyGlobal A.G. ("EnergyGlobal"), and the subsidiaries of each
of these subsidiaries, including GlobeGas B.V. ("GlobeGas"), Pol-Tex
Methane, Sp zo.o. ("Pol-Tex"), McKenzie Methane Jastrebie Sp.
zo.o. ("MMJ"), Danube International Petroleum Holding B.V.
("Danube Netherlands"), EuroGas Deutschland GmbH, EuroGas Europe
BV, EuroGas Resources Limted, Central European Petroleum, NV
EuroSilesia Sp. zo.o, and Energetyka Lubuska. See "-History."

The following table provides a brief summary of the principal
projects in which EuroGas is presently engaged. These projects are
described in greater detail in the pages that follow the table.

SUMMARY OF EXISTING EUROGAS PROJECTS

Nature/Name Ownership Interest Status of
Country of Project (% Interest-Form) Project
- ------- ------------------------------- ------------------ --------------

Poland . Polish Methane Gas Concessions

. Pol-Tex Concessions (Nr. 134/93) 100%-Subsidiary Shut-in Wells

. Two Additional Concessions 50%-Joint Venture Early
Exploration

. New 111 sq. km. Concession 100%-Subsidiary Finalizing
Agreement; Pre-
Exploration

. EuroSilesia Well Drilling and 51.4%-Subsidiary Actively Dril-
Servicing ling and
Servicing

. Carpathian Flysh/Foredeep Oil 50%-Joint Venture Evaluating
Seismic Data
Prior to Drill-
ing

.Energetyka Lubuska Power Plant 12.5%-Joint Venture Government
Evaluating
Proposal to
Construct.

.Zielona Gora Naatural Gas
Reservoirs and Plant 50%-Joint Venture Negotiating
Joint Venture;
Pre-Exploration

Ukraine .13 Oil and Methane Gas Properties 70%-Joint Venture Letter of
Intent to
Acquire; Pre-
exploration

.Ortinichska Oil Reserve and Operation Pre-exploration
Natural Gas Reservoir Agreement w/ Partners have
State-owned studied
Company reserves

.Three producing Oil Fields in Operation Studying
Western Ukraine and Poltava Agreement w/ Reservoir
Basin Ukranian Oil
Company

.Donetsk Coal Basin Methane Gas 50%-Joint Venture Testing/
Drilling in
late 1999

<PAGE> 13

.300 sq. km. Coal-Bed Methane 50%-Joint Venture Testing/
Gas Project Drilling
estimated
2000

Slovakia .Slovakian Oil & Gas Joint 50%-Joint Venture Testing/
Venture-Trebisov Natural Drilling
Gas Reservoir (some gas
shows; title
issues)

.Maseva Natural Gas Reservoir 67.5%-Joint Venture Pre-
Exploration

.Gemerska Talc Deposit 23%-2nd Tier Testing
Subsidiary Complete;
Seeking
Financing for
Development

Sakha
Republic TAKT Exploration Blocks Near 50%-Joint Venture Exploring
Lensk Property
Using
Seismic Tech-
niques

Canada .Big Horn Resources Ltd. 51% Subsidiary Producing
1,200 barrels
of oil equiv-
alent per day;
proven
reserves of
1.9 million
barrels of oil
equivalent at
December 31,
1998

.Beaver River Natural
Gas Field 15%-Joint Venture Drilling to
Revive
Abandoned
Natural
Gas Field

Slovenia .Operating Lubricant Refinery Agreement to Negotiations
Purchase From in Process
Government

Germany .Convertible Loan to Seiler $500,000 Loan Loan due May
Toxic Waste Company Convertible into 28, 1999
Equity Negotiation
in Process
for Repayment

ACTIVITIES IN POLAND

General. The Company believes that Poland offers an attractive
environment in which to explore for and develop oil, natural gas
and coal bed methane gas. The Republic of Poland is bordered on
the north by the Baltic Sea and Russia, on the west by Germany, on
the south by the Czech Republic and Slovak Republic and on the
east by Belarus, and Ukraine. Poland is comprised of
approximately 120,000 square miles, with a population of
approximately 40 million people. Between 1945 and 1989, Poland's
communist political and economic systems were directly influenced
by the former Soviet Union. In 1989, Poland peacefully asserted
its independence and adopted a new constitution, which established
a parliamentary democracy, and began Poland's transition to a
market-based economy. In March 1999, Poland became a member of
NATO and is expected to join the European Union within the next
several years.

In August 1991, the United States Environmental Protection Agency
(the "EPA") and the United States Agency for International
Development ("AID") published a joint study on the possibility of
economic recovery of methane gas associated with Poland's
extensive hard coal reserves. The joint study concluded that coal
bed methane was an abundant underdeveloped natural gas resource in
Poland and that the development and exploitation of this resource
could provide a much less environmentally harmful source of energy
for Poland than its extensive reliance on coal. The joint study
stated that the potential methane reserves were significant,
estimating a total methane resource associated with all coal mine
concessions in Poland (both active and inactive mines) of in
excess of 1.3 trillion

<PAGE> 14

cubic meters (44 Tcf). Shortly thereafter, Poland began to solicit
bids for concessions to explore for coal bed methane gas.

Coal bed methane gas production has been occurring for some time
in the United States and has drawn attention in Poland due in part
to the joint EPA/AID study. 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 the
heavy hydrocarbons are removed from natural gas, 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 price 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.

The Company's Polish concessions were originally pursued by
management of GlobeGas as they realized that there was a growing
demand in Europe for this type of gas that is a cleaner and more
efficient source of energy than coal. In 1989, the Polish
government adopted the position that production of the potential
methane reserves would not only benefit the country economically
but could also significantly reduce air pollution and acid rain in
the country. Management believes that Poland's extensive
collection pipeline network may facilitate the transmission and
sale of any gas discovered on the Company's concessions.

The Polish Concessions and Related Matters. The Company's Polish
concessions were originally pursued by GlobeGas as management
realized that there was a growing demand in Europe for this type
of gas that is a cleaner and more efficient source of energy than
coal. In January 1993, the Company's wholly-owned subsidiary,
Pol-Tex, was awarded exploration and exploitation rights for coal
bed methane gas in a concession, Nr.134/93, granted to Pol-Tex by
the Ministry of Environmental Protection, Natural Resources and
Forestry, located in the Upper Silesian Coal Basin (the "Pol-Tex
Concession"). In September 1993, the Company's wholly-owned
subsidiary, GlobeGas, entered into a joint venture agreement with
Rybnicka Spolka Weglowa SA, ("Rybnicka"), a large coal mining
company owned by the Republic of Poland, to form MMR (now
Pol-Tex) to exploit a second coal bed methane concession, owned
by Rybnicka, also located in the Upper Silesian Coal Basin.
During 1999, Pol-Tex purchase the minority interest from Rybnicka
and during 1999, MMR combined with Pol-Tex. In March 1996, the
Company's subsidiary, MMJ ("MMJ") entered into a joint venture
agreement relating to a concession, owned by Kopalnia Wegla
Kamiennego SA, ("Jastrzebie"), another large coal mining company
owned by the Republic of Poland, to develop coal bed methane gas
production located in the same area. These three concession areas
(the "Polish Concessions") are located in the Upper Silesian Coal
Basin, covering approximately 28,000 acres in south central Poland.
Through 1996, the Company drilled 12 explorative test wells or
these three concessions and on adjoining property.

In August 1997, the Company completed an agreement with Texaco to
transfer the Pol-Tex Concession, the largest of the coal bed
methane gas concessions held by the Company, to Texaco in exchange
for an initial payment of $500,000. The transaction included the
sale of assets and equipment having a fair market value of
approximately $200,000. Subsequent to the sale, Texaco drilled
six exploratory wells on the Pol-Tex Concession to complete its
appraisal and evaluation of the concession and spent over $12
million. However, Texaco determined not to proceed with the
project due to early gas production figures received from the
project which were considered uneconomic for Texaco and a
reduction in Texaco's world wide exploration budgets, which
included all Polish activities. Texaco has elected to curtail its
Polish coal bed methane operations.

Following a review of the information gathered by Texaco, the
Company concluded that EuroGas Polska may be able to economically
develop the concession due to its lower operating costs. EuroGas
has decided to buy back the concession rights and related maters
from Texaco. Early in 1999 Texaco made formal application to the
Ministry of Environmental Protection, Natural Resources and
Forestry to transfer the concession to EuroGas Polska. The
Ministry of Environmental Protection, Natural Resources and
Forestry has recently given verbal approval to issue a new
concession, to EuroGas Polska, to replace the one held by Texaco.
On March 19, 1999, EuroGas Polska and Texaco executed a purchase
agreement providing for Texaco's transfer of the usufruct
agreement to EuroGas Polska in exchange for a payment of

<PAGE> 15

$172,000. The agreement is subject to approval by the Ministry of
Environmental Protection, Natural Resources and Forestry. In
connection with the 1997 transfer of Pol-Tex Concession, the
Company also granted Texaco a right of first refusal to acquire
control of the Company's subsidiaries Pol-Tex and MMJ. With its
planned return of the former Pol-Tex Nr. 134/93 concession, Texaco
also relinquished its option right to acquire majority interest in

Pol-Tex and MMJ. The Company has operated these concession areas
through its subsidiaries Pol-Tex and MMJ. The Company is
presently negotiating a sale of, or joint venture or similar
arrangement with respect to, the Pol-Tex Concession. If such a
sale or joint venture is not consummated within the next few
months, the Company may be forced to recognize an impairment with
respect to the Pol-Tex Concession.

EuroGas Polska currently anticipates that it will place seven
wells in test production on the Pol-Tex Concession before the end
of the year. Because these wells were previously drilled by
Texaco and Pol-Tex, EuroGas Polska anticipates that the cost of
putting these wells into production will be approximately $800,000.

On October 13, 1997, the Company received additional concession
rights from the Polish Ministry of Environmental Protection of
Natural Resources and Forestry to explore and potentially develop
a 111 square kilometer coal bed methane concession located near
the Pol-Tex and MMJ concession areas. This concession was granted
Pol-Tex by the Ministry of Environmental Protection, Natural
Resources and Forestry in April of 1998 according to Polish
Government documents; however, the Company only recently received
the original concession paperwork. The Company plans to prepare a
feasibility study to explore the possibilities of drilling gas
wells for a combined heat and power plant project or other uses.
The concession agreement requires expenditure of $40,000 per year
pending completion of a feasibility study and negotiations with
third parties for the eventual purchase of natural gas.

During 1998, Pol-Tex acquired Katowice Drilling Enterprise,
subject to final governmental approval, through the Polish
governmental privatization program. Upon the payment of the
equity contribution described below, Pol-Tex will acquire a 51.4%
stake of EuroSilesia Sp. zo.o. ("EuroSilesia"), a new enterprise
formed by the Company and the Ministry of Treasury of the Republic
of Poland. The newly created company will drill and service wells
in Poland (Slask and Belchatow) and in the Ukraine (Western
Ukraine and Donetsk area). Pol-Tex proposes to obtain a
controlling interest in EuroSilsia by putting equity into the
newly created company of approximately $400,000. EuroSilesia,
currently employs 120 people in Poland.

On October 23, 1997, the Company completed an agreement with
Polish O&G Co. to mutually undertake, on a 50/50 cost basis,
additional appraisal and development activities for a large area
located in the Carpathian Flysch and tectonic Foredeep areas of
Poland. The agreement contemplates a total expenditure by the
Company of $15 million over a three-year period. The parties
established a joint team whose initial work is the interpretation
of the data generated by a $1.5 million wide-line seismic work
program which was conducted in the Rymanow-Leske area of the
Carpathian Mountains in southeastern Poland. In the framework of
the agreement, a study for the Rymanow-Lesko block (southeastern
Poland) was prepared. The results of the study, based on the
seismic exploration and geological evaluation, identified
substantial potential for oil and gas accumulations exceeding 50
billion cubic meters of gas and 60 million barrels of oil. The
potential reserve estimates are those of Polish O&G Co. and its
engineering staff and have not been independently verified by the
Company. The final report from Polish O&G Co. was to be received
during the second quarter of 1999. With positive results the
Company expects to be able to raise the funds necessary to fund
the project. The technical team expects to use the interpreted
data to select the site for drilling a deep well (5,000 to 5,500
meters).

The Company may seek to obtain an established industry partner to
participate in the proposed joint venture with Polish O&G Co.
There can be no assurance that the Company will be able to do so
or that such participation would be on terms favorable to the
Company.

In February 1999, the Company formed a consortium with National
Power Plc. (the largest power generation company in the UK) and
with a large German utility company, VEW Energie AG, ("VEW"), to
develop a power generation project in Zielona Gora, Western
Poland. The agreement calls for creation of a joint venture
company "Energetyka Lubuska". The venture submitted an offer to
regional Polish power company, EC Zielona Gora, ("Zielona Gora"),
to build a gas-fired combined heat and power plant. The proposed
power plant has been

<PAGE> 16

designed to deliver up to 180 Mwe and 80MWt. The Company currently
anticipates that the total investment required to develop the
project will be approximately $150 million. Of that amount, it
is proposed that National Power Plc. and VEW will pay approximately
55% and 37.5%, respectively, of the total project costs. The
Company will hold a 12.5% share in "Energetyka Lubuska" and will
be required to pay approximately 7.5% of the project cost. The
Company presently anticipates that the proposal will be approved
by Zielona Gora within 60 days.

The Company has executed a memorandum of understanding with Erdol
und Erdgas Gommern, ("EEG"), a unit of Gaz de France, Paris, and
Bayernwerk/VIAG of Munich, Germany, to enter into negotiations to
develop several sizable proven gas reservoirs in Western Poland
and to build gas treatment facilities and gas transmission systems
to supply natural gas to the power plant in Zielona Gora. The
agreement calls for creation of a 50/50 joint venture with the
Polish partner. The Company presently anticipates that the
project will need an investment of approximately $80 million, in
addition to the $40 million already invested by Polish O&G Co.

ACTIVITIES IN UKRAINE

EuroGas has entered into a letter of intent with an Ukrainian
state-owned company, ZahidUkrgeologia, to acquire 13 Ukrainian oil
and gas properties, which include both standard oil and gas and
coal bed methane projects located in the western Ukraine. The
Company has recently entered into an agreement with RWE-DEA to
jointly establish a new company "RWE-DEA-EuroGas E+D (Ukraine)."
Under the terms and conditions of this agreement, the joint
company would give RWE-DEA the right to select those properties
that have promising oil and natural gas reserves for further
exploration and development. Under the terms of the agreement, the
Company and RWE-DEA will be equal owners, although RWE-DEA will
maintain administrative control and will be the operator with
respect to any proposed field activities. To date, the parties
have identified several potential joint ventures in the Ukraine.

The Company has also signed two joint operation agreements with
ZahidUkrGeologyia and Chernihivnaftogasgeologyia, Ukrainian
state-owned companies. The joint operation agreement with
ZahidUkrGeologyia calls for study and development of Ortinichska,
a potential oil reservoir in the western Ukraine with potential
reserves exceeding 70 million barrels of oil and the Kamienska
natural gas reservoir, with potential reserves exceeding 20
billion cubic meters. The reserves projections are those of
ZahidUkrGeologyia and its engineers and have not been
independently verified by the Company.

The project with Chernihivnaftogasgeologiya calls for evaluation
of two potentially large reservoirs, the Selukivska oil reservoir,
with potential reserves exceeding 100 million barrels, and the
Pivdinno-Berestivska oil-gas-condensate reservoir. In addition,
the Company will conduct exploration work for U-prospect in the
Donetsk-Dniepr Depression. According to Ukrainian engineering
estimates, these multiple oil and gas exploration concessions
contain potential oil reserves exceeding 1 billion barrels in
place and potential total gas reserves exceeding 500 billion cubic
meters in place. The reserves projections are those of
Chernihivnaftogasgeologiya and its engineers, and have not been
independently verified by the Company.

The Company has also executed a joint operation agreement with
Ukraine's largest oil company, Ukrnafta. The agreement calls for
creation of a joint venture to rejuvenate and increase the
production for three producing oil fields: Dolina and Kohanovka
(Western Ukraine) and Glinsk-Rozbyshewsk (Poltava Basin). The
Dolina field is the largest producing field in the Western
Ukraine, with estimates of oil in place exceeding 1 billion
barrels. The field produced over 120 million barrels of oil and,
with use of new technology, it is expected that a newly discovered
reservoir from in the field can exceed an additional 100 million
barrels. The Glinsk-Rozbyshewsk and Kohanovka fields are also
estimated to have substantial remaining reserves which could
exceed over 100 million barrels. Reservoir evaluation studies by
the Company are currently underway. The projected reserves are
those of Ukrnafta and its engineers, and have not been
independently verified by the Company.

In October 1998, the Company formed a joint venture company,
EuroDonGas, with MGO (Ukrainian Mining Company) to explore and
develop coal bed methane and natural gas reservoirs in the Donetsk
Coal Basin. MGO engineering documentation places the potential
recoverable reserves in excess of 20 billion cubic meters to a
depth of 1500 meters. The Company intends to drill its first
exploration well as soon as practicable.

<PAGE> 17

The Company has also executed an agreement to create a new joint
venture with a private Ukrainian company, Vuhlegas. The project is
a coal-bed methane recovery and utilization operation. The
concession area is approximately 300 square km. It is estimated
by EuroDonGas that the area contains 6-10 trillion cubic feet
("Tcf") of natural gas. The foundation of the a joint venture
company Eurovuglegas was finalized in December 1998. EuroGas will
receive 70% of the revenues from the production until it has
recovered the full amount of its investment, following which the
revenues will be split on a 50/50 basis. The joint venture will
drill six coal bed methane/gas wells in the area of Gorska mine
(Donetsk area) as a part of a program to be financed by Global
Environmental Fund of the World Bank.

ACTIVITIES IN SLOVAKIA

General. Slovakia was until recently part of Czechoslovakia. On
January 1, 1993, the Czech Republic and Slovak Republic
("Slovakia") emerged as separate independent nations. Slovakia is
bounded 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,
Party of the Democratic Left, remains a major political force.
Slovakia is a member of the International Monetary Fund and 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.

The main economic segments of Slovakia are agriculture and
manufacturing. Various foreign companies have located
manufacturing plants in Slovakia, taking advantage of skilled,
cheap professionals and other labor, as well as the close
proximity to "Western" Europe. A prime example of this is
Volkswagen A.G., which has located manufacturing facilities in
Slovakia. Energy in Slovakia is primarily provided by massive gas
and oil imports from countries formerly a part of the Soviet
Union. Domestic production of oil and gas cover only a small
percentage of Slovakia's energy needs.

As part of its effort to diversify and expand its interests in
Europe, in July 1996, the Company acquired Danube International
Petroleum Company ("Danube"), which held rights to participate in
exploration for natural gas in Slovakia and the Czech Republic.
See "-History." Since the acquisition, the Company has focused
its efforts on the development of the Slovakian project, and
abandoned its interest in the Czech Republic during 1997. Danube
is a partner in a joint venture agreement (the "Slovakian Oil &
Gas Joint Venture") with 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 which covers large parts of Hungary and the southeastern
part of Slovakia

In March 1998, the Company acquired a 55% equity interest in
RimaMuran s.r.o. ("RimaMuran"), a closely-held entity whose
principal asset is a 43% interest in Rozmin s.r.o. ("Rozmin"), the
operating company which holds the Gemerska Talc Deposit located in
Roznava, Slovakia, approximately 50 kilometers west of Kosice in
eastern Slovakia. Thyssen Schachtbau GmbH, a leading
international mining engineering company, and Dorfner Group, a
leading German processing and refining company for industrial
minerals, hold the remaining shares in Rozmin. The Company
purchased its interest for a cash payment in the amount of $30,362
and 43% of the development budget which is expected to be
approximately $12 million over the next two and one-half years.
(The Company's obligation will be approximately $5 million).

Slovakian Oil & Gas Joint Venture. The activities of the Slovakian
Oil & Gas Joint Venture are conducted pursuant to a four-year
exploration permit granted on April 24, 1995 (the "License"). As
it continues its exploration and development on the area subject
to the License, the Slovakian Oil & Gas Joint Venture will seek to
acquire additional permits that have not yet been granted. The
Company is presently in discussions with officials of NAFTA and
the Slovakian government to discuss extension of or re-issue of
the License. Early negotiations indicate low risk potential for
the License not to be extended or re-issued. Prior to the
Company's acquisition of its interest in the Slovakia Oil & Gas
Joint Venture, eleven wells were drilled in the area covered by
the License. All of these wells had gas shows, although none were
completed for commercial production. The Company believes that
new wells can be drilled offsetting the old

<PAGE> 18

wells and that, if the new wells have similar gas shows, they
can be completed with routine western completion techniques
that now exist for the recovery of gas from these types of
formations.

The Slovakian Oil & Gas Joint Venture drilled its initial well,
Trebisov 5R, in what is known as the South Cluster. In the course
of such drilling, the Company encountered a 980 meter thick gas
column subdivided into an upper interval (appearing at 1575 meters
- 2100 meters below ground level) and a lower interval (2100
meters - 2555 meters deep). In December of 1996, after
hydrological fracturing, the upper interval tested 1 million cubic
feet of gas ("MMcf") per day through a 10 millimeter choke with a
flowing pressure of 450 pounds per square inch ("psi") and the
lower interval tested 0.4 MMcf per day through a 8 millimeter
choke, with a flowing pressure of 275 psi. The preliminary
testing , conducted by Schlumberger, an internationally recognized
oil and gas service company, was conducted prior to the cleaning
up of the well and removing water from the well.

Based upon the initial test results, the Company has engaged Ryder
Scott, a leading petroleum engineering firm, to prepare a reserve
analysis on the Trebisov reservoir. The joint venture also
completed a 148 sq. km. 3-D seismic survey covering the South
Cluster and a prospective area to the north. A survey to map
anomalous concentrations of gas in the surface soil samples was
completed in the licensed acreage to highlight areas for new
seismic surveys. In 1998, the Slovakian Oil & Gas Joint Venture
completed the remaining three wells of the six wells planned for
initial drilling. No drilling is planned in the licensed area
during 1999.

Under the terms of the joint venture agreement, the Company was
obligated to provide 75% ($4.98 million) of the projected initial
test phase funding of $6.64 million (including seismic testing)
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 have been expended and the
drilling is now being paid 60% by the Company and 40% by NAFTA.
When the cost of development and production exceeds $6.8 million,
additional funds will be paid 50% by the Company and 50% by NAFTA.

During March 1998, the Company was informed by NAFTA that there
may be certain title problems related to areas of mutual interest
proposed to be explored and developed by the Slovakian Oil & Gas
Joint Venture outside of the Trebisov area. All of the wells
drilled by the Company to date are located in the Trebisov area
and the Company is not aware of any title problems in that area.
The disputed area is located in the southern portion of the
property covered by the designations contained in the joint
venture agreement and is subject to a competing claim of ownership
by a private Slovakian company. To the extent that the Slovakian
Oil & Gas Joint Venture does not have the right to explore certain
areas as previously contemplated, the Company's expansion beyond
the Trebisov area may be limited. The Company has asserted a
claim against its joint venture partner for the misrepresentation
of the areas of mutual interest and has made a demand to be
properly compensated. There have been on going negotiations
between the Company and its joint venture partner and the Company
received indications that the issue will soon be resolved. The
Company has also notified the former Shareholder of Danube of a
claim against them by reason of this recent problem.

The Slovakian Oil & Gas Joint Venture has not established the
extent of any reservoir that may have been tapped by its
activities to date and has not entered into any contracts for the
sale or transportation of any gas that might be recovered. If the
Slovakian Oil & Gas Joint Venture is unable to obtain the
necessary permits or if it is unable to establish ongoing
production and sell the gas at a sufficiently high price to pay
the associated production costs, provide a return on the capital
expenditures made, provide funds for ongoing activities, and
provide a profit, it may be unable to continue its exploration and
development activities or successfully produce any natural gas
that may be discovered.

Other Concessions. The Company recently completed an agreement to
acquire a majority interest in Maseva, a private Slovakian company
which holds an oil and gas concession adjacent to the Trebisov
concession. This new concession, known as Maseva, has overlapping
claims with the Company's other concessions. The Company
completed exploration work consisting of a survey to map anomalous
concentrations of gas in surface soil samples to define areas for
new seismic surveys. The Company plans to conduct a three
dimensional seismic survey during the first six months of 2000.
The approximate cost will be $1.5 to $2.5 million. Based upon the
survey results, the Company intends to draft a comprehensive
development plan. No drilling is planned in the licensed area
prior to completion of the three dimensional seismic survey.

<PAGE> 19

The Maseva agreement provides for the Company's acquisition of the
Maseva interest in exchange for the issuance of 2,500,000 shares
of the Company's Common Stock and the grant of two-year warrants
enabling the holder to purchase up to 2,500,000 shares of Common
Stock for $2.50 per share (adjusted from an original $5.00 per
share warrant price because of the decline of the price of the
Common Stock.) The division of the working interest for this
territory will now be 67.5% for the Company, rather than the 50%
split which governs the adjacent Trebisov joint venture, provided
that the Company carries the cost of drilling the first two wells
in the previously disputed area.

By the purchase of the Maseva concession, the Company believes it
will solve any title problems it had with its original venture.
The Company has notified the former shareholder of Danube of a
claim against them by reason of the requirement to pay additional
consideration for concession interests originally represented as
owned by Danube.

In September of 1998, the Company acquired a 51% interest in
Envigeo Trade s.r.o.("Envigeo"), a Slovakian private company which
owns a 2,300 square kilometer appraisal and survey concession in
the northeast corner of Slovakia, referred to as the Carpathian
Flysch region, expiring in August 2001. This region extends into
Poland and Ukraine, where extensive discoveries of oil and gas
have been found. The acquisition was made from McCallan Oil and
Gas GmbH of Austria. The total price for the 51% participation
interest was $1,500,000, consisting of an initial payment of
$500,000, which was made in September 1998, and the balance of
$1,000,000, which was paid in December 1998. McCallan Oil has
spent over $300,000 in exploratory activities over the last 18
months. The Company is currently conducting a soil sampling
survey in the Envigeo concession. If the survey results are
favorable, the Company intends to pursue additional exploration
and, if justified, development and production.

Slovakian Talc Deposit. In March 1998, the Company acquired a 55%
interest in RimaMuran s.r.o. ("RimaMuran"), a closely-held entity
whose principal asset is a 43% interest in Rozmin s.r.o.
("Rozmin"), the operating entity which holds the Gemerska Talc
Deposit located in Roznava, Slovakia, approximately 50 kilometers
west of Kosice in eastern Slovakia. RimaMuran is a drilling
service company and presently employs approximately 70 people.
Thyssen Schachtbau GmbH, a leading international mining
engineering company, and Dorfner Group, a leading German
processing and refining company for industrial minerals, hold the
remaining ownership interest in Rozmin. Exploratory holes drilled
between 1987 and 1994 confirmed the existence of a large talc
deposit located approximately 350 meters, or 1150 feet, below the
surface. The Feasibility study was prepared by one of Germany's
leading engineering groups, Hansa GeoMin Consult, GmbH for
Deutsche Investitions- u. Entwicklungsgesellschaft mbH, ("DEG").
RimaMuran has the obligation to fund 44% of the projected $12
million of capital costs over the next two and one-half years.
RimaMuran does not have the assets necessary to meet this
obligation, and it is anticipated that the necessary funding, if
provided, would have to be provided by the Company.

The Company's majority owned subsidiary, RimaMuran, and the other
joint venture participants have continued to develop the Slovakian
talc deposit. The Company believes the exploitation of the talc
deposit will be particularly favorable due to a strong feasibility
study, the willingness of DEG, a wholly-owned financing subsidiary
of the German government, to participate, and the presence of
majority partners, Thyssen and Dorfner. The joint venture has
negotiated a non-recourse financing package which would give DEG a
10% equity participation in the project in exchange for financing
of which 9% would be contributed by RimaMuran and 1% by Thyssen
and Dorfner. The completion of the loan package is subject to the
receipt by DEG of a guarantee from Dorfner to purchase a portion
of the mined talc. Dorfner is now completing a market survey to
determine the amount of the guarantee it is willing to offer.
During the last two quarters of 1998, the Company advanced
$801,178, consisting of shareholder loans, to RimaMuran to fund
its participation in the project. In December 1998, the Company
advanced an additional payment of approximately $595,000 to Rosmin
on behalf of RimaMuran as its percentage portion of the
feasibility study and the budget.

During the fourth quarter of 1998, Rozmin entered into discussions
with Lucenac, a member of the Rio Tinto Group, which is considered
to be the largest mining company in the world. As a result of
these discussions, Lucenac has asked for drilling of two more core
holes in order to confirm previous test results and data that is
contained in the feasibility study performed by Thyssen and Dorfner.

<PAGE> 20

ACTIVITIES IN THE SAKHA REPUBLIC

General. On June 11, 1997, the Company acquired all of the issued
and outstanding stock of OMV (Jakutien) Exploration GmbH from OMV
A.G., Austria's largest industrial concern, in exchange for (a)
the payment of $6,252,724, (b) the grant of an option to acquire
up to 2,000,000 shares of Common Stock at a per share exercise
price of $4.00 to $6.00 on yearly sliding scale, (c) a five
percent interest in the acquired company's net profits from
identified preliminary oil and gas licenses, and (d) a one percent
interest in the gross production of the TAKT Joint Venture outside
such licenses. Subsequently, the subsidiary's name was changed to
EuroGas (JAKUTIEN)Exploration GmbH ("EJ"). In January of 1999 the
name of EJ was changed to EuroGas GmbH ("EG").

