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

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2006

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

For the transition period from _______________ to _______________

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

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

1006-100 Park Royal South
West Vancouver, B.C. Canada V7T 1A2
(Address of principal executive offices, Zip Code)

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

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

 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act). Yes [   ] No [X]

As of November 15, 2006, the registrant had 191,212,635 shares of common stock outstanding.

EUROGAS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

			Page
PART I - FINANCIAL INFORMATION
	Item 1. Financial Statements		3
		Condensed Consolidated Balance Sheets (Unaudited) as of Sept. 30, 2006 and December 31, 2005	3
		Condensed Consolidated Statements of Operations (Unaudited) as of Sept 30, 2006 and June. 30, 2005	4
		Condensed Consolidated Statements of Cash Flows (Unaudited) as of Sept. 30, 2006 and June 30, 2005	5
		Notes to Condensed Consolidated Financial Statements (Unaudited)	6
	Item 2. Managements Discussion and Analysis of Financial Condition Results of Operations		14
	Item 3. Quantitative and Qualitative Disclosures about Market Risk		19
	Item 4. Controls and Procedures		19
PART II - OTHER INFORMATION
	Item 1. Legal Proceedings		19
	Item 5. Other Information		20
	Item 6. Exhibits and Reports on Form 8-K		20
Signatures			26

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

		Sept. 30,			December 31,
		2006			2005
ASSETS
Current Assets
Cash	$	(4,518	)	$	(2,325	)
Investment in securities available for sale					801
Other receivables
Other current assets
Total Current Assets		(4,518	)		(1,524	)
Property and Equipment - full cost method
Talc mineral properties and mining equipment		-			-
Oil and gas properties not subject to amortization		-			825,426
Furniture and office equipment		54,831			320,879
Total Property and Equipment		54,831			1,144,781
Less: Accumulated depletion, depreciation and amortization		(1,945	)		(40,818	)
Net Property and Equipment		52,866			1,106,452
Investment in Securities Held as Collateral under Settlement
Obligation		2,872,930			2,872,930
Receivable from a Related Party		224,557			224,557
Total Assets	$	3,149,355		$	4,204,911
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accrued liabilities	$	15,103,421		$	13,467,892
Accrued settlement obligations		13,285,766			13,285,766
Accrued income taxes		446,814			931,711
Notes payable to related parties		756,398			756,398
Total Current Liabilities		29,592,399			28,441,767
Asset Retirement Obligation		518,907			396.407
Stockholders' Deficiency
Preferred stock, $0.001 par value; 3,661,968 shares authorized;
2,392,228 shares outstanding; liquidation preference: $499,197		350,479			350,479
Common stock, $0.001 par value; 325,000,000 shares authorized;
191,212,635 shares and 171,212,635 shares issued, respectively		191,213			191,213
Additional paid-in capital		144,012,186			144,012,186
Accumulated deficit		(185,314,524	)		(169,734,562	)
Accumulated other comprehensive income (loss)		1,065,962			1,064,962
Receivable from shareholder
Treasury stock, at cost; 5,028 shares		(1,362	)		(1,362	)
Total Stockholders' Deficiency		(41,088,342	)		(23,783,984	)
Total Liabilities and Stockholders' Deficiency	$	29,592,399		$	28,441,767

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

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

		For the Three Months Ended						For the Six Months Ended
		Sept. 30,						June 30,
		2006			2005			2006			2005
Oil and Gas Sales	$	-		$	-		$	-		$	-
Costs and Operating Expenses
Depreciation		2,268			2,146			4.624			4,502
Impairment of mineral interests and equipment		-			-			-			-
Litigation settlement expense		-			-			-			-
General and administrative		7,892			269,435			547,237			547,780
Total Costs and Operating Expenses		10,160			271,581			550,861			552,282
Other Income (Expenses)
Interest expense		(0	)		(6,578	)		(12,627	)		(13,312	)
Foreign exchange net gain (loss)		(0	)		(18,473	)		(52,332	)		(42,958	)
Equipment rental income		-
Interest income		-						-			-
Gain on sale of securities available for sale		-			-			-			-
Other expense		-			-			-			-
Net Other Expenses		(0	)		(25,051	)		(53,173	)		(56,270	)
Loss Before Accounting Change		(10,160	)		(296,632	)		(626,793	)		(608,552	)
Cumulative Effect of Accounting Change		(0	)		(10,567	)		(21.855	)		(22,549	)
Net Loss		(10,160	)		(307,199	)		(659,629	)		(631,101	)
Preferred Dividends		(34,782	)		(34,782	)		(69,564	)		(69,564	)
Loss Applicable to Common Shares	$	(10,160	)	$	(341,981	)	$	(729,193	)	$	(700,665	)
Basic and Diluted Loss Per Common Share
Loss before accounting change	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Net Loss	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.01	)
Basic and Diluted Weighted-Average Common
Shares Outstanding		191,212,635			168,212,635			191,212,635			168,212,635
Comprehensive Income (Loss)
Foreign currency translation adjustments
Unrealized gain on investment in securities		-			-			-			-
available for sale
Comprehensive Income (Loss)	$	(0	)	$	307,191		$	(729,193	)	$	631,101

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

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

		For the Six Months Ended
		Sept. 30,
		2006			2005
Cash Flows From Operating Activities
Net loss	$	(10,160	)	$	(631,101	)
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation					4,502
Gain on sale of property and equipment
Foreign exchange net (gain) loss					42,958
Cumulative effect of accounting change					22,549
Accretion of accrued settlement obligation
Compensation on write-down of receivable from related party
Impairment of mineral interests and equipment		-			-
Gain on sale of securities available for sale		-			-
Warrants issued for settlement cost		-			-
Changes in operating assets and liabilities:
Other receivables		-			-
Accrued liabilities		1,635,529			655,849
Accrued liabilities payable to related parties		-			-
Net Cash Used in Operating Activities					(289,757	)
Cash Flows From Investing Activities
Purchases of mineral interests, property and equipment		-			-
Proceeds from sale of interest in gas property and equipment		-			-
Proceeds from sale of investment in fixed-maturity securities		-			-
Proceeds from sale of securities available for sale		-			-
Purchase of securities available for sale		-			-
Net Cash Provided by (Used in) Investing Activities		-			-
Cash Flows From Financing Activities
Proceeds from issuance of common stock		-			-
Receivable from related party		289,657			289,657
Proceeds from sale of treasury stock		-			-
Acquisition of treasury stock		-			-
Net Cash Provided by (Used in) Financing Activities					289,657
Effect of Exchange Rate Changes on Cash		(15,834	)		(18,134	)
Net Increase (Decrease) in Cash		(16,764	)		(18,034	)
Cash at Beginning of Period		(3,518	)		97
Cash at End of Period	$	(4,518	)	$	45

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

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

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed Interim Financial Statements - The accompanying unaudited condensed consolidated financial statements include the accounts of EuroGas, Inc. and its subsidiaries ("EuroGas" or the "Company"). These financial statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with EuroGas' most recent annual financial statements included in the Company's report on Form 10-K for the year ended December 31, 2005. In particular, EuroGas' significant accounting principles were presented as Note 1 to the Consolidated Financial Statements in that Report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the full year ending December 31, 2006 as the company has been totally inactive due to the Chapter 7 Bankruptcy situation.

