SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K


(Mark
One)




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





For the
Fiscal Year Ended January 31, 2010




OR




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





Commission
File No. – None





ENERGAS RESOURCES,
INC.


(Name
of Small Business Issuer in its charter)





Delaware
            
            73-1620724(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)800
      Northeast 63rd
      StreetOklahoma
      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





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  o





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





Indicate
by check mark whether the registrant (1) has filed all reports to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x
No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  x No  o





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company x(Do
      not check if a smaller reporting
company)




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





The
aggregate market value of the voting stock held by non-affiliates of the Company
on July 31, 2009 was approximately $1,023,080.





As of
April 30, 2010, the Company had 94,150,144 issued and outstanding shares of
common stock.





Documents
incorporated by reference:  None





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION





This
report includes “forward-looking statements". All statements other than
statements of historical facts included in this report, 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.


2


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.





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.





MCFE. Equivalent cubic feet of gas,
using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or
natural gas liquids.





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.


3


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.




4




(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.





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.




5


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.




In June 2007 and January 2008 the
Company sold its oil and gas properties in Kentucky.  For financial
statement purposes, due to the uncertainty of collection, the January 2008 sale
was shown as “Properties Held For Resale” as of January 1, 2008.  This
accounting treatment was re-evaluated as of October 31, 2008 based on more
current information and was characterized as a note receivable.  See
Item 7 of this report for more information concerning the sale of these
properties.





In April 2008 the Company sold its
interest in the Ainsworth #1-33 well, located in Pittsburgh County, OK, for
$615,000 and incurred sales expenses of $24,600.





In January 2009 the Company acquired
Energas Pipeline Company and Energas Corp. from George Shaw, the Company’s
President, for 6,167,400 shares of the Company’s common
stock.  Energas Pipeline Company operates the natural gas gathering
system which is connected to the Company’s three wells in Atoka County,
Oklahoma.  Energas Corp. operates all of the Company’s wells and holds
the bonds required by state oil and gas regulatory authorities.





In March 2009 the Company acquired a 14
mile natural gas gathering system in exchange for 1,000,000 shares of the
Company’s common stock.  The gathering system, located in Callahan
County, Texas, will be used to transport any gas, produced from wells which may
be drilled on the Company’s leases in Texas, to the Enbridge Gas Company
pipeline.





During the year ended January 31, 2009
the Company advanced $660,826 to a third party for drilling and completing a
well in Niobrara County, Wyoming.  As of April 30, 2010 this well was
shut in.





In
November 2008 the Company entered into an agreement with Excalibur, Inc., an
unrelated third party, for the exploration and development of oil and gas leases
covering 1,560 acres in Callahan County, Texas.  The Agreement
provides that the Company will pay the costs to drill and complete five wells on
the leased acreage.





If any of
the five wells are completed as a producing well, Excalibur will receive a 12.5%
working interest in the well.  When the Company has received net
proceeds from the sale of production from a completed well equal to the cost of
drilling, completing, equipping, testing and operating the well, in addition to
leasehold costs of $39,000, Excalibur will receive an additional 12.5% working
interest in the well.





The
Company has drilled one well on the leases (the Maurice Snyder #1-141) which as
of April 30, 2010 was in the process of being evaluated.




6




In March,
2009  the Company acquired a 2% overriding royalty interests in the
leases held by an unrelated third party for $161,000, subject to the retention
by the third party of a 2% overriding royalty interest in the Maurice Snyder
#1-141 well.





On July 29, 2009, the Company acquired
an 85% working interest (62.7598% net revenue interest) in an oil and gas well
located in Uintah County, Utah for $40,000 in cash and 1,000,000 shares of its
Series A Preferred stock.  The Series A Preferred shares will
collectively be entitled to a dividend, payable quarterly, based upon 10% of the
Company’s net profits derived from the sale of any oil or gas produced from the
well.  For purposes of the Series A shares, net profits is defined as
10% of the Company’s share of the gross revenues derived from the sale of any
oil or gas produced from the well, less the Company’s share of all costs and
expenses associated with drilling, completing, reworking or operating the
well.  The Series A Preferred shares do not have any voting rights
except as provided by Delaware law.





The well acquired in the transaction is
presently shut-in.  The Company estimates that it will spend
approximately $355,000 in efforts to return the well to production.





The
Company principally operates in the Arkoma Basin in Oklahoma and the Powder
River Basin in Wyoming, and more recently in Texas.





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.





DRILLING
ACTIVITIES AND PROVEN RESERVES





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





Year Ended January 31,2008
            
            
            2009
            
            
            2010Gross
            
            
            Net
            
            
            Gross
            
            
            Net
            
            
            Gross
            
            
            NetExploratory
      Wells (1):Productive:Oil
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Gas
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Nonproductive
            
            
            1
            
            
            
            .422
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Development
      Wells (1):Productive:Oil
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Gas
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Nonproductive
            
            
            —
            
            
            
            —
            
            
            
            1
            
            
            
            .53
            
            
            
            —
            
            
            
            —Total
      Wells (1):Productive:Oil
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Gas
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Nonproductive
            
            
            1
            
            
            
            .422
            
            
            
            1
            
            
            
            .53
            
            
            
            —
            
            
            
            —








(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.




7


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 shows, as of April
30, 2010, by state and basin, the Company's producing wells, Developed Acreage,
and Undeveloped Acreage, excluding service (injection and disposal)
wells:





Productive Wells (1)
            
            
            Developed Acreage
            
            
            Undeveloped Acreage (2)Gross
            
            
            Net
            
            
            Gross
            
            
            Net
            
            
            Gross
            
            
            NetOklahoma
            
            
            2
            
            
            
            .66345Wyoming
            
            
            1
            
            
            
            .358
            
            
            
            40
            
            
            
            14.3
            
            
            
            600
            
            
            
            214.8Texas
            
            
            -
            
            
            
            -
            
            
            
            40
            
            
            
            16.0
            
            
            
            2,520
            
            
            
            1,008.0Totals
            
            
            3
            
            
            
            1.02145
            
            
            
            80
            
            
            
            30.3
            
            
            
            3,120
            
            
            
            1,222.8







(1)
              The
      wells in Oklahoma 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.


(3)
              For
      its Oklahoma wells, the Company’s interest is limited to the well bores
      only.




The following table shows, as of April
30, 2010 the status of Company’s gross acreage.





Held
      by
              Production
            
            
            Not
      Held by ProductionOklahomaWyoming
            
            
            640Texas
            
            
            40
            
            
            
            2,520







(1)
            For
      its Oklahoma wells, the Company’s interest is limited to the well bores
      only.




8




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  owns a 2%
Overriding Royalty Interests in the Texas leased acreage.





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 or other investigative
title activities are always performed before commencement of drilling
operations; however, as is customary in the industry.





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





Year
      Ended January 31,2008
            
            
            2009
            
            
            2010Production
      Data:Production
      –Oil
      (Bbls)
            
            
            1,499
            
            
            
            1,147
            
            
            
            1,052Gas
      (Mcf)
            
            
            59,491
            
            
            
            28,157
            
            
            
            18,502Average
      sales price –Oil
      (Bbls)
            
            $
            56.48
            
            
            $
            81.02
            
            
            $
            53.81Gas
      (Mcf)
            
            $
            5.88
            
            
            $
            6.35
            
            
            $
            3.23Average
      productioncosts
      per MCFE
            
            $
            2.90
            
            
            $
            1.38
            
            
            $
            1.68




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 FASB ASC 932 (formerly 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.




9





January
      31,2008
            
            
            2009
            
            
            2010Oil
            
            
            Gas
            
            
            Oil
            
            
            Gas
            
            
            Oil
            
            
            Gas(Bbls)
            
            
            (Mcf)
            
            
            (Bbls)
            
            
            (Mcf)
            
            
            (Bbls)
            
            
            (Mcf)Proved
      reserves
            
            
            53,909
            
            
            
            746,499
            
            
            
            5,644
            
            
            
            378,759
            
            
            
            101,494
            
            
            
            2,718,744Estimated
      future net cash flows from proved oil and gas reserves
            
            $3,865,249
            
            
            $730,682
            
            
            10,258,494Present
      value of future net cash flows from proved oil and gas
      reserves
            
            $2,077,673
            
            
            $357,270
            
            
            6,807,436





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 plans to operate 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.




10


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 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 regulations which are designed 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 direct
competition with all other merchants. 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.





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.




11





The
Company’s sales of oil and natural gas liquids will not be regulated and will be
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 transportation is through interstate common carrier pipelines. FERC
regulates interstate transportation rates and adjusts these rates annually based
on the rate of inflation, subject to certain conditions and
limitations.  Every five years, the FERC examines 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 federal regulations or the
periodic review of the index by the FERC will have.





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 will be 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




The Company does not refine or
otherwise process crude oil and condensate production. Substantially all of the
crude oil and condensate production from the Company’s well is 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.





The market price for crude oil is
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





As
of April 30, 2010, the Company employed 4 people.  The Company’s
employees work in management, engineering, and accounting. In addition, 2
contract workers were responsible for the supervision and operation of the
Company's field activities and providing well services.





ITEM
      1A.
            RISK
      FACTORS





Not applicable.





ITEM
      1B.
            UNRESOLVED STAFF
      COMMENTS





Not applicable.





ITEM
      2.
            PROPERTIES





See Item 1 of this report for
information concerning the Company’s oil and gas properties.





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 $4,000 per month. The
building is owned by George G. Shaw, the Company's Chief Executive Officer and a
Director.





ITEM
      3.
            LEGAL
      PROCEEDINGS





In July
2009 the Company entered into two option agreements with Lex
Dolton.  The first option was exercised in July 2009.  The
second agreement provided the Company with the option to acquire a 50% working
interest in oil and gas leases in Utah in exchange for the issuance of 2,000,000
shares of the Company’s Series C preferred stock.  Each Series C
preferred share would be entitled to a quarterly dividend based on the amount
received from the sale of oil or gas produced from any wells drilled on the
leased acreage.





In August
2009, the Company notified Dolton that it had elected to exercise the second
option and was prepared to issue the Series C preferred stock pursuant to the
agreement.  Nevertheless, Dolton refused to assign the working
interest to the Company.





On
November 16, 2009, as a result of Dolton’s failure to assign the working
interest pursuant to the second option agreement, the Company filed suit against
Dolton in the District Court of Arapahoe County, Colorado.  In its
complaint, the Company seeks damages for breach of contract and a mandatory
injunction requiring Dolton to assign the working interest.




14




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





Not
applicable





ITEM
      5.
              MARKET FOR
      REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASE OF EQUITY
SECURITIES.





The
Company’s common stock is listed on the OTC Bulletin Board under the symbol
EGSR.  The following table shows the high and low sale prices of the
Company’s common stock during the periods presented as reported by 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 StockQuarter
      Ended
            
            High
            
            
            LowApril
      30, 2007
            
            $
            0.05
            
            
            $
            0.02July
      31, 2007
            
            $
            0.05
            
            
            $
            0.02October
      31, 2007
            
            $
            0.04
            
            
            $
            0.02January
      31, 2008
            
            $
            0.04
            
            
            $
            0.02April
      30, 2008
            
            $
            0.04
            
            
            $
            0.03July
      31, 2008
            
            $
            0.04
            
            
            $
            0.03October
      31, 2008
            
            $
            0.15
            
            
            $
            0.04January
      31, 2009
            
            $
            0.11
            
            
            $
            0.01April
      30, 2009
            
            $
            0.11
            
            
            $
            0.055July
      31, 2009
            
            $
            0.07
            
            
            $
            0.015October
      31, 2009
            
            $
            0.059
            
            
            $
            0.021January
      31, 2010
            
            $
            0.04
            
            
            $
            0.015




As of April 30, 2010 there were
approximately 1,400 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 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.




