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NGAS Resources, Inc.            Correspondence

Stahl & Zelmanovitz

    Email: StahlNYC@AOL.com

    767 Third Avenue — 14th Floor

    Phone: (212) 826-6435

    New York, New York 10017

    Fax: (212) 826-6402

July 5, 2005

VIA EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W.

Washington, D.C. 20549-0405

    Attention:

    H. Roger Schwall,

Assistant Director

Re:       NGAS Resources, Inc. — Proposed 10-KSB/A, File No. 0-12185

Ladies and Gentlemen:

     This correspondence is provided on behalf of NGAS Resources, Inc. (the “Company”) in
response to the staff’s comment letters dated April 22, 2005 (the “Initial Comment Letter”)
and June 21, 2005 (the “June Comment Letter”) on the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2004 (the “Report”). The following responses are keyed to
the numbered paragraphs in the June Comment Letter. They include proposed responsive amendments to
the Report, marked where indicated to show changes from the Report, for subsequent filing on Form
10-KSB/A (the “10-KSB/A”).

Financial Statements

     1.     The dollar amounts recorded for common stock issued for cash and all other equity
transactions reflected in the consolidated statements of shareholders’ equity that the Company
plans to file with the 10-KSB/A in response to comment 3 of the Initial Comment Letter are properly
stated. In response to comment 1 of the June Comment Letter, the Company proposes to make
reclassification adjustments for several equity transactions reflected in its consolidated
statements of cash flows for the years ended December 31, 2004 and 2003. The background and basis
for these adjustments is set forth below.

             (a) Subscriptions Receivable. As noted in the roll-forward to be added to Note 10 to
the consolidated financial statements for common shares to be issued in response to comment 7 of
the Initial Comment Letter, a portion of the proceeds from an institutional private placement under
a securities purchase agreement dated December 31, 2003 (the “December 2003 Pipe”) were received in
January 2004, resulting in the classification of all the shares subscribed in the financing as
common shares to be issued at December 31, 2003. Although all of the shares subscribed in the
December 2003 Pipe were issued in January 2004, the Company believes the appropriate accounting
treatment for the financing in the consolidated statements of cash flows for the years ended
December 31, 2004 and 2003 requires (i) elimination of the subscriptions receivable classification
proposed in our response to comment 9 of the Initial Comment Letter and (ii) allocation of the net
proceeds from the December 2003 Pipe to proceeds from issuance of common shares for 2004 and 2003
under financing activities in proportion to the gross proceeds received in the financing at the
beginning of 2004 and the end of 2003, respectively. These reclassification adjustments are
reflected in the revised consolidated cash flow statements set forth below. This will also require
the following conforming revision in the 10-KSB/A to the disclosure in the third paragraph under
the caption “Capital Resources” in the MD&A:

        The proceeds from these equity financings and from convertible note financings
described below have been allocated primarily to construction of gas gathering lines
and our investments in sponsored Drilling Programs. See “Business — Gas Gathering
Facilities” and “ — Drilling Programs.” A portion of the proceeds from the second
equity financing in 2003 were received immediately after year end,
resulting in the
issuance of all the shares covered by the financing in
January 2004 and their
classification as common shares to be issued at December 31,
2003.

Securities and Exchange Commission

Division of Corporation Finance

July 5, 2005

Page 2

             (b) Contract Settlements Paid in Common Shares. As noted in the roll-forward to be
added to Note 10 to the consolidated financial statements for common shares to be issued in
response to comment 7 of the Initial Comment Letter, the common shares to be issued at issued
December 31, 2003 in connection with a contract settlement were reduced by 3,556 shares to reflect
the payment of the settlement in cash in the amount of $17,780 during 2004 in lieu of common
shares. The Company proposes to reclassify the transaction in the 10-KSB/A, along with the
adjustments for the December 2003 Pipe, in the revised consolidated cash flow statements set forth
below.

    Year Ended December 31,

    2004

    2003

    2002

    OPERATING ACTIVITIES

    Net income

    $
    1,611,701

    $
    3,660,140

    $
    634,950

    Adjustments to reconcile net income to
net cash provided by operating activities:

    Incentive bonus paid in common shares

    674,905

    364,680

    130,020

    Options, warrants and deferred compensation

    743,096

    742,800

    —

    Contract settlement paid in common shares

    (17,780
    )

    (293,074
    )

    —

    Depreciation, depletion and amortization

    1,886,965

    911,089

    652,069

    Write-down of investments

    63,627

    —

    —

    Write-off of deferred financing costs

    —

    29,786

    —

    Notes issued in kind for interest on long term debt

    74,036

    104,888

    —

    Gain on sale of assets

    (1,542,607
    )