The Republic of Sakha(Yakutia)(often referred to as "Yakutia"
in English and as "Jakutien" in German) is thinly populated (just
over 1,000,000 people) and covers approximately 3,100,000 square
kilometers that the United States Geological Service has rated as
extremely rich in natural resources. There has been limited
commercial exploitation of hydrocarbons in Yakutia and current
production is generally limited to providing fuel for heat and
energy to local urban and industrial complexes, partly because of
the general remoteness of the area and the poor transportation
network currently in existence. Since 1991, the Yakutian
government has put in place an economic and legal system that is
designed to encourage foreign investment and the export of
hydrocarbons. The Company's interest in acquiring EG was based in
large part on the Company's belief that EG's joint venture
operations are well-positioned to participate in the potential
international gas export project which has been envisioned
pursuant to feasibility studies conducted by Korean, Chinese, and
Japanese consortiums. This region is currently the subject of
multinational negotiations and discussions to build a pipe line
from the Irkutsk natural gas fields in Russia to China and Japan
with the possibility of connecting the large Sakha gas fields onto
the pipe line.

TAKT Joint Venture. EG's primary asset is a 50% interest in the
joint venture (known as "TAKT") with Sakhaneftegas, the national
oil and gas company of Yakutia. The conversion of TAKT to a joint
stock company with limited liability was approved by the Company
and Sakhaneftegas on December 1, 1997 and is expected to be
finalized in 2000. TAKT was formed to appraise, explore, develop,
and, when appropriate, export oil and gas reserves in two large
areas of interest located in Yakutia. Yakutia has the largest
land area of the members of the Russian Federation and is located
in the far eastern portion of what was formerly the Soviet Union.
TAKT has negotiated a detailed agreement with Yakutia and the
Russian Federation for the exploration, production, and
development of hydrocarbons located in the areas of interest.

TAKT currently holds two exploration blocks located near the city
of Lensk, which cover approximately 21,300 square kilometers
(approximately 8,225 square miles) located in the southeast
section of the East Siberian platform or East Siberian Basin. An
application to extend the two exploration licenses for an
additional 20 years was submitted to the Sakha Ministry of Justice
in January 1998. TAKT also holds rights of first refusal on any
Sakha oil and gas projects offered by Sakhaneftegas to third
parties in the Sahka Republic. TAKT has been conducting
activities within the two blocks for the past six years, employing
modern seismic and exploration techniques with encouraging
results. The exploration for and the production of hydrocarbons
in Yakutia is made more difficult by the climatic conditions, the
general remoteness of the area, and the lack of infrastructure.
The area is subject to extreme arctic conditions and does not have
any facilities for transporting hydrocarbons to existing markets.
The Company's ability to exploit any potential benefit from this
project will rely in part on the activities of other independent
entities in constructing the necessary infrastructure and
establishing markets for hydrocarbons. The Company considers the
TAKT project as a long term investment. In a feasibility study
done by OMV, Austria's largest industrial concern, dated March 30,
1993, OMV estimated future revenues for the TAKT Joint Venture at
$26.08 billion with net profits to OMV (Jakutien) GmbH, now called
EuroGas Austria GmbH, at $2.68 billion. The projected revenues are
those of OMV and its engineers, and have not been independently
verified by the Company.

Principal work undertaken by TAKT during 1998 consisted of
reprocessing 1700 kilometers of seismic lines. The reprocessing
work was completed in January 1999 by Yakutskgeofisika, the
geophysical arm of Sakhaneftegas, in Yakutsk. TAKT has completed
a preliminary interpretation of the first 400 kilometers of
reprocessed data in the vicinity of the 314-2 well that
successfully tested gas in a large structure in 1992. A pilot
survey was conducted in the vicinity of

<PAGE> 21

this well to test the applicability of a soil sampling method for
detecting anomalous concentrations of gas in surface soils.
Results are expected during the second quarter of 2000.

The Company presently anticipates that, during 1999, TAKT will
complete the interpretation and mapping of the reprocessed seismic
lines and will select a well location. The date for commencement
of this well will depend on technical discussions with local
drilling contractors and the ability of Sakhaneftegas to provide
its 50% contribution to the well cost. If the results of the
above mentioned soil survey are positive, a new survey will be
planned to cover an extensive part of the license area.

EG and Sakhaneftegas each appoint two members to the Board of
Directors of TAKT with EG having the right to nominate the
chairman who holds the tie-breaking vote. Unanimous votes are
required for any amendments of the joint venture itself, the
admission of new partners, any buying or selling of shares,
reappointment or dismissal of the director general, and certain
other specified actions. The Company has selected Paul
Hinterthur, the Company's Chief Executive Officer, and Dr. Mikhail
Tsikel, the former Vice President of Sakhaneftegas and an
independent industry consultant engaged by the Company, as its
representatives on TAKT's Board of Directors, with Mr. Hinterthur
serving as Chairman.

ACTIVITIES IN CANADA

Big Horn. On October 5, 1998, EuroGas entered into a stock
purchase agreement with Oxbridge Limited, Rockwell Limited, and
Conquest Financial Corporation, three individual shareholders of
Big Horn Resources Limited ("Big Horn") and EuroGas referred to
herein collectively as "ORC." ORC had the right to purchase
10,000,000 shares of Big Horn common stock at $0.42 U.S. ($0.65
Canadian) per share. Under the terms of the stock purchase
agreement and a stock subscription agreement, EuroGas acquired the
rights of ORC to purchase 8,500,000 shares of Big Horn common
stock and paid Big Horn $4,205,500 U.S. ($6,500,000 Canadian) on
October 17, 1998. After receiving approval of the transaction
from the Toronto Stock Exchange in January 1999, Big Horn issued
8,500,000 Big Horn common shares to EuroGas and issued 1,500,000
Big Horn common shares to ORC. The 1,500,000 shares were paid for
by EuroGas but were issued directly to ORC as a finder's fee. In
addition, EuroGas paid ORC $500,000 U.S. as a finder's fee and for
an option to purchase an additional 3,000,000 Big Horn common
shares at $0.53 U.S. ($0.80 Canadian) per share from ORC and to
purchase warrants held by ORC to acquire 2,000,000 Big Horn common
shares at $0.97 U.S. ($1.50 Canadian) per share from Big Horn.

ORC verbally agreed further on October 5, 1998 to sell and EuroGas
agreed to purchase 5,600,000 common shares of Big Horn held by
ORC, including the 4,500,000 common shares described above, for
$2,940,224 U.S. ($4,480,000 Canadian) or $0.53 U.S. ($0.80
Canadian) per share. On March 31, 1999, EuroGas completed the
acquisition of the 5,600,000 shares of Big Horn common stock by
execution of promissory notes in the aggregate amount of
$1,840,224 U.S. and by the cancellation of a June 1998 note
receivable from Rockwell Limited in the amount of $1,100,000 U.S.

As a result, the Company has slightly more than a 50% interest in
Big Horn. Big Horn currently has production equivalent to
approximately 1,200 barrels of oil equivalent per day. At December
31, 1998, Big Horn had estimated proven reserves of approximated
811,000 barrels of oil and 6,881,700 mcf of natural gas. Its
estimated net future discounted cash flows at December 31, 1998
were approximately $6.4 million U.S. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations".

During 1999, Big Horn acquired the assets of Edinburgh Resources,
Ltd. for approximately $1,700,000 U.S. ($2,480,000 Canadian).
Edinburgh's assets include various working interests in producing
natural gas properties located north of Calgary, Alberta Canada,
and a gas processing facility.

Beaver River. In October 1997, the Company entered into an option
agreement to acquire an interest in the Beaver River natural gas
field located in northeastern British Columbia. The gas field was
originally discovered and developed by Amoco Canada in the 1960s
and was one of the largest producing gas fields in British
Columbia, producing at a daily rate of approximately 250 to 300
MMcf. Technical problems, due to over production of natural gas,
led to excess water production and Amoco shut-in the field in
1978. In 1997 Wascana, a subsidiary of Canadian Occidental
Petroleum has

<PAGE> 22

entered into an agreement to attempt to reestablish commercial
natural gas production in the project using up-to-date
technology. The contracting parties amended the terms and
structure of the transaction to some degree so that the Company
has exercised a portion of its option by first purchasing 993,333
units of United Gunn Resources, Ltd. (one share of common and one
warrant), for a total of approximately $950,000. United Gunn
Resources, Ltd. holds an approximately 12% working interest in the
project. In April 1998, the Company entered into an Asset
Exchange Agreement with Beaver River Resources, Ltd., pursuant to
which the Company has subsequently acquired all of the issued and
outstanding shares of Beaver River Resources, Ltd. Beaver River
Resources, Ltd. currently owns a direct 16% percent working
interest in the project.

The operator of the Beaver River property, Wascana, is a
wholly-owned subsidiary of Canadian Occidental Petroleum Ltd.
Since April 1997, Wascana has re-completed one of the two
extraction wells on the field and a new salt water disposal well
next to the B-2 well. Drilling operations have moved to a second
well site to complete a work-over of that well. However, once
Wascana has spent all amounts required to earn its interest, the
parties will be bearing their relative percentages of the cost.
The Company expects that its carrying costs, directly and
indirectly, will be approximately $16,000 a month as Wascana has
notified the parties that it had spent $20,000,000 CDN through the
end of December 31, 1998. In early March of 1999, Wascana informed
the parties that it has begun test production on one of the
re-completed wells.

ACTIVITIES IN SLOVENIA

In the Summer of 1998, the Company entered into an arrangement to
purchase and interest in an operating lubricant refinery facility
in Slovenia. At present, the company that controls the refinery,
"Mapetrol," is owned by the Slovenian government. In order to
participate, the Company was required to post a cash bond in the
amount of $337,723 (which cash bond is refundable if the
transaction is not completed). It is anticipated that the
privatization will take a number of months, after which additional
cash and stock will be required to finance the total package, all
the details of which have yet to be negotiated. The refinery is
presently producing high quality lubricating oils that have wide
distribution potential.

ACTIVITIES IN GERMANY

The Company has provided a short term loan, convertible to equity,
to Seiler Trenn-Schmelzanlagen Betriebs GmbH of Freiberg, Germany
("Seiler"). Seiler specializes in toxic waste disposal using a
proprietary methodology. Seiler presently has an operating plant
in Freiberg. The Company loaned Seiler $500,000 that is due and
payable on May 28, 1999, which has not been repaid. Seiler
Trenn-Schmelzanlagen has pledged to the Company substantially all
of the assets of the Freiberg plant as collateral for the loan.
The Company is presently evaluating the possibility of proceeding
with a possible equity investment into Seiler, which would likely
consist of conversion of the existing the loan to equity. Seiler
TSB GmbH is a subsidiary of Seiler SPCS Inc. a U.S. corporation.

During 1999, the Company made an investment of $600,000 into Hansa
GeoMin Exploration Ltd. of Duisburg, Germany. Hansa GeoMin
Exploration Ltd. is involved in numerous mineral reclamation
projects, particularly gold, on the African continent. During the
third quarter of 1999, the Company recognized an impairment of the
full value of such investment.

ACTIVITIES IN THE UNITED STATES

During the first quarter of 1999, the Company acquired shares of
the convertible preferred stock of Intergold Corporation for
$1,000,000, which has a controlling interest in several mining
claims in the central Idaho area. During the third quarter of
1999, the Company recognized an impairment of the full value of
such investment.

<PAGE> 23

DISCLOSURE OF OIL AND GAS OPERATIONS

Reserves Reported to Other Agencies. -- No reserves were reported to any
other federal agency or authority for the year ended December 31, 1998 or
for the nine months ended September 30, 1999.

Oil and Gas Production and Production Costs. -- The following table sets
forth the average sales price per unit of oil and gas produced and the
average production cost per unit of production. During 1998, oil and gas
production related solely to operations in Canada.

<TABLE>
<CAPTION>
For the Nine For the
Months Ended Year Ended
September 30, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Average sales prices
Liquids, per barrel $ 12.04 $ 9.02
Natural Gas, per thousand cubic feet (mcf) $ 1.45 $ 1.51
Average production costs, per barrel
of equivalent oil (1) $ 2.93 $ 3.13
</TABLE>

(1) Natural gas converted to barrels of equivalent oil at a rate of 6 mcf =
1 barrel of equivalent oil.

Except for the oil and gas produced by Big Horn Resources, Ltd. in Canada,
the Company has not produced any gas or oil in any geographic area during
its history.

Productive Wells. -- The following table sets forth the number of gross
productive wells and net productive wells in which the Company has a working
interest.

Productive Oil and Gas Wells at December 17, 1999
<TABLE>
<CAPTION>

Productive Oil Wells (1) Productive Gas Wells (1)
------------------------- -------------------------
Gross (2) Net (2) Gross (2) Net (2)
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Canada 57 15.8 43 10.0
Eastern Europe and Russia - - - -
------------ ----------- ----------- ------------
Total 57 15.8 43 10.0
============ =========== =========== ============
<FN>
(1) Includes wells producing or capable of producing and injection
wells temporarily functioning as producing wells. Wells that
produce both oil and gas are classified as oil wells.
(2) Gross wells include the total number of wells in which the Company
has an interest. Net wells are the sum of the Company's fractional
interests in gross wells.
</FN>
</TABLE>

Developed and Undeveloped Acres. -- An acre is deemed to be developed if wells
have been drilled on such acre to a point that would permit the production
of commercial quantities of oil. The following table sets forth the number of
gross and net developed and undeveloped acres in which the Company has a
working interest.

Acreage (*) At December 31, 1998
<TABLE>
<CAPTION>

Undeveloped Developed Total
----------------------- --------------------- ----------------------
Gross Net Gross Net Gross Net
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Canada 18,244 6,719 22,500 8,000 40,774 14,719
Eastern Europe and Russia 6,444,506 3,586,671 - - 6,444,506 3,586,671
---------- ---------- ---------- --------- ----------- ----------
Total 6,462,750 3,593,390 22,500 8,000 6,485,250 3,601,390
=========== ========== ========== ========= =========== ==========

<FN>
(*) Gross acreage includes the total number of acres in all tracts in which
the Company has an interest. Net acreage is the sum of the Company's
fractional interests in gross acreage.

</FN>
</TABLE>
<PAGE> 24

Drilling Activities. -- The following table sets forth the number of
development wells (productive and dry) and exploratory wells (productive and
dry) for which drilling was completed 1999 and during the three years in the
period ended December 31, 1998.

Drilling Activities
<TABLE>
<CAPTION>
Development Exploratory
Wells Drilled Wells Drilled
---------------------- ----------------------
Productive Dry Productive Dry
Wells (2) Wells (1) Wells (2) Wells (1)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
For the Nine Months Ended
September 30, 1999:
Canada 1.2 0.1 2.3 0.5
Eastern Europe and Russia - - - -
---------- ---------- ---------- ----------
Total 1.2 0.1 2.3 0.5
========== ========== ========== ==========

Development Exploratory
Wells Drilled Wells Drilled
---------------------- ----------------------
Productive Dry Productive Dry
Wells (2) Wells (1) Wells (2) Wells (1)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
For the Year Ended
December 31, 1998:
Canada 0.4 - 0.9 -
Eastern Europe and Russia - - - -
---------- ---------- ---------- ----------
Total 0.4 - 0.9 -
========== ========== ========== ==========
For the Year Ended
December 31, 1997:
Canada - - - -
Eastern Europe and Russia - - - 12.0
---------- ---------- ---------- ----------
Total - - - 12.0
========== ========== ========== ==========

For the Year Ended
December 31, 1996:
Canada - - - -
Eastern Europe and Russia - - - -
---------- ---------- ---------- ----------
Total - - - -
========== ========== ========== ==========

<FN>
(1) A dry well is any well found to be incapable of producing either oil or
gas in sufficient quantities to justify completion as on oil or gas well.
(2) A productive well is any well other than a dry well.
</FN>
</TABLE>

As of the date of this Prospectus, the Company and its wholly- or partially-
owned subsidiaries are presently in the process of drilling (including wells
temporarily suspended but not those for which drilling is planned) the
following exploratory and development wells.

<TABLE>
<CAPTION>
Development Exploratory
Wells Drilling Wells Drilling
---------------------- ----------------------
Gross Net Gross Net
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
As of December 17, 1999
Canada 1 0.4 5 1.8
Eastern Europe and Russia 6 3.0 1 0.5
---------- ---------- ---------- ----------
Total 7 3.4 6 2.3
========== ========== ========== ==========
</TABLE>

COMPETITION

In seeking to explore for, develop, and produce oil and gas
resources, the Company competes with some of the largest
corporations in the world, in addition to many smaller entities
involved in this area. Many of the entities that the Company
competes with have access to far greater financial and managerial
resources than the Company. As a result of the exclusive nature
of the concessions held by the Company, to the extent that it is
able to successfully explore for, develop, and produce hydrocarbon
resources, the Company will be able to exclude any competitor from
production of the resources located on the concessions, but it
cannot exclude competitors from providing natural gas or other
energy sources at prices or on terms that purchasers deem more
beneficial.

EMPLOYEES AND CONSULTANTS

As of December 15, 1999, the Company had two administrative
employees located in Salt Lake City, Utah; three

<PAGE> 25

administrative employees located in London; and six technical and
field workers in Poland. The Company's four principal consultants
are located in Europe. None of the Company's employees is
represented by a collective bargaining organization, and the
Company considers its relationship with its employees to be
satisfactory. In addition to its employees, the Company regularly
engages technical and other consultants to provide specific
geological, geophysical, and other professional services. Because
the Company has concentrated primarily on acquiring concessions
for later exploitation rather than operating them during 1998, the
Company has relied principally on consultants who are paid
one-time fees for their work and assistance. The Company expects
to rely substantially on consultants through 1999, but expects
thereafter to rely more on employees and permanent operating
personnel.

OPERATIONAL HAZARDS AND INSURANCE

The Company is engaged in the exploration for methane and natural
gas and the drilling of wells and, as such, its 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. The Company has not as yet
obtained any hazard insurance although it has applications
pending. The occurrence of a significant adverse event that is
not covered by insurance would have a material adverse effect on
the Company.

OFFICE FACILITIES

The Company leases the 35th floor and penthouse of the building
located at 80 Broad Street, New York, New York, consisting of
approximately 8,800 square feet, under the terms of a sublease
ending on August 31, 2000. The rent under this lease is $11,025
per month and required an initial prepaid rent of $481,100 on
execution. The Company received a rent allowance equal to the
first four months of the lease term commencing on September 1,
1996. The monthly lease payments are subject to annual
escalation, based on the operating expenses of the building. The
offices are also currently occupied by the Company's public and
shareholder relations firm that currently provides services to the
Company in lieu of rent. The offices serve as the Company's
representative location in the Financial District of New York
City. The Company is using the New York offices periodically for
its board meetings as well as other meetings with members of the
investment community such as investment firms and banks.

The New York office maintains the Company's Website at
http://www.eugs.com and also has available, for interested
shareholders, maps and other material concerning the Company's
activities.

On October 1, 1999, the Company extended until September 30, 2002
its lease for property located at 942 East 7145 South, #101A,
Midvale, Utah. Rent for such lease is currently $1,836. The
lease provides for annual increases in the lease payment in an
amount equal to the increase in Consumer Price Index; provided
that, such annual increase shall be not less than 6% or greater
than 10%.

The Company has an oral month-to-month lease on office with
approximately 2,230 square feet in Warsaw, Poland. The rental
amount on such lease is included in the compensation of one of the
Company's Poland-based technical employees. In February of 1999
the Company opened an office (approximately 2785 square feet) in
Berlin, Germany. The property is located at Friedrichstrasse 95
10117 Berlin, Germany. This office is leased under a 5-year
contract and has a monthly rental of approximately $9684. The
Company intends to terminate such lease on or about December 31, 1999.

The Company maintains an office (approximately 2500 square feet)
at 22 Upper Brook Street, Mayfair, London, UK. The Company has
subleased the remaining space to two other companies. In November
1998, the Company entered into a ten-year lease that provides for
a deposit of approximately $500,000 and an annual payment of
$1,740,000, of which the Company's portion is approximately
$580,000.

<PAGE> 26

The Company maintains an office (approximately 400 square feet) at
Mitskiewich Sq. 8, Lviv,Ukraine. The agreement for the office was
signed in March of 1998. The terms of the lease is
month-to-month, and the monthly rent is approximately $250.

The Company's 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.

HISTORY

The Company was incorporated in the State of Utah under the name
Northampton, Inc. ("Northampton"), on October 7, 1985. On August
3, 1994, Northampton entered into a share exchange agreement with
EnergyGlobal, pursuant to which the former owners of EnergyGlobal
obtained voting control of Northhampton and EnergyGlobal became a
wholly-owned subsidiary of Northhampton. Energy Global had been
formed as a holding company for GlobeGas, an oil and gas operating
entity in which Energy Global held a minority interest. The
minority interest in GlobeGas was initially reported on the equity
method on Northampton's financial statements. The agreement with
EnergyGlobal required that Northampton complete a stock
consolidation of one share for each twenty four shares previously
issued and outstanding and deliver a sufficient number of
post-consolidation shares of the Company's common stock to the
former owners of EnergyGlobal to reduce the prior Shareholder'
interest to approximately 10%. Thus, the former Shareholder of
EnergyGlobal became the controlling Shareholder of the Company,
which changed its name to EuroGas, Inc.

The original asset of EnergyGlobal was a 16% minority interest in
GlobeGas, a Netherlands corporation that held, through Pol-Tex, a
concession in Poland. (GlobeGas was an 85% partner with a
formerly state-owned Polish coal company in Pol-Tex and held
additional interest in two other concessions for the exploration
and exploitation of methane coal bed gas reserves in the Upper
Silesian region of Poland.) From September of 1994 through May of
1995, the Company raised $3,380,963 in cash which was used to
acquire additional interests in GlobeGas and increased the
Company's participation in GlobeGas to 19.13%. In May 1995, the
Company acquired the remaining 80.87% interest in GlobeGas in
exchange for $1,150,000 in cash, the issuance of 2,256,560 shares
of Common Stock, and the issuance of 2,391,968 shares of newly
created Preferred Stock, convertible at the rate of two shares of
Common Stock for each share said series of Preferred Stock. The
Company originally booked its interest in GlobeGas as an interest
in a minority-held subsidiary, but since the acquisition of the
remaining interest in GlobeGas has restated its financial
presentation to reflect the historical cost basis of the assets
held by GlobeGas rather than the Company's purchase price,
substantially reducing the carrying value of these assets on the
Company's balance sheets. Since the operations of EnergyGlobal
and Northampton prior to the reorganization were immaterial, the
transaction has been accounted for as if GlobeGas were the
acquiring entity.

In 1996, the Company acquired the remaining 15% interest in the
Pol-Tex held by the Polish state coal company. In 1997, the
Company received additional concession rights in the form of a
usufruct from the Polish ministry of Environmental Protection of
Natural Resource and Forestry to explore and potentially develop a
111 square kilometer coal bed methane concession. This concession
was granted Pol-Tex by the Ministry of Environmental Protection,
Natural Resources and Forestry in April of 1998 according to
Polish Government documents. In 1996, the Company continued in
its quest to acquire additional gas interests in Eastern Europe by
acquiring Danube. Danube was a participant in joint ventures for
the exploration and production of natural gas in Slovakia and the
Czech Republic. In connection with the transaction, the Company
also issued 12,500,000 shares of restricted Common Stock to
Chemilabco, which held an interest in the operating subsidiaries
of Danube and held options to participate in the Czech and
Slovakian operations of Danube. The issuance of the 12.5 million
share to Chemilabco was subject to Chemilabco providing a minimum
of $5,000,000 of financing to the Company in 1996.

In mid-1997, the Company acquired all of the issued and
outstanding stock of EG from OMV Inc., Austria's largest
industrial concern. EG's primary asset is a 50% interest in the
TAKT joint venture with Sakhaneftegas, the national oil and gas
company of the Sakha Republic. In late 1997, Pol-Tex completed an
agreement with Polish O&G Co. to undertake additional appraisal
and development activities for a large area located in the
Carpathian Flysch and tectonic

<PAGE> 27

Foredeep areas of Poland. In late1997, the Company entered into
an option agreement to acquire an interest in the Beaver River
natural gas field located in northeastern British Columbia.

In early 1998, the Company acquired a 55% interest in RimaMuran, a
closely-held entity whose principal asset is a 43% interest in
Rozmin s.r.o., a joint venture which holds the Gemerska Talc
Deposit located in Roznava, Slovakia. In early 1998, the Company
entered into an arrangement to participate in a refinery facility
in Slovenia. In mid 1998, the Company completed an agreement to
acquire a majority interest in an adjacent oil and gas concession
known as Maseva which had overlapping claims with the Company's
other concessions and expects to conduct appraisal and exploration
work in that area during 1999. In mid 1998, the Company acquired
a 51% interest in Envigeo, a Slovakian private company, which owns
a 2,300 square kilometer appraisal and survey concession in the
North East corner of Slovakia, referred to as the Carpathian Flysh
region. In October 1998, the Company entered into an agreement
with Big Horn to purchase a 31% interest in Big Horn. As part of
the transaction, three parties that arranged the Company's
participation in Big Horn granted the Company a first right to
purchase all of their interest in Big Horn, at fair market prices,
with the intent of the Company to acquire a controlling interest
in Big Horn. Effective October 1998, the Company gained control
of the stock and warrants held by such third parties and now has
slightly over 50% of the total interest in Big Horn. Late in
1998, the Company provided a short term loan, convertible to
equity, to Seiler Trenn-Schmelzanlagen Betriebs GmbH of Freiberg,
Germany, a company that specializes in toxic waste disposal using
a proprietary methodology.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS

The information set forth as "NOTE 7 - SEGMENT INFORMATION" of the
consolidated financial statements of the Company included in this
Prospectus contains information regarding financial information
about foreign and domestic operations of the Company and its
subsidiaries.

LEGAL PROCEEDINGS

In 1996, KUKUI, Inc. ("KUKUI"), acting separately and on behalf of
the Unsecured Creditors Trust of the Bankruptcy Estate of McKenzie
Methane Corporation (McKenzie Methane Corporation was an affiliate
of the former owner of Pol-Tex), asserted certain claims against
Pol-Tex and GlobeGas in connection with lending activities between
McKenzie Methane Corporation and the management of GlobeGas prior
to its acquisition by the Company. The claim asserted that funds
that were loaned to prior GlobeGas management may have been
invested in GlobeGas and, therefore, McKenzie Methane Corporation
might have had an interest in GlobeGas at the time of the
acquisition of GlobeGas by the Company. These claims were
resolved pursuant to a settlement agreement entered into in
November 1996 (the "KUKUI Settlement Agreement"). Under the terms
of the settlement agreement, the Company issued to the Bishop's
Estate (KUKUI's parent) 100,000 shares of Common Stock and an
option to purchase up to 2,000,000 shares of Common Stock at any
time prior to December 31, 1998. The option exercise price was
$3.50 per share if exercised within 90 days of the execution of
the Company's 1997 agreement with Texaco (the "Texaco Agreement");
$4.50 per share if exercised prior to December 31, 1997; and $6.00
per share if exercised prior to December 31, 1998. The Company
also granted registration rights with respect to the securities.

In March 1997, a trustee over certain of the McKenzie parties and
other related entities asserted a claim to the proceeds that the
Company would receive from the Texaco Agreement and exploitation
of the Pol-Tex Concession in an action entitled: 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) W. Steve Smith, trustee, plaintiff v. McKenzie
Methane Poland Co., Francis Wood McKenzie, EuroGas, Inc.,
GlobeGas, B.V. and Pol-Tex Methane, Sp.zo.o., defendants (Adv.
No. 97-4114 in the United States Bankruptcy Court for the Southern
District of Texas Houston Division). The trustee's claim alleges
that the Company paid inadequate consideration for its acquisition
of GlobeGas (which indirectly controlled the Pol-Tex Concession)
from persons who were acting as nominees for the McKenzie parties
or in fact may be operating as a nominee for the McKenzie parties
and therefore the creditors of the McKenzie parties are the true
owners of the proceeds received from the development of the
Pol-Tex Concession (KUKUI is also the principal creditor of the
McKenzie parties in these other cases). The Company believes
that the litigation is without merit based on its belief that the
prior settlement with

<PAGE> 28

KUKUI bars any such claim, that the trustee over the McKenzie
parties has no jurisdiction to bring such claim against a Polish
corporation (Pol-Tex) and the ownership of Polish mining
rights, that the Company paid substantial consideration for
GlobeGas, and that there is no evidence that the creditors of the
McKenzie parties invested any money in the Pol-Tex Concession.
In October 1999, the Trustee filed a Motion for Leave to Amend and
Supplement Pleadings and Join Additional Parties in this action
and in adversary proceeding 97-4155 (described below) in which he
is seeking to add new parties and assert additional causes of
action. These new causes of action include claims for damages
based on fraud, conversion, breach of fiduciary duties, comcealment
and perjury. EuroGas has recently filed a response objecting to
this motion. The motion is currently pending before the court.

In June 1999, the Trustee filed another suit in the same bankruptcy
cases styled "Steve Smith, Trustee, Plaintiff vs. Eurogas, Inc.,
Globegas, B.V., Pol-Tex Methane, Sp.z.o.o., et al." Adversary
#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, Plaintiff,
vs. Eurogas, Inc., Globegas, B.V., Pol-Tex Methane, Sp.z.o.o."
Adversary #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, which agreement, in part, allowed
the Texaco Agreement to proceed. 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 August 21, 1997, KUKUI asserted a claim against the Company in
an action entitled KUKUI, Inc. v. EuroGas, Inc., Case No. H-972864
United States District for the Southern District of Texas, Houston
Division. KUKUI's claim is based upon an alleged breach of the
KUKUI 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 100,000 shares of Common Stock delivered to
KUKUI in connection with the settlement. In addition, Bishop
Estate, KUKUI's parent, has entered a claim for failure to
register the resale of shares of Common Stock subject to its
option to purchase up to 2,000,000 shares of Common Stock. The
Company has denied any liability and has filed a counterclaim
against KUKUI and Bishop's Estate for breach of contract.