15





During the year ended January 31, 2010
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.





In January 2009 the Company acquired
Energas Pipeline Company and Energas Corp. from George Shaw, the Company’s
President, for 6,167,400 restricted shares of the Company’s common
stock.  Energas Pipeline Company operates the natural gas gathering
system which is connected to the Company’s three wells in Atoka County,
Oklahoma.  Energas Corp. operates all of the Company’s wells and holds
the bonds required by state oil and gas regulatory authorities.  The
Company relied upon the exemption provided by Section 4(2) of the Securities Act
of 1933 in connection with the issuance of these shares.  As of April
30, 2010 the Company did not have any outstanding options, warrants or other
securities convertible into common stock.





See Item 11 of this report for
information concerning the Company’s outstanding options and
warrants.





ITEM
      6.
              SELECTED FINANCIAL
      DATA





Not
applicable.





ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





The
following discussion of financial condition and results of operations should be
read in conjunction with the consolidated financial statements and the notes to
the consolidated financial statements, which are included elsewhere in this
report.





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 principally operates in the
Arkoma Basin in Oklahoma, the Powder River Basin in Wyoming, Uintah County, Utah
and in Callahan County, Texas.





On
January 1, 2008 the Company sold its remaining oil and gas properties in
Kentucky, as well as its gathering systems, pipelines and equipment, for
$2,300,000.  For the sale of these assets, the Company received a
$100,000 deposit and a non-recourse promissory note for $2,200,000. In December
2008 the maker of the non-recourse note filed a petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code.  On February 27, 2009
the Company sold the non-recourse note to an unrelated third party for
$950,000.




16




In April 2008 the Company sold its
interest in the Ainsworth #1-33 well, located in Pittsburgh County, OK, for
$615,000 and incurred sales expenses of $24,600.





RESULTS
OF OPERATIONS





Material changes of certain items in
the Company's Statement of Operations for the year ended January 31, 2010 are
discussed below.





Item
            
            Increase
      (I) or Decrease (D)
            
            ReasonOil
      and gas sales
            
            D
            
            Production
      and price decrease.Lease
      operating expense
            
            D
            
            Less
      legal expense, no major repairs.General
      and administrative Expense
            
            I
            
            Increase
      in legal fees, accounting fees and contract services.Depreciation,
      depletion and amortization
            
            D
            
            Decline
      of production




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.




17





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.





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.





CAPITAL
RESOURCES AND LIQUIDITY





The Company’s material sources and
(uses) of cash during the years ended January 31, 2010 and 2009
were:




2010
            
            
            2009Cash
      used in operations
            
            $
            (279,458
            )
            
            $
            (74,048
            )Acquisition
      and development of oil and gas properties
            
            
            (775,995
            )
            
            
            (692,948
            )Cash
      resulting from purchase of subsidiaries
            
            
            —
            
            
            
            71,297Investment
      in partnership
            
            
            —
            
            
            
            (39,000
            )Payments
      on note receivable
            
            
            950,000
            
            
            
            87,980Sale
      of oil and gas properties
            
            
            —
            
            
            
            590,400(Payments
      to) advances from related parties
            
            
            49,469
            
            
            
            96,327Advances
      (net of repayments) on capital lease
            
            
            (1,445
            )
            
            
            7,164Cash
      supplied from cash on hand at beginning of twelvemonth
      period
            
            $
            (57,429
            )
            
            $
            47,172




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.




18




Contractual
Obligations





Except as shown in the following table,
as of January 31, 2010, 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.





Future
payments due on the Company's contractual obligations as of January 31, 2010 are
as follows:





Total
            
            2011
            
            
            2012
            
            
            2013
            
            
            ThereafterOffice
      equipment leases
            
            6,628
            
            
            2,655
            
            
            
            2,108
            
            
            
            1,865
            
            
            
            —Drilling
      obligation
            
            156,000
            
            
            0
            
            
            
            156,000
            
            
            
            —
            
            
            
            —




Critical
Accounting
Policies





See Note 3 to the financial statements
included as part of this report.





ITEM
      7A.
            QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET
DATA





Not applicable.





ITEM
      8.
            FINANCIAL STATEMENTS
      AND SUPPLEMENTARY DATA





See the
financial statements attached to this report.





ITEM
      9.
            CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES





On
August 1, 2008, Murrell, Hall, McIntosh & Co. PLLP resigned as the
Company’s independent registered public accounting firm. Prior to August 1, 2008
MHM had recently entered into an agreement with Eide Bailly LLP, pursuant to
which Eide Bailly acquired the operations of MHM.  Certain
professional staff and shareholders of MHM joined Eide Bailly either as
employees or partners of Eide Bailly and continued to practice as members of
Eide Bailly. On September 9, 2008, the Company, through and with the approval of
its Board of Directors, engaged Eide Bailly as its independent registered public
accounting firm.




Prior to
engaging Eide Bailly, the Company did not consult with Eide Bailly regarding the
application of accounting principles to a specific completed or contemplated
transaction or regarding the type of audit opinions that might be rendered by
Eide Bailly on the Company’s financial statements, and Eide Bailly did not
provide any written or oral advice that was an important factor considered by
the Company in reaching a decision as to any such accounting, auditing or
financial reporting issue.




19




The reports of MHM regarding the
Company’s financial statements for the fiscal years ended January 31, 2008 and
2007 did not contain any adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting
principles.  However, the reports of MHM for those fiscal years were
qualified with respect to uncertainty as to the Company’s ability to continue as
a going concern.  During the years ended January 31, 2008 and 2007,
and during the period from January 31, 2008 through August 1, 2008, the
date of resignation, there were no disagreements with MHM 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
MHM would have caused it to make reference to such disagreement in its
reports.





On July
15, 2009 Eide Bailly LLP resigned as the Company’s independent registered public
accounting firm.





The report of Eide Bailly regarding the
Company’s financial statements for the fiscal year ended January 31, 2009 did
not contain any adverse opinion or disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting
principles.  However, the report of Eide Bailly for that fiscal year
was qualified with respect to uncertainty as to the Company’s ability to
continue as a going concern.  During the year ended January 31, 2009,
and during the period from January 31, 2009 through July 15, 2009, the date of
resignation, there were no disagreements with Eide Bailly 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
Eide Bailly would have caused it to make reference to such disagreement in its
reports.





On August 12, 2009, the Company,
through and with the approval of its Board of Directors, engaged Smith, Carney
& Co., p.c. as its independent registered public accounting
firm.





Prior to engaging Smith, Carney, the
Company did not consult with Smith, Carney regarding the application of
accounting principals to a specific completed or contemplated transaction or
regarding the type of audit opinions that might be rendered by Smith, Carney on
the Company’s financial statements, and Smith, Carney did not provide any
written or oral advice that was an important factor considered by the Company in
reaching a decision as to any such accounting, auditing or financial reporting
issue.


20


ITEM
      9A.
            CONTROLS AND
      PROCEDURES





Evaluation of Disclosure
Controls and Procedures




In
connection with the preparation of this annual report, an evaluation was carried
out by George Shaw, the Company's Chief Executive and Principal financial
Officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 as of January 31, 2010. Disclosure controls and procedures are designed to
ensure that information required to be disclosed in reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to management to allow timely
decisions regarding required disclosures.
 
 Based
on that evaluation, and the material weaknesses outlined in our Management
Report on Internal Control Over Financial Reporting, the Company's management
concluded, as of the end of the period covered by this annual report, that
the  Company's  disclosure  controls
and  procedures  were not effective in
recording,  processing,  summarizing  and
reporting  information  required to be
disclosed,  within the time periods  specified in the SEC's
rules and forms, and that such  information  was
not  accumulated  and  communicated to management
to allow timely decisions regarding required disclosures.





Management’s
Report on Internal Control Over Financial Reporting




The
Company's management is responsible for establishing and maintaining adequate
internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting. As defined by the
Securities and Exchange Commission, internal control over financial reporting is
a process designed by, or under the supervision of the Company's principal
executive officer and principal financial officer and implemented by the
Company's Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company's financial statements in accordance with U.S.
generally accepted accounting principles.
 
 The
Company's internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the Company's transactions and
dispositions of its assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of the Company's financial
statements in accordance with U.S. generally accepted accounting principles, and
that its receipts and expenditures are being made only in accordance with
authorizations of the Company's management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on its financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 Management
has not yet assessed the effectiveness of the Company's internal control over
financial reporting as of January 31, 2010 as required by Section 404 of the
Sarbanes Oxley Act of 2002.  Therefore, management cannot state
whether or not the Company's internal controls over financial reporting are
effective.
 
 A
material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of the Company's annual or interim financial
statements will not be prevented or detected on a timely basis. In the course of
their engagement for the year ended January 31, 2010 the Company's external
audit firm reported that there were control deficiencies that in the aggregate
constituted a material weakness in internal controls. The control deficiencies
include the failure of management to complete the required testing of internal
controls under Section 404, the lack of governance regarding the failure to file
corporate tax returns for several years, the inadequacy of property records to
support lease agreements and ownership interests and to track by-well full cost
additions and the presence of significant audit adjustments. Audit adjustments
are the indication of a failure of internal controls to prevent or detect
misstatements of accounting information. The failure could be due to inadequate
design of the internal controls or to a misapplication or override of
controls.
 
 This
annual report does not include an attestation report of the Company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management's report on
internal control in this annual report.




21


ITEM
      9B.
            OTHER
      INFORMATION





Not applicable





ITEM
      10.
            DIRECTORS, EXECUTIVE
      OFFICERS AND CORPORATE
GOVERNANCE.





The Company’s executive officers and
directors are listed below. 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
            
            PositionGeorge
      G. Shaw
            
            79
            
            President,
      Principal Financial Officer, Principal Accounting Officer and a
      DirectorG.
      Scott Shaw
            
            38
            
            Vice
      President, Secretary 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,
Principal Financial Officer, Principal Accounting Officer and a director of the
Company.  Mr. Shaw has been an officer and director of the Company
since July 1991.  Mr. Shaw is the President of Energas Corporation and
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.





The Company does not have a
compensation committee.  The Company’s Board of Directors serves as
the Company’s Audit Committee.  The Company does not have a financial
expert as a member of its Board of Directors.  None of the Company’s
directors are independent as that term is defined Section 803 of the Listing
Standards of the NYSE Amex.





During the year ended January 31, 2010
the Company did not compensate any person for acting as a director of the
Company.





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


22


ITEM
      11.
            EXECUTIVE
      COMPENSATION





The following table shows the
compensation during the three years ended January 31, 2010, 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, 2010.





