SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A
(Mark One)

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

For the Fiscal Year Ended January 31, 2004

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

Commission File No. 0-33259

                             ENERGAS RESOURCES, INC.
                             -----------------------
                 (Name of Small Business Issuer in its charter)

                Delaware                                    73-1620724
         ------------------------                      --------------------
         (State of incorporation)                        (IRS Employer
                                                       Identification No.)

      800 Northeast 63rd Street
       Oklahoma City, Oklahoma                                  73105
---------------------------------------                   ----------------
   (Address of Principal Executive Office)                     Zip Code

Registrant's telephone number, including Area Code: (405)-879-1752
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

                                  Common Stock
                                (Title of Class)

Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.
                               X
                            ------       ------
                              YES          NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

The Company's revenues during the year ended January 31, 2004 were $312,022.

The aggregate market value of the voting stock held by non-affiliates of the
Company, (21,253,465 shares) based upon the closing price of the Company's
common stock on April 30, 2004 was approximately $8,501,386.

Documents incorporated by reference:      None

As of April 30, 2004 the Company had 34,263,001 issued and outstanding shares of
common stock.


<PAGE>


            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING NFORMATION

         This report includes "forward-looking statements". All statements other
than statements of historical facts included in this Registration Statement,
regarding the Company's financial position, reserve quantities and net present
values, business strategy, plans and objectives of management of the Company for
future operations and capital expenditures, are forward-looking statements.
Although the Company believes that the expectations reflected in the
forward-looking statements and the assumptions upon which such forward-looking
statements are based are reasonable, it can give no assurance that such
expectations and assumptions will prove to have been correct. Reserve estimates
are generally different from the quantities of oil and natural gas that are
ultimately recovered.









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<PAGE>

                                    GLOSSARY

         The following terms are used throughout this report:

         BBL. One stock tank barrel, or 42 U.S. gallons liquid volume, usually
used herein in reference to crude oil or other liquid hydrocarbons.

         BOE. Equivalent barrels of oil, using the ratio of six Mcf of natural
gas to one Bbl of crude oil, condensate or natural gas liquids.

         BTU. A British thermal unit which is the amount of heat required to
raise the temperature of one avoirdupois pound of pure water form 58.5 degrees
to 59.5 degrees Fahrenheit under standard conditions.

         DEVELOPED ACREAGE. The number of acres which are allocated or
assignable to producing wells or wells capable of production.

         DEVELOPMENT WELL. A well drilled as an additional well to the same
reservoir as other producing wells on a Lease, or drilled on an offset Lease not
more than one location away from a well producing from the same reservoir.

         EXPLORATORY WELL. A well drilled in search of a new undiscovered pool
of oil or gas, or to extend the known limits of a field under development.

         GROSS ACRES OR WELLS. A well or acre in which a working interest is
owned. The number of gross wells is the total number of wells in which a working
interest is owned.

         LEASE. Full or partial interests in an oil and gas lease, authorizing
the owner thereof to drill for, reduce to possession and produce oil and gas
upon payment of rentals, bonuses and/or royalties. Oil and gas leases are
generally acquired from private landowners and federal and state governments.
The term of an oil and gas lease typically ranges from three to ten years and
requires annual lease rental payments of $1.00 to $2.00 per acre. If a producing
oil or gas well is drilled on the lease prior to the expiration of the lease,
the lease will generally remain in effect until the oil or gas production from
the well ends. The Company is required to pay the owner of the leased property a
royalty which is usually between 12.5% and 16.6% of the gross amount received
from the sale of the oil or gas produced from the well.

         MCF. One thousand cubic feet.

         NET ACRES OR WELLS. A net well or acre is deemed to exist when the sum
of fractional ownership working interests in gross wells or acres equals one.
The number of net wells or acres is the sum of the fractional working interests
owned in gross wells or acres expressed as whole numbers and fractions.


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<PAGE>

         OPERATING COSTS. The expenses of producing oil or gas from a formation,
consisting of the costs incurred to operate and maintain wells and related
equipment and facilities, including labor costs, repair and maintenance,
supplies, insurance, production, severance and other production excise taxes.

         PRODUCING PROPERTY. A property (or interest therein) producing oil or
gas in commercial quantities or that is shut-in but capable of producing oil or
gas in commercial quantities, to which Producing Reserves have been assigned.
Interests in a property may include Working Interests, production payments,
Royalty Interests and other non-working interests.

         PRODUCING RESERVES. Proved Developed Reserves expected to be produced
from existing completion intervals open for production in existing wells.

         PROSPECT. An area in which a party owns or intends to acquire one or
more oil and gas interests, which is geographically defined on the basis of
geological data and which is reasonably anticipated to contain at least one
reservoir of oil, gas or other hydrocarbons.

         PROVED DEVELOPED RESERVES. Proved developed oil and gas reserves are
reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods. Additional oil and gas expected to be
obtained through the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms of primary
recovery may be included as "proved developed reserves" only after testing by a
pilot project or after the operation of an installed program has confirmed
through production response that increased recovery will be achieved.

         PROVED RESERVES. Proved oil and gas reserves are the estimated
quantities of crude oil, natural gas, and natural gas liquids which geological
and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions, i.e., prices and costs as of the date the estimate is made. Prices
include consideration of changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future conditions.

    (i) Reservoirs are considered proved if economic producibility is supported
by either actual production or conclusive formation testing. The area of a
reservoir considered proved includes (a) that portion delineated by drilling and
defined by gas-oil and/or oil-water contacts, if any; and (b) the immediately
adjoining portions not yet drilled, but which can be reasonably judged as
economically productive on the basis of available geological and engineering
data. In the absence of information on fluid contacts, the lowest known
structural occurrence of hydrocarbons controls the lower proved limit of the
reservoir.

    (ii) Reserves which can be produced economically through application of
improved recovery techniques (such as fluid injection) are included in the
"proved" classification when successful testing by a pilot project, or the
operation of an installed program in the reservoir, provides support for the
engineering analysis on which the project or program was based.


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<PAGE>

      (iii) Estimates of proved reserves do not include the following: (a) oil
that may become available from known reservoirs but is classified separately as
"indicated additional reserves", (b) crude oil, natural gas, and natural gas
liquids, the recovery of which is subject to reasonable doubt because of
uncertainty as to geology, reservoir characteristics, or economic factors; (c)
crude oil, natural gas, and natural gas liquids, that may occur in undrilled
prospects; and (d) crude oil, natural gas, and natural gas liquids, that may be
recovered from oil shales, coal, gilsonite and other such sources.

         PROVED UNDEVELOPED RESERVES. Proved undeveloped oil and gas reserves
are reserves that are expected to be recovered from new wells on undrilled
acreage, or from existing wells where a relatively major expenditure is required
for recompletion. Reserves on undrilled acreage are limited to those drilling
units offsetting productive units that are reasonably certain of production when
drilled. Proved reserves for other undrilled units can be claimed only where it
can be demonstrated with certainty that there is continuity of production from
the existing productive formation. Proved undeveloped reserves are not
attributable to any acreage for which an application of fluid injection or other
improved recovery technique is contemplated, unless such techniques have been
proved effective by actual tests in the area and in the same reservoir.

         ROYALTY INTEREST. An interest in an oil and gas property entitling the
owner to a share of oil and gas production free of Operating Costs.

         UNDEVELOPED ACREAGE. Lease acres on which wells have not been drilled
or completed to a point that would permit the production of commercial
quantities of oil and gas regardless of whether or not such acreage contains
proved reserves. Undeveloped acreage should not be confused with undrilled
acreage which is "Held by Production" under the terms of a lease.

         WORKING INTEREST. The operating interest under a Lease which gives the
owner the right to drill, produce and conduct operating activities on the
property and a share of production, subject to all Royalty Interests and other
burdens and to all costs of exploration, development and operations and all
risks in connection therewith.



                                       5
<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS

     The Company was incorporated under the laws of British Columbia,  Canada on
November  2, 1989 and on August 20,  2001 the Company  became  domesticated  and
incorporated in Delaware.

      The Company is involved in the exploration and development of oil and gas.
The Company's activities are primarily dependent upon available financial
resources to fund the costs of drilling and completing wells.

      The Company evaluates undeveloped oil and gas prospects and participates
in drilling activities on those prospects which in the opinion of management are
favorable for the production of oil or gas. If, through its review, a
geographical area indicates geological and economic potential, the Company
attempts to acquire Leases or other interests in the area and assemble a
Prospect. The Company normally sells portions of its leasehold interests in a
Prospect to unrelated third parties, thus sharing risks and rewards of the
exploration and development of the Prospect with the joint owners pursuant to an
operating agreement. One or more Exploratory Wells may be drilled on a Prospect,
and if the results indicate the presence of sufficient oil and gas reserves,
additional Development Wells may be drilled on the Prospect. The Company
typically seeks potential joint venture partners for development of its
Prospects.

     The Company's  corporate  offices are located at 800 Northeast 63rd Street,
Third Floor,  Oklahoma City,  Oklahoma  73105 and its telephone  number is (405)
879-1752. The Company's web site is www.energasresources.com.

PRINCIPAL AREAS OF OPERATION

     The Company  principally  operates  in the Arkoma  Basin in  Oklahoma,  the
Powder River Basin in Wyoming and the Appalachian Basin of Eastern Kentucky.

     The  Company has four gas wells in the Arkoma  Basin  which were  producing
approximately 255 Mcf of gas per day.

      The Company's oil and gas production in the Powder River Basin are
attributable to two wells in Rusty Creek Prospect in Niobrara County, Wyoming.
The Company does not intend to drill any additional wells on this prospect. As
of January 5, 2004, the Company's two wells in the Rusty Creek Prospect produced
approximately 35 barrels of crude oil per day.

     In August 2003 the Company  acquired 31 producing gas wells,  approximately
28 miles of pipeline,  two compressor  stations and approximately  23,000 leased
and 8,500  optioned  acres.  All of the acquired  properties  are located in the
Appalachian  Basin of eastern  Kentucky.  The Kentucky  properties were acquired
from three private  corporations  for $3,000,000 in convertible  notes. In March
2004 holders of notes in the  principal  amount of  $2,400,000  converted  their
notes into 4,800,000 shares of the Company's common stock. The remaining note in
the principal amount of $500,000  (reflecting a $100,000 payment by the Company)


                                       6
<PAGE>

bears  interest at 8.5% per year and is due in August 2023. At any time prior to
August 1, 2006 all or any part of the unpaid  principal  or interest due on this
note may be converted into shares of the Company's  common stock on the basis of
one  share of  common  stock for every  dollar  of note  principal  or  interest
converted.

DRILLING ACTIVITIES AND PROVEN RESERVES

      During the periods indicated, the Company drilled or participated in the
drilling of the following wells:

                                          Year Ended January 31,
                            --------------------------------------------------
                                 2002            2003              2004
                                 ----            ----              ----
                            Gross    Net     Gross    Net      Gross    Net

Exploratory Wells (1):
  Productive:
     Oil                      --      --       --      --
     Gas                      --      --       --      --      1.00    .875
  Nonproductive               --      --       --      --      1.00    1.00

Development Wells (1):
  Productive:
     Oil                      --      --       --      --
     Gas                      --      --       --      --         6    5.25
  Nonproductive               --      --       --      --

Total Wells (1):
  Productive:
     Oil                      --      --       --      --
     Gas                      --      --       --      --         7   6.125
  Nonproductive               --      --       --      --         1       1


(1)  Each well completed to more than one producing zone is counted as a single
     well. The Company has royalty interests in certain wells that are not
     included in this table.

      In May 2003 the Company arranged with a private investor to fund the
drilling of two natural gas wells in the Arkoma Basin of eastern Oklahoma. The
two wells were drilled in June 2003 and one well was successfully completed as a
gas well and the other well was a dryhole. The Company will receive
approximately 5% of the production from the productive well, after payment of
the Company's share of operating expenses, until the investor is repaid the
amounts advanced to drill and complete the wells, which were approximately
$490,000. After the amount advanced by the investor has been repaid, the Company
will receive approximately 25% of the production from the well after payment of
the Company's share of operating expenses

      The following table sets forth, at April 30, 2004, by state and basin, the
Company's producing wells, Developed Acreage, and Undeveloped Acreage, excluding
service (injection and disposal) wells:


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<PAGE>
                       Productive          Developed          Undeveloped
                        Wells (1)           Acreage            Acreage (2)
                      -------------      --------------     ----------------
                      Gross    Net        Gross     Net       Gross       Net

Oklahoma                5      2.4           -       -            -         -
Wyoming                 2       .4          80      32        5,613     3,015
Kentucky               37     32.4       1,480   1,295       21,520    18,830
                     ----     ----       -----   -----       ------    ------
Totals                 44     35.2       1,560   1,327       27,133    21,845

(1)  The wells in Oklahoma and Kentucky are gas wells and the wells in Wyoming
     are oil wells.
(2)  "Undeveloped Acreage" includes leasehold interests on which wells have not
     been drilled or completed to the point that would permit the production of
     commercial quantities of natural gas and oil regardless of whether the
     leasehold interest is classified as containing proved undeveloped reserves.