Business Condition - EuroGas has been inactive since the Company was put in Chapter 7 (Involuntary Bankruptcy) by one of its US creditors and has accumulated a deficit of $185,314,524 through September 30, 2006. EuroGas has had no revenue, losses from operations and negative cash flows from operating activities during the years ended December 31, 2005 and 2004. At September 30, 2006, the Company had a working capital deficiency of $29,588,881and a capital deficiency of $26,442,044. The Company has impaired most of its oil and gas properties and the remaining assets have been put under the control of a Bankruptcy Trustee. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern. Realization of the investment in properties and equipment is dependent upon the US Bankruptcy Court in Salt Lake City, Utah, releasing the Company from Chapter 7 and furthermore management afterwards obtaining financing for exploration, development and production for new properties. In addition, if exploration or evaluation of any property and equipment is unsuccessful, all or a portion of the remaining recorded amount of those properties will be recognized as impairment losses. Payment of current liabilities will require substantial additional financing. Management of the Company plans to finance operations, explore and develop its properties and pay its liabilities through borrowing, through sale of interests in its properties, through advances received against future talc sales and through the issuance of additional equity securities. Realization of any of these planned transactions is not assured.

Principles of Consolidation - The accompanying consolidated financial statements include the accounts of EuroGas, Inc., its majority-owned subsidiaries and EuroGas' share of properties held through joint ventures. All significant intercompany accounts and transactions have been eliminated in consolidation. Since all assets of the Company were sold at an auction held by the US Bankruptcy Trustee in March 2006 proceeds in the amount of appr. $ 800.000 are to distributed by the Bankruptcy Trustee once he files his Final Report with the Bankruptcy Court in Salt Lake City and the presiding Judge approves of this Report.

Stock-Based Compensation - At June 30, 2006, the Company had options outstanding that had been- previously granted to employees and consultants. The Company accounts for stock options granted to employees under APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and accounts for options granted to non-employees at their fair value under SFAS No. 123, Accounting for Stock-Based Compensation. No stock-based employee compensation expense is reflected in net loss during the periods presented in the accompanying financial statements as all options had an exercise price equal to the market value of the underlying common stock on the date of grant or the related compensation was recognized in earlier periods. There would not have been any effect to net loss or to basic and diluted loss per common share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation as the related compensation was recognized in earlier periods.

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

Reclassifications - Certain reclassifications have been made to the accompanying December 31, 2005 and June 30, 2005 financial statements to conform to the current period presentation.

Cumulative Effect of Accounting Change – The Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations, effectively on January 1, 2003. In accordance with the transition provisions of SFAS No. 143, the Company recorded asset retirement costs of $1,153, liabilities of $3,748, and recognized the cumulative effect on prior years of $1,579 as an expense during the six months ended June 30, 2005, which had no effect on basic and diluted loss per common share.

Recent Accounting Pronouncements - The Company adopted SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of January 1, 2003. Among other provisions, this statement modifies the criteria for classification of gains or losses on debt extinguishment such that they are not required to be classified as extraordinary items if they do not meet the criteria for classification as extraordinary items in APB Opinion No. 30, Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The adoption of this standard did not have any effect on the Company's financial position or results of operations.

The Company also adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities as of January 1, 2003. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized at fair value when the liability is incurred. The provisions of this statement did not have any effect on the Company's financial position or results of operations.

NOTE 2 - INVESTMENT IN SECURITIES

The Company's primary investment in securities consists of 209,550 shares of Enterra Energy Ltd. The Enterra shares are held as collateral by Oxbridge Limited under a claim, as discussed in Note 3. At June 30, 2003, the Company changed its expectation of realizing proceeds from sale of the Enterra shares to more than one year and reclassified the investment in the Enterra shares as a long-term asset. The Company's investments in equity securities, including the Enterra shares, are accounted for as available for sale, as defined by SFAS No. 115, as they have readily determinable fair values and are not restricted other than in connection with being pledged as collateral. Accordingly, the investments in securities available for sale are carried at market value with unrealized gains and losses included in accumulated other comprehensive income (loss). The cost of securities sold is determined by the average-cost method. The investments in securities consisted of the following:

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

NOTE 2
		Sept. 30, 2006			December 31, 2005
Cost	$	(0	)	$	412,892
Gross unrealized gains		1,293,521			1,077,166
Estimated Fair Value	$	2,377,738		$	1,490,058
Presented in the accompanying balance sheets as follows:
Investment in securities available for sale	$	-		$	-
Investment in securities held as collateral
under settlement obligation		2,377,738			-
Estimated Fair Value	$	2,377,738		$	1,490,058

During the nine months ended September 30, 2006, the Company made no sales or purchases of investment securities.

NOTE 3 - ACCRUED SETTLEMENT OBLIGATIONS

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

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

In March of 1997, the Trustee brought a related suit W. Steve Smith, Trustee v. Bertil Nordling, Rolf Schlegal, MCK Development B.V. Claron N.V., Jeffrey Ltd., Okibi N.V., McKenzie Methane Poland Co., Harven Michael McKenzie, Timothy Stewart McKenzie, Steven Darryl McKenzie and EuroGas, Inc., (Adv. No. 97-4155) in each of the three McKenzie individual bankruptcy cases. In general, the action asserts that the defendants, other than the Company, who acquired an interest in the Polish Project, received a fraudulent transfer of assets belonging to the individual McKenzie bankruptcy estates, or are alter egos or the strawmen for the McKenzies. As a result, the Trustee asserts that any EuroGas stock or cash received by these defendants should be accounted for and turned over to the Trustee. As to the Company, the Trustee asserts that as transfer agent, the Company should turn over the preferred stock presently

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

outstanding to the defendants or reserve such shares in the name of the Trustee and that any special considerations afforded these defendants should be canceled. It appears the Company was named to this litigation only because of its relationship as transfer agent to the stock in question. This suit has been administratively consolidated with 97-4114, and is currently pending before the Houston bankruptcy court. In October 1999, the Trustee filed a Motion for Leave to Amend and Supplement Pleadings and Join Additional Parties in the consolidated adversary proceedings, seeking to add new parties, including Wolfgang and Reinhard Rauball and assert additional causes of action against EuroGas and the other defendants in this action. These new causes of action include claims for damages based on fraud, conversion, breach of fiduciary duties, concealment and perjury. These causes of action claim that the Company and certain of its officers, directors or consultants cooperated or conspired with the McKenzies to secret or conceal the proceeds from the sale of the Polish Concession from the Trustee. In January 2000, this motion was granted by the bankruptcy court. The Company is vigorously defending this suit. On March 18, 2002, the court considered motions to dismiss filed by EuroGas and the Rauballs (other named defendants). These motions are currently pending before the Court. No trial date has been set.

