Mogul Energy International (MGUY) 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended  June 30, 2009

333-138806

(Commission File Number)

MOGUL ENERGY INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

98-0461623

(I.R.S. Employer Identification Number)

520 Pike Street, Suite 2210

Seattle, WA 98101

(Address of principal executive offices)

(206) 357-4220

(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 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 o
Non-accelerated filer   o   (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o        No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:     57,445,987 common shares issued and outstanding as July 5, 2009.

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1.	Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4T.	Controls and Procedures
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits

Mogul Energy International, Inc.

(an exploration stage company)

Financial Statement Index

	Index
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Cash Flows	F-4
Notes to the Financial Statements	F-5

The Notes are an integral part of the Financial Statements

F-1

Mogul Energy International, Inc.

(an exploration stage company)

Balance Sheets

(expressed in U.S. dollars)

Unaudited

	June 30, 2009			December 31, 2008
Assets:
Current
Cash	$	2,078		$	845,251
Receivable		14,120			52,169
Investment - held for sale		389,475			556,444
Prepaid and Deposits		38,142			29,744
Total current assets		443,815			1,483,608
Non-current
Exploration and evaluation		629,244			435,512
Total Assets	$	1,073,059		$	1,919,120
Current Liabilities:
Accounts payable	$	210,246		$	559,262
Contingencies and commitments		-			-
Shareholders’ Equity:
Deficit accumulation during exploration stage	$	(6,528,740	)	$	(6,125,607	)
Common stock (Authorized: 100,000,000 shares, $0.0001 par value. Outstanding: 57,445,987 shares at 03/31/09 and 12/31/08)		5,744			5,744
Additional paid-in capital		7,066,537			7,066,537
Warrants & Options:		571,704			571,704
Preferred: 10,000,000 shares authorized, none issued					-
Foreign exchange adjustment		(100,044	)		(112,894	)
Other comprehensive income (loss)		(152,388	)		(45,626	)
Total Shareholders’ Equity		862,813			1,359,858
Total Shareholders’ Equity and Liabilities	$	1,073,059		$	1,919,120

The Notes are an integral part of the Financial Statements

F-2

Mogul Energy International, Inc.

(an exploration stage company)

Statements of Operations

For the Six Months Ended June 30, 2008 and 2009 and

For the Period July 25, 2005 (inception) to June 30, 2009

(expressed in U.S. dollars)

Unaudited

	Three Months Ended June 30, 2009			Three Months Ended June 30, 2008			Six Months Ended June 30, 2009			Six Months Ended June 30, 2008			Cumulative from July 25, 2005 (inception) to June 30, 2009
Expenses:
General and administrative	$	(151,986	)	$	(240,833	)	$	(413,370	)	$	(606,787	)	$	(3,255,459	)
Impairment		-			(5,082	)					(51,749	)		(3,758,944	)
Other income and expenses
Revenue for services		12,865			-			12,865			-			12,865
Gain on disposition exploration property		-			715,209						715,209			1,287,072
Loss on sale of investment held for sale		(8,006	)		-			(2,629	)		-			(2,629	)
Interest income		-			2,291						2,291			8,354
Settlement of lawsuit		-			-						-			(820,000	)
Net income (loss) for the periods	$	(147,127	)	$	471,585		$	(403,134	)	$	58,964		$	(6,528,740	)
Other comprehensive income:
Net unrealized gain (loss) on investments held for sale for periods	$	155,263		$	-		$	(106,762	)	$	-		$	(152,388	)
Foreign exchange adjustment		27,740			-			12,850			-			(100,044	)
Total other comprehensive gain (loss) for the periods	$	183,003		$	-		$	(93,912	)	$	-		$	(252,432	)
Total comprehensive net gain (loss) for the periods	$	35,876		$	-		$	(497,046	)	$	-		$	(6,781,173	)
Basic earnings (loss) per share	$	(0.01	)	$	0.01		$	(0.00	)	$	0.00
Weighted average common shares outstanding		57,445,987			49,559,320			57,445,987			48,177,774

The Notes are an integral part of the Financial Statements

F-3

Mogul Energy International, Inc.