In early December, EuroGas signed a settlement agreement with Kukui,
the Bishop Estate and the bankruptcy Trustee, which, if fully
performed, would resolve all claims made by Kukui and the bankruptcy
Trustee in the aforementioned litigation. That settlement, in part,
requires EuroGas to pay $900,000 over the next 12 months and issue
100,000 shares of registered common stock to the Bishop Estate by
June 30, 2000. Recently, the Trustee declared that certain conditions
precedent set forth in the settlement agreeement have not been
met by EuroGas and the Trustee does not intend to seek bankruptcy
court approval of the agreement. EuroGas is not evaluating what effect
this has on the agreement. In the event the settlement agreement
does not resolve the foregoing litigation, EuroGas intends to
vigorously defend the litigation.

In July 1999, an action was commenced by Randy Crawford styled
"Randy Crawford, PhD. P.E., Plaintiff, vs. EuroGas, Inc., Danube
International Petroleum Company, Ltd., Danube Acquisition Corp.
and Martin Schuepback, Defendant," in the State District Court,
Dallas County, Texas, Cause # DV 9805298. In this litigation,
Crawford asserts that the Defendants breached a service agreement
under which he was employed to provide consulting and engineering
services and that he is now owed $159,500 and the right to purchase
284,000 shares of common stock at the price of $1.50. EuroGas has
responded denying jurisdiction and intends to defend, if necessary.
A mediation has been scheduled with all the parties in early
January 2000.

On October 11, 1999, an action was filed against Eurogas entitled
"Fred L. Oliver. Petroleum Ventures of Texas, Inc. R.A. Morse and
R. A. Morse, Trustee, Plaintiffs vs. Eurogas, Inc. and Beaver
River Resources, Ltd.,Defendants" in the State District Court of
Dallas County, Texas, Cause #DV99-08032-A. In this action,
Plaintiffs assert that Eurogas breached an agreement by failing
to seek registration of certain restricted and unregistered
shares issued to Plaintiffs in connection with Eurogas'
acquisition of its interest in Beaver River Resources, Ltd. The
action seeks rescission of the agreement, or in the alternative,
damages, and includes claims for costs, attorneys fees and
interest. Eurogas has filed an answer denying the allegations
contained in the lawsuit.

For the 1992 year, the Kingdom of the Netherlands assessed a tax
against the Company's operating subsidiary, GlobeGas in the amount
of approximately $911,000 even though it had significant operating
losses. The amount fluxuates on the financial statements of the
Company due to adjustments in exchange ratios. At September 30,
1999, the income tax liability recorded in the Company's financial
statements was $735,030. The Company has appealed the assessment
and has proposed a settlement which would result in a reduction in
the tax to $42,000. Pending final resolution, a liability for the
total amount assessed will continue to be reflected in the Company's
financial statements.

<PAGE> 29

Market for Common Stock

The 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 under the symbols "EUGF" on the
Frankfurt Stock Exchange, "EUGS" on the Stuttgart Exchange, "EUGM"
on the Munich Stock Exchange and EUGH on the Hamburg Stock
Exchange. As of December 13, 1999, there were 86,830,838 shares
of Common Stock issued and outstanding, held by approximately 249
holders of record (2,000 estimated beneficial owners).

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

Quarter Ended High Bid Low Bid
-------------- -------- -------

Year Ended December 31, 1997
----------------------------
March 31, 1997 $ 6.75 $3.4375
June 30, 1997 12.50 4.375
September 30, 1997 10.6875 4.9375
December 31, 1997 7.625 3.75

Year Ended December 31, 1998
----------------------------
March 31, 1998 6.8125 3.9375
June 30, 1998 5.75 3.625
September 30, 1998 4.97 2.0625
December 31, 1998 2.25 1.1875

Year Ended December 31, 1999
----------------------------
March 31, 1999 2.50 1.0312
June 30, 1999 1.0938 .5469
September 30, 1999 .9375 .5469
December 31, 1999 (through .875 .5467
December 10, 1999)

The liquidity of the Common Stock may be limited, and the reported
price quotes may not be indicative of prices that could be
obtained in actual transactions. On December 10, 1999, the high
and low bids for the Common Stock on the OTC Bulletin Board market
were $ .5938 and $ .5625, respectively.

DIVIDENDS

No dividends have been paid on the Common Stock, and the Company
does not have retained earnings from which to pay dividends. The
Company accrued cumulative preferred dividends of $311,304 and
$423,530 in 1998 and 1997, respectively. Of this amount, $165,007
was paid in 1998 by the issuance of shares of Common Stock in
connection with the conversion of a portion of the preferred
stock. All cumulative dividends with respect to the Company's
preferred stock would be required to be paid prior to the Company
declaring or paying any dividend on the Common Stock. Even if the
Company 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.

<PAGE> 30

Certain Financial Data

The following statement of operations and balance sheet data were
derived from the consolidated financial statements of the Company.

The selected financial data below should be read in conjunction
with the consolidated financial statements of the Company and the
notes thereto included in this Prospectus and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS" set forth in this Prospectus.

Statement of Operations Data

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31
-------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

Net Sales $ 3,326,629 $ - $ 879,404 $ - $ 6,262,591 $ - $ -

Net Loss $ 9,099,336 $ 5,720,220 $11,024,180 $11,501,899 $ 6,262,591 $ 4,327,581 $ 3,699,439

Loss Applicable $10,131,015 $ 5,930,569 $11,925,429 $ 6,413,183 $4,327,581 $ 3,699,439
to common
shares

Loss per $ 0.12 $ 0.09 $ 0.22 $ 0.22 $ 0.16 $ 0.013
Common Share
</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data

At Septmeber 30, At December 31,
------------------------- ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets $62,148,918 $52,074,750 $65,334,387 $40,754,543 $15,902,139 $ 7,680,367 $ 7,599,962

Long-Term - 349,284 1,788,294 3,157,789 10,631,547 4,011,750 3,011,750

Cash Dividends - - - - - - -
per Common
Share
Obligations

</TABLE>

WHERE YOU CAN FIND MORE INFORMATION

The Company files annual, quarterly, and current reports, proxy
statements, and other information with the SEC. You may read and
copy any reports, statements, or other information that the
Company files at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference
Room. The SEC also maintains an Internet site
(http://www.sec.gov) that makes available to the public reports,
proxy statements, and other information regarding issuers, such as
the Company, that file electronically with the SEC.

In addition, the Company will provide, without charge, to each
person to whom this Prospectus is delivered, upon written or oral
request of any such person, a copy of any or all of the foregoing
documents (other than exhibits to such documents which are not
specifically incorporated by reference in such documents).
Please direct written requests for such copies to the Company at
942 East 7145 South, #101A, Midvale, Utah 84047, Attention: Hank
Blankenstein, Vice President. Telephone requests may be directed
to the office of the President at (801) 255-0862.

The Company also maintains an Internet Website at
http://www.eugs.com and also has available, for interested
shareholders, maps and other material concerning the Company's
activities.

<PAGE> 31

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS

General

The Company is engaged primarily in the acquisition of rights to
explore for and exploit oil, natural gas, coal bed methane gas and
mineral mining. The Company has also extended its business into
co-generation (power and heat) projects. The Company has acquired
interests in a number of large exploration concessions, for oil,
natural gas and coal bed methane gas, and is in various stages of
identifying industry partners, farming out exploration rights,
undertaking exploration drilling, and seeking to develop
production. The Company currently has several projects in various
stages of development, including a coal bed methane gas project in
Poland, a natural gas project and several additional undeveloped
concession areas in Slovakia, a natural gas project in the Sakha
Republic (a member of the Russian Federation located in eastern
Siberia) and an interest in a talc deposit in Slovakia. The
Company has at least seven joint venture projects in the Ukraine
to explore for and exploit oil, natural gas and coal bed methane
gas with various Ukrainian State and private companies. The
Company has also created a consortium with the largest power
generation company in Great Britain, and with a large utility
company in Germany, to develop a co-generation power project in
Western Poland.

The Company has also acquired holdings in several oil and natural
gas projects in Canada. One acquisition has given the Company a
majority interest in a full-service oil and gas producing company.
The other project is a joint venture with a major oil and gas
company to reclaim one of Canada's largest natural gas fields.

The Company's principal assets consist of both 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 Company-owned
equipment. Since the Company has limited proven reserves and
established production, most of its holdings have not been
amortized. In the event that the Company is 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. The Company
periodically evaluates its 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.

Recent Developments

Funding Activities. On November 4, 1999, the Company sold 1,800
shares of Series C Preferred Stock, resulting in net proceeds to
the Company of approximately $1,651,500. At September 30, 1999,
the Company had approximately $2.1 million in cash and cash
equivalents and $7.8 million in negative working capital.

Capital Expenditures. Effective during October 1998, the Company
completed its acquisition of additional shares of capital stock
of a Canadian oil and gas development and production company,
giving the Company an ownership interest in excess of 50% of the
outstanding shares of the Canadian company. In October 1998,
the Company purchased 31% of the outstanding shares of capital
stock of Big Horn Resources Ltd., of Calgary, Alberta, Canada
("Big Horn"). Also in October 1998, the Company verbally agreed
with other Big Horn shareholders to acquire additional Big Horn
shares. Effective October 1998, the Company completed its
acquisition of the additional Big Horn shares by execution of
promissory notes and the cancellation of a note receivable,
giving the Company an ownership interest in excess of 50% of
the outstanding shares of Big Horn capital stock. Big Horn is a
full-service producer of oil and natural gas, producing the
equivalent of approximately 1,200 barrels of oil a day, with
proven reserves of approximately 1.9 million barrels of equivalent
oil and with a net present value of approximately $6.4 million
as of December 31, 1998, based on a 10% valuation rate. The total
cost of the acquisition of Big Horn by the Company was $7,593,484.
Because of the temporary decline in oil prices, the acquisition
price paid by the Company reflects a premium over the Company's
proportionate share of the book value of Big Horn.

<PAGE> 32

Outlook

In the past, the Company has focused its resources on pre-exploration
or early-exploration stage natural gas, coal bed methane gas, and
other hydrocarbon projects with little short-term revenue potential.
The Company believes that its investment in such early-stage projects will
prove profitable in the long-run and may continue to invest in
additional early-stage projects from time to time in the future.
Nonetheless, present management believes that, in order to balance
out its holdings, the focus of the Company's acquisition,
investment and development strategy should be on hydrocarbon
projects that have the potential to generate revenues within 1-5
years of the date of investment and is actively seeking such
investments.

Results of Operations-Nine Month Ended September 30, 1999 and 1998

The following table sets forth consolidated income statement data
and other selected operating data for the nine months ended
September 30, 1999 and 1998, respectively.

For the Nine Months Ended
September 30,
---------------------------
Revenues
1999 1998
---------- -----------

Oil and Gas Sales $ 3,326,629 -
Total Revenues 4,426,629 -

Operating Expenses

Oil and gas production 990,539 -
General and
Administrative 7,913,770 6,205,134

Depreciation, depletion
and amortization 1,428,166 19,066

Total Operating Expenses 10,332,475 6,224,200

Other Income (Expense)

Interest Income 190,051 857,615
Foreign currency
exchange gains
(losses), net 108,492 (67,507)

Realized loss on sale
and impairment of
securities (1,637,694) -

Interest Expense (405,731) (286,128)

Other Income (Expense)
Net (1,744,882) 503,980

Minority interest in
income of subsidiary (348,608) -

Net Loss (9,099,336) (5,720,220)

Loss Applicable to Common
Shares (10,131,015) (5,930,569)

<PAGE> 33

Revenues. Through September 1998, the Company had not generated
any revenues from oil and gas sales. As a result of the Company's
acquisition of the controlling interest in Big Horn, the Company's
results of operations for the nine months ended September 30, 1999
reflect oil and gas sales of approximately $3,326,629. For the
nine months ended September 30, 1998, the Company had no revenues.

Operating Expenses. General and administrative expenses were
$7,913,770 for the nine months ended September 30, 1999, compared
to $6,205,134 for the nine months ended September 30, 1998, an
increase of approximately 27%. The increase was primarily
attributable to increased personnel and administrative expenses,
additional costs associated with the closure of several offices
and significant expenses associated with the Slovakian projects.
Depreciation, depletion and amortization expenses were $1,428,166
for the nine months ended September 30, 1999, compared to $19,066
for the nine months ended September 30, 1998. The increase of
$1,409,100 was attributable to the Big Horn properties that were
amortized during the nine months ended September 30, 1999. Oil
and gas production expenses were $990,539 for the nine months
ended September 30, 1999, reflecting Big Horn production expenses.
The Company had no production expenses during the nine months
ended September 30, 1998.

Net Loss. The Company incurred a net loss of approximately
$9,099,336 for the nine months ended September 30, 1999,
compared to a net loss of $5,720,220 for the nine moths ended
September 30, 1998. The losses for both periods resulted
primarily from the absence of revenues, together with the
Company's ongoing operating expenses. The increase of $3,379,116
in net loss between the two nine-month periods was attributable
primarily to the Company realizing losses on securities in several
mineral property investments, a significant accrual for a
settlement of ongoing litigation and increased costs in the
administrative area. As indicated above, the Company is subject
to fluctuations in currency exchange rates which may result in
recognition in significant gains or losses during any period. The
Company recognized $108,492 in gains and $67,507 in losses as a
result of currency transactions during the nine months ended
September 30, 1999 and 1998, respectively. The net change in
foreign currency translation adjustment, which is a component of
accumulated other comprehensive loss, was a loss of $1,486,689 and
$160,309 for the nine months ended September 30, 1999 and 1998,
respectively.

<PAGE> 34

RESULTS OF OPERATIONS-1998, 1997, AND 1996 FISCAL YEARS

The following table sets forth consolidated income statement data
and other selected operating data for the years ended December 31,
1998, 1997 and 1996.

Revenues For the Years Ended December 31,
-------------------------------------------
1998 1997 1996
----------- ------------ -----------
Oil and Gas $ 879,404 $ - $ -

Total Revenues 879,404 - -

Operating Expenses

Oil and gas production 305,009 - -

General and administra-
tive 7,804,401 6,716,635 4,739,380

Depreciation, depletion
and amortization 293,955 25,637 132,459

Impairment of mineral
interests & equipment 3,512,792 1,972,612 -

Total Operating
Expenses 11,916,157 8,714,614 4,871,839

Other Income (Expense)

Interest Income 593,570 517,845 18,588
Interest Expense (465,371) (3,680,090) (1,057,039)
Foreign currency exchange
gains (losses), net (130,419) 331,837 (401,141)
Other Income 152,776 43,123 48,840

Other Expense, Net 150,556 (2,787,285) (1,390,752)

Minority interest in
earnings of subsidiary 137,983 - -

Net Loss (11,024,180) (11,501,899) (6,262,591)

Revenues. Prior to 1998, the Company had not generated any
revenues from oil and gas sales. As a result of the Company's
acquisition of the controlling interest in Big Horn, the Company's
results of operations for 1998 reflect oil and gas sales of
approximately $879,404. For the 1997 and 1996 years, the only
material revenues received by the Company resulted from a one-time
sale of mineral interest and equipment in 1997, resulting in
revenues of approximately $500,000.

Operating Expenses. Operating expenses include general and
administrative expenses, depreciation and amortization, cost of
mineral interests and equipment and impairment of mineral
interests and equipment. General and administrative expenses were
$7,804,401 for 1998, compared to $6,716,365 for 1997, an increase
of 16 %. General and administrative expenses for 1997 reflected
an increase of 42 % from 1996 general and administrative expenses
of $4,739,380. The principal factors that contributed to the
increase from 1997 to 1998 were legal expenses incurred in
connection with sales of registered and unregistered securities,
ongoing securities compliance, litigation issues, additional
consulting fees, hiring of additional staff members and opening of
new offices. The increase from 1996 to 1997 was due primarily to
payment of accrued and unpaid salaries to member of the staff and
certain consultants, hiring of new staff members and the
engagement of additional consultants. Depreciation and
amortization expenses were $293,955 for 1998, compared to $25,637
for 1997. During 1998 there was a significant increase in
properties that were amortized as compared to 1997. During 1998
the Company realized a significant impairment mainly due to the
acquisition of Big

<PAGE> 35

Horn. The interest was bought a fair market value, but due to
low oil prices for the last eighteen months the actual book value
of the investment was lower than fair market value, requiring the
Company to take an impairment charge. Under the full-cost method
by which the Company accounts for its mineral interests in
properties, costs of unproven properties are assessed periodically
and any resulting provision for impairment would normally be charged
to the proven property base. Because the Company has limited proven
properties, if impairment charges are required, a portion of those
charges may be charged to operations. The impact of such reassessment
and resulting impairment charges could be significant during any
particular period.

Income Taxes. Historically, the Company has not been required to
pay income taxes, due to the Company's absence of net profits.
For future years, the Company anticipates that it will be able to
utilize a substantial portion of its accumulated deficit, which
was approximately $46,082,787 as of December 31, 1998, to offset
profits, if and when achieved, resulting in a reduction in income
taxes payable.

Net Loss. The Company incurred net losses of approximately $11.0
million, $11.5 million and $6.3 million for the years ended
December 31, 1998, 1997 and 1996, respectively. These losses were
due in large part to the absence of revenues, combined with
continued expansion of the Company's activities, primarily as a
result of acquisitions, the growth of the Company's administrative
expenses . The Company did see a limited amount of revenue from
one of its projects in 1998.

Due to the highly inflationary economies of the Eastern European
countries in which the Company operates, the Company is subject to
extreme fluctuations in currency exchange rates that can result in
the recognition of significant gains or losses during any period.
Approximately ($130,419), $332,000, and ($401,000) in gains
(losses) were recognized as a result of currency transactions in
the three years ended December 31, 1998, 1997, and 1996,
respectively. The Company had a cumulative foreign currency
translation adjustment of ($457,678) at December 31, 1998. The
Company does not currently employ any hedging techniques to
protect against the risk of currency fluctuations.

CAPITAL AND LIQUIDITY

The Company had an accumulated deficit of $56,213,802 at September
30, 1999, substantially all of which has been funded out of
proceeds received from the issuance of stock and the incurrence of
payables. At September 30, 1999, the Company had total current
assets of approximately $8.3 million and total current liabilities
of approximately $16.1 million, resulting in negative working
capital of approximately $7.8 million. As of September 30, 1999,
the Company's balance sheet reflected approximately $35 million in
mineral interests in unproven mineral properties, net of valuation
allowance. These properties are held under licenses or
concessions that contain specific drilling or other exploration
commitments and that expire within one to three years, unless the
concession or license authority grants an extension or a new
concession license, of which there can be no assurance. If the
Company is unable to establish production or resources on these
properties, is unable to obtain any necessary future licenses or
extensions, or is unable to meet its financial commitments with
respect to these properties, it could be forced to write off the
carrying value of the applicable property.

Throughout its existence, the Company has relied on cash from
financing activities to provide the funds required for
acquisitions and operating activities. The Company's financing
activities provided net cash of approximately $6.0 million and
$7.4 million during the nine months ended September 30, 1999 and
1998, respectively. Such net cash has been used principally to
fund cumulative net losses of approximately $9 million and $5.7
million, respectively. During the nine months ended September
30, 1999 and 1998, the Company's operating activities used net
cash of approximately $4.8 million and $6.9 million, respectively.
A portion of the Company's cash was used in acquiring mineral
interests, property and equipment, either directly or indirectly
through the acquisition of subsidiaries, with approximately $6.4
million and $5.8 million used in investing activities for the nine
months ended September 30, 1999 and 1998, respectively, of which
approximately $4.6 million and $4.1 million, respectively, was
used in acquiring mineral interests.

<PAGE> 36

While the Company had cash of approximately $2.0 million at
September 30, 1999, it has substantial financial commitments with
respect to exploration and drilling obligations related to the
mineral properties in which it has an interest. Many of the
Company's 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, the Company has relied principally on cash provided
from equity and debt transactions to meet its cash requirements.
While the Company currently has sufficient cash to meet its
short-term needs, it will require additional cash, either from
financing transactions or operating activities, to meet its
longer-term needs. There can be no assurance that the Company
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 the Company on reasonable terms. If the Company is
able to obtain additional financing or structure strategic
relationships in order to fund existing or future projects,
existing shareholders will likely continue experience further
dilution of their percentage ownership of the Company.

If the Company is unable to establish production or reserves
sufficient to justify the carrying value of its assets or to
obtain the necessary funding to meet its short and long-term
obligations or to fund its 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 the Company's consolidated financial
statements do not provide for the effect of inflation on the
Company's operations or its 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. The
Company's 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. Due to inflationary problems in Eastern
Europe reflected in currency exchange losses, the Company has seen
losses on its assets values in those countries.

Year 2000 Issues

General. The Company is actively engaged in assessing and
correcting potential year 2000 ("Y2K") information system
problems. In short, the Y2K problem is a result of information
technology systems being designed to recognize the year portion of
a date as two rather then four digits, which means that years
coded "00" may be recognized as the year 1900, rather than the
year 2000. As a result, certain hardware and software products
may not properly function or may fail beginning in year 2000.

During 1998, the Company initiated an information system
implementation project (the "Project"), which affects nearly every
aspect of the Company's U.S. operations. In an effort to address
compliance issues, the scope of the Project was expanded to ensure
Y2K compliance for newly acquired software and hardware. The
Project has two significant phases that are designed to improve
both operating processes and information systems capabilities.

The first phase of the Project included hardware and software for
the Company's U.S. financial reporting operations. During 1998,
phase one was completed with hardware and software that has been
tested and certified as Y2K compliant. Phase two focused on the
Company's offshore financial reporting systems. In September,
1999, the Company received confirmation from its only offshore
service provider that the Company's offshore financial reporting
systems are Y2K compliant.

State of Readiness. The Company's information systems consist
principally of its financial system. The Company's financial
system includes general ledger, accounts payable, sales and use
tax calculations, payroll and human resources applications. Phase
one of the Project provided systems that are Y2K compliant for the
general ledger, accounts payable and payroll.

<PAGE> 37

The Company's office support system includes network hardware and
operating systems, desktop and laptop computers and servers. The
Company is in the process of evaluating Y2K compliance for these
systems and has identified potential compliance issues primarily
related to imbedded time clocks. However, since the majority of
the Company's hardware has been replaced or upgraded over the past
two years, critical systems compliance is not expected to be a
major issue.

Costs to Address Y2K Issues. As of September 30, 1999, the
Company had spent $50,000 on hardware and $25,000 for software in
connection with the Project.

Risks of the Company's Y2K Issues. The Company anticipates that
the risks related to its information and non-information systems
will be mitigated by current efforts being made in conjunction
with the Project, as well as ongoing assessment and correction
programs. However, the primary Y2K risk to the Company's
operations is service disruption from third-party providers that
supply telephone, electrical, banking, and financial reporting
services. Any disruption of these critical services would hinder
the Company's ability to operate. Therefore, efforts are
currently under way to obtain Y2K compliance certification from
the Company's major service providers. Most of the Company's
third-party joint venture organizations are outside of the U.S.,
particularly in eastern Europe. The Company has very little
control, other than awareness, over these organizations. Concern
about potential problems has been raised, but commitment to
compliance is beyond the Company's control.

Contingency Plans. The Company has prepared documentation that
could be used in the event of system and service disruption.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company conducts business in many foreign currencies. As
a result, it is subject to foreign currency exchange rate risk due
to effects that foreign exchange rate movements of those
currencies have on the Company's costs and on the cash flows which
it receives from its foreign operations. The Company believes that
it currently has no other material market risk exposure. To date,
the Company has addressed its foreign currency exchange rate risks
principally by maintaining its liquid assets in U.S. Dollars, in
interest-bearing accounts, until payments in foreign currency are
required, but does not reduce this risk by utilizing hedging
activities.

<PAGE> 38

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is the name and age of each director and executive
officer director of the Company, together with all positions and
offices of the Company held by each and the term of office and the
period during which each has served:

Name Age Positions with the Co. Director Since
---------------------- ---- ---------------------- --------------
Karl Arleth 50 President and Director April 1999

Hank Blankenstein 57 Vice-President,
Treasurer and Director December 1995
Director

Dr. Gregory P Fontanta 39 Direcvtor January 1996

Dr. Hans Fischer 53 Director January 1996

Rudolph Heinz 58 Director June 1999

BIOGRAPHICAL INFORMATION

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

Karl Arleth is the President and a director of EuroGas. Prior to
joining EuroGas, Mr. Arleth served as a Director of Azerbaijan
International Operating Company (AIOC) shareholding for the
newly-formed BP Amoco p.l.c. from January 1998 to April 1999. In
this role, Mr. Arleth chaired the shareholder board of AIOC, and
an international consortium of 11 companies engaged in the
development and transportation of oil from Azeri-Chirag-Gunashli
offshore field complex in Azerbaijan. Previously, from January
1998 until January 1999, Mr. Arleth was President of Amoco Caspian
Se Petroleum Limited in Baku, Azerbaijan. From January 1997 until
January 1998, he was Director of Strategic Planning for Amoco
Corporation Worldwide Exploration and Production Sector in
Chicago. From 1992 until 1997, Mr. Arleth was President of Amoco
Poland Limited in Warsaw, Poland, where he was responsible for oil
and gas exploration and production projects as well as business
development activities that focused on natural gas transmission,
distribution, storage and electric power generation. As a result
of EuroGas' acquisition of a controlling interest in Big Horn, Mr.
Arleth and Mr. Blankenstein have served as directors of Big Horn
since July 1999.

Hank Blankenstein is Vice President, Treasurer and a director of
EuroGas. In addition to his service as a director since December
1995, Mr. Blankenstein has served as Vice President and Treasurer
since 1996. Mr. Blankenstein has had over 30 years experience in
various levels of management positions. He served as an
administrative and financial officer for American Micro Systems
and National Semiconductor, several large semiconductor
operations, from 1973 to 1985. Prior to that, he served in a
number of operational positions for high-tech industry companies,
having engineering production supervising responsibilities, in
charge of a 400-person division. He has been involved in several
high-tech start-up situations, serving in senior management
positions. He holds a Bachelor of Science degree in Finance and
Banking from Brigham Young University that was awarded in 1966.
As a result of EuroGas' acquisition of a controlling interest in
Big Horn, Mr. Arleth and Mr. Blankenstein have served as directors
of Big Horn since July 1999.

Dr. Gregory P. Fontana is a director of EuroGas. He is currently
an attending cardiothoracic surgeon at Brotman Medical Center and
Cedars-Sinai Medical Center in California. He received his M.D.
in 1984 at the University of California followed by ten years of
postgraduate training at Duke University and University of
California at Los Angeles. Some of his academic appointments
include Clinical Fellow in Pediatric Cardiac Surgery at Harvard

<PAGE> 39

Medical School and Clinical Assistant Professor of Surgery at UCLA
School of Medicine and he has received several research grants,
including a National Research Service Award and Minimally-Invasive
Cardiac Surgery Grant. He belongs to several professional
organizations, including the American Heart Association, and has
authored numerous scientific presentations and bibliographies. He
is currently a consultant to Heartport, Inc., Redwood City,
California.

Dr. Hans Fischer has served as a director of EuroGas since
January 1996. He is currently Professor of Radiology at the
University of California, Los Angeles, Harbor-UCLA Medical Center
where he has been on the faculty since 1992. He has been a chair,
member, and designated alternate on Research, Clinical Radiology,
Quality Assurance and Ambulatory Care Committees for Harbor-UCLA
Medical Center since 1990. He trained at Leibniz-Gymnasium,
Dortmund West Germany, School of Medicine, University of Muenster
West Germany and School of Sociology, University of Muenster West
Germany. He received his M.D. in 1971 and Ph.D. in 1985 from
University of Muenster.

Rudoph Heinz has served as a director of EuroGas since June 14,
1999. Mr. Heinz presently serves as the General Manager of the
German Federation of Money Managers, a position he has held since
May 1997. Prior to becoming an independent money manager and
Independent Financial Advisor, Mr. Heinz was manager of the
securities department for the Frankfurt based BHF Bank from April
1990 until June 1992 and was also responsible for that bank's
United States, Japan, and United Kingdom Subsidiaries. From 1983
until 1990, Mr. Heinz was the sole General Manager of DB Capital
Management GmbH, a Deutsche Bank subsidiary with operations in
Germany, United States, Japan and the United Kingdom.

KEY CONSULTANTS AND EMPLOYEES

The following paragraphs sets forth brief biographical information
for certain of the Company's key employees:

Andrew K. Andraczke has been Vice President, Secretary, and a
member of the management committee of Pol-Tex since 1992, and is
responsible for business development and coordination of
administrative, legal, and political aspects of the Pol-Tex
venture. Mr. Andraczke also directs computer operations and
system support for the venture's exploration and production
activities. Mr. Andraczke holds B.Sc., M.Sc., and Ph.D degrees in
computer science and applications from the Computer Science
Institute of Polytechnical University in Warsaw where he also
taught as an Associate Professor. He served as the General
Manager of the Computing Center of the Center for Geological
Research in the Central Office of Geology (Ministry of Geology)
from 1972 to 1976, where he developed and implemented Poland's
first general database of geological and mineral resources of
Poland. He also implemented computer mapping systems, oil and gas
reservoir simulations, and production control for mining
operations. From 1976 to 1982, he worked for several oil and gas
and mining firms, including OTC Oklahoma Production in Tulsa,
Kansas Oil Consolidated in Tulsa, John W. Mecom Company in
Houston, InteResources Group, Inc. in Houston, and British Sulphur
Corporation in London, performing reservoir modeling of secondary
and tertiary oil reservoirs, inorganic polymer floods, and
underground coal gasification projects. During this time, he also
developed data acquisition and reserve balance systems for mines
in the U. S., Mexico, and Egypt. Mr. Andraczke joined Oil
Exploration and Production Company in Houston in 1982 and served
as an internal consultant and management advisor on computer
applications and emerging technologies until 1987.