In June 1999, the Trustee filed another suit in the same bankruptcy cases styled Steve Smith, Trustee, vs. EuroGas, Inc., GlobeGas, B.V., Pol-Tex Methane, SP. Z.O.O., et al (Adv. No. 99-3287). That suit sought sanctions against the defendants for actions allegedly taken by the defendants during the bankruptcy cases which the Trustee considered improper. The defendants filed a motion to dismiss the lawsuit, which was granted in August 1999. In July 1999, the Trustee also filed a suit in the same bankruptcy cases styled Steve Smith, Trustee, vs. EuroGas, Inc., GlobeGas, B.V., Pol-Tex Methane, SP. Z.O.O. (Adv. No. 99-3444). This suit seeks damages in excess of $170,000 for the defendants’ alleged violation of an agreement with the Trustee executed in March 1997. EuroGas disputes the allegations and has filed a motion to dismiss or alternatively, to abate this suit, which motion is currently pending before the court.

On March 18, 2002, the court considered motions to dismiss filed by EuroGas and the Rauballs (other named defendants). On September 10, 2002, the Court entered an Order which required the Trustee to specify the causes of action asserted against each Defendant. A few days prior to this Order, the Trustee filed his Second Motion for Leave to Amend and Supplement Pleadings and to Drop Certain Defendants (the “Second Motion”). On October 21, 2002, EuroGas and other Defendants filed their Response to the Second Motion. On November 11, 2002, the Trustee filed his Motion and Reply to this Response under which, in part, Trustee sought court approval to file a Third Amended Complaint. On March 13, 2003 the Court entered and Order Granting Trustee’s Motion for Leave to Amend.

On March 13, 2003 the Trustee filed his Third Amended Complaint, which is now styled Steve Smith, Trustee v. Harven Michael McKenzie, McKenzie Methane Poland, Inc., EuroGas, Inc., Wolfgang Rauball, Reinhard Rauball, MCK Development, B.V., Claron, N.V., Jeffrey, Ltd. and Okibi N.V. (Adv. No. 97-4114 and 97-4115). As to EuroGas, the Third Amended Complaint asserts claims for breach of contract, fraud in the inducement, conspiracy, aiding and abetting civil conspiracy, fraudulent transfer and punitive damages. As to Wolfgang and Reinhard Rauball, the Complaint asserts claims for turnover under Section 542 and 543 (Reinhard Rauball only) of the Bankruptcy Code, conversion, post-petition avoidable transfers, civil conspiracy, aiding and abetting civil conspiracy and punitive damages. The Company has filed a Motion to Dismiss the Third Amended Complaint. A trial date set for November 2003 was postponed pending a settlement agreement described below.

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

Management’s estimate of the amounts due under the claims made by the Trustee and his attorneys have been adequately accrued in the accompanying financial statements.

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

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

Holbrook Claim — On February 9, 2001, James R. Holbrook, a documents escrow agent appointed under the Settlement Agreement, filed his Complaint of Escrow Agent for Interpleader and for Declaratory Relief against EuroGas, the Trustee and the other parties to the settlement in an action styled James R. Holbrook v. W. Steve Smith, Trustee, Kukui, Inc., EuroGas, Inc. and Kruse Landa & Maycock, L.L.C., (Adv. No. 01-3064) in the McKenzie bankruptcy cases. Under this complaint, Holbrook sought a determination of the defendants’ rights in certain EuroGas files that he had received from Kruse Landa and Maycock, former attorneys for EuroGas. Through this litigation, the Trustee sought turnover of all these files pursuit to the Settlement Agreement. EuroGas has opposed turnover of privileged materials and filed a cross-claim in the suit asking for a declaratory judgment that the Settlement Agreement is enforceable and that the Trustee be ordered to specifically perform his obligations under the Settlement Agreement. The Trustee filed a

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

counterclaim requesting specific performance by EuroGas and other relief. At the direction of the court, both parties filed motions for summary judgment. On December 17, 2001, the court entered an order granting Trustee’s Motion for Summary Judgment and denying a related Motion to Strike Affidavit, which EuroGas had filed. EuroGas has appealed this order to the United States District Court for the Southern District of Texas. On September 25, 2002 the District Court entered its Opinion and Order affirming the Bankruptcy Court’s orders. On October 25, 2002 EuroGas filed a notice of appeal of the District Court’s order to the Fifth Circuit Court of Appeals. The appeal is currently pending before this Court. EuroGas cannot predict the outcome of these appeals, but intends to vigorously pursue the appeals to completion.

Settlement of McKenzie Claims — On November 4, 2003, EuroGas signed a settlement agreement with the Bankruptcy Trustee, Kukui, and other parties. The settlement agreement called EuroGas to make payments totaling $2,800,000, to be paid in installments, with an initial payment of $250,000 paid November 5, 2003 and $250,000 to be paid by December 6, 2003. Upon completion of the payments all the cases relating to the McKenzie bankruptcy claim, including the Kukui, claim, and the Holbrook claim, as described below, will be dismissed. Under this settlement EuroGas, its subsidiaries, Wolfgang Rauball and Reinhard Rauball will be released from any further claim by Kukui and the Bankruptcy Trustee. Since the initial payments were made EuroGas has not been able to make further payments and is in default of the settlement agreement. Subsequently EuroGas management has met with the Bankruptcy Trustee, on March 27, 2004 in Houston, Texas. The discussion centered on revival of the settlement agreement, this discussion is ongoing. Continued discussion are on going to revive the settlement agreement. A third party investor has indicated that he is prepared to place the required settlement amount in a trust fund in the very near future to obtain a settlement. In the meantime the Bankruptcy Trustee has filed a petition in US Bankruptcy court in Salt Lake City, Utah to have EuroGas, Inc. forced into involuntary bankruptcy. EuroGas has retained local council and has responded to the claim. Because Eurogas was unable to finance the settlement agreement the Bankruptcy court in Houston Texas has added a monetary amount of $113 million to the default judgment, against EuroGas, Inc. and certain parties, that was obtained by the Trustee for the McKenzie matter. On October 20, an Order for Relief was signed by the US Bankruptcy Court in Salt Lake City, Utah. This has put the Company into receivership at this point. There is ongoing negotiations by the third party to purchase the judgment against EuroGas presently held by the Bankruptcy Trustee in the McKenzie matter, who forced EuroGas into involuntary Bankruptcy. The plan is to purchase the judgment held by the McKenzie trustee by a friendly third party and then request the US Bankruptcy Court in Salt Lake City, Utah to convert the present chapter 7 bankruptcy to a voluntary chapter 11 reorganization. . In October of 2005, the Bankruptcy Trustee was asked to sell the Polish asset, GlobeGas B.V., Pol-Tex Methane, Sp. zo.o., McKenzie Methane Jastrzebie Sp. zo.o., to a third party. The Trustee eventually put the group of Polish companies up for an auction which was held on March 28, 2006, after a certain amount of legal wrangling by some of the creditors. The assets were sold at the auction and the Bankruptcy Trustee received appr. $ 800.000 for the assets which he distributed after costs to certain creditors of the company in November 2006.