      The following table shows, as of April 30, 2004 the status of Company's
gross developed and undeveloped acreage.

      Gross Acreage           Held by Production     Not Held by Production

      Oklahoma                           -                       -
      Wyoming                          640                    3180
      Kentucky                      23,000                       -

      Acres Held By Production remain in force so long as oil or gas is produced
from the well on the particular lease. Leased acres which are not Held By
Production require annual rental payments to maintain the lease until the first
to occur of the following: the expiration of the lease or the time oil or gas is
produced from one or more wells drilled on the lease acreage. At the time oil or
gas is produced from wells drilled on the leased acreage the lease is considered
to be Held By Production.

      The Company does not own any Overriding Royalty Interests.

      Title to properties is subject to royalty, overriding royalty, carried,
net profits, working and other similar interests and contractual arrangements
customary in the oil and gas industry, to liens for current taxes not yet due
and to other encumbrances. As is customary in the industry in the case of
undeveloped properties, little investigation of record title is made at the time
of acquisition (other than a preliminary review of local records). Drilling
title opinions are always prepared before commencement of drilling operations;
however, as is customary in the industry.

      The following table sets forth the Company's net production of oil and
gas, average sales prices and average production costs during the periods
presented:


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<PAGE>

                                         Year Ended January 31,
                                -----------------------------------------
Production Data:                 2002             2003             2004
                                 ----             ----             ----

Production - Oil (Bbls)           498              403              950
Gas (Mcf)                      29,234           30,683          143,616
Average sales price -
Oil (Bbls)                   $  19.65          $ 26.08         $  28.62
Gas (Mcf)                    $   3.24          $  3.44         $   4.86
Average production
  costs per BOE              $   2.93          $  4.79         $   3.74

      Production costs may vary substantially among wells depending on the
methods of recovery employed and other factors, but generally include severance
taxes, administrative overhead, maintenance and repair, labor and utilities.

      The Company is not obligated to provide a fixed and determined quantity of
oil or gas in the future. During the last three fiscal years, the Company has
not had, nor does it now have, any long-term supply or similar agreement with
any government or governmental authority.

      Below are estimates of the Company's net Proved Reserves and the present
value of estimated future net revenues from such Reserves based upon the
standardized measure of discounted future net cash flows relating to proved oil
and gas reserves in accordance with the provisions of Statement of Financial
Accounting Standards No. 69, "Disclosures about Oil and Gas Producing
Activities" (SFAS No. 69). The standardized measure of discounted future net
cash flows is determined by using estimated quantities of Proved Reserves and
the periods in which they are expected to be developed and produced based on
period-end economic conditions. The estimated future production is priced at
period-end prices, except where fixed and determinable price escalations are
provided by contract. The resulting estimated future cash inflows are then
reduced by estimated future costs to develop and produce reserves based on
period-end cost levels. No deduction has been made for depletion, depreciation
or for indirect costs, such as general corporate overhead. Present values were
computed by discounting future net revenues by 10% per year.

                                               January 31,
                            ---------------------------------------------------
                                 2002              2003              2004
                            --------------        ------------     -------------
2004
                             Oil       Gas       Oil     Gas       Oil     Gas
                           (Bbls)     (Mcf)     (Bbls)   (Mcf)   (Bbls)   (Mcf)

Proved reserves              6,842   713,262   3,761  597,773   73,790 4,394,959
Estimated future net cash
  flows from proved oil and
    gas reserves              $1,338,106        $2,147,220        $12,908,072

Present value of future net
  cash flows from proved
  oil and gas reserves          $493,982          $891,410         $5,510,762

     In August 2003 the Company  acquired 31 producing gas wells,  approximately
28 miles of pipeline,  two compressor  stations and approximately  23,000 leased


                                       9
<PAGE>

and 8,500  optioned  acres.  All of the acquired  properties  are located in the
Appalachian Basin of Eastern  Kentucky.  As of January 31,2004 the present value
of the  future  cash  flows  attributable  to the  properties  in  Kentucky  was
$4,398,221  ($2,800,981  in Proved  Developed  Reserves and $1,597,240 in Proved
Undeveloped Reserves).

      The Company's Proved Reserves include only those amounts which the Company
reasonably expects to recover in the future from known oil and gas reservoirs
under existing economic and operating conditions, at current prices and costs,
under existing regulatory practices and with existing technology. Accordingly,
any changes in prices, operating and development costs, regulations, technology
or other factors could significantly increase or decrease estimates of Proved
Reserves.

      In general, the volume of production from natural gas and oil properties
owned by the Company declines as reserves are depleted. Except to the extent the
Company acquires additional properties containing proved reserves or conducts
successful exploration and development activities, or both, the proved reserves
of the Company will decline as reserves are produced. Volumes generated from
future activities of the Company are therefore highly dependent upon the level
of success in acquiring or finding additional reserves and the costs incurred in
doing so.

GOVERNMENT REGULATION

      Various state and federal agencies regulate the production and sale of oil
and natural gas. All states in which the Company operated impose restrictions on
the drilling, production, transportation and sale of oil and natural gas.

      Under the Natural Gas Act of 1938, the Federal Energy Regulatory
Commission (the "FERC") regulates the interstate transportation and the sale in
interstate commerce for resale of natural gas. The FERC's jurisdiction over
interstate natural gas sales has been substantially modified by the Natural Gas
Policy Act under which the FERC continued to regulate the maximum selling prices
of certain categories of gas sold in "first sales" in interstate and intrastate
commerce.

      Effective January 1, 1993, however, the Natural Gas Wellhead Decontrol Act
(the "Decontrol Act") deregulated natural gas prices for all "first sales" of
natural gas. Because "first sales" include typical wellhead sales by producers,
all natural gas produced from the Company's natural gas properties is sold at
market prices, subject to the terms of any private contracts which may be in
effect. The FERC's jurisdiction over natural gas transportation is not affected
by the Decontrol Act.

     The  Company's  sales of natural  gas will be affected  by  intrastate  and
interstate gas  transportation  regulation.  Beginning in 1985, the FERC adopted
regulatory  changes  that have  significantly  altered  the  transportation  and
marketing  of natural  gas.  These  changes  are  intended by the FERC to foster
competition by, among other things, transforming the role of interstate pipeline
companies  from  wholesale  marketers  of natural gas to the primary role of gas
transporters.  All natural gas  marketing by the pipelines is required to divest
to a marketing affiliate,  which operates separately from the transporter and in


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<PAGE>

direct competition with all other merchants.  As a result of the various omnibus
rulemaking   proceedings  in  the  late  1980s  and  the   individual   pipeline
restructuring  proceedings of the early to mid-1990s,  the interstate  pipelines
must    provide     open    and     nondiscriminatory     transportation     and
transportation-related   services  to  all  producers,   natural  gas  marketing
companies,  local  distribution  companies,   industrial  end  users  and  other
customers seeking service. Through similar orders affecting intrastate pipelines
that provide similar interstate  services,  the FERC expanded the impact of open
access regulations to intrastate commerce.

      More recently, the FERC has pursued other policy initiatives that have
affected natural gas marketing. Most notable are (1) the large-scale divestiture
of interstate pipeline-owned gas gathering facilities to affiliated or
non-affiliated companies; (2) further development of rules governing the
relationship of the pipelines with their marketing affiliates; (3) the
publication of standards relating to the use of electronic bulletin boards and
electronic data exchange by the pipelines to make available transportation
information on a timely basis and to enable transactions to occur on a purely
electronic basis; (4) further review of the role of the secondary market for
released pipeline capacity and its relationship to open access service in the
primary market; and (5) development of policy and promulgation of orders
pertaining to its authorization of market-based rates (rather than traditional
cost-of-service based rates) for transportation or transportation-related
services upon the pipeline's demonstration of lack of market control in the
relevant service market. The Company does not know what effect the FERC's other
activities will have on the access to markets, the fostering of competition and
the cost of doing business.

      As a result of these changes, sellers and buyers of natural gas have
gained direct access to the particular pipeline services they need and are
better able to conduct business with a larger number of counter parties. The
Company believes these changes generally have improved the access to markets for
natural gas while, at the same time, substantially increasing competition in the
natural gas marketplace. The Company cannot predict what new or different
regulations the FERC and other regulatory agencies may adopt or what effect
subsequent regulations may have on production and marketing of natural gas from
the Company's properties.

      In the past, Congress has been very active in the area of natural gas
regulation. However, as discussed above, the more recent trend has been in favor
of deregulation and the promotion of competition in the natural gas industry.
Thus, in addition to "first sales" deregulation, Congress also repealed
incremental pricing requirements and natural gas use restraints previously
applicable. There are other legislative proposals pending in the Federal and
State legislatures which, if enacted, would significantly affect the petroleum
industry. At the present time, it is impossible to predict what proposals, if
any, might actually be enacted by Congress or the various state legislatures and
what effect, if any, these proposals might have on the production and marketing
of natural gas by the Company. Similarly, and despite the trend toward federal
deregulation of the natural gas industry, whether or to what extent that trend
will continue or what the ultimate effect will be on the production and
marketing of natural gas by the Company cannot be predicted.

     The  Company's  sales of oil and natural gas liquids are not  regulated and
are at market prices. The price received from the sale of these products will be
affected  by the cost of  transporting  the  products  to  market.  Much of that


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<PAGE>

transportation is through interstate common carrier  pipelines.  Effective as of
January 1, 1995, the FERC implemented  regulations generally  grandfathering all
previously approved interstate transportation rates and establishing an indexing
system for those rates by which  adjustments are made annually based on the rate
of inflation,  subject to certain conditions and limitations.  These regulations
may tend to  increase  the cost of  transporting  oil and natural gas liquids by
interstate  pipeline,  although the annual  adjustments  may result in decreased
rates in a given  year.  These  regulations  have  generally  been  approved  on
judicial  review.  Every five  years,  the FERC will  examine  the  relationship
between the annual  change in the  applicable  index and the actual cost changes
experienced  by the oil  pipeline  industry.  The Company is not able to predict
with certainty what effect, if any, these relatively new federal  regulations or
the periodic review of the index by the FERC will have on the Company.

      Federal, state, and local agencies have promulgated extensive rules and
regulations applicable to the Company's oil and natural gas exploration,
production and related operations. Most states require permits for drilling
operations, drilling bonds and the filing of reports concerning operations and
impose other requirements relating to the exploration of oil and natural gas.
Many states also have statutes or regulations addressing conservation matters
including provisions for the unitization or pooling of oil and natural gas
properties, the establishment of maximum rates of production from oil and
natural gas wells and the regulation of spacing, plugging and abandonment of
such wells. The statutes and regulations of some states limit the rate at which
oil and natural gas is produced from the Company's properties. The federal and
state regulatory burden on the oil and natural gas industry increases the
Company's cost of doing business and affects its profitability. Because these
rules and regulations are amended or reinterpreted frequently, the Company is
unable to predict the future cost or impact of complying with those laws.

COMPETITION AND MARKETING

      The Company is faced with strong competition from many other companies and
individuals engaged in the oil and gas business, many are very large, well
established energy companies with substantial capabilities and established
earnings records. The Company may be at a competitive disadvantage in acquiring
oil and gas prospects since it must compete with these individuals and
companies, many of which have greater financial resources and larger technical
staffs. It is nearly impossible to estimate the number of competitors; however,
it is known that there are a large number of companies and individuals in the
oil and gas business.

     Exploration  for  and  production  of  oil  and  gas  are  affected  by the
availability of pipe, casing and other tubular goods and certain other oil field
equipment   including   drilling  rigs  and  tools.  The  Company  depends  upon
independent  drilling  contractors to furnish rigs, equipment and tools to drill
its  wells.  Higher  prices  for oil and gas may  result  in  competition  among
operators for drilling  equipment,  tubular  goods and drilling  crews which may
affect the Company's ability  expeditiously to drill,  complete,  recomplete and
work-over  its wells.  However,  the  Company has not  experienced  and does not
anticipate difficulty in obtaining supplies, materials, drilling rigs, equipment
or tools.


