UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 20-F
(Mark one)

[ ]    Registration Statement Pursuant to Section 12(b) or (g) of the Securities
       Exchange Act of 1934

                                       or

[X]    Annual Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
       Act of 1934

                     FOR THE FISCAL YEAR ENDED MAY 31, 2004

                                       or

[ ]    Transition  Report  Pursuant  to Section  13  or 15 d) of the  Securities
       Exchange Act of 1934

              For the transition period from _________ to _________

                         Commission file number: 0-30920

                           BARADERO RESOURCES LIMITED
             (Exact name of Registrant as Specified in its Charter)

                           BARADERO RESOURCES LIMITED
                 (Translation of Registrant's Name Into English)

                            BRITISH COLUMBIA, CANADA
                 (Jurisdiction of Incorporation or Organization)

 #1305 - 1090 WEST GEORGIA STREET, VANCOUVER, BRITISH COLUMBIA, CANADA, V6E 3V7
                    (Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

                                      NONE

Securities registered or to be registered pursuant to Section 12(g) of the Act.

                           COMMON STOCK, NO PAR VALUE
                                (Title of Class)

Securities for which there is a reporting  obligation  pursuant to Section 15(d)
of the Act.

                                 NOT APPLICABLE
                                (Title of Class)

Indicate the number of  outstanding  shares of each of the  issuer's  classes of
capital  or common  stock as of the close of the  period  covered  by the annual
report.

                   1,911,521 COMMON SHARES AS OF MAY 31, 2004

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
     ---            ---
Indicate by check mark which financial statement item the registrant has elected
to follow.

Item 17   X     Item 18                                            Page 1 of 152
         ---            ---

<PAGE>



GENERAL INFORMATION:

UNLESS OTHERWISE INDICATED, ALL REFERENCES HEREIN ARE TO CANADIAN DOLLARS.

                                    GLOSSARY

The following is a glossary of oil and gas terms used in this annual report:


BBL OR BARREL                          34.972 Imperial gallons or 42 US gallons.

FARM-OUT                               Transfer of all or part of the  operating
                                       rights from the working interest owner to
                                       an  assignee,  who assumes all or some of
                                       the burden of  development  in return for
                                       an interest in the property. The assignor
                                       usually retains an overriding royalty but
                                       may retain any type of interest.

GROSS                                  ACRES The total  number of acres in which
                                       the Company  holds a working  interest or
                                       the right to earn a working interest.

GROSS WELLS                            The  total  number  of wells in which the
                                       Company has a working interest.

LIQUIDS                                Crude oil and natural gas liquids.

MCF                                    One thousand cubic feet.

MCFE                                   One thousand cubic feet equivalent.

NET ACRES                              The  gross   acres   multiplied   by  the
                                       percentage working interest therein owned
                                       or to be owned by the Company.

NET RESERVES                           The Company's lessor royalty,  overriding
                                       royalty,  and working  interest  share of
                                       reserves  from  the   properties,   after
                                       deduction of all freehold, and overriding
                                       royalties payable to others.

NET REVENUE INTEREST                   The  percentage  interest  in  which  the
                                       lessor   has  the  right  to   receive  a
                                       specified fractional share of the mineral
                                       produced   from  the  property  or  value
                                       thereof.

NET WELLS                              The  gross   wells   multiplied   by  the
                                       percentage working interest therein owned
                                       or to be owned by the Company.

PRESENT VALUE                          The present value of estimated future net
                                       revenues  computed  by  applying  current
                                       prices  of  oil  and  gas   reserves   to
                                       estimated future production of proved oil
                                       and gas  reserves  as of the  date of the
                                       latest  balance  sheet  presented,   less
                                       estimated future  expenditures  (based on
                                       current   costs)   to  be   incurred   in
                                       developing   and   producing  the  proved
                                       reserves computed using a discount factor
                                       of ten percent and assuming  continuation
                                       of existing economic conditions.

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

                                       (i)   Reservoirs are considered proved if
                                             economic producibility is supported
                                             by  either  actual   production  or
                                             conclusive formation test. The area
                                             of a  reservoir  considered  proved
                                             includes:


                                       -2-

<PAGE>



                                             (A)  that  portion   delineated  by
                                                  drilling    and   defined   by
                                                  gas-oil    and/or    oil-water
                                                  contacts, if any; and

                                             (B)  the   immediately    adjoining
                                                  portions not yet drilled,  but
                                                  which can be reasonably judged
                                                  as economically  productive on
                                                  the    basis   of    available
                                                  geological   and   engineering
                                                  data.   In  the   absence   of
                                                  information on fluid contacts,
                                                  the  lowest  known  structural
                                                  occurrence   of   hydrocarbons
                                                  controls   the  lower   proved
                                                  limit of the reservoir.

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

                                       (iii) Estimates of proved reserves do not
                                             include the following:

                                             (A)  oil that may become  available
                                                  from known  reservoirs  but is
                                                  classified    separately    as
                                                  "indicated          additional
                                                  reserves",

                                             (B)  crude oil,  natural  gas,  and
                                                  natural   gas   liquids,   the
                                                  recovery  of which is  subject
                                                  to reasonable doubt because of
                                                  uncertainty   as  to  geology,
                                                  reservoir characteristics,  or
                                                  economic factors,

                                             (C)  crude oil,  natural  gas,  and
                                                  natural gas liquids,  that may
                                                  occur in undrilled  prospects,
                                                  and

                                             (D)  crude oil,  natural  gas,  and
                                                  natural gas liquids,  that may
                                                  be recovered  from oil shales,
                                                  coal, gilsonite and other such
                                                  sources.

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

PROVED UNDEVELOPED RESERVES            Reserves   that   are   expected   to  be
                                       recovered  from new  wells  on  undrilled
                                       acreage,  or from existing  wells where a
                                       relatively major  expenditure is required
                                       for  recompletion.  Reserves on undrilled
                                       acreage   shall  be   limited   to  those
                                       drilling  units   offsetting   productive
                                       units  that  are  reasonably  certain  of
                                       production when drilled.  Proved reserves
                                       for other  undrilled  units  are  claimed
                                       only  where it can be  demonstrated  with
                                       certainty  that  there is  continuity  of
                                       production  from the existing  productive
                                       formation.  Under  no  circumstances  are
                                       estimates for proved undeveloped reserves
                                       attributable  to any acreage for which an
                                       application  of fluid  injection or other
                                       improved     recovery     technique    is
                                       contemplated, unless such techniques have
                                       been proved  effective by actual tests in
                                       the area and in the same reservoir.

UNDEVELOPED ACREAGE                    Lands  on  which  there  are  no  current
                                       reserves assigned.


                                       -3-

<PAGE>




WORKING INTEREST                       The interest  held by a company in an oil
                                       or natural gas property,  which  interest
                                       normally bears its proportionate share of
                                       the  costs of  exploration,  development,
                                       and operation as well as any royalties or
                                       other production burdens.

FORWARD LOOKING STATEMENTS

The Company cautions readers regarding  forward looking  statements found in the
following  discussion  and  elsewhere  in this  annual  report  and in any other
statement  made by, or on the  behalf of the  Company,  whether or not in future
filings with the Securities  Exchange  Commission  (the "SEC").  Forward looking
statements are statements not based on historical  information  and which relate
to future  operations,  strategies,  financial  results  or other  developments.
Forward looking  statements are necessarily based upon estimates and assumptions
that are inherently  subject to significant  business,  economic and competitive
uncertainties and contingencies,  many of which are beyond the Company's control
and many of which,  with respect to future  business  decisions,  are subject to
change.  See "Item 3. Key Information - Risk Factors".  These  uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking  statements made by or on
behalf of the Company.  The Company  disclaims any  obligation to update forward
looking statements.


                                       -4-

<PAGE>



                                     PART I


ITEM 1.  DIRECTORS, SENIOR MANAGEMENT AND ADVISORS.
--------------------------------------------------------------------------------

Not applicable.


ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.
--------------------------------------------------------------------------------

Not applicable.


ITEM 3.  KEY INFORMATION.
--------------------------------------------------------------------------------

SELECTED FINANCIAL DATA

The  selected  financial  data of the Company for the years ended May 31,  2004,
2003 and 2002 was derived from the  financial  statements  of the Company  which
have been audited by D&H Group, independent Chartered Accountants,  as indicated
in their report which is included  elsewhere in this annual report. The selected
financial  data set forth for the year ended May 31, 2001 and the fiscal  period
ending  May 31,  2000,  are  derived  from the  Company's  audited  consolidated
financial statements, not included herein.

The  information  in the following  table was  extracted  from the more detailed
consolidated  financial  statements and related notes included herein and should
be read in conjunction  with such financial  statements and with the information
appearing  under  the  heading  "Item 5.  Operating  and  Financial  Review  and
Prospects".

Reference is made to Note 11 of the Company's  consolidated financial statements
included herein for a discussion of the material  differences  between  Canadian
generally accepted accounting  principles ("GAAP") and US GAAP, and their effect
on the Company's financial statements.

<TABLE>
<CAPTION>

                                                                       YEAR ENDED MAY 31,
                                             ----------------------------------------------------------------------
                                                 2004          2003             2002(1)       2001(1)    2000(1)(2)
                                                 ----          ----             ------        ----       ----

<S>                                           <C>          <C>            <C>           <C>            <C>

Oil and Gas Sales                                  $98,904       $22,064              -             -             -
Interest and Other Income                           $4,099       $11,590       $113,663       $16,059       $17,906
Production Costs                                  $(28,741)      $(4,870)             -             -             -
General and Administrative Expenses               $(79,849)     $(99,139)     $(378,279)    $(164,702)    $(127,600)
Depreciation, depletion and impairment            $(44,187)    $(580,101)      $(61,702)            -             -
Impairments and write-offs                               -     $(233,120)     $(116,506)            -             -
Net Earnings (Loss)                               $179,158   $(1,072,481)     $(640,944)    $(375,893)     $153,358
Total Assets                                      $137,713      $135,533     $1,257,671    $1,440,756    $1,646,607
Net Assets (Deficiency)                            $(4,924)    $(184,082)      $877,399    $1,386,547    $1,503,093
Capital Stock                                   $1,751,878    $1,751,878     $1,740,878    $1,609,082    $1,349,735
Weighted Average Number of Shares                1,911,521     1,910,919      1,627,355       808,439       509,504
Dividends per Share                                    Nil           Nil            Nil           Nil           Nil
Basic and Fully Diluted
     Earnings (Loss) Per Share                       $0.09        $(0.56)        $(0.39)       $(0.46)        $0.30

</TABLE>

(1)  On September  27, 2001,  the Company  completed a  reorganization  with the
     shareholders of California Exploration Inc. ("CalEx").  This reorganization
     was treated for accounting purposes as a reverse takeover, whereby CalEx is
     deemed to be the purchaser  and parent  company.  Accordingly,  CalEx's net
     assets are included in the consolidated balance sheets at their historical

                                       -5-

<PAGE>



     book  value and the net  assets  and  business  of the  Company,  the legal
     parent,  were  recorded  at their fair values on  September  27,  2001.  In
     addition,  the  consolidated  statements of operations and deficit and cash
     flow for the year ended May 31, 2002 include  CalEx's results of operations
     and cash flow for the year ended May 31, 2002 and the Company's  results of
     operations and cash flow from September 27, 2001. The  comparative  figures
     for the years ended May 31, 2001 and 2000 are those of CalEx.
(2)  CalEx was incorporated on October 6, 1999,  therefore the fiscal year ended
     May 31, 2000, is for the period from October 6, 1999 to May 31, 2000.

ADJUSTMENT TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The  consolidated  financial  statements  of the Company  have been  prepared in
accordance  with  Canadian  GAAP.  Canadian  GAAP  differs in  certain  material
respects from US GAAP.  Material  differences  between  Canadian and US GAAP and
their effect on the Company's  consolidated  financial statements are summarized
in the tables below.
<TABLE>
<CAPTION>

                                                                           2004            2003            2002
                                                                             $               $               $
<S>                                                                   <C>             <C>             <C>

Consolidated Statements of Operations and Comprehensive Income

Earnings (loss) for the year
    Canadian GAAP                                                           179,158      (1,072,481)       (640,944)
    Write-down of investment (i)                                                  -               -          68,236
                                                                       ------------    ------------    ------------
                                                                            179,158      (1,072,481)       (572,708)
Other Comprehensive Income
    Unrealized holding gain (loss) on
       available-for-sale marketable securities (i)                          38,400          48,000         (42,000)
                                                                       ------------    ------------    ------------
Comprehensive earnings (loss) for the year                                  217,558      (1,024,481)       (614,708)
                                                                       ============    ============    ============

    Earnings (loss) per share basic and fully diluted - US GAAP               $0.11          $(0.54)         $(0.38)
                                                                       ============    ============    ============

</TABLE>

<TABLE>
<CAPTION>

                                                                                           2004            2003
                                                                                             $               $
<S>                                                                                   <C>             <C>

Consolidated Balance Sheets

Total Assets
    Canadian GAAP                                                                           137,713         135,533
    Cumulative unrealized holding gains on available for sale securities (i)                 89,161          50,236
                                                                                       ------------    ------------
    US GAAP                                                                                 226,874         185,769
                                                                                       ============   =============
Total Liabilities
    Canadian GAAP                                                                           142,637         319,615
                                                                                       ------------    ------------
    US GAAP                                                                                 142,637         319,615
                                                                                       ============   =============
Shareholders' Equity (Deficiency)
    Canadian GAAP                                                                            (4,924)       (184,082)
    Cumulative unrealized holding gains available for sale securities (i)                    89,161          50,236
                                                                                       ------------   -------------
    US GAAP                                                                                  84,237        (133,846)
                                                                                       ============   =============

</TABLE>



                                       -6-

<PAGE>



(i)      Marketable securities

         US  GAAP  requires  marketable   securities  which  are  classified  as
         available for sale to be carried at fair value, as determined by quoted
         published market prices,  with unrealized losses and gains on available
         for  sale  securities  to  be  included  as  a  separate  component  of
         shareholders'  equity.  In addition,  net realized  gains and losses on
         security   transactions   would   be   determined   on   the   specific
         identification cost basis and included in the determination of earnings
         for the year.

(ii)     Stock option plan for employees and directors

         The Company has a stock option plan which  reserves  common  shares for
         issuance  to  directors,  employees  and  consultants.  During the 2003
         fiscal year the Company adopted, on a prospective basis, the fair value
         method of accounting for stock options granted to directors,  employees
         and consultants as recommended by Section 3870 Stock-Based Compensation
         and Other Stock Based  Payments of the Canadian  Institute of Chartered
         Accountants' Handbook. No options were granted to directors,  employees
         or consultants  during the 2004 and 2003 fiscal years. Had compensation
         costs for the Company's stock option plan been determined  based on the
         fair  value at the grant date for awards  during the 2002  fiscal  year
         consistent  with the  provisions  of Statement of Financial  Accounting
         Standards  ("SFAS") No. 123, the Company's earnings (loss) and earnings
         (loss) per share  would have been  increased  to the  proforma  amounts
         indicated below:

                                                                         2002
                                                                           $

         Earnings (loss) - as reported under US GAAP                   (614,708)
         Earnings (loss) - proforma                                    (694,758)

         Earnings (loss) per share - as reported under US GAAP           $(0.38)
         Earnings (loss) per share - proforma                            $(0.43)

         The fair market value of each option granted to an employee or director
         is  estimated  on the date of grant  using the  Black - Scholes  Option
         Pricing Model with the following assumptions used for grants during the
         2002 fiscal year:

                                                        2002

                Risk-free interest rate                 3.14%
                Expected volatility                      125%
                Expected lives                        3 years

(iii)    Private Placements of Common Stock

         The Company conducts the majority of its equity financings  pursuant to
         private  placements.  US GAAP  does  not  permit  a  discount  from the
         estimated  fair value,  or the market price,  as  appropriate.  US GAAP
         requires the recognition of the estimated fair value or market value of
         the Company's common stock as a credit to share capital,  with a charge
         to  operations  for the  portion  of the  discount  relating  to equity
         financings  conducted  with officers and directors of the Company and a
         charge to  shareholders'  equity,  as a capital  distribution,  for the
         discount relating to the remaining portion of the equity financings.

         Under US GAAP,  share  capital,  as at May 31,  2004 would  increase by
         $315,721 (2003 - $315,721; 2002 - $315,721).  There is no net change to
         shareholders' equity.



                                       -7-

<PAGE>



(iv)     Income Tax

         Under  Canadian  GAAP,  deferred tax assets  relating to the  potential
         benefit  of income tax loss  carryforwards  are not  recognized  unless
         there is reasonable  assurance of realization  of the benefit.  US GAAP
         provides similar treatment,  but requires the benefit be recognized and
         a valuation  allowance be  recognized  to fully offset the deferred tax
         asset.

         Provision  for (benefit  from) income taxes for the 2004 fiscal year is
         as follows:

                                                         $              RATE

                Current
                Federal and provincial                   71,000          39.62%
                Net operating carryforward              (71,000)         39.62%
                                                   ------------    ------------
                                                              -               -
                                                   ============    ============

         As at May 31,  2004,  the Company has fully  reserved  the $128,000 tax
         benefit of operating loss  carryforwards,  by a valuation  allowance of
         the same  amount,  because the  likelihood  of  realization  of the tax
         benefit  cannot  be  determined.  Of the  total  tax  benefit,  $nil is
         attributable to the 2004 fiscal year.

(v)      Functional Currency

         The Company's functional currency is the Canadian dollar.

(vi)     Development Stage Company

         As of May 31,  2004,  the Company is  considered  a  development  stage
         company as defined by SFAS No. 7.

The Company's consolidated statements of cash flow comply with US GAAP.

New Accounting Standards

In May 2003, the Financial  Accounting Standards Board ("FASB") issued Statement
No. 150,  "Accounting for Certain Financial  Instruments with Characteristics of
Both  Liabilities and Equity" ("SFAS No. 150"),  which addresses how to classify
and  measure  certain  financial   instruments  with   characteristics  of  both
liabilities  (or  assets in some  circumstances)  and  equity.  SFAS No.  150 is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after June 15, 2003.  Adoption of SFAS No. 150 on July 1, 2003 had no
impact on the Company's financial position and results of operations.

In  January  2003,  the FASB  issued  Interpretation  No. 46  "Consolidation  of
Variable  Interest  Entities" ("FIN No. 46") (revised December 2003). FIN No. 46
clarifies the application of Accounting  Research  Bulletin No. 51 "Consolidated
Financial  Statements" to only certain entities in which equity investors do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  equity to  finance  its  activities  without
additional subordinated financial support from other parties. FIN No. 46 applies
immediately to variable  interest  entities  created after January 31, 2003, and
the variable  interest  entities obtained after that date. It applies at the end
of the first annual  reporting period beginning after June 15, 2003, to variable
interests in which an enterprise  holds a variable  interest  which was acquired
before  February  1,  2003.  Adoption  of FIN No. 46 on January 1, 2004 will not
materially impact the Company's financial position or results of operations.

A similar  guideline  has been  introduced  in Canada,  Accounting  Guideline 15
"Consolidation of Variable Interest Entities".  This guideline applies to annual
and interim  periods  beginning  on or after  November  1, 2004.  The Company is
continuing to evaluate the potential impact of Accounting Guideline 15.



                                       -8-

<PAGE>



In July 2003,  the CICA released  Section 1100  "Generally  Accepted  Accounting
Principles".  This new section establishes  standards for financial reporting in
accordance  with generally  accepted  accounting  principles.  It describes what
constitutes  Canadian  GAAP  and its  sources,  replacing  "Financial  Statement
Concepts"  paragraph  1000.59-61.  Also, in July 2003, the CICA released Section
1400,  "General  Standards of Financial  Statement  Presentation".  This section
clarifies what constitutes  fair  presentation in accordance with Canadian GAAP.
Both these sections are effective for fiscal years beginning on or after October
1, 2003 and the Company is currently evaluating their impact.

Exchange Rate History

The following table sets forth the average exchange rate for one Canadian dollar
expressed  in terms of one U.S.  dollar for the fiscal years ended May 31, 2004,
2003, 2002, 2001 and 2000.


PERIOD                                                                AVERAGE

June 1, 2003 - May 31, 2004                                            0.7443
June 1, 2002 - May 31, 2003                                            0.6574
June 1, 2001 - May 31, 2002                                            0.6377
June 1, 2000 - May 31, 2001                                            0.6596
October 6, 1999 - May 31, 2000                                         0.6834


The following  table sets forth the high and low exchange rates for one Canadian
dollar  expressed  in terms of one U.S.  dollar for the  six-month  period ended
October 31, 2004.

MONTH                                          HIGH                      LOW

October 2004                                  0.8201                    0.7858
September 2004                                0.7906                    0.7651
August 2004                                   0.7714                    0.7506
July 2004                                     0.7644                    0.7489
June 2004                                     0.7459                    0.7261
May 2004                                      0.7364                    0.7158


Exchange  rates are based upon the noon  buying  rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York.

The noon rate of exchange on November  24, 2004,  reported by the United  States
Federal  Reserve Bank of New York for the  conversion  of Canadian  dollars into
United States dollars was CDN$1.1813 (US$0.8465 = CDN$1.00).

Risk Factors

The  Company's  initial  business  was  the  exploration  for,  development  and
exploitation  of oil and gas prospects  principally in the United States.  In an
attempt  to  diversify  the  Company's  operations,  management  reviewed  other
business opportunities.  In December 2001, the Company entered into an agreement
to acquire a private company in the software development industry. The agreement
was  ultimately  not proceeded with and was terminated in January 2003. In March
2004, the Company sold its remaining interests in oil and gas properties.  As of
the date of this annual  report the Company  does not hold any  interests in oil
and gas  leases  and is  continuing  its  review  of other  business  and  asset
acquisitions,  which  may  or may  not  be in the  oil  and  gas  industry.  Any
significant  business or asset acquisition or change of business may require TSX
Venture  Exchange  ("TSXV")  and  Company  shareholder  approvals.  There are no
assurances  that the  Company may  identify  suitable  acquisitions,  be able to
finance these purchases if negotiated, or receive the requisite approvals.

The  historical  results of the  Company's  operations  discussed in this annual
report are not necessarily  indicative of the future  operations of the Company.
In particular, if the Company acquires another business or assets, the Company's
operations  may change  significantly  from  those in which it has  historically
engaged.  Therefore,  the  discussion  of the  Company's  historical  operations
contained in this annual  report may not provide an adequate  representation  of
the Company's future performance and results of its operations.

                                       -9-

<PAGE>



THE  COMPANY  HAS LIMITED  FINANCIAL  RESOURCES  AND IF THE COMPANY IS UNABLE TO
SECURE ADDITIONAL FUNDING, THE COMPANY MAY FAIL.