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

NOTE 4 - NOTES PAYABLE TO RELATED PARTIES

Notes payable to related parties are considered current and consist of:

NOTE 4

		September 30,
		2006		December 31, 2005
Loans from a key employee, due in 2002, with
interest at 10%, unsecured	$	218,285	$	218,285
Loans from an officer and from companies
associated with a director, due in 2002 and
2003, with interest at 7.5% to 10%, unsecured.		40,334		35,080
Total Notes Payable to Related Parties		258,619		253,365

NOTE 5 - RELATED PARTY TRANSACTIONS

Receivable from a Related Party – The Chief Executive Officer and principal shareholder of EuroGas, together with various other companies under his control, have paid miscellaneous business expenses on behalf of EuroGas, and EuroGas has paid certain expenses on their behalf. The resulting receivables and payables are combined and presented in the accompanying financial statements as receivable from related parties of $258,619 and $253,365 as of September 30, 2006 and December 31, 2005, respectively.

Related party loans are described in Note 4, Notes Payable to Related Parties.

NOTE 6 - PREFERRED AND COMMON STOCK

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

There are 260 shares of the 1997 Series A Convertible Preferred Stock (the "1997 Series preferred stock"). The 1997 Series preferred stock is non-voting and accrues dividends at $60.00 per share, or six percent annually. The 1997 Series preferred stock has a liquidation preference of $1,000 per share, plus unpaid dividends before liquidation payments applicable to common shares but after liquidation payments to the 1995 Series preferred stock outstanding. The 1997 Series preferred stock, along with unpaid dividends thereon, are convertible into common shares at the rate of $1,000 divided by the lesser of 125% of the average closing bid price for five trading days prior to issuance or 82% of the average closing bid price for five trading days prior to conversion. The 1997 Series preferred stock has a liquidation preference of

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

$260,000. Annual dividend requirements of the 1997 Series preferred stock are $15,600. The following is a summary of the preferred stock outstanding at June 30, 2006:

			Liquidation Preference				Annual Dividend Requirement
	Shares
			Per
Designation	Outstanding		Share		Total		Per Share		Total
1995 Series	2,391,968	$	0.10	$	239,197	$	0.05	$	119,598
1997 Series A Convertible	260		1,000.00		260,000		60.00		15,600
Total	2,392,228			$	499,197			$	135,198

Aggregate accrued dividends on preferred stock were $819,358 and $684,160 at June 30, 2005 and December 31, 2004, respectively.

NOTE 7 - CONTINGENCIES AND COMMITMENTS

Purchase of Rozmin – EuroGas acquired a direct 43% interest in Rozmin s.r.o. through a series of transactions from 1998 through April 2002. Rozmin s.r.o. holds a talc deposit in Eastern Slovakia. On April 17, 2001, EuroGas entered into an agreement to purchase an additional 57% interest in Rozmin s.r.o. from Belmont Resources, Inc. ("Belmont"), in exchange for EuroGas issuing 12,000,000 common shares, paying Belmont $100,000 in advance royalties, and modifying the exercise price of existing stock options. EuroGas further agreed to issue an additional 1,000,000 common shares for each $0.05 decrease in the ten-day average OTC Bulletin Board quoted trading price of the Company's common shares below $0.30 per share through April 17, 2002. During 2002 EuroGas issued 3,830,000 common shares to Belmont under the stock price guarantee. In connection with the purchase by EuroGas, Rozmin s.r.o. granted an overriding royalty to Belmont of two percent of gross revenues from any talc sold.

Additionally, EuroGas agreed to issue additional common shares to Belmont if Belmont did not realize approximately $1,218,000 from the resale of the original 12,000,000 common shares by April 17, 2002, and provide notice of such deficiency to EuroGas, to compensate Belmont for the shortfall based on the ten-day average trading price on the date of the notice of shortfall from Belmont. Because Belmont has not provided notice of the sale of the shares and the resulting deficiency, EuroGas is not able to calculate the shares that may be issuable, but estimates it may be obligated to issue approximately 12,000,000 additional common shares, based on recent market prices for the Company’s common stock, to Belmont under this provision of the agreement.

EuroGas also agreed to arrange the necessary financing to place the talc deposit into commercial production by April 17, 2002 and agreed that if the talc deposit was not in commercial production by then, EuroGas agreed to pay Belmont additional advanced royalties of $10,000 per month for each month of delay in achieving commercial production. As of September 30, 2003 EuroGas has accrued $175,000 in advance royalty due to Belmont because the talc deposit is not in commercial production.

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

In January 2005 the Company’s subsidiary Rozmin s.r.o. was notified that the concession regarding the Talc deposit had been cancelled by the Slovakian Government for unspecified and dubious reasons. At this point therefore no further concession is held by Rozmin. This does not nullify the obligation to Belmont Resources as to the balance of the purchase price. The Company and Belmont, however, entered into an agreement for Belmont not to pursue legal proceedings against the Company as long as the situation in respect to Rozmin has not been cleared. The Company was be forced to impair the cost of the assets, $3,843,560, because of the cancellation of the concession.

Litigation – The principal portion of the Company's active litigation involves matters relating to the Company's acquisition of GlobeGas (which indirectly controlled the Pol-Tex Concession in Poland) and is described in Note 3.

Netherlands Tax Liability – EuroGas' subsidiary, GlobeGas BV, lost its appeal for a reduction of a 1992 income tax liability in the Netherlands with a carrying amount of $929,680 at June 30, 2006. The tax arose from the sale of equipment at a profit by the former owner of GlobeGas to its Polish subsidiary. The liability is reflected in EuroGas' financial statements; however, GlobeGas does not have the ability to pay the assessed obligation and as a result may face forced liquidation and dissolution by the Netherlands tax authority. In August of 2005 GlobeGas, BV was stricken from the Registry in the Netherlands, this has put the GlobeGas issue to rest.

Employment commitments and contingencies – During April 1999, EuroGas entered into a three-year employment contract with a former chief executive officer. The contract provided for an annual salary of $400,000 plus living and other allowances of $28,200. In addition, options to purchase 1,000,000 common shares at $0.95 per share were granted in connection with the employment contract. The officer resigned in January 2001. The options vested on January 1, 2000, and were considered to have expired during 2002 due to the termination of the officer's employment. EuroGas has accrued salary obligations to the officer in the amount of $230,000, plus certain expenses, which are included in accrued liabilities. EuroGas believes there may be offsets to this amount but has not reduced the accrued amount.

Former officers have made claims for compensation and for reimbursement of expenses against EuroGas, which amounts have been included as accrued liabilities.

On February 5, 2002 EuroGas entered into an employment agreement with its new President. The three-year agreement provides for annual compensation of $400,000 to be paid in monthly installments. The agreement provides for all terms of the agreement to continue for the unexpired term of the agreement should the Company be involved in a winding-up or merger transaction. The agreement may be terminated if either party fails to meet its obligations under the terms of the agreement. In June 2002, the Company agreed to compensate its Chief Executive Officer and principal shareholder $25,000 per month.

Lease commitments – The Company abandoned its office facilities from various leasers in Vienna, Austria and Vancouver for lack of working capital and because of the Chapter 7 bankruptcy situation. Except for Vancouver, the office leases were on month-to-month agreements. EuroGas entered into a lease agreement for its Vancouver office space that required monthly payments of $6,851 through January 2003. Thereafter, the lease was on a month-to-month basis but has since been abondoned by the lessor.