(an exploration stage company)

Statements of Cash Flows

For the Six Months Ended June 30, 2009 and 2008 and

For the Period July 25, 2005 (inception) to June 30, 2009

(Expressed in U.S. dollars)

Unaudited

	Three Months Ended June 30, 2009			Three Months Ended June 30, 2008			Six Months Ended June 30, 2009			Six Months Ended June 30, 2008			Cumulative from 7/25/05 (inception) to June 30, 2009
Operating Activities
Net income (loss) for periods	$	(147,127	)	$	471,585		$	(403,134	)	$	58,964		$	(6,528,740	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation (Office)		-			-			-			1,055			6,209
Impairment		-			5,082			-			51,749			3,758,946
Shares and options for services		-			126,982			-			127,000			523,103
Gain on disposition of exploration Property		-			(715,194	)		-			(715,194	)		(607,039	)
Loss  - on investment held for sale		8,006			-			2,629			-			2,629
Changes in non-cash working capital
Accounts payables ( decrease) increase		31,214			(55,010	)		(349,016	)		(215,194	)		210,246
GST receivable increase		3,685			(4,926	)		38,049			22,194			(14,120	)
Prepaid		(7,223	)		(36,242	)		(8,398	)		(36,715	)		(38,142	)
Litigation payable		-			-			-			-			19,467
Cash used in operating activities	$	(111,445	)	$	(207,723	))	$	(719,870	)	$	(706,156	)	$	(2,667,442	)
Investing Activities
Purchase equipment		-			-			-			-			(6,209	)
Proceeds - sale of investments held for sale		11,712			-			57,578			-			57,578
Exploration and evaluation		(185	)		23,653			(193,731	)		(49,273	)		(4,388,188	)
Cash used for investing activities	$	11,527		$	23,653		$	(136,153	)	$	(49,273	)	$	(4,336,819	)
Financing Activities
Due to officers and directors		-			14,896			-			(175,298	)		-
Cash call payable - exploration		-			49,273			-			-			-
Loans from shareholders		-			(53,388	)		-			(99,990	)		-
Proceeds from subscriptions receivable		-			-			-			454,824			462,324
Proceeds from sale of equity securities		-			1,985,573			-			2,389,946			6,644,059
Cash from financing activities	$	-		$	1,996,354		$			$	2,569,482		$	7,106,383
Foreign exchange adjustment		27,740			(4,040	)		12,850			(5,809	)		(100,044	)
Increase in cash during periods		(99,917	)		2,039,510			(843,173	)		1,814,053
Cash beginning of periods		74,256			227,226			845,251			227,226			-
Cash at end of periods	$	2,078		$	2,035,470		$	2,078		$	2,035,470		$	2,078
Interest and taxes paid during period	None			None			None			None			None
Schedule of Non-cash Transactions
Net unrealized loss on investments heldfor sale	$	155,263		$	-		$	(106,762	)	$	-		$	(152,388	)

The Notes are an integral part of the Financial Statements

F-4

Mogul Energy International, Inc.

Notes to the March 31, 2009 and 2008 Financial Statements

Unaudited

NOTE 1 - Organization and Nature of Business

Mogul Energy International, Inc. (Company) was formed as a Delaware corporation on July 25, 2005 to engage in the business of oil and gas exploration.  The Company’s business activities included financing and acquiring drilling prospects and exploration for oil and gas.

The Company acquires low entry cost exploration prospects, as measured on a dollar per barrel for proven and potential reserves in proximity to producing oil fields, and exploring for oil and gas reserves.

In Management’s opinion all of the adjustments necessary for a fair statement of the results of interim periods ended June 30, 2009 and June 30, 2008 have been made, such adjustments are of a normal recurring nature.

NOTE 2 - Capital Stock

Common Stock

On December 31, 2007 the company issued 4,472,134 flow-through common shares at $0.18 per share pursuant to the income tax laws of Canada (Income Tax Act, Canada).  Total proceeds of the offering were $804,984.  The related tax impact has been recorded and renounced to shareholders on a look back basis for 2007.  Share issuance costs were $83,977.  In connection with the issuance the company granted 241,106 finders’ fee warrants.  Of these, 106,055 have terms that allow the holder to purchase one common share of the company for $0.20 and one warrant per common share for a period of two years.  The fair value of the warrants was estimated at $8,124 calculated using the Black-Scholes method: risk free rate 3.05%, share price $0.18, strike price $0.20, volatility 83% and dividend yield 0.00.

On December 31, 2007 the company issued 100,000 shares at $0.15 per common share for total proceeds of $15,000.