                                       12
<PAGE>

      The Company does not refine or otherwise process crude oil and condensate
production. Substantially all of the crude oil and condensate production of the
Company's wells are sold at posted prices under short-term contracts, which is
customary in the industry.

      The market for oil and gas is dependent upon a number of factors beyond
the Company's control, which at times cannot be accurately predicted. These
factors include the proximity of wells to, and the capacity of, natural gas
pipelines, the extent of competitive domestic production and imports of oil and
gas, the availability of other sources of energy, fluctuations in seasonal
supply and demand, and governmental regulation. In addition, there is always the
possibility that new legislation may be enacted which would impose price
controls or additional excise taxes upon crude oil or natural gas, or both.
Oversupplies of natural gas can be expected to recur from time to time and may
result in the gas producing wells being shut-in. Increased imports of natural
gas, primarily from Canada, have occurred and are expected to continue. Such
imports may adversely affect the market for domestic natural gas.

      Since the early 1970's the market price for crude oil has been
significantly affected by policies adopted by the member nations of Organization
of Petroleum Exporting Countries ("OPEC"). Members of OPEC establish prices and
production quotas among themselves for petroleum products from time to time with
the intent of controlling the current global supply and consequently price
levels. The Company is unable to predict the effect, if any, that OPEC or other
countries will have on the amount of, or the prices received for, crude oil and
natural gas produced and sold from the Company's wells.

      Gas prices, which were once effectively determined by government
regulations, are now largely influenced by competition. Competitors in this
market include producers, gas pipelines and their affiliated marketing
companies, independent marketers, and providers of alternate energy supplies,
such as residual fuel oil. Changes in government regulations relating to the
production, transportation and marketing of natural gas have also resulted in
significant changes in the historical marketing patterns of the industry.
Generally, these changes have resulted in the abandonment by many pipelines of
long-term contracts for the purchase of natural gas, the development by gas
producers of their own marketing programs to take advantage of new regulations
requiring pipelines to transport gas for regulated fees, and an increasing
tendency to rely on short-term contracts priced at spot market prices.

GENERAL

      The Company has never been a party to any bankruptcy, receivership,
reorganization, readjustment or similar proceedings. Since the Company is
engaged in the oil and gas business, it does not allocate funds to product
research and development in the conventional sense. The Company does not have
any patents, trade-marks, or labor contracts. With the exception of the
Company's oil and gas leases, the Company does not have any licenses,
franchises, concessions or royalty agreements. Backlog is not material to an
understanding of the Company's business. The Company's business is not subject
to renegotiation of profits or termination of contracts or subcontracts at the
election of federal government.


                                       13
<PAGE>

      As of April 30, 2004, the Company employed seven people whose functions
were associated with management, engineering, geology, land and legal,
accounting, financial planning and administration.

      The Company's offices are located at 800 Northeast 63rd Street, Oklahoma
City, Oklahoma. The 4,800 square feet of office space is occupied under an
unwritten lease, on a month-to-month basis, requiring rental payments of $3,800
per month. The building is owned by George G. Shaw, the Company's Chief
Executive Officer and a Director.

EMPLOYEES

         At April 30, 2004, the Company employed seven people. The Company's
employees worked in management, engineering, geology, land and legal and
accounting. In addition, five part-time employees were responsible for the
supervision and operation of the Company's field activities and providing well
services.

ITEM 2.  DESCRIPTION OF PROPERTY

        The Company's offices are located at 800 Northeast 63rd Street, Oklahoma
City, Oklahoma and consist of 4,800 square feet which is rented on a
month-to-month basis for $3,800 per month. The building is owned by George G.
Shaw, the Company's Chief Executive Officer and a Director.

ITEM 3.  LEGAL PROCEEDINGS.

     In September, 2003 James Attarian, a principal shareholder and a former
director of the Company, as well as several companies controlled by Dr.
Attarian, filed a lawsuit against the Company seeking payment of $360,000 loaned
to the Company by Dr. Attarian and his affiliates plus $933,000 paid by Dr.
Attarian and his affiliated companies for shares of the Company's stock and the
costs of drilling unproductive oil and gas wells.

      In February 2004 the Company settled all litigation brought by Dr. James
Attarian and his affiliated companies. The settlement required the Company to:

     o    collectively  pay $500,000 to Mankato  Investments LLC, Mankato Energy
          Partners LLC and Prepaid Capital LLC, all of which are affiliated with
          Dr. Attarian;

     o    issue 350,000 shares of its common stock to Mankato Investments LLC;

     o    grant  Dr.  Attarian  an  option  to  purchase  250,000  shares of the
          Company's common stock at a price of $0.32 per share any time prior to
          July 15, 2005.

      The shares of the Company's common stock issued to Mankato Investments LLC
are restricted securities and do not have any registration rights. The options
granted to Dr. Attarian are subject to the Company's Non-Qualified Stock Option
Plan and the shares issuable upon the exercise of the options will be freely
tradable.


                                       14
<PAGE>

      The settlement also required the Company to assign to Mankato Investments
the Company's interests in oil and gas leases covering approximately 30,000
acres in Fremont County, Wyoming. The Company did not have any wells on the
leases assigned to Mankato Investments.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not Applicable


ITEM 5. MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
        OTHER SHAREHOLDER MATTERS.

      Prior to May 7, 2003 the Company's common stock was traded listed on the
Toronto Venture Exchange under the symbol EEG. On March 3, 2003 the Company's
common stock was listed on the OTC Bulletin Board under the symbol EGSR. The
following table sets forth the high and low sale prices of the Company's common
stock in U.S. currency during the periods presented as reported by the Toronto
Venture Exchange and the NASD. The closing sale prices reflect inter-dealer
prices without adjustment for retail markups, markdowns or commissions and may
not reflect actual transactions.
                                              Closing Sale Price
                                                 Common Stock
                                             -------------------
            Quarter Ended                    High           Low

            April 30, 2001                   $0.19          $0.12
            July 31, 2001                    $0.25          $0.12
            October 31, 2001                 $0.25          $0.12
            January 31, 2002                 $0.16          $0.03

            April 30, 2002                   $0.07          $0.04
            July 31, 2002                    $0.13          $0.03
            October 31, 2002                 $0.13          $0.03
            January 31, 2003                 $0.11          $0.05

            April 30, 2003                   $0.21          $0.05
            July 31, 2003                    $0.46          $0.15
            October 31, 2003                 $0.30          $0.11
            January 31, 2004                 $0.26          $0.15

      On April 30, 2004, there were approximately 900 holders of the Company's
common stock.

     The market price of the  Company's  common stock is subject to  significant
fluctuations in response to, and may be adversely  affected by (i) variations in
quarterly  operating  results,  (ii)  developments  in the oil and gas  industry


                                       15
<PAGE>

generally and more particularly  within the  geographically and geological areas
that the Company owns and operates  properties,  and (iii)  general stock market
conditions.

      The Company's common stock is subject to the "penny stock" rules. The
penny stock trading rules impose additional duties and responsibilities upon
broker-dealers and salespersons recommending the purchase or sale of a penny
stock. Required compliance with these rules will materially limit or restrict
the ability to resell the Company's common stock, and the liquidity typically
associated with other publicly traded stocks may not exist.

    During the year ended January 31, 2004 neither the Company, any officer or
director of the Company, nor any principal shareholder purchased any shares of
the Company's common stock either from the Company, from third parties in a
private transaction, or as a result of purchases in the open market.

Potential Issuance of Additional Shares.

      As of April 30, 2004 the Company had 30,263,001 outstanding shares of
common stock.

      The following table lists additional shares of the Company's common stock
which may be issued as the result of the exercise of outstanding options,
warrants or convertible notes:

                                                          Number of      Note
                                                           Shares     Reference

   Shares issuable upon exercise of warrants sold in
   private offering                                       4,260,000       A

   Shares issuable upon exercise of options granted
   pursuant to the Company's Incentive and Non-Qualified
   Stock Option Plans.                                      250,000       B

   Shares issuable upon the exercise of warrants issued
   to a private investor.                                   100,000       C

   Shares issuable upon conversion of promissory note       500,000       D

   Shares issuable upon the exercise of warrants issued
   to a private investor.                                 4,000,000       E

A.      Between  January 1, 2004 and May 10,  2004 the Company  sold  4,260,000
shares  of  common  stock  and  4,260,000  warrants  to  private  investors  for
$1,278,000.  Each  warrant  entitles  the  holder to  purchase  one share of the
Company's common stock at a price of $0.50 per share. The warrants expire on the
earlier of January 31, 2006 or three weeks following written notification by the
Company  that its  common  stock  closed  at or above  $0.85  per share for five
consecutive trading days.


                                       16
<PAGE>

B.     Options  are  held by Dr.  James  Attarian,  a former  director  of the
Company,  are  exercisable  at a price of $0.32 per share and expire on July 15,
2005. See Item 3 of this report.

C.     The  warrants  allow  the  holders  to  purchase  100,000  shares of the
Company's  common  stock  at a price  of $0.32  per  share at any time  prior to
November June 30, 2005.

D.     In August 2003, the Company  acquired oil and gas properties  from three
private corporations for $3,000,000 in convertible notes. At the holder's option
the notes were  convertible  into shares of the Company's  common stock equal in
number to the amount  determined  by dividing  each $1.00 of note  principal  or
accrued  interest to be converted by one. In order to induce the  noteholders to
convert  their notes into common stock,  and thereby  eliminate the debt owed to
the noteholders,  the Company provided the noteholders with an option to convert
their notes at a  conversion  price of $0.50.  In March 2004 holders of notes in
the principal  amount of $2,400,000  converted their notes into 4,800,000 shares
of the  Company's  common  stock.  The company paid  $100,000 on principal  plus
interest  and the  remaining  note in the  principal  amount of  $500,000  bears
interest at 8.5% per year and is due in August 2023. At any time prior to August
1, 2006 all or any part of the unpaid principal or interest due on this note may
be converted into shares of the Company's common stock on the basis of one share
of common stock for every dollar of note principal or interest converted.

E.     In September  2003 the Company  agreed to sell  2,000,000  shares of its
common stock to a private  investor for $0.15 a share.  For each share purchased
the  Company  agreed to issue one  warrant  to the  investor.  For each  warrant
exercised, the Company will issue a second warrant to the investor. Each warrant
entitles the investor to purchase one share of the  Company's  common stock at a
price of $0.20 per share at any time on or before  September  30,  2004 and at a
price of $0.30 per share at any time after September 30, 2004. All warrants will
expire on September 30, 2005. If the investor  purchasers all 2,000,000  shares,
the investor  could acquire up to 4,000,000  additional  shares of the Company's
common stock. As of April 30, 2004 the investor had purchased  2,000,000  shares
from the Company, had exercised 2,000,000 warrants and was therefore entitled to
warrants to purchase an  additional  2,000,000  shares of the  Company's  common
stock.

      The Company has agreed to file a registration statement with the
Securities and Exchange Commission so that the shares issuable upon the exercise
of the warrants referred to in Note A as well as the shares referred to in Note
D will be available for public sale.

    The shares issuable upon the exercise of the options referred to in Note B
are available for public sale by means of a separate registration statement on
Form S-8.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
         OPERATION

RESULTS OF OPERATIONS

     The  factors  that most  significantly  affect  the  Company's  results  of
operations are (i) the sale prices of crude oil and natural gas, (ii) the amount


                                       17
<PAGE>

of production sales, (iii) the amount of lease operating expenses,  and (iv) the
level of interest rates on, and amount of,  borrowings.  Sales of production and
level of  borrowings  are  significantly  impacted by the  Company's  ability to
maintain or increase its production from existing oil and gas properties through
its  exploration and  development  activities.  The following table reflects the
average prices  received by the Company for oil and gas, the average  production
cost per BOE, and the amount of oil and gas produced for the periods presented:

                                    Year Ended January 31,
                             ----------------------------------
Production Data:             2002           2003           2004
                             ----           ----           ----

Production - Oil (Bbls)        498           403            950
Gas (Mcf)                   29,234        30,683        143,616
Average sales price -
   Oil (Bbls)               $19.65        $26.08         $28.62
Gas (Mcf)                   $ 3.24        $ 3.44          $4.86
Average production
    costs per BOE           $ 2.93        $ 4.79          $3.74

      Prices received by the Company for sales of crude oil and natural gas have
fluctuated significantly from period to period. The fluctuations in oil prices
during these periods reflect market uncertainty regarding the inability of the
Organization of Petroleum Exporting Countries ("OPEC") to control the production
of its member countries, as well as concerns related to the global supply and
demand for crude oil. Gas prices received by the Company fluctuate with changes
in the spot market price for gas, which reached recent record levels in December
2000 in the United States. This price increase was due to demand in excess of
deliverability and higher worldwide energy prices.