The Company has limited financial resources,  no revenues,  and has no assurance
that additional  funding will be available to it should the Company identify any
potential  acquisition  candidates.  As of May 31, 2004, the Company had working
capital of $96,135,  which does not include $127,548 owed to related parties. As
of the date of this annual  report,  the Company is not generating any cash flow
from  its  operations  to meet  ongoing  corporate  overhead  and to  repay  its
outstanding liabilities.

The only significant  source of funds presently  available to the Company is the
sale of its equity  capital.  There can be no assurance that the Company will be
able to  obtain  adequate  financing  in the  future  or that the  terms of such
financing  will be  favourable.  If the Company is not able to raise  additional
capital,  or  generate  additional  cash  flow,  the  Company  may have to cease
operations,  in which case any  investment in the Company's  shares would become
worthless.

If the  Company  issues  additional  shares  to fund its  operations  or for the
acquisition  of  additional  businesses,  the  shareholders  of the Company will
experience dilution of their ownership interests.

The Company's consolidated financial statements were prepared on a going concern
basis  which  assumes  that the  Company  will be able to realize its assets and
discharge its liabilities in the normal course of business.

THE COMPANY HAS NO  OPERATIONS  OR REVENUES  AND WILL  CONTINUE TO INCUR  LOSSES
UNTIL IT CAN ACQUIRE A BUSINESS OR ASSETS WHICH GENERATE  SUFFICIENT REVENUES TO
COVER THE COMPANY'S OPERATING AND OVERHEAD EXPENSES.

The Company has no  operations  or revenues  and  essentially  has no  financial
resources.  The Company will,  in all  likelihood,  continue to incur  operating
expenses  without  corresponding  revenues until the Company acquires a business
opportunity. There is no assurance that the Company can identify such a business
opportunity  and  consummate  such a combination.  As a result,  the Company may
continue to incur net operating losses that will increase continuously.

TRADING OF THE COMPANY'S COMMON SHARES HAVE BEEN EXTREMELY LIMITED AND INVESTORS
MAY NOT BE ABLE TO RE-SELL THE SHARES.

To date,  there has been extremely  limited  trading of the Company's  shares of
common  stock  on the  Over-the-Counter  Bulletin  Board  system  and the  TSXV.
Therefore,  persons  purchasing  shares of the Company's common stock may not be
able to resell  the  shares  and may have to hold the  shares  indefinitely.  In
addition, purchasers may not be able to use their shares for collateral or loans
and  may not be able  to  liquidate  at a  suitable  price  in the  event  of an
emergency.

IF THE  COMPANY  ISSUES  SHARES OR OPTIONS  TO ITS  OFFICERS,  DIRECTORS  OR KEY
EMPLOYEES,  OR IF THE COMPANY  OBTAINS  FUNDING  THROUGH THE SALE OF  ADDITIONAL
COMMON SHARES, THE SHAREHOLDERS WILL EXPERIENCE DILUTION.

The Company may in the future grant to some or all of its  directors,  officers,
insiders and key employees  options to purchase the  Company's  common shares as
non-cash incentives to those employees.  Such options may be granted at exercise
prices equal to market prices, or at prices as allowed under the policies of the
TSXV,  when the  public  market is  depressed.  To the extent  that  significant
numbers of such  options may be granted and  exercised,  the  interests  of then
existing shareholders of the Company will be subject to additional dilution.

The  Company is  currently  without a source of revenue  and will most likely be
required to issue additional shares to settle advances outstanding,  finance its
operations  and, if the  Company  successfully  negotiates  the  acquisition  of
another  business  or  property,  may issue  additional  shares to finance  such
acquisition  and/or any related  exploration  programs,  if any. The issuance of
additional shares will cause the Company's  existing  shareholders to experience
dilution of their ownership interests.



                                      -10-

<PAGE>



THE PRICE OF THE COMPANY'S  COMMON SHARES IS SUBJECT TO MARKET  FLUCTUATIONS AND
VOLATILITY  WHICH  MAY NOT BE  RELATED  TO THE  COMPANY'S  OPERATIONS  AND  SUCH
FLUCTUATIONS MAY IMPACT THE COMPANY'S ABILITY TO COMPLETE EQUITY FINANCINGS;  IF
THE COMPANY CANNOT COMPLETE ADDITIONAL EQUITY FINANCINGS,  IT MAY NOT BE ABLE TO
CONTINUE ITS OPERATIONS.

In recent years, the securities  markets in Canada have experienced a high level
of price and volume  volatility,  and the  market  price of  securities  of many
companies , particularly junior natural resources  exploration  companies,  have
experienced  wide  fluctuations in price which have not necessarily been related
to the  operating  performance,  underlying  asset  values or  prospects of such
companies.  In  particular,  the per share price of the Company's  common shares
fluctuated  from a high of $0.35 to a low of $0.04  during the  12-month  period
ending October 31, 2004.  Continued price  fluctuations  will have a significant
impact on the Company's ability to complete equity financings.

CONFLICTS OF INTEREST MAY ARISE AMONG THE MEMBERS OF OUR BOARD OF DIRECTORS  AND
SUCH CONFLICTS MAY CAUSE THE COMPANY TO ENTER INTO  TRANSACTIONS  ON TERMS WHICH
ARE NOT BENEFICIAL TO THE COMPANY.

Several of the Company's directors are also directors,  officers or shareholders
of other  companies.  Some of the  directors  and  officers are engaged and will
continue to be engaged in the search for additional  business  opportunities  on
behalf of other corporations, and situations may arise where these directors and
officers will be in direct  competition with the Company.  Such associations may
give rise to conflicts of interest from time to time.  Such a conflict poses the
risk that the  Company may enter into a  transaction  on terms which could place
the Company in a worse position than if no conflict existed.  Conflicts, if any,
will be dealt with in  accordance  with the relevant  provisions of the BUSINESS
CORPORATIONS ACT (British Columbia) (the "BCBCA").  The directors of the Company
are  required by law to act  honestly  and in good faith with a view to the best
interest of the Company and to disclose any interest which they many have in any
project or  opportunity  of the Company.  However,  each  director has a similar
obligation to other  companies  for which such director  serves as an officer or
director.  In order to avoid the possible  conflict of interest  which may arise
between  the  directors'  duties to the  Company  and their  duties to the other
companies on whose boards they serve,  the directors and officers of the Company
have agreed to the following:

1.       participation in other business  ventures offered to the directors will
         be allocated  between the various companies and on the basis of prudent
         business judgment and the relative financial abilities and needs of the
         companies to participate;

2.       no commissions  or other  extraordinary  consideration  will be paid to
         such directors and officers; and

3.       business  opportunities  formulated  by or through  other  companies in
         which the  directors  and officers are involved  will not be offered to
         the Company  except on the same or better terms than the basis on which
         they are offered to third party participants.

See "Item 7. Major  Shareholders and Related Party  Transactions - Related Party
Transactions - Conflicts of Interest".  As of the date of this annual report all
material  conflicts of interests which have arisen since June 1, 2003, have been
described in "Item 7. Major Shareholders and Related Party Transactions."

If a conflict of  interest  arises at a meeting of the board of  directors,  any
director in a conflict  will  disclose  his  interest and abstain from voting on
such matter.  In determining  whether or not the Company will participate in any
project or  opportunity,  the board of  directors  will  primarily  consider the
degree of risk to which the Company may be exposed and its financial position at
that time.

THE COMPANY DOES NOT PAY DIVIDENDS ON ITS COMMON  SHARES;  THEREFORE,  INVESTORS
SEEKING DIVIDEND INCOME SHOULD NOT PURCHASE THE COMMON SHARES.

The Company has never  declared or paid cash  dividends on its common shares and
does  not  anticipate  doing so in the  foreseeable  future.  Additionally,  the
determination as to the declaration of dividends is within the discretion of the
Company's  Board of  Directors,  which may never  declare cash  dividends on the
Company's  common  stock.  Investors  cannot expect to receive a dividend on the
Company's common shares in the foreseeable future, if at all.


                                      -11-

<PAGE>



THE COMPANY'S CURRENT  CORPORATE  OPERATIONS ARE PERFORMED BY OTHER THAN COMPANY
PERSONNEL AND IF SUCH PERSONNEL ARE NOT AVAILABLE IN THE FUTURE, THE COMPANY MAY
INCUR SIGNIFICANT  EXPENSES TO FIND SUITABLE  REPLACEMENTS  AND/OR TO HIRE OTHER
PERSONNEL.

Corporate  accounting,  management and administration are provided,  in part, by
Chase Management Ltd. ("Chase"),  a company owned by Mr. Nick DeMare, a director
and the President,  Chief Executive  Officer and Chief Financial  Officer of the
Company. In the event the Company needs to employ additional personnel,  it will
need to  recruit  qualified  personnel  to staff  its  operations.  The  Company
believes that such personnel  currently are available at reasonable salaries and
wages in the  geographic  areas in which the Company  operates.  There can be no
assurance,  however,  that such  personnel  will be available in the future.  In
addition,  it cannot be  predicted  whether  the labour  staffing  at any of the
Company's  projects will be unionized,  which may result in  potentially  higher
operating costs.

THE  COMPANY'S  SHARES ARE  SUBJECT TO THE SEC'S PENNY  STOCK  RULES,  WHICH MAY
RESTRICT  THE  ABILITY  OF BROKERS TO SELL THE  COMPANY'S  COMMON  STOCK AND MAY
REDUCE THE SECONDARY MARKET FOR THE COMMON STOCK.

The SEC has adopted  rules that regulate  broker-dealer  practices in connection
with  transactions  in  "penny  stock".  Generally,   penny  stocks  are  equity
securities with a price of less than US $5.00 (other than securities  registered
on certain national securities exchanges or quoted on the NASDAQ system). If the
Company's  shares are traded for less than US $5.00 per share, as they currently
are,  the shares will be subject to the SEC's  penny stock rules  unless (1) the
Company's net tangible  assets exceed US $5,000,000  during the Company's  first
three years of continuous  operations or US $2,000,000 after the Company's first
three years of continuous operations; or (2) the Company has had average revenue
of at least US  $6,000,000  for the last  three  years.  The penny  stock  rules
require a  broker-dealer,  prior to a transaction in a penny stock not otherwise
exempt  from the  rules,  to deliver a  standardized  risk  disclosure  document
prescribed  by the SEC that  provides  information  about  penny  stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer  quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account  statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a  transaction  in a penny  stock not  otherwise  exempt from those  rules,  the
broker-dealer must make a special written  determination that the penny stock is
a suitable  investment  for the  purchaser and receive the  purchaser's  written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading  activity in the secondary  market for a stock that becomes
subject to the penny stock rules. Since the Company's shares are traded for less
than US $5.00 per  share,  the  Company's  common  stock is subject to the penny
stock rules. Therefore, the holders of the common stock may find it difficult to
sell the common  stock of the  Company.  These rules may restrict the ability of
brokers to sell the common  stock and may  reduce the  secondary  market for the
common stock. A limited  secondary  market may result in a decrease in the value
of the shares and/or a partial or total loss of an investor's investment.

THE COMPANY MAY BE DEEMED TO BE A "PASSIVE FOREIGN INVESTMENT  COMPANY" FOR U.S.
TAX PURPOSES WHICH COULD SUBJECT U.S. SHAREHOLDERS TO INCREASED TAX LIABILITY.

The  Company may be deemed to be a "Passive  Foreign  Investment  Company".  See
"Item 10.  Additional  Information  - Taxation."  As a result,  a United  States
holder  of the  Company's  common  shares  could be  subject  to  increased  tax
liability,  possibly  including  an  interest  charge,  upon  the  sale or other
disposition of the United States  holder's  common shares or upon the receipt of
"excess  distributions"  (defined to include  gain on the sale of stock)  unless
such holder made an election  either to (1) include in his or her taxable income
certain  undistributed amounts of the Company's income or (2) mark to market his
or her Company  common  shares at the end of each  taxable  year as set forth in
Section 1296 of the Code.

THIS ANNUAL REPORT CONTAINS STATEMENTS ABOUT FUTURE EVENTS AND RESULTS WHICH MAY
NOT BE ACCURATE.

Statements  contained in this annual  report that are not  historical  facts are
forward-looking statements that involve risks and uncertainties. Such statements
may not prove to be accurate as actual  results and future  events  could differ
materially from those anticipated in such statements.



                                      -12-

<PAGE>



THE COMPANY'S  OPERATIONS ARE NOT, AND MAY NOT BE, DIVERSIFIED AND, AS SUCH, THE
COMPANY MAY BE SUBJECT TO  FLUCTUATIONS IN THE BUSINESS OR INDUSTRY IN WHICH THE
COMPANY MAY OPERATE.

The Company's operations,  even if successful,  will in all likelihood result in
the  Company   engaging  in  a  business   combination   with  another   entity.
Consequently, the Company's activities may be limited to those engaged in by any
entity with which the Company  merges or acquires.  The  Company's  inability to
diversify  its  activities  into a number of areas may  subject  it to  economic
fluctuations within a particular  business or industry and, therefore,  increase
the risks associated with its operations.

IF THE COMPANY BECOMES SUBJECT TO REGULATION UNDER THE INVESTMENT COMPANY ACT OF
1940 THE COMPANY WILL INCUR  SIGNIFICANT  COSTS FOR  REGISTRATION AND COMPLIANCE
WITH THE INVESTMENT COMPANY ACT OF 1940.

Although the Company  will be subject to the  reporting  requirements  under the
Securities  Exchange  Act of 1934,  management  believes the Company will not be
subject to regulation under the Investment  Company Act of 1940 (the "Investment
Company Act"), insofar as it will not be engaged in the business of investing or
trading in securities.  In the event the Company engage in business combinations
which result in the Company holding passive investment  interests in a number of
entities,  the  Company  could be subject  to  regulation  under the  Investment
Company  Act.  In such event,  the  Company  would be required to register as an
investment  company and could be expected to incur significant  registration and
compliance costs. The Company has not obtained a formal  determination  from the
Securities and Exchange Commission as to its status under the Investment Company
Act and, consequently, violation of the Investment Company Act could subject the
Company to civil and criminal penalties and could cause it to cease operations.

IF THE COMPANY  ACQUIRES  ANOTHER  BUSINESS OR ASSETS,  THE  SHAREHOLDERS OF THE
COMPANY WILL EXPERIENCE DILUTION IN THEIR OWNERSHIP OF THE COMPANY AND THERE MAY
BE A CHANGE OF CONTROL IN THE COMPANY.

If the Company  engages in a business  combination or acquisition of assets,  in
all  likelihood,  such  a  transaction  would  result  in  the  Company  issuing
securities  to the owners of the  business or assets  acquired.  The issuance of
previously  authorized and unissued  common stock would result in a reduction in
the  percentage  of  shares  owned  by the  Company's  present  and  prospective
shareholders and may result in a change in control or management of the Company.

THE  COMPANY'S  MANAGEMENT  MAY RESIGN OR BE REPLACED AS A RESULT OF A CHANGE OF
CONTROL  OF THE  COMPANY  IN  CONNECTION  WITH  ANY  ACQUISITION  OF A  BUSINESS
OPPORTUNITY BY THE COMPANY.

A business  combination  involving  the issuance of the  Company's  common stock
will, in all likelihood, result in shareholders of a another company obtaining a
controlling  interest in the Company.  Any such business combination may require
the Company's  management and/or affiliates to sell or transfer all or a portion
of the  Company's  common  stock held by them and/or to resign as members of the
Company's  board of directors.  The  resulting  change in control of the Company
could  result in removal of one or more of the  Company's  present  officers and
directors and a corresponding reduction in or elimination of their participation
in our future affairs.

THE REQUIREMENT FOR AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY THE COMPANY FROM
ACQUIRING CERTAIN BUSINESS OPPORTUNITIES.

Management believes that any potential business opportunity must provide audited
financial  statements  for  review  for the  protection  of all  parties  to the
business combination.  One or more attractive business  opportunities may choose
to forego the  possibility of a business  combination  with the Company,  rather
than incur the expenses associated with preparing audited financial statements.

THE  COMPANY  IS  DEPENDENT  UPON  ITS  MANAGEMENT  AND  THE  LOSS OF ANY OF ITS
MANAGEMENT AND/OR IF THE COMPANY IS UNABLE TO RECRUIT ADDITIONAL  MANAGERS COULD
NEGATIVELY IMPACT THE COMPANY'S ABILITY TO CONTINUE ITS OPERATIONS.

The success of the  operations  and  activities of the Company is dependent to a
significant  extent on the efforts and  abilities of its key  officer,  Mr. Nick
DeMare,  a  director  and the  President,  Chief  Executive  Officer  and  Chief
Financial Officer of the Company.  The loss of services of Mr. DeMare could have
a material adverse effect on the Company.

                                      -13-

<PAGE>



The Company has not entered into employment  agreements with any of its officers
and is not  expected  to do so in the  foreseeable  future.  The Company has not
obtained  key-man  life  insurance  on any of its  officers  or  directors.  The
Company's ability to recruit and retain highly qualified management personnel is
critical to its success; if it is unable to do so this may materially affect the
Company's financial performance.

INVESTORS  IN THE  UNITED  STATES  MAY  NOT  BE  ABLE  TO  ENFORCE  THEIR  CIVIL
LIABILITIES AGAINST THE COMPANY OR ITS DIRECTORS AND OFFICERS.

It may be difficult to bring and enforce suits against the Company.  The Company
is a corporation domiciled in British Columbia.  None of the Company's directors
are residents of the United  States,  and all or a substantial  portion of their
assets  are  located  outside  of the  United  States.  As a  result,  it may be
difficult for U.S.  holders of the Company's  common shares to effect service of
process  on these  persons  within the  United  States or to enforce  judgements
obtained in the U.S. based on the civil liability provisions of the U.S. federal
securities laws against the Company or its officers and directors.  In addition,
a  shareholder  should  not assume  that the courts of Canada (i) would  enforce
judgments of U.S. courts  obtained in actions against the Company,  its officers
or directors  predicated upon the civil liability provisions of the U.S. federal
securities  laws or other laws of the United States,  or (ii) would enforce,  in
original  actions,  liabilities  against the Company,  its officers or directors
predicated  upon the U.S.  federal  securities  laws or other laws of the United
States.

However, U.S. laws would generally be enforced by a Canadian court provided that
those laws are not contrary to Canadian  public  policy,  are not foreign  penal
laws or laws that deal with  taxation  or the  taking of  property  by a foreign
government  and provided that they are in compliance  with  applicable  Canadian
legislation regarding the limitation of actions.  Also, a judgment obtained in a
U.S.  court would  generally  be  recognized  by a Canadian  court  except,  for
example:

         a)       where the U.S.  court where the  judgment  was rendered had no
                  jurisdiction according to applicable Canadian law;

         b)       the judgment was subject to ordinary remedy (appeal,  judicial
                  review and any other  judicial  proceeding  which  renders the
                  judgment not final,  conclusive or enforceable  under the laws
                  of  the  applicable   state)  or  not  final,   conclusive  or
                  enforceable under the laws of the applicable state;

         c)       the judgment  was obtained by fraud or in any manner  contrary
                  to natural justice or rendered in contravention of fundamental
                  principles of procedure;

         d)       a dispute between the same parties,  based on the same subject
                  matter  has given rise to a  judgment  rendered  in a Canadian
                  court or has been decided in a third  country and the judgment
                  meets the necessary  conditions for  recognition in a Canadian
                  court;

         e)       the outcome of the judgment of the U.S. court was inconsistent
                  with Canadian public policy;

         f)       the judgment enforces  obligations  arising from foreign penal
                  laws or laws that deal with taxation or the taking of property
                  by a foreign government; or

         g)       there has not been  compliance  with  applicable  Canadian law
                  dealing with the limitation of actions.


ITEM 4.  INFORMATION ON THE COMPANY.
--------------------------------------------------------------------------------


HISTORY AND DEVELOPMENT OF THE COMPANY

NAME AND INCORPORATION

The Company was incorporated under the British Columbia Company Act ("BC Company
Act") on December 10, 1999 under the name "Buck  Ventures Ltd." On May 10, 2000,
the Company changed its name to "QDM Ventures Ltd." On

                                      -14-

<PAGE>



September  25,  2001,  the Company  changed its name from QDM  Ventures  Ltd. to
"California  Exploration Ltd." On June 3, 2004 the Company changed its name from
California Exploration Ltd. to "Baradero Resources Limited".

With the introduction of the Capital Pool Company Policy in November,  1999 (the
"CPC  Policy"),  the TSXV  created a new  category of listing,  the capital pool
company,  pursuant to which a company  formed by  individuals  acceptable to the
TSXV could complete an initial public offering  earlier in its development  than
may be  possible  with a regular  initial  public  offering.  Proceeds  from the
initial  public  offering  must  be  used  primarily  to  investigate   business
opportunities  for  acquisition  by  the  capital  pool  company.  Only  certain
acquisitions  can be made by the capital pool company to satisfy the CPC Policy.
Such an acquisition is referred to as a qualifying  transaction (the "Qualifying
Transaction").

The  Company  was  initially  formed to operate as a capital  pool  company,  in
accordance  with the CPC  Policy.  During the  period  ended May 31,  2000,  the
Company  completed its initial  financing and sold 2,200,001  common shares at a
price of $0.10 per share for proceeds of $220,000.  During  December  2000,  the
Company  completed an initial  public  offering  (the "IPO") and sold  1,000,000
common shares at a price of $0.20 per share, for gross proceeds of $200,000. The
proceeds from these financings were used to investigate business opportunities.

Pursuant  to an  Agreement  and Plan of Merger  dated July 3, 2001,  between the
Company, CalEx and QDM Acquisition Corporation (a wholly-owned subsidiary of the
Company formed for the purpose of merging into CalEx), the shareholders of CalEx
acquired control of the Company in a reverse acquisition completed September 27,
2001. CalEx is an oil and gas company  incorporated in the State of Nevada.  See
"Item  5.  Operating  and  Financial   Review  and  Prospects  -  Overview."  In
conjunction   with  the  merger  the  Company   changed  its  domicile   through
continuation  from British  Columbia to the Yukon  Territory  under the BUSINESS
CORPORATIONS ACT (Yukon) (the "YBCA").

The acquisition  constituted a Qualifying  Transaction  under the CPC Policy and
qualified  the  Company  for a Tier 2  listing.  Pursuant  to the  terms  of the
Agreement and Plan of Merger,  each  shareholder  of CalEx received one share of
the  Company's  common  stock  for  each  share  of  CalEx  common  stock  held.
Additionally,  all of the  issued  and  outstanding  shares  of QDM  Acquisition
Corporation  (which  were held by the  Company)  were  converted  into shares of
CalEx. As a result, CalEx became a wholly-owned subsidiary of the Company.