Name
      and Principal Position
            
            Fiscal Year
            
            Salary (1)
            
            
            Bonus (2)
            
            
            Stock Awards (3)
            
            
            Option Awards (4)
            
            
            All
      Other Annual Compen- sation (5)
            
            
            TotalGeorge
      Shaw,
            
            2010
            
            $
            39,000
            
            
            
            
            
            $
            5,000
            
            
            
            
            
            
            
            
            $
            44,000President
            
            2009
            
            $
            36,000
            
            
            
            
            
            $
            15,375
            
            
            
            
            
            
            
            
            $
            51,3752008
            
            $
            36,000
            
            
            
            —
            
            
            $
            15,000
            
            
            
            —
            
            
            
            —
            
            
            $
            51,000Scott
      Shaw
            
            2010
            
            $
            48,000
            
            
            
            
            
            
            $
            5,000
            
            
            
            
            
            
            
            
            
            
            $
            53,000Vice
      President
            
            2009
            
            $
            48,000
            
            
            
            
            
            
            $
            3,750
            
            
            
            
            
            
            
            
            
            
            $
            51,7502008
            
            $
            48,000
            
            
            
            
            
            
            $
            7,500
            
            
            
            
            
            
            
            
            
            
            $
            55,500







(1)
            The
      dollar value of base salary (cash and non-cash)
  received.




(2)
            The
      dollar value of bonus (cash and non-cash)
  received.




(3)
            During
      the periods covered by the table, the value of the Company’s shares issued
      as compensation for services calculated in accordance with FASB ASC 718
      (formerly FAS 123R).




(4)
            The
      amount recognized for financial statement reporting purposes and
      calculated in accordance with FASB ASC 718 (formerly FAS 123R), for
      options awarded during the year.




(5)
            All
      other compensation received that the Company could not properly report in
      any other column of the table.





The following shows the amounts which
the Company expects to pay to its officers during the twelve month period ending
January 31, 2011, 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.





Name
            
            Proposed
      Compensation
            
            
            Time
      to Be Devoted To Company’s BusinessGeorge
      G. Shaw
            
            $
            84,000
            
            
            
            100
            %G.
      Scott Shaw
            
            $
            72,000
            
            
            
            100
            %





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.




23


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.





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 January 31, 2010.  The Company’s Incentive
and Non-Qualified Stock Option Plans were not approved by the Company's
shareholders.





Plan
      Category
            
            Number
      of Securities to be Issued Upon Exercise of Outstanding Options
      [a]
            
            
            Weighted-Average
      Exercise Price of of Outstanding Options
            
            
            Number
      of Securities Remaining Available For Future Issuance Under Equity
      Compensation Plans (Excluding Securities Reflected in Column
      (a))Incentive
      Stock Option Plan
            
            
            —
            
            
            
            —
            
            
            
            2,000,000Non-Qualified
      Stock Option Plan
            
            
            —
            
            
            
            —
            
            
            
            750,000




The following table provides
information as of April 30, 2010 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.


24





Name
      of Plan
            
            Total
      Shares Reserved Under Plans
            
            
            Shares
      Reserved for Outstanding Options
            
            
            Shares
      Issued As Stock Bonus
            
            
            Remaining
      Options/ Shares Under PlansIncentive
      Stock Option Plan
            
            
            2,000,000
            
            
            
            —
            
            
            
            —
            
            
            
            2,000,000Non-Qualified
      Stock Option Plan
            
            
            1,000,000
            
            
            
            —
            
            
            
            —
            
            
            
            750,000Stock
      Bonus Plan
            
            
            4,000,000
            
            
            
            —
            
            
            
            2,036,981
            
            
            
            1,963,019




The following table summarizes the
options and stock bonuses granted pursuant to the Plans as of April 30,
2010:




Incentive Stock
Options





Shares
      Subject To Option
            
            Exercise
      Price
            
            Date
      of Grant
            
            Expiration
      Date of Option
            
            Options
      Exercised as of April 30, 2010




None.





Non-Qualified Stock
Options




Shares
      Subject To Option
            
            
            Exercise
      Price
            
            
            Date
      of Grant
            
            
            Expiration
      Date of Option
            
            
            Options
      Exercised as of April 30, 2010250,000
            
            
            $
            0.32
            
            
            
            6-30-03
            
            
            
            7-15-05
            
            
            
            250,000





Stock
Bonuses





Name
            
            Shares
      Issued as Stock Bonus
            
            Date
      IssuedGeorge
      Shaw
            
            
            100,000
            
            10/30/03Scott
      Shaw
            
            
            100,000
            
            10/30/03Employees
      and consultants
            
            
            1,836,981
            
            various
      dates2,036,981




Separate from its Stock Bonus Plan, the
Company has issued the following shares of its common stock to George and Scott
Shaw for services rendered.




25





Name
            
            Shares
      Issued for Services Rendered
            
            
            Date
      IssuedGeorge
      Shaw
            
            
            100,000
            
            
            
            10/2005Scott
      Shaw
            
            
            100,000
            
            
            
            10/2005George
      Shaw
            
            
            150,000
            
            
            
            10/2006Scott
      Shaw
            
            
            150,000
            
            
            
            10/2006George
      Shaw
            
            
            750,000
            
            
            
            9/2007Scott
      Shaw
            
            
            750,000
            
            
            
            9/2007George
      Shaw
            
            
            750,000
            
            
            
            10/2008Scott
      Shaw
            
            
            750,000
            
            
            
            10/2008George
      Shaw
            
            
            500,000
            
            
            
            1/2010Scott
      Shaw
            
            
            500,000
            
            
            
            1/2010





ITEM
      12.
            SECURITY OWNERSHIP OF
      CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT





The following table shows the ownership
of the Company’s common stock as of April 30, 2010 by (i) each person who is
known to the Company to be the beneficial owner of more than 5% the Company’s
common stock, (ii) each director and executive officer of the Company, and (iii)
all executive officers and directors of the Company 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 executive
officers and directors of the Company, except that George G. Shaw is the father
of G. Scott Shaw.  As of April 30, 2010 the Company did not have any
outstanding options, warrants or other securities convertible into common
stock.





Name
      and address
            
            Shares
      Beneficially Owned
            
            
            Percent
      of Outstanding SharesGeorge
      G. Shaw
            
            
            21,633,649
            (1)
            
            
            22.98
            %Third
      Floor, 800 Northeast 63rd
      Street Oklahoma City, Oklahoma 73105G.
      Scott Shaw
            
            
            8,178,905
            
            
            
            8.68
            %800
      Northeast 63rd
      Street Oklahoma City, Oklahoma 73105Terry
      R. and Marguerite S. Tyson 16250 County Rd. U Lipscomb, TX
      79056-6304
            
            
            8,792,800
            
            
            
            9.34
            %Executive
      Officers and Directors as a group (two persons)
            
            
            38,605,354
            
            
            
            41.0
            %







(1)
            Includes
      (i) 2,024,916 shares held by Energas Corporation, (ii) 3,460,320 shares
      held by Energas Pipeline Co., Inc. and (iii) 1,585,000 shares of common
      stock held by Mr. Shaw.  Energas Corporation and Energas
      Pipeline Co., Inc. are controlled by Mr.
Shaw.




26




ITEM
      13.
            CERTAIN RELATIONSHIPS
      AND RELATED TRANSACTIONS, DIRECTOR
  INDEPENDENCE





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 $4,000 per
month to George Shaw, the owner of the building. During the years ended January
31, 2010, 2009 and 2008 the Company paid rent of $48,000, $47,600 and $45,600,
respectively. In addition, and prior to January 31, 2009, Mr. Shaw owned Energas
Pipeline Company which operates the natural gas gathering system to which the
Company's three wells in Atoka County, Oklahoma are connected. During the years
ended January 31, 2010, 2009 and 2008 Energas Pipeline Company received $-0-,
$13,658 and $13,550, respectively, for operating the gathering
system.





In January 2009 the Company acquired
Energas Pipeline Company and Energas Corp. from George Shaw, the Company’s
President, for 6,167,400 shares of the Company’s common
stock.  Energas Pipeline Company operates the natural gas gathering
system which is connected to the Company’s three wells in Atoka County,
Oklahoma.  Energas Corp. operates, but holds no interest in, all of
the Company’s wells and holds the bonds required by state oil and gas regulatory
authorities.





As of January 31, 2010 the Company had
borrowed $90,706 from Mr. Shaw.  These loans are non-interest bearing,
unsecured, and do not have fixed terms of repayment.  The amounts
borrowed from Mr. Shaw 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
      14.
            PRINCIPAL ACCOUNTANT
      FEES AND SERVICES





Eide Bailly LLP audited the Company’s
financial statements for the year ended January 31, 2009.  The
following table shows the aggregate fees billed to the Company during the year
ended January 31, 2009 by Eide Bailly.





27





2009Audit
      Fees
            
            $
            34,099Audit-Related
      FeesFinancial
      Information SystemsDesign
      and Implementation FeesTax
      FeesAll
      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
10-Q reports during the fiscal year.  Before Eide Bailly LLP was
engaged by the Company to render audit services, the engagement was approved by
the Company’s Board of Directors.





Smith Carney & Co., P.C. served as
the Company's independent public accountants during the fiscal year ended
January 31, 2010.  The following table shows the aggregate fees billed
to the Company during the year ended January 31, 2010 by Eide Bailly and Smith
Carney & Co.





2010Audit
      Fees
            
            $
            99,830Audit-Related
      FeesFinancial
      Information SystemsDesign
      and Implementation FeesTax
      FeesAll
      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
10-Q reports during the fiscal year.  Before Smith Carney & Co.
was engaged by the Company to render audit services, the engagement was approved
by the Company’s Board of Directors.




28


ITEM
      15.
            EXHIBITS, FINANCIAL
      STATEMENTS SCHEDULES




Exhibit
      No.
                
                Description
      of Exhibit
                
                Page
      Number3.1
                
                Certificate
      of Incorporation *3.2
                
                Bylaws
      *3.3
                
                Certificate
      of Domestication in Delaware
                
                *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.
                
                *21.
                
                Registrant’s
      Subsidiaries
                
                *31.
                
                Rule
      13a-14(a)/15d-14(a) certifications
                
                5832.
                
                Section
      1350 certifications
                
                60





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





**
              Incorporatedby
      reference to the same exhibit filed with the Company’s report on Form 8-K
      dated June 27, 2005.


29




REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





The
Board of Directors and Stockholders


Energas
Resources, Inc.:





We
have audited the accompanying consolidated balance sheets of Energas Resources,
Inc. as of January 31, 2010 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year 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 audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting.  Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion. 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
audit provide a reasonable basis for our opinion.





In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Energas Resources,
Inc. as of January 31, 2010 and the results of its operations and cash flows for
the year then ended, in conformity 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, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of operations. As
discussed in Note 2 to the financial statements, certain factors indicate
substantial doubt that the Company will be able to continue as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts
and classification of liabilities that might result from the outcome of these
uncertainties.








/s/
Smith, Carney & Co.,
p.c.





Oklahoma
City, Oklahoma


May
17, 2010








REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and


Stockholders
of Energas Resources, Inc.