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

NOTE 8 – SUBSEQUENT EVENTS The Houston Bankruptcy Trustee representing the McKenzie estate, has filed a petition in US Bankruptcy court in Salt Lake City, Utah to have EuroGas, Inc. forced into involuntary bankruptcy. EuroGas has retained local council and has responded to the claim. Because Eurogas was unable to finance the settlement agreement the Bankruptcy court in Houston Texas has added a monetary amount of $113 million to the default judgment, against EuroGas, Inc. and certain parties, that was obtained by the Trustee for the McKenzie matter. On October 20, an Order for Relief was signed by the US Bankruptcy Court in Salt Lake City, Utah. This has put the Company into receivership at this point. There is ongoing negotiations by the third party to purchase the judgment against EuroGas presently held by the Bankruptcy Trustee in the McKenzie matter, who forced EuroGas into involuntary Bankruptcy. The plan is to purchase the judgment held by the McKenzie trustee by a friendly third party and then request the US Bankruptcy Court in Salt Lake City, Utah to convert the present chapter 7 bankruptcy to a voluntary chapter 11 reorganization. On March 28, 2006, the Bankruptcy Trustee involved with the EuroGas, Inc. involuntary bankruptcy, held an auction to sell the following Polish asset GlobeGas B.V., Pol-Tex Methane, Sp. zo.o., McKenzie Methane Jastrzebie Sp. zo.o., These assets were sold under order of the Bankruptcy court to various companies. In November 2006 the Bankruptcy Trustee has filed his Final Report for the Chapter 7 Bankruptcy Proceedings, has distributed the proceeds received from the March 28, 2006 auction to various creditors of the company and the Utah Bankruptcy Court has accepted the Trustee's report. The company therefore has been effectually released from Chapter 7 Bankruptcy and according to a statement from the US Bankruptcy Trustee management is now back in control of the company. Therefore management's main objective is now to seek a final settlement with its major creditor, the Houston based Bankruptcy Trustee for McKenzie et al, as a pre-condition to obtain financing from certain interested parties as well as pursuing the acquisition of new natural resources assets.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General – The Company was primarily engaged in the acquisition of rights to explore for and exploit natural gas, coal bed methane gas, crude oil, talc and other minerals. The Company had acquired interests in several large exploration concessions and was in various stages of identifying industry partners, farming out exploration rights, undertaking exploration drilling, and seeking to develop production. The Company was also involved in a planning-stage co-generation and mineral reclamation project. Due to the auction sale of all of its assets the company currently has no assets. Management has therefore taken the stand to keep the company on an "as-is" basis until a settlement solution has been found with its creditors. The company has been approached by several interested groups in Europe which would be prepared to fund a settlement with its creditors, finance the company thus enabling the company to acquire new assets in the natural resource business once the Bankruptcy Court in Salt Lake City has released the company from Chapter 7 and a settlement with its creditors is achieved. Unless otherwise indicated, all dollar amounts in this Form 10-Q are reflected in United States dollars.

          When used herein, the terms the "Company," and "EuroGas," include EuroGas, Inc. and its wholly owned subsidiaries.

Results of Operations – The following table sets forth consolidated income statement data and other selected operating data for the three-month and six-month periods ended September 30, 2006 and June 30, 2005, respectively.

		For the Three Months Ended				For the Six Months Ended
		Sept. 30,				June 30,
		2006		2005		2006		2005
Oil and Gas Sales	$	-	$	-	$	-	$	-

Costs and Operating Expenses
Depreciation		(0	)		2,146			4.624			4,502
Impairment of mineral interests and
equipment		-			-			-			-
Litigation settlement expense		-			-			-			-
General and administrative		(0	)		269,435			547,237			547,780
Total Costs and Operating Expenses		(0	)		271,581			550,861			552,282
Other Income (Expenses)
Interest expense		(3,893	)		(6,578	)		(12,627	)		(13,312	)
Foreign exchange net gain (loss)					(18,473	)		(52,332	)		(42,958	)
Equipment rental income					-						-
Interest income		-			-			-			-
Gain on sale of securities available for sale		-			-			-			-
Other expense		-			-			-			-
Net Other Expenses		(0	)		(25,051	)		(53,173	)		(56,270	)
Loss Before Accounting Change					(296,632	)		(626,793	)		(608,552	)
Cumulative Effect of Accounting
Change					(10,567	)		(21.855	)		(22,549	)
Net Loss		(10.160	)		(307,199	)		(659,629	)		(631,1010	)
Preferred Dividends		(34,782	)		(34,782	)		(69,564	)		(69.564	)
Loss Applicable to Common Shares	$	(10.160	)	$	(341,981	)	$	(729,193	)	$	(700,665	)
Basic and Diluted Loss Per Common
Share
Loss before accounting change	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Net Loss	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.01	)

Basic and Diluted Weighted-Average
Common
Shares Outstanding		191,212,635			168,212,635			191,212,635			168,212,635
Comprehensive Income (Loss)
Net loss	$	(10.160	)	$	(307,191	)	$	(729,193	)	$	(631,101	)
Foreign currency translation adjustments		-			-			-			-
Unrealized gain on investment in securities
available for sale		-			-			-			-
Comprehensive Income (Loss)	$	(10.160	)	$	(307,191	)	$	(729,193	)	$	(631,101	)

Three months ended June 30, 2006 compared with three months ended June 30, 2005

          Revenues. The Company had no oil and gas sales for the three months ended September 30, 2006 and for the three months ended September 30, 2005

          Operating Expenses. Operating expenses primarily include general and administrative expenses, depreciation, impairment of mineral interests and equipment and litigation settlement expense. General and administrative expenses were $ 0 for the three months ended September 30, 2006 compared to $269,435 for the three months ended June 30, 2005. The decrease in administrative expenses is the result of the corporate inactivity of the company due to the Chapter 7 Bankruptcy. All administrative items were carried at $ 0.

          Other Income and Expense. Interest expense was $3,893 for the three months ended September 30, 2006 compared to $6,578 during the three months ended June 30, 2006.

          Income Taxes. Historically, the Company has not been required to pay income taxes due to the Company's absence of net profits. For future years, the Company anticipates that it will be able to utilize operating loss carry forwards in the United States of America of approximately $18,300,000 as of June 30, 2006 to offset profits, if and when achieved, resulting in a reduction in income taxes payable. However, to the extent accumulated deficits have not been incurred in countries where income is earned, such offsets will not be available.

          Net Loss. The Company incurred a net loss of $ 10.160 for the three months ended September 30, 2006 compared to a net loss of $307,199 for the three months ended June 30, 2006. The losses were due in large part to the absence of revenues, combined with continued administrative, interest, foreign exchange loss and other recurring continuing expenses.

          Due to the fluctuating economies of the Eastern European countries in which the Company operates, the Company is subject to fluctuations in currency exchange rates that can result in the recognition of significant gains or losses during any period. The Company does not currently employ any hedging techniques to protect against the risk of currency fluctuations.