From its  incorporation  on October  6,  1999,  CalEx  principally  operated  in
California where it acquired,  explored and developed  petroleum and natural gas
prospects in California.  It had also acquired  petroleum and natural gas leases
in Texas. As a prospect  generator,  CalEx obtained financial support from joint
venture partners. In addition, CalEx raised equity financing through the sale of
its common stock.

On June 3, 2004, the Company completed a consolidation of its share capital on a
one new for four old basis.

On March 29,  2004,  the  British  Columbia  legislature  enacted  the BCBCA and
repealed  the BC Company  Act. At the  Company's  annual and special  meeting of
shareholders  held on  November  18,  2004,  the  Company  received  shareholder
approval to continue its corporate  jurisdiction into British Columbia under the
BCBCA.  See "Item 10.  Additional  Information  -  Memorandum  and  Articles  of
Association".  Effective  November  23, 2004,  the Company  changed its domicile
through  continuation  from the Yukon  Territory to British  Columbia  under the
BCBCA.

The Company's  registered and principal business office is located at Suite 1305
- 1090 West Georgia Street,  Vancouver,  British Columbia,  V6E 3V7. The contact
person is Nick DeMare.  The telephone number is (604) 685-9316 and the facsimile
number is (604)  683-1585.  The Company does not have a registered  agent in the
United States.

The  Company's  common  shares  were  listed on the TSXV on  October 1, 2001 and
currently trade under the symbol "BRH".

Effective  January 27, 2002, the Company's common stock was approved for trading
on the  Over-the-Counter  Bulletin Board (the "OTC Bulletin  Board") operated by
the National  Association  of Securities  Dealers.  The Company's  common shares
currently trade on the OTC Bulletin Board under the symbol "BRHAF".



                                      -15-

<PAGE>



BUSINESS OVERVIEW

The Company's  original goal was to identify,  acquire,  explore and develop oil
and natural gas reserves in the Western United States,  principally in the State
of  California.  The  Company's  business plan  contemplated  that joint venture
partners would reimburse the Company for 100% of its prospect costs to acquire a
100% capital  interest (75% working  interest) in the drilling of the first well
on each prospect  resulting in the Company retaining up to a 25% interest in the
prospect with the remaining 75% interest in the prospect  being divided  amongst
the joint venture partners. Upon completion of the first well on a prospect, the
Company  would be  required  to fund its pro rata share of  further  development
costs.

In conjunction with the Qualifying  Transaction,  the Company proceeded with the
first stage of the exploration and  development  program  prescribed for its oil
and gas interests,  which consisted of the drilling of eight wells. Of the eight
wells,  six were  initially  abandoned  as dry holes,  one, the Suisun #25 well,
required  side-tracking to reach the target zone and one well was completed as a
producing well although it was shut-in shortly after commencement of production.
This well was subsequently  abandoned.  In addition,  the joint venture partners
informed the Company that they  terminated  their joint venture  agreements  and
agreed to pay  maintenance  costs with respect to the prospect  they retained an
interest  in. It was  therefore  determined  by  management  of the  Company  to
consider other  opportunities in the oil and gas industry.  Throughout the first
half of calendar 2002, the Company worked towards finding  partners to drill the
side-track well to the Suisun #25 well.

In August 2002, the Company commenced the side-track of the Suisun #25 well. The
side-track was completed in September 2002. Case hole logs and perforations were
accomplished  to test several  zones within the shallow  objective of the Suisun
Sands.  Gas was flowed to the surface at very low  pressures.  It was determined
that there was  insignificant  pressure and volume to be economic.  The well was
then plugged and abandoned.

In an attempt to diversify the Company's operations,  management began reviewing
other  business  opportunities  during late calendar 2001. In December 2001, the
Company  identified  and began  negotiations  with  Optimal  Power  Systems Ltd.
("OPS"), a private software  development company  incorporated under the laws of
Alberta.  On December 21, 2001,  the Company  requested a halt in the trading of
its common  shares.  On January 14, 2002,  the Company signed a letter of intent
whereby it agreed,  subject to shareholder and regulatory approvals,  to acquire
100% of the issued and outstanding  common shares of OPS. Under the terms of the
letter of intent, the Company provided OPS bridge loans totaling  $150,000.  OPS
was unable to complete a  restructuring  of their business plan which would have
enabled the Company to proceed  with the  acquisition.  On January 7, 2003,  the
Company  terminated  the  agreement  under the  letter of intent  and  requested
repayment of the bridge loans. Although the principals of OPS have pledged their
holdings in OPS as  security,  it is not known  whether the Company will recover
the  amount,  if  any,  of  the  bridge  loans.  Accordingly,  the  Company  has
written-off the full amount of the bridge loans.

In December 2002, the Company acquired a minor interest in producing oil and gas
leases in Texas. See "Item 4. Information on the Company - Principal  Properties
- West Ranch Field,  Texas."  During the 2003 fiscal year the Company  commenced
principal  operations  from the Texas  interest  and was no longer  considered a
development  stage company.  In March 2004, the Company sold its interest in the
oil and gas leases.  As of the date of this annual  report the Company  does not
hold any  interest in oil and gas leases.  It is currently  reviewing  potential
asset  and  business  acquisitions  which  may or may  not be in the oil and gas
industry.

Management  anticipates  that the  Company  may be able to  participate  in only
limited  potential  business  ventures.  The Company's  lack of  diversification
should be considered a substantial risk to its  shareholders  because it may not
permit the Company to offset  potential  losses from one venture  against  gains
from another.

Management  anticipates  that the search for an alternate  business  opportunity
will  be  complex  and  extremely   risky.   Potentially,   available   business
opportunities  may occur in many  different  industries and at various stages of
development,  all of which will make the task of comparative  investigation  and
analysis of such business opportunities extremely difficult and complex.

The Company and the owner(s) of any business opportunities which the Company may
acquire will incur significant legal and accounting costs in connection with the
Company's acquisition of a business opportunity, including the costs

                                      -16-

<PAGE>



of preparing annual reports,  quarterly reports,  other filings under applicable
securities laws and regulations, agreements and related documents.

The Company's  officers and directors  will analyze new business  opportunities.
Management  intends  to  concentrate  on  identifying   preliminary  prospective
business  opportunities  which may be brought to the Company's attention through
present  affiliations and relationships of the Company's officers and directors,
or  by  the   Company's   shareholders.   In  analyzing   prospective   business
opportunities, management intends to consider such matters as:

            -     available technical, financial and managerial resources;
            -     working capital and other financial requirements;
            -     history of operations, if any;
            -     prospects  for the  future,  and the  nature  of  present  and
                  expected competition;
            -     quality and  experience  of management  services  which may be
                  available and the depth of that management;
            -     potential for further research, development, or exploration;
            -     potential for growth, expansion and profit; and
            -     perceived public recognition of name identification,  products
                  and services.

The Company's  officers and directors  expect to meet personally with management
and key personnel of any business  opportunity the Company intends to acquire as
part of their "due diligence" investigation. To the extent possible, the Company
intends to utilize written reports and personal  investigations  to evaluate the
above factors.

The Company will rely upon the efforts of its officers, directors and, to a much
lesser extent,  the efforts of its  shareholders,  in  implementing  its plan of
operation.  The  Company  does not  anticipate  hiring  outside  consultants  or
advisors, except for its legal counsel and accountants.  However, if the Company
does retain an outside consultant or advisor,  any cash fee earned by such party
will most likely be paid by the prospective  merger/acquisition candidate. As of
the date of this report,  the Company does not have any  contracts or agreements
with any outside consultants and none are contemplated.

ACQUISITION STRUCTURE

In implementing a structure for a particular business  acquisition,  the Company
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing  agreement with another  corporation  or entity.  The Company may also
acquire  stock or assets  of an  existing  business.  On the  consummation  of a
transaction,   it  is  probable  that  the  Company's  present   management  and
shareholders  will no longer be in  control of the  Company.  In  addition,  the
Company's  directors may, as part of the terms of the  acquisition  transaction,
resign  and be  replaced  by new  directors  without  a  vote  of the  Company's
shareholders.

Management  does not intend to consider an  opportunity  where the entity cannot
provide independent  audited financial  statements within a reasonable period of
time after  closing  of the  proposed  transaction.  If such  audited  financial
statements are not available at closing, or within a reasonable time thereafter,
the  closing  documents  will  provide  that the  proposed  transaction  will be
voidable  at  the  Company's  discretion.  If the  transaction  is  voided,  the
agreement will also contain a provision  providing for the acquisition entity to
reimburse the Company for all costs associated with the proposed transaction.

INVESTMENT COMPANY ACT OF 1940

Although the Company is subject to regulation  under the Securities Act of 1933,
and the Securities  Exchange Act of 1934,  management  believes the Company will
not be subject to regulation  under the  Investment  Company Act of 1940. In the
event the Company engages in a business combination which results in the Company
holding a passive investment interest in a number of entities, the Company could
be subject to regulation  under the Investment  Company Act. In such event,  the
Company  would be required to  register  as an  investment  company and could be
expected to incur significant registration and compliance costs. The Company has
obtained no formal  determination from the Securities and Exchange Commission as
to its status under the Investment Company Act. Consequently, a violation of the
Investment Company Act could subject the Company to civil and criminal penalties
and could cause the Company to cease operations.

                                      -17-

<PAGE>



INVESTMENT ADVISERS ACT OF 1940

Under the  Investment  Advisers Act of 1940, an  "investment  adviser" means any
person who, for compensation, engages in the business of advising others, either
directly or through  publications or writings,  as to the value of securities or
as to the advisability of investing in, purchasing,  or selling  securities,  or
who, for compensation and as part of a regular  business,  issues or promulgates
analyses or reports concerning securities.  The Company will only seek to locate
a suitable merger or acquisition candidate, and does not intend to engage in the
business of advising others in investment matters for a fee or otherwise.

DISPOSITIONS

As a prospect  generator,  the  Company's  business  was to acquire  oil and gas
prospects and farm-out its properties with industry joint venture  partners.  No
dispositions or farm-outs  occurred during fiscal 2002.  During fiscal 2003, the
Company  recorded an impairment  charge of $574,508 to reflect its  unsuccessful
drilling  activities  and related  acquisition  costs of the  abandonment of the
regional California  prospects and the Michigan  exploratory well. During fiscal
2003,  the Company  also  wrote-off  $169,322 in  connection  with the letter of
intent and bridge loan with OPS.  During  fiscal  2004,  the Company sold its 3%
working  interest  in the West  Ranch  Field.  See "Item 4.  Information  on the
Company - Principal Properties - West Ranch Field, Texas."

EXPLORATION EXPENDITURES

During fiscal 2004, 2003 and 2002, the Company  incurred  $60,908,  $246,094 and
$451,045,  respectively,  on the  acquisition  and  exploration of its petroleum
interests.

2005 EXPLORATION BUDGET

As of the date of this annual  report,  the  Company  does not have any plans to
undertake any exploration activities.

SALES AND REVENUE DISTRIBUTION

Commencing in the 2003 fiscal year,  the Company's  share of petroleum,  natural
gas and  natural gas  liquids  produced  from its wells was sold to a variety of
purchasers at the wellhead in the United States. All of its sales were conducted
with unaffiliated customers. These purchasers provided a ready market for all of
the Company's production and paid the local market price, which fluctuated based
upon prevailing market conditions. Due to the number of purchasers in each area,
the loss of one or a number of purchasers did not pose a significant risk to the
continuity  of the  Company's  operations.  In March 2004,  the Company sold its
remaining oil and gas leases.

Total  revenues,  interest and other income  reported for fiscal 2004,  2003 and
2002, were as follows:

<TABLE>
<CAPTION>

                                                                 YEARS ENDED MAY 31,
                                                   --------------------------------------------
                                                       2004            2003            2002
<S>                                               <C>             <C>             <C>

Petroleum and Natural Gas Sales
     - United States                               $     98,904    $     22,064    $          -
                                                   ------------    ------------    ------------
Interest and Other Income
     - United States                                         91          10,902         108,900
     - Canada                                             4,008             688           4,763
                                                   ------------    ------------    ------------
                                                          4,099          11,590         113,663
                                                   ------------    ------------    ------------
Total Revenue, Interest and Other Income          $     103,003    $     33,654    $    113,663
                                                   ============    ============    ============

</TABLE>


                                      -18-

<PAGE>



PRINCIPAL PROPERTIES

WEST RANCH FIELD, TEXAS

On December 18,  2002,  the Company  entered into a purchase and sale  agreement
with PNP Petroleum Inc.  ("PNP"),  a private  corporation at arm's-length to the
Company,  whereby the Company acquired a 3% net working interest  (2.360825% net
revenue  interest)  in certain oil and gas leases known as the West Ranch Field.
To acquire its  interest  the Company  funded US $43,500 of initial  development
costs.

The West Ranch Field is located approximately 25 miles southeast of Victoria, in
Jackson  County,  Texas.  The field was  discovered in 1938 by Mobil Oil and has
produced  in  excess  of 300 BCF gas and 300 MMBO from  hundreds  of wells.  The
geology of the West Ranch Field  consists of typical  Gulf Coast sand  sequences
with numerous stacked sand pays of both Miocene and Frio age rocks. Over 25 main
producing  sands have been  identified  within the West Ranch  Field  production
limits  with the Greta,  Glasscock,  41-A,  98-A and Ward  sands  being the most
prolific  producers.  These  sands  are  historically  high  permeability,  high
porosity sands capable of producing high fluid rates.

In the early 1980's the previous  operator  became active in the region  through
acquisition  of a few old  producing  well  bores.  After  reworking  geological
structure  and net sand maps,  the  operator  was able to extend  the  southwest
production  limits of the  field by the  drilling  of  infield  wells  targeting
structural highs. PNP purchased the West Ranch Field and took over its operation
on January 1, 2002.  The  property  includes  35 wells with only a small  number
currently  producing on gas lift. After a detailed  engineering  analysis of the
property, the operator developed a plan, which focused on the re-establishing of
shut-in wells to active status by adding  compression,  salt water  handling and
disposal.  Effective March 1, 2004, the Company sold its 3% net working interest
in the West Ranch  Field to Westport  Petroleum,  Inc.  ("Westport"),  a private
corporation at arms-length to the Company, for $89,814 (US $67,000) cash.

OIL AND GAS RESERVES

The following  table sets forth  information  regrading  the Company's  share of
estimated  proven oil and gas reserve  quantities,  reserve value and discounted
future net revenues as of May 31, 2003. The reserve  related  information at May
31, 2003 was determined through independent engineering evaluations completed by
Bommer Engineering Co. ("Bommer"), an independent petroleum consulting firm. The
Company does not have any long-term  supply or similar  agreements  with foreign
governments or authorities in which the Company acts as producer.  As of May 31,
2004,  the  Company  did not have any  interests  in oil  and/or  gas  leases or
reserves.

There are numerous  uncertainties  inherent in  estimating  quantities of proved
reserves and  projecting  future rates of production  and timing of  development
expenditures.  The following reserve information  represents  estimates only and
should not be construed as being exact:

<TABLE>
<CAPTION>

                                                                                                       PRESENT VALUE OF
                                                                                                       ESTIMATED FUTURE
                                                                                      ESTIMATED          NET REVENUES
                                                                         GAS          FUTURE NET     BEFORE INCOME TAXES
                                              GAS          OIL        EQUIVALENT     REVENUES (2)     DISCOUNTED AT 10%
                                            (MMCF)        (MBO)       (MMCFE)(1)        ($000)              ($000)
<S>                                        <C>          <C>           <C>            <C>                  <C>

May 31, 2003

Proved oil and gas reserves                  21.75        5.67          55.77           95.70                60.0
                                             =====        ====          =====           =====                ====
</TABLE>

(1)      Condensates  and natural gas liquids are  converted to MCFE at the rate
         of six gallons of liquids per MCF of natural gas. These conversions are
         based upon the  approximate  energy content of natural gas  condensates
         and liquids.
(2)      Estimated future net revenue represents  estimated future gross revenue
         to be  generated  from  the  production  of  proved  reserves,  net  of
         estimated  production and future  development  costs,  using prices and
         costs in effect as of the date of the  estimates.  The amounts shown do
         not give effect to non-property  related expenses,  such as general and
         administrative  expenses, debt service and future income tax expense or
         depreciation, depletion and amortization.



                                      -19-

<PAGE>



ACREAGE

As of the date of this annual report, the Company does not have any interests in
oil and/or gas  properties  or  leases.  As of May 31,  2003,  the  Company  had
interests in the West Ranch Field, Texas, as follows:

                                                    GROSS ACRES      NET ACRES

Proved developed producing                                  814           19.21
Proved developed non-producing                              320            7.55
                                                   ------------    ------------
                                                          1,134           26.76
                                                   ============    ============

PRODUCTIVE OIL AND GAS WELLS

As of the date of this annual report, the Company does not hold any interests in
any oil and/or gas wells.  As of May 31,  2003,  the  Company had  interests  in
fifteen  producing  wells  (0.354 net  wells),  six proved  non-producing  wells
(0.141648  net wells) and 18 shut-in  wells  (0.425 net wells) at the West Ranch
Field. The Company commenced  receiving  revenues in March 2003. During the year
ended May 31, 2003,  the West Ranch Field  produced  14,063 barrels (332 barrels
net to the Company) of oil and 33,929 mcfs (801 mcfs net to the Company) of gas.

PROPOSED EXPLORATION AND DEVELOPMENT PROGRAM

With the sale of the Company's  interest in the West Ranch Field, the Company no
longer holds any oil and gas properties and there are no exploration budgets for
the 2005 fiscal year.

OTHER ASSETS

As at the date of this annual  report,  the Company  does not hold any  material
assets.

EMPLOYEES

As of the date of this annual report the Company has no full-time employees. The
Company's  management  functions  are  provided  by private  companies  owned by
officers  and  directors  of the Company.  See "Item 7. Major  Shareholders  and
Related Party  Transactions  - Related  Party  Transactions."  In addition,  the
Company employs a number of consultants to perform specific functions,  on an as
needed basis.

ORGANIZATIONAL STRUCTURE

Effective May 31, 2004, the Company wrote-off its investment in its wholly-owned
subsidiary,   California  Exploration  Inc.  ("CalEx"),  which  was  engaged  in
petroleum and natural gas operations in the United States.

As of the date of this annual report the Company does not have any subsidiaries.

PRINCIPAL OFFICES

The  Company's  corporate  office is located at Suite  #1305,  1090 West Georgia
Street,  Vancouver,  British  Columbia,  Canada,  V6E 3V7. The corporate  office
facility  is  provided  on a  month-to-month  basis  by  Chase  Management  Ltd.
("Chase")  as part of its  agreement  with  the  Company.  See  "Item  7.  Major
Shareholders and Related Party Transactions - Related Party Transactions."


ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
--------------------------------------------------------------------------------


The  following  discussion  of the results of  operations of the Company for the
fiscal years ended May 31, 2004,  2003,  and 2002 should be read in  conjunction
with the  consolidated  financial  statements  of the Company and related  notes
included therein.


                                      -20-

<PAGE>



The Company's  consolidated financial statements are prepared in accordance with
Canadian GAAP, the application of which, in the case of the Company, conforms in
all  material  respects  for the periods  presented  with US GAAP except for the
differences  referred to in Note 11 of the consolidated  financial statements of
the Company  included  herein.  The noon rate of exchange on November  24, 2004,
reported  by the  United  States  Federal  Reserve  Bank  of New  York,  for the
conversion  of  Canadian  dollars  into  United  States  dollars was CDN $1.1813
(US$0.8465 = CDN$1.00).  The effects of inflation and price changes have not had
a material impact on the Company's  income or net sales revenues during the past
three years.

OVERVIEW

On  September  27,  2001,  the  Company  completed  a  reorganization  with  the
shareholders of CalEx, whereby the Company issued 4,346,084 common shares of its
share capital for 100% of the issued and outstanding share capital of CalEx.

Since this  transaction  resulted in the former  shareholders of CalEx acquiring
control of the  Company,  the  reorganization  has been  treated for  accounting
purposes as a reverse takeover. In accounting for this transaction:

         i)       CalEx is deemed to be the  purchaser  and parent  company  for
                  accounting purposes.  Accordingly, its net assets are included
                  in the  consolidated  balance sheets at their  historical book
                  value;

         ii)      control of the net  assets and  business  of the  Company  was
                  acquired  effective  September 27, 2001. The  transaction  has
                  been accounted for as a purchase of the assets and liabilities
                  of the Company by CalEx,  with the assets and  liabilities  of
                  the Company recorded at their fair values; and

         iii)     the consolidated statements of operations and deficit and cash
                  flow for the year ended May 31, 2002 include  CalEx's  results
                  of  operations  and cash flow for the year ended May 31,  2002
                  and the Company's results of operations and cash flow from the
                  effective date of the business  acquisition.  The  comparative
                  figures for the years ended May 31, 2001 and 2000 are those of
                  CalEx.

In January  2002,  the Company  entered  into an  agreement  to acquire OPS. The
proposed  acquisition  was  terminated  in January  2003. As of the date of this
annual report, the Company does not hold any significant assets. The Company is,
however,  actively reviewing other potential business or asset acquisitions.  As
of the date of this annual report,  the Company has not identified any potential
acquisitions. The Company may consider potential acquisitions not related to the
oil and gas industry.  In the event that a potential  acquisition is not engaged
in the oil and gas  industry,  the Company will probably be required to seek and
obtain  Company  shareholder  and  regulatory  approvals in order to complete an
acquisition. If the Company proceeds with an acquisition, significant additional
financing  may be  required,  and  there is no  assurance  that  funds  would be
available on terms acceptable to the Company or at all.

The Company derives  interest  income on its bank deposits and other  short-term
deposits,  which  depend  on the  Company's  ability  to  raise  funds.  Of most
significance  would be further  cash  received  from  issuance of shares to fund
ongoing operations.

During  fiscal 2004,  the Company  changed its  reporting  currency  from United
States  dollars to Canadian  dollars to reflect the Company's  activities at the
end of the 2004 fiscal year.  All assets and  liabilities  are  translated  into
Canadian  dollars at the rate of exchange  prevailing at the balance sheet date.
Revenues and expenses are translated at the average rate for the year.

RESULTS OF OPERATIONS

YEAR ENDED MAY 31, 2004 COMPARED TO YEAR ENDED MAY 31, 2003

With the sale in March 2004 of the Company's  working interest in the West Ranch
Field,  it no longer has any significant  operations and is currently  reviewing
potential  business  opportunities or asset  acquisitions which may, or may not,
remain in the natural gas and petroleum industry.