Dr. F. Horvath is currently a Professor at the Eotvos University
in Budapest, a position he has held for more than six years. Dr.
Horvath now acts as the Company's chief geological advisor. He is
particularly familiar with many of the formations in which the
Company has or is planning to obtain concessions. At Eotvos
University, he specializes in instructing students in geophysics
and geology for general and applied geophysics, basin research,
petroleum exploration, and seismic interpretation. His primary
field of research has been the tectonic interpretation of
geological and geophysical data, particularly in the evolution of
sedimentary basins and the exploration for hydrocarbon resources.
He is the principal investigator of eight major research projects
and has worked with leading academic and industrial experts in
Europe and the Americas. His contribution to earth sciences has
been acknowledged by a number of awards, including an honorary
fellowship in the European Union of Geosciences, Academia
Europaea, and the Geological Society of America.

<PAGE> 40

FAMILY RELATIONSHIPS

Dr. Reinhard Rauball, the former Chairman of the Board of
Directors, and Wolfgang Rauball, formerly an independent
consultant to the Company, are brothers. Wolfgang Rauball was
instrumental the acquisition of the concessions in Poland, the
later acquisition of Danube, which holds concessions in Slovakia,
the acquisition of EG and the Yakutia Concession, Ukrainian joint
ventures, the acquisition of control of Big Horn Resources, the
participation in the British Columbia project, the participation
of RWE-DEA in the Ukraine, and the negotiations regarding the
participation of National Power, VEW, EEG, Polish Oil and Gas in
the matter relating to the proposed power plant in western Poland.
From time to time, the Rauballs, principally Wolfgang Rauball,
have also arranged for equity and debt financing for the Company
through parties with whom they have previous business and personal
relationships and have made loans to the Company. Dr. Reinhard
Rauball resigned from all of his positions with the Company on
February 18, 1999. Mr. Wolfgang Rauball resigned from all
position he has held with the Company and its subsidiaries on June
30, 1999.

EXECUTIVE COMPENSATION

The compensation of the Company's chief executive officer and the
other executive officers of the Company whose total cash
compensation for the 1998 fiscal year exceeded $100,000 (the
"Named Officers") is shown on the following pages in two tables
and discussed in a compensation report of the Board of Directors.

SUMMARY COMPENSATION TABLE
The following table sets forth, for the three most recent fiscal
years of the Company, the compensation paid to the Named Officers.

<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------
Annual Compensation Awards Payouts
---------------------------- ------------- -------
Other Restri- All
Annual cted Opt- LTI Other
Compen- Stock ions/ Pay Compen-
Name and Principal Salary Bonus sation Awards SARs outs sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------- ---- -------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Paul Hinterthur (1) 1998 $200,003 0 0 0 0 0 0
President, CEO and 1997 294,100 0 0 0 0 0 0
Director 1996 27,000 0 0 0 200,000 0 0

Reinhard Rauball, (2) 1998 $245,000 0 0 0 0 0 0
Chairman of the 1997 874,120 (3) 0 0 0 0 0 0
Board and Director 1996 33,000 0 0 0 250,000 0 0

Hank Blankenstein, 1998 $198,462 0 0 0 0 0 0
Vice President and 1997 300,000 0 0 0 0 0 0
Treasurer 1996 84,000 0 0 0 200,000 0 0

</TABLE>

(1) Paul Hinterthur died in May 1999.

(2) Dr. Rauball resigned as Chairman of the Board and as a
director effective February 18, 1999.

(3) Dr. Rauball was paid for services rendered to the
Company, that had not been reimbursed to him, beginning in
August of 1994 to the present.

OPTION GRANTS IN LAST FISCAL YEAR

The Company did not grant to Named Officers any options to acquire
shares of Common Stock during 1998. The Company has not granted
any stock appreciation rights to the Named Officers.

<PAGE> 41

AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND YEAR END
OPTION VALUES

The following table sets forth the number of unexercised options
to acquire shares of Common Stock held on December 31, 1998 and
the aggregate value of such options held by the Named Officers.
The Named Officers did not exercise options to acquire shares of
Common Stock during 1998. As of December 31, 1998, the Company
had not granted any stock appreciation rights to any of the Named
Officers.

Unexer- Unexer-
Name Exercisable cisable Exercisable cisable
-------------------- --------------- --------- ----------- -------
Paul Hinterthur (1) 200,000 - $12,500 -

Reinhard Rauball 250,000 - 15,625 -

Hank Blankenstein 200,000 - 12,500 -

(1) Paul Hinterthur died in May 1999.

(2) Reflects the difference between the exercise price of
the unexercised options and the market value of shares of
Common Stock of December 31, 1998. The last transaction of
the Common Stock on December 31, 1998, the last trading date
of the Company's fiscal year, was $1.5469 per share.

EXECUTIVE EMPLOYMENT AND CONSULTING ARRANGEMENTS

The Company has relied heavily on consultants to identify
potential projects, to negotiate the terms of acquisitions, to
develop relationships with governmental regulators and industry
partners, and to complete business and financing transactions. As
a result of services in these areas, the Company paid $600,000 in
1998, $1,260,253 in 1997 and $479,166 in 1996 to Wolfgang Rauball,
the brother of Reinhard Rauball, the former Chairman of the Board
of the Company. The Company did not make any payments to Wolfgang
Rauball in 1995. The Company also paid $509,467 in 1997, and
$449,600 in 1996 to Armando Ulrich. The Company also paid
$240,000 in 1998, and $273,113 during 1997 to Andrew K. Andraczke,
a key employee in Poland who does not perform executive level
functions. If the Company does not continue to make significant
acquisitions and as revenues are developed, the Company
anticipates that it will rely more on the services of employees
and the amounts paid to consultants will be reduced.

COMPENSATION OF DIRECTORS

The Company compensated its outside directors for service on the
Board of Directors by payment of a monthly fee of $5,000 and
reimbursement of expenses incurred in attending board meetings.
This has been reduced to $2500 per month beginning in 1999. The
Company does not separately compensate its board members who are
also employees of the Company for their service on the board.

COMPENSATION REPORT OF THE BOARD OF DIRECTORS

General.

Management compensation is overseen by the Board of Directors.
For the year ended December 31, 1998, the Board had not appointed
an independent compensation committee. As of December 31, 1998,
the Board of Directors consisted of two members of executive
management, Paul Hinterthur and Hank Blankenstein, and two outside
directors who are not employees of the Company. In July 1999, the
Board established a compensation committee comprised of Dr.
Gregory P. Fontana, Dr. Hans Fischer and Rudolph Heinz. The
following compensation report was prepared by the members of the
Board serving as of March 31, 1999.

Compensation Objectives.

In determining the amount of compensation for the Company's
executive officers, the Board of Directors is guided by several
factors. Because the Company has very few employees, compensation
practices are flexible in response to the needs and talents of the
individual officer and are geared toward rewarding contributions
that

<PAGE> 42

enhance shareholder value. Historically, the Company has
compensated senior management based on the perceived contribution
to the development of the Company's operations. This compensation
has consisted principally of salaries believed to reflect the
contributions of the respective officers. In addition, because
the Company has only recently begun to generate revenues from
operations and has attempted to preserve capital for development
of the Company's business and operations, the Company has used
stock options as a form of compensation for executive officers.
The use of stock options is designed to align the interests of the
executive officers with the long-term interests of the Company and
to attract and retain talented employees who can enhance the
Company's value. Although certain members of the Board of
Directors are also executive officers, none participates in the
determination of his own compensation.

Compensation Components.

The Company's compensation of its executive officers consists of
three components: base salary, bonuses and long-term incentive
awards in the form of stock options. The Board of Directors
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 the Company 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 the comparable size and at a similar stage of
development, to the extent known; and (iv) the capital position
and needs of the Company. The Board of Directors does not assign
any specific weights to these factors in determining salaries. It
does, however, attempt to maintain base salaries as low as
possible, consistent with the needs and status of the executive
officers, in order to preserve capital for future growth and
development.

From time to time, the Company may also compensate its executive
officers in the form of bonuses. Because the Company is presently
in the early stage of its development and does 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 of Directors in the
near term will be based upon its subjective evaluation of each
individual's contribution to the Company. 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, 1996, 1997 and 1998, the Board of Directors 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 the Company's compensation structure
consists of the grant of stock options to compensate executive
officers and other key employees. In 1996, the Company adopted
the 1996 Stock Option and Award Plan, which is designed to give
each option holder an interest in preserving and maximizing
shareholder value in the long term, to reward option holders for
past performance and to give option holders the incentive to
remain with the Company over an extended period. Individual
grants are determined on the basis of the Board's assessment of an
individual's current and expected future performance, level of
responsibilities, and the importance of his or her position with,
and contribution to, the Company. In the year ended December 31,
1996, the Board awarded options to purchase 200,000 shares of
Common Stock, 250,000 shares of Common Stock and 200,000 shares of
Common Stock to Mr. Hinterthur, Dr. Rauball and Mr. Blankenstein,
respectively.

Chief Executive Compensation.

Based upon the Board's subjective impression of the salaries of
presidents or chief executive officers of similarly situated
companies (both in and outside the industry), the Company's
progress in developing its interests, properties and operations
and exploiting its assets and the Board's subjective assessment of
the contributions of Mr. Hinterthur, the Board of Directors
determined to pay Mr. Hinterthur a base salary of approximately
$200,000 for the year ended December 31, 1998. Consistent with
the Board's desire to preserve capital for future growth and
development, the Board elected not to pay a bonus to Mr.
Hinterthur or any other executive officer for the 1998 fiscal
year. The Board did not grant any options under the stock option
plan during the 1998 fiscal year to Mr. Hinterthur or any other
executive officer. Mr. Hinterthur passed away in May 1999.

<PAGE> 43

Use of Consultants.

The Company anticipates that it will continue to rely on both
executive management and outside consultants in connection with
the acquisition of additional projects and the initial development
of existing projects. However, the Company anticipates that if it
is able to establish ongoing revenues from production, it will
retain management personnel as employees of the Company and
compensate them on a salary basis, based on comparable
compensation packages offered by employers within the Company's
general industry and geographical area.

Respectfully submitted as of March 31, 1999,

Paul Hinterthur
Hank Blankenstein
Dr. Gregory P. Fontana
Dr. Hans Fischer

<PAGE> 44

Performance Graph

The following graph shows a comparison of cumulative shareholder
return for the Common Stock for the period beginning August 3,
1994 (the date the Common Stock was first quoted in the
over-the-counter market) and ending December 31, 1998, as well as
the cumulative total return for the NASDAQ Composite Index and the
Howard Weil, Blumberg Oilfield Service and Manufacturing Index.
The Peer Group Index is a price-weighted composite index comprised
of the cumulative shareholder return for forty-seven companies
involved in oilfield services.

The performance graph assumes that $100 was invested at the market
close on August 3, 1994 and that dividends, if any, were
reinvested for all companies, including those on the NASDAQ
Composite Index and the Peer Group Index.

[GRAPH]

<TABLE>
<CAPTION>
Total Return Analysis 8/3/94 13/30/94 12/29/95 12/31/96 12/31/97 12/31/98
--------------------- -------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
EuroGas $ 100.00 $ 703.13 $ 364.58 $ 846.36 $ 1,406.25 $ 325.52
HW BBG Oilfield Svc. & $ 100.00 $ 93.76 $ 137.19 $ 221.87 $ 337.53 $ 168.26
Nasdaq Composite $ 100.00 $ 103.90 $ 146.48 $ 180.22 $ 220.13 $ 308.60
----------------------------------------------------------------------------------------
</TABLE>
The figures for EuroGas reflect a 24-1 reverse stock split of its common
shares effective 9/6/94.

<PAGE> 45

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of November 24, 1999,
information with respect to Common Stock owned beneficially by
each Director, by the Named Officers, by all Officers and
Directors as a group and by each person known by the Company to be
a beneficial owner of more than 5% of the outstanding Common
Stock. Except as otherwise indicated below, each person named has
sole voting and investment power with respect to the shares
indicated.

Name of Person or Group (1) Common Stock Options(2) Percent(3)
- --------------------------- ------------ ---------- ----------

Principal Shareholder:

Finance Credit and 2,175,833 2,220,000 4.9%
Development Corporation
"Chateau Amiral"
Bloc B-42, Boulevard
d'Italic
MC 9800 Monaco

Officers, Directors, and
Controlling Persons:

Karl Arleth - 1,000,000 1.2%

Dr Greogry P. Fontana - 100,000 *

Dr Hans Fischer - 100,000 *

Hank Blankenstein - 200,000 *

Rudolph Heinz - - -
--------- --------- ----
All Officers and Directors
as a Group (5 Persons) - 1,400,000 1.6%

_________________________
* Represents less than 1% of the issued and outstanding
Common Stock.

(1) Except as otherwise indicated, to the best knowledge of
the Company, all stock is owned beneficially and of record
by the listed shareholder, and each shareholder has sole
voting and investment power.

(2) Represents options exercisable within 60 days of
December 13, 1999 held by such individual or entity.

(3) The percentage indicated represents the number of
shares of Common Stock and options exercisable within 60
days held by the indicated shareholder divided by the sum of
(a) the number of shares subject to options exercisable by
such shareholder within 60 days and (b) 86,830,838, which
is the number of shares of Common Stock issued and
outstanding as of December 13, 1999.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES

The Articles of Incorporation of the Company provide for the
indemnification of the officers and directors to the full extent
permitted by Utah corporate law. Such indemnification includes
the advancement of costs and expenses and extends to all matters,
except those in which there has been intentional misconduct,
fraud, a knowing violation of law, or the payment of dividends in
violation of the Utah Revised Business Corporation Act. Such
indemnification could include indemnification for liabilities
under the provisions of the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions,
the registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as express in the Act and is therefore unenforceable.

<PAGE> 46

INDEX TO FINANCIAL STATEMENTS

Page
1. EuroGas, Inc. and Subsidiaries

Report of Independent Certified Public
Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Balance Sheets-September 30, 1999
(Unaudited) and December 31, 1998 and 1997 . . . . . . . . . . . F-3

Consolidated Statements of Operations for the
Nine Months Ended September 30, 1999 and 1998 (Unaudited),
and for the Years Ended December 31, 1998, 1997 and 1996 . . . . F-4

Consolidated Statements of Stockholders' Equity
(Deficit) for the Years Ended December 31, 1996, 1997
and 1998 and for the Nine Months Ended September 30, 1999
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 (Unaudited), and for the
Years Ended December 31, 1998, 1997 and 1996 . . . . . . . . . . F-7

Notes to Consolidated Financial Statements . . . . . . . . . . . F-9

Supplemental Information on Oil and Gas Producing
Activities (Unaudited) . . . . . . . . . . . . . . . . . . . . . F-27

2. Unaudited Pro Forma Condensed Consolidated Financial Statement

Unaudited Pro Forma Condensed Consolidated Statement
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . F-30

Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1998. . . . . . . . . F-31

Notes to the Unaudited Pro Forma Condensed Consolidated
Statement of Operations . . . . . . . . . . . . . . . . . . . . F-32

3. Big Horn Resources Ltd.

Auditors' Report to the Directors. . . . . . . . . . . . . . . . F-33

Consolidated Balance Sheets--December 31, 1998 and 1997. . . . . F-34

Consolidated Statements of Earnings and Deficit
for the Years Ended December 31, 1998 and 1997 . . . . . . . . . F-35

Consolidated Statements of Changes in Financial Position
for the Years Ended December 31, 1998 and 1997 . . . . . . . . . F-36

Notes to Consolidated Financial Statements for the Years
Ended December 31, 1998 and 1997 . . . . . . . . . . . . . . . . F-37

<PAGE> F-1

HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS

(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East 300 South, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and the Shareholders
EuroGas, Inc.

We have audited the accompanying consolidated balance sheets of EuroGas,
Inc., a Utah corporation, and Subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of EuroGas,
Inc. and Subsidiaries as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.

HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah
March 31, 1999
F-2
<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998 1997
------------ ------------ ------------
(Unaudited)
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . .$ 2,070,092 $ 7,489,510 $ 17,247,667
Investment in securities available-for-sale 708,117 1,088,488 -
Trade accounts receivable . . . . . . . . . 1,689,146 1,107,508 -
Value added tax receivables . . . . . . . . 392,054 431,235 173,691
Receivable from joint venture partners. . . 2,455,695 2,293,048 -
Receivable from related party . . . . . . . - 200,000 -
Other receivables . . . . . . . . . . . . . 712,986 788,291 -
Other current assets. . . . . . . . . . . . 288,787 120,176 29,370
------------ ------------ ------------
Total Current Assets . . . . . . . . . . 8,316,877 13,518,256 17,450,728
------------ ------------ ------------
Property and Equipment - Full Cost Accounting
Oil and gas properties subject to
amortization . . . . . . . . . . . . . . . 18,890,849 17,008,936 -
Oil and gas properties not subject
to amortization. . . . . . . . . . . . . . 34,974,970 33,817,752 22,723,660
Other mineral interest property . . . . . . 167,814 167,814 -
Other property and equipment. . . . . . . . 849,585 580,868 1,010,772
------------ ------------ ------------
Total Property and Equipment . . . . . . 54,883,218 51,575,370 23,734,432
Less: accumulated depletion depreciation
and amortization . . . . . . . . . . . . . (1,748,830) (307,054) (767,177)
------------ ------------ ------------
Net Property and Equipment . . . . . . . 53,134,388 51,268,316 22,967,255
------------ ------------ ------------
Other Assets . . . . . . . . . . . . . . . . 697,653 547,815 336,560
------------ ------------ ------------
Total Assets . . . . . . . . . . . . . . . .$ 62,148,918 $ 65,334,387 $ 40,754,543
============ ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable. . . . . . . . . . . . . .$ 3,769,834 $ 4,060,125 $ 1,532,949
Accrued liabilities . . . . . . . . . . . . 4,897,213 2,618,014 3,420,042
Accrued income taxes . . . . . . . . . . . 915,191 870,836 753,306
Notes payable - current portion . . . . . . 5,255,570 4,226,739 1,107,944
Notes payable to related parties. . . . . . 1,261,194 1,182,124 1,270,547
------------ ------------ ------------
Total Current Liabilities. . . . . . . . . 16,099,002 12,957,838 8,084,788

Long-Term Liabilities ------------ ------------ ------------
Notes payable . . . . . . . . . . . . . . . - 1,788,294 2,246,773
Notes payable to related parties. . . . . . - - 911,016
------------ ------------ ------------
Total Long-Term Liabilities. . . . . . . - 1,788,294 3,157,789
------------ ------------ ------------
Minority Interest. . . . . . . . . . . . . . 3,330,236 2,865,376 -
------------ ------------ ------------
Stockholders' Equity
Preferred stock - $0.001 par value;
5,000,000 shares authorized; issued
and outstanding: September 30, 1999 -
2,392,229 shares (unaudited), December
31, 1998 - 2,393,728 shares, December
31, 1997 - 2,392,228 shares;
liquidation preference: September 30,
1999 - $710,626(unaudited), December
31, 1998 - $1,999,197. . . . . . . . . . . 2,392 2,394 2,392
Common stock - $0.001 par value;
325,000,000 shares authorized; issued
and outstanding: September 30, 1999 -
86,830,838 shares (unaudited), December
31, 1998 - 76,254,630 shares, December
31, 1997- 62,283,934 shares. . . . . . . . 86,831 76,255 62,284
Additional paid-in capital. . . . . . . . . 101,507,263 94,563,961 61,659,345
Accumulated deficit . . . . . . . . . . . . (56,213,802) (46,082,787) (32,197,306)
Accumulated other comprehensive income. . . (2,663,004) (836,944) (14,749)
------------ ------------ ------------
Total Stockholders' Equity . . . . . . . . 42,719,680 47,722,879 29,511,966
------------ ------------ ------------
Total Liabilities and Stockholders'
Equity . . . . . . . . . . . . . . . . . .$ 62,148,918 $ 65,334,387 $ 40,754,543
============ ============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE> F-3

EUROGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Nine Months
Ended September 30, For the Years Ended December 31,
-------------------------- ----------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales. . . . . . . . . .$ 3,326,629 $ - $ 879,404 $ - $ -
------------ ------------ ------------ ------------ ------------
Costs and Operating Expenses
Oil and gas production. . . . . . . 990,539 - 305,009 - -
Impairment of mineral interests
and equipment. . . . . . . . . . . - - 3,512,792 1,972,612 -
Depreciation, depletion, and
amortization . . . . . . . . . . . 1,428,166 19,066 293,955 25,637 132,459
General and administrative. . . . . 7,913,770 6,205,134 7,804,401 6,716,365 4,739,380
------------ ------------ ------------ ------------ ------------
Total Costs and Operating
Expenses . . . . . . . . . . . 10,332,475 6,224,200 11,916,157 8,714,614 4,871,839
------------ ------------ ------------ ------------ ------------
Other Income (Expenses)
Interest income . . . . . . . . . . 190,051 857,615 593,570 517,845 18,588
Foreign exchange net gains (losses) 108,492 (67,507) (130,419) 331,837 (401,141)
Interest expense. . . . . . . . . . (405,731) (286,128) (465,371) (3,680,090) (1,057,039)
Loss on sale and impairment
of securities. . . . . . . . . . . (1,637,694) - - - -
Minority interest in income
of subsidiary. . . . . . . . . . . (348,608) - (137,983) - -
Other income. . . . . . . . . . . . - - 152,776 43,123 48,840
------------ ------------ ------------ ------------ ------------
Total Other Income (Expense) . . (2,093,490) 503,980 12,573 (2,787,285) (1,390,752)
------------ ------------ ------------ ------------ ------------
Net Loss . . . . . . . . . . . . . . (9,099,336) (5,720,220) (11,024,180) (11,501,899) (6,262,591)

Preferred Dividends. . . . . . . . . (1,031,679) (210,349) (2,861,301) (423,530) (150,592)
------------ ------------ ------------ ------------ ------------
Loss Applicable to Common Shares . .$(10,131,015) $ (5,930,569) $(13,885,481) $(11,925,429) $ (6,413,183)
============ ============ ============ ============ ============
Basic and Diluted Loss Per
Common Share. . . . . . . . . . . .$ (0.12) $ (0.09) $ (0.22) $ (0.22) $ (0.16)
============ ============ ============ ============ ============
Weighted Average Number of Common
Shares Used In Per Share
Calculation . . . . . . . . . . . . 82,182,414 63,918,059 64,129,062 54,705,726 41,059,000
============ ============ ============ ============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE> F-4

<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Accumulated Total
Preferred Stock Common Stock Additional Other Stockholders'
---------------------- ----------------------- Paid-in Accumulated Comprehen- Equity
Shares Amount Shares Amount Capital Deficit sive Loss (Deficit)
---------- ---------- ----------- ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - December
31, 1995. . . . . . . . . 2,391,968 $ 2,392 32,974,033 $ 32,974 $ 10,895,071 $(13,858,694) $ (14,749) $ (2,943,006)
------------
Net loss . . . . . . . . . - - - - - (6,262,591) - (6,262,591)
Dividends on preferred
shares. . . . . . . . . . - - - - - (150,592) - (150,592)
------------
COMPREHENSIVE LOSS (6,413,183)
Issuance for cash. . . . . - - 18,912 19 6,789 - - 6,808
Issuance upon conversion
of debentures . . . . . . - - 1,128,917 1,129 3,340,621 - - 3,341,750
Issuance as settlement
costs . . . . . . . . . . - - 22,000 22 100,678 - - 100,700
Issuance of 1996 Series
preferred and common for
purchase of subsidiary. . 1,250,000 1,250 15,000,000 15,000 499,763 - - 516,013
---------- ---------- ----------- ---------- ------------ ------------ ---------- ------------
BALANCE - December 31,
1996. . . . . . . . . . . 3,641,968 3,642 49,143,862 49,144 14,842,922 (20,271,877) (14,749) (5,390,918)
------------
Net loss . . . . . . . . . - - - - - (11,501,899) - (11,501,899)
Dividends on preferred shares - - - - - (423,530) - (423,530)
------------
COMPREHENSIVE LOSS . . . .
(11,925,429)
------------
Issuance of common stock and
2,200,000 options for cash,
net of $75,000 offering
costs . . . . . . . . . . - - 4,929,999 4,930 20,170,070 - - 20,175,000
Conversion of notes payable
and related interest. . . - - 2,646,907 2,647 10,945,344 - - 10,947,991
Issuance for cash, net of
$1,750,000 offering costs 15,000 15 50,000 50 13,249,935 - - 13,250,000
Options granted in connection
with acquisition of OMV
(Jakutien) Exploration
GmbH. . . . . . . . . . . - - - - 1,150,000 - - 1,150,000
Conversion of 1996 Series
preferred shares and
related accrued dividends (1,250,000) (1,250) 2,500,001 2,500 71,524 - - 72,774
Conversion of 1997 Series
preferred shares and
related dividends . . . . (14,740) (15) 2,763,165 2,763 229,800 - - 232,548
Issuance to acquire minority
interest in subsidiary. . - - 250,000 250 999,750 - - 1,000,000
---------- ---------- ----------- ---------- ------------ ------------ ---------- ------------
BALANCE - December 31,
1997. . . . . . . . . . . 2,392,228 2,392 62,283,934 62,284 61,659,345 (32,197,306) (14,749) 29,511,966
------------
Net loss . . . . . . . . . - - - - - (11,024,180) - (11,024,180)
Dividends on preferred
shares. . . . . . . . . . - - - - - (2,861,301) - (311,301)
Net change in unrealized
losses on securities. . . - - - - - - (379,266) (379,266)
Translation adjustments. . - - - - - - (442,929) (442,929)
------------
COMPREHENSIVE LOSS . . . . (12,157,676)
Issuance of 1998 Series
preferred shares for cash,
net of $1,275,005 offering
costs . . . . . . . . . . 17,000 18 50,000 50 15,724,927 - - 15,724,995
Beneficial conversion feature
of 1998 Series preferred
shares. . . . . . . . . . - - - - 2,550,000 - - 2,550,000
Conversion of 1999 Series
preferred shares and
related dividends . . . . (15,500) (16) 8,860,196 8,860 156,163 - - 165,007
Issuance for financing and
other services. . . . . . - - 60,500 61 226,064 - - 226,125
Issuance upon exercise of
stock options for cash. . - - 100,000 100 149,900 - - 150,000
Issuance of stock and
warrants for oil and gas
property interests. . . . - - 4,900,000 4,900 14,097,562 - - 14,102,462
---------- ---------- ----------- ---------- ------------ ------------ ---------- ------------
BALANCE - December 31,
1998. . . . . . . . . . . 2,393,728 $ 2,394 76,254,630 $ 76,255 $ 94,563,961 $(46,082,787) $ (836,944) $ 47,722,879
========== ========== =========== ========== ============ ============ ========== ============
(Continued)
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE> F-5
<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(CONTINUED)
<TABLE>
<CAPTION>
Accumulated Total
Preferred Stock Common Stock Additional Other Stockholders'
---------------------- ----------------------- Paid-in Accumulated Comprehen- Equity
Shares Amount Shares Amount Capital Deficit sive Loss (Deficit)
---------- ---------- ----------- ---------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - December 31,
1998. . . . . . . . . . . 2,393,728 $ 2,394 76,254,630 $ 76,255 $ 94,563,961 $(46,082,787) $ (836,944) $ 47,722,879
------------
Net loss (unaudited) . . . - - - - - (9,099,336) - (9,099,336)
Dividends on preferred shares
(unaudited) . . . . . . . - - - - - (1,031,679) - (1,031,679)
Net change in unrealized
losses on securities
(unaudited) . . . . . . . - - - - - - (1,976,514) (1,976,514)
Reclassification adjustment
for realized losses on
securities included in
net loss. . . . . . . . . - - - - - - 1,637,694 1,637,694
Translation adjustments
(unaudited) . . . . . . . - - - - - - (1,487,240) (1,487,240)
COMPREHENSIVE LOSS (unaudited) (11,957,075)
------------
Issuance of Series B 1998
preferred stock for proceeds
of $6,500,000 less $487,500
in issuance costs
(unaudited) . . . . . . . 6,500 6 - - 6,012,494 - - 6,012,500
Beneficial Conversion feature
of 1998 Series preferred
shares (unaudited). . . . - - - - 901,875 - - 901,875
Conversion of Series B
preferred stock plus accrued
dividends of 49,729 shares,
or $39,501 for the nine
months ended September 30,
1999 (unaudited). . . . . (7,910) (8) 10,576,208 10,576 28,933 - - 39,501
---------- ---------- ----------- --------- ------------- ------------ ----------- ------------
BALANCE - September 30, 1999
(Unaudited) . . . . . . . 2,392,318 $ 2,392 86,830,838 $ 86,831 $ 101,507,263 $(56,213,802) $(2,663,004) $ 42,719,680
========== ========== =========== ========= ============= ============ =========== ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE> F-6