      Changes in natural gas and crude oil prices will significantly affect the
revenues and cash flow of the wells and the value of the oil and gas properties.
Declines in the prices of crude oil and natural gas could have a material
adverse effect on the success of the Company's operations and activities,
recoupment of the costs of acquiring, developing and producing the its wells and
profitability. The Company is unable to predict whether the prices of crude oil
and natural gas will rise, stabilize or decline in the future.

      Other than the foregoing, the Company does not know of any trends, events
or uncertainties that have had or are reasonably expected to have a material
impact on the Company's net sales, revenues or expenses.

YEAR ENDED JANUARY 31, 2004

      Material changes of certain items in the Company's Statement of Operations
for the year ended January 31, 2004, as compared to the same period last year,
are discussed below:


                                       18
<PAGE>


                          Increase (I)
Item                    or Decrease (D)  Reason

Oil and Gas Sales             I          Increase in gas prices and August 2003
                                         acquisition  of gas wells in Kentucky

Employee Stock Bonus          I          Shares of common stock issued for
                                         services rendered

Legal and Accounting          I          Legal costs associated with oil and gas
                                         drilling program, acquisition of oil
                                         and gas properties in Kentucky and
                                         registration  statement on Form S-8

Oil and gas production        I          August 2003 acquisition of gas wells in
                                         Kentucky

Consulting                    I          Use of three consultants during period
                                         and expense associated with issuance of
                                         stock for past services

Office and General Expense    I          Lease expense for new office equipment

Travel and Promotion          I          Expenses relating to geological studies
                                         in Kansas, Wyoming, and the acquisition
                                         of the Kentucky properties.

Interest                                 Expense I Interest expense (8.5% per
                                         year) related to $3,000,000 convertible
                                         note issued by Company to pay for oil
                                         and gas properties in Kentucky.

YEAR ENDED JANUARY 31, 2003

    Material changes of certain items in the Company's Statement of Operations
for the year ended January 31, 2003, as compared to the same period last year,
are discussed below:

                          Increase (I)
Item                   or Decrease (D)  Reason

Oil and Gas Sales            I         Increase in the price of oil and gas.

Salaries and Benefits        D         Temporary  staff was eliminated and the
                                       compensation paid to some employees was
                                       reduced.


                                       19
<PAGE>

Legal and Accounting          D        Less costs associated with amending the
                                       Company's registration statement on Form
                                       10-SB.

Rent                          I        Off-site space was used for part of the
                                       year to store some of the Company's
                                       records and equipment, plus rent due in
                                       the prior year was paid in the current
                                       year.

Office and General Expense    D        Office expenses were reduced to conserve
                                       cash.

Pipeline Costs                I        Duke Energy increased the charges for
                                       transporting gas through its pipeline.

Interest                      D        Settlement of debt since October 2001
                                       resulted in less interest expense during
                                       the current year.

OIL AND GAS PRICE FLUCTUATIONS

      Fluctuations in crude oil and natural gas prices have significantly
affected the Company's operations and the value of its assets. As a result of
the instability and volatility of crude oil and natural gas prices and at times
the market conditions within the oil and gas industry, financial institutions
are selective in the energy lending area and have reduced the percentage of
existing reserves that may qualify for the borrowing base to support energy
loans.

      The Company's principal source of cash flow is the production and sale of
its crude oil and natural gas reserves which are depleting assets. Cash flow
from oil and gas production sales depends upon the quantity of production and
the price obtained for such production. An increase in prices permits the
Company to finance its operations to a greater extent with internally generated
funds, may allow the Company to obtain equity financing more easily or on better
terms, and lessens the difficulty of attracting financing from industry partners
and non-industry investors. However, price increases heighten the competition
for Leases and Prospects, increase the costs of exploration and development
activities, and, because of potential price declines, increase the risks
associated with the purchase of Producing Properties during times that prices
are at higher levels.

      A decline in oil and gas prices (i) reduces the cash flow internally
generated by the Company which in turn reduces the funds available for servicing
debt and exploring for and replacing oil and gas reserves, (ii) increases the
difficulty of obtaining equity and debt financing and worsens the terms on which
such financing may be obtained, (iii) reduces the number of Leases and Prospects
which have reasonable economic terms, (iv) may cause the Company to permit
Leases to expire based upon the value of potential oil and gas reserves in
relation to the costs of exploration, (v) results in marginally productive oil
and gas wells being abandoned as non-commercial, and (vi) increases the
difficulty of attracting financing from industry partners and non-industry
investors. However, price declines reduce the competition for Leases and
Prospects and correspondingly reduce the prices paid for Leases and Prospects.
Furthermore, exploration and production costs generally decline, although the
decline may not be at the same rate as that of oil and gas prices.


                                       20
<PAGE>

      The Company's results of operations are somewhat seasonal due to seasonal
fluctuations in the sales prices for natural gas. Although in recent years crude
oil prices have been generally higher in the third and fourth fiscal quarters,
these fluctuations are not believed to be seasonal. Natural gas prices have been
generally higher in the fourth fiscal quarter.

CAPITAL RESOURCES AND LIQUIDITY

    The Company's material sources and (uses) of cash during the year ended
January 31, 2004 were:

      Cash used in operations $(611,460) Loans from shareholder and unrelated
      third party $(112,550) Sale of common stock $1,002,878) Purchase of
      equipment and oil and gas properties $(222,942) Increase (decrease) in
      cash on hand at January 31, 2004 $55,926

    The Company's material sources and (uses) of cash during the year ended
January 31, 2003 were:

      Cash on hand at February 1, 2002              $    2,054
      Cash used in operations                         (364,535)
      Loans from shareholder, related parties
        and investor                                   440,544
      Reduction of notes payable                       (25,458)
      Other                                            (31,222)
                                                    ----------

      Cash on hand at January 31, 2003              $   21,383
                                                    ==========

      As a result of the Company's continued losses and lack of cash there is
substantial doubt as to the Company's ability to continue operations. The
Company plans to generate profits by drilling productive oil or gas wells.
However, the Company will need to raise the funds required to drill new wells
from third parties willing to pay the Company's share of drilling and completing
the wells. The Company may also attempt to raise needed capital through the
private sale of its securities or by borrowing from third parties. The Company
may not be successful in raising the capital needed to drill oil or gas wells.
In addition, any future wells which may be drilled by the Company may not be
productive of oil or gas. The inability of the Company to generate profits may
force the Company to curtail or cease operations.

      During the years ended January 31, 2003 and 2002, the Company did not
spend any amounts on oil and gas exploration and did not acquire any oil or gas
properties. The lack of capital expenditures during the years ended January 31,
2003 and 2002 was primarily the result of the Company's inability to conduct
exploration activities during these periods due to a lack of funds. During the
year ended January 31, 2004 the Company spent $920,000 on oil and gas
exploration.


                                       21
<PAGE>

      As of January 31, 2004, the Company did not have any material capital
commitments, other than funding its operating losses and repaying outstanding
debt. It is anticipated that any capital commitments that may occur will be
financed principally through borrowings from institutional and private lenders
(although such additional financing has not been arranged) and the sale of
shares of the Company's common stock or other equity securities. However, there
can be no assurance that additional capital resources and financings will be
available to the Company on a timely basis, or if available, on acceptable
terms.

      As of January 31, 2004 the Company had outstanding loans to officers,
directors and others of approximately $0.00. See Item 12 of this report for
information concerning these loans. As of this same date the Company did not
have sufficient funds to pay these liabilities. The Company plans to repay these
loans from the sale of oil or gas from wells which may be drilled by the
Company, if sufficient capital is available, or from the proceeds received from
the sale of the Company's capital stock. Mr. Shaw, who was owed $578,188 by the
Company as of January 31, 2004, has advised the Company that he will not look
for repayment of the amounts owed to him by the Company prior to December 31,
2004. The other lenders may at any time file a lawsuit to enforce the collection
of the amounts owed by the Company.

     In August 2003 the Company acquired 31 producing gas wells, a pipeline,
compressor stations and approximately 23,000 leased and 8,500 optioned acres
from three private corporations for $3,000,000 in convertible notes. In March
2004 the Company paid $100,000, plus interest, on one of the notes and holders
of notes in the principal amount of $2,400,000 converted their notes into
4,800,000 shares of the Company's common stock. The remaining note in the
principal amount of $500,000 bears interest at 8.5% per year and is due in
August 2023. At any time prior to August 1, 2006 all or any art of the unpaid
principal or interest due on this note may be converted into shares of the
Company's common stock on the basis of one share of common stock for every
dollar of note principal or interest converted.

     Between January 1, 2004 and May 10, 2004 the Company sold 4,260,000 shares
of common stock and 4,260,000 warrants to private investors for $1,278,000. Each
warrant entitles the holder to puchase one share of the Company's common stock
at a price of $0.50 per share. The warrants expire on the earlier of January 31,
2006 or three weeks following written notification by the Company that its
common stock closed at or above $0.85 per share for five consecutive trading
days.

ITEM 7.  FINANCIAL STATEMENTS

      See the financial statements attached to this report.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

     Effective  January 24, 2002 the Company  retained  Spicer,  Jefferies & Co.
("Spicer") to act as the Company's independent  certified public accountant.  In
this regard  Spicer  replaced  Bedford  Curry & Co. which  audited the Company's


                                       22
<PAGE>

financial statements for the fiscal years ended January 31, 2001, 2000 and 1999.
The report of Bedford  Curry for these  fiscal  years did not contain an adverse
opinion, or disclaimer of opinion and were not qualified or modified as to audit
scope or accounting  principles.  However, the report of Bedford Curry for these
fiscal years was  qualified  with  respect to  uncertainty  as to the  Company's
ability to continue as a going concern.  During the Company's  three most recent
fiscal years and the subsequent interim period ended January 24, 2002 there were
no  disagreements  with Bedford Curry on any matter of accounting  principles or
practices, financial statement disclosure or auditing scope or procedures, which
disagreements,  if not resolved to the  satisfaction of Bedford Curry would have
caused it to make reference to such disagreements in its reports.

      Bedford Curry is based in Vancouver, British Columbia. The Company
dismissed Bedford Curry due to rules of the Securities and Exchange Commission
which require the Company's financial statements to be audited by accountants
that are based in the United States. The Company has authorized Bedford Curry to
discuss any matter relating to the Company and its operations with Spicer.

      The change in the Company's auditors was recommended and approved by the
Company's board of directors.

      During the two fiscal years ended January 31, 2001 and subsequent interim
period ended January 24, 2002, the Company did not consult with Spicer regarding
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, or any matter that was the subject of a
disagreement or a reportable event as defined in the regulations of the
Securities and Exchange Commission.

      Effective April 8, 2004 Spicer Jeffries LLP resigned as the Company's
independent accountants as a result of the decision by Spicer Jeffries to
discontinue its auditing practice for publicly traded corporations. Spicer
Jeffries audited the Company's financial statements for the fiscal years ended
January 31, 2003, 2002 and 2001. The reports of Spicer Jeffries for these fiscal
years did not contain an adverse opinion, or disclaimer of opinion and were not
qualified or modified as to audit scope or accounting principles. However, the
reports of Spicer Jeffries for these fiscal years was qualified with respect to
uncertainty as to the Company's ability to continue as a going concern. During
the Company's two most recent fiscal years and subsequent interim period ended
April 8, 2004 there were no disagreements with Spicer Jeffries on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Spicer Jeffries would have caused it to make reference to such disagreements in
its reports.

      On April 14, 2004 the Company retained Russell & Atkins, PLC to act as the
Company's independent certified public accountants. The change in the Company's
auditors was recommended and approved by the board of directors of the Company.

      During the two most recent fiscal years and subsequent interim period
ending April 14, 2004 the Company did not consult with Russel & Atkins regarding
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, or any matter that was the subject of a
disagreement or a reportable event as defined in the regulations of the
Securities and Exchange Commission.



                                       23
<PAGE>



ITEM 8A.  CONTROLS AND PROCEDURES

      George Shaw, the Company's Chief Executive Officer and David W. Young, the
Company's Chief Financial Officer, have evaluated the effectiveness of the
Company's disclosure controls and procedures as of a date within 90 days prior
to the filing date of this report (the "Evaluation Date"); and in their opinion
the Company's disclosure controls and procedures ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to them by others within those entities, particularly during the
period in which this report is being prepared, so as to allow timely decisions
regarding required disclosure. To the knowledge of Mr. Shaw and Mr. Young there
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect the Company's internal controls
subsequent to the Evaluation Date. As a result, no corrective actions with
regard to significant deficiencies or material weakness in the Company's
internal controls were required.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

      The following table sets forth information with respect to each of the
Company's executive officers and directors. The Company's directors are
generally elected at the annual shareholders' meeting and hold office until the
next annual shareholders' meeting or until their successors are elected and
qualified. The Company's executive officers are elected by our board of
directors and serve at its discretion.