                                      -21-

<PAGE>



During the 2004 fiscal year the Company reported a net income of $179,158 ($0.09
per share), an increase of $1,251,639 compared to a loss of $1,072,481 in fiscal
2003.

Oil and gas sales for 2004 was  $98,904,  compared to $22,064 in 2003.  Revenues
from oil and gas sales in fiscal 2003 were for five months, from January 2003 to
May 2003, and in fiscal 2004, were generated for a period of seven months,  from
June 2003 to  February  2004.  Effective  March 1, 2004,  the  Company  sold its
interest in the West Ranch  Field.  Production  costs in fiscal 2003 were $4,870
compared to $28,741 in fiscal 2004.

During  fiscal  2003 the  Company  recorded an  impairment  charge of  $574,508,
reflecting its share of unsuccessful drilling activities and related acquisition
costs on  abandonment  of the  regional  California  prospects  and the Michigan
exploratory  well.  During fiscal 2004 the Company recorded a $13,996  depletion
charge on the West Ranch  Field oil and gas leases and an  impairment  charge of
$30,191 for the Company's share of drilling costs on the High Noon Prospect.

General and administration  costs decreased by $19,290,  from $99,139 in 2003 to
$79,849 in 2004. The decrease in costs were as a result of the Company's reduced
operations.  The  Bakersfield  office was closed and corporate  activities  were
reduced during fiscal 2003. The Company also wrote-off $63,798 in fiscal 2003 on
the  remaining  capital  assets as a result of the  closure  of the  Bakersfield
office.

During fiscal 2004 the Company  recorded a gain of $204,770 for  liabilities  of
CalEx which amounts were previously  recognized on the consolidation of CalEx in
fiscal 2003.  With the  abandonment of CalEx,  the Company no longer  recognized
these liabilities. The Company also negotiated a recovery of old receivables due
from Halo Resources Ltd.  ("Halo") in which it received  15,000 common shares of
Halo and $12,912  cash,  for a total  recovery  of  $24,162.  In fiscal 2003 the
Company wrote-off $138,319 of receivables from Halo.

During fiscal 2003 the Company wrote-off  $169,322 relating to a $150,000 bridge
loan and related costs due from OPS, a private  company in which the Company had
proposed to acquire.

YEAR ENDED MAY 31, 2003 COMPARED TO YEAR ENDED MAY 31, 2002

During the 2003 fiscal year,  the Company  reported a loss of $1,072,481  ($0.56
per share),  compared to a loss of $640,944 ($0.39 per share) for the year ended
May 31, 2002.  The increase in loss reported in fiscal 2003,  was  attributed to
the unsuccessful  drilling results at Regional California and the termination of
the proposed acquisition of OPS.

In January  2002,  the Company had entered into an agreement to acquire OPS. The
Company  provided OPS with a $150,000 bridge loan and incurred  $20,196 of costs
associated with the proposed acquisition. The agreement was terminated in fiscal
2003 and the Company wrote-off the amounts as uncollectible.

During  fiscal  2003,  the Company  recorded an  impairment  charge of $574,508,
reflecting the unsuccessful  drilling  results at Regional  California and other
wells.  An  impairment  charge  of  $61,702  was  recorded  in fiscal  2002.  In
connection  with its  activities  as the  operator  of the  Regional  California
properties,  the Company  also had  recorded  $138,319  due from Halo, a related
party, as receivable on account of unpaid joint interest billings. During fiscal
2003, the Company wrote-off the amount as uncollectible.

With the unsuccessful results in fiscal 2003, the Company implemented procedures
to reduce its general  and  administration  costs.  The  Bakersfield  office was
closed and corporate  activities reduced or eliminated  wherever possible.  As a
result general and administration  expenses decreased by $279,140, from $378,279
in fiscal 2002 to $99,139 in fiscal 2003. The Company  wrote-off  $63,798 on the
remaining capital assets as a result of the closure of the Bakersfield office.

During  the last  quarter  of  fiscal  2003,  the  Company  commenced  receiving
production revenue from its interest in the West Ranch Field. During this period
the West Ranch  Field  generated  $22,064  oil and gas  revenue,  comprising  of
$14,763 (332  barrels) of oil and $7,301 (801 mcf) of gas.  Production  costs of
$4,870 was incurred and depletion of $5,593 was recorded.


                                      -22-

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

As at May 31,  2004,  the  Company  had an  accumulated  deficit of  $1,756,802,
working capital of $96,135 and advances  payable of $127,548.  The advances have
been provided by Nick DeMare, the President of the Company,  for working capital
and are non-interest  bearing and are not due for repayment until June 30, 2005.
The Company also held  marketable  securities with a quoted market value, at May
31, 2004, of $115,650.  The Company does not have sufficient  working capital to
satisfy it ongoing overhead for the next 12 months,  and will require additional
advances  or equity  financing  to pursue any  business  opportunities  and meet
ongoing  corporate  overhead.  There are no assurances  that the Company will be
able to identify  and  complete  acquisitions  or obtain  sufficient  additional
resources.

The Company also anticipates spending  approximately  $80,000 during fiscal 2005
for administrative and other operating expenditures.

The Company  does not have any loans or bank debt and there are no  restrictions
on the use of its cash resources.

There are no material commitments for capital expenditures during fiscal 2005.

The Company holds its cash and cash equivalents mainly in Canadian funds.

TREND INFORMATION

As of the date of this annual report the Company  essentially has no operations,
does not hold any interests in oil and gas leases and is  continuing  its review
of other business and asset acquisitions, which may or may not be in the oil and
gas industry. In particular, if the Company acquires another business or assets,
the Company's  operations  may change  significantly  from those in which it has
historically  engaged.  Therefore,  the  discussion of the Company's  historical
operations  contained  in  this  annual  report  may  not  provide  an  adequate
representation   of  the  Company's  future   performance  and  results  of  its
operations.

RESEARCH AND DEVELOPMENT

During  fiscal 2004,  the Company  incurred  $30,717 on rework costs on the West
Ranch Field  Prospect  prior to its sale and $30,191  for  participation  in the
drilling of an  unsuccessful  well in Alberta,  Canada.  During  fiscal 2003 and
2003,   the  Company   incurred   $246,094  and  $451,045,   respectively,   for
participation in Regional California.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any material off balance sheet  arrangements that have
or are  reasonably  likely to have a current or future  effect on the  Company's
financial  condition,  changes in  financial  condition,  revenues or  expenses,
results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS

The Company does not have any contractual obligations.


ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
--------------------------------------------------------------------------------


DIRECTORS AND SENIOR MANAGEMENT

The names,  positions held with the Company and terms of office of each director
and officer of the Company as of the date of this annual report, are as follows:


                                      -23-

<PAGE>



                                                   TERM OF OFFICE
NAME                  POSITION WITH THE COMPANY    (FOR EACH OFFICE HELD)
----                  -------------------------    ----------------------

Nick DeMare           President                    September 24, 2003 to present
                      Chief Executive Officer      September 24, 2003 to present
                      Chief Financial Officer      September 24, 2003 to present
                      Director                     October 27, 2002 to present

Andrew Carter         Director                     September 24, 2003 to present

Harvey Lim            Director                     September 24, 2003 to present

David Henstridge      Corporate Secretary          November 18, 2004 to present


Each officer's and director's  term of office shall expire at the Company's next
annual general  meeting.  The Company does not have an executive  committee or a
compensation  committee.  The  Company's  audit  committee  is  responsible  for
reviewing the  Company's  financial  statements  before they are approved by the
Company's directors.

There are no family relationships between any directors or executive officers of
the Company. To the best of the Company's  knowledge,  there are no arrangements
or understandings  with major  shareholders,  customers,  suppliers,  or others,
pursuant to which any of the Company's  officers or directors was selected as an
officer or director of the Company.

Set forth  below are  brief  descriptions  of  recent  employment  and  business
experience of the Company's officers and directors.

Nick DeMare (Age 50),  Director,  President,  Chief Executive  Officer and Chief
                       Financial Officer

Mr.  DeMare holds a Bachelor of Commerce  degree from the  University of British
Columbia  and is a  member  in  good  standing  of the  Institute  of  Chartered
Accountants  of British  Columbia.  Since  May,  1991,  Mr.  DeMare has been the
President of Chase Management Ltd. ("Chase"), a private company which provides a
broad range of administrative,  management and financial services to private and
public companies engaged in mineral exploration and development, gold and silver
production,  oil and gas  exploration  and production and venture  capital.  Mr.
DeMare  indirectly owns 100% of Chase. Mr. DeMare currently serves as an officer
and  director  of  other  public  reporting   companies.   See  "Item  7.  Major
Shareholders  and Related  Party  Transactions  - Related Party  Transactions  -
Conflicts of Interest."

Andrew Carter (Age 57), Director

Mr. Carter  obtained a  certificate  in  accounting  from the Principal  Midland
College of TAFE (Western  Australia) in 1987.  Since 1992, Mr. Carter has been a
member of the  Australian  Institute  of Credit  Management.  Mr.  Carter has an
extensive background,  initially in the mining industry and then as a commercial
financial  executive.  During the 1970's,  Mr. Carter was involved in the mining
industry, where he managed exploration crews in the Leonora and Kimberly regions
in Western  Australia.  He subsequently  changed  professions  and, in 1988, was
appointed Chief  Executive of RAC Finance  Limited,  the largest  non-bank owned
commercial  financier in Western  Australia.  During this time, he was appointed
Chairman and Director of Australian  Finance  Conference Limited and represented
the industry as a panel member of the Commercial Tribunal for Western Australia.
In 1999, Mr. Carter relocated to Vancouver where he has been providing  services
as an independent corporate consultant. Mr. Carter is currently the President of
Tinka  Resources  Ltd., a public  company  trading on the TSXV, and serves as an
officer and director of other  public  reporting  companies.  See "Item 7. Major
Shareholders  and Related  Party  Transactions  - Related Party  Transactions  -
Conflicts of Interest".



                                      -24-

<PAGE>



Harvey Lim (Age 46), Director

Mr. Lim holds a Bachelor  of  Commerce  degree  from the  University  of British
Columbia  and is a  member  in  good  standing  of the  Institute  of  Chartered
Accountants of British Columbia.  Mr. Lim was employed by Coopers & Lybrand (now
PricewaterhouseCoopers  LLP) from 1981 to 1988.  From 1988 to 1991,  Mr. Lim was
employed as controller  with Ingot  Management Ltd. Since 1991, Mr. Lim has been
employed  by Chase as  controller.  Mr. Lim  currently  serves as an officer and
director of other public reporting  companies.  See "Item 7. Major  Shareholders
and Related  Party  Transactions  - Related  Party  Transactions  - Conflicts of
Interest."

David Henstridge (Age 56), Corporate Secretary

Mr.  Henstridge is a professional  Geologist with over 30 years of experience in
mineral  exploration  overseas.  He graduated from the University of Adelaide in
1971  with a B.Sc.  (Honours)  in  Geology  and is a  member  of the  Australian
Institute of Mining and Metallurgy and the Australian Institute of Geoscientists
and the Geological Society of Australia.  From 1971 to 1987, Mr. Henstridge held
various  positions  with Central  Pacific  Minerals  N.L.  and managed  numerous
advanced  exploration  projects  throughout  Australia,  Europe  and the  United
States.  Since 1987,  Mr.  Henstridge  has worked for, and consulted to, several
companies on advanced exploration and feasibility  projects in Australia,  Papua
New Guinea,  Fiji,  China and North and South  America.  From 1993 to 2001,  Mr.
Henstridge  held the  position of president  and CEO of Peruvian  Gold Limited a
TSXV listed company. From 2001 to January 2004, Mr. Henstridge held the position
of Chairman of Argosy Minerals Inc., also a TSXV listed company.  Mr. Henstridge
is  currently  President,  CEO and a director  of Tumi  Resources  Limited and a
director of Tinka Resources  Limited and Mawson Resources Ltd., all of which are
mineral exploration companies that trade on the TSXV.

COMPENSATION

During the fiscal year ended May 31, 2004, the former and current  directors and
officers of the Company, as a group, had received or charged the Company a total
of $38,800 for  services  rendered by the  directors  and  officers or companies
owned by the individuals.

The Company is required,  under applicable securities  legislation in Canada, to
disclose to its shareholders  details of compensation  paid to its directors and
officers.  The  following  fairly  reflects all material  information  regarding
compensation  paid  by  the  Company  to  its  directors  and  officers,   which
information has been disclosed to the Company's  shareholders in accordance with
applicable Canadian law.

"Named Executive  Officers" means the Chief Executive  Officer ("CEO") and Chief
Financial  Officer  ("CFO")  of  the  Company,   regardless  of  the  amount  of
compensation of those  individuals,  and each of the Company's three most highly
compensated  executive  officers,  other  than the  CEO,  who  were  serving  as
executive  officers  at the end of the most  recent  fiscal year and whose total
salary and bonus  amounted to $40,000 or more.  In addition,  disclosure is also
required for any individuals whose total salary and bonus during the most recent
fiscal year was $40,000 whether or not they are an executive  officer at the end
of the fiscal year.

The  Company  currently  has two Named  Executive  Officers,  Nick  DeMare,  our
President,  CEO and CFO, and Desmond O'Kell,  a former director and President of
the Company.

The following table sets forth the  compensation  awarded,  paid to or earned by
the Named Executive Officers during the financial years ended May 31, 2002, 2003
and 2004:


                                      -25-

<PAGE>

<TABLE>
<CAPTION>

                                       ANNUAL COMPENSATION                  LONG TERM COMPENSATION
                                  ----------------------------    ----------------------------------------
                                                                              AWARDS               PAYOUTS
                                                                  -----------------------------    -------
                                                        OTHER                        RESTRICTED
                                                       ANNUAL     SECURITIES UNDER   SHARES OR                  ALL OTHER
       NAME AND                                        COMPEN-        OPTIONS/       RESTRICTED      LTIP        COMPEN-
  PRINCIPAL POSITION      YEAR    SALARY    BONUS      SATION       SARS GRANTED    SHARE UNITS    PAYOUTS       SATION
                                    ($)      ($)         ($)             (#)            (#)          ($)           ($)

<S>                     <C>       <C>      <C>      <C>             <C>             <C>          <C>            <C>

Nick DeMare(1)            2004      Nil      Nil      38,800(2)        Nil/Nil         N/A          N/A           Nil
President, CEO,
CFO and Director
                          2003      N/A      N/A         N/A           N/A/N/A         N/A          N/A           N/A
                          2002      N/A      N/A         N/A           N/A/N/A         N/A          N/A           N/A
Desmond O'Kell(1)         2004      N/A      N/A         N/A           N/A/N/A         N/A          N/A           N/A
former Director and
President

                          2003      Nil      Nil         Nil         250,000/Nil       N/A          N/A           Nil
                          2002      N/A      N/A         N/A           N/A/N/A         N/A          N/A           N/A

</TABLE>

NOTES:
(1)  On October 7, 2002,  Desmond  O'Kell was  appointed as the President of the
     Company.  On September 24, 2003, Mr. O'Kell  resigned as a director and the
     President of the Company and Mr. DeMare was appointed  the  President,  CEO
     and CFO of the Company.
(2)  $38,800 paid to Chase, a private  corporation  owned by Nick DeMare.  Chase
     personnel  (excluding  Mr.  DeMare)  provide  accounting,  secretarial  and
     administrative services to the Company.

LONG TERM INCENTIVE PLAN AWARDS

The Company has no long-term  incentive  plans in place and therefore there were
no awards made under any long-term incentive plan to the Name Executive Officers
during the  Company's  most  recently  completed  financial  year. A "Long- Term
Incentive Plan" is a plan under which awards are made based on performance  over
a period longer than one  financial  year,  other than a plan for options,  SARs
(stock appreciation rights) or restricted share compensation.

OPTIONS AND SHARE APPRECIATION RIGHTS

There were no stock options exercised by the Named Executive Officers during the
financial year ended May 31, 2004, nor were there any unexercised  stock options
outstanding at May 31, 2004.

TERMINATION OF EMPLOYMENT OR CHANGE OF CONTROL

The  Company   does  not  have  any   compensatory   plan(s),   contract(s)   or
arrangement(s)  with  respect  to  the  resignation,  retirement  or  any  other
termination of the Named Executive Officer's employment,  a change of control of
the  Company  or a change  in the  Named  Executive  Officer's  responsibilities
following  a change in  control,  which  entitle a Named  Executive  Officer  to
receive  from  the  Company  an  amount,   including  all  period   payments  or
installments, exceeding $100,000.

DIRECTOR COMPENSATION

CASH COMPENSATION

During  the  financial  year ended May 31,  2004,  the  Company  did not pay any
amounts to its directors who are not the Named Executive Officers.

NON-CASH COMPENSATION

No stock  options were granted by the Company to its  directors  who are not the
named  Executive  Officers  during the financial year ended May 31, 2004.  There
were no stock options unexercised by the directors who are not the Named

                                      -26-

<PAGE>



Executive  Officers during the financial year ended May 31, 2004, nor were there
any unexercised stock options outstanding at May 31, 2004.

INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS OF THE COMPANY

During  the fiscal  year  ended May 31,  2001,  the  Company  provided a loan of
US$35,000 to Ted Carlsen,  a former  President  and director of the Company,  to
acquire 87,500 common shares of the Company (the "Loan Shares"). The Company had
received a promissory  note for the loan.  The promissory  note is  non-interest
bearing  and is  repayable  either in part or in full as required by the Company
upon the  disposition  of part or all of the Loan  Shares  held by Mr.  Carlsen.
During  the fiscal  year  ended May 31,  2002,  the  Company  received a partial
payment of US $5,000  and,  as at May 31,  2004,  75,000  Loan  Shares  remained
pledged as security  for the  remaining  principal  balance of US $30,000 of the
promissory note.

Otherwise,  during the Company's  last  completed  financial  year ended May 31,
2004, no current or former director,  executive officer or senior officer of the
Company,  proposed  management  nominee  for  election  as a  director  or  each
associate  or  affiliate of any such  director,  executive or senior  officer or
proposed  nominee  is or  has  been  indebted  to  the  Company  or  any  of its
subsidiaries  or  is  and  has  been  indebted  to  another  entity  where  such
indebtedness  is or has been the  subject  of a  guarantee,  support  agreement,
letter of credit or other similar  arrangement or understanding  provided by the
Company or any of its subsidiaries, other than routine indebtedness.

EMPLOYMENT AGREEMENTS

The Company has a management contract with Chase, a company owned by Mr. DeMare,
whereby  the  Company  is  paying  Chase  $3,000  per  month,   for  accounting,
administrative, professional and management services provided to the Company. In
addition,  the Company may engage Chase to perform extra  services in which case
Chase will  charge the Company  for its  employees  at  competitive  rates.  The
Company is also paying Chase $2,000 per month for the services of Mr.  DeMare in
his capacity as President, CEO and CFO of the Company.

There are no  service  contracts  with the  Company  or any of its  subsidiaries
providing  for benefits  upon  termination  of employment of any director of the
Company.

BOARD PRACTICES

AUDIT COMMITTEE

THE AUDIT COMMITTEE'S CHARTER

MANDATE

The primary  function of the audit committee (the  "Committee") is to assist the
board of directors in fulfilling  its financial  oversight  responsibilities  by
reviewing the financial reports and other financial  information provided by the
Company to regulatory  authorities and  shareholders,  the Company's  systems of
internal controls  regarding finance and accounting and the Company's  auditing,
accounting and financial reporting processes. The Committee's primary duties and
responsibilities are to:

         -    Serve  as an  independent  and  objective  party  to  monitor  the
              Company's  financial  reporting  and internal  control  system and
              review the Company's financial statements.

         -    Review  and  appraise  the  performance of the Company's  external
              auditors.

         -    Provide  an open  avenue  of  communication  among  the  Company's
              auditors,  financial  and  senior  management  and  the  Board  of
              Directors.



                                      -27-

<PAGE>



COMPOSITION

The Committee  shall be comprised of three  directors as determined by the Board
of Directors,  the majority of whom shall be free from any relationship that, in
the opinion of the Board of Directors,  would interfere with the exercise of his
independent  judgment as a member of the  Committee.  At least one member of the
Committee shall have accounting or related financial management  expertise.  All
members of the  Committee  that are not  financially  literate will work towards
becoming financially literate to obtain a working familiarity with basic finance
and accounting  practices.  For the purposes of the Audit Committee Charter, the
definition of "financially literate" is the ability to read and understand a set
of  financial  statements  that  present a breadth  and level of  complexity  of
accounting issues that are generally comparable to the breadth and complexity of
the  issues  that can  presumably  be  expected  to be raised  by the  Company's
financial statements.

The members of the  Committee  shall be elected by the Board of Directors at its
first meeting  following  the annual  shareholders'  meeting.  Unless a Chair is
elected  by the full  Board of  Directors,  the  members  of the  Committee  may
designate a Chair by a majority vote of the full Committee membership.

MEETINGS

The  Committee  shall  meet a  least  twice  annually,  or  more  frequently  as
circumstances  dictate.  As part of its job to foster  open  communication,  the
Committee will meet at least annually with the Chief  Financial  Officer and the
external auditors in separate sessions.

RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties, the Committee shall:

DOCUMENTS/REPORTS REVIEW

(a)      Review and update the Charter annually.

(b)      Review  the  Company's  financial  statements,  MD&A and any annual and
         interim earnings,  press releases before the Company publicly discloses
         this  information  and  any  reports  or  other  financial  information
         (including quarterly financial statements),  which are submitted to any
         governmental  body,  or to the  public,  including  any  certification,
         report, opinion, or review rendered by the external auditors.

EXTERNAL AUDITORS

(a)      Review annually,  the performance of the external auditors who shall be
         ultimately  accountable  to the Board of Directors and the Committee as
         representatives of the shareholders of the Company.

(b)      Recommend  to  the  Board  of  Directors  the  selection   and,   where
         applicable, the replacement of the external auditors nominated annually
         for shareholder approval.

(c)      Review with management and the external auditors the audit plan for the
         year-end   financial   statements   and  intended   template  for  such
         statements.

(d)      Review and  pre-approve  all audit and  audit-related  services and the
         fees  and  other  compensation   related  thereto,  and  any  non-audit
         services, provided by the Company's external auditors.

Provided  the  pre-approval  of  the  non-audit  services  is  presented  to the
Committee's  first scheduled  meeting following such approval such authority may
be  delegated  by the  Committee  to  one or  more  independent  members  of the
Committee.



                                      -28-

<PAGE>



FINANCIAL REPORTING PROCESSES

(a)      In consultation with the external auditors,  review with management the
         integrity of the Company's financial  reporting process,  both internal
         and external.