Nine months ended September 30, 2006 compared with Six months ended June 30, 2005

          Revenues. The Company had no oil and gas sales for the snine months ended September 30, 2006and for the six months ended June 30, 2005

          Operating Expenses. Operating expenses primarily include general and administrative expenses, depreciation, impairment of mineral interests and equipment and litigation settlement expense. General and administrative expenses were $547,237 for the nine months ended September 30, 2006 compared to $547,780 for the six months ended June 30, 2005 The slight decrease in administrative expenses is the result of reduced expenditures relating to administrative items, telephone and legal charges. Depreciation expense was $4.624 for the six months ended June 30, 2006 compared to $4,502for the six months ended June 30, 2005. Since the company was inactive no provisions were carried forward from June 30, 2006 until September 30, 2006.

          Other Income and Expense. Interest expense was $12,627 for the six months ended June 30, 2006 compared to $13,312 during the six months ended June 30, 2005

          Income Taxes. Historically, the Company has not been required to pay income taxes due to the Company's absence of net profits. For future years, the Company anticipates that it will be able to utilize operating loss carry forwards in the United States of America of approximately $18,200,000 as of June 30, 2006 to offset profits, if and when achieved, resulting in a reduction in income taxes payable. However, to the extent accumulated deficits have not been incurred in countries where income is earned, such offsets will not be available.

Capital and Liquidity

          The Company had an accumulated deficit of $185,314,524 at September 30, 2006 substantially all of which has been funded out of proceeds received from the issuance of stock and the incurrence of liabilities. At September 30, 2006 the Company had total current assets of $3,150,355 and total current liabilities of $29,592,399 resulting in a working capital deficiency of $26,442,044. As of September 30, 2006 the Company's balance sheet reflected $0 in mineral interests in properties not subject to amortization, net of valuation allowance mostly due to sale of the company's Polish properties by the Bankruptcy Court.

          Throughout its existence, the Company has relied on cash from financing activities to provide the funds required for acquisitions and operating activities. As a result, the Company used net cash of $547,263 during the six months ended June 30, 2006.

          While the Company had a negative amount of cash of $(3,518) at June 30, 2006 it has substantial short-term and long-term financial commitments. Many of the Company's projects were long-term and will require the expenditure of substantial amounts over a number of years before the establishment, if ever, of production and ongoing revenues. As noted above, the Company has relied principally on cash provided from equity and debt transactions to meet its cash requirements. The Company does not have sufficient cash to meet its short-term or long-term needs, and it will require additional cash, either from financing transactions or operating activities, to meet its immediate and long-term obligations. There can be no assurance that the Company will be able to obtain additional financing, either in the form of debt or equity, or that, if such financing is obtained, it will be available to the Company on reasonable terms. If the Company is able to obtain additional financing or structure strategic relationships in order to fund existing or future projects, existing shareholders will likely continue to experience further dilution of their percentage ownership of the Company.

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

Inflation

          The amounts presented in the Company's consolidated financial statements do not provide for the effect of inflation on the Company's operations or its financial position. Amounts shown for property, plant, and equipment and for costs and expenses reflect historical costs and do not necessarily represent replacement costs or charges to operations based on replacement costs. The Company's operations, together with other sources, are intended to provide funds to replace property, plant and equipment as necessary. Net income would be lower than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments. Due to inflationary problems in Eastern Europe that are seen in currency exchange losses, the Company has seen losses on its asset values in those countries.

Warning Regarding Forward-looking Statements and Factors that may affect Future Results

          This Quarterly Report on Form 10-Q contains forward-looking statements and information relating to the Company and its business, which are based on the beliefs of management of the Company and assumptions made based on information currently available to management. These statements can be identified by the use of the words "will," "anticipate," "estimate," "project," "likely," "believe," "intend," "expect" or similar words. Forward-looking statements reflect the current views of management of the Company and are not intended to be accurate descriptions of the future. When considering these statements, the reader should bear in mind the cautionary information set forth in this section and other cautionary statements throughout this Report and the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and in the Company's other filings with the Securities and Exchange Commission. All forward-looking statements are based on management's existing beliefs about present and future events outside of management's control and on assumptions that may prove to be incorrect. The discussion of the future business prospects of the Company is subject to a number of risks and assumptions, including those identified below. Should one or more of these or other risks materialize or if the underlying assumptions of management prove incorrect, actual results of the Company may vary materially from those anticipated, estimated, projected or intended. Among the factors that may affect the Company's results are its ability to establish beneficial relationships with industry partners to provide funding and expertise to the Company's projects; its efforts to locate commercial deposits of hydrocarbons on the Company's concessions and licenses; the negotiation of additional licenses and permits for the exploitation of any reserves located; the success of exploratory activities; the completion of wells drilled by the Company, its joint venture partners and other parties allied with the Company's efforts; the economic recoverability of in-place reservoirs of hydrocarbons; technical problems in completing wells and producing gas; the success of marketing efforts; the ability to obtain the necessary financing to successfully pursue the Company's business strategy;

operating hazards and uninsured risks; the intense competition and price volatility associated with the oil and gas industry; and international and domestic economic conditions.

          The Company's activities are subject to risks in addition to the risks normally associated with the exploration and development of hydrocarbons. Each of the eastern European countries in which the Company has obtained or seeking to obtain concessions is in the process of developing capitalistic economies. As a result, many of their laws, regulations, and practices with respect to the exploration and development of hydrocarbons have not been time tested or, in some cases, yet adopted. The Company's operations are subject to significant risks that any change in the government itself or in government personnel, or the development of new policies and practices may adversely effect the Company's operations and financial results at some future date. Furthermore, the Company's concessions and licenses are often subject, either explicitly or implicitly, to ongoing review by governmental ministries. In the event that any of these countries elects to change its regulatory system, it is possible that the government might seek to annul or amend the governing agreements in a manner unfavorable to the Company or impose additional taxes or other duties on the activities of the Company. As a result of the potential for political risks in these countries, it remains possible that the governments might seek to nationalize or otherwise cause the interest of the Company in the various concessions and licenses to be forfeited. Many of the areas in which the Company's prospects are located lack the necessary infrastructure for transporting, delivering, and marketing the products which the Company seeks to identify and exploit. Consequently, even if the Company is able to locate hydrocarbons in commercial quantities, it may be required to invest significant amounts in developing the infrastructure necessary to carry out its business plan. The Company does not presently have a source of funding available to meet these costs.

          Future terrorist activity or government action against perceived terrorist threats in the United States or in areas of the world in which the Company does business or owns property may, however, adversely affect the Company's business operations and financial condition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

          Based on their evaluation, as of a date within 90 days of the filing date of this Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The principal portion of the Company’s active litigation involves matters relating to the Company’s acquisition of GlobeGas (which indirectly controlled the Pol-Tex Concession in Poland) and include the McKenzie Bankruptcy claim, the Kukui, Inc. claim, and the Holbrook Claim.