<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30, For the Years Ended December 31,
-------------------------- ----------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss. . . . . . . . . . . . . . $ (9,099,336) $ (5,720,220) $(11,024,180) $(11,501,899) $ (6,262,591)
Adjustments to reconcile net loss
to cash provided by operating
activities:
Impairment of mineral interests
and equipment. . . . . . . . . . - - 3,512,792 1,972,612 -
Depreciation, depletion, and
amortization . . . . . . . . . . 1,397,073 19,066 293,955 25,637 132,458
Expenses paid by issuance of
notes payable. . . . . . . . . . - - - 1,321,295 -
Compensation paid by issuance of
common stock . . . . . . . . . . - - 226,125 - 351,808
Minority interest in income
of subsidiary. . . . . . . . . . 348,608 - 137,983 - -
Loss on sale of securities
available-for-sale . . . . . . . 1,637,694 - - - -
Exchange (gain) loss. . . . . . . (108,492) 67,507 113,294 (331,837) (401,141)
Changes in assets and liabilities,
net of acquisitions:
Trade receivables . . . . . . . (534,686) (365,360) (72,121) - -
Other receivables . . . . . . . (558,384) - (491,783) 26,510 (97,595)
Prepaid expenses. . . . . . . . (180,158) (118,133) - - -
Accounts payable. . . . . . . . 556,814 (621,443) (734,515) 1,814,545 (210,990)
Accrued liabilities . . . . . . 1,689,853 (202,161) (812,107) 3,271,804 2,468,676
Other . . . . . . . . . . . . . - 30,213 (115,783) 156,451 33,903
------------ ------------ ------------ ------------ -------------
Net Cash Used in Operating
Activities . . . . . . . . . . . (4,851,014) (6,910,531) (8,966,340) (3,244,882) (3,985,472)
------------ ------------ ------------ ------------ -------------
Cash Flows From Investing Activities
Purchases of mineral interests,
property and equipment . . . . . . (4,622,749) (4,130,785) (9,087,686) (5,391,567) (3,368,342)
Proceeds from sale of interest
in gas property. . . . . . . . . . - - - 501,646 -
Acquisition of subsidiaries,
net of cash acquired . . . . . . . - - (2,159,363) (6,314,287) 181,743
Increase in deposits and prepayments. (199,446) (308,290) (168,575) - (540,000)
Investment in securities
available-for-sale . . . . . . . . (1,696,700) (1,408,200) (1,467,754) - -
Proceeds from sale of securities
available-for-sale . . . . . . . . 100,557 - - - -
------------ ------------ ------------ ------------ -------------
Net Cash Used In Investing
Activities . . . . . . . . . . . (6,418,338) (5,847,275) (12,883,378) (11,204,208) (3,726,599)
------------ ------------ ------------ ------------ -------------
Cash Flows From Financing Activities
Proceeds from issuance of notes payable to
related parties. . . . . . . . . . 429,070 - - 339,191 4,542,487
Principal payments on notes payable to
related parties. . . . . . . . . . (150,000) (2,097,556) (999,439) (905,866) (1,002,026)
Proceeds from issuance of notes
payable. . . . . . . . . . . . . . 184,742 - - 1,135,729 4,846,995
Principal payments on notes
payable. . . . . . . . . . . . . . (482,489) (2,855,384) (3,192,109) (2,707,551) (80,123)
Proceeds from issuance of common
stock, net of offering costs . . . - 12,637,500 150,000 20,175,000 6,808
Proceeds from issuance of preferred
stock, net of offering costs . . . 6,012,500 - 15,724,995 13,250,000 -
Dividends paid on preferred stock . - (260,141) (260,139) - (120,000)
Proceeds from issuance of
common stock by subsidiary . . . . - - 592,568 - -
------------ ------------ ------------ ------------ -------------
Net Cash Provided By Financing
Activities . . . . . . . . . . . 5,993,823 7,424,419 12,015,876 31,286,503 8,194,141
------------ ------------ ------------ ------------ -------------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents . . . . . (143,889) 148,202 75,685 (232,351) 88,323
------------ ------------ ------------ ------------ -------------
Net Increase (Decrease) in Cash
and Cash Equivalents. . . . . . . . (5,419,418) (5,185,185) (9,758,157) 16,605,062 570,393

Cash and Equivalents at Beginning
of Period . . . . . . . . . . . . . 7,489,510 17,247,667 17,247,667 642,605 72,212
------------ ------------ ------------ ------------ -------------
Cash and Equivalents at End of
Period. . . . . . . . . . . . . . . $ 2,070,092 $ 12,062,482 $ 7,489,510 $ 17,247,667 $ 642,605
============ ============ ============ ============ =============
(Continued)
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE> F-7

<PAGE>
EUROGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30, For the Years Ended December 31,
-------------------------- ----------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>

Supplemental Disclosure of Cash Flow Information
Cash paid for interest. . . . . . . $ 255,847 $ 300,557 $ 485,157 $ 362,622 $ 97,162
Cash paid for income taxes. . . . . - - - - -

Supplemental Schedule of Noncash
Investing and Financing Activities
Assigned notes receivable in
satisfaction of notes payable . . $ 600,000 $ - $ - $ - $ -
Common stock and stock options
issued to acquire property . . . . - 7,584,000 14,102,462 - -
Common stock issued upon conversion
of notes payable and accrued
interest . . . . . . . . . . . . . - - - 10,947,991 4,091,750
Common stock issued as payment of
preferred dividends. . . . . . . . 39,502 48,961 165,008 305,322 -
Common stock issued to acquire
minority interest in subsidiary. . - - - 1,000,000 -

Cash paid in connection with
business acquisitions:
Fair value of assets acquired. . . $ - $ - $ 11,923,200 $ 7,506,621 $ 4,999,405
Excess property cost over
fair value. . . . . . . . . . . . - - 3,512,792 - -
Liabilities assumed and incurred . - - (7,484,675) (28,317) (433,392)
Obligation to sellers. . . . . . . - - - - (2,500,000)
Minority interest recognized . . . - - (2,112,348) - (950,000)
Common stock issued. . . . . . . . - - - - (516,013)
Stock options granted. . . . . . . - - - (1,150,000) -
------------ ------------ ------------ ------------ ------------
Cash paid . . . . . . . . . . . - - 5,838,969 6,328,304 600,000
Less cash acquired. . . . . . . . . - - (3,679,606) (14,017) (781,743)
------------ ------------ ------------ ------------ ------------
Net Cash Paid (Received). . . . . $ - $ - $ 2,159,363 $ 6,314,287 $ (181,743)
============ ============ ============ ============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE> F-8

<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information With Respect to September 30, 1999 and for the Nine Months
Ended September 30, 1999 and 1998 is Unaudited)

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS - EuroGas, Inc. and its subsidiaries ("EuroGas" or
the "Company") are engaged primarily in the evaluation, acquisition,
exploration and disposition of mineral interests, and rights to exploit
oil, natural gas, coal bed methane gas and other minerals. EuroGas has
also begun efforts to participate in the development of co-generation
(power and heat) projects. EuroGas is in various stages of identifying
industry partners, farming out exploration rights, undertaking exploration
drilling, and seeking to develop production. During 1998, EuroGas acquired
a controlling interest in Big Horn Resources Ltd., an exploration and
production company operating in Western Canada. EuroGas has an interest in
a joint venture to reclaim a natural gas field in Western Canada. EuroGas
holds and is developing properties in Eastern Europe including coal bed
methane gas properties in Poland, proved natural gas properties and
unproved oil and gas concessions in Slovakia, unproved natural gas
properties in Eastern Russia and an interest in a talc deposit in Slovakia.
EuroGas has entered into and is in the process of entering into joint
ventures in the Ukraine to explore for and develop oil, natural gas and
coal bed methane gas with various Ukrainian State and private companies.

BUSINESS CONDITION -Through the activities explained above, EuroGas and its
subsidiaries have accumulated deficits of $46,082,787 since their inception
in 1995 through December 31, 1998 and have accumulated deficits of
$56,215,341 through September 30, 1999. They have had losses from
operations and negative cash flows from operating activities during each of
the three years in the period ended December 31, 1998 and for the nine
months ended September 30, 1999. Although the Company had positive working
capital and stockholders' equity at December 31, 1998 and had positive
stockholders' equity at September 30, 1999, realization of the investment
in properties and equipment is dependent on EuroGas obtaining financing for
the exploration, development and production of those properties. If
exploration of unproved properties is unsuccessful, all or a portion of
recorded amount of those properties will be recognized as impairment
losses. Further, EuroGas is dependent on improvement in oil and gas prices
in order to establish profitable operations from oil and gas production. As
in the past, management plans to finance operations and acquisitions
through issuance of additional equity securities, the realization of which
is not assured.

PRINCIPLES OF CONSOLIDATION -The accompanying consolidated financial
statements include the accounts of all majority-owned subsidiaries and
EuroGas' share of properties held through joint ventures from the date of
acquisition. All significant intercompany accounts and transactions have
been eliminated in consolidation.

USE OF ESTIMATES -The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions which affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of expenses during the reporting period. Actual results could
differ from those estimates.

MINERAL INTERESTS IN PROPERTIES - The full cost method of accounting is
used for oil and gas properties. Under this method, all costs associated
with acquisition, exploration, and development of oil and gas properties
are capitalized on a country by country basis. Costs capitalized include
acquisition costs, geological and geophysical expenditures, lease rentals
on undeveloped properties and costs of drilling and equipping productive
and non-productive wells. Drilling costs include directly related overhead
costs. Proceeds from disposal of properties are applied as a reduction of
cost without recognition of a gain or loss except where such disposal would
result in a major change in the depletion rate. Capitalized costs are
categorized either as being subject to amortization or not subject to
amortization. The cost of properties not subject to amortization are
assessed periodically and any resulting provision for impairment which may
be

F-9
<PAGE>

required is charged to operations. The assessment for impairment is
based upon estimated fair value of the properties. Fair value is determined
based upon estimated future discounted net cash flows.

Capitalized costs of properties subject to amortization and estimated
future costs to develop proved reserves are amortized and depreciated
using the unit-of-production method based on the estimated proven oil and
natural gas reserves as determined by independent engineers. Units of
natural gas are converted into barrels of equivalent oil based on the
relative energy content basis. Capitalized costs of properties subject to
amortization, net of accumulated amortization and depreciation, are limited
to estimated future discounted net cash flows from proven reserves, based
upon year-end prices, and any resulting impairment is charged to
operations.

OTHER PROPERTY AND EQUIPMENT - Other property and equipment are stated at
cost. Minor repairs, enhancements and maintenance costs are expensed when
incurred; major improvements are capitalized. Depreciation of other
property and equipment is provided on a straight-line basis over the
estimated useful lives, as follows: buildings- 40 years and equipment-3 to
5 years. Upon retirement, sale, or other disposition of other property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts, and gain or loss is included in operations. Depreciation expense
for the three years in the period ended December 31, 1998, was $78,765,
$83,885, and $196,232, respectively, of which $19,229 and $65,639 were
capitalized in mineral interests and equipment in 1998 and 1997,
respectively. Depreciation expense for the nine month period ended
September 30, 1999 and 1998 was $148,124 and $24,903, respectively.

POLITICAL RISK - EuroGas has mineral interest property and interests
in projects in Poland, Slovakia, Slovenia, Ukraine, and in the Sakha
Republic (Eastern Russia). Although recent political and economic trends
in these countries have been toward the development of market economies
that encourage foreign investment, EuroGas has a concentration of risk
related to its Eastern Europe and Russian properties and interests
which are subject to political instability, changes in government,
unilateral renegotiation of concessions or contracts, nationalization,
foreign exchange restrictions, or other uncertainties.

FINANCIAL INSTRUMENTS - EuroGas considers all highly-liquid debt
instruments purchased with maturities of three months or less to be cash
equivalents. The amounts reported as cash and cash equivalents, investment
in securities available-for-sale, trade and other receivables, accounts
payable and notes payable are considered to be reasonable approximations of
their fair values. The fair value estimates presented herein were based on
estimated future cash flows. The amounts reported as investment in
securities available-for-sale are based upon quoted market prices. The cost
of securities sold is based on the average purchase price per share.

EuroGas had cash in foreign banks at December 31, 1998 in excess of
$7.1 million and $1.9 million at September 30, 1999 which cash is not
insured by the U.S. Federal Deposit Insurance Corporation. Included in
that amount, EuroGas had cash in Polish banks in the amount of approximately
$1,570,000 at December 31, 1998 and $433,376 at September 30, 1999 for
which EuroGas would incur certain taxes if the cash were transferred out
of Poland.

DERIVATIVE FINANCIAL INSTRUMENTS - EuroGas and its international
subsidiaries occasionally incur obligations payable in currencies other
than their functional currencies. This subjects EuroGas to the risks
associated with fluctuations in foreign currency exchange rates. EuroGas
does not reduce this risk by utilizing hedging. The amount of risk is not
material to EuroGas' financial position or results of operations.

F-10
<PAGE>

LOSS PER SHARE - Basic loss per common share is computed by dividing net
loss available to common stockholders by the weighted-average number of
common shares outstanding during the period. Diluted earnings per share
during periods of income reflect potential dilution which could occur if
all potentially issuable common shares from stock purchase warrants and
options, convertible notes payable and preferred stock resulted in the
issuance of common stock. In the present position, diluted loss per share
is the same as basic loss per share because 17,004,647 and 13,450,000
potentially issuable common shares at December 31, 1998 and 1997,
respectively, and 14,949,778 potentially issuable common shares at
September 30, 1999, would have decreased the loss per share and have been
excluded from the calculation.

FOREIGN CURRENCY TRANSLATION - Effective January 1, 1998, the functional
currencies of the subsidiaries operating in Poland and Slovakia were
changed from the U.S. dollar to the local currencies due to those economies
ceasing to be considered highly inflationary. The change had no effect on
consolidated financial position at the date of the change or on the
consolidated results of operations for periods prior to the change. The
effect of changes in exchange rates during the year ended December 31,
1998, and in the future with respect to those subsidiaries, has been and
will be recognized as a separate component of comprehensive loss whereas
those changes were previously recognized in the results of operations.
Where the functional currencies of foreign subsidiaries continue to be the
U.S. dollar, financial statements are translated into U.S. dollars using
historical exchange rates and net foreign exchange gains and losses from
those subsidiaries are reflected in the results of operations. Exchange
gains and losses from holding foreign currencies and having liabilities
payable in foreign currencies are included in the results of operations.

INCOME TAXES - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences in the balances of
existing assets and liabilities on the Company's financial statements and
their respective tax bases and attributable to operating loss carry
forwards. Deferred taxes are computed at the enacted tax rates for the
periods when such amounts are expected to be realized or settled.

STOCK BASED COMPENSATION - Prior to 1999, EuroGas accounted for stock-based
compensation from stock options granted to employees and consultants based
on the intrinsic value of the options on the date granted. Since January
1, 1998, EuroGas has accounted for stock options granted to employees
based on the intrinsic value of the options on the date granted and has
accounted for options granted to consultants and other non-employees based
on the fair value of the options as determined by the Black-Scholes option
pricing model.

NEW ACCOUNTING STANDARDS - During 1998, EuroGas adopted Statements of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" in 1997. SFAS No. 131 requires certain information
to be reported about operating segments on a basis consistent with
management's decision making process and requires the presentation of
revenue and total assets by country. These statements expanded or modified
disclosures and had no impact on consolidated financial position, results
of operations or cash flows when adopted.

In June 1999, SFAS No.133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No.133 was issued and establishes accounting and
reporting standards requiring that derivative instruments be recorded in
the balance sheet as either an asset or liability measured at its fair
value. SFAS No. 133 is effective for year beginning January 1, 2000 and, is
not expected to have a material impact on the financial condition or
results of operations of EuroGas.

INTERIM FINANCIAL STATEMENTS - The accompanying consolidated financial
statements at September 30, 1999 and for the nine months ended September
30, 1999 and 1998 are unaudited. In the opinion of management, all
necessary adjustments (which include only normal recurring adjustments)
have been made

F-11
<PAGE>

to present fairly the financial position, results of
operations and cash flows for the periods presented. The results of
operations for the nine month period ended September 30, 1999 are not
necessarily indicative of the operating results to be expected for the full
year.

PRIOR YEAR PRESENTATION - Certain September 1998 amounts have been
reclassified in order to conform with the 1999 presentation.

NOTE 2--PROPERTY ACQUISITIONS

Acquisition of Big Horn Resources, Ltd. - Effective October 5, 1998,
EuroGas acquired slightly more than a 50% interest in Big Horn Resources
Ltd. ("Big Horn"), an oil and gas exploration and production company
operating in Western Canada. EuroGas acquired the majority interest by
cash payments of $4,723,498 on October 17, 1998, by executing promissory
notes effective October 1998, in the aggregate amount of $1,840,224, and
by EuroGas' cancellation of a note receivable from one of Big Horn
shareholders in the amount of $1,100,000. These payments, and the face
amount of the notes, were discounted $70,238 to October 5, 1998 using a 10%
discount rate.

The acquisition was accounted for under the purchase method of accounting;
the total purchase price of $7,593,484 was determined based upon the fair
value of the consideration paid. The purchase price was allocated to the
acquired net assets of Big Horn based upon their fair values on the
effective date of the acquisition. The fair value of the acquired
properties was based upon a reserve report prepared by independent
petroleum engineers. The purchase price exceeded the fair value of the net
assets acquired by $3,512,792 which was recognized as a non-recurring
impairment expense at the date of the acquisition. The operations of Big
Horn have been included in the consolidated results of operations of
EuroGas since acquisition.

Summary unaudited pro forma results of operations for the years ended
December 31, 1998 and 1997, assuming the acquisition of Big Horn had
occurred on January 1, 1997, excluding non-recurring items, are as follows:

1998 1997
------------ ------------
Revenues . . . . . . . . . . . . . . . . . .$ 2,138,415 $ 1,916,000
Net loss . . . . . . . . . . . . . . . . . . (7,528,473) (14,538,000)
Net loss applicable to common shares . . . . (10,389,774) (14,962,000)
Net loss per common share. . . . . . . . . . (0.16) (0.27)

ACQUISITION OF MASEVA GAS S.R.O. - During October 1998, EuroGas acquired a
90% interest in Maseva Gas s.r.o. ("Maseva"), a Slovak company which holds
a 850 square kilometer concession to explore for oil and natural gas. The
concession is adjacent to the southern boarder of the Trebisov concession
held by EuroGas through the Nafta/Danube joint venture in Slovakia.
EuroGas purchased Maseva by issuing 2,500,000 common shares and warrants to
purchase an additional 2,500,000 shares at $2.50 per share within two
years. The purchase price was $6,527,462 based upon the $2.00 per share
quoted market value of the EuroGas common shares issued, and the fair value
of the warrants on the acquisition date. The fair value of the options was
determined by using the Black-Scholes option-pricing model with the
following assumptions: dividend yield of 0.0%, expected volatility of
63.2%, risk-free interest rate of 5.0% and an expected life of 2 years.
The unproved oil and gas concession is the primary asset acquired. Maseva
has had no operations. The acquisition is considered to be the purchase of
properties. Accordingly, pro forma amounts are not presented. The cost of
the acquisition was allocated to oil and gas properties not subject to
amortization.

F-12
<PAGE>

ACQUISITION OF BEAVER RIVER PROJECT - In March 1998, EuroGas exercised its
option to acquire a 16% carried interest in the Beaver River Project in
British Columbia, Canada in exchange for $300,000 and the issuance of
2,400,000 common shares which were valued at $3.16 per share. The
acquisition has been valued at $7,875,000. The interest in the Beaver
River Project has been classified as oil and gas properties not subject to
amortization. EuroGas retains the right to purchase back 1,900,000 of the
2,400,000 common shares issued any time prior to April 15, 1999 by
returning the carried interest if EuroGas determines that the results
produced do not warrant the continued holding of the carried interest.

ACQUISITION OF OIL REFINERY - During the third quarter of 1998, EuroGas
posted a refundable cash bond of $337,723 which will allow EuroGas to
purchase an interest in an operating oil refinery in Slovenia. If
purchased, EuroGas will be required to pay cash and issue common shares to
complete the acquisition. The refundable bond has been included as a
long-term other asset in the accompanying financial statements.

ACQUISITION OF TALC MINERAL INTEREST - During 1999, EuroGas acquired a 24%
interest in an undeveloped talc deposit in Eastern Slovakia through an
investment in a joint venture company. The investment in the talc mineral
interest and related mining equipment was $167,813 and $160,373,
respectively. At December 31, 1998 and September 30, 1999, EuroGas had a
receivable for advances to the joint venture company in the amount of
$1,059,494.

ACQUISITION OF MAJORITY INTEREST IN ENVIGEO TRADE S.R.O. - During September
1998, EuroGas acquired a 51% interest in Envigeo Trade s.r.o. ("Envigeo"),
a private Slovakian company which owns a 2,300 square kilometer oil and gas
concession in Northeast Slovakia. The concession expires in August 2001.
EuroGas paid $500,000 at the date of the acquisition, and the balance of
$1,000,000 during November 1998. The unproved oil and gas concession is the
primary asset acquired and Envigeo has had no operations of any
significance. The acquisition is considered to be the purchase of
properties. Accordingly, pro forma amounts are not presented. The cost of
the acquisition was allocated to oil and gas properties not subject to
amortization. To date, EuroGas has invested $1,620,000 in the Envigeo
properties.

ACQUISITION OF OMV (JAKUTIEN) EXPLORATION GASELLSCHAFT M.B.H. - On June 11,
1997 EuroGas acquired all the issued and outstanding stock of OMV
(Jakutien) Exploration Gasellschaft m.b.H. (OMVJ), in exchange for
$6,252,724 in cash, options to purchase 2,000,000 common shares valued at
$1,150,000, and a 5% interest in OMVJ's net profits. OMVJ's primary asset
is a 50% interest in a joint venture in the Republic of Sakha (commonly
known as Yakutia) of the Russian Federation. Expenses relating to the
purchase were $75,580.

The acquisition was accounted for under the purchase method of accounting
with the total purchase price of $7,478,304 determined based upon the
consideration paid and the fair value of the options granted. The purchase
price was allocated to the acquired assets and liabilities of OMVJ based
upon their fair values on the date of the acquisition. The operations of
OMVJ have been included in the consolidated results of operations of
EuroGas since the acquisition date.

NOTE 3--RECEIVABLE FROM RELATED PARTY AND OTHER RECEIVABLES

On December 7, 1999, a wholly-owned subsidiary of EuroGas executed a
promissory note with an officer and member of management in the amount of
$200,000. The note, due on March 31, 1999, was repaid in full on January
7, 1999.

F-13
<PAGE>

On October 28, 1999, EuroGas executed a promissory note in the amount of
$500,000 to an independent third party. Terms of the note dictate that
interest accrues at 5%. The balance was due on May 28, 1999 and is unpaid
at September 30, 1999.

NOTE 4--INVESTMENT IN EQUITY SECURITIES

Equity securities purchased during 1999 were recorded at cost because their
resale was restricted and their fair value was not readily determinable.
The investments consisted of $1,000,000 of 20% cumulative convertible
preferred stock of Intergold Corporation and $600,000 in share capital of
Hansageomyn GmbH, both of which are mining companies.

During the third quarter of 1999, EuroGas determined not to further invest
in the two companies. The value of the underlying common shares to the
preferred stock have dropped substantially, and management has determined
there has been an other than temporary decline in the fair value of both
investments. Accordingly, during the third quarter, EuroGas recognized a
$1,600,000 impairment of the investments.

During the first quarter of 1998, EuroGas acquired 993,333 units of United
Gunn Resources, Ltd. (each unit consisting of one share of common stock and
one warrant) through a private placement subscription agreement for
$962,398. United Gunn Resources, Ltd. holds an approximate 12% working
interest in the Beaver River Project. Through December 31, 1998, EuroGas
acquired an additional 613,500 shares of United Gunn through market
purchases at a cost of $491,460. Through the purchase of equity
securities, EuroGas held approximately 9% of the outstanding United Gunn
shares at December 31, 1998. The United Gunn Resources, Ltd. shares have
been accounted for as investment in securities available-for-sale and are
carried at market value.

Investment in securities available-for-sale consisted of the following:

September 30, December 31,
1999 1998
---------- ----------
Cost . . . . . . . . . . . . . . . . . .$1,426,203 $1,467,754
Gross unrealized losses. . . . . . . . . (718,086) (379,266)
---------- ----------
Estimated fair value . . . . . . . . . .$ 708,117 $1,088,488
========== ==========

EuroGas sold 139,000 shares of United Gunn during the nine months ended
September 30, 1999, for $100,557 which resulted in a realized loss of
$37,694. The cost of securities sold was determined by the average cost
method.

NOTE 5--MINERAL INTERESTS IN PROPERTIES AND EQUIPMENT

Prior to 1998, EuroGas had no property subject to amortization. Through the
acquisition of Big Horn, EuroGas acquired properties with both proved and
unproved reserves. Certain of the Big Horn reserves are in production and
are being amortized. In addition to the Canadian property, the extent of
reserves relating to Company's interests in the Slovak Trebisov oil and gas
properties was established in May 1998 when an independent reserve report
relating to those properties was obtained and which reported proved
reserves of oil and gas. Accordingly, the cost of those properties were
reclassified in 1998 as oil and gas properties subject to amortization. The
wells drilled on the property have been completed; however, a gas gathering
system is yet to be constructed. As described more fully in Note 13 -
Commitments and Contingencies, a

F-14
<PAGE>

dispute arose as a result of a conflicting property claim, and work to bring
the wells into production has been suspended. Amortization will begin when
and if production begins from wells on that property.

In August 1997, EuroGas closed a transaction with a subsidiary of Texaco
for the exploration and potential development of EuroGas' coal bed methane
gas interests held by a concession in Poland. EuroGas retained a 14% to
20% carried interest in the net profits from the property, and transferred
the remaining interest in the property to Texaco in exchange for an initial
payment of $500,000. The payment received during 1997 was applied as a
reduction of the cost of the properties without recognition of a gain or
loss. EuroGas has since reacquired the interest for $172,000.

The following is a summary of changes to oil and gas properties:

<TABLE>
<CAPTION> December 31,
September 30, _____________________________________
1999 1998 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Properties Subject to Amortization
Cost at beginning of period. . . . $17,008,936 $ - $ - $ -
Reclassification from
properties not subject to
amortization. . . . . . . . . . . - 7,278,613 - -
Acquisition costs. . . . . . . . . 1,063,815 8,784,050 - -
Development costs. . . . . . . . . 1,488,002 4,459,065 - -
Less ceiling test and valuation
adjustments . . . . . . . . . . . - (3,512,792) - -
----------- ----------- ----------- -----------
Cost at end of period. . . . . . . 18,890,849 17,008,936 - -
Less depreciation, depletion and
amortization . . . . . . . . . . (1,456,823) (220,600) - -
Translation adjustments. . . . . . (669,904) - - -
----------- ----------- ----------- -----------
Net Properties Subject to
Amortization. . . . . . . . . . . $17,434,026 $16,788,336 $ - $ -
=========== =========== =========== ===========
Properties Not Subject To Amortization
Cost at beginning of period. . . . $33,817,752 $22,723,660 $14,252,754 $ 7,037,244
Acquisition costs. . . . . . . . . - 17,804,072 7,574,601 4,217,069
Exploration costs. . . . . . . . . 2,272,087 573,569 3,368,917 2,998,441
Reclassification to properties
subject to amortization . . . . . - (7,278,613) - -
Proceeds from sale of property . . (13,094) - (500,000) -
Less accumulated valuation and
adjustments . . . . . . . . . . - - (1,972,612) -
Translation adjustment . . . . . (1,101,775) (4,936) - -
----------- ----------- ----------- -----------
Net Property Not Subject to
Amortization at End of Period . $34,974,970 $33,817,752 $22,723,660 $14,252,754
=========== =========== =========== ===========

Other Mineral Interest Property
Cost at beginning of year. . . $ 167,814 $ - $ - $ -
Acquisition costs. . . . . . . - 167,814 - -
----------- ----------- ----------- -----------
Net Other Mineral Interest
Property. . . . . . . . . . . . $ 167,814 $ 167,814 $ - $ -
=========== =========== =========== ===========
</TABLE>
F-15
<PAGE>

NOTE 6--OTHER PROPERTY AND EQUIPMENT

Other property and equipment consisted of the following:

December 31,
September 30, ----------------------
1999 1998 1997
---------- ---------- ----------
Land. . . . . . . . . . . . . . . . . . $ - $ - $ 22,156
Buildings . . . . . . . . . . . . . . . - 19,571 92,914
Equipment . . . . . . . . . . . . . . . 849,585 561,297 895,702
---------- ---------- ----------
849,585 580,868 1,010,772
Less: Accumulated depreciation . . . . (292,007) (86,454) (767,177)
---------- ---------- ----------
Net Other Property and Equipment . . . $ 557,578 $ 494,414 $ 243,595
========== ========== ==========
NOTE 7-GEOGRAPHIC INFORMATION

EuroGas and its subsidiaries operate solely in the oil and gas exploration
and production industry. Accordingly, segment information is not presented
separately from the accompanying balance sheets and statements of
operations. Property and equipment and other non-current assets were
located in the following geographic areas:

December 31,
September 30, -----------------------
1999 1998 1997
----------- ----------- -----------
Canada. . . . . . . . . . . . . . . . $18,828,874 $15,995,000 $ -
Eastern Europe and Russia . . . . . . 35,003,167 35,821,131 23,303,815
----------- ----------- -----------
Total Property and Equipment
and Other Assets . . . . . . . . . . $53,832,041 $51,816,131 $23,303,815
=========== =========== ===========

Sales and net loss were in the following geographic areas:
<TABLE>
<CAPTION>
For the Nine Months For the Year Ended
Ended September 30, December 31,
------------------------ ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales - Canada. . $ 3,326,629 $ - $ 879,404 $ - $ -
=========== =========== ============ ============ ===========
Net Loss
United States (Corporate). $(5,190,123) $(1,990,154) $ (2,625,306) $ (4,915,997) $(2,175,936)
Canada . . . . . . . . . . 350,541 - (3,362,517) - -
Eastern Europe and Russia (4,259,754) (3,730,066) (5,036,357) (6,585,902) (4,086,655)
----------- ----------- ------------ ------------ -----------
Net Loss $(9,099,336) $(5,720,220) $(11,024,180) $(11,501,899) $(6,262,591)
=========== =========== ============ ============ ===========
</TABLE>
F-16
<PAGE>

NOTE 8--NOTES PAYABLE TO RELATED PARTIES

Notes payable to related parties were as follows:
December 31,
September 30,----------------------
1999 1998 1997
---------- ---------- ----------
Loan from a former director, due on
demand with interest at 10%,
unsecured. . . . . . . . . . . . . . $ 290,206 $ 290,206 $ 290,206
Loan from a company associated with
a director, due in 1999 with interest
at 7.5%, unsecured . . . . . . . . . 239,694 165,683 362,477
Loan from a director, due in 1999,
interest: 7.5% to 10%, unsecured . . 612,010 606,951 1,409,596
Loans from a director and his affiliates,
interest at 7.5% to10%, due on demand
and in 1999, unsecured . . . . . . . 119,284 119,284 119,284
---------- ---------- ----------
Total Notes Payable to Related Parties 1,261,194 1,182,124 2,181,563
Less: Current Portion . . . . . . . . (1,261,194) (1,182,124) (1,270,547)
---------- ---------- ----------
Notes Payable to Related Parties -
Long-Term. . . . . . . . . . . . . . $ - $ - $ 911,016
========== ========== ==========
NOTE 9--NOTES PAYABLE

Other loans and notes payable were as follows:
December 31,
September 30,----------------------
1999 1998 1997
---------- ---------- ----------
Loans due 1999, interest at 10%,
unsecured. . . . . . . . . . . . . . $ 509,488 $ 517,749 $3,354,717
Line of credit with a bank, payable
by a subsidiary on demand with interest
at 1% above the bank's prime, and
secured by all of the subsidiaries
assets . . . . . . . . . . . . . . . 3,518,840 3,708,990 -
10% Notes due in 2000, unsecured. . . 1,240,224 1,840,224 -
Less: Discount on note. . . . . . . . (12,982) (51,930) -
---------- ---------- ----------
Total Notes Payable . . . . . . . . . 5,255,570 6,015,033 3,354,717
Less: Current Portion . . . . . . . . (5,255,570) (4,226,739) (1,107,944)
---------- ---------- ----------
Note Payable - Long-Term. . . . . . . $ - $1,788,294 $2,246,773
========== ========== ==========

Annual maturities of notes payable to related parties and others are as
follows:

September 30, December 31,
Years ending December 31: 1999 1998
----------- -----------
1999 . . . . . . . . 5,889,522 5,408,863
2000 . . . . . . . . 627,242 1,788,294

F-17
<PAGE>

NOTE 10--INCOME TAXES

Deferred tax assets are comprised of the following:

December 31,
------------------------
1998 1997
----------- -----------
Tax loss carry forwards . . . . . . $ 4,904,209 $ 2,885,384
Reserves for contingencies. . . . . 396,863 396,863
Less: Valuation allowance. . . . . (5,301,072) (3,282,247)
----------- -----------
Net Deferred Tax Asset. . . . . . . $ - $ -
=========== ===========

The following is a reconciliation of the amount of tax (benefit) that would
result from applying the federal statutory rate to pretax loss with the
provision for income taxes:

<TABLE>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Tax at statutory rate (34%) . . . . $(3,748,221) $(3,910,646) $(2,129,281)
Non-deductible expenses . . . . . . 1,729,396 - -
State taxes, net of federal benefit (195,944) (154,969) -
Deferred tax asset valuation change 603,635 2,280,330 295,877
Effect of lower tax rates and foreign
losses with no federal benefit . . 1,611,134 1,785,285 1,833,404
----------- ----------- -----------
Total Income Tax Benefit. . . . . . $ - $ - $ -
=========== =========== ===========
</TABLE>

As of December 31, 1998, EuroGas has operating loss carry forwards of
approximately $13,760,047 in various countries which expire from 1999
through 2013.