(b)      Consider  the  external  auditors'  judgments  about  the  quality  and
         appropriateness  of the Company's  accounting  principles as applied in
         its financial reporting.

(c)      Consider and approve, if appropriate, changes to the Company's auditing
         and  accounting  principles  and practices as suggested by the external
         auditors and management.

(d)      Following  completion  of the  annual  audit,  review  separately  with
         management  and the  external  auditors  any  significant  difficulties
         encountered during the course of the audit,  including any restrictions
         on the scope of work or access to required information.

(e)      Review any significant  disagreement  among management and the external
         auditors  in  connection   with  the   preparation   of  the  financial
         statements.

(f)      Review with the external  auditors and  management  the extent to which
         changes and improvements in financial or accounting practices have been
         implemented.

(g)      Review any  complaints or concerns about any  questionable  accounting,
         internal accounting controls or auditing matters.

(h)      Review certification process.

(i)      Establish a procedure  for the  confidential,  anonymous  submission by
         employees of the Company of concerns regarding questionable  accounting
         or auditing matters.

OTHER

Review any related-party transactions.

COMPOSITION OF THE AUDIT COMMITTEE

The following are the members of the Committee (1):

                                INDEPENDENT (1)            FINANCIALLY LITERATE

Nick DeMare                          N                               Y
Harvey Lim                           Y                               Y
Andrew Carter                        Y                               Y

NOTE:
(1) As defined by Multilateral Instrument 52-110 ("MI 52-110").

The Company is relying on the exemption provided under Section 6.1 of MI52-110.

AUDIT COMMITTEE OVERSIGHT

At no time since the  commencement  of the  Company's  most  recently  completed
financial year was a  recommendation  of the Committee to nominate or compensate
an external auditor not adopted by the Board of Directors.



                                      -29-

<PAGE>



RELIANCE ON CERTAIN EXEMPTIONS

At no time since the  commencement  of the  Company's  most  recently  completed
financial  year has the  Company  relied on the  exemption  in Section 2.4 of MI
52-110 (De Minimis Non-audit Services), or an exemption from MI 52-110, in whole
or in part, granted under Part 8 of Multilateral Instrument 52-110.

PRE-APPROVAL POLICIES AND PROCEDURES

The Committee has adopted specific policies and procedures for the engagement of
non-audit services as described above under the heading "External Auditors".

REMUNERATION COMMITTEE

The Company does not have a separate Remuneration Committee.

TERMINATION OF EMPLOYMENT OR CHANGE OF CONTROL

Other than as described in the Summary Compensation Table and above, the Company
has no plans or arrangements in respect of remuneration  received or that may be
received  by the  Named  Executive  Officers  in  the  Company's  most  recently
completed  financial year or current financial year in view of compensating such
officers in the event of termination of employment (as a result of  resignation,
retirement, change of control, etc.) or a change in responsibilities following a
change of control,  where the value of such  compensation  exceeds  $100,000 per
executive officer.

The Company does not have any  contracts  with the  directors of the Company (or
any entities  controlled by the directors of the Company) providing for benefits
upon termination of employment.

EMPLOYEES

During the years ended May 31, 2004 and 2003,  the Company had no  full-time  or
part-time  employees in the area of  management  and  administration.  Corporate
accounting,  management and  administration  are provided,  in part, by Chase, a
company  owned by Mr. Nick  DeMare.  Chase  provides its services to a number of
public and private  companies  and currently  employs six  full-time  employees,
including Mr. Lim (excluding Mr.  DeMare).  Mr. DeMare  provides his services as
the President,  CEO and CFO of the Company. During the fiscal year ended May 31,
2002, the Company  employed no full-time  employees and one part-time  employee.
The Company also retains  consultants to handle  specific  projects on a case by
case basis. In the event the Company needs to employ personnel,  it will need to
recruit qualified  personnel to staff its operations.  The Company believes that
such personnel  currently are available at reasonable  salaries and wages in the
geographic areas in which the Company and its subsidiaries operate. There can be
no assurance, however, that such personnel will be available in the future.

SHARE OWNERSHIP

The following table sets forth certain  information  regarding  ownership of the
Company's shares by the Company's officers and directors as of October 31, 2004.


                                                     SHARES AND
                                                       RIGHTS
                                                    BENEFICIALLY
                                                      OWNED OR        PERCENT OF
TITLE OF CLASS     NAME AND ADDRESS OF OWNER        CONTROLLED(1)      CLASS (1)
--------------     -------------------------        -------------     ----------

Common Stock       Nick DeMare                          189,131(2)       9.5%
                   Burnaby, British Columbia,
                   Canada

Common Stock       Andrew Carter                            Nil          0.0%
                   North Vancouver,
                   British Columbia, Canada


                                      -30-

<PAGE>



                                                     SHARES AND
                                                       RIGHTS
                                                    BENEFICIALLY
                                                      OWNED OR        PERCENT OF
TITLE OF CLASS     NAME AND ADDRESS OF OWNER        CONTROLLED(1)      CLASS (1)
--------------     -------------------------        -------------     ----------


Common Stock       Harvey Lim                               Nil          0.0%
                   Burnaby, British Columbia,
                   Canada

Common Stock       David Henstridge                         Nil          0.0%
                   Victoria, Australia

NOTES:
(1)  Where  persons  listed on this  table  have the right to obtain  additional
     shares of common  stock  through  the  exercise of  outstanding  options or
     warrants  within 60 days from May 31,  2004,  these  additional  shares are
     deemed to be  outstanding  for the purpose of computing  the  percentage of
     common stock owned by such  persons,  but are not deemed to be  outstanding
     for the purpose of  computing  the  percentage  owned by any other  person.
     Based on  1,911,521  shares of common stock  outstanding  as of October 31,
     2004.
(2)  Includes  15,000  common  shares and 61,631 common shares held by Chase and
     DNG Capital Corp. ("DNG"), respectively,  private corporations wholly-owned
     by Mr. DeMare.

All of the Company's shareholders have the same voting rights.

STOCK OPTION PLAN

The Company has a rolling stock option plan (the "Plan"), which makes a total of
10% of the issued and outstanding  shares of the Company  available for issuance
thereunder.  The Company's  Plan is approved  annually by the  shareholders.  In
accordance  with the policies of the TSXV, a rolling plan,  which is the type of
plan the Company has adopted,  requires the approval of the  shareholders of the
Company on an annual basis.

The purpose of the Plan is to provide the Company with a share related mechanism
to enable the  Company to  attract,  retain and  motivate  qualified  directors,
officers, employees and other service providers, to reward directors,  officers,
employees and other service  providers  for their  contribution  toward the long
term  goals of the  Company  and to enable and  encourage  such  individuals  to
acquire shares of the Company as long term investments.

The Plan  provides  that it is  solely  within  the  discretion  of the Board to
determine who should receive options and in what amounts. The Board of Directors
may issue a majority of the options to insiders  of the  Company.  However,  the
Plan provides that in no case will the Plan or any existing  share  compensation
arrangement  of the Company  result,  at any time, in the issuance to any option
holder,  within a one year  period,  of a number of shares  exceeding  5% of the
Company's issued and outstanding share capital.

The following information is intended to be a brief description of the Plan:

1.       The maximum number of common shares that may be issued upon exercise of
         stock  options  granted  under the Plan  will be that  number of shares
         which is 10% of the issued and outstanding  shares of the Company.  Any
         outstanding options will form a part of the foregoing 10%. The exercise
         price of the stock options,  as determined by the Board of Directors in
         its sole  discretion,  shall not be less than the closing  price of the
         Company's  shares traded through the facilities of the TSXV on the date
         prior to the date of grant,  less  allowable  discounts,  in accordance
         with the  policies  of the TSXV or, if the shares are no longer  listed
         for trading on the TSXV,  then such other exchange or quotation  system
         on which the shares are listed and quoted for trading.

2.       The Board of Directors  will not grant  options to any one person which
         will, when exercised, exceed 5% of the issued and outstanding shares of
         the Company.

3.       Upon  expiry of the  option,  or in the  event an  option is  otherwise
         terminated  for any reason,  without having been exercised in full, the
         number of shares in respect of the expired or  terminated  option shall
         again be available  for the purposes of the Plan.  All options  granted
         under the Plan may not have an expiry date

                                      -31-

<PAGE>



         exceeding  five  years  from the date on which the  Board of  Directors
         grant and announce the granting of the option.

4.       If the option  holder  ceases to be a director of the Company or ceases
         to be employed by the Company  (other than by reason of death),  as the
         case may be,  then the  option  granted  shall  expire  on the 90th day
         following  the date that the option  holder  ceases to be a director or
         ceases  to be  employed  by  the  Company,  subject  to the  terms  and
         conditions set out in the Plan.

The Plan may be  administered  by the  Company's  secretary or such other senior
officer or employee as may be designated by the Board of Directors  from time to
time. Upon the approval of the Plan by the Company's  shareholders,  shareholder
approval will not be required or sought on a case-by-case  basis for the purpose
of the  granting of options to and the  exercise of options by  employees of the
Company regularly  employed on a full-time or part-time basis,  directors of the
Company and persons who perform  services for the Company on an ongoing basis or
who have provided, or are expected to provide, services of value to the Company.

There are no stock options  granted and  outstanding to acquire common shares of
the Company as of the date of this annual report.


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
--------------------------------------------------------------------------------


PRINCIPAL HOLDERS OF VOTING SECURITIES

To the best of the Company's  knowledge,  it is not directly or indirectly owned
or controlled by another corporation or by any foreign government. The following
table sets forth certain information regarding ownership of the Company's shares
by all persons who own five  percent (5%) or more of the  Company's  outstanding
shares, as of October 31, 2004.


                                                     SHARES AND
                                                       RIGHTS
                                                    BENEFICIALLY
                                                      OWNED OR        PERCENT OF
TITLE OF CLASS     NAME AND ADDRESS OF OWNER        CONTROLLED(1)      CLASS (1)
--------------     -------------------------        -------------     ----------

Common Stock       Greystoke Investments Inc.           287,613           15.1%
                   St. Albert, Alberta, Canada

Common Stock       Nick DeMare                          189,131(2)         9.5%
                   Burnaby, British Columbia,
                   Canada

Common Stock       Ted Carlsen                          113,750            6.0%
                   Bakersfield, California, USA

(1)  Where  persons  listed on this  table  have the right to obtain  additional
     shares of common stock through the exercise of  outstanding  options within
     60 days from October 31,  2004,  these  additional  shares are deemed to be
     outstanding  for the purpose of computing  the  percentage  of common stock
     owned by such persons, but are not deemed to be outstanding for the purpose
     of computing the percentage  owned by any other person.  Based on 1,911,521
     shares of common stock outstanding as of October 31, 2004.
(2)  Includes  15,000  common  shares and 61,631 common shares held by Chase and
     DNG Capital Corp. ("DNG"), respectively,  private corporations wholly-owned
     by Mr. DeMare.

None of the Company's  principal  shareholders have different voting rights than
any of the Company's other common shareholders.

ESCROWED SHARES

On the completion of the Agreement and Plan of Merger, a total of 580,875 common
shares  held by the  principals  of  CalEx  described  below  were  escrowed  in
accordance  with  the  policies  of the  TSXV  (the  "Escrowed  Securities")  in
connection with the acquisition. The Escrowed Securities are being released from
escrow on an automatic six year time

                                      -32-

<PAGE>



release,  at six month  intervals,  in equal  tranches  of 5% for the first four
tranches  ending  September  27,  2003,  and in  equal  tranches  of 10% for the
remaining eight tranches ending on September 27, 2007.

As at the date of this  annual  report,  the  following  shares  remain  held in
escrow.


                                                  NUMBER OF COMMON
        NAME OF BENEFICIAL OWNER                  SHARES IN ESCROW

        Monica Carlsen                                    4,500
        Ted Carlsen                                      97,500
        Desmond O'Kell                                  246,526 (1)
                                                        -------
        Total:                                          348,526
                                                        =======

        (1)  held by Greystoke Investments Inc., a private company owned by
             Mr. O'Kell.

CHANGES IN SHAREHOLDINGS

There have been no significant changes to the above listed persons' ownership.

CHANGE OF CONTROL

As of the date of this annual  report,  there are no  arrangements  known to the
Company  which may at a  subsequent  date  result in a change of  control of the
Company.

UNITED STATES SHAREHOLDERS

As of October 31, 2004,  there were  approximately  3 registered  holders of the
Company's common shares in the United States,  with combined holdings of 120,750
shares, representing 6.3% of the issued shares of the Company.

CONTROL BY FOREIGN GOVERNMENT OR OTHER PERSONS

To the  best  of the  Company's  knowledge,  the  Company  is  not  directly  or
indirectly owned or controlled by another  corporation,  any foreign government,
or any other natural or legal person, severally or jointly.

RELATED PARTY TRANSACTIONS

Other than as disclosed  below, for the period from June 1, 2003 through October
31, 2004, the Company has not entered into any transactions or loans between the
Company and any (a) enterprises that directly or indirectly  through one or more
intermediaries,  control or are controlled by, or are under common control with,
the Company; (b) associates;  (c) individuals owning, directly or indirectly, an
interest  in the  voting  power  of the  Company  that  gives  them  significant
influence over the Company,  and close members of any such individuals'  family;
(d) key management personnel and close members of such individuals' families; or
(e)  enterprises  in which a substantial  interest in the voting power is owned,
directly or indirectly, by any person described in (c) or (d) or over which such
a person is able to exercise significant influence.

1.       The Company has  retained  Chase,  a company  wholly-owned  by Mr. Nick
         DeMare,  the President,  Chief  Executive  Officer and Chief  Financial
         Officer  and a director of the  Company,  to provide  office  premises,
         administrative,  accounting and management  services.  In consideration
         therefor,  Chase is  currently  paid a monthly fee of $3,000.  Chase is
         also reimbursed for out-of-pocket  disbursements  incurred on behalf of
         the Company.  In addition,  Chase also provides the Company  additional
         services  which are billed at rates  which Chase  charges to  unrelated
         third parties.  Management  believes the arrangement with Chase is fair
         to the  Company  and  similar to terms  which  could be  obtained  from
         unrelated  third  parties.  During the year ended May 31,  2004 and the
         period from June 1, 2004 to October 31,  2004,  the Company  paid Chase
         $34,800 and $18,225, respectively.


                                      -33-

<PAGE>



2.       The Company is  currently  paying Chase a monthly fee of $2,000 for the
         services  of Mr.  Nick  DeMare  in his  capacity  as  President,  Chief
         Executive Officer and Chief Financial Officer of the Company. See "Item
         6.  Directors,   Senior   Management  and  Employees  -  Compensation."
         Management  believes  the  arrangement  with  Chase  for  Mr.  DeMare's
         services is fair to the Company. During the year ended May 31, 2004 and
         the period from June 1, 2004 to October  31,  2004,  the  Company  paid
         Chase $4,000 and $10,000 respectively.

3.       During  the fiscal  year ended May 31,  2001,  the  Company  provided a
         working capital loan of $55,300 (US $35,000) to Ted Carlsen, the former
         President  of the  Company.  During the fiscal year ended May 31, 2002,
         $7,900  (US  $5,000)  was  repaid.   See  "Indebtedness  of  Directors,
         Officers,  Promoters  and Other  Management"  below.  As of October 31,
         2004, the Company is owed $47,400 (US $30,000).

See also "Item 6.  Directors, Senior Management and Employees - Compensation".

INDEBTEDNESS OF DIRECTORS, OFFICERS, PROMOTERS AND OTHER MANAGEMENT

Except as described  below, no director,  officer or promoter or other member of
management of the Company,  or any associate or affiliate of any such person, is
or has been indebted to the Company.

During the fiscal year ended May 31, 2001, the Company,  through CalEx, provided
a loan of $55,300 to Ted  Carlsen,  the former  President  and  Director  of the
Company, to acquire 87,500 common shares of the Company (the "Loan Shares"). The
Company had  received a promissory  note for the loan.  The  promissory  note is
non-interest  bearing and is repayable  either in part or in full as required by
the Company upon the  disposition  of part or all of the Loan Shares held by Mr.
Carlsen.  During the fiscal  year ended May 31,  2002,  the  Company  received a
partial  payment of $7,900 and, as at May 31, 2004,  75,000 Loan Shares remained
pledged  as  security  for the  remaining  principal  balance  of $47,400 of the
promissory note.

Otherwise,  during the Company's  last  completed  financial  year ended May 31,
2004, no current or former director,  executive officer or senior officer of the
Company,  proposed  management  nominee  for  election  as a  director  or  each
associate  or  affiliate of any such  director,  executive or senior  officer or
proposed  nominee  is or  has  been  indebted  to  the  Company  or  any  of its
subsidiaries  or  is  and  has  been  indebted  to  another  entity  where  such
indebtedness  is or has been the  subject  of a  guarantee,  support  agreement,
letter of credit or other similar  arrangement or understanding  provided by the
Company or any of its subsidiaries.

CONFLICTS OF INTEREST

The table below shows that certain  directors of the Company are also directors,
officers or shareholders of other companies which are engaged in the business of
acquiring,   developing  and  exploiting  natural  resource   properties.   Such
associations  may give rise to  conflicts  of interest  from  time-to-time.  The
directors  of the Company are  required by law to act honestly and in good faith
with a view to the best  interest of the Company  and to disclose  any  interest
which they may have in any project or opportunity of the Company.  However, each
director has a similar  obligation  to other  companies  for which such director
serves as an officer or director. As of the date of this report, no conflicts of
interest have arisen,  except as described  below and above.  Where conflicts of
interests  arose,  the directors of the Company  disclosed  their  interests and
abstained from voting on the transaction.

The following table  identifies the name of each director of the Company and any
company,  other than the Company,  which is a reporting issuer in Canada and the
United  States,  and for which such director  currently  serves as an officer or
director:


                                      -34-

<PAGE>



<TABLE>
<CAPTION>

DIRECTOR             REPORTING ISSUER                        CAPACITY                             COMMENCED SERVICE
<S>                <C>                                     <C>                                   <C>

Nick DeMare          Aguila American Resources Ltd.          Director                              January 2003
                     Andean American Mining Corp.            Director                              August 2002
                                                             Secretary                             December 1995
                     Dial Thru International Inc.            Director                              January 1991
                     GGL Diamond Corp.                       Director                              May 1989
                     Global Energy Inc.                      Director, President, Secretary        September 2002
                                                             & Treasurer
                     Golden Peaks Resources Ltd.             Director                              January 1992
                     Goldmarca Limited                       Director                              September 2000
                     Gold Point Exploration Ltd.             Director & President                  August 2003
                     Halo Resources Ltd.                     Director                              January 1996
                                                             President & CEO                       July 2003
                     Hilton Resources Ltd.                   Director                              October 1989
                                                             President & CEO                       July 2003
                     Kookaburra Resources Ltd.               Director                              June 1988
                     Lariat Resources Ltd.                   Director & President                  August 2002
                     Mawson Resources Corp.                  Director                              March 2004
                     Medina International Corp.              Director, Secretary & Treasurer       May 2002
                     Tinka Resources Limited                 Director & Secretary                  October 2003
                     Tumi Resources Limited                  Director                              January 2002

Andrew Carter        Hilton Resources Ltd.                   Director                              July 2003
                     Tinka Resources Ltd.                    Director, President & CEO             February 2003

Harvey Lim           Gold Point Exploration Ltd.             Director & Secretary                  October 2003
                     Halo Resources Ltd.                     Secretary                             December 1988
                     Hilton Resources Ltd.                   Secretary                             June 1997
                     Medina International Corp.              Director                              May 2002
                     Tumi Resources Limited                  Director                              January 2002

</TABLE>

There  are no known  existing  or  potential  conflicts  of  interest  among the
Company,  promoters,  directors,  officers,  principal holders of securities and
persons providing professional services to the Company which could reasonably be
expected to affect an investor's investment decision except as described in this
section.

The  Company  does not have any  agreements  with  its  officers  or  directors,
including any officers or directors with a conflict of interest, with respect to
the amount of time they must spend on the Company's business.


ITEM 8.  FINANCIAL INFORMATION.
--------------------------------------------------------------------------------

DESCRIPTION                                                            PAGE
-----------                                                            ----
Audited Consolidated Financial Statements for the
Years Ended May 31, 2004, 2003 and 2002                             F-1 to F-17

SIGNIFICANT CHANGES

There are no significant changes proposed by the Company.



                                      -35-

<PAGE>



DIVIDEND POLICY

The Company has not paid any  dividends on its common shares and does not intend
to pay dividends on its common shares in the immediate  future.  Any decision to
pay  dividends  on its common  shares in the future will be made by the board of
directors on the Company on the basis of earnings,  financial  requirements  and
other such conditions that may exist at that time.

LEGAL PROCEEDINGS

The Company knows of no material,  active or pending legal  proceedings  against
it; nor is the Company  involved as a plaintiff  in any material  proceeding  or
pending litigation.

The Company knows of no active or pending  proceedings against anyone that might
materially adversely affect an interest of the Company.


ITEM 9.  THE OFFER AND LISTING.
--------------------------------------------------------------------------------

PRICE HISTORY

The  TSXV  classifies  listed  companies  into  two  different  tiers  based  on
standards, which include historical financial performance, stage of development,
and financial resources of the listed company. Tier 1 is the TSXV's premier tier
and is reserved for the TSXV's most advanced  issuers with the most  significant
financial  resources.  Tier 1 issuers benefit from decreased filing requirements
and improved service standards. The majority of the companies listed on the TSXV
are Tier 2 companies.  The Company trades on the TSXV under the symbol "BRH" and
is classified as a Tier 2 company.

There  have  been no  trading  suspensions  imposed  by the  TSXV  or any  other
regulatory authorities in the past three years.

The following tables list the volume of trading and high and low sales prices on
the TSXV for shares of the Company's common stock for the periods indicated,  as
adjusted for the Company's  one new for four old reverse  stock split  effective
June 3, 2004:

                  TSX VENTURE EXCHANGE - STOCK TRADING ACTIVITY

                                                            SALES PRICE
                                                   ----------------------------
YEAR ENDED                       VOLUME                HIGH             LOW

May 31, 2004                  1,057,971                $0.13           $0.03
May 31, 2003 (1)                 11,966                $0.16           $0.02
May 31, 2002 (1)(2)             114,384                $0.70           $0.17
May 31, 2001 (2)(3)             601,634                $0.63           $0.20

(1)  Trading in the  Company's  shares was halted on December  21, 2001 to allow
     for the announcement of the proposed acquisition of OPS. The shares resumed
     trading on January 13, 2003.
(2)  Trading in the Company's  shares was halted on May 3, 2001 to allow for the
     announcement  of the  acquisition of CalEx.  The shares resumed  trading on
     July 12, 2001.
(3)  Trading in the  Company's  shares  commenced  on December  21,  2000,  upon
     completion of its initial public offering.