We have
audited the accompanying consolidated balance sheet of Energas Resources, Inc.
as of January 31, 2009 and the related consolidated statements of income,
stockholders' equity and cash flows for the year ended January 31, 2009. Energas
Resources, Inc.'s management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based on
our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting an Oversight Board (United States).  Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. 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
audit provides a reasonable basis for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Energas Resources, Inc. as
of January 31, 2009 and the results of its operations and its cash flows for the
year ended January 31, 2009 in conformity  with accounting principles
generally accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that Energas
Resources, Inc. will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of operations.  As discussed in Note 2, certain factors indicate
substantial doubt that the Company will be able to continue as a going
concern.  The financial statements do not include any adjustments to
reflect the possible future effect on the recoverability and classification of
assets or the amounts and classification of liabilities that might result from
the outcome of these uncertainties.








/s/ Eide
Bailly LLP





Greenwood
Village, Colorado


June 9,
2009





ENERGAS
RESOURCES, INC.
 CONSOLIDATED
BALANCE SHEETS


January
      31,
            
            
            January
      31,2010
            
            
            2009ASSETSCurrent
      AssetsCash
            
            $
            18,647
            
            
            $
            76,076Restricted
      cash
            
            
            25,637
            
            
            
            25,049Accounts
      receivable
            
            
            87,563
            
            
            
            54,539Deposits
            
            
            14,315
            
            
            
            -Total
      Current Assets
            
            
            146,162
            
            
            
            155,664Property
      and EquipmentOil
      and gas properties, using full cost accountingProved
      properties
            
            
            9,858,142
            
            
            
            2,606,814Unproved
      properties
            
            
            251,352
            
            
            
            162,012Pipelines
      and gathering systems
            
            
            -
            
            
            
            -10,109,494
            
            
            
            2,768,826Less
      accumulated depreciation, depletion, and amortization,including
      impairment of $2,637,686 and $1,505,656
            
            
            (3,435,598
            )
            
            
            (2,249,545
            )6,673,896
            
            
            
            519,281Other,
      net of accumulated depreciation of $41,651 and $34,035
            
            
            10,351
            
            
            
            14,4746,684,247
            
            
            
            533,755Goodwill
            
            
            146,703
            
            
            
            146,703Property
      held for resale
            
            
            350,000
            
            
            
            -Drilling
      receivable
            
            
            156,000
            
            
            
            -Investment
      in partnership
            
            
            -
            
            
            
            39,000Note
      Receivable, net of allowance of $0 and $1,162,020
            
            
            -
            
            
            
            950,000Total
      Assets
            
            $
            7,483,112
            
            
            $
            1,825,122LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
            
            $
            550,457
            
            
            $
            219,791Advanced
      drilling funds
            
            
            -
            
            
            
            126,263Due
      to related parties
            
            
            90,706
            
            
            
            40,431Current
      portion of lease
            
            
            1,746
            
            
            
            1,444Current
      asset retirement obligation
            
            
            54,682
            
            
            
            23,691Note
      payable
            
            
            -
            
            
            
            16,000Total
      Current Liabilities
            
            
            697,591
            
            
            
            427,620Asset
      Retirement Obligation
            
            
            109,828
            
            
            
            87,726Long-term
      lease
            
            
            3,973
            
            
            
            5,720Drilling
      commitment
            
            
            156,000
            
            
            
            156,000Total
      Liabilities
            
            
            967,392
            
            
            
            677,066Stockholders'
      EquityPreferred
      stock, $0.0001 par value, 20,000,000 share authorized,
      1,000,000shares
      designated Series A, 1,000,000 shares issued and
    outstandingJanuary
      31, 2010
            
            
            100
            
            
            
            -Common
      stock, $.001 par value 100,000,000 shares authorized 94,150,144
      and90,700,144
      shares issued and outstanding at January 31, 2010 and 2009,
      Respectively
            
            
            94,150
            
            
            
            90,700Additional
      paid in capital
            
            
            26,572,530
            
            
            
            19,308,395Retained
      (deficit)
            
            
            (20,151,060
            )
            
            
            (18,251,039
            )Total
      Stockholders' Equity
            
            
            6,515,720
            
            
            
            1,148,056Total
      Liabilities and Stockholders' Equity
            
            $
            7,483,112
            
            
            $
            1,825,122


See
accompanying notes to consolidated financial statements.
  F-3




ENERGAS
RESOURCES, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS




Years
      EndedJanuary
      31,2010
            
            
            2009RevenueOil
      and gas sales
            
            $
            116,291
            
            
            $
            272,223Overhead
      and marketing revenue
            
            
            39,487
            
            
            
            -Pipeline
      revenue
            
            
            10,015
            
            
            
            12,074Total
      Revenue
            
            
            165,793
            
            
            
            284,297Operating
      ExpensesLease
      operating expense
            
            
            80,281
            
            
            
            119,038Pipeline
      and gathering expense
            
            
            2,925
            
            
            
            14,432General
      and administrative expense
            
            
            613,044
            
            
            
            498,615Bad
      debt expense
            
            
            -
            
            
            
            1,160,997Property
      impairments
            
            
            1,309,189
            
            
            
            1,225,455Depreciation,
      depletion and amortization
            
            
            59,461
            
            
            
            142,321Total
      Operating Expenses
            
            
            2,064,900
            
            
            
            3,160,858Operating
      (Loss)
            
            
            (1,899,107
            )
            
            
            (2,876,561
            )Other
      (Expenses) IncomeOther
      income
            
            
            61
            
            
            
            -Interest
      income
            
            
            588
            
            
            
            140,115Gain
      on sale of properties
            
            
            -
            
            
            
            267,549Gain
      on sale of subsidiary
            
            
            -
            
            
            
            7,116Interest
      expense
            
            
            (1,563
            )
            
            
            (5,861
            )Total
      Other (Expense)
            
            
            (914
            )
            
            
            408,919Net
      (Loss) before Income Taxes
            
            
            (1,900,021
            )
            
            
            (2,467,642
            )Provision
      for income taxes
            
            
            -
            
            
            
            -Net
      (Loss)
            
            $
            (1,900,021
            )
            
            $
            (2,467,642
            )Net
      (Loss) per Share, Basic and Diluted
            
            $
            (0.02
            )
            
            $
            (0.03
            )Weighted
      average of number of shares outstanding
            
            
            92,327,788
            
            
            
            83,046,405







F-4




ENERGAS
RESOURCES, INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


FOR
THE YEARS ENDED JANUARY 31, 2010 AND


JANUARY
31, 2009




Common
      Stock
            
            
            Preferred
      Stock
            
            
            Additional
      Paid-In
      Capital
            
            
            Accumulated
      Deficit
            
            
            TotalShareholders' EquityShares
            
            
            Amount
            
            
            Shares
            
            
            AmountBalance,
      January 31, 2008
            
            
            82,532,744
            
            
            $
            82,533
            
            
            
            -
            
            
            $
            -
            
            
            $
            19,025,907
            
            
            $
            (15,783,397
            )
            
            $
            3,325,043Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,467,642
            )
            
            
            (2,467,642
            )Restricted
      stock issued for compensation
            
            
            2,000,000
            
            
            
            2,000
            
            
            
            -
            
            
            
            -
            
            
            
            39,000
            
            
            
            -
            
            
            
            41,000Stock
      issued for purchase of subsidaries
            
            
            6,167,400
            
            
            
            6,167
            
            
            
            -
            
            
            
            -
            
            
            
            243,488
            
            
            
            -
            
            
            
            249,655Balance,
      January 31, 2009
            
            
            90,700,144
            
            
            
            90,700
            
            
            
            -
            
            
            
            -
            
            
            
            19,308,395
            
            
            
            (18,251,039
            )
            
            
            1,148,056Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,900,021
            )
            
            
            (1,900,021
            )Stock
      issued for conversion of debt
            
            
            200,000
            
            
            
            200
            
            
            
            -
            
            
            
            -
            
            
            
            15,800
            
            
            
            -
            
            
            
            16,000Stock
      issued for services
            
            
            750,000
            
            
            
            750
            
            
            
            -
            
            
            
            -
            
            
            
            51,750
            
            
            
            -
            
            
            
            52,500Stock
      issued for purchase of gathering system
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            -
            
            
            
            -
            
            
            
            59,000
            
            
            
            -
            
            
            
            60,000Preferred
      stock issued for purchase of properties
            
            
            
            
            
            
            
            
            
            
            1,000,000
            
            
            
            100
            
            
            
            7,124,085
            
            
            
            -
            
            
            
            7,124,185Restricted
      stock issued for compensation
            
            
            1,500,000
            
            
            
            1,500
            
            
            
            
            
            
            
            
            
            
            
            13,500
            
            
            
            -
            
            
            
            15,000Balance,
      January 31, 2010
            
            
            94,150,144
            
            
            $
            94,150
            
            
            
            1,000,000
            
            
            $
            100
            
            
            $
            26,572,530
            
            
            $
            (20,151,060
            )
            
            $
            6,515,720





See
accompanying notes to consolidated financial statements.




F-5




ENERGAS
RESOURCES, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


Year
      Ended January 31,2010
              
              
              2009Cash
      Flows From Operating ActivitiesNet
      (Loss)
              
              $
              (1,900,021
              )
              
              $
              (2,467,642
              )Adjustments
      to reconcile net loss to net cash used byoperating
      activitiesDepreciation,
      depletion and amortization
              
              
              59,461
              
              
              
              142,320Bad
      debt provision
              
              
              -
              
              
              
              1,160,997Gain
      on sale of subsidiary
              
              
              -
              
              
              
              (7,115
              )Gain
      on sale of properties
              
              
              -
              
              
              
              (267,549
              )Property
      impairments
              
              
              1,309,189
              
              
              
              1,225,455Common
      stock issued for services
              
              
              67,500
              
              
              
              41,000(Increase)
      Decrease inRestricted
      cash
              
              
              (588
              )
              
              
              -Accounts
      receivable
              
              
              (33,024
              )
              
              
              130,216Deposits
              
              
              (13,509
              )
              
              
              -Increase
      (Decrease) inAccounts
      payable and accrued expenses
              
              
              330,666
              
              
              
              (231,791
              )Drilling
      advances
              
              
              (126,263
              )
              
              
              126,263Accrued
      interest
              
              
              -
              
              
              
              4,008Asset
      retirement obligation
              
              
              27,131
              
              
              
              69,790Net
      Cash Flows Used By Operating Activities
              
              
              (279,458
              )
              
              
              (74,048
              )Cash
      Flows From Investing Activities(Investment
      in) oil and gas properties
              
              
              (775,995
              )
              
              
              (692,948
              )Cash
      received from purchase of subsidiaries
              
              
              -
              
              
              
              64,182Sale
      of subsidiary
              
              
              -
              
              
              
              7,115Investment
      in partnership
              
              
              -
              
              
              
              (39,000
              )Payments
      on note receivable
              
              
              950,000
              
              
              
              87,980Sale
      of oil and gas properties
              
              
              -
              
              
              
              590,400Net
      Cash Provided By Investing Activities
              
              
              174,005
              
              
              
              17,729Cash
      Flows from Financing ActivitiesAdvances
      from (Repayments to) related parties and stockholders
              
              
              49,469
              
              
              
              96,327Advances
      on capital lease
              
              
              -
              
              
              