During the quarter ended March 31, 2008 the Company issued 2,383,000 shares of its common stock at $0.15 per share, related costs totaled $16,795.  In connection with the offering 135,051 finders’ fee warrants were granted allowing the holder to purchase one common share of the company for one Class B warrant and $0.15.  The warrants had a fair market value of $12,212 calculated using the Black-Scholes model: risk free rate 3.05%, share price $0.18, strike price $0.15, volatility 83% and dividend yield 0.00.

During the period ended June 30, 2008 the Company issued a total of 3,800,000 flow-through common shares, pursuant to the income tax laws of Canada (Income Tax Act, Canada).  Through a series of closings: 2,800,000, 400,000, and 600,000 closed on  June2, June 5 and June 11, 2008 respectively at $0.25 per flow-through common share for proceeds of $950,000.  The related tax impact will be recorded when the qualifying transaction expenditures are renounced to shareholders.  In addition, the company also issued 2,300,000 common shares as follows: on June 2, 2008 and 4,000,000 common shares and on June 11, 2008 for a total of 6,300,000 shares of its common stock at $0.20 per share for total proceeds of $1,260,000.  Share issuance costs associated with the two classes of financings that closed in June amounted to $102,444 in cash and finder’s fee warrants granted as follows:

· 52,500 warrants each of which allows the holder to purchase one common share of the Company for $0.20 per share expiring on December 20, 2009.  The fair market value of the warrants was $11,807 calculated using the Black-Scholes method: risk free rate 2.71%, share price $0.225, strike price $0.20, volatility 520% and dividend yield $0.00.

· 224,000 warrants each of which allows the holder to purchase one common share of the Company for $0.20 per share expiring on June 11, 2010.  The fair market value of the warrants was $57,378 calculated using the Black-Scholes method: risk free rate 2.71%, share price $0.225, strike price $0.20, volatility 520% and dividend yield $0.00.

F-5

Mogul Energy International, Inc.

Notes to the March 31, 2009 and 2008 Financial Statements

Unaudited

· 432,500 warrants each of which allows the holder to purchase one common share of the Company for $0.20 per share expiring on December 20, 2009.  The fair market value of the warrants was $97,183 calculated using the Black-Scholes method: risk free rate 2.71%, share price $0.225, strike price $0.20, volatility 520% and dividend yield $0.00.

Warrant and Options

The following are details related to warrants issued by the company to shareholders:

	June 30, 2009				June 30, 2009
	Shares		Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding warrants at beginning of the period		1,366,667	$	0.40		1,991,667		$	0.43
Warrants Granted		-		-		-			-
Exercised		-		-		-			-
Forfeited		-		-		-			-
Expired		-		-		(625,000	)	$	0.50
Outstanding at the end of period		1,366,667	$	0.40		2,021,669		$	0.40

Fair Value Assumptions – The fair value of warrants and options granted is estimated on the date granted using the Black-Scholes option pricing model with following weighted average assumptions used for the grants:

1. For the period ended September 30, 2007, risk free interest rates ranging from 3.73% to 4%, expected dividend yields of zero, expected life ranging from two years, and expected volatility ranging from 2% to 51%.

2. For the year ended December 31, 2006 the valuation of the warrants was estimated on a reasonability test as the stock was not publicly traded at that time.

The following are details related to warrants issued by the company as finders’ fees:

	June 30, 2009
	Shares		Weighted Average Exercise Price
Outstanding warrants at beginning of period		950,106	$	0.20
Warrants granted
Exercised
Forfeited
Expired
Outstanding at the end of period		950,106	$	0.20

1. For the period ended June 30, 2008, risk free rate was 2.71%, expected dividend yield was zero, expected life ranged from 18 months to 2 years, and expected volatility of 520%.

F-6

Mogul Energy International, Inc.

Notes to the March 31, 2009 and 2008 Financial Statements

Unaudited

2. For the period ended December 31, 2007, risk free rate was 3.05%, expected dividend yield of zero, expected life of 2 years, and expected volatility of 82%.

A summary of the status of the warrants under various agreements follows for the quarter ended June 30, 2009:

Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Remaining Contractual Life (years)
$	0.15 to $0.40		2,316,773		0.31	$	0.32		2,316,773		0.31

For quarter ended June 30, 2008

Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Remaining Contractual Life (years)
$	0.40		1,396,669		0.12	$	0.40		1,396,669		0.12

Employee Stock Option Plan

On August 7th, 2007 the Company granted 2,250,000options to Directors and employees of the Company.  These options vest at a rate of 20% per quarter.  These options were fully vested as of August 7th, 2008.