                                      -36-

<PAGE>





                                                            SALES PRICE
                                                   ----------------------------
QUARTER ENDED                    VOLUME                HIGH             LOW

August 31, 2004                  63,541                $0.35           $0.08
May 31, 2004                    631,600                $0.12           $0.08
February 29, 2004               410,500                $0.13           $0.05
November 30, 2003                13,621                $0.09           $0.04
August 31, 2003                   2,250                $0.04           $0.03
May 31, 2003                      7,352                $0.06           $0.02
February 28, 2003 (1)             4,614                $0.16           $0.04
November 30, 2002 (1)                 -                    -               -
August 31, 2002 (1)                   -                    -               -

(1)  Trading in the  Company's  shares was halted on December  21, 2001 to allow
     for the announcement of the proposed acquisition of OPS. The shares resumed
     trading on January 13, 2003.


                                                            SALES PRICE
                                                   ----------------------------
MONTH ENDED                      VOLUME                HIGH             LOW

October 31, 2004                 27,625                $0.30           $0.23
September 30, 2004                1,625                $0.26           $0.23
August 31, 2004                   2,500                $0.35           $0.23
July 31, 2004                       625                $0.34           $0.25
June 30, 2004                    60,416                $0.34           $0.08
May 31, 2004                     45,600                $0.10           $0.08

On January 22, 2002, the Company's  common shares were approved for quotation on
the  Over-the-Counter  Bulletin  Board  system  (the  "OTCBB")  operated  by the
National  Association of Securities Dealers. The Company currently trades on the
OTCBB under the symbol "BRHAF".  The following tables set forth the market price
ranges and the  aggregate  volume of trading of the common shares of the Company
on the OTCBB system for the periods indicated, as adjusted for the Company's one
new for four old reverse stock split effective June 3, 2004:

                   OTC BULLETIN BOARD - STOCK TRADING ACTIVITY


                                                           BID PRICE (US$)
                                                   ----------------------------
YEAR ENDED                       VOLUME                HIGH             LOW

May 31, 2004                     28,000                $0.10           $0.05
May 31, 2003                      3,263                $0.60           $0.04
May 31, 2002 (1)                632,700                $1.72           $0.04

(1)  The Company's common stock  commenced  trading on the OTC-BB on January 22,
     2002.



                                                           BID PRICE (US$)
                                                   ----------------------------
QUARTER ENDED                    VOLUME                HIGH             LOW

August 31, 2004                   6,000                $0.20           $0.06
May 31, 2004                     23,000                $0.10           $0.06
February 29, 2004                 5,000                $0.10           $0.05
November 30, 2003                     -                    -               -
August 31, 2003                       -                    -               -
May 31, 2003                          -                $0.04           $0.04
February 28, 2003                   250                $0.12           $0.04
November 31, 2002                 1,125                $0.20           $0.12
August 31, 2002                   6,250                $1.20           $0.40


                                      -37-

<PAGE>



                                                           BID PRICE (US$)
                                                   ----------------------------
MONTH ENDED                      VOLUME                HIGH             LOW

October 31, 2004                      -                    -               -
September 30, 2004                    -                    -               -
August 31, 2004                   5,000                $0.20           $0.17
July 31, 2004                         -                $0.17           $0.16
June 30, 2004                     1,000                $0.16           $0.06
May 31, 2004                     23,000                $0.07           $0.06

These above  quotations  reflect  inter-dealer  prices without  retail  mark-up,
markdown, or commissions and may not necessarily represent actual transactions.

The OTC-BB is smaller and less liquid than the major  securities  markets in the
United States. The trading volume of the Company's shares on the OTC-BB has been
volatile.  Consequently,  shareholders  in the United  States may not be able to
sell their shares at the time and at the price they desire.


ITEM 10. ADDITIONAL INFORMATION.
--------------------------------------------------------------------------------

ARTICLES OF CONTINUANCE AND BYLAWS

The  Company  was  incorporated  under the laws of British  Columbia,  Canada on
December 10, 1999 by  registration  of its Memorandum and Articles with the B.C.
Registrar of Companies under the  incorporation  number 597349. On September 25,
2001, the Company was continued under the YBCA to the Yukon Territory, Canada by
the  registration  of its Articles of  Continuance  with the Yukon  Registrar of
Corporations.

On March 29,  2004,  the  British  Columbia  legislature  enacted  the BCBCA and
repealed  the British  Columbia  COMPANY ACT (the "BC COMPANY  ACT").  The BCBCA
removes many of the  restrictions  contained  in the BC COMPANY  ACt,  including
restrictions  on the  residency of  directors,  the  location of annual  general
meetings and limits on authorized  share  capital,  as well,  the BCBCA uses new
forms and terminology and has replaced the Memorandum with a Notice of Articles.

On November 23, 2004, the Company was continued to British  Columbia,  Canada by
the registration of a Continuation Application with the BC Registrar.

The  Company  is of the view  that the BCBCA  provides  to  shareholders  of the
Company  substantively  the same rights as were available to shareholders  under
the  YBCA,  including  rights  of  dissent  and  appraisal  and  rights to bring
derivative and oppression actions.  The following is a comparison of some of the
principal  provisions of the YBCA and the BCBCA that the Company believes may be
relevant to  shareholders.  This  summary is not intended to be  exhaustive  and
shareholders  should  consult their legal  advisors with respect to the detailed
provisions of the BCBCA and their rights under it.  Reference  should be made to
the full text of both statutes for particulars of the differences.

Note:  Within this summary,  the term  "Articles" when referring to the BCBCA is
the  equivalent to the "by-laws"  under the YBCA.  The term "Notice of Articles"
when referring to the BCBCA is the equivalent of the "articles" under the YBCA.

SALE OF COMPANY'S  UNDERTAKING.  Under the BCBCA, a sale of all or substantially
all the  property  of a  corporation,  other  than  in the  ordinary  course  of
business,  of the  corporation  requires  approval  by special  resolution.  The
Company's Articles confirm a special resolution,  being a resolution passed by a
majority of not less than two-thirds of the votes cast by shareholders who voted
in respect of the  resolution  (the "Special  Resolution"),  must be approved in
respect of the proposed sale. The provisions of the YBCA are  substantially  the
same.



                                      -38-

<PAGE>



ALTERATION  TO  NOTICE  OF  ARTICLES  OF  THE  COMPANY.  Under  the  BCBCA,  any
substantive change to the Notice of Articles of a corporation,  such as a change
in the name of the  corporation  and certain  changes to the share  capital of a
corporation,  require approval of a Special Resolution in respect of the change.
The provisions of the YBCA are substantially the same.

ARTICLE  AMENDMENTS.  The BCBCA provides that unless the Articles or a unanimous
shareholder agreement otherwise provide, the directors may, by resolution, make,
amend,  or repeal  any  Articles  that  regulate  the  business  or affairs of a
corporation. However, the directors must submit an Article, or an amendment or a
repeal  of  an  Article,  to  the  shareholders  of  the  corporation,  and  the
shareholders may, with approval of a way of Special Resolution,  confirm, reject
or amend the  article,  amendment  or  repeal.  The  provisions  of the YBCA are
substantially the same in connection with amendments to the by-laws.

AUTHORIZATION OF UNLIMITED NUMBER OF SHARES.  The BCBCA permits a corporation to
have an unlimited number of shares without par value. The provisions of the YBCA
are substantially the same.

RIGHTS OF DISSENT  AND  APPRAISAL.  The BCBCA  provides  that  shareholders  who
dissent to certain  actions being taken by a corporation may exercise a right of
dissent  and  require  the  corporation  to  purchase  the  shares  held by such
shareholder  at the fair value of such shares.  The dissent  right is applicable
where  the  corporation  proposes  to  (a)  amend  its  articles  to  alter  the
restrictions  on the  powers  of the  corporation  or on the  business  that the
corporation may carry on, (b) adopt an amalgamation agreement, (c) in respect of
a  resolution  to  approve an  amalgamation  under the BCBCA (d) in respect of a
resolution  approving an  arrangement,  the terms of which  arrangement  permits
dissent, (e) continue out of the jurisdiction, (f) in respect of a resolution to
authorize and ratify the lease or other  disposition of all or substantially all
its  undertaking,  (g) in  respect  of  any  other  resolution,  if  dissent  is
authorized by the resolution,  or (h) in respect of any court order that permits
dissent.  The  dissenting  shareholder  is required to strictly  comply with the
provisions  of the BCBCA in order to exercise  this  remedy.  The YBCA  provides
similar rights to shareholders. See "Dissent Rights" below.

OPPRESSION  REMEDIES.  Under the BCBCA, a shareholder  of a corporation  has the
right to apply to a court for an order  where the  business or affairs are being
or have been conducted,  or the exercise of the directors' of the  corporation's
or any of its affiliates' powers, in a manner oppressive or unfairly prejudicial
to or  would  unfairly  disregard  the  interests  of  any  shareholder  of  the
corporation.  On such an  application,  the court may make any  interim or final
order  it  considers  appropriate,  including  regulating  the  conduct  of  the
corporation's  affairs.  Under the YBCA, the oppression  remedy is substantially
the same as that contained in the BCBCA.

SHAREHOLDER  DERIVATIVE  ACTIONS.  Pursuant to the BCBCA, a  complainant,  which
includes a  shareholder,  may apply to the court for leave to bring an action in
the name of and on behalf of a corporation or any subsidiary, or to intervene in
an  existing  action to which the  corporation  is a party  for the  purpose  of
prosecuting, defending or discontinuing the action on behalf of the corporation.
On such an application, the court may make any order it thinks fit, including an
order  authorizing the complainant or any other person to control the conduct of
the  action.  Pursuant  to the  YBCA,  derivative  actions  are  dealt  with  in
substantially the same manner as the BCBCA.

FINANCIAL  ASSISTANCE.  The BCBCA does not  restrict a  corporation  from giving
financial  assistance  to  shareholders  or directors of the  corporation  or an
affiliated  corporation.  The provisions of the YBCA are  substantially the same
except that in certain cases a solvency test is met.

RECORD DATE FOR VOTING. The BCBCA provides the Company with the ability to fix a
record date for voting  purposes.  Transfers of shares after the record date are
not recognized for voting entitlement  purposes.  The YBCA also provides for the
setting of a fixed record date for voting  purposes  but a transferee  of shares
requesting to have its name included in the relevant  shareholder  list at least
ten days (or such  shorter  time as is  provided  in the  by-laws)  prior to the
meeting is entitled to vote, provided that the transferee can establish that the
transferee owns the shares.

REQUISITION  OF MEETINGS.  The BCBCA provides that holders of not less than five
per cent of the issued shares of a corporation that carry the right to vote at a
meeting  sought to be held may  requisition  the  directors to call a meeting of
shareholders for the purposes stated in the  requisition.  The provisions of the
YBCA are substantially the same.


                                      -39-

<PAGE>



FORM OF PROXY AND INFORMATION CIRCULAR.  The BCBCA requires that management of a
distributing corporation (public company),  concurrently with giving notice of a
meeting  of  shareholders,  send a form  of  proxy  in  prescribed  form to each
shareholder who is entitled to receive notice of the meeting.  Where  management
of a corporation  solicits proxies,  an information  circular in prescribed form
must  also  accompany  the  notice of the  meeting.  The YBCA  contains  similar
provisions.

PLACE OF  MEETINGS.  The BCBCA  provides  that  meetings  of  shareholders  of a
corporation  must be held at the place within the  Province of British  Columbia
provided in the articles. A meeting of shareholders of a corporation may however
be held at a place  outside of British  Columbia if the  location is approved by
the resolution  required by the Articles for the purpose, or if no resolution is
required  for that  purpose by the  Articles,  approved by ordinary  resolution.
Under the YBCA,  meetings of  shareholders  of a  corporation  must be held at a
location in the Yukon  Territory  or, if the  articles so provide at one or more
places specified in the articles,  or in the absence of such  determination,  at
the place where the registered office of the corporation is located.

QUORUM OF SHAREHOLDERS.  The BCBCA states that the quorum of shareholders of the
corporation at a meeting of  shareholders  is established in the articles of the
corporation.  If no quorum is  established  by the  articles,  the quorum is two
shareholders  entitled  to vote at the meeting  whether  present in person or by
proxy. Under the YBCA, unless the articles of a corporation otherwise provide, a
quorum of shareholders is present at a meeting of shareholders  (irrespective of
the number of persons  actually present at the meeting) if holders of a majority
of the  shares  entitled  to  vote at the  meeting  are  present  in  person  or
represented by proxy.

SHAREHOLDER   PROPOSALS.   The  BCBCA  contains  eligibility   requirements  for
shareholders  that wish to submit  proposals  for  inclusion in a  corporation's
proxy materials. The YBCA imposes similar requirements.

DUTIES  OF  DIRECTORS.   The  BCBCA  provides  that  subject  to  any  unanimous
shareholder agreement, the directors manage, or supervise the management of, the
business and affairs of the Company.  The YBCA contains  substantially  the same
provisions.

REMOVAL OF  DIRECTORS.  The BCBCA  permits the removal of  directors  by special
resolution. Unless otherwise provided in the articles of a corporation, a quorum
of  directors  may fill a vacancy  among  the  directors,  except  for a vacancy
resulting  from an increase  in the number or the  minimum or maximum  number of
directors  or the  failure to elect the number or  minimum  number of  directors
provided  for  in  the  articles.  The  YBCA  contains  substantially  the  same
provisions.

The  following  is a  summary  of  all  material  provisions  of  the  Company's
Continuation  Application  and  Articles  and certain  provisions  of the BCBCA,
applicable to the Company:

         A.       DIRECTOR'S  POWER  TO  VOTE  ON  A  PROPOSAL,  ARRANGEMENT  OR
                  CONTRACT IN WHICH THE DIRECTOR IS MATERIALLY INTERESTED.

                  Under the BCBCA, subject to certain exceptions,  a director or
                  senior  officer of the  Company  must  disclose  any  material
                  interest that he  personally  has, or that he as a director or
                  senior  officer of another  corporation  has in a contract  or
                  transaction  that is  material  to the  Company  and which the
                  Company has entered into or proposes to enter into.

                  A director or senior  officer of the  Company  does not hold a
                  disclosable interest in a contract or transaction if:

                  1.       the  situation  that  would  otherwise  constitute  a
                           disclosable  interest  arose  before the coming  into
                           force of the BCBCA,  and the interest  was  disclosed
                           and  approved  under,  or  was  not  required  to  be
                           disclosed  under  legislation  that  applied  to  the
                           Company before the coming into effect of the BCBCA;
                  2.       both the Company and the other party to the  contract
                           or transaction  are wholly owned  subsidiaries of the
                           same corporation;
                  3.       the Company is a wholly owned subsidiary of the other
                           party to the contract or transaction;

                                      -40-

<PAGE>



                  4.       the other party to the contract or  transaction  is a
                           wholly owned subsidiary of the Company; or
                  5.       the   director   or  senior   officer   is  the  sole
                           shareholder  of the  Company or of a  corporation  of
                           which the Company is a wholly owned subsidiary.

                  A director or senior  officer of the  Company  does not hold a
                  disclosable  interest  in a  contract  or  transaction  merely
                  because:

                  1.       the contract or  transaction is an arrangement by way
                           of a security granted by the Company for money loaned
                           to, or  obligations  undertaken  by, the  director or
                           senior  officer,  or a person in whom the director or
                           senior  officer  has a  material  interest,  for  the
                           benefit  of  the  Company  or  an  affiliate  of  the
                           Company;
                  2.       the contract or  transaction  relates to an indemnity
                           or insurance under the BCBCA;
                  3.       the   contract   or   transaction   relates   to  the
                           remuneration  of the director or senior  officer,  in
                           that person's capacity as director, officer, employee
                           or agent of the  Company  or of an  affiliate  of the
                           Company;
                  4.       the contract or transaction  relates to a loan to the
                           Company,  and the  director or senior  officer,  or a
                           person in whom the  director or senior  officer has a
                           material interest, is or is to be a guarantor of some
                           or all of the loan; or
                  5.       the contract or transaction  has been or will be made
                           with  or for the  benefit  of a  corporation  that is
                           affiliated  with  the  Company  and the  director  or
                           senior  officer is also a director or senior  officer
                           of  that   corporation   or  an   affiliate  of  that
                           corporation.

                  A  director  or  senior  officer  who  holds  such a  material
                  interest  must disclose the nature and extent of such interest
                  in writing.  The disclosure  must be evidenced in writing in a
                  consent  resolution,  the  minutes  of a meeting  or any other
                  record  deposited with the Company's record office. A director
                  who has a disclosable interest in a contract or transaction is
                  not entitled to vote on any  directors'  resolution to approve
                  that contract or transaction, but may be counted in the quorum
                  at the directors' meeting at which such vote is taken.

         B.       DIRECTORS' POWER, IN THE ABSENCE OF AN INDEPENDENT  QUORUM, TO
                  VOTE COMPENSATION TO THEMSELVES OR ANY MEMBERS OF THEIR BODY.

                  The  compensation of the directors is decided by the directors
                  unless the Board of Directors  specifically  requests approval
                  of the compensation from the shareholders.  If the issuance of
                  compensation  to the directors is decided by the directors,  a
                  quorum is the majority of the directors in office.

         C.       BORROWING  POWERS  EXERCISABLE  BY THE  DIRECTORS AND HOW SUCH
                  BORROWING POWERS MAY BE VARIED.

                  The Company, if authorized by the directors, may:

                  1.       borrow  money  in  the  manner  and  amount,  on  the
                           security,  from  the  sources  and on the  terms  and
                           conditions that they consider appropriate;
                  2.       issue bonds,  debentures  and other debt  obligations
                           either  outright or as security for any  liability or
                           obligation  of the Company or any other person and at
                           such discounts or premiums and on such other terms as
                           they consider appropriate;
                  3.       guarantee  the repayment of money by any other person
                           or the  performance  of any  obligation  of any other
                           person; and
                  4.       mortgage,  charge,  whether  by  way of  specific  or
                           floating  charge,  grant a security  interest  in, or
                           give other  security on, the whole or any part of the
                           present  and  future  assets and  undertaking  of the
                           Company.

                  The  borrowing  powers  may  be  varied  by  amendment  to the
                  Articles  of  the  Company  which  requires  approval  of  the
                  shareholders of the Company by Special Resolution.

                                      -41-

<PAGE>



         D.       RETIREMENT AND  NON-RETIREMENT OF DIRECTORS UNDER AN AGE LIMIT
                  REQUIREMENT.

                  There are no such  provisions  applicable to the Company under
                  the Notice of Articles, Articles or the BCBCA.

         E.       NUMBER OF SHARES REQUIRED FOR A DIRECTOR'S QUALIFICATION.

                  A director of the  Company is not  required to hold a share in
                  the capital of the Company as qualification for his office.

DESCRIPTION OF COMMON SHARES

The authorized  capital of the Company consists of an unlimited number of common
shares without par value.  A complete  description is contained in the Company's
Notice of Articles.

Of the Company's  unlimited  share capital,  a total of 1,911,521  common shares
were issued and outstanding as of October 31, 2004.

All of the common  shares are fully paid and not  subject to any future  call or
assessment.  All of the common  shares of the Company  rank equally as to voting
rights,  participation  in a  distribution  of the  assets of the  Company  on a
liquidation,  dissolution  or winding-up of the Company and the  entitlement  to
dividends.  The holders of the common  shares are entitled to receive  notice of
all shareholder  meetings and to attend and vote at such meetings.  Shareholders
are not entitled to  cumulative  voting.  Each common share  carries with it the
right to one vote.  The  common  shares  do not have  preemptive  or  conversion
rights.  In  addition,  there  are no  sinking  fund  or  redemption  provisions
applicable to the common  shares or any  provisions  discriminating  against any
existing or prospective  holders of such securities as a result of a shareholder
owning a substantial number of shares. The Company's board of directors does not
stand for re-election at staggered intervals.

DIVIDEND RECORD

The Company has not paid any  dividends  on its common  shares and has no policy
with respect to the payment of dividends.

OWNERSHIP OF SECURITIES AND CHANGE OF CONTROL

Except for the Investment Canada Act,  discussed below, there are no limitations
on the rights to own securities, including the rights of non-resident or foreign
shareholders  to hold or exercise  voting  rights on the  securities  imposed by
foreign law or by the constituent documents of the Company.

Any person who beneficially owns or controls,  directly or indirectly, more than
10% of the Company's  voting  shares is considered an insider,  and must file an
insider  report  with the  British  Columbia,  Alberta  and  Ontario  Securities
Commissions  within ten days of  becoming  an insider  disclosing  any direct or
indirect  beneficial  ownership of, or control over direction over securities of
the Company. In addition, if the Company itself holds any of its own securities,
the Company must disclose such ownership.

There are no  provisions in the Company's  Continuation  Application,  Notice of
Articles  and  Articles  that would  have an effect of  delaying,  deferring  or
preventing a change in control of the Company  operating  only with respect to a
merger,  acquisition  or corporate  restructuring  involving  the Company or its
subsidiaries.

CHANGES TO RIGHTS AND RESTRICTIONS OF SHARES

Under the BCBCA and the Company's Articles,  if the Company wishes to change the
rights  and  restrictions  of the  common  shares the  Company  must  obtain the
approval of the shareholders by Special Resolution.



                                      -42-

<PAGE>



SHAREHOLDER MEETINGS

ANNUAL AND EXTRAORDINARY GENERAL MEETINGS

Under the BCBCA and the Company's Articles, the Company's annual general meeting
is to be held once in each  calendar  year and not more than 15 months after the
previous  meeting.  No advance  notice  will be required  to be  published  at a
meeting where directors are to be elected.  The Company,  under the BCBCA,  must
give  shareholders  not less than 21 days' notice of any general  meeting of the
shareholders.

The  Directors  may fix in advance a date,  which is no fewer than 35 days or no
more than 60 days prior to the date of the  meeting,  as the record date for the
meeting.  All the holders of common shares as at the record date are entitled to
attend and vote at a general meeting.

On a show of hands,  every person who is present,  a shareholder or proxy holder
and entitled to vote shall have one vote. Whenever a vote by show of hands shall
have been taken upon a  question,  unless a ballot  thereon  is so  required  or
demanded,  a  declaration  by the Chairman of the meeting that the vote upon the
resolution has been carried or carried by the necessary  majority or is defeated
must be entered in the minutes of the meeting and shall be  conclusive  evidence
of the fact without proof of the number or  proportion of the votes  recorded in
favor of or against the  resolution and the result of the vote so taken shall be
the decision of the members upon the said question.