Name                         Age       Position

George G. Shaw               73        President and Chief Executive Officer and
                                       Chairman of the Board
G. Scott Shaw                33        Vice President, Secretary and a Director
David W. Young               54        Chief Financial Officer and a Director

      The following is a brief description of the business background of the
Company's executive officers and directors:

     GEORGE G. SHAW is the President,  Chief  Executive  Officer and Chairman of
the Board of  directors of the Company and has held these  positions  since July
1991.  Mr.  Shaw is the  President  of Energas  Corporation  and its  subsidiary
Energas Pipeline Co., Inc., both privately held companies engaged in oil and gas
exploration and gas gathering. Mr. Shaw is the father of G. Scott Shaw.

     G. SCOTT SHAW is the Vice  President  and a director of the Company and has
held these positions since August 1996. Mr. Shaw became the Company's  Secretary
in April 2003. Mr. Shaw graduated from Oklahoma State  University in 1993 with a
Bachelor of Science degree in Biology. Mr. Shaw is the son of George G. Shaw.


                                       24
<PAGE>

     DAVID W.  YOUNG has held the  position  of Chief  Financial  Officer of the
Company  since April 1995.  Mr.  Young has been a director of the Company  since
August 2001.  Mr. Young is a practicing  accountant  and was graduated  from the
University of Central Oklahoma in 1975, with a B.B.S. in accounting.

     The Company does not have a compensation committee.  The Company's Board of
Directors  serves  as the  Company's  Audit  Committee.  David  W.  Young is the
director  serving  as the  Company's  financial  expert.  Since Mr.  Young is an
officer and director of the Company,  Mr. Young is not  independent as that term
is  defined  Section  121(A) of the  Listing  Standards  of the  American  Stock
Exchange.  Mr. Young is a certified  public  accountant and since 1981 Mr. Young
has had his own public accounting firm.

      The Company has adopted a Code of Ethics which is applicable to the
Company's principal executive, financial, and accounting officers and persons
performing similar functions. The Code of Ethics is available on the Company's
website located at www.energasresources.com

ITEM 10.  EXECUTIVE COMPENSATION

      The following table sets forth the compensation during the years ended
January 31, 2004, 2002 and 2001, paid or accrued, to George G. Shaw, the
Company's Chief Executive Officer during those years. None of the Company's
executive officers received compensation in excess of $100,000 during the three
years ended January 31, 2004.

                                                                     Long-Term
                                                                    Compensation
                                                                      Awards
                                                                    Common Stock
                                Year Ended   Annual Compensation     Underlying
Name and Principal Position     January 31,  Salary (2)  Bonus (3)    Options
---------------------------     -----------  ----------  --------   ------------

George G. Shaw                     2004      $34,000
 President and Chief Executive
   Officer                         2003      $33,000        --            --
                                   2002      $33,000        --            --

(1) The named executive officer received additional non-cash compensation,
    perquisites and other personal benefits; however, the aggregate amount and
    value thereof did not exceed 10% of the total annual salary and bonus paid
    to and accrued for the named executive officer during the year.
(2) Dollar value of base salary (both cash and non-cash) earned during the year.
(3) Dollar value of bonus (both cash and non-cash) earned during the year.

    The following shows the amounts which the Company expects to pay to its
officers during the twelve month period ending January 31, 2005, and the time
which the Company's executive officers plan to devote to the Company's business.
The Company does not have employment agreements with any of its officers.


                                       25
<PAGE>

                                Proposed                Time to Be Devoted
Name                          Compensation            To Company's Business
------------                  ------------            ---------------------

George G. Shaw                   $60,000                      100%
G. Scott Shaw                    $48,000                      100%
David W. Young                   $24,000                       30%

      The Company does not have any employment agreements with its officers or
employees. The Company does not maintain any keyman insurance on the life or in
the event of disability of any of its officers.

STOCK OPTION AND BONUS PLANS

      Incentive Stock Option Plan. The Company's Incentive Stock Option Plan
authorizes the issuance of up to 2,000,000 shares of the Company's common stock
to persons that exercise options granted pursuant to the Plan. Only Company
employees may be granted options pursuant to the Incentive Stock Option Plan.
The option exercise price is determined by the Company's Board of Directors but
cannot be less than the market price of the Company's common stock on the date
the option is granted.

      Non-Qualified Stock Option Plan. The Company's Non-Qualified Stock Option
Plan authorizes the issuance of up to 1,000,000 shares of the Company's common
stock to persons that exercise options granted pursuant to the Plans. The
Company's employees, directors, officers, consultants and advisors are eligible
to be granted options pursuant to the Plans, provided however that bona fide
services must be rendered by such consultants or advisors and such services must
not be in connection with the offer or sale of securities in a capital-raising
transaction. The option exercise price is determined by the Company's Board of
Directors.

      Stock Bonus Plan. The Company's Stock Bonus Plan allows for the issuance
of up to 4,000,000 shares of common stock. Such shares may consist, in whole or
in part, of authorized but unissued shares, or treasury shares. Under the Stock
Bonus Plan, the Company's employees, directors, officers, consultants and
advisors are eligible to receive a grant of the Company's shares, provided
however that bona fide services must be rendered by consultants or advisors and
such services must not be in connection with the offer or sale of securities in
a capital-raising transaction.

Summary

      The following table shows the weighted average exercise price of the
outstanding options granted pursuant to the Company's Incentive and
Non-Qualified Stock Option Plans as of December 31, 2003. The Company's
Incentive and Non-Qualified Stock Option Plans were not approved by the
Company's shareholders.


                                       26
<PAGE>

                                                            Number of Securities
                                                            Remaining Available
                          Number                            For Future Issuance
                       of Securities                            Under Equity
                       to be Issued    Weighted-Average      Compensation Plans
                      Upon Exercise    Exercise Price of   (Excluding Securities
                      of Outstanding    of Outstanding         Reflected in
Plan Category          Options  [a]        Options               Column (a))
---------------      ---------------   -----------------    -------------------

Incentive Stock               --               --                2,000,000
   Option Plan

Non-Qualified Stock
   Option Plan           250,000            $0.32                  750,000

      The following sets forth certain information as of April 30, 2004
concerning the stock options and stock bonuses granted by the Company pursuant
to the Plans. Each option represents the right to purchase one share of the
Company's common stock.

                                 Total      Shares                   Remaining
                                Shares    Reserved for    Shares      Options/
                              Reserved    Outstanding   Issued As      Shares
Name of Plan                 Under Plans    Options     Stock Bonus  Under Plans
------------                 -----------  ------------  -----------  -----------

Incentive Stock Option Plan   2,000,000          --           --      2,000,000
Non-Qualified Stock Option
   Plan                       1,000,000     250,000           --        750,000
Stock Bonus Plan              4,000,000          --    1,270,000      2,730,000

     The  following  table  summarizes  the  options and stock  bonuses  granted
pursuant to the Plans as of April 30, 2004:

Incentive Stock Options

                                                                   Options
                  Shares                           Expiration     Exercised
                  Subject     Exercise    Date of    Date of    as of April 30,
                 To Option     Price       Grant     Option         2004
                 ----------   --------    -------   ---------    --------------

                                     None

Non-Qualified Stock Options

                                                                   Options
                  Shares                           Expiration     Exercised
                  Subject     Exercise    Date of    Date of    as of April 30,
                 To Option     Price       Grant     Option         2004
                 ----------   --------    -------   ---------    --------------

                  250,000       $0.32     6-30-03     7-15-05           --


                                       27
<PAGE>

Stock Bonuses
                         Shares Issued
  Name                   as Stock Bonus                  Date Issued

Taylor Dillard              350,000                         10/30/03
Hiram Kelly                 350,000                         10/30/03
Sherman Formhals            100,000                         10/30/03
David Young                 100,000                         10/30/03
Jerry Parry                 100,000                         10/30/03
George Shaw                 100,000                         10/30/03
Scott Shaw                  100,000                         10/30/03
Vicki Webb                   30,000                         10/30/03
Patricia Harris              20,000                         10/30/03
Ronnie Webb                  20,000                         10/30/03
                        -----------
                          1,270,000

Other Warrants and Convertible Securities

      See Item 5 of this report for information concerning other outstanding
options and warrants.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table shows the beneficial  ownership of the Company's common
stock  as of April  30,  2004 by (i)  each  person  who is known to us to be the
beneficial  owner of more than 5%,  (ii)  each of our  directors  and  executive
officers,  and (iii) all of our executive officers and directors as a group. All
persons  listed  have sole  voting and  investment  power with  respect to their
shares unless otherwise  indicated,  and there are no family relationships among
the Company's  executive  officers and directors,  except that George G. Shaw is
the father of G. Scott Shaw. For purposes of the following  table, the number of
shares and percent of  ownership  of the  Company's  common stock that the named
person  beneficially owns includes shares of the Company's common stock that the
person has the right to acquire on or before June 30, 2004 from the  exercise of
stock options or otherwise.

                                                   Shares           Percent of
                                                Beneficially       Outstanding
Name and address                                  Owned               Shares
----------------                                -----------        -----------

George G. Shaw
Third Floor, 800 Northeast 63rd Street
Oklahoma City, Oklahoma 73105                  6,776,956 (1)          22.7%

G. Scott Shaw                                    463,780               1.5%
800 Northeast 63rd Street
Oklahoma City, Oklahoma 73105

David W. Young                                       --                 --
800 Northeast 63rd Street
Oklahoma City, Oklahoma 73105


                                       28
<PAGE>
                                                 Shares            Percent of
                                                Beneficially       Outstanding
Name and address                                  Owned              Shares
----------------                                -----------       -----------
Clare LLC
401 South LaSalle, Suite 302
Chicago, Illinois 60605                                --               --

Executive Officers and Directors as a group
 (three persons)                                7,240,736            24.2%

(1)  Includes (i) 2,024,916 shares held by Energas Corporation of which
     1,759,680 of these shares are subject to a time-release escrow agreement,
     and (ii) 3,460,320 shares held by Energas Pipeline Co., Inc. are subject to
     a time-based escrow agreement and (iii) 1,585,000 shares of common stock
     held by Mr. Shaw. The shares held under the escrow agreements will be
     released from escrow in 12 six month installments commencing on March 21,
     2002 (initially four installments of 290,000 shares of common stock
     followed by eight installments of 580,000 shares of common stock). Mr. Shaw
     controls Energas Corporation and Energas Pipeline Co., Inc.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      In December 2000, Mankato Investments LLC purchased 275,675 shares of
common stock and common stock purchase warrants exercisable for the purchase of
275,675 shares of common stock for $.33 per share on or before December 21,
2002. The Company received proceeds from this sale of $60,350. In April 2001,
Jurassic Capital LLC purchased 384,550 shares of common stock and common stock
purchase warrants exercisable for the purchase of 384,550 shares of common stock
for $.195 per share on or before April 11, 2003. The Company received proceeds
from this sale of $74,733. Mankato Investments LLC and Jurassic Capital LLC are
controlled by James H. Attarian, a former director of the Company.

      In February 1999 the Company borrowed $300,000 from Mankato Investments
LLC to fund lease acquisitions and the exploration and development. The loan was
due April 1, 2002 and beginning April 1, 2002 the loan bears interest at 12% per
year. As of August 31, 2002 this loan was in default. As partial consideration
for this loan, the Company issued warrants for the purchase of 60,000 shares of
the Company's common stock at a price of $0.28 per share. These warrants were
exercised in September 2000.

      During the year ended January 31, 2001, the Company received additional
loans of $60,000 from Mankato Investments LLC. The loan proceeds were used for
operating expenses. The loans are non-interest bearing, were due May 13, 2002
and are in default. As of May 14, 2003 Mankato Investments had not instituted
proceedings to collect the amounts owed by the Company.

      During the year ended January 31, 2002 the Company issued 400,070 shares
of its common stock to Mankato Investments LLC in payment of $138,800 advanced
to the Company by Mankato Investments. The $138,800 in advances were in addition
to the $360,000 owed by the Company to Mankato.