The following table summarizes the continuity of the Company’s stock options:

	June 30, 2009
	Options		Weighted Average Exercise Price		Weighted Average Remaining Life (years)
Options outstanding		2,250,000	$	0.30		3.07
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at the end of period		2,250,000,	$	0.30		3.07

The fair value of the options was calculated using the Black Scholes method: risk free rate 3.73%, share price $0.28, strike price $0.30, volatility 51% and dividend yield 0.00.

F-7

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

Unaudited

Preferred Stock

The Company’s Articles of Incorporation authorize its Board of Directors, without approval from the common shareholders, to issue 10,000,000 shares of preferred stock in any series, rights and preferences as determined by the Board. Preferred shares may be issued that: have greater voting rights than the common stock, diluting the value of any outstanding shares of common stock.

NOTE 3 - Oil and Gas Properties

Disposition of EWA Concession Agreement 20% Working

On March 21, 2008, the Company entered into an Agreement of Purchase and Sale with Egypt Oil Holdings Ltd. (Egypt Oil), Sea Dragon Energy Inc. (Sea Dragon) and Dover Investments Ltd.  The Agreement, with an effective date of March 21, 2008, was part of a larger transaction (the “Transaction”) that closed on April 24, 2008.  The Transaction resulted in the sale of the Company’s 20% working interest in the EWA Concession Agreement (Concession) to Sea Dragon in exchange for satisfaction of the Company’s outstanding “Cash calls payable” ($759,306) related to the Company’s drilling program on the Concession, a cash payment of $100,000 CDN plus 4,000,000 shares of Sea Dragon’s common stock, valued at an estimated $0.15 per share based on a recent share offering of Sea Dragon, a publicly traded Company.  Ninety percent of Sea Dragon’s shares received by the Company for this transaction have been placed in escrow.  The terms of the escrow call for the  release of these shares on the earlier of: (i) the Company announcing the drilling results of the second exploratory well drilled on the Concession (note 5); or (ii) July 31, 2009.

A further $76,667 capitalized prior to April 25, 2008 and subsequently assessed as impaired.  The corresponding accounts payable were assumed by EOH as a part of the Purchase and Sale agreement with Egypt Oil and Sea Dragon.

Saskatchewan Exploration Program

The Company commenced an exploration program in 2008 on its leased properties located in eastern Saskatchewan.

The first well encountered a heavily oil stained, marginal reservoir, within the Bakken interval.  This well has been suspended.  At December 31, 2008 a determination cannot be made about the extent of oil reserves that should be classified as proved reserves as a result pending further analysis expected to be completed in 2009.

The second well has been abandoned after encountering a wet zone at the Bakken reservoir level.  Reclamation costs associated with the abandoned well were estimated to be $26,186 and were classified to accounts payable and charged as impaired.

The Company’s exploration program previously announced has changed significantly.  Further exploration in Saskatchewan has been postponed as the Company evaluates the results of the wells drilled to date.

Due to expiration of the leased property, a lack of resources and falling oil prices the Company has realized an impairment charge of $1,203,247 related to the expiration of substantially all leased property assets and their related acquisition costs previously capitalized on the balance sheet as Exploration and Evaluation.  A further impairment charge of $412,134 has been recognized for the dry hole and other related costs of the 2008 exploration.  The suspended well costs have been recorded as a capitalized asset pending determination of reserves.

F-8

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

Unaudited

United States (Excelaron)

On February 12, 2009 the Company entered into an agreement with Excelaron LLC (“Excelaron”), California company, whereby Excelaron has agreed to permit the Company to subscribe for a 40% Members Percentage Interest in Excelaron.  In substance the subscription of this interest is contingent upon the Company making a $2,300,000 capital contribution to be used to acquire and develop oil and gas lease agreements that Excelaron has entered into.  These leases are located in California.  Should the Company not meet the contingent payment amounts its interest in Excelaron would be significantly reduced.  For every $250,000 invested below $1,000,000 the company would receive a 2% interest in Excelaron and a 5% for each $250,000 above $1,000,000.  As of June 30, 2009 no further investments have been made over and above the initial payment of $175,000.