DIFFERENCES FROM REQUIREMENTS IN THE UNITED STATES

Except for the Company's quorum  requirements,  certain  requirements related to
related party transactions,  the requirement for notice of shareholder  meetings
and the approval of amendments to the  Company's  articles,  which are discussed
above,  there  are no  significant  differences  in the  law  applicable  to the
Company,  in the areas outlined  above,  in British  Columbia  versus the United
States. In most states in the United States, a quorum must consist of a majority
of the shares  entitled to vote. Some states allow for a reduction of the quorum
requirements  to less than a majority of the shares  entitled to vote.  Having a
lower  quorum  threshold  may  allow  a  minority  of the  shareholders  to make
decisions about the Company,  its management and operations.  In addition,  most
states  in the  United  States  require  that a notice of  meeting  be mailed to
shareholders  prior to the meeting date.  Additionally,  in the United States, a
director may not be able to vote on the approval of any transaction in which the
director has a interest.  Generally,  most states in the United  States  require
amendments to a company's articles of incorporation to be approved by at least a
majority of the votes cast by the holders of the issued and outstanding  shares.
Some states, or some older  corporations,  may require approval of amendments by
2/3 of the votes cast by the holders of the issued and  outstanding  shares.  In
addition,  in the United States voting by separate voting groups may be required
on the approval of any such amendments.

MATERIAL CONTRACTS

The following is a listing of contracts material to the business of the Company,
which were not entered into in the ordinary  course of business,  during the two
years preceding the date of this annual report:

(1)      Purchase and Sale Agreement, dated December 18, 2003, between CalEx and
         PNP Petroleum  Inc.  relating to the  acquisition of an interest in the
         West Ranch Field, Texas; and

(2)      Purchase and Sale  Agreement,  dated March 1, 2004,  between  CalEx and
         Westport Petroleum Inc. relating to the sale of an interest in the West
         Ranch Field, Texas.

See "Item 4.  Information on the Company - Principal  Properties - Principal Oil
and Gas Properties - West Ranch Field, Texas."

EXCHANGE CONTROLS

There are no governmental  laws,  decrees,  or regulations in Canada relating to
restrictions on the export or import of capital,  or affecting the remittance of
interest,  dividends, or other payments to non-resident holders on the Company's
Common  Stock.  Any  remittances  of dividends to United States  residents  are,
however, subject to a 15% withholding

                                      -43-

<PAGE>



tax  (10%  if the  shareholder  is a  corporation  owning  at  least  10% of the
outstanding Common Stock of the Company) pursuant to Article X of the reciprocal
tax  treaty  between  Canada  and the United  States.  See "Item 10.  Additional
Information - Taxation," below.

Except as  provided  in the  Investment  Canada  Act (the  "Act"),  there are no
limitations  specific to the rights of non- Canadians to hold or vote the common
stock of the Company under the laws of Canada or in the charter documents of the
Company.

The following  discussion  summarizes  the principal  features of the Investment
Canada Act for a non-resident who proposes to acquire the common shares.

The Investment  Canada Act generally  prohibits  implementation  of a reviewable
investment  by  an  individual,   government  or  agency  thereof,  corporation,
partnership,  trust or joint venture (each an "entity") that is not a "Canadian"
as defined in the Investment Canada Act (a "non-Canadian"), unless after review,
the  Director of  Investments  appointed  by the  minister  responsible  for the
Investment  Canada Act is satisfied  that the  investment is likely to be of net
benefit to Canada.  An investment in the common shares by a  non-Canadian  other
than a "WTO Investor" (as that term is defined by the Investment Canada Act, and
which  term  includes  entities  which are  nationals  of or are  controlled  by
nationals of member states of the World Trade Organization) when the Company was
not  controlled by a WTO  Investor,  would be  reviewable  under the  Investment
Canada Act if it was an  investment  to acquire  control of the  Company and the
value of the  assets  of the  Company,  as  determined  in  accordance  with the
regulations  promulgated  under the Investment  Canada Act, equals or exceeds $5
million for direct acquisition and over $50 million for indirect acquisition, or
if an order for review was made by the federal  cabinet on the grounds  that the
investment   related  to  Canada's  cultural  heritage  or  national   identity,
regardless  of the value of the  assets of the  Company.  An  investment  in the
common  shares by a WTO  Investor,  or by a  non-Canadian  when the  Company was
controlled by a WTO Investor,  would be reviewable  under the Investment  Canada
Act if it was an investment  to acquire  control of the Company and the value of
the assets of the Company,  as  determined in  accordance  with the  regulations
promulgated  under  the  Investment  Canada  Act was not less  than a  specified
amount,  which for 2004 is any amount in excess of $237 million.  A non-Canadian
would acquire  control of the Company for the purposes of the Investment  Canada
Act  if  the  non-Canadian  acquired  a  majority  of  the  common  shares.  The
acquisition  of one third or more, but less than a majority of the common shares
would be presumed to be an acquisition of control of the Company unless it could
be established that, on the acquisition,  the Company was not controlled in fact
by the acquirer through the ownership of the common shares.

Certain  transactions  relating  to the common  shares  would be exempt from the
Investment Canada Act,  including:  (a) an acquisition of the common shares by a
person in the ordinary course of that person's business as a trader or dealer in
securities;  (b) an acquisition of control of the Company in connection with the
realization of security granted for a loan or other financial assistance and not
for a purpose related to the provisions of the Investment Canada Act; and (c) an
acquisition  of control of the  Company  by reason of an  amalgamation,  merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect  control in fact of the  Company,  through the  ownership of the common
shares, remained unchanged.

TAXATION

MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES

Management  of the  Company  considers  that  the  following  discussion  fairly
describes the material Canadian federal income tax consequences  applicable to a
holder of Common Stock of the Company who is a resident of the United States and
who is not a resident of Canada and who does not use or hold,  and is not deemed
to use or hold,  his shares of Common  Stock of the Company in  connection  with
carrying on a business in Canada (a "non-resident shareholder").

This summary is based upon the current provisions of the Income Tax Act (Canada)
(the  "ITA"),  the  regulations  thereunder  (the  "Regulations"),  the  current
publicly  announced  administrative  and assessing  policies of Revenue  Canada,
Taxation and all specific  proposals (the "Tax  Proposals") to amend the ITA and
Regulations  announced  by the  Minister of Finance  (Canada)  prior to the date
hereof.  This  description  is not exhaustive of all possible  Canadian  federal
income tax  consequences  and, except for the Tax Proposals,  does not take into
account or anticipate any changes in law,  whether by legislative,  governmental
or judicial action.

                                      -44-

<PAGE>



DIVIDENDS

Dividends  paid on the common  stock of the  Company to a  non-resident  will be
subject to  withholding  tax. The Canada- US Income Tax  Convention  (1980) (the
"Treaty") provides that the normal 25% withholding tax rate is reduced to 15% on
dividends  paid on  shares of a  corporation  resident  in  Canada  (such as the
Company) to  residents  of the United  States,  and also  provides for a further
reduction of this rate to 5% where the  beneficial  owner of the  dividends is a
corporation  which is a resident of the United States which owns at least 10% of
the voting shares of the corporation paying the dividend.

CAPITAL GAINS

In general,  a  non-resident  of Canada is not subject to tax under the ITA with
respect  to a  capital  gain  realized  upon  the  disposition  of a share  of a
corporation  resident in Canada that is listed on a prescribed  stock  exchange.
For purposes of the ITA, the Company is listed on a prescribed  stock  exchange.
Non-residents  of Canada who dispose of shares of the Company will be subject to
income tax in Canada with respect to capital gains if:

         (a)      the non-resident holder;
         (b)      persons  with  whom the  non-resident  holder  did not deal at
                  arm's length; or
         (c)      the non-resident holder and persons with whom the non-resident
                  holder did not deal with at arm's length,

owned  not less  than 25% of the  issued  shares  of any  class or series of the
Company at any time during the five-year period  preceding the  disposition.  In
the case of a  non-resident  holder  to whom  shares  of the  Company  represent
taxable Canadian  property and who is resident in the United States, no Canadian
taxes will be payable on a capital gain realized on such shares by reason of the
Treaty unless the value of such shares is derived principally from real property
situated in Canada.  However, in such a case, certain  transitional relief under
the Treaty may be available.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following  discussion  summarizes the material  United States federal income
tax  consequences,  under  current  law,  applicable  to a US Holder (as defined
below)  of  the  Company's  common  stock.  This  discussion  does  not  address
consequences peculiar to persons subject to special provisions of federal income
tax law, such as tax-exempt organizations, qualified retirement plans, financial
institutions,  insurance  companies,  real estate investment  trusts,  regulated
investment companies,  broker-dealers,  nonresident alien individuals or foreign
corporations,  and shareholders owning common stock representing 10% of the vote
and value of the Company. In addition, this discussion does not cover any state,
local or foreign tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code
of 1986,  as amended (the  "Code"),  Treasury  Regulations,  published  Internal
Revenue Service ("IRS") rulings,  published  administrative positions of the IRS
and court decisions that are currently applicable,  any or all of which could be
materially and adversely changed,  possibly on a retroactive basis, at any time.
In addition,  this  discussion  does not consider the  potential  effects,  both
adverse and beneficial of recently proposed legislation which, if enacted, could
be  applied,  possibly  on  a  retroactive  basis,  at  any  time.  Holders  and
prospective  holders of the Company's  Common Stock should consult their own tax
advisors  about the  federal,  state,  local and  foreign  tax  consequences  of
purchasing, owning and disposing of shares of Common Stock of the Company.

US HOLDERS

As used herein, a "US Holder" is defined as (i) citizens or residents of the US,
or any state  thereof,  (ii) a corporation  or other entity created or organized
under the laws of the US, or any political subdivision thereof,  (iii) an estate
the income of which is subject to US federal  income tax regardless of source or
that is  otherwise  subject  to US federal  income tax on a net income  basis in
respect of the common stock, or (iv) a trust whose  administration is subject to
the primary  supervision  of a US court and which has one or more US fiduciaries
who have the authority to control all substantial  decisions of the trust, whose
ownership of common stock is not effectively connected with the conduct of

                                      -45-

<PAGE>



a trade or business in the United  States and  shareholders  who acquired  their
stock   through  the  exercise  of  employee   stock  options  or  otherwise  as
compensation.

DISTRIBUTIONS ON SHARES OF COMMON STOCK

US Holders receiving dividend distributions  (including  constructive dividends)
with  respect to the  Company's  common  stock are  required to include in gross
income for United  States  federal  income tax purposes the gross amount of such
distributions to the extent that the Company has current or accumulated earnings
and profits,  without  reduction for any Canadian  income tax withheld from such
distributions.  Such  Canadian tax withheld may be credited,  subject to certain
limitations,  against the US Holder's United States federal income tax liability
or,  alternatively,  may be deducted in computing the US Holder's  United States
federal  taxable  income by those who  itemize  deductions.  (See more  detailed
discussion  at  "Foreign  Tax Credit"  below.) To the extent that  distributions
exceed current or accumulated earnings and profits of the Company,  they will be
treated first as a return of capital up to the US Holder's adjusted basis in the
common  stock and  thereafter  as gain from the sale or exchange of such shares.
Preferential tax rates for long-term capital gains are applicable to a US Holder
which is an individual, estate or trust. There are currently no preferential tax
rates  for  long-term  capital  gains for a US  Holder  which is a  corporation.
Dividends paid on the Company's  common stock will not generally be eligible for
the dividends received deduction  provided to corporations  receiving  dividends
from certain United States corporations.

FOREIGN TAX CREDIT

A US Holder who pays (or has withheld from  distributions)  Canadian  income tax
with respect to the ownership of the Company's common stock may be entitled,  at
the  option of the US  Holder,  to either a  deduction  or a tax credit for such
foreign tax paid or withheld. Generally, it will be more advantageous to claim a
credit  because  a  credit  reduces  United  States  federal  income  taxes on a
dollar-for-dollar  basis, while a deduction merely reduces the taxpayer's income
subject to tax. This election is made on a year-by-year basis and applies to all
foreign taxes paid by (or withheld from) the US Holder during that year. Subject
to certain  limitations,  Canadian  taxes  withheld  will be eligible for credit
against the US Holder's United States federal income taxes.  Under the Code, the
limitation on foreign taxes  eligible for credit is calculated  separately  with
respect to specific classes of income.  Dividends paid by the Company  generally
will be either "passive" income or "financial services" income, depending on the
particular US Holder's circumstances. Foreign tax credits allowable with respect
to each  class of income  cannot  exceed the US  federal  income  tax  otherwise
payable with respect to such class of income.  The  consequences of the separate
limitations will depend on the nature and sources of each US Holder's income and
the deductions  appropriately allocated or apportioned thereto. The availability
of the foreign tax credit and the  application of the  limitations on the credit
are fact  specific  and holders and  prospective  holders of common stock should
consult their own tax advisors regarding their individual circumstances.

DISPOSITION OF SHARES OF COMMON STOCK

A US Holder will  recognize gain or loss upon the sale of shares of common stock
equal to the  difference,  if any,  between (i) the amount of cash plus the fair
market value of any property  received;  and (ii) the shareholder's tax basis in
the common  stock.  This gain or loss will be capital gain or loss if the shares
are a capital asset in the hands of the US Holder, and such gain or loss will be
long-term  capital  gain or loss if the US Holder has held the common  stock for
more than one year.  Gains and  losses  are netted  and  combined  according  to
special  rules in arriving at the overall  capital gain or loss for a particular
tax  year.  Deductions  for  net  capital  losses  are  subject  to  significant
limitations.  For US Holders who are individuals, any unused portion of such net
capital  loss may be carried  over to be used in later tax years  until such net
capital loss is thereby exhausted.  For US Holders which are corporations (other
than  corporations  subject to Subchapter S of the Code),  an unused net capital
loss may be carried back three years from the loss year and carried forward five
years  from the loss year to be offset  against  capital  gains  until  such net
capital loss is thereby exhausted.

OTHER CONSIDERATIONS

The Company has not  determined  whether it meets the  definition  of a "passive
foreign  investment  company" (a "PFIC").  It is unlikely that the Company meets
the  definition  of  a  "foreign  personal  holding  company"  (a  "FPHC")  or a
"controlled foreign corporation" (a "CFC") under current US law.


                                      -46-

<PAGE>



If more  than  50% of the  voting  power  or value  of the  Company  were  owned
(actually  or  constructively)  by  US  Holders  who  each  owned  (actually  or
constructively)  10% or more of the voting power of the Company's  common shares
("10%  Shareholders"),  then  the  Company  would  become  a CFC  and  each  10%
Shareholder would be required to include in its taxable income as a constructive
dividend  an amount  equal to its share of certain  undistributed  income of the
Company.  If (1) more  than 50% of the  voting  power or value of the  Company's
common  shares  were  owned  (actually  or  constructively)  by  five  or  fewer
individuals  who are citizens or  residents of the United  States and (2) 60% or
more of the Company's  income consisted of certain  interest,  dividend or other
enumerated  types of income,  then the Company  would be a FPHC.  If the Company
were a FPHC,  then each US Holder  (regardless  of the  amount of the  Company's
common  shares  owned by such US  Holder)  would be  required  to include in its
taxable  income  as  a   constructive   dividend  its  share  of  the  Company's
undistributed income of specific types.

If 75% or more of the  Company's  annual gross income has ever  consisted of, or
ever consists of, "passive" income or if 50% or more of the average value of the
Company's  assets in any year has ever consisted of, or ever consists of, assets
that produce, or are held for the production of, such "passive" income, then the
Company would be or would become a PFIC. The Company has not provided assurances
that it has not been and does not expect to become a PFIC.  Please note that the
application of the PFIC provisions of the Code to resource companies is somewhat
unclear.

If the Company  were to be a PFIC,  then a US Holder would be required to pay an
interest  charge  together  with tax  calculated at maximum tax rates on certain
"excess  distributions"  (defined to include  gain on the sale of stock)  unless
such US Holder  made an  election  either to (1)  include in his or her  taxable
income  certain  undistributed  amounts of the  Company's  income or (2) mark to
market his or her Company  common  shares at the end of each taxable year as set
forth in Section 1296 of the Code.

INFORMATION REPORTING AND BACKUP WITHHOLDING

US information  reporting  requirements may apply with respect to the payment of
dividends to US Holders of the  Company's  shares.  Under  Treasury  regulations
currently in effect,  non-corporate holders may be subject to backup withholding
at a 31% rate with respect to dividends when such holder (1) fails to furnish or
certify a correct  taxpayer  identification  number to the payor in the required
manner,  (2) is  notified  by the IRS that it has failed to report  payments  of
interest or dividends  properly or (3) fails,  under certain  circumstances,  to
certify  that it has been  notified  by the IRS  that it is  subject  to  backup
withholding for failure to report interest and dividend payments.

INSPECTION OF DOCUMENTS

Copies of the  documents  referred to in this annual  report may be inspected at
the  Company's  corporate  office  at Suite  1305 - 1090  West  Georgia  Street,
Vancouver, British Columbia V6E 3V7, during normal business hours.


ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
--------------------------------------------------------------------------------

Not applicable.


ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
--------------------------------------------------------------------------------

Not applicable.


                                     PART II


ITEM 13.  ITEM DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
--------------------------------------------------------------------------------

Not applicable.


                                      -47-

<PAGE>



ITEM 14.  MATERIAL  MODIFICATIONS  TO  THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS.
--------------------------------------------------------------------------------

See  "Item 4.  Information  on the  Company  - History  and  Development  of the
Company"  and  "Item  10.  Other   Information  -  Memorandum  and  Articles  of
Association".


ITEM 15.  CONTROLS AND PROCEDURES.
--------------------------------------------------------------------------------

An evaluation was performed under the supervision and with the  participation of
the Company's management,  including Mr. DeMare, the Company's President,  Chief
Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of the
design  and  operation  of the  Company's  disclosure  controls  and  procedures
pursuant to Rules  13a-15(b)  and 15d- 15(b) of the  Securities  Exchange Act of
1934 (the "Exchange Act") as of May 31, 2004.  Based upon that  evaluation,  Mr.
DeMare,  concluded  that the Company's  disclosure  controls and  procedures are
effective to ensure that information  required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded,  processed,
summarized  and reported  within the time periods  specified in  Securities  and
Exchange Commission rules and forms.

During  the  fiscal  year  ended May 31,  2004,  there  were no  changes  in the
Company's  internal  control  over  financial  reporting  that  have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.


ITEM 16.  [RESERVED]
--------------------------------------------------------------------------------

Not applicable.


ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT.
--------------------------------------------------------------------------------

The Board of Directors  has  determined  that the Company has at least one audit
committee  financial expert,  Mr. Nick DeMare, who serves on the Company's audit
committee.  Mr. DeMare is not considered to be an "independent director" as that
term is defined in Rule  4200(a)(15)  of the National  Association of Securities
Dealers.


ITEM 16B.   CODE OF ETHICS.
--------------------------------------------------------------------------------

The Company has not yet adopted a code of ethics that  applies to the  Company's
principal executive officer,  principal financial officer,  principal accounting
officer,  or controller,  or persons  performing  similar  functions.  Given the
Company's  current  operations,  management does not believe a code of ethics is
necessary at this stage of the Company's development.


ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.
--------------------------------------------------------------------------------

AUDIT FEES

For the  fiscal  years  ended May 31,  2004 and 2003,  the  Company's  principal
accountant  billed  $9,989  and  $12,725,  respectively,  for the  audit  of the
Company's annual financial  statements or services that are normally provided by
the  accountant  in  connection   with  statutory  and  regulatory   filings  or
engagements for those fiscal years.

AUDIT-RELATED FEES

For the  fiscal  years  ended May 31,  2004 and 2003,  the  Company's  principal
accountant billed $nil and billed $nil  respectively,  for assurance and related
services that were reasonably  related to the performance of the audit or review
of the Company's  financial  statements  outside of those fees  disclosed  above
under "Audit Fees".

                                      -48-

<PAGE>



TAX FEES

For the  fiscal  years  ended May 31,  2004 and 2003,  the  Company's  principal
accountant billed $nil and billed $nil,  respectively,  for tax compliance,  tax
advice, and tax planning services.

ALL OTHER FEES

For the  fiscal  years  ended May 31,  2004 and 2003,  the  Company's  principal
accountant is expected to bill $Nil and billed $Nil, respectively,  for products
and services other than those set forth above.

PRE-APPROVAL POLICIES AND PROCEDURES

Prior to engaging the Company's accountants to perform a particular service, the
Company's audit  committee  obtains an estimate for the service to be performed.
The  Company's  audit  committee   reviews  and   pre-approves   all  audit  and
audit-related  services and the fees and other compensation related thereto, and
any non-audit  services,  provided by the Company's external auditors.  Provided
the pre-approval of the non-audit services is presented to the audit committee's
first scheduled  meeting following such approval such authority may be delegated
by  the  audit  committee  to one  or  more  independent  members  of the  audit
committee.  The audit  committee in accordance  with  procedures for the Company
approved all of the services described above.

At no time since the  commencement  of the  Company's  most  recently  completed
financial year has the Company relied on the waiver in paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.


ITEM 16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
--------------------------------------------------------------------------------

Not applicable.


ITEM 16E.   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
            PURCHASERS.
--------------------------------------------------------------------------------

Not applicable.


                                    PART III


ITEM 17.  FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------

See pages 52 (F-1) through 68 (F-17).


ITEM 18.  FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------

Not applicable.


ITEM 19.  EXHIBITS.
--------------------------------------------------------------------------------

   EXHIBIT NUMBER     DESCRIPTION                                           PAGE

        1.1           Certificate of Continuation and Notice of Articles      69

        1.2           Articles                                                73


                                      -49-

<PAGE>



   EXHIBIT NUMBER     DESCRIPTION                                           PAGE

        4.2           Escrow Agreement dated June 28, 2000 among the
                      Company and each of  Donald W. Busby 1999
                      Irrevocable  Trust,  Chase Management Ltd.,
                      Nick DeMare and William Lee. (1)                       N/A

        4.3           Stock Option Plan 2004                                 111

        4.8           Escrow Agreement dated September 26, 2001
                      among the Company, Computershare Trust Company
                      of Canada and each of Greystoke Investments
                      Inc., Ted Carlsen and Monica Carlsen (2)               N/A

        4.10          Purchase and Sale Agreement dated
                      December 18, 2003 between CalEx and PNP
                      Petroleum Inc.(3)                                      N/A

        4.11          Purchase and Sale Agreement effective
                      March 1, 2004 between CalEx and
                      Westport Petroleum, Inc.                               134

        12.1          Certification of Nick DeMare Pursuant to
                      Rule 13a-14(a)                                         149

        13.1          Certification of Nick DeMare Pursuant to
                      18 U.S.C. Section 1350                                 151

         (1)      Previously  filed as an exhibit to the Company's  registration
                  statement on Form 20-F, filed with the Securities and Exchange
                  Commission on August 31, 2000. File Number 0-30920.