EuroGas' subsidiary, Globegas BV, has applied for a reduction in an income
tax liability in the Netherlands of an amount equivalent to approximately
$737,000 at September 30, 1999. The tax arose from the sale of equipment at
a profit by the former owner of Globegas to a EuroGas Polish subsidiary.
EuroGas' position is that the gain on the sale should not have been taxable
to Globegas. The liability will continue to be reflected in EuroGas'
financial statements until the proposed reduction is accepted by the
Netherlands' taxing authorities.

NOTE 11--RELATED PARTY TRANSACTIONS

Related party loans are described in Note 8--Notes Payable To Related
Parties and loans to related parties are described in Note 3--Receivable
From Related Party and Other Receivables.

During 1997, a shareholder advanced $2,023,306 as a short-term loan to
EuroGas. In connection with this loan, the shareholder retained control of
the proceeds from an issuance of common shares during 1997 by EuroGas and
paid Company obligations from those proceeds. The shareholder received
$104,493 for management services from these funds.

F-18
<PAGE>

NOTE 12--STOCKHOLDERS' EQUITY

PREFERRED STOCK - There were 2,391,968 shares of 1995 Series Preferred
Stock (the "1995 Series") issued on April 12, 1995. The 1995 Series is
non-voting, non-participating , and has a liquidation preference of $0.10
per share plus unpaid dividends. The 1995 Series stockholders are entitled
to an annual dividend of $0.05 per share. Each share of the 1995 Series
shall be converted into two shares of EuroGas' common stock upon lawful
presentation and shall pay dividends until converted. EuroGas has the
right to redeem the 1995 Series, on not less than 30 days written notice,
at a price of $36.84 per share, plus any accrued but unpaid dividends.
Annual dividend requirements of the 1995 Series are $119,598.

EuroGas issued 1,250,000 shares of 1996 Series Preferred Stock (the "1996
Series") on July 12, 1996. All of the shares of 1996 Series Preferred Stock
were converted into 2,500,001 common shares, at the rate of two common
shares per 1996 Series Preferred share, on July 3, 1997, along with accrued
but unpaid dividends.

On May 29, 1997, EuroGas authorized the 1997 Series A Convertible Preferred
Stock (the "1997 Series"). This series of preferred stock is non-voting and
accrues dividends at $60.00 per share, or six percent annually. The 1997
Series has a liquidation preference of $1,000 per share, plus unpaid
dividends before liquidation payments applicable to common shares but after
liquidation payments to other previously issued and outstanding preferred
stock series. The 1997 Series, along with unpaid dividends thereon, is
convertible into common shares at the rate of $1,000 divided by the lessor
of 125% of the average closing bid price for five trading days prior to
issuance or 82% of the average closing bid price for five trading days
prior to conversion. By December 31, 1997, 14,740 of the 15,000 shares of
1997 Series, along with related accrued dividends, had been converted into
2,763,165 common shares.

From May through November 1998, EuroGas issued 17,000 shares of 1998
Series B Convertible Preferred Stock (the "1998 Series") in an ongoing
private placement offering. Of the total authorized preferred shares,
30,000 shares have been designated as the 1998 Series with a par value of
$0.001 per share and a liquidation preference of $1,000 per share plus all
accrued but unpaid dividends. The 1998 Series shares are non-voting and
bear a dividend rate of 6% per annum. Dividends may be paid in shares of
EuroGas common stock at its option. The 1998 Series stock was issued for
proceeds in the amount of $15,224,995. The proceeds were net of $1,275,005
in commissions, and proceeds of $500,000 which the investor paid directly
to an un-related third party on behalf of EuroGas. EuroGas recognized the
$500,000 as a note from the third party.

These 1998 Series preferred shares are convertible into shares of common
stock at the rate of $1,000, plus any accrued but unpaid dividends through
the conversion date, divided by the lesser of 125% of the average closing
price five trading days prior to issuance of the Series B shares, or 85% of
the average closing price five trading days prior to conversion. Because
the 1998 Series was immediately convertible into common shares at a 15%
discount, EuroGas has recognized a favorable conversion feature as
preferred dividends on the dates the preferred stock was issued. During
1998, $2,550,000 in preferred dividends were recognized relating to the
favorable conversion feature.

During 1998, 15,500 shares of 1998 Series preferred stock were converted,
according to the conversion factors mentioned, into 8,860,196 common shares
at a weighted-average price of $1.77 per share. In connection with the
conversion, 88,914 common shares were issued for $165,007 in accrued
dividends on the converted 1998 Series shares at a weighted average price
of $1.86 per common share. The annual dividend requirements for the 1,500
shares of 1998 Series shares outstanding at December 31, 1998 was $90,000.

F-19
<PAGE>

EuroGas retained the right at December 31, 1998, to issue an additional
4,000 shares of 1998 Series preferred stock at $1,000 per share less
commissions of 7.5% every 30 days beginning January 1, 1999, to a maximum
13,000 shares, if the common stock of EuroGas is trading in excess of $3.00
per share or if the subscribers otherwise consent. EuroGas filed a
registration statement with the U.S. Securities and Exchange Commission
relating to the common stock underlying the 1998 Series shares. The
registration statement became effective on August 7, 1998. EuroGas is
required to maintain the effective status of the registration statement for
the period the 1998 Series shares remain outstanding.

During the nine months ended September 30, 1999, EuroGas issued 6,500
shares of Series B 1998 preferred stock for $6,500,000, or $1,000 per
share, less $487,500 of offering costs. In addition, 8,000 shares of Series
B 1998 preferred stock and $39,501 of accrued but unpaid preferred
dividends were converted into 10,576,208 common shares at a weighted
average price of $0.76 per share. Because the 1998 Series issued during
1999 was immediately convertible into common shares at a 15% discount,
EuroGas has recognized a favorable conversion feature as preferred
dividends on the dates the preferred shares were issued. During 1999,
$901,875 in preferred dividends were recognized relating to the favorable
conversion feature.

The following is a summary of the preferred stock outstanding at September
30, 1999:

<TABLE>
<CAPTION>
Liquidation Preference Annual Dividend Requirement
Shares ---------------------- ---------------------------
Designation Outstanding Per Share Total Per Share Total
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1995 Series 2,391,968 $ 0.10 $ 239,197 $ 0.05 $ 119,598
1997 Series A Convertible 260 1,000 260,000 60.00 15,600
----------- ---------- ---------- ---------- ----------
Total 2,392,228 $ 499,197 $ 135,198
=========== ========== ==========
</TABLE>

As further discussed in Note 14, EuroGas issued 1,800 shares of Series C 6%
convertible preferred stock in November 1999.

COMMON STOCK - During February 1998 EuroGas issued 13,000 common shares
valued at $61,737, or $4.75 per share in connection with an earlier private
placement. EuroGas also issued 7,500 common shares valued at $24,375, or
$3.25 per share, on August 19, 1998, to compensate a former employee, and
40,000 shares valued at $140,000, or $3.50 per share, were issued during
August 1998 to compensate for services relating to unsuccessful
acquisitions. The services provided were valued at the market price at
which EuroGas' common shares were trading on the date of the issuance of
shares.

On April 1, 1998, EuroGas issued 2,400,000 common shares valued at
$7,575,000, or $3.16 per share, in connection with the acquisition of an
interest in the Beaver River Project. In addition, 2,500,000 shares valued
at $5,000,000, or $2.00 per share, together with warrants to purchase
2,500,000 common shares, were issued on October 9, 1998 to acquire an
interest in the Maseva property. The fair value of the warrants issued of
$1,527,462 was determined by the Black-Scholes option pricing model. The
portion of the purchase prices relating to the common stock issued was
based upon the market value of the common shares issued as consideration.

EuroGas issued 100,000 common shares during 1998 upon the exercise of stock
options for $150,000 or $1.50 per share.

F-20
<PAGE>

NOTE 13--STOCK OPTIONS AND WARRANTS

On April 20, 1999, ten-year options to purchase 1,000,000 shares of common
stock at $0.95 per share were issued in connection with an employment
agreement with EuroGas' new Chief Executive Officer. The options vest on
January 1, 2000. No compensation was recognized in connection with the
grant because the exercise price was equal to the fair value of the
underlying shares on the date of the grant.

On October 9, 1998, warrants to purchase 2,500,000 common shares were
issued in connection with the acquisition of the Maseva property. The
warrants are exercisable at $2.50 per share until October 8, 2000 at which
time they expire if not exercised.

During 1997, options to purchase 2,000,000 common shares were issued in
connection with the acquisition of OMVJ. The options are exercisable at
$4.00 per share until April 1, 1998, at $5.00 per share until March 31,
1999 and then at $6.00 per share until March 31, 2000 at which time they
expire if not exercised. Options to purchase 2,200,000 common shares were
granted in conjunction with the issuance of 2,999,999 common shares for
$7,500,000 (less $75,000 in offering costs). The options were exercisable
at $3.00 per share through December 31, 1998 when they expired. Options to
purchase 250,000 common shares were granted in connection with an
investment firm contract. The options are exercisable at $11.79 per share
through August 9, 2002.

EuroGas granted options to its employees and consultants during 1996 under
the Stock Option and Award Plan which was adopted in January 1996. Options
for 2,000,000 common shares were authorized and granted in January 1996.
The options granted to employees and consultants are exercisable at $1.50
over a period of five years beginning July 18, 1996 and expire January 18,
2001. The market value of the underlying common shares was equal to the
exercise price on the date granted and, therefore, no compensation relating
to the options was recognized when granted.

EuroGas has accounted for stock-based compensation from stock options
granted to employees and consultants (prior to 1998) based on the
intrinsic value of the options on the date granted. Had compensation cost
for EuroGas' Stock Option and Award Plan been determined based on the fair
value at the grant dates for options under that plan consistent with the
alternative method of SFAS No. 123, "Accounting for Stock-Based
Compensation", EuroGas' loss applicable to common shares and loss per
common share for the nine months ended September 30, 1999, and for the
years ended December 31, 1998, 1997 and 1996 would have been increased to
the pro forma amounts shown below.

<TABLE>
<CAPTION>
December 31,
September 30, -------------------------------------
1999 1998 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss applicable to common shares:
As reported . . . . . . . . $(10,132,554) $(13,885,481) $(11,925,429) $ (6,413,183)
Pro forma . . . . . . . . . (10,878,615) (13,885,481) (11,925,429) (8,492,547)

Basic and diluted net loss per common share:
As reported . . . . . . . . $ (0.12) $ (0.22) $ (0.22) $ (0.16)
Pro forma . . . . . . . . . (0.13) (0.22) (0.22) (0.21)
</TABLE>

The fair value of the warrants and option granted during 1999, 1998, 1997
and 1996 were estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions for 1999, 1998 and 1996,
respectively: average risk-free interest rate - 4.85%, 5%, 5.7% and 5.7%;
expected volatility - 68.7%, 63.5%, 95.5% and 82.6%; expected life - 10
years, 2.0 years, 1.4 years and 5.0 years.

F-21
<PAGE>

A summary of the status of stock warrants and options as of September 30,
1999 and changes during the nine months then ended is presented below:

Weighted-
Average
Exercise
Shares Price
---------- ------------
Outstanding at beginning of period . . . . 13,750,000 $3.43
Granted 1,000,000 0.95
Exercised. . . . . . . . . . . . . . . . . - -
Expired. . . . . . . . . . . . . . . . . . (2,200,000) 6.00
----------
Outstanding at end of period . . . . . . . 12,550,000 2.86
==========
Exercisable at end of period . . . . . . . 11,500,000 3.03
==========
Weighted-average fair value of
options granted during the period . . . . $ 0.75

Options and warrants outstanding at September 30, 1999 were exercisable at
prices ranging from $0.95 to $11.79 with remaining contractual lives from
1.3 to 10 years and an average contractual life of 1.7 years.

A summary of the status of stock warrants and options as of December 31,
1998, 1997 and 1996 and changes during the years then ended are presented
below:

<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- -----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 13,450,000 $ 3.54 9,000,000 $ 2.78 - -
Granted. . . . . . . . . . . . . 2,600,000 2.46 4,450,000 3.94 9,000,000 $ 2.78
Exercised. . . . . . . . . . . . (100,000) 1.50 - - - -
Expired. . . . . . . . . . . . . (2,200,000) 3.00 - - - -
----------- ---------- -----------
Outstanding at end of year 13,750,000 3.43 13,450,000 3.54 9,000,000 2.78
=========== ========== ===========
Exercisable at end of year 13,650,000 3.45 13,300,000 3.56 8,800,000 2.81
=========== ========== ===========
Weighted-average fair value of
options granted during the year $0.61 $2.07 $1.04

</TABLE>

Options and warrants outstanding at December 31, 1998 were exercisable at
prices ranging from $1.50 to $11.79 with remaining contractual lives from
2.0 to 3.6 years and an average contractual life of 1.8 years.

NOTE 14--COMMITMENTS AND CONTINGENCIES

As discussed further in Note 9 - Income Taxes, EuroGas has proposed a
settlement of its tax liability in the Kingdom of the Netherlands.

F-22
<PAGE>

A bankruptcy estate trustee appointed in the McKenzie Bankruptcy case
has asserted a claim to the proceeds that EuroGas would receive from
an agreement with Texaco during 1997, relating to the exploitation of
the Pol-Tex methane gas concession in Poland. The Trustee's claim is
apparently based upon the theory that EuroGas paid inadequate consideration
for its acquisition of Globegas (which indirectly controlled the Pol-Tex
concession) from persons who were acting as nominees for the McKenzie's,
or in fact may be operating as a nominee for the McKenzie's, and therefore,
the creditors of the estate are the true owners of the proceeds received
or to be received from the development of the Pol-Tex concession. EuroGas
is vigorously defending against the claim. EuroGas believes that the claim
is without merit based on the fact that a condition of a prior settlement
with the principal creditor of the estate bars any such claim, that the
trustee over the estate has no jurisdiction over Pol-Tex Methane, a Polish
corporation, or its interests held in Poland, that EuroGas paid substantial
consideration for Globegas and that there is no evidence that the creditors
invested any money in the Pol-Tex concession.

In October 1999, the Trustee filed a Motion for Leave to Amend and Supplement
Pleadings and Join Additional Parties in this action and in adversary
proceeding 97-4155 (described below) in which he is seeking to add new
parties 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. EuroGas has recently filed a response objecting
to this motion. The motion is currently pending before the court.

In July 1999, the above mentioned trustee filed another suit in the same
bankruptcy cases that seeking damages in excess of $170,000 for the
defendants' alleged violation of an agreement with the trustee which allowed
the Texaco agreement to proceed. EuroGas disputes the allegations and has
filed a motion to dismiss or alternately, to abate this suit which motion is
currently pending before the court.

During 1997, a shareholder, who is also the principal creditor in the above
claim, asserted a claim against EuroGas based upon an alleged breach of
the settlement agreement between the shareholder and EuroGas as a result
of EuroGas' failure to file and obtain the effectiveness of a registration
statement for the resale by the shareholder of 100,000 shares delivered to
the shareholder in connection with the settlement. In addition, the
shareholder's parent company entered a claim for failure to register the
resale of the shares subject to its option to purchase up to 2,000,000
common shares of EuroGas. EuroGas has denied any liability and has filed a
counterclaim against the shareholder and its parent company for breach of
contract concerning their activities with the bankruptcy trustee.

In early December, EuroGas signed a settlement agreement with Kukui, the
Bishop Estate and the bankruptcy Trustee, which, if fully performed,
would resolve all claims made by Kukui and the bankruptcy Trustee in the
aforementioned litigation. That settlement, in part, requires EuroGas to
pay $900,000 over the next 12 months and issue 100,000 shares of registered
common stock to the Bishop Estate by June 30, 2000. Recently, the Trustee
declared that certain conditions precedent set forth in the settlement
agreement have not been met and the Trustee does not intend to seek
bankruptcy court approval of the agreement. EuroGas is now evaluating
what effect this has on the agreement. In the event the settlement
agreement does not resolve the foregoing litigation, EuroGas intends to
vigorously defend the litigation.

In October 1999, an action was filed against EuroGas which asserts that
EuroGas breached an agreement to seek registration of certain restricted
and unregistered common shares issued to the plaintiffs in connection with
EuroGas' acquisition of its interest in Beaver River Resources, Ltd. The
action seeks rescission of the agreement, or in the alternative, damages,
and includes claims for costs, attorneys' fees and interest. EuroGas has
filed an answer denying the allegations contained in the lawsuit.

F-23
<PAGE>

EuroGas has engaged officers, and technical and business consultants for
its various projects under terms which will require a minimum payment of
$1,600,000 during the year ending December 31, 1999.

During March of 1998, EuroGas was notified there may be certain title
problems related to an area of mutual interest to be explored and developed
by the Nafta/Danube joint venture in Slovakia. The problem area is outside
of the Trebisov area where EuroGas has drilled six wells and which is
unaffected by the claim. The disputed area is located in the southern
portion of the property covered by the designations contained in the
Nafta/Danube joint venture agreements and was subject to a competing claim
of ownership by a private Slovak company. EuroGas' expansion beyond the
Trebisov was limited by the extent the Nafta/Danube joint venture did not
have exploration rights as previously contemplated. During the second
quarter of 1998, EuroGas acquired a 90% interest in Maseva Gas, s.r.o.
("Maseva") which holds the rights to the exploration territory known as
"Kralovsky Chlmec"and includes the disputed area located to the south of
Trebisov. The division of the working interest for this territory is 67.5%
for EuroGas (rather than the 50% split which governs the Trebisov area),
provided that EuroGas carries the cost of drilling the first two wells in
the Maseva concession.

EuroGas has notified the former shareholders of Danube of a potential
claim against them by reason of this recent problem. EuroGas believes the
owners of Danube knew, or should have known, about the problem prior to the
acquisition of Danube and made no disclosure concerning the problem.
EuroGas has made a claim against the former Danube shareholders for
indemnity to the extent EuroGas suffers any damage by reason of the
potential title claim. It is uncertain whether EuroGas will be able to
recover from the former Danube shareholders.

As a result of the title problems with the Nafta/Danube property, a dispute
has arisen with the joint venture partner, Nafta Gbely a.s. ("Nafta").
EuroGas has asserted a claim for misrepresentation of the property asset at
the time of its acquisition and has made demand on Nafta in an amount equal
to EuroGas' investment in the property. Efforts to bring the property to
production were suspended pending resolution of the claims. EuroGas has
received indications the Slovak government may seek to resolve the dispute.
Recently, the government completed its nationalization of Nafta; although
discussions are scheduled between EuroGas and Nafta, resolution of this
matter is not assured.

During 1997, EuroGas accrued a $1,000,000 obligation to a lender. During
the fourth quarter of 1998, following resolution of the contingency,
management revised its estimate to zero and reversed the accrual. The
reversal is accounted for as change in an accounting estimate.

An assertion has been made against EuroGas by holders of registration
rights that EuroGas failed to file a Registration Statement for certain
shares and warrants held. EuroGas has not completed settlement
negotiations; no amount has been estimated or provided with respect to
this claim.

During October 1997 EuroGas received an additional concession rights from
the Polish Ministry of Environmental Protection of Natural Resources and
Forestry to explore and potentially develop a 111 square kilometer coal
bed methane concession. The concession agreement requires expenditure of
$40,000 per year pending completion of a feasibility study and
negotiations with third parties for the eventual pruchase of natural gas.

In October 1997, EuroGas completed an agreement on a 50/50 cost basis for
appraisal and development activities for an area located in the
Carpathian Flysch and tectonic Fordeep areas of Poland. The agreement
contemplates a total expenditure by EuroGas of $15 million over a three-
year period. EuroGas does not presently have the assets necessary to
meet this obligation.

F-24
<PAGE>

In March 1998, EuroGas acquired a 53% interest in RimaMuran s.r.o. whose
principal asset is a minority interest in a talc deposit in eastern
Slovakia. RimaMuran will have an obligation to fund 33 to 39% of the
projected $12,000,000 capital cost requirements over the next two and
one-half years. RimaMuran does not have the assets necessary to meet this
obligation, and it is anticipated that the necessary funding will need to
be provided by EuroGas . To date, EuroGas has invested $1,387,682 in the
RimaMuran project.

During February 1998, EuroGas formed a consortium with a large United
Kingdom power producer and with a German Utility company to develop a power
generation project in Zielona Gora, Western Poland. EuroGas anticipates
the total investment required to develop the project will approximate $150
Million. EuroGas will hold a 12.5% share interest in the joint venture
created by the consortium and will be required to pay approximately 7.5%,
or $11,250,000 of the estimated project cost. EuroGas does not presently
have the assets necessary to meet this obligation.

During 1998, EuroGas entered into six agreements which grant rights to
jointly explore prospects within the Ukraine. The agreements commit EuroGas
to form joint ventures and joint companies and use the partners' concession
agreements in exploiting the potential standard oil and gas, as well as
coal-bed methane gas reserves. The potential reserves in the Ukraine have
not been independently verified.

During April 1999, EuroGas entered into a three-year employment contract
with its new chief executive officer. The contract provides for annual
salary of $400,000 plus living and other allowances of $28,200. In
addition, options to purchase, 1,000,000 shares of EuroGas common stock at
$0.95 were granted in connection with the employment contract. The options
vest on January 1, 2000, and expire in April 2009.

The Company leases office facilities from various lessors in the United
States, Poland, Germany, Ukraine, the Netherlands, and the United Kingdom.
Annual commitments for future minimum rental payments required under the
leases as of September 30, 1999 were as follows:
Lease
Payments
Year Ending December 31: ----------
1999 $ 685,976
2000 270,660
2001 270,660
2002 221,022
2003 116,208
Thereafter 9,684
----------
Total $1,574,210
==========

NOTE 15--SUBSEQUENT EVENTS (UNAUDITED)

During November 1999, EuroGas paid $600,000 of principal on an 8% note
payable with a remaining principal balance of approximately $640,000.

During November 1999, the Company designated a new 1999 Series C 6%
convertible preferred stock (the "1999 Series") and completed a private
placement of 1,800 shares, resulting in proceeds to EuroGas of $1,651,500,
net of $148,500 offering costs. The 1999 Series shares have a par value of
$0.001 per share and a liquidation preference of $1,000 per share, plus all
accrued but unpaid dividends. The 1999 Series shares are non-voting and
bear a 6% dividend rate per annum, or $60.00 per share. The 1999 Series
preferred shares are convertible into common shares of EuroGas at the rate
of $1,000 divided by an applicable percentage

F-25
<PAGE>

(85.0% to 77.5% depending on the number of days after issuance a
registration statement filed with the Securities Exchange Commission
becomes effective) of the average closing bid price for five trading days
preceding the date of issuance or the conversion date. Alternately, the
1999 Series preferred shares are convertible into common shares of Big
Horn Resources, Ltd. held by EuroGas at the rate of $1,000 divided by an
applicable percentage (80.0% if conversion is from 46 to 75 days after
issuance or 77.5% if conversion is more than 75 days after issuance) of
the average closing bid price of the Big Horn common stock for five
trading days preceding the conversion date. EuroGas has placed 8,500,000
shares of Big Horn common stock in escrow for use should the 1999 Series
preferred shareholders elect to convert their shares into Big Horn common
shares. During the fourth quarter of 1999, EuroGas will recognize
$270,000 in preferred dividends for the effects of the 15% discount
beneficial conversion feature from the issuance of the 1999 Series
preferred stock.

F-26
<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED)

The aggregate amounts of capitalized costs relating to oil and gas
producing activities and the related accumulated depreciation, depletion,
and amortization as of December 31, 1998 and 1997, by geographic area, were
as follows:

<TABLE>
<CAPTION>
Eastern Europe
Total Canada and Russia
------------- ------------ ------------
<S> <C> <C> <C>
AT DECEMBER 31, 1998
Unproved oil and gas properties. . . . . . . . $ 36,764,402 $ 9,776,610 $ 26,987,792
Proved oil and gas properties. . . . . . . . . 20,521,728 9,912,902 10,608,826
------------- ------------ ------------
Gross capitalized costs. . . . . . . . . . . . 57,286,130 19,689,512 37,596,618
Less: Ceiling test adjustment and
impairments . . . . . . . . . . . . . . . . . (6,459,442) (3,512,793) (2,946,649)
Less: Accumulated depreciation, depletion,
and amortization. . . . . . . . . . . . . . . (220,600) (220,600) -

Future abandonment and restoration . . . . . . (246,125) (246,125) -
------------- ------------ ------------
Net capitalized costs. . . . . . . . . . . . . $ 50,359,963 $ 15,709,994 $ 34,649,969
============= ============ ============

AT DECEMBER 31, 1997
Unproved oil and gas properties. . . . . . . . $ 25,665,373 $ - $ 25,665,373
Gross capitalized costs. . . . . . . . . . . . 25,665,373 - 25,665,373
Less: Ceiling test adjustment and
impairments . . . . . . . . . . . . . . . . . (2,941,713) - (2,741,713)
------------- ------------ ------------
Net capitalized costs. . . . . . . . . . . . . $ 22,723,660 $ - $ 22,723,660
============= =========== ============
</TABLE>

Costs incurred in oil and gas producing activities, both capitalized and
expensed, during the years ended December 31, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
Eastern Europe
Total Canada and Russia
------------- ------------ ------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
Property acquisition costs
Proved. . . . . . . . . . . . . . . . . . $ 8,784,050 $ 8,784,050 $ -
Unproved. . . . . . . . . . . . . . . . . 17,804,072 9,776,610 8,027,462
Exploration costs. . . . . . . . . . . . . . . 573,570 - 573,570
Development costs. . . . . . . . . . . . . . . 4,459,065 1,128,852 3,330,213
------------- ------------ ------------
Total Costs Incurred . . . . . . . . . . . . . $ 31,620,757 $ 19,689,512 $ 11,931,245
============= ============ ============
FOR THE YEAR ENDED DECEMBER 31, 1997
Property acquisition costs
Unproved. . . . . . . . . . . . . . . . . $ 7,574,601 $ - $ 7,574,601
Exploration costs. . . . . . . . . . . . . . . 3,368,917 - 3,368,917
Development costs. . . . . . . . . . . . . . . - - -
------------- ------------ ------------
Total Costs Incurred . . . . . . . . . . . . . $ 10,943,518 $ - $ 10,943,518
============= ============ ============
</TABLE>
F-27
<PAGE>

The results of operations from oil and gas producing activities for the
years ended December 31, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
Eastern Europe
Total Canada and Russia
------------- ------------ ------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
Oil and gas sales. . . . . . . . . . . . . . . $ 879,404 $ 879,404 $ -
Production costs . . . . . . . . . . . . . . . (305,009) (305,009) -
Impairment of mineral interests. . . . . . . . (3,512,792) (3,512,792) -
Depreciation, depletion, and amortization. . . (220,600) (220,600) -
------------- ------------ ------------
Results of operations for oil and gas producing
activities (excluding corporate overhead and
financing costs). . . . . . . . . . . . . . . $ (3,158,997) $ (3,158,997) -
============= ============ ============
FOR THE YEAR ENDED DECEMBER 31, 1997
Impairment of mineral interests. . . . . . . . $ (2,941,713) $ - $ (2,941,713)
Depreciation, depletion, and amortization. . . - - -
------------- ------------ ------------
Results of operations for oil and gas producing
activities (excluding corporate overhead and
financing costs). . . . . . . . . . . . . . . $ (2,941,713) $ - $ (2,941,713)
============= ============ ============
</TABLE>

RESERVE INFORMATION - The following estimates of proved and proved
developed reserve quantities, presented in barrels and thousand cubic feet
(MCF), and related standardized measure of discounted net cash flow are
estimates only, and do not purport to reflect realizable values or fair
market values of EuroGas' reserves. EuroGas emphasizes that reserve
estimates are inherently imprecise and that estimates of new discoveries
are more imprecise than those of producing oil and gas properties.
Accordingly, these estimates are expected to change as future information
becomes available. EuroGas' proved reserves are located in Canada and the
Slovak Republic. Unproved reserve properties are located in the Slovak
Republic, Sakha Republic (Russian Federation), Canada, Poland, and the
Ukraine.