NOTE 4 - Commitments

Office Lease

The Company rents office space in Seattle, Washington on a month-to-month basis for $400 per month, and $450 per month for office space in Vancouver, British Columbia, Canada.

In November, 2008, the Company entered into a 13 months lease for office space in Toronto, Ontario Canada at a net monthly cost of $3,954 Canadian Funds (approximately $US3,250).  This lease expires November, 2009.

NOTE 5 - Contingencies

Environmental Uncertainties

The Company may be exposed to financial risks in the oil and gas exploration business for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Flow-through financing

The Company must meet its obligations linked to the financing on a flow-through basis.  The Company raised a total of $804,984 in 2007 and $950,000 in 2008 on a flow-though basis.  These amounts have been renounced to investors on a look-back basis.  At December 31, 2008 the company estimated that is has spent approximately $847,647 on qualified capital exploration expenditures leaving a commitment of approximately $907,337 that is required to be spent on exploration in Canada in 2009.  Should the Company not meet this commitment it may have to adjust the amount of capital exploration expenses renounced to investors and/or be subject to penalties assessed by the Canadian Customs and Revenue Agency.

Governmental Regulations and Licensing

In order to drill for, recover, transport or sell any gas or oil from the properties subject to the Company’s drilling rights, the Company will generally be required to obtain additional licenses and permits and enter into agreements with various landowners and/or government authorities. The issuance of these permits and licenses generally will be contingent upon the consent of the governmental authority having jurisdiction over the property, which entities have broad discretion in determining whether or not to grant such authority. These licenses, permits, and agreements will generally contain numerous restrictions and require payment of development and exploration fees and royalties typically based on the recoverable reserves or expenditures. The amount of any such fee and royalties and other terms will determine in part, the commercial viability of any extraction prospect.

NOTE 6 - Loss Per Share

Loss per share is calculated using the weighted average number of shares issued during the relevant period. The weighted average number of common shares was 57,445,987 for the period ended June 30, 2009.

F-9

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

Unaudited

NOTE 7 - Net Operating Loss Carry-forward

At June 30, 2009, the Company had an estimated net operating loss (NOL) carry-forward of approximately $3,000,000 available to reduce any future taxable income (after adjusting for amounts related to Canadian investor flow-through capital and share based compensation).   The NOL carry-forward begins to expire in 2025 and will fully expire in 2028. Because management is unable to determine that it is more likely than not that the Company will realize the tax benefit related to the NOL carry-forward, by having taxable income, a valuation allowance has been established at the balance sheet date to reduce the tax benefit asset value to zero.

NOTE 8 - Capitalized costs relating to the oil and gas acquisitions and exploration activity

Schedule “A”Canada
Costs at Dec. 31, 2006	$	441,106
Lease property acquisition costs		800,000
Less impairment during 2007		(37,860)
Costs at December 31, 2007	$	1,203,246
Additions during 2008:		-
Exploration	$	832,035
Lease property acquisition costs		15,612
Less accumulated depreciation, depletion, amortization and impairment		(1,615,381)
Net book value December 31, 2008	$	435,512
Additions during 2009
Exploration		18,731
Net book value of Canadian Assets at June 30, 2009		454,243
Schedule “B”United States*
Cost at January 1, 2009	$	-
Additions: payment for 40% of Excelaron (Contingent)		175,000
Net book value of U.S. Assets at June 30, 2009	$	175,000

F-10

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

Mogul Energy International, Inc.

(an exploration stage enterprise)

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  These statements relate to future events and/or our future financial performance.  Generally, you can identify forward-looking statements by terminology such as “intends,” "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", or "potential" or the negative of these terms or other comparable terminology.  To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties.  These statements reflect only our current expectations and involve known and unknown risks, uncertainties and other factors, many of which are unforeseen, including the risks in Item 1A entitled "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  You should not place undue reliance on these forward-looking statements.  These forward-looking statements are within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created thereby.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited interim financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our unaudited interim financial statements and the related notes that appear elsewhere in this quarterly report.

In this Quarterly Report, unless otherwise specified, all references to "common shares" refer to common shares in the capital of Mogul Energy International, Inc., and the terms "we" "us" and "our" mean Mogul Energy International, Inc. (the “Company” and “Registrant”).