              8,708Payments
      on capital lease
              
              
              (1,445
              )
              
              
              (1,544
              )Net
      Cash Provided By (Used By) Financing Activities
              
              
              48,024
              
              
              
              103,491Increase
      (Decrease) in Cash
              
              
              (57,429
              )
              
              
              47,172Cash
      at Beginning of Period
              
              
              76,076
              
              
              
              28,904Cash
      at End of Period
              
              $
              18,647
              
              
              $
              76,076Supplemental
      Information:Interest
      Paid in Cash
              
              $
              1,563
              
              
              $
              1,853Income
      Taxes Paid
              
              $
              -
              
              
              $
              -Non-Cash
      Transactions:Common
      stock issued for consulting services
              
              $
              22,500
              
              
              $
              -Common
      stock issued for engineering services
              
              $
              30,000
              
              
              $
              -Common
      Stock issued for purchase of gathering system
              
              $
              60,000
              
              
              $
              -Restricted
      stock issued for compensation
              
              $
              15,000
              
              
              $
              41,000Common
      Stock issued for purchase of subsidiaries
              
              $
              -
              
              
              $
              249,655Preferred
      stock issued for oil and gas properties
              
              $
              7,124,185
              
              
              $
              -










F-6




ENERGAS
RESOURCES, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS
ENDED JANUARY 31, 2010 AND 2009




1.  NATURE
OF OPERATIONS





Energas
Resources, Inc. (the “Company”) 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. (“AT GAS”).  In addition, the Company owns and operates natural
gas gathering systems located in Oklahoma, which serve wells operated by the
Company for delivery to a mainline transmission system.  The majority
of the Company’s operations are maintained and occur through AT
GAS.  AT GAS is a company incorporated in the state of
Oklahoma.





On
January 31, 2009 the Company purchased all the outstanding shares of Energas
Corporation (“Corp.”) from George G. Shaw, the Company’s president. Corp. is the
operator of all of the Company’s wells. Corp. became a wholly owned subsidiary
of the Company as of the date of acquisition.





On
January 31, 2009 the Company purchased all the outstanding shares of Energas
Pipeline (“Pipeline”) from George G. Shaw, the Company’s
president.  Pipeline operates the natural gas gathering system to
which the Company's four wells in Atoka County, Oklahoma are
connected.  Pipeline became a wholly owned subsidiary of the Company
as of the date of acquisition.




2.  GOING
CONCERN





The
Company is in the process of acquiring and developing petroleum and natural gas
properties with adequate production and reserves to operate profitably. As of
January 31, 2010, the Company had incurred losses for the years ended January
31, 2010 and 2009 of $(1,900,021) and $(2,467,642), respectively.  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 mineral 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 that
might be necessary if the Company is unable to continue as a going
concern.





3.  SIGNIFICANT
ACCOUNTING POLICIES





Basis of consolidation - The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, AT Gas, Corp., Pipeline and TGC (through February 15,
2008).  All significant inter-company items have been eliminated in
consolidation.




F-7




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.





The oil
industry is subject, by its nature, to environmental hazards and cleanup costs
for which we carry liability insurance.  At this time, we know of no
substantial costs from environmental accidents or events for which we may be
currently liable.  In addition, our oil and gas business makes us
vulnerable to changes in wellhead prices of crude oil and natural
gas.  Such prices have been volatile in the past and can be expected
to be volatile in the future.  By definition, proved reserves are
based on current oil and gas prices.  Price declines reduce the
estimated proved reserves and increase annual amortization expense (which is
based on proved reserves).





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.





Under the
full cost method, the net book value of natural gas and oil properties, less
related deferred income taxes, may not exceed a calculated
“ceiling”.  The ceiling is the estimated after-tax future net revenue
from proved natural gas and oil properties, discounted at 10% per annum plus the
lower of cost or fair market value of unproved properties.  In
calculating future net revenues, prices and costs in effect at the time of the
calculation are held constant indefinitely, except for changes that are fixed
and determinable by existing contracts.  The net book value is
compared to the ceiling on an annual basis.  The excess, if any, of
the net book value above the ceiling is required to be written off as an
expense.





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.






F-8




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.





Equipment - Equipment is
recorded at cost and depreciated on the straight-line basis over the following
periods:





Computer
      equipment
              
              5-7
      yearsTruck
              
              7
      yearsOffice
      equipment
              
              5-7
      yearsComputer
      software
              
              5
      yearsGathering
      systems
              
              30
      years





Asset Retirement Obligations–
In accordance with accounting guidance the Company records the fair value of its
liability for asset retirement obligations at the time a well is completed and
ready for production and a corresponding increase in the carrying amount of the
related long live assets.  Over time, the liability is accreted to its
present value at the end of each reporting period, and the capitalized cost is
depreciated over the useful life of the related assets.  Upon
settlement of the liability, the Company will either settle the obligation for
its recorded amount or incur a gain or loss upon settlement.  The
Company’s asset retirement obligations relate to the plugging and abandonment of
its natural gas properties.





Accounts Receivable –
Management periodically assesses the collectibility of the Company’s accounts
receivable and notes receivable.  Accounts determined to be
uncollectible are charged to operations when that determination is
made.  The provision for bad debt related to the note receivable has
been recorded at $1,162,020 as of January 31, 2009 due to the factors discussed
in Note 7.





Earnings per share- The
Company follows accounting guidance 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, 2010 and
2009, no options or warrants were considered common stock equivalents as their
effect would be anti-dilutive.





Stock-based compensation -
Effective February 1, 2006 the Company adopted the fair value recognition
provisions of updated accounting guidance regarding stock-based compensation,
using the modified-prospective transition method. Under this transition method,
stock-based compensation expense will be recognized in the consolidated
financial statements for granted, modified, or settled stock options.
Compensation expense recognized included the estimated expense for stock options
granted on and subsequent to February 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of the updated accounting
guidance, and the estimated expense for the portion vesting in the period for
options granted prior to, but not vested as of February 1, 2006, based on the
grant date fair value estimated in accordance with the original accounting
guidance. Results for prior periods have not been restated, as provided for
under the modified-prospective method.






F-9




The
updated accounting guidance requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. In the Company’s pro forma information required
under the updated accounting guidance for the periods prior to fiscal 2007, the
Company accounted for forfeitures as they occurred.




The
Company is using the Black-Scholes option-pricing model as its method of
valuation for share-based awards granted beginning in fiscal 2007. The Company’s
determination of fair value of share-based payment awards on the date of grant
using an option-pricing model is affected by the Company’s stock price as well
as assumptions regarding a number of highly complex and subjective variables.
These variables include, but are not limited to the Company’s expected stock
price volatility over the term of the awards, and certain other market variables
such as the risk free interest rate.





No
options were granted, modified or settled during the years ended January 31,
2010 and 2009, and there was no stock-based compensation expense included in net
income for these periods subject to the option pricing considerations discussed
above.





The
Company awarded 1,500,000 and 2,000,000 shares of restricted common stock to
employees on January 21, 2010 and September 26, 2008,
respectively.  Using the discounted market price of $0.01 and $.0205
on the date of the grant, the Company has recognized stock based compensation of
$15,000 and $41,000 during the years ended January 31, 2010 and 2009,
respectively.





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.





Goodwill - Goodwill represents
the excess of cost over fair value of assets acquired. Goodwill is not subject
to amortization but is tested for impairment annually or more frequently if
events or changes in circumstances indicate that the asset might be impaired, as
required by ASC Topic 350, "Intangibles - Goodwill and Other".








Concentration of credit
risk – The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits.  The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant risk.





Trade
receivables consist of uncollateralized customer obligations due under normal
trade terms. The note receivable results from oil and gas properties and a
pipeline sold in a prior period. Management reviews the estimated recoverability
of trade and notes receivable and reduces their earning amount by utilizing a
valuation allowance that reflects management's best estimate of the amount that
may not be recoverable. Management believes all trade receivables to be fully
collectible at January 31, 2010 and 2009. An allowance for bad debt was recorded
against the note receivable as of January 31, 2009 as discussed further in Note
7.





Financial Instruments – The
carrying value of current assets and liabilities reasonably approximates their
fair value due to their short maturity periods.






F-10




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.





In July
2006, the Financial Accounting Standards Board (FASB) issued an interpretation
of accounting guidance regarding accounting for uncertainty in income
taxes.  The interpretation is intended to clarify the accounting for
uncertainty in income taxes recognized in a company’s financial statements and
prescribes the recognition and measurement of a tax position taken or expected
to be taken in a tax return.  The interpretation also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.





Under the
interpretation, evaluation of a tax position is a two-step process.  The
first step is to determine whether it is more-likely-than-not that a tax
position will be sustained upon examination, includingthe resolution of any
related appeals or litigation based on the technical merits of that
position.  The second step is to measure a tax position that meets the
more-likely-than-not threshold to determine the amount of benefit to be
recognized in the financial statements.  A tax position is measured at the
largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement.





Tax
positions that previously failed to meet the more-likely-than-not recognition
threshold should be recognized in the first subsequent period in which the
threshold is met.  Previously recognized tax positions that no longer meet
the more-likely-than-not criteria should be de-recognized in the first
subsequent financial reporting period in which the threshold is no longer
met.





The
adoption of the interpretation at February 1, 2007 did not have a material
effect on the Company’s financial position.





Segment Reporting –Accounting
guidance requires a public entity to report financial and descriptive
information about its reportable operating segments.  Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments.





The
majority of the operations involve the operation, development and production of
oil and gas properties.  An incidental amount of assets (less than
10%) are associated with pipeline activities and the pipeline is operated solely
to serve specific properties.  Therefore management does not consider
the pipeline activities to be separable from the oil and gas activities and the
operations are reported herein as a single operating segment.





Reclassifications – Certain
prior period amounts have been reclassified to conform to current period
presentation.





New Accounting Pronouncements
-  In June 2009 the FASB established the Accounting Standards
Codification (“Codification” or “ASC”) as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in accordance with GAAP. Rules and
interpretive releases of the SEC issued under authority of federal securities
laws are also sources of GAAP for SEC registrants. Existing GAAP was not
intended to be changed as a result of the Codification, and accordingly the
change did not impact the Company’s financial statements. The ASC does change
the way the guidance is organized and presented.




F-11




In
December 2007, the Financial Accounting Standards Board, (FASB), issued new
accounting guidance regarding non-controlling interests in consolidated
financial statements. The new guidance establishes new accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. The new guidance is effective for fiscal years
beginning on or after December 15, 2008. Management adopted this guidance
on February 1, 2009 and the adoption of the guidance did not have a
material impact to the Company’s financial position, results of operations, or
cash flows.




In
March 2008, the FASB issued updated accounting guidance regarding
disclosures about derivative instruments and hedging activities. The updated
guidance changes the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for current
accounting guidance and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. The updated guidance is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. Management adopted
this updated guidance on February 1, 2009 and the adoption of the guidance
did not have a material impact to the Company’s financial position, results of
operations, or cash flows.





In
December 2008, the FASB issued updated accounting guidance regarding employers’
disclosures about pensions and other postretirement benefits, to provide
guidance on an employer's disclosures about plan assets of a defined benefit
pension or other postretirement plan. The disclosures about plan assets required
by the updated guidance are to be provided for fiscal years beginning after
December 15, 2009. The Company is currently assessing the impact of this update
guidance.