On November 4, 2003, EuroGas signed a settlement agreement with the Bankruptcy Trustee, Kukui, and

other parties. The settlement agreement provides for EuroGas to make payments totaling $2,800,000, to be paid in installments, with an initial payment of $250,000 paid November 5, 2003 and $250,000 to be paid by December 6, 2003. Upon completion of the payments all the cases relating to the McKenzie bankruptcy claim, including the Kukui, claim, and the Holbrook claim will be dismissed. Under this settlement EuroGas, its subsidiaries, Wolfgang Rauball and Reinhard Rauball will be released from any further claim by Kukui and the Bankruptcy Trustee. A third party investor has indicated that he is prepared to place the required settlement amount in a trust fund in the very near future to obtain a settlement. In the meantime the Bankruptcy Trustee has filed a petition in US Bankruptcy court in Salt Lake City, Utah to have EuroGas, Inc. forced into involuntary bankruptcy. EuroGas has retained local council and has responded to the claim. A hearing, on the petition, is now set for August 17, 2004. In the meantime the Bankruptcy Trustee has filed a petition in US Bankruptcy court in Salt Lake City, Utah to have EuroGas, Inc. forced into involuntary bankruptcy. EuroGas has retained local council and has responded to the claim. Because Eurogas was unable to finance the settlement agreement the Bankruptcy court in Houston Texas has added a monetary amount of $113 million to the default judgment, against EuroGas, Inc. and certain parties, that was obtained by the Trustee for the McKenzie matter. On October 20, an Order for Relief was signed by the US Bankruptcy Court in Salt Lake City, Utah. This has put the Company into receivership at this point. There is ongoing negotiations by the third party to purchase the judgment against EuroGas presently held by the Bankruptcy Trustee in the McKenzie matter, who forced EuroGas into involuntary Bankruptcy. The plan is to purchase the judgment held by the McKenzie trustee by a friendly third party and then request the US Bankruptcy Court in Salt Lake City, Utah to convert the present chapter 7 bankruptcy to a voluntary chapter 11 reorganization. . In October of 2005, the Bankruptcy Trustee was asked to sell the Polish asset, GlobeGas B.V., Pol-Tex Methane, Sp. zo.o., McKenzie Methane Jastrzebie Sp. zo.o., to a third party. The Trustee eventually put the group of Polish companies up for an auction, which was held on March 28, 2006, after a certain amount of legal wrangling by some of the creditors.

Item 5. Other information

N/A

Item 6. Exhibits and Reports on Form 8-K

          (a)      The following exhibits are filed with this report.

Exhibit
Number	Title of Document	Location
2.1	Exchange Agreement between Northampton, Inc., and Energy Global, A.G.	Report on Form 8-K dated August 3, 1994, Exhibit No. 1*
2.2	Agreement and Plan of Merger between EuroGas, Inc., and Danube International Petroleum Company, Inc., dated July 3, 1996, as amended	Report on Form 8-K dated July 12, 1996, Exhibit No. 5*
2.3	English translation of Transfer Agreement between EuroGas and OMV, Inc. for the Acquisition of OMV (Yakut) Exploration GmbH dated June 11, 1997	Report on Form 8-K dated June 11, 1997 Exhibit No. 1*
2.4	Asset Exchange Agreement between EuroGas, Inc., and Beaver River Resources, Ltd., dated April 1, 1988	Report on Form S-1 dated July, 23, 1998 Exhibit No. 2.03*
3.1	Articles of Incorporation	Registration Statement on Form S-18, File No. 33-1381-D Exhibit No. 1*
3.2	Amended Bylaws	Annual Report on Form 10-K for the fiscal year ended September 30, 1990, Exhibit No. 1*
3.3	Designation of Rights, Privileges, and Preferences of 1995 Series Preferred Stock	Quarterly Report on Form 10-QSB dated March 31, 1995, Exhibit No. 1*
3.4	Designation of Rights, Privileges, and Preferences of 1996 Series Preferred Stock	Report on Form 8-K dated July 12, 1996, Exhibit No. 1*
3.5	Designation of Rights, Privileges, and Preferences 1997 Series A Convertible Preferred Stock	Report on Form 8-K dated May 30, 1997 Exhibit No. 1*
3.6	Designation of Rights, Privileges, and Preferences of 1998 Series B Convertible Preferred Stock	Report on Form S-1 Dated July 23, 1998 Exhibit No. 3.06*
3.7	Articles of Share Exchange	Report on Form 8-K dated August 3, 1994, Exhibit No. 6*

Exhibit
Number	Title of Document	Location
3.8	Designation of Rights, Privileges, and Preferences of 1999 Series C 6% Convertible Preferred Stock	Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999
4.1	Subscription Agreement between EuroGas, Inc., and Thomson Kernaghan & Co., Ltd., dated May 29, 1998	Report on Form S-1 dated July 23, 1998 Exhibit No. 4.01*
4.2	Warrant Agreement dated July 12, 1996, with Danube Shareholder	Report on Form 8-K dated July 12, 1996, Exhibit No. 2*
4.3	Registration Rights Agreement Between EuroGas, Inc., and Thomson Kernaghan & Co., Ltd., dated May 29, 1998	Report on Form S-1 dated July 23, 1998 Exhibit No. 4.02*
4.4	Registration Rights Agreement dated July 12, 1996, with Danube Shareholder	Report on Form 8-K dated July 12, 1996 Exhibit No. 3*
4.5	Registration Rights Agreement by and among EuroGas, Inc., and Finance Credit & Development Corporation, Ltd., dated June 30, 1997	Report on Form S-1 dated July 23, 1998 Exhibit No. 4.06*
4.6	Option granted to the Trustees of the Estate of Bernice Pauahi Bishop	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 10*
4.7	Registration Rights Agreement by and among EuroGas, Inc., and Kukui, Inc., and the Trustees of the Estate of Bernice Pauahi Bishop	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 11*
4.8	Option issued to OMV Aktiengesellschaft to acquire up to 2,000,000 shares of restricted common stock	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996, Exhibit No. 13*
4.9	Form of Convertible Debenture issued on January 12, 2000.	Quarterly report on Form 10-Q dated March 31, 2000.
10.1	English translation of Mining Usufruct Contract between The Minister of Environmental Protection, Natural Resources and Forestry of the Republic of Poland and Pol- Tex Methane, dated October 3, 1997	Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 1*
10.2	Agreement between Polish Oil and Gas Mining Joint Stock Company and EuroGas, Inc., dated October 23, 1997	Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 2*
10.3	1996 Stock Option and Award Plan	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 14*