                                       29
<PAGE>

      Based upon Rule 144 forms filed with the Securities and Exchange
Commission, the Company believes that substantially all of the shares owned by
Mankato Investments, Jurassic Capital, and Dr. Attarian have been sold, or are
in the process of being sold, in the public market.

      See "Legal Proceedings" for information concerning the settlement of
lawsuits filed by Dr. Attarian against the Company.

      The Company's offices are located at 800 Northeast 63rd Street, Oklahoma
City, Oklahoma. The office space is occupied under an unwritten month-to-month
lease requiring rental payments of $3,800 per month to George Shaw, the owner of
the building. During the years ended January 31, 2004, 2003 and 2002 the Company
paid rent of $45,600, $61,803 and $40,797, respectively. In addition, Mr. Shaw
owns Energas Pipeline Company that operates the natural gas gathering system to
which the Company's four wells in Atoka County, Oklahoma are connected. During
the years ended January 31, 2004, 2003 and 2002, Energas Pipeline Company
received $16,592, $14,428 and $13,765, respectively, for its services in
operating the gathering system.

      As of January 31, 2004 the Company had borrowed approximately $578,188
from George Shaw and entities controlled by Mr. Shaw. These loans are
non-interest bearing, unsecured, and do not have fixed terms of repayment. The
amounts borrowed from Mr. Shaw and his affiliates were used to fund the
Company's operations.

      The Company believes that the rent paid to Mr. Shaw and the terms of the
other transactions between the Company and its officers and directors discussed
above were fair and reasonable and were upon terms as least as favorable as the
Company could have obtained from unrelated third parties.

      Transactions with the Company's officers, directors, and principal
shareholders may continue and may result in conflicts of interest between the
Company and these individuals. Although these persons have fiduciary duties to
the Company and its shareholders, there can be no assurance that conflicts of
interest will always be resolved in favor of Company and its shareholders.
Neither the Company's Articles of Incorporation nor Bylaws contain any
provisions for resolving potential or actual conflicts of interest.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibit No.  Description of Exhibit                               Page Number


3.1          Certificate of Incorporation                              *

3.2          Bylaws                                                    *

3.3          Certificate of Domestication in Delaware                  *


                                       30
<PAGE>

4.1          Form of Certificate of Common Stock                       *

4.6          Escrow Amendment Agreement among Registrant,
             Pacific Corporate Trust Company, Energas
             Corporation and Energas Pipeline Company                  *

4.7          Escrow Agreement, dated September 20, 1991,
             among Registrant,  Pacific Corporate Trust
             Company, Energas Corporation and Energas
             Pipeline Company                                          *

4.8          Registration Rights Agreement, dated July 18,
             2001 between Registrant and Clare, LLC                    *

4.9          Escrow Amendment Agreement, dated April 13, 1994,
             among Registrant,  Pacific Corporate Trust Company,
             Energas Corporation and Energas Pipeline Company          *

10.7         Gas Purchase Agreement, dated March 1, 1991 between
             Registrant and Energas Pipeline Company.                  *

10.8         Gas Purchase Agreement, dated March 1, 1991 between
             Registrant and Energas Pipeline Company.                  *

10.9         Gas Gathering  Agreement,  dated July 1, 1992 between
             Energas Pipeline  Company,  Inc. and A.T. Gas
             Gathering Systems, Inc.                                   *

10.10        Gas Purchase  Agreement, dated February 13, 1997,
             between  Panenergy Field Services, Inc. and Energas
             Pipeline Company.                                         *

10.11        Gas  Purchase Agreement, dated October 1, 1999,
             between  Registrant  and Ozark Gas Gathering, L.L.C.      *

16.          Letter regarding change in certifying public accountant. **

21.          Registrant's Subsidiaries                                 *

23.         Consent of Accountants                                   _____

31.         Rule 13a-14(a)/15d-14(a) certifications

32.         Section 1350 certifications

*  Incorporated by referenced to the same exhibit filed with the Company's
   initial registration statement on Form 10-SB.


                                       31
<PAGE>

** Incorporated by reference to the same exhibit filed with the Company's report
   on Form 8-K dated April 8, 2004.

      During the three months ended January 31, 2004 the Company did not file
any reports on Form 8-K.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Spicer Jeffries LLP served as the Company's independent public accountants
during the fiscal year ended January 31, 2002 and 2003. The following table sets
forth the aggregate fees billed to the Company during the years ended January
31, 2003 and 2004 by Spicer Jeffries LLP.

                                     2003           2004

Audit Fees                        $13,938        $17,500
Audit-Related Fees                     --             --
Financial Information Systems          --             --
Design and Implementation Fees         --             --
Tax Fees                               --             --
All Other Fees                         --             --

     Audit fees represent amounts billed for professional  services rendered for
the audit of the Company's  annual  financial  statements and the reviews of the
financial  statements  included in the Company's Forms 10-Q for the fiscal year.
Before Spicer  Jeffries LLP was engaged by the Company to render audit services,
the engagement was approved by the Company's Board of Directors.

     Effective  April 8, 2004 Spicer  Jeffries  LLP  resigned  as the  Company's
independent  accountants  as a result  of the  decision  by Spicer  Jeffries  to
discontinue its auditing practice for publicly traded corporations.

     On April 14, 2004 the Company retained Russell & Atkins,  PLC to act as the
Company's independent certified public accountants.







                                       32
<PAGE>






                              RUSSELL & ATKINS, PLC

                                                      5809 North Grand, Suite D
Dennis Atkins                                         Oklahoma City, OK  73118
Casey Russell                                         Telephone: (405) 607-8743
Member SEC                                                  Fax: (405) 607-8744
Practice Section                                    E-mail: HARCPAS@hotmail.com
-------------------------------------------------------------------------------

To the Board of Directors
Energas Resources, Inc.

We have audited the consolidated balance sheets of Energas Resources, Inc. as of
January 31, 2004 and 2003 and the consolidated statements of operations,
stockholders' (deficit) and cash flows 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a
reasonable basis of our opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Energas Resources, Inc. as of
January 31, 2004 and 2003 and the results of its operations and its cash flows
for the years then ended in accordance with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated sufficient cash flows from
operations and has suffered operating losses since inception. These conditions
raise substantial doubt about its ability to continue as a going concern.
Management's plans in this regard are also discussed in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Russell & Atkins, PLC
-------------------------------

Oklahoma City, Oklahoma
May 17, 2004


<PAGE>


                             ENERGAS RESOURCES, INC.
                           CONSOLIDATED BALANCE SHEETS
                            January 31, 2004 and 2003

                                               FYE 2004            FYE 2003
                                               --------            --------
                  Assets
                 --------

Cash and Cash Equivalents                       77,309              21,383
Accounts Receivable                            152,330                 700
          Total Current Assets                 229,639              22,083

Property and Equipment, Net (Note 3)         3,855,492             505,595
                                            ----------           ---------
             Total Assets                 $  4,085,131          $  527,678
                                          ============          ==========

                  Liabilities and Stockholders' (Deficit)

Accounts Payable and Accrued Expenses          369,298             270,002
Note Payable                                    13,492                   -
Due to Related Parties and Shareholders
  (Note 7)                                   1,066,737           1,007,404
Investor Advance                               373,915             168,000
Current Portion of Long Term Debt              157,391              34,542
                                            ----------          ----------
             Total Current Liabilities       1,980,833           1,479,948

Long-Term Debt Less Current Portion          2,950,375                   -
                                            ----------          ----------
           Total Liabilities                 4,931,208           1,479,948

                  Stockholders' (Deficit)

Commons Stock, $.001 Par Value 100,000,000
  Shares Authorized and 33,163,001 and
  26,143,00 shares issued and outstanding       33,163              26,143
Additional Paid in Capital                   8,644,157           7,621,777
Deficit                                     (9,523,397)         (8,600,190)
                                          ------------        ------------
          Total Stockholders' (Deficit)       (846,077)           (952,270)
                                          ------------         -----------
   Total Liabilities and Stockholders'
        Deficit                            $ 4,085,131        $    527,678
                                           ===========       =============



                                      F-1

<PAGE>


                             ENERGAS RESOURCES, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
            As of and for the Years Ending January 31, 2004 and 2003



                                          FYE 2004          FYE 2003
                                          --------          --------
                     Revenues

Oil and Gas Sales                   $     296,657          $    116,031
Pipeline Revenues                          15,365                15,808
Gain from Debt Refinancing                      -                10,904
                               --------------------        --------------
Total Revenues                      $     312,022           $   142,743

                     Expenses
Salaries and Benefits                     393,862               254,567
Depreciation and Depletion                 36,701                30,885
Legal and Accounting                      143,602                86,637
Rent                                       45,600                61,803
Oil and Gas Production                    151,454                26,544
Consulting                                246,721                32,682
Office and General                         41,668                28,622
Travel and Promotion                          359                16,530
Telephone                                  16,477                17,924
Regulatory Fees                             3,537                 6,952
Pipeline Costs                              3,000                20,793
Interest Expense                          152,248                45,596
                                     ------------            ----------
Total Expenses                          1,235,229               629,535
                                      -----------            ----------

Net Loss                             $   (923,207)          $  (486,792)
                                     ============           ===========

Loss Per Share - Basic and Diluted   $      (0.03)          $     (0.02)
                                     ============           ===========

Weighted Average Shares Outstanding    28,667,028            26,143,001
                                     ============           ===========











                                      F-2


<PAGE>


                             ENERGAS RESOURCES, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
            As of and for the Years Ending January 31, 2004 and 2003


                                                         FYE 2004      FYE 2003
            Cash Flows From Operating Activities
Net Loss From Operating Activities                      (923,207)     (486,792)
Adjustments to reconcile net loss to net cash provided
 by operating activities:
  Depreciation and Depletion                              36,701        30,885
  Amortization of discount and debt issuance costs                       2,444
  Gain on settlement of past due note payable                          (10,904)
   Stock Paid for Consulting                             50,000
   Employee Bonus and Stock Bonus                       279,400
   Stock Issued for Debt                                100,000
   Interest Capitalized                                 107,766
(Increase) Decrease in
   Accounts Receivable                                 (151,630)         6,092
   Prepaid Expenses                                                        214
   Other Assets                                           4,000
Increase (Decrease) in
   Accounts Payable and Accrued Expeses                  53,165         89,526
                                                     ----------       --------
      Net Cash Flows From Operating Activities         (447,805)      (364,535)

            Cash Flows From Financing Activities
Increase (Decrease) in Due to Related Party
  and Stockholders                                       55,450        272,544
Payments on Notes Payable                                     -        (25,458)
Sale of Common Stock                                  1,002,878
Proceeds From Investor Advance                         (168,000)       168,000
                                                   ------------      ---------
    Net Cash Provided (Used) by Financing Activities    890,328        415,086

            Cash Flows From Investing Activities
Purchase of Property and Equipment                     (386,597)       (31,222)
                                                      ---------      ---------
   Net Cash Provided (Used) in Investing Activities    (386,597)       (31,222)
                                                      ---------      ---------
            Increase (Decrease) in Cash
Cash at Beginning of Year                                55,926         19,329
Cash at End of Year                                      21,383          2,054
                                                     ----------     ----------
                                                     $   77,309     $   21,383
                                                     ==========     ==========
Supplemental Information:
   Interest Paid in Cash                                      -
   Income Taxes Paid in Cash                                  -
Non-Cash Transactions:
   Stock Issued for Consulting and Employee Compensation
      and Bonuses                                       329,400
   Stock Issued to Settle Debt Obligations              100,000
    Interest Expense Added to the Pincipal Balance
       of Long Term Debt                                107,765
   Settlement of Accrued Interest for Note Payable                      10,000
                                                      ---------     ----------
                                                     $  537,165     $   10,000
                                                     ==========     ==========


                                      F-3
<PAGE>


                             ENERGAS RESOURCES, INC.
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
            As of and for the Years Ending January 31, 2004 and 2003


                                                        Additional
                                      Common Stock       Paid in     Accumulated
                                   Shares      Amount     Capital      Deficit
                                   ------      ------   -----------  ----------

Balances, January 31, 2002       26,143,001    26,143    7,621,777   (8,113,398)

Net Loss                                                               (486,792)
                                 ----------   -------    ---------   ----------

Balances, January 31, 2003       26,143,001    26,143    7,621,777   (8,600,190)