In
April 2009, the FASB issued updated accounting guidance to amend and
clarify the initial recognition and measurement, subsequent measurement and
accounting, and related disclosures arising from contingencies in a business
combination. Under the new guidance, assets acquired and liabilities assumed in
a business combination that arise from contingencies should be recognized at
fair value on the acquisition date if fair value can be determined during the
measurement period. If fair value cannot be determined, companies should
typically account for the acquired contingencies using existing guidance. We
will adopt updated guidance along with prior amended guidance in the first
quarter of fiscal 2010 and we do not expect the adoption will have a material
effect on our financial position or results of operations.





In
April 2009, the FASB issued amended accounting guidance regarding fair
value disclosures of financial instruments in interim financial statements. The
amended guidance will require disclosures about fair value of financial
instruments in financial statements for interim reporting periods and in annual
financial statements of publicly-traded companies. This amended guidance also
will require entities to disclose the method(s) and significant assumptions used
to estimate the fair value of financial instruments in financial statements on
an interim and annual basis and to highlight any changes from prior periods.
Management adopted this amended guidance on May 1, 2009 and the adoption of
amended guidance did not have a material impact to the Company’s financial
position, results of operations, or cash flows.






F-12




In April
2009, the FASB issued amended accounting guidance regarding recognition and
presentation of other-than-temporary impairments. The guidance amends the
other-than-temporary impairment guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities. Management
adopted this amended guidance on May 1, 2009 and the adoption of amended
guidance did not have a material impact to the Company’s financial position,
results of operations, or cash flows.





In April
2009, the FASB issued additional accounting guidance for estimating fair value
when the market activity for an asset or liability has declined significantly.
Management adopted this additional guidance on May 1, 2009 and the adoption
additional guidance did not have a material impact to the Company’s financial
position, results of operations, or cash flows.





In May
2009, the FASB issued new accounting guidance regarding subsequent events, which
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. We have adopted the provisions of the new guidance,
which became effective for interim and annual reporting periods ending after
June 15, 2009.





In
June 2009, the FASB issued amended accounting guidance to address the
elimination of the concept of a qualifying special purpose entity. The amended
guidance also replaces the quantitative-based risks and rewards calculation for
determining which enterprise has a controlling financial interest in a variable
interest entity with an approach focused on identifying which enterprise has the
power to direct the activities of a variable interest entity and the obligation
to absorb losses of the entity or the right to receive benefits from the entity.
Additionally, the amended guidance provides more timely and useful information
about an enterprise’s involvement with a variable interest entity. The amended
guidance will become effective in the first quarter of 2010. The Company is
currently evaluating whether this amended guidance will have an impact on the
Company consolidated financial statements.





In
December 2008, the Securities and Exchange Commission published a Final Rule,
“Modernization of Oil and Gas
Reporting.” The new rule permits the use of new technologies to determine
proved reserves if those technologies have been demonstrated to lead to reliable
conclusions about reserve volumes. The new requirements also will allow
companies to disclose their probable and possible reserves. In addition, the new
disclosure requirements require companies to (a) report the independence
and qualifications of its reserve preparer, (b) file reports when a third
party is relied upon to prepare reserve estimates or conducts a reserve audit,
and (c) report oil and gas reserves using an average price based upon the
prior 12 month period rather than year end prices. The new requirements were
effective for annual reports on Form 10-K for fiscal years ending on or after
December 31, 2009. The Company adopted the Final Rule as of
January 31, 2010. The adoption of the rule resulted in a lower price used
in reserve calculations and a decrease in 2010 reserves. See Note 20 for further
discussion of the impact of implementation.




In
January 2010, the FASB issued amended accounting guidance to align the oil and
gas reserve estimation and disclosure requirements of ASC 932 with the
requirements in the Security and Exchange Commission’s Final Rule, “Modernization of Oil and Gas
Reporting.” The amendments to the accounting guidance are effective for
annual reports on Form 10-K for fiscal years ending on or after
December 31, 2009. The impact of the adoption of this amended accounting
guidance is noted above.






F-13




4.  PURCHASE
OF GATHERING SYSTEM





On April
14, 2009 the Company issued 1,000,000 shares of common stock valued at $60,000,
based on the closing quoted market price of $0.06, for a gas gathering system in
Callahan County, Texas.  The gas gathering system had not been placed
into service as of January 31, 2010 and is now included in properties held for
resale.





5.  SALE
OF OIL AND GAS PROPERTIES





As of
June 1, 2007 the Company had finalized a sales agreement for the sale of all
Pulaski County, Kentucky properties, gathering systems and equipment for
$1,635,560.  The Company received cash payments totaling $1,604,500
and in October 2007 agreed to a sales price adjustment reducing the price by
$31,060.  The sales price adjustment was recorded in the carrying
amount of oil and gas properties in accordance with the requirements of the full
cost method of accounting for oil and gas properties.





On
January 1, 2008 the Company finalized a sales agreement for the sale of all
remaining Kentucky properties, gathering systems, pipelines and equipment for
$2,300,000.  The Company received a $100,000 deposit and a
non-recourse note receivable for $2,200,000 due on January 1, 2010, with
interest of 7.5%, secured by first mortgage liens on real property; lien and
security interest in all wells, fixtures and equipment; and collateral
assignment of production and proceeds from the properties.  See
Note 7 for additional discussion of the note receivable resulting from this
transaction.





On April
11, 2008 the Company sold the Ainsworth #1-33 well for $615,000 less sales
expenses of $24,600.  The Company determined that the sale of the
Ainsworth significantly altered the relationship between capitalized costs and
proved reserves of the remaining full cost pool, therefore the net book value of
the property, $322,851 was removed from the full cost pool and a gain was
recognized of $267,549 on the sale during the year ended January 31,
2009.





6.  PURCHASE
OF UINTAH COUNTY, UTAH WELL





On July
29, 2009 the Company purchased an 85% working interest, 62.7598% net revenue
interest, in the Conoco Federal #22-1 well in Uintah County, Utah for
$7,164,185. The company paid $40,000 in cash and 1,000,000 shares of the
Company's Series A preferred stock valued at $7,124,185. The fair value of the
well was determined by the present value discounted at ten percent (10%) of cash
flows from an independent reserve report on the well conducted as of July 1,
2009.





The
Company also committed to connect the Conoco Federal #22-1 well to a gathering
system within nine months of the purchase of the well. The connection expense is
estimated to be $355,475.





The
Series A preferred shares are entitled to receive quarterly dividends based upon
ten percent of the net profits derived from the Conoco Federal #22-1
well.





7.  NOTE
RECEIVABLE





At the
time of the transaction described in Note 5, current production levels indicated
that significant funds would need to be invested in the properties to fully
develop anticipated reserves and thereby generate revenues sufficient to repay
the promissory note. Due to this uncertainty, management determined to
characterize the promissory note as 'properties held for resale' on the balance
sheet.  Following accounting guidance management also determined to
hold all payments received on the promissory note as a liability titled "Deposit
on Sale" and did not reduce the note balance nor record interest income from the
date of the transaction through the six months ended July 31, 2008.






F-14




On
December 2, 2008 the debtor, Wildcat Energy Corp., with its parent entity Platina
Energy Group, filed a voluntary petition for reorganization relief under Chapter
11 of the United States Bankruptcy Code. At the time of filing, all payments due
to the Company had been received. However, the act of filing for bankruptcy is a
condition of default under the promissory note, which would allow the Company to
petition the bankruptcy court to foreclose on the related oil and gas properties
and all pipeline and other equipment if they so choose.





In
considering their options for collection of the outstanding note balance,
management determined that the previous classification of properties held for
resale should have been as a note receivable with consideration given for an
allowance for bad debt. FASB ASC 310 (formerly SFAS 114, "Accounting by
Creditors for Impairment of a Loan"), defines the conditions under which a
creditor should consider impairment of a loan and provides a framework in which
to measure the impairment.  Within this framework, management believes
the note receivable is collateral dependent as the repayment of the debt is
expected to be provided solely by the underlying
collateral.   Under these conditions, FASB ASC 310 requires an
allowance for uncollectability if the present value of expected future cash
flows from the collateral is less than the recorded investment in the
debt.





On
February 27, 2009 the Company sold the note receivable for $950,000 less
expenses of $28,909 and therefore has recorded an allowance for bad debt of
$1,162,020 as of January 31, 2009.





8.  SALE
OF TGC





On
February 15, 2008 the Company sold all the outstanding stock in its subsidiary,
TGC, for $10,000.  The Company retained outstanding liabilities of
approximately $75,000 some of which are disputed.  This sale resulted
in the recognition of a $7,115 gain for financial reporting
purposes.





9.  PURCHASE
OF SUBSIDIARIES





ENERGAS
CORPORATION





On
January 30, 2009 the Company issued 4,872,500 shares of restricted common stock
valued at $197,238 to George G. Shaw, the Company’s President, for 100% of the
outstanding shares of Energas Corporation.  The shares were valued at
88% of the closing stock price on the day the acquisition.  The
purchase price was determined by third party valuation of the projected cash
flows of Corp.  Corp. became a wholly owned subsidiary of the Company
as of the date of acquisition.  The purchase price was allocated to
the assets of Corp. as follows:




Cash
            
            $
            64,182Restricted
      cash
            
            
            25,049Receivables
            
            
            236,114Payables
            
            
            (222,393
            )Goodwill
            
            
            94,286$
            197,238






F-15




ENERGAS
PIPELINE





On
January 30, 2009 the Company issued 1,294,900 shares of restricted common stock
valued at $52,417 to George G. Shaw, the Company’s President, for 100% of the
outstanding shares of Energas Pipeline.  The shares were valued at 88%
of the closing stock price on the day the acquisition. The purchase price was
determined by third party valuation of the projected cash flows of Pipeline.
Pipeline became a wholly owned subsidiary of the Company as of the date of
acquisition.  The purchase price was allocated to the assets of
Pipeline as follows:





Receivables
            
            $
            19,227Payables
            
            
            (19,227
            )Goodwill
            
            
            52,417$
            52,417





10.  RELATED
PARTY





Until
January 30, 2009, George G. Shaw, the Company's President, owned Energas
Corporation which operates the Company’s wells in Oklahoma and Wyoming. Corp.
billed the Company a total of $710,143 for the year ended January 31, 2009 for
drilling costs, lease operating expenses and overhead.  Of the amounts
received overhead fees were $54,505 for the year ended January 31, 2009 for
operation of the wells.





Until
January 30, 2009, George G. Shaw, the Company's President, owned Energas
Pipeline Company (Pipeline) that operates the natural gas gathering system to
which the Company's four wells in Atoka County, Oklahoma are connected. The
Company sells gas from these wells to Pipeline, these sales were approximately
$148,000 during year ended January 31, 2009. The price the Company receives for
the gas sold is the market price less a marketing and transportation fee of
$0.10 per mcf that is deducted from the sales price.  During the year
ended January 31, 2009 Energas Pipeline Company received $13,658 in marketing
and transportation fees.