Proved reserves are estimated reserves of crude oil (including condensate
and natural gas liquids) and natural gas that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are those expected to be recovered
through existing wells, equipment and operating methods.

<TABLE>
<CAPTION>
Total Canada Slovak Republic
---------------------- ---------------------- ----------------------
Oil Gas Oil Gas Oil Gas
(Barrels) (MCF) (Barrels) (MCF) (Barrels) (MCF)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Proved Developed and Undeveloped Reserves
Balance - January , 1998. . . - - - - - -
Purchases of minerals in
place. . . . . . . . . . . . 847,500 7,246,700 847,500 7,246,700 - -
Extensions and discoveries. . 94,880 5,487,785 - - 94,880 5,487,785
Production. . . . . . . . . . (36,500) (365,000) (36,500) (365,000) - -
---------- ---------- ---------- ---------- ---------- ----------
Balance - December 31, 1998 . 905,880 12,369,485 811,000 6,881,700 94,880 5,487,785
========== ========== ========== ========== ========== ==========
Proved Developed Reserves -
December 31, 1998 . . . . . . 764,800 3,726,300 764,800 3,726,300 - -
========== ========== ========== ========== ========== ==========
</TABLE>
F-28
<PAGE>

The standardized measure of discounted future net cash
flows is computed by applying year-end prices of oil and
gas (with consideration of price changes only to the
extent provided by contractual arrangements) to the
estimated future production of proved oil and gas
reserves, less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing
the proved reserves, less estimated future income tax
expenses (based on year-end statutory tax rates, with
consideration of future tax rates already legislated) to
be incurred on pretax net cash flows less the tax basis of
the properties and available credits, and assuming
continuation of existing economic conditions. The
estimated future net cash flows are then discounted using
a rate of 10 percent per year to reflect the estimated
timing of the future cash flows.

The standardized measure of discounted estimated net cash
flows related to proved oil and gas reserves at December
31, 1998 were as follows. There were no proved oil and
gas reserves at December 31, 1997 or December 31, 1996:

<TABLE>
<CAPTION>
Eastern Europe
Total Canada and Russia
------------ ------------ ------------
<S> <C> <C> <C>
Future cash inflows. . . . . . . . . . . . . . $ 36,750,126 $ 20,864,305 $ 15,885,821
Future production costs and
development costs . . . . . . . . . . . . . . (9,937,200) (8,431,705) (1,505,494)
Future income tax expenses . . . . . . . . . . (3,379,138) (2,096,829) (1,282,310)
------------ ------------ ------------
Future net cash flows. . . . . . . . . . . . . 23,433,788 10,335,771 13,098,017

10% annual discount for estimated
timing of cash flows. . . . . . . . . . . . . (9,770,798) (3,935,291) (5,835,507)
------------ ------------ ------------
Standardized measures of discounted future
net of cash flows relating to proved oil
and gas reserves. . . . . . . . . . . . . . . $ 13,662,990 $ 6,400,480 $ 7,262,510
============ ============ ============
</TABLE>

The primary changes in the standardized measure of discounted estimated
future net cash flows for the year ended December 31, 1998 were as follows:

<TABLE>
<CAPTION>
Eastern Europe
Total Canada and Russia
------------ ------------ ------------
<S> <C> <C> <C>
Beginning of year. . . . . . . . . . . . . . . $ - $ - $ -
Purchase of minerals in place. . . . . . . . . 6,948,967 6,948,967 -
Extensions and discoveries . . . . . . . . . . 6,857,937 - 6,857,937
Development. . . . . . . . . . . . . . . . . . 4,406,706 1,076,493 3,330,213
Production . . . . . . . . . . . . . . . . . . (574,395) (574,395) -
Revisions of estimates:
Sales prices . . . . . . . . . . . . . . . (320,693) - (320,693)
Development costs. . . . . . . . . . . . . (2,580,213) - (2,580,213)
Accretion of discount. . . . . . . . . . . . . 866,857 180,583 686,274
Net change in income taxes . . . . . . . . . . (2,004,491) (1,293,483) (711,008)
Change in exchange rate. . . . . . . . . . . . 62,315 62,315 -
------------ ------------ ------------
End of year. . . . . . . . . . . . . . . . . . $ 13,662,990 $ 6,400,480 $ 7,262,510
============ ============ ============
</TABLE>
F-29
<PAGE>

EUROGAS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Effective October 5, 1998, EuroGas, Inc. ("EuroGas") completed
the acquisition of 14,100,000 common shares (slightly more
than a 50% interest) of Big Horn Resources Ltd. ("Big
Horn"), an oil and gas exploration and production company
operating in Western Canada. The accompanying unaudited
pro forma condensed consolidated statement of operations
has been prepared to present the results of operations of
EuroGas, Inc. and subsidiaries as if the acquisition of
Big Horn had occurred on January 1, 1998. By the date of
the closing of the acquisition on March 31, 1999, EuroGas
had made cash payments of $4,723,498 on October 17, 1998,
executed promissory notes on March 30, 1999 in the
aggregate amount of $1,840,224, and had canceled a June
1998 note receivable from one of the Big Horn shareholders
in the amount of $1,100,000. These payments and the face
amount of the notes were discounted by $70,238 using a 10%
discount rate to establish the purchase price on October
5, 1998, the date the parties agreed to the terms of these
transactions, of $7,593,484.

The acquisition was accounted for under the purchase
method of accounting. The purchase price was determined
based upon the fair value of the consideration paid. The
purchase price was allocated to the acquired net assets of
Big Horn based upon their relative fair values on the
effective date of the acquisition. The fair value of the
acquired properties was based on a reserve report
prepared by independent petroleum engineers. The purchase
price exceeded the fair value of the net assets acquired
by $3,512,792 which was recognized by EuroGas, Inc. as a
non-recurring impairment expense at the date of the
acquisition.

The following financial information was derived from, and
should be read in conjunction with the consolidated
statements of operations of EuroGas, Inc. and subsidiaries
and of Big Horn for the year ended December 31, 1998. The
operations of Big Horn were included in the consolidated
results of operations of EuroGas, Inc. and subsidiaries
from October 5, 1998. Accordingly, adjustments have been
made to eliminate the duplication of the Big Horn
operations for the three months ended December 31, 1998.
Since the results of operations from Big Horn are included
in the consolidated results of operations of EuroGas, Inc.
and subsidiaries for the three months ended March 31,
1999, operations for Big Horn and related pro forma
amounts have not been separately presented for that
period. The unaudited condensed consolidated pro forma
statement of operations has been included herein for
comparative purposes only and does not purport to be
indicative of the results of operations which actually
would have been obtained had the agreement been completed
on January 1, 1998, or the results of operations which may
be obtained in the future. In addition, future results may
vary significantly from the results reflected in this pro
forma financial statement.

F-30
<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Big Horn Pro Forma Pro Forma
EuroGas, Inc. Resources Adjustments Results
----------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
Oil and Gas Sales $ 879,404 $ 2,711,520 (A) $ (879,404)
(C) (573,105) $ 2,138,415
----------- ----------- ----------- ------------
Costs and Operating Expenses
Oil and gas production costs 305,009 828,950 (A) (305,009) 828,950
Impairment of mineral interest
and equipment 3,512,792 1,281,221 (D) (3,512,792) -
(F) (1,281,221) -
Royalties - 573,105 (C) (573,105) -
Depreciation, depletion,
and amortization 293,955 872,579 (B) (7,114) -
(A) (246,125) 913,295
General and administrative 7,804,401 222,826 (A) (41,121) 7,986,106
----------- ----------- ----------- ------------

Total Costs and Operating
Expenses 11,916,157 3,778,681 (5,966,487) 9,728,351
----------- ----------- ----------- ------------

Other Income (Expense)
Interest income 593,570 63,443 (A) (62,521) 594,492
Foreign exchange net losses (130,419) - - (130,419)
Interest expense (465,371) (96,240) (A) 61,412 (500,199)
Income tax benefit - 14,869 - 14,869
Minority interest in income
of subsidiary (137,983) - (E) 67,927 (70,056)
Other 152,776 - - 152,776
----------- ----------- ----------- ------------
Total Other Income (Expense) 12,573 (17,928) 66,818 61,463
----------- ----------- ----------- ------------
Net Loss (11,024,180) (1,085,089) 4,580,796 (7,528,473)

Preferred Dividends (2,861,301) - - (2,861,301)
------------ ----------- ----------- ------------
Loss Applicable to Common Shares $(13,885,481) $(1,085,089) $ 4,580,796 $(10,389,774)
============ =========== =========== ============
Basic and Diluted Loss Per
Common Share $ (0.22) $ (0.16)
============ ============
Weighted Average Number of Common
Shares Used In Per Share
Calculations 64,129,062 64,129,062
============ ============
</TABLE>

Notes to the unaudited pro forma condensed consolidated statement of
operations are presented on the following page.

F-31
<PAGE>

EUROGAS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS

NOTE 1- Pro forma adjustments are as follows:

A - Adjustments to eliminate duplicated Big Horn operations
from October 5, 1998 through December 31, 1998. The EuroGas
condensed consolidated statement of operations for the year ended
December 31, 1998 includes the results of operations of Big Horn
from the date of its acquisition on October 5, 1998.

B - Adjustment to reflect depletion expense based upon an allocation of
EuroGas' purchase price and assuming the acquisition occurred on
January 1, 1998.

C - Adjustment to classify royalties according to U.S. generally accepted
accounting principles.

D - Adjustment to eliminate the nonrecurring impairment loss recognized
by EuroGas which was directly attributable to the acquisition.

E - Adjustment to reflect minority interest in the Big Horn income from
January 1, 1998

F - Adjustment to eliminate the impairment loss recognized by Big Horn
prior to the EuroGas acquisition.

NOTE 2- The translation to U.S. dollars and adjustments to U.S.
generally accepted accounting principles of the Big Horn financial
statements, which were prepared in Canadian dollars and using Canadian
generally accepted accounting principles, was done using the average
exchange rate for the year ended December 31, 1998, as follows:

<TABLE>
<CAPTION>
U.S.
Canadian GAAP in U.S.
Financial U.S. GAAP Canadian Exchange GAAP in
Statements Adjustments Dollars Rate U.S. Dollars
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue and Income
Oil and gas sales $ 4,021,076 $ 4,021,076 1.48 $ 2,711,520
Interest and other
income 94,084 94,084 1.48 63,443
----------- ----------- ---------- -----------
Total Revenue and
Income 4,115,160 4,115,160 1.48 2,774,963
----------- ----------- ----------
Costs and Expenses
Oil and gas production
costs 1,229,300 1,229,300 1.48 828,950
Impairment of mineral
interest and equipment - $ 1,900,000 1,900,000 1.48 1,281,221
Royalties 849,892 849,892 1.48 573,105
Depreciation, depletion,
and amortization 1,365,000 (71,000) 1,294,000 1.48 872,579
General and administrative 330,442 330,442 1.48 222,826
Interest 142,720 142,720 1.48 96,240
Income tax benefit - (22,050) (22,050) 1.48 (14,869)
----------- ----------- ----------- -----------
Total Costs and Expenses 3,917,354 1,806,950 5,724,304 1.48 3,860,052
----------- ----------- ----------- -----------
Net Income (Loss) $ 197,806 $(1,806,950) $(1,609,144) 1.48 $(1,085,089)
=========== =========== =========== ===========
</TABLE>

F-32
<PAGE>

AUDITORS' REPORT TO THE DIRECTORS

We have audited the consolidated balance sheets of Big Horn Resources Ltd.
as at December 31, 1998 and 1997 and the consolidated statements of
earnings and deficit and changes in financial position for the years then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at December
31, 1998 and 1997 and the results of its operations and the changes in its
financial position for the years then ended in accordance with generally
accepted accounting principles in Canada.

KPMG LLP
Chartered Accountants

Calgary, Canada
March 26, 1999

F-33

<PAGE>

Big Horn Resources Ltd.
-------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
DECEMBER 31 December 31
1998 1997
-------------------------------------------------------------------------

ASSETS

CURRENT ASSETS
Cash $252,175 $76,240
Accounts receivable 1,702,025 1,851,835
Prepaid expenses and other assets 12,986 5,336
- - --------------------------------------------------------------------------
1,967,186 1,933,411

CAPITAL ASSETS (NOTE 3) 15,181,925 4,428,367
- - --------------------------------------------------------------------------
$17,149,111 $6,361,778
==========================================================================

LIABILITIES

CURRENT LIABILITIES
Accounts payable and accrued
liabilities $1,867,680 $1,946,172
- - --------------------------------------------------------------------------
1,867,680 1,946,172

BANK INDEBTEDNESS (NOTE 4) 1,421,759 1,600,000

Provision for future abandonment and
site restoration costs 191,670 50,000
- - --------------------------------------------------------------------------
3,481,109 3,596,172
- - --------------------------------------------------------------------------

SHAREHOLDERS' EQUITY

SHARE CAPITAL (NOTE 5) 18,209,175 7,504,585
DEFICIT (4,541,173) (4,738,979)
- - --------------------------------------------------------------------------
13,668,002 2,765,606
SUBSEQUENT EVENTS (NOTE 8)
- - --------------------------------------------------------------------------
$17,149,111 $6,361,778
==========================================================================

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-34

<PAGE>

Big Horn Resources Ltd.

-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT
-------------------------------------------------------------------------

YEAR Year
ENDED Ended
DECEMBER 31 December 31
1998 1997
---------------------------------------------------------------------------

REVENUE

Oil and gas sales $3,807,620 $2,637,805
Alberta royalty tax credit 213,456 93,981
Interest and other income 94,084 4,813
-------------------------------------------------------------------------
4,115,160 2,736,599
-------------------------------------------------------------------------

EXPENSES

Operating expenses 1,229,300 858,848
Royalties 849,892 759,855
General and administrative 330,442 243,413
Interest on long-term debt 142,720 93,121
Depletion and depreciation (note 3) 1,365,000 5,118,937
-------------------------------------------------------------------------
3,917,354 7,074,174
-------------------------------------------------------------------------
NET EARNINGS (LOSS) 197,806 (4,337,575)

DEFICIT - BEGINNING OF YEAR (4,738,979) (401,404)
-------------------------------------------------------------------------

DEFICIT - END OF YEAR ($4,541,173) ($4,738,979)
=========================================================================

BASIC EARNINGS (LOSS) PER SHARE $0.01 ($0.46)
=========================================================================

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-35
<PAGE>

Big Horn Resources Ltd.
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
- - --------------------------------------------------------------------------

YEAR Year
ENDED Ended
DECEMBER 31 December 31
1998 1997
-------------------------------------------------------------------------

Cash provided by (used in):

Operations

Net earnings (loss) $197,806 ($4,337,575)

Add non-cash items:
Depletion and depreciation 1,365,000 5,118,937

Net change in non-cash working
capital items (644,282) (522,658)
-------------------------------------------------------------------------
918,524 258,704
-------------------------------------------------------------------------
Financing

Issue of share capital 10,704,590 3,492,035
Increase (decrease) in bank
indebtedness (178,241) 208,074
Accrued share issue costs - 150,000
-------------------------------------------------------------------------
10,526,349 3,850,109
-------------------------------------------------------------------------

Investing

Acquisition of Ironwood Petroleum
Ltd., net of cash acquired (6,548,925) -
Additions to capital assets (4,720,013) (4,032,573)
-------------------------------------------------------------------------
(11,268,938) (4,032,573)

Increase in cash 175,935 76,240

Cash, beginning of year 76,240
-------------------------------------------------------------------------
Cash, end of year $252,175 $76,240
=========================================================================

See accompanying notes to consolidated financial statements

F-36
<PAGE>

Big Horn Resources Ltd.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

__________________________________________________________________________
1. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements are prepared in accordance
with generally accepted accounting principles in Canada.
Substantially all of the exploration and production activities of the
Company are conducted jointly with others and these consolidated
financial statements reflect only the Company's proportionate
interest in such activities. These consolidated financial statements
include the accounts of Ironwood Petroleum Ltd. ("Ironwood")
effective from October 1, 1998.

(a) Petroleum and natural gas properties

The Company follows the full cost method of accounting for petroleum
and natural gas properties. All costs related to the exploration for
and the development of oil and gas reserves are capitalized on a
country by country basis. Costs capitalized include land acquisition
costs, geological and geophysical expenditures, lease rentals on
undeveloped properties and costs of drilling productive and
non-productive wells. Proceeds from the disposal of properties are
applied as a reduction of cost without recognition of a gain or loss
except where such disposals would result in a significant change in
the depletion rate.

Capitalized costs are depleted and depreciated using the unit of
production method based on the estimated gross proven oil and natural
gas reserves before royalties as determined by independent engineers.
Units of natural gas are converted into equivalent barrels of oil
based on their on their relative energy content.

Capitalized costs, net of accumulated depletion and depreciation,
are limited to estimated undiscounted future net revenues from proven
reserves, based on year-end prices, less estimated future site
restoration costs, general and administrative expenses, financing
costs and income taxes.

Estimated future abandonment and site restoration costs are
provided for over the life of proven reserves on a unit of production
basis. The annual charge is included in depletion and depreciation
expense and actual abandonment and site restoration costs are charged
to the provision as incurred.

The amounts recorded for depletion and depreciation and the
provision for future abandonment and site restoration costs are based
on estimates of proven reserves and future costs. The recoverable
value of capital assets is based on a number of factors including the
estimated proven reserves and future costs. By their nature, these
estimates are subject to measurement uncertainty and the impact on
financial statements of future periods could be material.

(b) Per share data

Per share amounts are calculated based on the weighted average
number of shares outstanding during the year. The exercise of stock
options and warrants would not have a material dilutive effect on the
per share data.

The Company's financial instruments consist of cash, accounts
receivable, accounts payable, accrued liabilities and bank
indebtedness. The fair values of all of the Company's financial
instruments approximate their carrying values.

(d) Estimates and assumptions

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities
at the dates of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results
could differ from those estimates.

F-37
<PAGE>

2. ACQUISITION

Effective October 1, 1998 the Company acquired all of the issued
and outstanding shares of Ironwood for $7,230,361 including
acquisition costs of $143,191.

This business combination has been accounted for using the
purchase method based on the assets and liabilities of Ironwood as at
September 30, 1998. The results of operations of Ironwood have been
included in the Company's consolidated financial statements effective
from October 1, 1998.

Details of the acquisition are as follows:

Assets acquired:
Current assets, excluding cash $613,792
Capital assets 7,342,545
----------
7,956,337
Liabilities assumed:
Current liabilities 1,321,742
Provision for future abandonment
and site restoration costs 85,670
----------
1,407,412

Net non-cash assets acquired 6,548,925
Cash acquired 681,436
----------
Net assets acquired $7,230,361
==========
Consideration:
Cash $7,230,361
==========

3. CAPITAL ASSETS
------------------------------------------------------------------------
December 31, 1998
-------------------------------------------------------------------------
Accumulated
depletion and
Cost depreciation Net
-------------------------------------------------------------------------
Petroleum and natural
gas properties $22,716,141 $7,593,981 $15,122,160

Office furniture and
equipment 91,265 31,500 59,765
-------------------------------------------------------------------------
$22,807,406 $7,625,481 $15,181,925
=========================================================================

December 31, 1997
-------------------------------------------------------------------------
Accumulated
depletion and
Cost depreciation Net
-------------------------------------------------------------------------

Petroleum and natural
gas properties $10,672,915 $6,304,981 $4,367,934

Office furniture and
equipment 71,933 11,500 60,433
-------------------------------------------------------------------------
$10,744,848 $6,316,481 $4,428,367
=========================================================================

F-38
<PAGE>

The provision for depletion and depreciation in 1998 and 1997
includes the following components:

1998 1997
-------------------------------------------------------------------------

Amortization of capital assets $1,309,000 $ 982,800

Provision for future abandonment and
site restoration 56,000 36,000

Write-down of abandoned overseas properties - 300,137

Ceiling test adjustment - 3,800,000
-------------------------------------------------------------------------
$1,365,000 $5,118,937
=========================================================================

As at December 31, 1998 costs of undeveloped land of $3,100,00
(1997 - $824,712) have been excluded from the calculation of
depletion expense.

4. BANK INDEBTEDNESS

Bank indebtedness represents the outstanding balance under an
authorized line of credit of $7,000,000 (1997 - $2,300,000) with the
Alberta Treasury Branches. Drawings under the line of credit bear
interest at 1% above the bank's prime lending rate. Security is
provided by a first charge over all of the Company's assets. The
balance is repayable on demand.

F-39
<PAGE>

5. SHARE CAPITAL

(a) Authorized
Unlimited number of voting common shares without nominal or par value.

(b) Issued and to be issued.
-------------------------------------------------------------------------
Number of
common
shares Amount
-------------------------------------------------------------------------

Balance, December 31, 1996, shares issued and
to be issued 8,818,221 $4,012,550

Shares issued on exercise of warrants 436,250 305,377

Shares issued on exercise of warrants ( see
note 5(c) ) 500,000 115,000

Shares issued on exercise of stock options 73,500 26,460
-------------------------------------------------------------------------
Balance, December 31, 1997, shares issued 9,827,971 4,459,387

Proceeds received on issue of Special
Warrants, net of issue costs of $388,802
(see note 5(d)) - 3,045,198
-------------------------------------------------------------------------

Balance, December 31, 1997, shares issued
and to be issued 9,827,971 7,504,585

Shares issued on conversion of Special
Warrants ( see note 5(d) ) 3,434,000 -

Shares issued on exercise of stock options 564,500 172,260

Shares issued as compensation 10,220 9,198

Shares issued on private placement
(see note 5(e) ) 3,210,000 3,600,000

Shares issued on private placement
(see note 5(f) ) 1,075,500 914,175

Proceeds received from private placement
subscription ( see note 5(g) ) - 6,500,000

Share issue costs - (491,043)
-------------------------------------------------------------------------
Balance, December 31, 1998, shares issued 18,122,191 $11,709,175
Proceeds received from private placement
subscription (see note 5(g)) - 6,500,000
=========================================================================
Balance, December 31, 1998, shares issued
and to be issued 18,122,191 $18,209,175
=========================================================================

(c) On August 26, 1997, 500,000 common shares were issued to an
officer and director of the Company on the exercise of
500,000 share purchase warrants at a price of $0.23 per share
for an aggregate consideration of $115,000.

(d) On September 16, 1997, the Company issued 592,000 Special
Warrants at a price of $2.00 per Special Warrant. Each
Special Warrant entitled the holder to acquire one common
share, one flow-through common share and one share purchase
warrant at no additional cost. Each share purchase warrant
entitled the holder to purchase an additional share of the
Company at a price of $1.25 per share exercisable until
September 21, 1998. On September 17, 1997 the Company issued
2,250,000 Special Warrants, of which 1,125,000 were
flow-through Special Warrants, at a price of $1.00 per
Special Warrant. Each Special Warrant entitled the holder to
acquire one common share and one share purchase warrant at no
additional cost. Each share purchase warrant entitled the
holder to purchase an additional share of the Company at a
price of $1.25 per share exercisable until September 21,
1998. The net proceeds to the Company from both issues were
$3,045,585. These proceeds were received in 1997. All of
the common shares referred to above were issued in 1998. The
share purchase warrants expired unexercised on September 21,
1998.

F-40
<PAGE>

(e) On March 20, 1998, the Vancouver Stock Exchange approved a
non-brokered private placement of 3,000,000 common shares at a price
of $1.20 per share for proceeds of $3,600,000. The private placement
included 2,000,000 share purchase warrants exercisable up to March
22, 1999 at a price of $1.50 per common share. In addition, 210,000
common shares were issued as a finder's fee. The share purchase
warrants expired unexercised on March 22, 1999.

(f) On December 31, 1998 the Company issued 1,075,500 flow-through
common shares through a non-brokered private placement. Proceeds to
the Company from this issue were $914,175. Pursuant to the
flow-through share agreement, the Company will renounce $914,175 of
income tax deductions to the subscribers to these shares. At
December 31, 1998 $379,547 had been renounced.

(g) As described in note 2, the Company acquired, effective October
1, 1998, all of the issued and outstanding shares of Ironwood for
$7,230,361. This acquisition was partly financed by the issuance of
10,000,000 common shares at a price of $0.65 per share. This private
placement received final approval by the Toronto Stock Exchange on
January 29, 1999 and the common shares were issued from treasury on
February 4, 1999. The remaining funds held in escrow pursuant to the
private placement were released to the Company on February 5, 1999 in
the amount of $4,278,241. These funds are recorded as a reduction in
the Company's bank indebtedness at December 31, 1998.

(h) Options:

Number of options Exercise price Expiry date
----------------- -------------- -----------------
175,000 $0.69 November 25, 2001

85,000 $0.92 July 16, 2002

30,000 $1.15 March 09, 2003

85,000 $1.15 March 09, 2006

534,500 $0.98 May 26, 2008

25,000 $0.97 July 30, 2008
--------------------------------------------------
934,500
==================================================

(i) Warrants:

There are 50,000 share purchase warrants held by a company controlled
by a consultant to the Company as partial consideration for the purchase
of certain petroleum and natural gas properties. These warrants are
exercisable up to June 10, 1999 at an exercise price of $1.15.

There are 225,000 broker warrants outstanding related to the issue of
the Special Warrants referred to in note 5(d). These warrants vest as
to 1/4 on each of September 19, 1998, March 19, 1999, September 19, 1999
and March 19, 2000. These warrants are exercisable at a price of $1.00
per common share. The warrants will expire if not exercised on or
before the September 19, 2000.

F-41
<PAGE>

6. INCOME TAXES

The income tax provision is calculated by applying Canadian
federal and provincial statutory tax rates to pre-tax income with
adjustments as set out in the following table:

1998 1997
-------- -----------
Earnings (loss) before income taxes $197,806 $(4,337,575)

Combined federal and provincial income tax
rate 45% 45%

Computed income tax provision $ 89,013 $(1,951,909)

Increase (decrease) resulting from:

Non-deductible Crown royalties 330,734 315,925

Resource allowance (248,225) (143,808)

Alberta Royalty Tax Credit (96,056) -

Recognition of accounting loss
carry-forwards (361,939) -

Depletion on assets with no tax base 285,237 818,100

Accounting losses not recognized - 1,001,208

Other 1,236 2,775
--------- -----------
$ - $ -
========= ===========

At December 31, 1998 the Company had approximately $12,697,000
(1997 - $6,240,000) of tax pools available to reduce future taxable
income.

7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

The Year 2000 Issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before,
on or after January 1, 2000 and, if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant system failure which could affect the Company's ability
to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers,
suppliers or other third parties, will be fully resolved.

8. SUBSEQUENT EVENTS

(a) On January 1, 1999 the Company amalgamated with its wholly-owned
subsidiary, Ironwood Petroleum Ltd. under the continuing name Big Horn
Resources Ltd.

(b On February 4, 1999 the Company issued 10,000,000 common shares
from treasury as described in note 5(g).

(c) On February 5, 1999 the Company received the remaining proceeds
from escrow from its private placement as described in note 5(g).

9. DIFFERENCES IN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES BETWEEN
CANADA AND THE UNITED STATES

The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") in Canada.
Differences in accounting principles as they pertain to the accompanying
financial statements are immaterial except as described below:

(a) Under U.S. GAAP the carrying value of petroleum and natural gas
properties and related facilities, net of deferred income taxes, is
limited to the present value of after-tax future net revenue from
proven reserves based on prices and costs at the balance sheet date
and discounted at 10%, plus the lower of cost and fair value of
unproven properties. The application of the full cost ceiling test
under U.S. GAAP resulted in a write-down of capitalized costs in 1998.

(b) Under U.S. GAAP deferred income tax assets or liabilities are
computed on the difference between financial statements and income
tax bases of assets and liabilities. Deferred income tax provisions
are based on the change during the period in the related deferred
income tax asset or liability accounts.

F-42
<PAGE>

(c) Under U.S. GAAP future income taxes are recognized on the
difference between the book value and the tax value of net assets
acquired on a purchase.

(d) Under U.S. GAAP, cash restricted for use in repayment of
bank indebtedness is shown as a current asset.