Stock issued for consulting
  (4/9/03 @ $.10 per share)         500,000       500       49,500
Private Placement
  (6/30/03 @$.05 per share)       1,000,000     1,000       49,000
Private Placement
   (9/10/03 @$.15 per share)      2,000,000     2,000      298,000
Settlement of debt for stock
    (9/29/03 @ $.10 per share)    1,000,000     1,000       99,000
Stock bonus (10/16/03 @ $.22 per
  share)                            700,000       700      153,300
Employee stock plan
    (10/16/03 @ $.22 per share)     570,000       570      124,830
Exercise of stock warrants
     (1/31/04 @ $.20 per share)   1,250,000     1,250      248,750
Net Loss                                                               (923,207)
                                 ----------   -------    ---------   ----------
Balances, January 31, 2004     $ 33,163,001  $ 33,163  $ 8,644,157  $(9,523,397)
                               ============  ========= ===========  ===========





                                      F-4
<PAGE>



                             ENERGAS RESOURCES, INC.
                      SUPPLEMENTAL INFORMATION (UNAUDITED)
                      Years Ended January 31, 2004 and 2003


Capitalized Costs Relating to Oil and
  Gas Producing Activities at January 31,         2004            2003
                                                  -----           -----

Unproved oil and gas properties                $234,093         $234,093
Proved oil and gas properties                 3,673,141          337,341
                                              ---------        ----------
                                              3,907,234          571,434
Less accumulated depreciation, depletion,
   amortization and impairment                 (103,668)         (72,783)
                                            -----------        ---------

Net capitalized costs                        $3,803,566         $498,651
                                             ==========         ========

Costs Incurred in Oil and Gas Producing
  Activities For the Year Ended January 31,      2004              2003
                                                -----             -----

Property acquisition costs
     Proved                                  $3,000,000                -
     Unproved                                         -          $29,880

Exploration costs                              $490,000                -

Development costs                              $430,000                -

Amortization rate per equivalent barrel
    of production                                 $4.51            $4.57

Results of Operations for Oil and Gas Producing
 Activities For the Year Ended January 31,       2004              2003

Oil and gas sales                              $296,657         $116,031
Gain on sale of oil and gas properties                -                -
Gain on sale of oil and gas leases                    -                -
Production costs                               (315,109)         (26,544)
Exploration expenses                                  -                -
Depreciation, depletion, and amortization       (30,885)         (25,211)
                                             ----------        ---------
                                                (49,337)          64,276
Income tax expense                                    -                -
                                             ----------        ---------
Results of Operations for Oil and Gas Producing
 Activities  (excluding corporate overhead and
 financing costs)                              ($49,337)         $64,276
                                              =========         ========


                                      F-5
<PAGE>

                             ENERGAS RESOURCES, INC.
                      SUPPLEMENTAL INFORMATION (UNAUDITED)
                      Years Ended January 31, 2004 and 2003


                                            2004                     2003
                                            -----                    -----
                                         Oil        Gas         Oil       Gas
                                       (Bbls)       (Mcf)      (Bbls)     (Mcf)

Proved developed and undeveloped reserves
     Beginning of year                  3,761     597,773      6,842    713,262
     Revisions of previous estimates                          (2,678)   (84,806)
     Improved recovery                  5,714           -          -          -
     Purchase of minerals in place     65,265   3,940,802          -          -
     Extensions and discoveries             -           -          -          -
     Production                          (950)   (143,616)      (403)   (30,683)
     Sales of minerals in place             -           -          -          -
                                     --------   ---------     ------   --------
End of year                            73,790   4,394,959      3,761    597,773
                                       ======   =========      =====    =======

Proved developed reserves
     Beginning of year                  3,761     597,773      6,842    713,262
     End of year                       32,764   2,241,709      3,761    597,773


                                                      2004            2003
                                                      ----            ----
Standardized Measure of Discounted Future
  Net Cash Flows-
     Future cash inflows                          $21,092,100     $2,976,046
     Future production costs                       (6,847,028)      (828,826)
     Future development costs                      (1,337,000)             -
     Future income tax expenses                             -              -
                                                 ------------     ----------
     Future net cash flows                         12,908,072      2,147,220

        10% annual discount for estimated
          timing of cash flows                     (7,397,310)    (1,255,810)
     Standardized measures of discounted
       future net cash flows relating to
       proved oil and gas reserves                 $5,510,762       $891,410
                                                   ==========       ========


                                      F-6

<PAGE>

                             ENERGAS RESOURCES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 2004 AND 2003

NOTE 1 - NATURE OF OPERATIONS

Energas Resources, Inc. was originally incorporated in 1989 in British Columbia,
Canada as a public company listed on the Canadian Venture Exchange. In 2001, the
Company registered as a Delaware corporation becoming a United States domestic
corporation. In 2002, its registration statement filed with the Securities and
Exchange Commission became effective and its stock is traded in the Over the
Counter (OTC) market.

The Company is primarily engaged in the operation, development, production,
exploration and acquisition of petroleum and natural gas properties in the
United States through its wholly-owned subsidiary, A.T. Gas Gathering Systems,
Inc., an Oklahoma corporation ("AT Gas"). AT Gas owns a natural gas gathering
system, located in Oklahoma, which serves the Company's wells for delivery to a
mainline transmission system. All of the Company's oil and gas property
interests are leased.

Although the Company has taken steps to verify title to resource properties in
which it has an interest, in accordance with industry standards for the current
stage of exploration of such properties, these procedures do not guarantee the
Company's title. Property title may be subject to unregistered prior agreements
and title may be affected by undetected defects.

On August 1, 2003, the Company entered into agreements to acquire producing oil
and gas properties located in Kentucky from three private corporations in
exchange for $3,000,000 in convertible notes. All properties were initially
transferred into TGC, Inc. ("TGC") (a Kentucky corporation) and 100% of the
outstanding shares of TGC were subsequently transferred into Energas Resources,
Inc. The notes are convertible at a rate of one share of common stock for each
$1.00 of principal converted. The properties consist of 31 producing wells,
approximately 28 miles of pipeline, two compressor stations and approximately
23,000 leased and 8,500 optioned acres.

The Company is in the process of acquiring and developing petroleum and natural
gas properties with adequate production and reserves to operate profitability.
As of January 31, 2004, it had a working capital deficiency of $1,643,426 and
incurred an operating loss of $1,086,862 for the year then ended. The Company's
ability to continue as a going concern is dependent upon obtaining financing and
achieving profitable levels of operations. The Company is currently seeking
additional funds and additional resource property interests through private
placements of equity and debt instruments. There can be no assurance that its
efforts will be successful.

The consolidated financial statements do not give effect to any adjustments
which would be necessary should the Company be unable to continue as a going
concern and therefore be required to realize its assets and discharge its
liabilities in the normal course of business at amounts different from those
reflected in these consolidated financial statements.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, AT Gas and TGC. All
significant intercompany items have been eliminated in consolidation.

                                      F-7
<PAGE>

Use of estimates in the preparation of financial statements - The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue recognition - Oil and natural gas revenue is recognized at the time
title is transferred to the customer. Pipeline revenue is earned as a gathering
fee at the time the gas is delivered to the customer.

Petroleum and natural gas properties - The Company employs the full cost method
of accounting for petroleum and natural gas properties whereby all costs
relating to exploration and development of reserves are capitalized. Such costs
include land acquisition costs, geological and geophysical costs, costs of
drilling both productive and non-productive wells and related overhead.

Capitalized costs, excluding costs relating to unproven properties, are depleted
using the unit-of-production method based on estimated proven reserves, as
prepared by an independent engineer. For the purposes of the depletion
calculation, proven reserves are converted to a common unit of measure on the
basis of their approximate relative energy content. Investments in unproved
properties are not amortized until the proved reserves associated with the
projects can be determined or until impairment occurs. If an assessment of such
properties indicates that properties are impaired, the amount of impairment is
added to the capitalized cost base to be amortized.

In applying the full-cost method, the Company performs a ceiling test to ensure
that capitalized costs net of accumulated depletion do not exceed the estimated
future net revenues from production of proven reserves. The carrying value of
the properties is compared quarterly to estimated future net cash flows from
production or proven reserves. The present value of future net revenue from
proved reserves is estimated, using a 10% discount rate, based on current prices
less estimated future development and production costs. In addition, the cost of
properties not being amortized and the lower of cost or estimated fair value of
unproven properties included in the costs being amortized is added to the
present value of the future net revenues and this amount is adjusted for the
related tax effects for the purposes of computing the ceiling. During the years
ended January 31, 2004 and 2003, the Company recognized no impairment to
properly state its capitalized costs under the full cost method.

Proceeds on disposal of properties are normally applied as a reduction of the
capitalized costs without recognition of a gain or loss, unless such amounts
would significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case gain or loss would be recognized.
Abandonment of properties are accounted for as adjustments of capitalized costs
with no loss recognized, unless such adjustment would significantly alter the
relationship between capitalized costs and proved reserves of oil and gas
attributable to a cost center.

Long-lived assets - The Company reviews its long-lived assets for impairment
whenever changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. For purposes of evaluating the recoverability of
long-lived assets, the recoverability test is performed using estimated
undiscounted net cash flows to be generated by the asset.


                                      F-8
<PAGE>

Equipment - Office equipment, furniture and fixtures and software are recorded
at cost and depreciated using the declining balance method over useful lives of
3 to 5 years. Pipeline costs are depreciated using the straight-line method over
a period of 3 years.

Environmental liabilities - The Company expenses or capitalizes environmental
costs depending on their future economic benefit. Costs that relate to an
existing condition caused by past operations with no future economic benefit are
expensed. Liabilities for future expenditures of a non-capital nature are
recorded when future environmental expenditures and/or remediation is deemed
probable and the costs can be reasonably estimated. Costs of future expenditures
for environmental remediation obligations are not discounted to their present
value. During the years ended January 31, 2004 and 2003, the Company spent $-0-
on plugging and filling well holes, removing drilling anchors, hauling and
disposing of water and drilling mud, filling mud pits, surface leveling and
reseeding and general site clean up.

Financial instruments - The Company's financial instruments consist of cash,
accounts receivable, accounts payable, loans payable, and amounts due to
shareholder. It is management's opinion that the Company is not exposed to
significant interest, currency or credit risk arising from its financial
instruments and that their fair values approximate their carrying values, unless
otherwise noted.

Foreign currency translation - Foreign currency is translated in accordance with
Statement of Financial Accounting Standards No. 52, which provides the criteria
for determining the functional currency for entities operating in foreign
countries. The Company has determined its functional currency is the United
States (U.S.) dollar since substantially all of its operations are in U.S.
dollars. Financial statements of previous periods presented in Canadian dollars
have been translated to U.S. dollars at rates prevailing during the year for
revenue and expense items and at year-end rates for assets and liabilities
except for fixed assets and prepaid expenses which are translated at the rate in
effect at the time of their acquisition. The net effects of currency
translations were not material in any period.

Earnings per share - The Company follows SFAS No. 128; Earnings per Share, for
computing and presenting earnings per share, which requires, among other things,
dual presentation of basic and diluted earnings per share on the face of the
statement of operations. Basic EPS is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities, options or warrants were exercised or converted into common shares
or resulted in the issuance of common shares that then share in the earnings of
the entity. For the years ended January 31, 2004 and 2003, no options or
warrants were considered common stock equivalents as their effect would be
anti-dilutive.

Stock-based compensation - In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 encourages, but does not
require, companies to record compensation expense for stock-based employee
compensation plans at fair value. The Company has elected to account for its
stock-based compensation plans using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB No. 25). Under the provisions of APB No. 25, compensation cost
for stock options is measured as the excess, if any, of the quoted market price
of the Company's common stock at the date of grant over the amount an employee
must pay to acquire the stock.

Concentration - The Company sells all of its oil and gas production through a
related company operating its wells, Energas Pipeline Company. Energas Pipeline
Company currently sells the production to Conoco and Duke Energy. The Company
has determined that other customers for its production could replace its current
exclusive customers on a timely basis.

                                      F-9

<PAGE>

Cash and cash equivalents - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.

Income taxes - Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for future timing
differences between the financial statement carrying amounts and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered.

Recent pronouncements - In April 2002, the Financial Accounting Standards Board
("FASB") issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections." Such standard
requires any gain or loss on extinguishments of debt to be presented as a
component of continuing operations (unless specific criteria are met) whereas
SFAS No. 4 required that such gains and losses be classified as an extraordinary
item in determining net income. The adoption of SFAS 145 did not have a material
effect on the Company's financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." Such standard requires costs associated with
exit or disposal activities (including restructurings) to be recognized when the
costs are incurred, rather than at a date of commitment to an exit or disposal
plan. SFAS No. 146 nullifies EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." Under SFAS No. 146, a
liability related to an exit or disposal activity is not recognized until such
liability has actually been incurred; whereas under EITF Issue No. 94-3, a
liability was recognized at the time of a commitment to an exit or disposal
plan. The provisions of this standard are effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS 146 did not
have a material effect on the Company's financial position or results of
operations.