The
Company's offices are occupied under a month to month lease requiring
rental payments of $4,000 per month to George G. Shaw, the Company's President
and owner of the building. During the years ended January 31, 2010 and 2009 the
Company paid rent of $48,000 and $47,600, respectively, to the Company's
President.





As of
January 31, 2010 and 2009 the Company has advances from the Company’s President
of $90,706 and $40,431, respectively.  These advances have no stated
interest and are due on demand.





11.
INCOME TAXES





As
of  January  31,  2010,  the  Company  has  approximately  $14,581,000  of
net operating losses expiring through 2030 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. These net
operating loss carry-forwards may result in future income tax benefits of
approximately $5,832,000; 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.






F-16




A
reconciliation of the provision (benefit) for income taxes with the amounts
determined by applying the U.S. federal income tax rate to income before income
taxes is as follows:




Year
      Ended January 312010
            
            
            2009Computed
      at the federal statutory rate of 34%
            
            $
            (646,000
            )
            
            $
            (839,000
            )State
      tax (benefit) at statutory rates
            
            
            (114,000
            )
            
            
            (148,000
            )Property
      impairments and cost pool
            
            
            425,000
            
            
            
            440,000Change
      in valuation allowance
            
            
            335,000
            
            
            
            547,000Income
      tax expense
            
            $
            -
            
            
            $
            -





Significant
components of the Company's deferred tax liabilities and assets are as
follows:





As
      of January 312010
            
            
            2009Deferred
      tax liabilities – timing in full cost pool
            
            $
            (309,000
            )
            
            $
            (210,000
            )Deferred
      tax assets – net operating losses
            
            
            5,832,000
            
            
            
            5,646,000Deferred
      tax assets – asset impairment
            
            
            1,014,000
            
            
            
            490,000Valuation
      allowance for deferred tax assets
            
            
            (6,537,000
            )
            
            
            (5,926,000
            )Net
      deferred tax assets
            
            $
            -
            
            
            $
            -





The
changes in the valuation allowance are as follows:





Year
      Ended January 312010
            
            
            2009Beginning
      balance, February 1,
            
            $
            (5,926,000
            )
            
            $
            (5,097,000
            )Expiring
      Canadian net operating losses
            
            
            —
            
            
            
            158,000Current
      year net operating losses
            
            
            (186,000
            )
            
            
            (547,000
            )Asset
      impairment
            
            
            (524,000
            )
            
            
            (490,000
            )Changes
      in timing of full cost pool
            
            
            99,000
            
            
            
            50,000Ending
      balance, January 31,
            
            $
            (6,537000
            )
            
            $
            (5,926,000
            )




The
ability of the Company to utilize NOL carryforwards to reduce future federal
taxable income and federal income tax of the Company is subject to various
limitations under the Internal Revenue Code of 1986, as amended. The utilization
of such carryforwards may be limited upon the occurrence of certain ownership
changes, including the issuance or exercise of rights to acquire stock, the
purchase or sale of stock by 5% stockholders, as defined in the Treasury
regulations, and the offering of stock by the Company during any three-year
period resulting in an aggregate change of more than 50% in the beneficial
ownership of the Company.





The
company is delinquent in filing tax returns with the Internal Revenue service
and state taxing authorities.  The Company is in the process of
completing and filing these delinquent returns.  The filing of these
returns could result in changes to the net operating loss (NOL) carry forwards
as currently estimated.





Effective
February 1, 2007 the Company adopted accounting guidance which prescribes a
more-likely-than-not threshold for financial statement recognition and
measurement to a tax position taken or expected to be taken in a tax
return.  This guidance also provides guidance on derecognition of
income tax income tax assets and liabilities, classification of current and
deferred income tax assets and liabilities, accounting for income taxes in
interim periods and income tax disclosures.






F-17




The
Company is subject to examination in the U.S. federal and state tax jurisdiction
of the 2001 to 2009 tax years.  There are not current examinations of
the Company’s prior tax returns.  The Company has not filed any U.S or
state income tax returns since 2001.  The penalty and interest charges
on the delinquent returns is estimated to be minimal due to net operating losses
incurred in each year of operations.





No
penalty and interest on any tax positions have been computed and the Company
does not anticipate there will be a charge in the uncertain tax position in the
next 12 months.





12.
EARNINGS PER SHARE





Accounting
guidance requires a reconciliation of the numerator and denominator of the basic
and diluted earnings per share (EPS) computations.





The
following reconciles the components of the EPS computation for the years ended
January 31, 2010 and 2009:





2010
            
            
            2009Basic
      (loss) per share computationNumerator:Net
      loss
            
            $
            (1,900,021
            )
            
            $
            (2,467,642
            )Denominator:Weighted
      average common shares outstanding
            
            
            92,327,788
            
            
            
            83,046,405Basic
      (loss) per share
            
            $
            (0.02
            )
            
            $
            (0.03
            )Diluted
      (loss) per shareNumerator:Net
      loss
            
            $
            (1,900,021
            )
            
            $
            (2,467,642
            )Denominator:Weighted
      average common shares outstanding
            
            
            92,327,788
            
            
            
            83,046,405Diluted
      (loss) per share
            
            $
            (0.02
            )
            
            $
            (0.03
            )





13.
ASSET RETIREMENT OBLIGATION





The
following table provides a roll forward of the asset retirement
obligations:





Year
      Ended
            
            
            Year
      EndedJanuary 31, 2010
            
            
            January 31, 2009Asset
      retirement obligation beginning balance
            
            $
            111,417
            
            
            $
            41,627Liabilities
      incurred
            
            
            28,164
            
            
            
            68,293Liabilities
      settled
            
            
            —
            
            
            
            (17,890
            )Revisions
            
            
            (2,202
            )
            
            
            —Accretion
      expense
            
            
            27,131
            
            
            
            19,387Asset
      retirement obligation ending balance
            
            
            164,510
            
            
            
            111,417Less
      current portion
            
            
            (54,682
            )
            
            
            (23,691
            )Asset
      retirement obligation, long-term
            
            $
            109,828
            
            
            $
            87,726




F-18




14.  CAPITAL
LEASE





The
Company has a lease on a copier through October, 2012.  This lease has
been classified as a capital lease as the lease term is more than 75% of the
estimated economic life of the copier. The balances on the lease are as
follows:





Year
      Ended
            
            
            Year
      EndedJanuary
      31, 2010
            
            
            January
      31,2009Remaining
      lease payments
            
            $
            7,391
            
            
            $
            9,855Imputed
      interest
            
            
            (1,672
            )
            
            
            (2,691
            )Copier
      lease balance
            
            
            5,719
            
            
            $
            7,164Less
      current portion
            
            
            (1,746
            )
            
            
            (1,444
            )Copier
      lease, long-term
            
            $
            3,973
            
            
            $
            5,720




Future
principal payments over the next five years are as follows: 2011 - $1,746; 2012
- $2,108; 2013 - $1,865.





15.  OPERATING
LEASES





The
Company has one operating lease for office equipment requiring payment through
October 2012.  All leases are warranted with full
maintenance.





The
minimum annual rental commitment as of January 31, 2009 under non-cancellable
leases is as follows:  2011 - $909.





16.   MAJOR
PURCHASERS





The
Company’s natural gas and oil production is sold under contracts with various
purchasers. Natural gas sales to one purchaser approximated 51% of total natural
gas and oil revenues for the year ended January 31, 2010. Oil sales to one
purchaser approximated 49% of total natural gas and oil revenues for the year
ended January 31, 2010.





17.  FINANCIAL
INSTRUMENTS




In
September 2006, the FASB issued accounting guidance regarding fair value
measurements in order to establish a single definition of fair value and a
framework for measuring fair value in generally accepted accounting principles
(GAAP) that is intended to result in increased consistency and comparability in
fair value measurements. The accounting guidance also expands disclosures about
fair value measurements. The accounting guidance applies whenever other
authoritative literature requires (or permits) certain assets or liabilities to
be measured at fair value, but does not expand the use of fair value. The
guidance was originally effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those years
with early adoption permitted.
 
 In early
2008, the FASB issued amended guidance regarding fair value measurements which
delays by one year, the effective date of the original accounting guidance for
all non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The delay pertains to items including, but not
limited to, non-financial assets and non-financial liabilities initially
measured at fair value in a business combination, non-financial assets recorded
at fair value at the time of donation, and long-lived assets measured at fair
value for impairment assessment under accounting guidance for the impairment or
disposal of long-lived assets.
 
 The
Company has adopted the portion of the accounting guidance for fair value
measurements that has not been delayed by the amendments as of the beginning of
its 2009 fiscal year, and plans to adopt the balance of its provisions as of the
beginning of its 2010 fiscal year. Items carried at fair value on a recurring
basis (to which the accounting guidance applies in fiscal 2009) consist of
available for sale securities based on quoted prices in active or brokered
markets for identical as well as similar assets and liabilities. Items carried
at fair value on a non-recurring basis (to which accounting guidance will apply
in fiscal 2010) generally consist of assets held for sale. The Company also uses
fair value concepts to test various long-lived assets for impairment. The
Company is continuing to evaluate the impact the standard will have on the
determination of fair value related to non-financial assets and non-financial
liabilities in post-2009 years.
 
 Fair
value of assets and liabilities measured on a recurring basis at January 31, 2009
are as follows:
 
 Fair
      Value Measurement at Reporting Date UsingFair
      Value
                
                Quoted
      Prices In Active Markets for Identical Assets/ Liabilities (Level
      1)
                
                Significant
      Other
                  Observable
                  Inputs
                  (Level
      2)
                Significant
      Unobservable Inputs
                  (Level
      3)Notes
      receivable
                
                $
                950,000
                
                
                $
                950,000
 
 Level
2 inputs include the signed and completed contract for sale of note
receivable to third party and subsequent collection by the Company.


The
carrying amounts on the accompanying consolidated balance sheet for cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities
are carried at cost, which approximates market value.





The
company has no assets that the fair value of assets and liabilities are measured
on a recurring basis at January 31, 2010.




F-19




18.  CONTINGENCIES





In the
normal course of its operations, the Company may, from time to time, be named in
legal actions seeking monetary damages. While the outcome of these matters
cannot be estimated with certainty, management does not expect, based upon
consultation with legal counsel, that they will have a material effect on the
Company's business or financial condition or results of operations.





19.  STOCK-BASED
COMPENSATION





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.





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 January 31, 2010. The Company's Incentive and Non-Qualified
Stock Option Plans were not approved by the Company's shareholders.





Plan
      Category
            
            Number
      of Securities to be Issued Upon Exercise of Outstanding Options
      [a]
            
            
            Weighted-Average
      Exercise Price of Outstanding options
            
            
            Number
      of Securities Remaining Available For Future Issuance Under Equity
      Compensation Plans (Excluding Securities Reflected in column
      [a]Incentive
      Stock Option Plan
            
            
            —
            
            
            
            —
            
            
            
            2,000,000Non-Qualified
      Stock Option Plan
            
            
            —
            
            
            
            —
            
            
            
            750,000






F-20




The
following table provides information as of January 31, 2010 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.