Exhibit
Number	Title of Document	Location
10.4	Settlement Agreement by and among Kukui, Inc., and Pol- Tex Methane, Sp. zo.o., McKenzie Methane Rybnik, McKenzie Methane Jastrzebie, GlobeGas, B.V. (formerly known as McKenzie Methane Poland, B.V.), and the Unsecured Creditors' Trust of the Bankruptcy Estate of McKenzie Methane Corporation	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 15*
10.5	Acquisition Agreement between EuroGas, Inc., and Belmont Resources, Inc., dated July 22, 1998	Report on Form S-1 dated July 23, 1998 Exhibit No. 10.20*
10.6	General Agreement governing the operation of McKenzie Methane Poland, B.V.	Report on Form 8-K dated August 3, 1994, Exhibit No. 2*
10.7	Concession Agreement between Ministry of Environmental Protection, Natural Resources, and Forestry and Pol-Tex Methane Ltd.	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 18*
10.8	Association Agreement between NAFTA a.s. Gbely and Danube International Petroleum Company	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 19*
10.9	Agreement between Moravske' Naftove' Doly a.s. and Danube International Petroleum Company	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 20*
10.10	Form of Convertible Debenture	Report on Form 8-K dated August 3, 1994, Exhibit No. 7*
10.11	Form of Promissory Note, as amended, with attached list of shareholders	Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, Exhibit No. 23*
10.12	Amendment #1 to the Association Agreement Entered on 13th July 1995, between NAFTA a.s. Gbely and Danube International Petroleum Company	Annual Report on Form 10-KSB for the Fiscal year ended December 31, 1996, Exhibit No. 25*
10.13	Acquisition Agreement by and among Belmont Resources, Inc., EuroGas Incorporated, dated October 9, 1998	Form 10-Q Dated September 30, 1998 Exhibit No. 1*
10.14	Letter of Intent by and between Polish Oil and Gas Company and Pol-Tex Methane, dated April 28, 1997	Annual Report on Form 10-KSB for the Fiscal year ended December 31, 1996, Exhibit No. 27*

Exhibit
Number	Title of Document	Location
10.15	Purchase and Sale Agreement between Texaco Slask Sp. zo.o., Pol-Tex Methane Sp. zo.o. and GlobeGas B.V.	Report on Form 8-K Dated March 24, 1997 Exhibit No. 1*
10.16	English translation of Articles of Association of the TAKT Joint Venture dated June 7, 1991, as amended April 4, 1993	Report on Form 8-K/A Dated June 11, 1997 Exhibit No. 3*
10.17	English translation of Proposed Exploration and Production Sharing Contract for Hydrocarbons between the Republic of Sakha (Yakutia) and the Russian Federation and the TAKT Joint Venture	Report on Form 8-K/A Dated June 11, 1997 Exhibit No. 4*
10.18	English translation of Agreement on Joint Investment and Production Activities between EuroGas, Inc., and Zahidukrgeologia, dated May 14, 1998	Registration Statement on Form S-1 dated July 23, 1998 Exhibit No. 10.21*
10.19	English translation of Statutory Agreement of Association of Limited Liability Company with Foreign Investments between EuroGas, Inc., and Makyivs'ke Girs'ke Tovarystvo, dated June 17, 1998	Registration Statement on Form S-1 dated July 23, 1998 Exhibit No. 10.22*
10.20	Partnership Agreement between EuroGas, Inc., and RWE- DEA Aktiengesellschaft for Mineraloel and Chemie AG, date July 22, 1998	Amendment No. 1 to Registration Statement on Form S-1 dated August 3, 1998 Exhibit No. 10.23
10.21	Mining Usufruct Contract between The Minister of Environmental Protection, Natural Resources and Forestry of the Republic of Poland and Pol-Tex Methane, dated October 3, 1997	Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 1*
10.22	Agreement between Polish Oil and Gas Mining Joint Stock Company and EuroGas, Inc., dated October 23, 1997	Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 2*
10.23	Agreement for Acquisition of 5% Interest in a Subsidiary by and between EuroGas, Inc., B. Grohe, and T. Koerfer, dated November 11, 1997	Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 3*
10.24	Option Agreement by and between EuroGas, Inc., and Beaver River Resources, Ltd., dated October 31, 1997	Quarterly Report on Form 10-Q dated September 30, 1997 Exhibit No. 4*
10.25	Lease Agreement dated September 3, 1996, between Potomac Corporation and the Company; Letter of Amendment dated September 30, 1999.	Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999*
10.26	Sublease dated November 2, 1999, between Scotdean Limited and the Company	Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999*

Exhibit
Number	Title of Document	Location
10.27	Securities Purchase Agreement dated November 4, 1999, between the Company and Arkledun Drive LLC	Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999*
10.28	Registration Rights Agreement dated November 4, 1999, between the Company and Arkledun Drive LLC	Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999*
10.29	Supplemental Agreement dated November 4, 1999, between the Company and Arkledun Drive LLC	Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999*
10.30	Executive Employment Agreement dated April 20, 1999 between the Company and Karl Arleth	Registration Statement on Form S-1, File No. 333-92009, filed on December 2, 1999*
10.31	Settlement Agreement dated June 16, 2000, between the Company and FCOC	Form 10-K for year ended December 31, 2000*
10.32	Securities Purchase Agreement dated October 2, 2000, between the Company and Arkledun Drive LLC	Form 10-K for year ended December 31, 2000*
10.33	Registration Rights Agreement dated October 2, 2000, between the Company and Arkledun Drive LLC	Form 10-K for year ended December 31, 2000*
10.34	Settlement Agreement dated November 14, 2000, between the Company and Arkledun Drive LLC	Form 10-K for year ended December 31, 2000*
10.35	Consulting Agreement dated September 18, 2000, between the Company and Spinneret Financial Systems, Ltd.	Form 10-K for year ended December 31, 2000*
10.36	Securities Purchase Agreement dated March 27, 2001 between the Company and Belmont Resources Inc.	Form 10-K for year ended December 31, 2000*
10.37	Agreement dated April 9, 2001 between the Company and Belmont Resources Inc.	Form 10-K for year ended December 31, 2000*
10.38	Warrant Agreement dated September 8, 2000 with Oxbridge Limited	Form 10-K for year ended December 31, 2000*
10.39	Warrant Agreement dated September 8, 2000 with Rockwell International Ltd.	Form 10-K for year ended December 31, 2000*
10.40	Warrant Agreement dated September 8, 2000 with Conquest Financial Corporation	Form 10-K for year ended December 31, 2000*
10.41	Termination and Transfer Agreement dated June 23, 2000 between the Company and Belmont Resources, Inc.	Form 10-K for year ended December 31, 2000*
10.42	Loan Agreement dated March 3, 1999 between the Company and Pan Asia Mining Corp.	Form 10-K for year ended December 31, 2000*

Exhibit
Number	Title of Document	Location
10.43	Agreement dated July 14, 2000 between the Company and Oxbridge Limited	Form 10-K for year ended December 31, 2000*
10.44	Amended Agreement dated July 25, 2000 between the Company, Pan Asia Mining Corp., and Oxbridge Limited	Form 10-K for year ended December 31, 2000*
10.45	Settlement Agreement dated November 20, 2000 between the Company and Beaver River Resources, Ltd.	Form 10-K for year ended December 31, 2000*
21.1	Subsidiaries	Annual Report on Form 10- KSB for the Fiscal year ended December 31, 1995, Exhibit No. 24*
31.1	Certification of Principal Executive Officer	Filed herewith
31.2	Certification of Principal Financial Officer	Filed herewith
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

*	Incorporated by reference
	(b)      No current reports on Form 8-K were filed during the reporting quarter.

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EUROGAS, INC.
	(Registrant)
November 22, 2006	By	/s/ Wolfgang Rauball
		Wolfgang Rauball
		Chief Executive Officer
November 22, 2006	By	/s/ Andreas Danicek
		Andreas Danicek
		Interim Chief Financial Officer