    (2,695
    )

    (4,361
    )

    Future income taxes

    1,795,785

    257,647

    —

    Changes in assets and liabilities:

    Subscriptions receivable

    2,335,009

    (2,335,009
    )

    —

    Accounts receivable

    (1,778,538
    )

    (175,142
    )

    95,324

    Prepaid expenses and other current assets

    (1,378,759
    )

    (329,752
    )

    (258,648
    )

    Accounts payable

    2,117,643

    514,788

    374,018

    Accrued liabilities

    672,531

    1,804,651

    418,959

    Income taxes payable

    (144,450
    )

    144,450

    —

    Customers’ drilling deposits

    2,489,401

    3,398,400

    3,909,500

    Net cash provided by operating activities

    7,267,556

    11,718,804

    5,951,831

    INVESTING ACTIVITIES

    Proceeds from sale of assets

    2,187,400

    20,745

    26,800

    Purchase of property and equipment

    (1,097,568
    )

    (1,341,701
    )

    (224,533
    )

    Purchase of investment

    —

    —

    (9,827
    )

    Increase in bonds and deposits

    (25,650
    )

    (58,000
    )

    —

    Additions to oil and gas properties

    (53,755,431
    )

    (7,346,345
    )

    (1,366,003
    )

    Net cash used in investing activities

    (52,691,249
    )

    (8,725,301
    )

    (1,573,563
    )

    FINANCING ACTIVITIES

    Net payments on short term borrowings

    —

    (134,162
    )

    (11,905
    )

    Decrease (increase) in loans to related parties

    158,827

    117,100

    (212,093
    )

    Proceeds from issuance of common shares

    12,605,180

    6,889,563

    102,500

    Proceeds from issuance of long term debt

    22,679,258

    8,236,125

    693,868

    Payments of deferred financing costs

    (684,206
    )

    (410,000
    )

    —

    Payments of long term debt

    (80,987
    )

    (2,128,443
    )

    (163,751
    )

    Net cash provided by financing activities

    34,678,072

    12,570,183

    408,619

    Change in cash

    (10,745,621
    )

    15,563,686

    4,786,887

    Cash, beginning of year

    22,594,993

    7,031,307

    2,244,420

    Cash, end of year

    $
    11,849,372

    $
    22,594,993

    $
    7,031,307

Securities and Exchange Commission

Division of Corporation Finance

July 5, 2005

Page 3

     The foregoing adjustments will also be reflected in the first two MD&A paragraphs under
“Liquidity” to be included in the 10-KSB/A. Accordingly, in addition to deleting the references to
working capital adjustments in those paragraphs, as proposed in response to comment 2 of the
Initial Comment Letter, the disclosure will be conformed as set forth below. For clarity, the
revised disclosure is marked to show only those conforming revisions.

        Liquidity. Net cash provided by our operating activities in 2004 was
$7,267,556. Our cash position during 2004 was decreased by the use of $52,691,249
in investing activities, reflecting net additions of $53,755,431 to our oil and gas
properties. These investments were funded in part with proceeds from institutional
private placements of our common stock and convertible notes and from bank
borrowings. See “Capital Resources” below. As a result of these activities, net
cash decreased from $22,594,993 at December 31, 2003 to $11,849,372 at December 31,
2004.

        Net
cash provided by our operating activities in 2003 was
$11,718,804. Our
cash position during 2003 was increased by $12,570,183 from financing activities,
consisting primarily of proceeds from the issuance of our common shares and
convertible notes. Our cash position was decreased by the use of $8,725,301 in
investing activities, comprised primarily of $7,346,345 in net additions to our oil
and gas properties and $1,341,701 in the purchase of property and equipment. As a
result of these activities, cash and cash equivalents increased from $7,031,307 at
December 31, 2002 to $22,594,993 as of December 31, 2003.

     The following table is provided on a supplemental basis for reconciliation of the dollar
amounts recorded for common shares issued and to be issued in the consolidated statements of cash
flows, modified as proposed above, and in the consolidated statements of changes in shareholders’
equity, as proposed in response to comment 3 of the Initial Comment Letter, in each of the years
presented in the consolidated financial statements.