General Development of Business

We are a Delaware corporation formed on July 25, 2005, with our principal place of business in Seattle, Washington.  We also maintain an office in Vancouver, British Columbia and Toronto, Ontario, Canada.  We are an independent oil and gas exploration company established to take advantage of low cost acquisition opportunities near other producing and proven oil fields. Since our formation, we have engaged in only limited activities related to the acquisition of our property rights and financing activities. To date, we have not generated any operating revenues.  The address of our website is www.mogulenergy.com. Information on our website is not part of this report.

We are an exploration company focused on exploration and acquisition of properties with potential for hydrocarbon (oil and gas) development.  Our business strategy is to conduct exploration on our current properties for hyrdrocarbons and expand our business through development of those properties and, if warranted, the acquisition and development of other properties that have:

§ Low entry cost as measured on a dollar per barrel for proven and potential reserves;

§ Ready access to infrastructure allowing for production within a short time period without significant capital commitments; and

§ Ready access to local and export markets without the need for immediate investment in pipeline construction projects.

Initially, we intend to use third-party providers to engage in most if not all of any oil and gas producing activities in which we may engage if our properties reveal the potential for such activity in the future.

Material Changes in Financial Condition and Results of Operations

As at June 30, 2009, we had total assets of $1,073,059 as compared to $1,919,120 at December 31, 2008.  Non-Current assets increased to $629,244 with primarily due the addition of our investment of $175,000 for our initial disbursement for our interest in Excelaron LLC.

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

As at June 30, 2009, we had $210,246 in current liabilities relative to current liabilities of $559,262 at December 31, 2008. Our total liabilities have decreased by approximately $349,016 as we continue to pay payables from our drilling program that ended in December 2008.

The Company report a net loss of $403,134 for the six month period ended June 30, 2009, compared to a net gain of $58,964 for the comparable period in 2008.  The net gain in the prior period was as a result of the divestiture of the one third interest in the EWA Concession.  Expenses in the current period increased 92% for accounting and decrease in 64% for travel and promotion relative to the prior comparable period.

The Company is contemplating further financing through the issuance of common shares, a loan or the possibility of a merger in order to proceed with its business objectives.

We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital. In this regard we have raised and will need to continue to raise additional capital as discussed above.

The continuation of our business is dependent upon obtaining further financing, a successful program of acquisition and exploration, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

No information is provided under this Item because the Company is a smaller reporting company.

Item 4T.  Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

As required under the Exchange Act, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as of the end of the period covered by this report, being June 30, 2009. We are responsible for establishing and maintaining adequate internal controls and procedures for the financial reporting of our company. Disclosure control and procedures are the controls and other procedures that are designed to ensure that we record, process, summarize and report in a timely manner the information that we must disclose in reports that we file with or submit to the SEC.  Our management has concluded, based on their evaluation, that as of June 30, 2009, as the result of the material weaknesses described below, our disclosure controls and procedures were ineffective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.  For more information, see Item 9A – Controls and Procedures – in Part II of our Annual Report on Form 10-K for the year ended December 31, 2008.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

Item 1A.  Risk Factors

There have been no material changes to the risk factors previously disclosed in Item 1A – Risk Factors – in Part I of our Annual Report on Form 10-K for the year ended December 31, 2008.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Between January 1, 2009 and June 30, 2009, the Company did not sell any equity securities of the Company which were not registered under the Securities Act.

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Securities Holders

None

Item 5.  Other Information

There have been no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.