On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure." This standard amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. This standard also requires prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The adoption of SFAS 148 did not have a material
effect on the Company's financial position or results of operations.

SFAS No. 149 " Amendment of Statement 133 on Derivative Instruments and Hedging
Activities". This statement amends and clarifies financial accounting and
reporting for derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under SFAS 133,
"Accounting for derivative instruments and hedging activities".

SFAS No. 150 "Accounting for certain financial instruments with characteristics
of both liabilities and equity". This statement establishes standards how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity.


                                      F-10
<PAGE>


NOTE 3 - PROPERTY AND EQUIPMENT


                                                     Accumulated         Net
                                                    Depreciation/     Book Value
                             Cost      Depletion          2004           2003
                             ----      ---------     -------------     --------
Unproved oil and gas
  properties             $  234,093   $       -       $  234,093     $ 234,093
Proved oil and gas
  Properties              3,509,485     103,668        3,405,817       264,558
Office equipment             19,976      17,785            2,191         6,944
Truck                        24,120      24,120                -             -
Pipeline and equipment       74,485      24,750           49,735             -
Computer software             2,400       2,400                -             -
                         ----------    --------       ----------     ---------
                        $ 3,864,559   $ 172,723       $3,691,836    $  505,595
                        ===========   =========       ==========    ==========

Oil and gas properties are accounted for using the full cost method as discussed
in Note 2. Depletion was $30,885 and $25,211 for the years ended January 31,
2004 and 2003, respectively.

NOTE 4 - NOTES PAYABLE

                                                    2004              2003
                                                    ----              ----
Note payable to individual, bearing interest
 at 12%, payments of $5,000 monthly,
 due March 6, 2003, secured by personal
 guarantee of Company's President and
 200,000 shares of his stock in the Company      $  13,492          $ 34,542
                                                 =========          ========

NOTE 5 - COMMON STOCK

The Company has authorized capital of 100,000,000 common shares with a $.001 par
value. The issued shares are as follows:

                                    2004                    2003
                                   Number        Amount     Number       Amount

Balance, beginning of year       26,143,001  $7,647,920   26,143,001  $7,647,920
Shares issued for:
  Services                        1,770,000     329,400            -           -
  Private placement, net of
   legal costs                    3,000,000     350,000            -           -
  Warrants exercised, net of
   legal costs                    1,250,000     250,000            -           -
  Settlement of debt              1,000,000     100,000            -           -
                                -----------   ---------    ---------  ----------
Balance, end of year             33,163,001  $8,677,320   26,143,001  $7,647,920
                                ===========  ==========   ==========  ==========

In April 2003, the Company issued 500,000 shares of common stock at $.10 per
share in exchange for services valued at $50,000. In October 2003, the Company
issued 1,270,000 shares of common stock at $.22 per share to ten employees as
compensation for services valued at 279,400.

                                      F-11
<PAGE>

In June 2003, the Company issued 1,000,000 shares of common stock at $.05 per
share in exchange for cash of $50,000. In September 2003, the Company issued
2,000,000 shares of common stock at $.15 per share in exchange for $300,000
cash.

In September 2003, the Company issued 1,000,000 shares of common stock at $.10
per share for the relief of $100,000 of debt.

In October 2003, a related party exercised warrants to purchase 1,250,000 shares
of common stock at a price of $.20 per share for a total of $250,000.

Options and warrants - The Company has issued stock options and stock warrants
as follows:

<TABLE>
<S>            <C>          <C>          <C>          <C>         <C>            <C>
                        Outstanding    Granted    Exercised   Outstanding
            Exercise    January 31,      or          or        January 31,  Expiration
             Price         2002      (Cancelled)   Expired        2003        Date
           ---------    -----------  -----------   --------    -----------  ----------

Warrants:   $  0.32       275,675            -     (275,675)            -     12/31/02
            $  0.20       384,550            -            -       384,550     04/07/03


Options:    $  0.32                    250,000                     50,000     07/15/05

Warrants:   $  0.20       384,550            -     (384,550)            -     04/07/03*
            $  0.32                    100,000            -       100,000     06/30/05
           $0.20/0.30   2,000,000            -            -     2,000,000     9/30/04-05
</TABLE>

*Expired unexercised

The Company is offering for sale a Private Placement under an exemption from
registration provided by Regulation D of Section 4(2) of the Securities Act of
1933. Such Offering is for a total of 500 units at $3,000 per unit. Each unit
consists of 10,000 shares of common stock at a price of $.30 per share and
10,000 warrants exercisable at $.50 per share for two years following the
Offering closing date. The total proceeds to the Company, net of sales
commissions of $150,000, assuming all 500 units will be sold, will be
$1,350,000.

NOTE 6 - RELATED PARTY TRANSACTIONS

The Company had oil and gas sales and pipeline revenue of $237,498 and $131,839
during the years ended January 31, 2004 and 2003 from Energas Pipeline Company
("EPC"), which is owned by the President of the Company. EPC purchases oil and
gas at the wellhead from the Company, generating oil and gas sales, and then
resells to Conoco and Duke Energy. EPC also pays a gathering fee to the Company
recorded as pipeline revenue.

The Company incurred oil and gas production and pipeline costs to Energas Corp.,
a company owned by the President of the Company, in the amounts of $47,100 and
$47,337 for the years ended January 31, 2004 and 2003.

                                      F-12
<PAGE>

In addition, the Company leases office space on a month-to-month basis from Shaw
Construction Company, owned by the President of the Company, and incurred rent
expense in the amount of $45,600 and $61,803 during the years ended January 31,
2004 and 2003.

NOTE 7 - DUE TO RELATED PARTIES AND NOTE PAYABLE TO SHAREHOLDER

                                                         2004           2003
                                                         ----           ----

Open advances from related corporation owned by
  Company's President, non-interest bearing          $ 742,810      $ 444,686

Note payable to shareholder, bearing interest at
  12%, due April, 2002, unsecured                      280,000        300,000

Advance from shareholder, non-interest bearing               -        100,000

Note payable to shareholder, non-interest bearing,
  due May 2002, unsecured                                    -         60,000

Open advances from Company's President,
  non-interest bearing                                  18,927         48,718

Advance from shareholder, non-interest bearing               -         29,000

Note payable to shareholder, bearing interest
  at 10%, due August 2002, unsecured                    25,000         25,000
                                                    ----------     ----------
                                                    $1,066,737     $1,007,404
                                                    ==========     ==========

NOTE 8 - INVESTOR ADVANCE PAYABLE

During the year ended January 31, 2003, the Company entered into an agreement
with an investor seeking to acquire an interest in its oil and gas properties.
Pursuant to this agreement, the Company received a total of $168,000 during the
year ended January 31, 2003. An additional $205,915 was received during the year
ended January 31, 2004 from three investors. The Company has not yet completed
the transfer of any interests in its oil and gas properties to these investors
and, accordingly, the funds received are recorded as a current liability in the
accompanying consolidated financial statements.

NOTE 9 - LONG TERM DEBT
                                                      2004           2003
                                                      ----           ----
Note payable to private corporation, secured
by oil and gas properties, interest at 8.5%,
convertible to common stock at a rate of one
share for each dollar owed, due in 240 monthly
installments including principal and interest
in the amount of $12,972.70 beginning
September 1, 2003                                 $ 1,553,883      $      -


                                      F-13
<PAGE>


NOTE 9 - LONG TERM DEBT (cont'd)
                                                      2004           2003
                                                      ----           ----
Note payable to private corporation, secured
by oil and gas properties, interest at 8.5%,
convertible to common stock at a rate of one
share for each dollar owed, due in 240 monthly
installments including principal and interest
in the amount of $8,678.23 beginning
September 1, 2003                                  1,035,922             -

Note payable to private corporation, secured
by oil and gas properties, interest at 8.5%,
convertible to common stock at a rate of one
share for each dollar owed, due in 240 monthly
installments including principal and interest
in the amount of $4,339.12 beginning
September 1, 2003                                    517,961             -
                                                  ----------        ------

                                                  $3,107,766        $    -
          Less: Current Portion                     (157,391)
                                                  ----------       -------
                                                $  2,950,375        $    -
                                                ============      ========

Maturities of long-term debt for the next five years ending January 31, are as
follows:

                                2006      $54,011
                                2007       58,784
                                2008       63,980
                                2009       69,636
                                2010       75,791


NOTE 10 - INCOME TAXES

The Company has approximately $6,682,000 of net operating losses expiring
through 2024 that may be used to offset future taxable income but are subject to
various limitations imposed by rules and regulations of the Internal Revenue
Service. The net operating losses are limited each year to offset future taxable
income, if any, due to the change of ownership in the Company's outstanding
shares of common stock. In addition, at January 31, 2004, the Company had an
unused Canadian net operating loss carry-forward of approximately $395,000 USD,
expiring through 2008. These net operating loss carry-forwards may result in
future income tax benefits of approximately $2,673,000; however, because
realization is uncertain at this time, a valuation reserve in the same amount
has been established. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company's deferred tax liabilities and assets as
of January 31, 2004 and 2003 are as follows:

                                      F-14
<PAGE>


                                                2004           2003
                                                ----           ----

            Deferred tax liabilities       $        --       $       --
                                           ===========       ==========

            Deferred tax assets
               Net operating losses        $ 2,673,000       $2,294,000

               Valuation allowance for
                  deferred tax assets       (2,673,000)      (2,294,000)
                                           -----------       ----------
                                           $        --      $        --
                                           ===========      ===========

The valuation allowance increased $379,000 and increased $126,303 for the period
ending January 31, 2004 and 2003, respectively.

NOTE 11 - CONTINGENCIES

The Company is subject to federal, state and local laws and regulations
governing environmental quality and pollution control. During the years ended
January 31, 2004 and 2003, the Company spent $-0- on plugging and filling well
holes, removing drilling anchors, hauling and disposing of water and drilling
mud, filling mud pits, surface leveling and reseeding and general site clean up.
Although the Company believes that compliance with environmental regulations
will not have a material adverse effect on its operations, risks of substantial
costs and liabilities are inherent in oil and gas production, and there can be
no assurance that significant costs and liabilities, including criminal
penalties, will not be incurred. Through the date of this report, the Company
has no asserted or unasserted environmental claims or no liability has been
accrued in the accompanying balance sheets.

Litigation - As of January 31, 2004, the Company had no pending or threatened
litigation other than the settlement detailed in Note 12.

NOTE 12 - SUBSEQUENT EVENTS

During the period from February 1, 2004 through May 14, 2004, the Company sold a
total of 443 units of its Private Placement for a total of $1,329,000 of which
$1,275,000 has been received. The Company has also settled two lawsuits with a
shareholder and his related companies for a total of $500,000 in cash, 350,000
shares of the Company's common stock and 250,000 options with an exercise price
of $.32 with an expiration date of June 15, 2005.


                                      F-15


<PAGE>


                             ENERGAS RESOURCES, INC.
                      SUPPLEMANTAL INFORMATION (UNAUDITED)
                      Years Ended January 31, 2004 and 2003



The following estimates of proved and proved developed reserve quantities and
related standardized measure of discounted net cash flow are estimates only, and
do not purport to reflect values or fair market values of the Company's'
reserves. The Company emphasizes that reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise that those of producing
oil and gas properties. Accordingly, these estimates are expected to change as
future information becomes available. All of the Company's reserves are located
in the United States.

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.

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 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 in year end statutory
rates, with consideration of future tax rates already legislated) to be incurred
on continuation of existing economic conditions. The estimated future net cash
flows are then discounted using a rate of ten percent a year to reflect the
estimated timing of the future cash flows.





                                      F-16

<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 9th day of July 2004.

                             ENERGAS RESOURCES, INC.


                                  By: /s/ George G. Shaw
                                      --------------------------------------
                                      George G. Shaw, President and Chief
                                      Executive Officer


                                  By: /s/ David W. Young
                                      ---------------------------------------
                                      David W. Young, Chief Financial Officer

      In accordance with the Exchange Act, this Report has been signed by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.

                                     Title                    Date

/s/ George G. Shaw
--------------------------
George G. Shaw                      Director             July 9, 2004

/s/ Scott Shaw
--------------------------
G. Scott Shaw                       Director             July 9, 2004


/s/ David W. Young
-------------------------
David W. Young                      Director             July 9, 2004






<PAGE>







                             ENERGAS RESOURCES, INC.

                                   FORM 10-KSB

                                    EXHIBITS