The impact of the differences between Canadian and U.S. GAAP on the
consolidated statements of earnings and deficit are as follows:

1998 1997
-------------------------
Net earnings (loss) under Canadian GAAP 197,806 $(4,337,575

Ceiling test write-down (1,900,000) -

Application of liability method for
income taxes 22,050 -

Adjustment of depletion 71,000 160,000
--------------------------------------------------------------------
Net earnings(loss)under U.S. GAAP $(1,609,144) $(4,177,575)
--------------------------------------------------------------------
Earnings per share under U.S. GAAP $(0.09) $(0.43)

The impact of the differences between Canadian and U.S. GAAP on the
consolidated balance sheets are as follows:

CANADIAN
GAAP ADJUSTMENTS US GAAP
--------------------------------------------
December 31, 1998
Restricted cash $ - $ 4,278,241 $ 4,278,241
Capital assets 15,181,925 (1,128,460) 14,053,465
Bank indebtedness (1,421,759) 4,278,241 5,700,000
Deferred income tax
liability - 1,918,490 1,918,490
Deficit (4,541,173) (3,046,950) (7,588,123)

December 31, 1997
Capital assets $ 4,428,367 $(1,240,000) $ 3,188,367
Deficit 4,738,979 (1,240,000) (5,978,979)

F-43
<PAGE>

WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR OTHER PERSON TO
GIVE ANY INFORMATION OR REPRESENT
ANYTHING NOT CONTAINED IN THIS 7,844,675
PROSPECTUS. THIS PROSPECTUS DOES SHARES OF COMMON STOCK
NOT OFFER TO SELL OR BUY ANY
SECURITIES IN ANY JURISDICTION
WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS IS
CURRENT AS OF DECEMBER 16, 1999.
EuroGas, Inc.
_______________________

COMMON STOCK
SUMMARY
TABLE OF CONTENTS
_______________
(For a more detailed Table of
Contents, see page ii of the Prospectus
Prospectus) ______________

Prospectus PAGE
Table of Contents................... ii
Prospectus Summary.................. iv
Risk Factors........................ 1
Use of Proceeds..................... 7
Determination of Offering Price..... 7
Dilution............................ 7
Selling Shareholder................. 7
Plan of Distribution................ 8
Description of Securities Being
Registered........................ 9
Legal Matters and Experts........... 12
Description of Business and
Properties of the Company............ 13
Management's Discussion and Analysis. 32
Management........................... 39
Index to Financial Statements........ 47

_______________________

December 17, 1999

<PAGE>

Part II

INFORMATION NOT REQUIRED TO BE IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following are the estimated expenses in connection with
the distribution of the securities being registered:

Securities and Exchange Commission registration Fee $ 1,202
Legal fees 20,000
State "blue sky" fees and expenses (including
attorney's fees) 4,798
Accounting fees and expenses 30,000
Printing expenses 1,000
Listing fees -
--------
Total $ 57,000

All expenses, except the SEC fees, are estimates.

The Selling Shareholder will not bear any portion of the
foregoing expenses, but will pay fees in connection with the sale
of the Common Stock offered hereby in those transactions completed
to or through securities broker and/or dealers in the form of
markups, markdowns, or commissions.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's articles of incorporation provide that officers
and directors of the Company shall be indemnified to the maximum
extent permitted by law. The provisions of the Utah Revised
Business Corporation Act (the "Revised Act") are, and provide, as
follows:

Section 16-10a-902 ("Section 902") of the Revised Act
provides that a corporation may indemnify any individual who was,
is, or is threatened to be made a named defendant or respondent (a
"Party") in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (a "Proceeding"),
because he is or was a director of the corporation or, while a
director of the corporation, is or was serving at its request as a
director, officer, partner, trustee, employee, fiduciary or agent
of another corporation or other person or of an employee benefit
plan (an "Indemnifiable Director"), against any obligation
incurred with respect to a Proceeding, including any judgment,
settlement, penalty, fine or reasonable expenses (including
attorneys' fees), incurred in the Proceeding if his conduct was in
good faith, he reasonably believed that his conduct was in, or not
opposed to, the best interests of the corporation, and, in the
case of any criminal Proceeding, he had no reasonable cause to
believe his conduct was unlawful; provided however, that, pursuant
to Subsection 902(4), (i) indemnification under Section 902 in
connection with a Proceeding by or in the right of the corporation
is limited to payment of reasonable expenses (including attorneys'
fees) incurred in connection with the Proceeding and (ii) the
corporation may not indemnify an Indemnifiable Director in
connection with a Proceeding by or in the right of the corporation
in which the Indemnifiable Director was adjudged liable to the
corporation, or in connection with any other Proceeding charging
that the Indemnifiable Director derived an improper personal
benefit, whether or not involving action in his official capacity,
in which Proceeding he was adjudged liable on the basis that he
derived an improper personal benefit.

Section 16-10a-903 ("Section 903") of the Revised Act
provides that, unless limited by its articles of incorporation, a
corporation shall indemnify an Indemnifiable Director who was
successful, on the merits or otherwise, in the defense of any
Proceeding, or in the defense of any claim, issue or matter in the
Proceeding, to which he was a Party because he is or was an
Indemnifiable Director of the corporation, against reasonable
expenses (including attorneys' fees) incurred by him in connection
with the Proceeding or claim with respect to which he has been
successful.

<PAGE> 49

In addition to the indemnification provided by Sections 902
and 903, Section 16-10a-905 ("Section 905") of the Revised Act
provides that, unless otherwise limited by a corporation's
articles of incorporation, an Indemnifiable Director may apply for
indemnification to the court conducting the Proceeding or to
another court of competent jurisdiction. On receipt of an
application and after giving any notice the court considers
necessary, (i) the court may order mandatory indemnification under
Section 903, in which case the court shall also order the
corporation to pay the director's reasonable expenses to obtain
court-ordered indemnification, or (ii) upon the court's
determination that the director is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances and
regardless of whether the director met the applicable standard of
conduct set forth in Section 902 or was adjudged liable as
described in Subsection 902(4), the court may order
indemnification as the court determines to be proper, except that
indemnification with respect to certain Proceedings resulting in a
director being found liable as described in Subsection 902(4) is
limited to reasonable expenses (including attorneys' fees)
incurred by the director.

Section 16-10a-904 ("Section 904") of the Revised Act
provides that a corporation may pay for or reimburse the
reasonable expenses (including attorneys' fees) incurred by an
Indemnifiable Director who is a Party to a Proceeding in advance
of the final disposition of the Proceeding if (i) the director
furnishes the corporation a written affirmation of his good faith
belief that he has met the applicable standard of conduct
described in Section 902, (ii) the director furnishes to the
corporation a written undertaking, executed personally or in his
behalf, to repay the advance if it is ultimately determined that
he did not meet the required standard of conduct, and (iii) a
determination is made that the facts then known to those making
the determination would not preclude indemnification.

Section 16-10a-907 of the Revised Act provides that, unless a
corporation's articles of incorporation provide otherwise, (i) an
officer of the corporation is entitled to mandatory
indemnification under Section 903 and is entitled to apply for
court ordered indemnification under Section 905, in each case to
the same extent as an Indemnifiable Director, (ii) the corporation
may indemnify and advance expenses to an officer, employee,
fiduciary or agent of the corporation to the same extent as an
Indemnifiable Director, and (iii) a corporation may also indemnify
and advance expenses to an officer, employee, fiduciary or agent
who is not an Indemnifiable Director to a greater extent than the
right of indemnification granted to Indemnifiable Directors, if
not inconsistent with public policy, and if provided for by its
articles of incorporation, bylaws, general or specific action of
its board of directors or contract.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and
controlling persons pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is contrary to public
policy as expressed in the Securities Act and, therefore, is
unenforceable. (See "ITEM 17. UNDERTAKINGS.")]

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

UNREGISTERED SALES OF SECURITIES IN 1999

On November 4, 1999, the Company completed a private
placement of 1,800 shares of Series C Preferred Stock to the
Selling Shareholder, an accredited investor, resulting in net
proceeds to the Company of approximately $1,651,500 to be used for
general working capital. The private placement of the Series C
Preferred Stock was effected in reliance upon the exemption for
sales of securities not involving a public offering, as set forth
in Section 4(2) of the Securities Act of 1933, as amended, based
upon the following based upon the following: (a) the investor
represented and warranted to the Company that it was an
"accredited investor," as defined in Rule 501 of Regulation D
promulgated under the Securities Act and had such 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; (b) there was no public offering or general
solicitation with respect to the offering, and the investor
represented and warranted that it was acquiring the securities for
its own account and not with an intent to distribute the such
securities; (c) the investor was provided with copies of the
Company's most recent Annual Report on Form 10-KSB and any and all
other information requested by the investor with respect to the
Company, (d) the investor acknowledged that all securities being
purchased were "restricted securities" for purposes of the
Securities Act, and agreed to transfer such securities only in a
transaction registered with the SEC under the Securities Act or
exempt from registration under the Securities Act; and (e) a
legend was placed on the certificates and other documents
representing each such 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.

<PAGE> 50

During 1999, the Company completed two private placements of
1998 Series B Convertible Preferred Stock to an existing
shareholder of the Company pursuant to the Series B Subscription
Agreement (described in greater detail below). The company sold
an aggregate of 6,500 shares of Series B Convertible Preferred
Stock, resulting in net proceeds to the Company of approximately
$6,012,500. The private placements of the Series B Convertible
Preferred Stock were effected in reliance upon the exemption for
sales of securities not involving a public offering, as set forth
in Section 4(2) of the Securities Act of 1933, as amended, based
upon the Company's pre-existing relationship with the purchaser
and representations and warranties provided by the purchaser.

UNREGISTERED SALES OF SECURITIES IN 1998

In May 1998, the Company entered into the Series B
Subscription Agreement, pursuant to which it agreed to sell up to
30,000 shares of its 1998 Series B Convertible Preferred Stock at
the price of $1,000 per share for an aggregate of $30,000,000
gross proceeds to three accredited investors. At the time of the
execution of the Series B Subscription Agreement, 8,000 shares
were sold by the Company under the under the Series B Subscription
Agreement, resulting in net proceeds of $7,400,000; on September
12, 1998, the Company sold an additional 5,500 shares of Series B
Convertible Preferred Stock under the Series B Subscription
Agreement, resulting in net proceeds of approximately $5,100,000;
and on November 13, 1998, the Company sold another 3,500 shares of
Series B Convertible Preferred Stock under the Series B
Subscription Agreement, resulting in net proceeds of approximately
$3,200,000.

Such sales of the Series B Convertible Preferred Stock were
effected in reliance upon the exemption for sales of securities
not involving a public offering, as set forth in Section 4(2) of
the Securities Act of 1933, as amended, based upon the following
based upon the following: (a) the investor represented and
warranted to the Company that it was an "accredited investor," as
defined in Rule 501 of Regulation D promulgated under the
Securities Act and had such 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; (b) there was
no public offering or general solicitation with respect to the
offering, and the investor represented and warranted that it was
acquiring the securities for its own account and not with an
intent to distribute the such securities; (c) the investor was
provided with copies of the Company's most recent Annual Report on
Form 10-KSB and any and all other information requested by the
investor with respect to the Company, (d) the investor
acknowledged that all securities being purchased were "restricted
securities" for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered with the
SEC under the Securities Act or exempt from registration under
the Securities Act; and (e) a legend was placed on the
certificates and other documents representing each such 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.

UNREGISTERED SALES OF SECURITIES IN 1997

During 1997, the Company sold or delivered 10,544,030 shares
of common stock and 4,450,000 options in transactions that were
not registered under the Securities Act as described in more
detail below. Unless otherwise noted, the sales were made without
the participation of underwriters and without the payment of any
commission. Unless otherwise noted, each such sale of the Series B

<PAGE> 51

Convertible Preferred Stock was effected in reliance upon the
exemption for sales of securities not involving a public offering
set forth in Section 4(2) of the Securities Act of 1933 and/or
upon Rule 506 of Regulation D promulgated under the Securities
Act, based upon the following: (a) each investor represented and
warranted to the Company that he/she/or it was an "accredited
investor," as defined in Rule 501 of Regulation D promulgated
under the Securities Act and/or had such 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;
(b) there was no public offering or general solicitation with
respect to the offering, and each investor represented and
warranted that he/she/it was acquiring the securities for
his/her/its own account and not with an intent to distribute the
such securities; (c) each investor was provided with copies of the
Company's most recent Annual Report on Form 10-KSB and any and all
other information requested by such investor with respect to the
Company, (d) each investor acknowledged that all securities being
purchased were "restricted securities" for purposes of the
Securities Act, and agreed to transfer such securities only in a
transaction registered with the SEC under the Securities Act or
exempt from registration under the Securities Act; and (e) a
legend was placed on the certificates and other documents
representing each such 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. In each instance, the
Company used the proceeds for general working capital.

The following summary does not include two sales previously
reported in which the Company relied principally on Regulation S
as an exemption from registration. The reports considering those
sales were on the Company's Form 8-K dated March 24, 1997,
covering the sale of 500,000 shares for gross proceeds of $2.5
million and Form 8-K dated May 30, 1997, covering the issuance of
a newly created preferred stock for gross proceeds of $15 million.

On June 11, 1997, the Company delivered an option to OMV A.G.
in connection with its purchase of a subsidiary of OMV A.G. whose
principal asset was a joint venture in the Sakha Republic as
described under "BUSINESS & PROPERTIES: Activities in the Sakha
Republic." The terms of the option provide for an exercise price
of $4.00 per share until April 1, 1998, $5.00 per share until
March 31, 1999, and $6.00 per share until March 31, 2000, at which
time the unexercised portion expires.

On June 30, 1997, the Company sold 1,430,000 shares of its
restricted stock, at $7.00 per share, for a gross purchase price
of $10 million (US) to Chemilabco B.V., a principal shareholder of
the Company. (See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT."

Also on June 30, 1997, the Company sold to Finance Credit &
Development Corporation, Ltd., in a transaction that amended a
prior financing agreement, a total of 2,999,999 shares of
restricted common stock for $7.5 million and converted a $1
million outstanding debenture to 333,334 shares of restricted
common stock. In connection therewith, the Company also granted a
warrant for the acquisition of 2,200,000 shares of the Company's
common stock at $3.00 per share.

During the 1997 fiscal year, the holder of convertible
debenture notes (proceeds of which were received prior to 1997),
converted a total of $10,947,991 of principal and accrued interest
into 2,646,907 shares of the Company stock pursuant to the terms
of the various debentures.

On July 3, 1997, 1,250,000 shares of the 1996 Preferred Stock
were automatically converted into 2,500,000 shares of common
stock. The shares were held by the former Shareholder of Danube
that the Company acquired during fiscal 1996.

On August 9, 1997, the Company sold an option to purchase
250,000 shares to CIBC Oppenheimer in connection with the entering
into of a financial advisory agreement. The option provides for
an exercise price $11.79, expires August 9, 2002, and provides
CIBC Oppenheimer with registration and cashless exercise rights.

On August 30, 1997, the Company converted a promissory note
held by the former Danube Shareholder in the amount of $2,846,590
of principal and accrued interest into 383,790 shares of the
Company's common stock.

On November 11, 1997, the Company delivered 250,000 shares of
restricted common stock for the acquisition of the 5% interest in
the Danube subsidiary which had been held by two foreign
individuals which had invested $1 million with the Danube project
prior to its acquisition by the Company in 1996.

<PAGE> 52

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 16. Exhibits and Financial Statement Schedules

(a) Financial Statements. The following Consolidated Financial
Statements of the Company and report of independent accountants,
unaudited pro forma financial statements, consolidated financial
statements of Big Horn Resources, Ltd. and report of independent
accountants are included on pages F-1 through F-42.

Page

1. EuroGas, Inc. and Subsidiaries

Report of Independent Certified Public
Accountants. . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Balance Sheets-September 30, 1999
(Unaudited)
and December 31, 1998 and 1997 . . . . . . . . . . . F-3

Consolidated Statements of Operations for the
Nine Months
Ended September 30, 1999 and 1998 (Unaudited),
and for the
Years Ended December 31, 1998, 1997 and 1996 . . . . F-4

Consolidated Statements of Stockholders' Equity
(Deficit)
for the Years Ended December 31, 1996, 1997
and 1998 and
for the Nine Months Ended September 30, 1999
(Unaudited), . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Cash Flows for the
Nine Months
Ended September 30, 1999 and 1998 (Unaudited),
and for the
Years Ended December 31, 1998, 1997 and 1996 . . . . F-7

Notes to Consolidated Financial Statements . . . . . . F-9

Supplemental Information on Oil and Gas
Producing Activities (Unaudited) . . . . . . . . . . . F-27

2. Unaudited Pro Forma Condensed Consolidated Financial
Statement

Unaudited Pro Forma Condensed Consolidated
Statement of Operations . . . . . . . . . . . . . . .F-28

Unaudited Pro Forma Condensed Consolidated
Statement of
Operations for the Year Ended December 31,
1998 . . . . . . . . . . . . . . . . . . . . . . . . .F-29

Notes to the Unaudited Pro Forma Condensed
Consolidated Statement
of Operations . . . . . . . . . . . . . . . . . . .F-30

3. Big Horn Resources Ltd.

Auditors' Report to the Directors. . . . . . . . . . .F-31

Consolidated Balance Sheets--December 31, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . .F-32

Consolidated Statements of Earnings and Deficit
for the Years
Ended December 31, 1998 and 1997 . . . . . . . . . .F-33

Consolidated Statements of Changes in Financial
Position
for the Years Ended December 31, 1998 an 1997 . . .F-34

Notes to Consolidated Financial Statements for
the Years
Ended December 31, 1998 and 1997 . . . . . . . . . .F-35

<PAGE>

(b) Exhibits

<PAGE> 53

Exhibit
Number Title of Document Location
- ------ ---------------------------------------------- ------------------
2.1 Exchange Agreement between Northamption, Inc., Report on form 8-K
and Energy Global, A.G. dated August 3, 1994,
Exhibit No. 1*

2.2 Agreement and Plan of Merger between EuroGas, Report on Form 8-K
Inc., and Danube International Petroleum dated July 12, 1996
Company, Inc. dated July 3, 1996, as Exhibit No. 5*
amended.

2.3 English translation of Transfer Agreement Report on form 8-K
between EutoGas and OMV, Inc. for the dated June 11, 1997
Acquisition of OMV (Yakut) Exploration Exhibit No. 1*
GmbH dated June 1, 1997

2.4 Asset Exchange Agreement between EuroGas, Inc., Report on Form S-1
and Beaver River Resources, Ltd., dated April dated July 23, 1998
1, 1988 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, Quarterly Report on
Privileges and Preferences Form 10-QSB dated
of 1995 Series Preferred Stock March 31, 1995,
Exhibit No. 1*

3.4 Designation of Rights Report on Form 8-K
Privileges and Preferences dated July 12, 1996
of 1996 Series Preferred Stock Exhibit No. 1*

3.5 Designation of Rights Report on form 8-K
Privileges and Preferences dated May 30 1997
1997 Series A Convertible Exhibit No. 1*

3.6 Deisgnation of Rights, Privileges Report on Form S-1
and Preferences of 1998 Series B Dated July 23, 1998
Convertible Preferred Stock 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, Registration Statement
and Preferences of 1999 Series C on Form S-1, File No.
6% Convertible Preferred Stock 333-92009, filed on
December 2, 1999

4.1 Subscription Agreement between Report on Form S-1
EuroGas, In., and Thomas Kernaghan dated July 23, 1998
& Co., Ltd, dated May 292, 1998 Exhibit No. 4.01*

4.2 Warrant Agreement dated July 12, 1996, Report on Form 8-K
with Danube Shareholder dated July 12, 1996
Exhibit No. 2*

<PAGE> 54

4.3 Registration Rights Agreement Between Report on Form S-1
EuroGas, In., and Thomas Kernaghan dated July 23, 1998
& co., Ltd, dated May 29, 1998 Exhibit No. 4.02*

4.4 Registration Rights Agreement dated Report on Form 8-K
July 12, 1996, with Danube Shareholder dated July 12, 1996
Exhibit No. 3*

4.5 Registration Rights Agreement by and Report on Form S-1
among EuroGas, Inc., and Finance dated July 23, 1998
Credit & Development Corporation, Ltd. Exhibit No. 4.06*
dated June 30, 1997

4.6 Option granted to the Trustees of the Annual Report on
Estate of Bernice Pauahi Bishop Form 10-KSB for the
fiscal year ended
December 31, 1995,
Exhibit No. 10*

4.7 Registration Rights Agreement by and Annual Report on
among EuroGas, Inc., and Kakui, Inc, and Form 10-KSB for the
the Trustees of the Estate of Bernice fiscal year ended
Pauahi Bishop December 31, 1995,
Exhibit No. 11*

4.8 Option issued to OMV Aktiengesellschaft Annual Report on
to acquire up to 2,000,000 shares of Form 10-KSB for
restricted common stock the fiscal year
ended December 31,
1996, Exhibit No.
13*

5.2 Opinion of Parr Waddoups Brown Gee & Registration Statement
Loveless on Form S-1, File No.
333-92009, filed on
December 2, 1999

10.1 English translation of Mining Usufruct Quarterly Report on
Contract between The Minister of Form 10-Q dated
Environmental Protection, Natural September 30, 1997
Resources and Forestry of the Republic Exhibit No. 1*
of Poland and Pol-Tex Methane, dated
October 3, 1997

10.2 Agreement between Polish Oil and Gas Quarterly Report on
Mining Joint Stock Company and EuroGas, Form 10-Q dated
Inc., dated October 23, 1997 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 Annual Report on
Kukui, Inc., and Pol-tex Methane, Sp Form 10-KSB for the
zo.o., McKenzie Methane Rybnik, fiscal year ended
McKenzie Methane Jastrzebie, GlobeGas, December 31, 1995,
B.V. (formerly known as McKenzie Exhibit No. 15*
Methane Poland, B.V.), and the
Unsecured Creditors' Trust of the
Bankruptcy Estate of McKenzie Methane
Corporation

10.5 Acquisition Agreement between EuroGas, Report on Form S-1
Inc., and Belmont Resources, Inc., dated dated July 23, 1998
July 22, 1998 Exhibit No. 10.20*

<PAGE> 55

10.6 General Agreement governing the operation of Report on Form 8-K
McKenzie Methane Poland, B.V. dated August 3, 1994
Exhibit No. 2*

10.7 Concessions Agreement between Ministry of Annual Report on
Environmental Protection, Natual Resources, Form 10-KSB for the
and Forestry and Pol-tex Methane Ltd. fiscal year ended
December 31, 1995
Exhibit No. 18*

10.8 Association Agreement between NAFTA a.s. Annual Report on
Gbely and Danube International Petroleum Form 10-KSB for the
Company fiscal year ended
December 31, 1995,
Exhibit No. 19*

10.9 Agreement between Moravske' Naftove' Annual Report on
Doly a.s. and Danube International Form 10-KSB for the
Petroleum Company 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, Annual Report on
with attached list of shareholders Form 109-KSB for the
fiscal year ended
December 31, 1995,
Exhibit No. 23*

10.12 Amendment #1 to the Association Annual Report on
Agreement Entered on 13th of July Form 10-KSB for the
1995, between NAFTA a.s. Gbely and Fiscal year ended
Danube International Petroleum December 31, 1996,
Company Exhibit No. 25*

10.13 Acquisition Agreement by and among Form 10-Q
Belmont Resources, In., EuroGas Dated September 30,
Incorporated, dated October 9, 1998 1998
Exhibit No. 1*

10.14 Letter of Intent by and between Annual Report on
Polish Oil and Gas Company and Form 10-KSB for the
Pol-Tex Methane, dated April 28, Fiscal year ended
1997 December 31, 1996,
Exhibit No. 27*

10.15 Purchase and Sale Agreement between Report on Form 8-K
Texaco Slaskk Sp. zo.o., Pol-Tex Dated March 24, 1997
Methane Sp. zo.o and GlobeGas Exhibit No. 1*
B.V.

10.16 English translation of Articles of Report on Form 8-K/A
Association of the TAKT Joint Venture Dated June 11, 1997
dated June 7, 1991, as amended April Exhibit No. 3*
4, 1993

10.17 English transalation of Proposed Report on Form 8-K/A
Exploration and Production Sharing Dated June 11, 1997
contract for Hydrocarbons between Exhibit No. 4*
the Republic of Sakha (Yakutia) and
the Russian Federation and the TAKT
Joint Venture

<PAGE> 56

10.18 English translation of Agreement on Registration Statement
Joint Investment and Production on Form S-1 dated July
Actuvities between EuroGas, Inc., and 23, 1998 Exhibit No.
Zahidukrgeologia, dated May 14, 1998 10.21*

10.19 English translation of Statutory Agreement Registration Statement
of Association of Limited Liability on Form S-1 dated July
Company with Foreign Investments between 23, 1998 Exhibit No.
EuroGas, Inc., and Makyivs'ke Girs'ke 10.22*
Tovarystvo, dated June 17, 1998

10.20 Partnership Agreement between EuroGas, Inc. Amendment No. 1 dated
and RWE-DEA Altiengesellschaft for August 3, 1998 Exhibit
Mineraloel and Chemie AG, dated No. 10.23
July 22, 1998

10.21 Mining Usufruct Contract between The Quarterly Report on
Minister of Environmental Protection, Form 10-Q dated
Natural Resources and Forestry of the September 30, 1997
Republic of Poland and Pol-Tex Exhibit No. 1*
Methane, dated October 3, 1997

10.22 Agreement between Polish Oil and Gas Quarterly Report on
Mining Joint Stock Companyh and EuroGas, Form 10Q dated
Inc., dted October 232, 1997 September 30, 1997
Exhibit No. 2*

10.23 Agreement for Acquisition of 5% Interest Quarterly Report on
in a Subsidiary by and between EuroGas, Form 10-Q dated
Inc., B. Grohe, and T. Koerfer, dated September 30, 1997
November 11, 1997 Exhibit No. 3*

10.24 Option Agreement by and between EuroGas, Quarterly Report on
Inc., and Beaver River Resources, Ltd., Form 10-Q dated
dated October 31, 1997 September 30, 1997
Exhibit No. 4*

10.25 Lease Agreement dated September 3, 1996, Registration Statement
between Potomac Corporation and the on Form S-1, File No.
Company; Letter of Amendment dated 333-92000, filed on
September 30, 1999 December 2, 1999

10.26 Sublease dated November 2, 1999, between Registration Statement
Scotdean Limited and the Company on Form S-1, File No.
333-92009, filed on
December 2, 1999

10.27 Securities Purchase Agreement dated Registration Statement
November 4, 1999, between the Company on Form S-1, File No.
and Arkledun Driver LLC 333-92009, filed on
December 2, 1999

10.28 Registration Rights Agreement dated Registration Statement
November 4, 1999, between the Company and on Form S-1, File No.
Arkledun Drive LLC 333-92009, filed on
December 2, 1999

10.29 Supplemental Agreement dated November 4, Registration Statement
1999, between the Company and Arkledun Drive on Form S-1, File No.
LLC 333-92009,filed on
December 2, 1999

10.30 Executive Employment Agreement dated Registration Statement
April 20, 1999 between the Company and Karl on Form S-1, File No.
Arleth 333-92009, filed on
December 2, 1999

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

23.2 Consent of Hansen, Barnett & Maxwell, Filed herewith
auditors of the Registrant

<PAGE> 57

23.3 Consent of KPMG LLP, auditors of Big Registration Statement
Horn Resources Ltd. on Form S-1, File No.
333-92009, filed on
December 2, 1999

23.4 Consent of Parr Waddoups Brown Gee &
Loveless +

23.5 Consent of Ryder Scott Company, Registration Statement
Petroleum Engineers on Form S-1 dated July
23, 1998 *

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

*Incorporated by reference

+Included in Exhibit 5.2

ITEM 17. UNDERTAKINGS

(a) The undersigned Company hereby undertakes:

(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a
post-effective amendment to this Registration Statement:

(i) To include any Prospectus required by
section 10(a)(3) of the Securities Act;

(ii) To reflect in the Prospectus any facts or
events arising after the effective date of this
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in this Registration Statement; notwithstanding
the foregoing, any increase or decrease in
volume of securities offered (if the total
dollar value of securities offered would not
exceed that which was registered) and any
deviation from the low or high end of the
estimated maximum offering range may be
reflected in the form of prospectus filed with
SEC pursuant to Rule 424(b) if, in the
aggregate, the change in volume and price
represent no more than a 20% change in the
maximum aggregate offering price set forth in
the ACalculation of Registration Fee@ table in
the effective registration statement.

(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in this Registration
Statement or any material change to such
information in this Registration Statement;

(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.

(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company, the Company has been informed
that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final
adjudication of such issue.

<PAGE> 58

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Amendment No. 1 to Form
S-1 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Salt Lake City,
State of Utah, on December 15 1999.

EUROGAS, INC.

By:/s/ Hank Blankenstein
------------------------
Hank Blankenstein, Vice
President
and Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to Form S-1 Registration Statement
has been signed by the following persons in the capacities and as of
the dates indicated.

/s/ Karl Arleth
- ----------------------
Karl Arleth Chief Executive Offider and December 15, 1999
Director (principal executive
officer)

/s/ Hank Blankenstein
--------------------- Vice President, Chief December 15, 1999
Financial Officer and
Director (principal
accounting and
financial officer)

/s/ Dr. Gregory P. Fontana
-------------------------- Director December 15, 1999
Dr. Gregory P. Fontana

/s/ Dr. Hans Fischer Director December 15, 1999
-------------------------
Dr. Hans Fischer

/s/ Rudolph Heinz
--------------------------
Rudolph Heinz Director December 15, 1999

<PAGE> 59

Exhibit 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to Form S-1 Registration Statement and related
Prospectus of EuroGas, Inc. for the registration of 7,844,675 shares of
common stock and to the use therein of our report dated March 31, 1999,
with respect to the consolidated financial statements of EuroGas, Inc.
and Subsidiaries.

/s/ Hansen, Barnett & Maxwell
______________________________
HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah
December 17, 1999