Item 6.  Exhibits

Exhibit
Number	Description
(3)	(i) Articles of Incorporation; and (ii) Bylaws
3.1	Certificate of Incorporation (1)*
3.2	By-laws (1)*
3.3	Form of Registration Rights Agreement with the Selling Shareholders (1)*
3.4	Form of Subscription Agreement ($0.001) (2)*
3.5	Form of Subscription Agreement ($0.15) (2)*
3.6	Form of Subscription Agreement ($0.40) dated for reference July 28, 2005 (2)*
3.7	Form of Subscription Agreement ($0.40) dated for reference October 31, 2005 (2)*
3.8	Form of Subscription Agreement ($0.40) dated for reference January 19, 2006 (2)*
3.9	Form of Flow Through Subscription Agreement ($0.40) dated for reference February 8, 2006 (2)*
3.10	Form of Subscription Agreement for Unit Offering dated for reference April 11, 2006 (2)*
3.11	Form of Subscription Agreement ($0.15) dated for reference December 12, 2007 (incorporated by reference from our Current Report on Form 8-K filed on February 15, 2008)*
3.12	Form of Flow Through Subscription Agreement ($0.18) dated for reference December 12, 2007 (incorporated by reference from our Current Report on Form 8-K filed on February 15, 2008)*
(4)	Instruments Defining the Rights of Security Holders
4.1	2007 Stock Incentive Plan (incorporated by reference from our Current Report on Form 8-K filed on August 10, 2007)*
(5)	Opinion re Legality
5.1	Opinion of Sierchio Greco & Greco, LLP (3)*
(10)	Material Contracts
10.1	A Binding Farm-Out Agreement East Wadi Araba Concession dated August 6, 2005 (1)*
10.2	A Binding Joint Venture Agreement - Egypt dated August 7, 2005 (1)*
10.3	Farm-Out Agreement dated September 29, 2005 (1)*
10.4	Farm-out Agreement dated November 8, 2005 (1)*
10.5	Assignment Agreement-East Wadi Araba Concession dated December 9, 2005 (1)*

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

10.6	Assignment Agreement dated December 9, 2005 (1)*
10.7	Amendment to Binding Farm-Out Agreement East Wadi Araba Concession-Egypt dated March 30, 2006 (1)*
10.8	Assignment Agreement dated April 4, 2006 (1)*
10.9	Concession Agreement for Petroleum Exploration and Exploitation (the "Concession Agreement") between Dover, the Arab Republic of Egypt and the Egyptian General Petroleum Corporation (“EGPC”) dated July 18, 2002 (1)*
10.10	East Wadi Araba Concession - Gulf of Suez, Egypt Amending Agreement dated April 13, 2006 (1)*
10.11	Deed of Assignment submitted May 30, 2006 (1)*
10.12	A Binding Agreement dated April 14, 2005 (1)*
10.13	Agreement dated October 2, 2006 with Ernie Pratt (2,3)*
10.14	Office Lease Agreement as amended (2)*
10.15	Promissory note dated April 1, 2006 in the aggregate amount of $113,791.35 (2)*
10.16	Assignment Agreement dated January 24, 2007 (2)*
10.17	Letter of Intent dated July 30, 2007 (incorporated by reference from our Current Report on Form 8-K filed on August 7, 2007)*
10.18	Form of Stock Option Agreement (incorporated by reference from our Current Report on Form 8-K filed on August 10, 2007)*
(14)	Code of Ethics
14.1	Code of Ethics (5)*
(23)	Consents of Experts and Counsel
23.1	Consent of Sierchio Greco & Greco, LLP (included in Exhibit 5.1) (3)*
23.2	Consent of Jorgensen & Co. (incorporated by reference from our Registration Statement on Form SB-2/A filed on May 8, 2007) (1,2,3,4)*
23.3	Consent of Chapman Petroleum Engineering Ltd. (1,2,3,4)*
(31)	Certifications
31.1	Certification of Principal Executive Officer pursuant to Section 302
31.2	Certification of Principal Financial and Accounting Officer pursuant to Section 302
32.1	Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 1350
(99)	Additional Exhibits
99.1	List of Freehold Properties Leases (1)*
99.2	Evaluation of Resource Potential East Wadi Araba Concession, Offshore Gulf of Suez, Egypt (1)*
99.3	Settlement Agreement dated January 24, 2007 (2)*

* Previously filed.

1 Filed with our Registration Statement on Form SB-2 on November 17, 2006, and incorporated herein by reference.

2 Filed with our Registration Statement on Form SB-2/A on February 6, 2007, and incorporated herein by reference.

3 Filed with our Registration Statement on Form SB-2/A on March 29, 2007, and incorporated herein by reference.

4 Filed with our Registration Statement on Form SB-2/A on April 25, 2007, and incorporated herein by reference.

5 Filed with our Annual Report on Form 10-K, for the year ending December 31, 2008, and incorporated herein by reference.

Mogul Energy International, Inc.

Notes to the June 30, 2009 and 2008 Financial Statements

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.

MOGUL ENERGY INTERNATIONAL, INC.

/s/ Naeem Tyab

By: Naeem Tyab, President

(Principal Executive Officer)

(Principal Financial Officer)

Dated:  July 12, 2009