Name
      of Plan
            
            Total
      Shares Reserved Under Plans
            
            
            Shares
      Reserved for Outstanding Options
            
            
            Shares
      Issued As Stock Bonus
            
            
            Remaining
      Options/Shares Under PlansIncentive
      Stock Option Plan
            
            
            2,000,000
            
            
            
            —
            
            
            
            N/A
            
            
            
            2,000,000Non-Qualified
      Stock Option Plan
            
            
            1,000,000
            
            
            
            —
            
            
            
            N/A
            
            
            
            750,000Stock
      Bonus Plan
            
            
            4,000,000
            
            
            
            —
            
            
            
            2,036,981
            
            
            
            1,963,019





The
following table summarizes the options and stock bonuses granted pursuant to the
Plans as of January 31, 2010:





Incentive Stock
Options





Shares
      Subject to Option
            
            Exercise
      Price
            
            
            Date
      of Grant
            
            
            Expiration
      Date of Option
            
            
            Options
      Exercised as of January 31, 2009None
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —




Non-Qualified Stock
Options





Shares
      Subject to Option
            
            
            Exercise
      Price
            
            
            Date
      of Grant
            
            
            Expiration
      Date of Option
            
            
            Options
      Exercised as of January 31, 2010250,000
            
            
            $
            0.32
            
            
            
            6-30-03
            
            
            
            7-15-05
            
            
            
            250,000




Stock Bonus
Plan





Name
            
            Shares
      Issued as Stock Bonus (1)(2)(3)
            
            Date
      IssuedGeorge
      Shaw
            
            
            100,000
            
            10/30/03Scott
      Shaw
            
            
            100,000
            
            10/30/03Employees
      and consultants
            
            
            1,836,981
            
            Various
      dates2,036,981





(1)
            In
      October 2006 the Company issued 150,000 shares of its restricted common
      stock toGeorge
      Shaw and 150,000 shares to Scott Shaw for services rendered. However the
      shares issued in October 2006 were not issued pursuant to the Company's
      Stock Bonus Plan. Shares were valued at market price on the date of
      grant.





(2)
            In
      October 2008 the Company issued 750,000 shares of its restricted common
      stock toGeorge
      Shaw and 750,000 shares to Scott Shaw for services rendered. However the
      shares issued in October 2008 were not issued pursuant to the Company's
      Stock Bonus Plan. Shares were valued at market price on the date of
      grant.


(3)
              In
      January 2010 the Company issued 500,000 shares of its restricted common
      stock toGeorge
      Shaw and 500,000 shares to Scott Shaw for services rendered. However the
      shares issued in January 2010 were not issued pursuant to the Company's
      Stock Bonus Plan. Shares were valued at market price on the date of
      grant.




F-21




20.  SUPPLEMENTAL
INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(UNAUDITED)





Net
Capitalized Costs





The
Company’s aggregate capitalized costs related to natural gas and oil producing
activities are summarized as follows:





January
      31, 2010
            
            
            January
      31, 2009Natural
      gas and oil properties andRelated
      lease equipment:Proved
            
            $
            9,858,142
            
            
            $
            2,606,814Unproved
            
            
            251,352
            
            
            
            162,01210,109,494
            
            
            
            2,768,826Accumulated
      depreciation, depletion and impairment
            
            
            (3,435,598
            )
            
            
            (2,249,545
            )Net
      capitalized costs
            
            $
            6,673,896
            
            
            $
            519,281





Unproved
properties not subject to amortization consisted mainly of leasehold acquired
through acquisitions. The Company will continue to evaluate its unproved
properties; however, the timing of the ultimate evaluation and disposition of
the properties has not been determined.





Costs
Incurred





Costs
incurred in natural gas and oil property acquisition, exploration and
development activities that have been capitalized are summarized as
follows:





Years
      Ended January 31,2010
            
            
            2009Development
      costs
            
            $
            775,995
            
            
            $
            692,948Investment
      in Snyder Well Partnership
            
            
            -
            
            
            
            39,000$
            775,995
            
            
            $
            731,948





Results
of Operations for Natural Gas and Oil Producing Activities





The
Company’s results of operations from natural gas and oil producing activities
are presented below for the fiscal years ended January 31, 2010 and 2009. The
following table includes revenues and expenses associated directly with the
Company’s natural gas and oil producing activities. It does not include any
interest costs and general and administrative costs and, therefore, is not
necessarily indicative of the contribution to consolidated net operating results
of the Company’s natural gas and oil operations.





Years
      Ended January 31,2010
            
            
            2009Production
      revenues
            
            $
            116,291
            
            
            $
            272,223Production
      and transportation costs
            
            
            (81,004
            )
            
            
            (133,470
            )Impairment
      of property
            
            
            (1,132,030
            )
            
            
            (1,225,455
            )Gain
      on sale of properties
            
            
            --
            
            
            
            267,549Depletion
      expense
            
            
            (50,904
            )
            
            
            (119,786
            )(1,147,647
            )
            
            
            (938,939
            )Imputed
      income tax provision (1)
            
            
            -
            
            
            
            -Results
      of operation for natural gas/oilproducing
      activity
            
            $
            (1,147,647
            )
            
            $
            (938,939
            )





(1)
            The
      imputed income tax provision is hypothetical (at the statutory rate) and
      determined without regard to the Company’s deduction for general and
      administrative expenses, interest costs and other income tax credits and
      deductions, nor whether the hypothetical tax provision will be
      payable.







F-22




Natural
Gas and Oil Reserve Quantities





The
following schedule contains estimates of proved natural gas and oil reserves
attributable to the Company. Proved reserves are estimated quantities of natural
gas and oil 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 which are
expected to be recovered through existing wells with existing equipment and
operating methods. Reserves are stated in thousand cubic feet (mcf) of natural
gas and barrels (bbl) of oil. Geological and engineering estimates of proved
natural gas and oil reserves at one point in time are highly interpretive,
inherently imprecise and subject to ongoing revisions that may be substantial in
amount.  Although every reasonable effort is made to ensure that the
reserve estimates are accurate, due to their nature reserve estimates are
generally less precise than other estimates presented in connection with
financial statement disclosures.





Gas
      – mcf
            
            
            Oil
      - bblsProved
      reserves:Balance,
      January 31, 2008
            
            
            746,499
            
            
            
            53,909Sale
      of reserves in place
            
            
            (298,035
            )
            
            
            --Revisions
      of previous estimates
            
            
            (41,548
            )
            
            
            (47,118
            )Production
            
            
            (28,157
            )
            
            
            (1,147
            )Balance,
      January 31, 2009
            
            
            378,759
            
            
            
            5,644Purchase
      of reserves in place
            
            
            2,448,135
            
            
            
            85,194Revisions
      of previous estimates
            
            
            (89,648
            )
            
            
            11,708Production
            
            
            (18,502
            )
            
            
            (1,052
            )Balance,
      January 31, 2010
            
            
            2,718,744
            
            
            
            101,494Proved
      developed reserves:Balance,
      January 31, 2010
            
            
            2,718,744
            
            
            
            101,494Balance,
      January 31, 2009
            
            
            378,759
            
            
            
            5,644





Standardized
Measure of Discounted Future Net Cash Flows:





The
following schedule presents the standardized measure of estimated discounted
future net cash flows from the Company's proved reserves for the fiscal years
ended January 31, 2010 and 2009. Estimated future cash flows are based on
independent reserve data. Because the standardized measure of future net cash
flows was prepared using the prevailing economic conditions existing during the
year ended January 31, 2010 and at January 31, 2009, it should be emphasized
that such conditions continually change. Accordingly, such information should
not serve as a basis in making any judgment on the potential value of the
Company's recoverable reserves or in estimating future results of
operations.







F-23





Years
      Ended January 31,2010
            
            
            2009Future
      production revenues (1)
            
            $
            13,698,976
            
            
            $
            1,358,079Future
      production costs
            
            
            (3,440,478
            )
            
            
            (627,398
            )Future
      development costs
            
            
            —
            
            
            
            —Future
      income tax
            
            
            —
            
            
            
            —Future
      net cash flows
            
            
            10,258,498
            
            
            
            730,681Effect
      of discounting future annual cash flows at 10%
            
            
            (3,451,062
            )
            
            
            (373,412
            )Standardized
      measure of discounted net cash flows
            
            $
            6,807,436
            
            
            $
            357,269







(1)
            The
      weighted average natural gas and oil wellhead prices used in computing the
      Company’s reserves were $3.04 per mcf and $53.54 per bbl for the year
      ended January 31, 2010 as compared to $3.18 per mcf and $27.22 per bbl at
      January 31, 2009.





The
following schedule contains a comparison of the standardized measure of
discounted future net cash flows to the net carrying value of proved natural gas
and oil properties at January 31, 2010 and 2009:





Years
      Ended January 31,2010
            
            
            2009Standardized
      measure of discounted futurenet
      cash flows
            
            $
            6,807,436
            
            
            $
            357,269Proved
      natural gas & oil property net ofAccumulated
      depreciation, depletion and amortization, including impairment of
      $2,637,686 and $1,505,655 at January 31, 2010 and 2009,
      respectively
            
            
            6,807,436
            
            
            
            357,269Standardized
      measure of discounted future net cash flows in excess of net carrying
      value of proved natural gas & oil properties
            
            $
            —
            
            
            $
            —




The
following reconciles the change in the standardized measure of discounted future
net cash flow for the years ended January 31, 2010 and 2009.





Years
      Ended January 31,2010
            
            
            2009Beginning
      balance
            
            $
            357,269
            
            
            $
            2,077,673Sales
      of oil and gas produced, net of net of production costs
            
            
            (43,100
            )
            
            
            (150,827
            )Net
      changes in prices and production costs
            
            
            171,964
            
            
            
            (718,537
            )Sales
      of reserves in place
            
            
            —
            
            
            
            (597,908
            )Purchase
      of reserves in place
            
            
            6,304,846
            
            
            
            —Revisions
      of estimates, less related production Costs
            
            
            (12,426
            )
            
            
            (1,520,861
            )Accretion
      of discount
            
            
            35,727
            
            
            
            53,075Net
      change in income taxes
            
            
            —
            
            
            
            1,214,654Other
            
            
            (6,844
            )
            
            
            —Ending
      balance
            
            $
            6,807,436
            
            
            $
            357,269




F-24





21.  DRILLING
COMMITMENT





On
November 24, 2008, Corp. acquired a working interest pursuant to a joint
development agreement.  The agreement requires the drilling of a total
of five wells at a price of $39,000 per well.  Four payments remain
outstanding as of January 31, 2009 for a total accrued commitment of $156,000 as
of January 31, 2010 and 2009.





22.  SUBSEQUENT
EVENTS





Management has evaluated subsequent
events through May 17, 2010, the date which our financial statements have been
issued, and has concluded that no material events, other than those disclosed
elsewhere herein, have occurred subsequent to January 31, 2010 that need to
included in these financial statements. See accompanying notes to
consolidated financial statements.






F-25





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 17th day of May
2010.





ENERGAS
      RESOURCES, INC.By:
              /s/
      George G. ShawGeorge
      G. Shaw, President, PrincipalAccounting
      Officer and Principal 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
                
                Director
                
                May
      17, 2010George
      G. Shaw/s/
      G.
      Scott Shaw
                
                Director
                
                May
      17, 2010G.
      Scott Shaw










ENERGAS
RESOURCES, INC.


FORM
10-K





EXHIBITS