    Year Ended December 31,

    CASH FLOWS:

    2004

    2003

    2002

    Proceeds
from issuance of common shares, adjusted

to reflect reclassifications in 10-KSB/A

    $
    12,605,180

    $
    6,889,563

    $
    102,500

    CHANGES IN SHAREHOLDERS’ EQUITY:

    Common shares issued for cash, as reported

    $
    12,200,886

    $
    2,460,450

    $
    102,500

    Reconciliations:

    Common
shares issued upon exercise

of options and warrants, as reported

    3,507,493

    1,904,164

    —

    Portion of
fair value of exercised warrants previously

included in paid-in-capital upon issuance of warrants

    (20,250
    )

    —

    —

    Cashless exercise of employee stock options

    —

    (558,000
    )

    —

    Cash
received at the end of 2003 for shares issued at

the beginning of 2004 in the Year-End Pipe

    (3,082,949
    )

    3,082,949

    —

    Subtotal

    $
    12,605,180

    $
    6,889,563

    $
    102,500

     The Company believes that the footnotes to its consolidated financial statements, combined
with the reclassification adjustments to the consolidated statements of cash flows proposed for
filing in the 10-KSB/A, provide an adequate basis for reconciling the remaining spread between the
dollar amounts recorded for common stock issued for cash and all other equity transactions
reflected in the consolidated statements of shareholders’ equity, without the need for the
supplemental reconciliation table.

     2.     The disclosure in the introductory paragraph of Note 17 to the consolidated financial
statements included in the Report will be expanded in the 10-KSB/A as set forth below. The
following paragraph includes the revised disclosure proposed in our response to comment 4 of the
Initial Comment Letter but, for clarity, is marked to show only the additional disclosure proposed
in response to comment 2 of the June Comment Letter.

Securities and Exchange Commission

Division of Corporation Finance

July 5, 2005

Page 4

        (a) Differences Reflected in Consolidated Financial Statements. The
Company follows accounting principles generally accepted in Canada (“Canadian
GAAP”), which are different in some respects than accounting principles generally
accepted in the United States of America (“U.S. GAAP”). The only difference that
affects the Company’s consolidated financial statements for the reported periods
involves the accounting treatment of the Company’s investment in municipal bonds
described in Note 6, which would be reportable at fair value under U.S. GAAP. This
would have no effect on the Company’s consolidated statements of cash flows for the
reported periods but would have the following effects on
shareholders’ equity and
net income, as reported under Canadian GAAP:

         3 & 4.     The Company proposes to include the following introductory paragraphs immediately
following the cover page to the 10-KSB/A as error correction and explanatory disclosure:

        NGAS Resources, Inc. (the “Company”) is an independent energy company focused
on natural gas development and production in the Appalachian Basin, primarily in
eastern Kentucky. The Company is amending its annual report on Form 10-KSB for the
year ended December 31, 2004 (the “Report”) in response to review comments on the
Report by the staff of the Securities and Exchange Commission. The review was
limited to the Company’s consolidated financial statements and related disclosures
in Management’s Discussion and Analysis of Financial Position and Results of
Operations (“MD&A”).

        In response to review comments, this amendment reflects two adjustments to the
consolidated financial statements included in the Report. In the consolidated
statements of operations, reported drilling, production and gas gathering expenses
have been adjusted to include depreciation of vehicles and other field equipment
used in each of those activities, and corresponding reclassification adjustments
have been made to the balance of reported depreciation, depletion and amortization.
In the consolidated statements of cash flows, reported changes in subscriptions
receivable during 2004 and 2003 have been eliminated from operating activities and
reclassified in financing activities as proceeds from issuance of common stock
during those years in proportion to the subscription amounts received at the
beginning of 2004 and the end of 2003, respectively. This amendment also adds
consolidated statements of changes in shareholders’ equity for the periods covered
by the Report and reflects several conforming reclassifications of equity accounts
reported in the consolidated statements of cash flows for the years ended December
31, 2004 and 2003.

        The Company is also amending the Report to (a) modify the first two paragraphs
under the caption “Liquidity” and the third paragraph under the caption “Capital
Resources” in the MD&A by deleting references to working capital adjustments in
addressing its cash flows for 2004 and 2003 and reflecting certain equity account
reclassifications in those years, (b) revise the index to financial statements in
Item 7 and the report of independent registered public accounting firm to reflect
the addition of consolidated statements of changes in shareholders’ equity for the
reported periods, (c) clarify in Note 1 to the consolidated financial statements and
the report of independent registered public accounting firm that the financial
statements have been prepared solely in accordance with accounting principles
generally accepted in Canada, and expand the disclosure in Note 17 to reconcile
differences between those accounting principals and accounting principles generally
accepted in the United States of America, (d) expand the summary of accounting
policies in Note 1 to the consolidated financial statements relating to customer
drilling deposits and costs incurred in exploratory drilling activities and (e) add
conforming revisions to the certifications provided as exhibits to the Report
pursuant to Rule 13a-14(a) under the Securities Exchange Act.

Securities and Exchange Comm