         (2)      Previously  filed as an exhibit to the Company's annual report
                  on  Form  20-F,   filed  with  the   Securities  and  Exchange
                  Commission on November 29, 2001. File Number 0-30920.

         (3)      Previously  filed as an exhibit to the Company's annual report
                  on  Form  20-F,   filed  with  the   Securities  and  Exchange
                  Commission on January 16, 2004. File Number 0-30920.



                                      -50-

<PAGE>



                                   SIGNATURES


The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the  undersigned to sign
this annual report on its behalf.


                           BARADERO RESOURCES LIMITED



Dated:   NOVEMBER 30, 2004                  /s/  NICK DEMARE
                                            Nick DeMare,
                                            ------------------------------------
                                            President, Chief Executive Officer,
                                            Chief Financial Officer and Director


                                      -51-

<PAGE>






















--------------------------------------------------------------------------------



                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)

                        CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


--------------------------------------------------------------------------------
































                                       F-1

                                      -52-

<PAGE>












AUDITOR'S REPORT




To the Shareholders of
Baradero Resources Limited (formerly California Exploration Ltd.)


We have audited the consolidated  balance sheets of Baradero  Resources  Limited
(formerly  California  Exploration  Ltd.)  as at May 31,  2004  and 2003 and the
consolidated statements of operations, deficit and cash flow for the years ended
May 31, 2004, 2003 and 2002. These financial  statements are the  responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with Canadian  generally accepted auditing
standards in Canada and the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform an audit
to obtain  reasonable  assurance  whether the financial  statements  are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the overall  financial  statements
presentation.

In our opinion,  these consolidated  financial statements present fairly, in all
material respects,  the financial position of the Company as at May 31, 2004 and
2003 and the results of its operations and cash flow for the years ended May 31,
2004, 2003 and 2002 in accordance with Canadian  generally  accepted  accounting
principles.

Canadian generally accepted  accounting  principles vary in certain  significant
respects from  accounting  principles  generally  accepted in the United States.
Application  of accounting  principles  generally  accepted in the United States
would have affected assets,  liabilities and shareholders'  equity as at May 31,
2004 and 2003 and results of operations  for the years ended May 31, 2004,  2003
and  2002 to the  extent  summarized  in Note 11 to the  consolidated  financial
statements.

On September  24, 2004 we reported  separately to the  shareholders  of Baradero
Resources  Limited  (formerly  California   Exploration  Ltd.)  on  consolidated
financial  statements  as at,  and for the years  ended,  May 31,  2004 and 2003
audited in accordance with Canadian generally accepted auditing standards.


                                                       /s/ D&H Group

Vancouver, BC
September 24, 2004                                 CHARTERED ACCOUNTANTS



                                       F-2

                                    D&H Group
                          A Partnership of Corporations
               A Member of BHD Association with affiliated offices across Canada
        and Internationally  10th Floor, 1333 West Broadway,  Vancouver B.C. V6H
        4C1 www.dhgroup.ca F 604-731-9923 T 604-731-5881

                                      -53-

<PAGE>
















COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA - U.S. REPORTING DIFFERENCE




In the United States,  reporting  standards for auditors require the addition of
an explanatory  paragraph  (following the opinion  paragraph) when the financial
statements are affected by conditions and events that cast substantial  doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to the  financial  statements.  Our  report  to  the  shareholders  dated
September 24, 2004 is expressed in accordance with Canadian reporting  standards
which do not permit a reference to such events and  conditions  in the auditors'
report when these are adequately disclosed in the financial statements.



                                                      /s/ D&H Group

Vancouver, BC
September 24, 2004                                 CHARTERED ACCOUNTANTS



















                                       F-3

                                    D&H Group
                          A Partnership of Corporations
               A Member of BHD Association with affiliated offices across Canada
        and Internationally  10th Floor, 1333 West Broadway,  Vancouver B.C. V6H
        4C1 www.dhgroup.ca F 604-731-9923 T 604-731-5881

                                      -54-

<PAGE>



                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                           CONSOLIDATED BALANCE SHEETS
                                  AS AT MAY 31
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)



                                                       2004            2003
                                                         $               $

                                     ASSETS

CURRENT ASSETS

Cash                                                    100,921          36,207
Amounts receivable and prepaids                          10,303          10,469
                                                   ------------    ------------
                                                        111,224          46,676

OIL AND GAS PROPERTIES (Note 4)                               -          73,093

OTHER ASSETS (Note 5)                                    26,489          15,764
                                                   ------------    ------------
                                                        137,713         135,533
                                                   ============    ============

                                   LIABILITIES

CURRENT LIABILITIES

Accounts payable and accrued liabilities (Note 7)        15,089         220,067

ADVANCES (Note 7)                                       127,548          99,548
                                                   ------------    ------------
                                                        142,637         319,615
                                                   ------------    ------------

                        SHAREHOLDERS' EQUITY (DEFICIENCY)


SHARE CAPITAL (Note 6)                                1,751,878       1,751,878

DEFICIT                                              (1,756,802)     (1,935,960)
                                                   ------------    ------------
                                                         (4,924)       (184,082)
                                                   ------------    ------------
                                                        137,713         135,533
                                                   ============    ============
NATURE OF OPERATIONS (Note 1)



APPROVED BY THE DIRECTORS

/s/ NICK DEMARE          , Director
------------------------
/s/ HARVEY LIM           , Director
------------------------


                                       F-4

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.

                                      -55-

<PAGE>



                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
                           FOR THE YEARS ENDED MAY 31
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


<TABLE>
<CAPTION>

                                                       2004            2003            2002
                                                         $               $               $

<S>                                               <C>             <C>             <C>

REVENUES

Oil and gas sales                                        98,904          22,064               -
                                                   ------------    ------------    ------------
EXPENSES

Production                                               28,741           4,870               -
General and administration                               79,849          99,139         378,279
Depreciation, depletion and impairment                   44,187         580,101          61,702
                                                   ------------    ------------    ------------
                                                        152,777         684,110         439,981
                                                   ------------    ------------    ------------
LOSS BEFORE OTHER ITEMS                                 (53,873)       (662,046)       (439,981)
                                                   ------------    ------------    ------------
OTHER ITEMS

Interest and other income                                 4,099          11,590         113,663
Gain on abandonment of subsidiary (Note 2)              204,770               -               -
Recoveries (write-off) of other assets (Note 7(b))       24,162        (173,115)       (193,477)
Impairment of amounts receivable and bridge loan              -        (169,322)       (116,506)
Write-off of capital assets                                   -         (63,798)              -
Unrealized foreign exchange loss                              -         (15,790)         (4,643)
                                                   ------------    ------------    ------------
                                                        233,031        (410,435)       (200,963)
                                                   ------------    ------------    ------------
NET EARNINGS (LOSS) FOR THE YEAR                        179,158      (1,072,481)       (640,944)

DEFICIT - BEGINNING OF YEAR                          (1,935,960)       (863,479)       (222,535)
                                                   ------------    ------------    ------------
DEFICIT - END OF YEAR                                (1,756,802)     (1,935,960)       (863,479)
                                                   ============    ============    ============


BASIC AND DILUTED EARNINGS (LOSS) PER SHARE               $0.09          $(0.56)          $(0.39)
                                                   ============    ============    ============
WEIGHTED AVERAGE NUMBER OF
     COMMON SHARES OUTSTANDING                        1,911,521       1,910,919       1,627,355
                                                   ============    ============    ============

</TABLE>












                                       F-5


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.

                                      -56-

<PAGE>



                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                           FOR THE YEARS ENDED MAY 31
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)



<TABLE>
<CAPTION>

                                                                       2004            2003            2002
                                                                         $               $               $

<S>                                                               <C>             <C>             <C>

CASH PROVIDED FROM (USED FOR)

OPERATING ACTIVITIES

Net earnings (loss) for the year                                        179,158      (1,072,481)       (640,944)
Items not affecting cash
     Amortization of capital assets                                           -          13,527          59,911
     Depreciation, depletion and impairment                              44,187         580,101          61,702
     Impairment of amounts receivable and bridge loan                         -         169,322         116,506
     Write-off of capital assets                                              -          63,798               -
     Gain on abandonment of subsidiary                                 (204,770)              -               -
     Unrealized foreign exchange loss                                         -          13,257           6,823
     Write-off (recoveries) of other assets                             (11,250)        173,115         193,477
     Other income                                                        (3,785)              -               -
Decrease (increase) in amounts receivable and prepaids                      166          (3,963)        110,885
Increase (decrease) in accounts payable and accrued liabilities            (208)        (46,597)        240,020
                                                                   ------------    ------------    ------------
                                                                          3,498        (109,921)        148,380
                                                                   ------------    ------------    ------------
INVESTING ACTIVITIES

Additions to oil and gas properties                                     (60,908)       (246,094)       (451,045)
Proceeds from sale of oil and gas properties                             89,814               -               -
Other assets                                                              4,310         234,031        (289,347)
Loan repayment                                                                -               -           7,900
                                                                   ------------    ------------    ------------
                                                                         33,216         (12,063)       (732,492)
                                                                   ------------    ------------    ------------
FINANCING ACTIVITIES

Issuance of common shares                                                     -          11,000               -
Deferred acquisition costs                                                    -         (12,675)        (20,196)
Advances received                                                        28,000           9,548          90,000
Cash assumed on reorganization                                                -               -         157,074
Reorganization costs                                                          -               -         (49,797)
                                                                   ------------    ------------    ------------
                                                                         28,000           7,873         177,081
                                                                   ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH                                          64,714        (114,111)       (407,031)

CASH - BEGINNING OF YEAR                                                 36,207         150,318         557,349
                                                                   ------------    ------------    ------------
CASH - END OF YEAR                                                      100,921          36,207         150,318
                                                                   ============    ============    ============

</TABLE>

SUPPLEMENTARY CASH FLOW INFORMATION (Note 10)




                                       F-6

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.

                                      -57-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


1.       NAME CHANGE AND NATURE OF OPERATIONS AND GOING CONCERN

         Baradero   Resources  Limited  (the  "Company")  was  involved  in  the
         acquisition,  exploration,  development and production of crude oil and
         natural gas  reserves.  In March 2004,  the Company sold its  remaining
         interests  in  oil  and  gas  properties.   The  Company   subsequently
         participated  in the  drilling  of an  unsuccessful  well  in  Alberta,
         Canada.  On May  31,  2004,  the  Company  abandoned  its  oil  and gas
         subsidiary and no longer holds any oil and gas  interests.  See Notes 3
         and 4. The Company is currently assessing its business opportunities.

         Effective  June 3, 2004, the Company  changed its name from  California
         Exploration Ltd. to Baradero Resources Limited.

         As at  May  31,  2004,  the  Company  had  an  accumulated  deficit  of
         $1,756,802,   working  capital  of  $96,135  and  advances  payable  of
         $127,548.  The  Company  will  require  additional  advances  or equity
         financing  to  pursue  any  business  opportunities  and  meet  ongoing
         corporate  overhead.  There are no assurances  that the Company will be
         able  to  identify  and  complete  acquisitions  or  obtain  sufficient
         additional resources.

         These   consolidated   financial   statements  have  been  prepared  in
         accordance  with  Canadian  generally  accepted  accounting  principles
         ("Canadian  GAAP") applicable to a going concern which assumes that the
         Company will realize its assets and  discharge its  liabilities  in the
         normal  course of  business.  Realization  values may be  substantially
         different from the carrying values shown in the consolidated  financial
         statements should the Company be unable to continue as a going concern.
         The ability of the Company to settle its  liabilities  as they come due
         and to fund ongoing  operations  is  dependent  upon the ability of the
         Company to obtain additional funding from equity financing.  Failure to
         continue as a going  concern would  require  restatement  of assets and
         liabilities on a liquidation  basis, which could differ materially from
         the going concern basis.


2.       SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

         These   consolidated   financial   statements  have  been  prepared  in
         accordance  with Canadian GAAP.  The  significant  differences  between
         these  principles  and those that would be applied  under United States
         generally accepted  accounting  principles ("US GAAP") are disclosed in
         Note 11.

         The consolidated  financial  statements have, in management's  opinion,
         been properly  prepared  within  reasonable  limits of materiality  and
         within the framework of the significant  accounting policies summarized
         below.

         The  consolidated  financial  statements  includes  the accounts of the
         Company and the activities of its wholly- owned subsidiary,  California
         Exploration Inc.  ("CalEx"),  to May 31, 2004.  Effective May 31, 2004,
         the Board of  Directors  of the Company  determined  to abandon  CalEx,
         resulting in a gain of $204,770  for  liabilities  of CalEx  previously
         recognized  by the  Company.  The  Company no longer  accounts  for the
         activities of CalEx.

         USE OF ESTIMATES

         The  preparation  of financial  statements in conformity  with Canadian
         GAAP requires  management to make estimates and assumptions that affect
         the  reported  amount of  assets  and  liabilities  and  disclosure  of
         contingent liabilities at the date of the financial statements, and the
         reported amounts of revenues and expenditures during the period. Actual
         results may differ from those estimates.
                                       F-7

                                      -58-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         CASH EQUIVALENTS

         Cash includes cash and short-term  deposits  maturing within 90 days of
         the original date of acquisition.

         OIL AND GAS PROPERTIES

         CAPITALIZED COSTS

         The Company  follows the full cost method of accounting for oil and gas
         operations.  Under this method all costs related to the exploration for
         and   development  of  oil  and  gas  reserves  are  capitalized  on  a
         country-by-  country  basis.  Costs  include lease  acquisition  costs,
         geological  and  geophysical  expenses,  overhead  directly  related to
         exploration  and  development  activities  and costs of  drilling  both
         productive  and  non-productive   wells.  Proceeds  from  the  sale  of
         properties are applied against  capitalized costs,  without any gain or
         loss being recognized, unless such a sale would significantly alter the
         rate of depletion and depreciation.

         DEPLETION AND DEPRECIATION

         Depletion of exploration  and  development  costs and  depreciation  of
         production  equipment is provided using the  unit-of-production  method
         based  upon  estimated  proven  oil  and gas  reserves.  The  costs  of
         significant  unevaluated  properties are excluded from costs subject to
         depletion. For depletion and depreciation purposes, relative volumes of
         oil and  gas  production  and  reserves  are  converted  at the  energy
         equivalent conversion rate of six thousand cubic feet of natural gas to
         one barrel of crude oil.

         CEILING TEST

         In applying the full cost method,  the Company  performs a ceiling test
         whereby the carrying  value of petroleum and natural gas properties and
         production  equipment,  net of future income taxes and the  accumulated
         provision  for site  restoration  and  abandonment  costs,  is compared
         annually to an estimate of future net cash flow from the  production of
         proven reserves. Net cash flow is estimated using year end prices, less
         estimated future general and administrative  expenses,  financing costs
         and income taxes.  Should this  comparison  indicate an excess carrying
         value, the excess is charged against earnings.

         JOINT OPERATIONS

         Substantially  all of the Company's oil and gas exploration  activities
         were conducted jointly with others and, accordingly, these consolidated
         financial  statements reflect the Company's  proportionate  interest in
         such activities.

         LONG-TERM INVESTMENTS

         Long-term investments are accounted for using the cost method.



                                       F-8

                                      -59-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         REVENUE RECOGNITION

         The Company  recognizes  oil and gas  revenues  from its  interests  in
         producing wells as oil and gas is produced and sold from these wells.

         INCOME TAXES

         Income tax  liabilities and assets are recognized for the estimated tax
         consequences  attributable to differences  between the amounts reported
         in the  consolidated  financial  statements  and their  respective  tax
         bases, using enacted income tax rates. The effect of a change in income
         tax rates on future income tax  liabilities and assets is recognized in
         income in the period that the change  occurs.  Future income tax assets
         are recognized to the extent that they are considered  more likely than
         not to be realized.

         EARNINGS (LOSS) PER SHARE

         Basic  earnings per share is computed by dividing  income  available to
         common  shareholders  by the weighted  average  number of common shares
         outstanding  during the period. The computation of diluted earnings per
         share  assumes  the  conversion,  exercise  or  contingent  issuance of
         securities only when such conversion, exercise or issuance would have a
         dilutive  effect  on  earnings  per  share.   The  dilutive  effect  of
         convertible  securities  is reflected in diluted  earnings per share by
         application  of the "if  converted"  method.  The  dilutive  effect  of
         outstanding  options and warrants and their equivalents is reflected in
         diluted earnings per share by application of the treasury stock method.

         CONCENTRATION OF CREDIT RISK

         Financial  instruments,   which  potentially  subject  the  Company  to
         concentrations   of  credit   risk,   consist  of  cash.   The  Company
         periodically evaluates the credit worthiness of financial institutions,
         and  maintains  cash  accounts  only in large  high  quality  financial
         institutions.


3.       CHANGE IN REPORTING CURRENCY

         For the 2004 fiscal year, on a retroactive  basis,  the Company changed
         its reporting  currency from United States dollars to Canadian  dollars
         to reflect the Company's activities at the end of the 2004 fiscal year.
         All assets and liabilities are translated into Canadian  dollars at the
         rate of exchange  prevailing  at the balance  sheet date.  Revenues and
         expenses are translated at the average rate for the year.

         The figures  for the 2003  fiscal year as reported in Canadian  dollars
         versus  United  States  dollars  include  a net  loss  for the  year of
         $1,072,481(2002 - $640,944) versus US $699,602 (2002 - US $408,713) and
         a deficit as at May 31, 2003, of $1,935,960 versus US $1,250,220.



                                       F-9

                                      -60-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


4.       OIL AND GAS PROPERTIES

                                                       2004            2003
                                                         $               $

         Evaluated property                                   -          78,686
         Accumulated, depreciation,
                depletion and impairment                      -          (5,593)
                                                   ------------    ------------
                                                              -          73,093
                                                   ============    ============


         During the 2004 fiscal  year,  the Company  sold its 3% interest in oil
         and gas leases ( the "West  Ranch  Field')  located in Jackson  County,
         Texas, USA, for $89,814, which was the net carrying cost at the time of
         disposition.  The Company subsequently  participated in the drilling of
         an unsuccessful well in Alberta, Canada at a cost of $30,191.

         As at May  31,  2004,  the  Company  does  not  hold  any  oil  and gas
         interests.


5.       OTHER ASSETS

                                                       2004            2003
                                                         $               $

         Secure One Inc. (a)                             15,239          15,764
         Halo Resources Ltd. (b)                         11,250               -
                                                   ------------    ------------
                                                         26,489          15,764
                                                   ============    ============

         (a)      During the 2004 fiscal year,  the Company  sold 20,000  common
                  shares  of  Secure  One  Inc.  ("Secure")   (formerly  Westone
                  Ventures Inc.),  for net proceeds of $4,310,  realizing a gain
                  of $3,785.  The quoted market value of the  remaining  580,000
                  common shares of Secure at May 31, 2004, was $104,400.

         (b)      During the 2004  fiscal  year,  the  Company  received  15,000
                  common  shares  of  Halo  Resources  Ltd.  ("Halo")  (formerly
                  Trimark Energy Ltd.),  a public  company with common  officers
                  and directors, as part of its recovery of accounts receivable,
                  as described in Note 7(b). The quoted market value of the Halo
                  shares at May 31, 2004, was $11,250.


6.       SHARE CAPITAL

                                                      NUMBER
                                                     OF SHARES           $

         Authorized - unlimited common shares
                      without par value

         Balance, May 31, 2002                        1,897,771       1,740,878

         Shares issued on exercise of warrants           13,750          11,000
                                                   ------------    ------------
         Balance, May 31, 2003 and May 31, 2004       1,911,521       1,751,878
                                                   ============    ============

         (a)      On June 3, 2004, the Company  completed a consolidation of its
                  share capital on a 1 new for 4 old basis.  All share  balances
                  have been adjusted accordingly.
                                      F-10

                                      -61-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


6.       SHARE CAPITAL (continued)

         (b)      As at May 31, 2004,  489,113 shares are held in escrow and are
                  being  released at six months  intervals  over a period ending
                  September 27, 2007.

         (c)      A summary of the  Company's  outstanding  stock options at May
                  31, 2004,  2003 and 2002, and the changes for the years ending
                  on those dates is presented below:
<TABLE>
<CAPTION>

                                                2004                       2003                      2002
                                       -----------------------   ------------------------  ------------------------
                                                     WEIGHTED                  WEIGHTED                   WEIGHTED
                                         NUMBER      AVERAGE       NUMBER       AVERAGE       NUMBER      AVERAGE
                                       OF OPTIONS    EXERCISE    OF OPTIONS    EXERCISE     OF OPTIONS    EXERCISE
                                       OUTSTANDING    PRICE      OUTSTANDING     PRICE     OUTSTANDING     PRICE
                                                        $                          $                         $
                <S>                   <C>           <C>         <C>           <C>         <C>            <C>

                  Balance,
                     beginning of year     158,750     1.68          271,250     1.96            71,250     0.80
                  Granted                        -      -                  -       -            200,000     2.40
                  Expired / cancelled     (158,750)    1.68         (112,500)    2.40                 -       -
                                        ----------                ----------                 ----------
                  Balance, end of year           -      -            158,750     1.68           271,250     1.96
                                        ==========                ==========                 ==========
</TABLE>

         (d)      A  summary  of  the   Company's   warrants   outstanding   and
                  exercisable  at May 31, 2004,  2003 and 2002,  and the changes
                  for the years ending on those dates is presented below:
<TABLE>
<CAPTION>

                                                2004                       2003                      2002
                                       -----------------------   ------------------------  ------------------------
                                         NUMBER      EXERCISE      NUMBER      EXERCISE       NUMBER      EXERCISE
                                       OF WARRANTS    PRICE      OF WARRANTS     PRICE     OF WARRANTS     PRICE
                                       OUTSTANDING      $        OUTSTANDING       $       OUTSTANDING       $

                <S>                   <C>           <C>         <C>           <C>         <C>            <C>
                  Balance,
                     beginning of year           -      -             13,750     0.80            13,750     0.80
                  Exercised                      -      -            (13,750)    0.80                 -       -
                                        ----------                ----------                 ----------
                  Balance, end of year           -      -                  -       -             13,750       -
                                        ==========                ==========                 ==========
</TABLE>


7.       RELATED PARTY TRANSACTIONS

         (a)      During the 2004 fiscal year the Company was charged a total of
                  $38,800  (2003  -  $43,914;   2002  -  $nil)  for  accounting,
                  administration, management and consulting services provided by
                  the  former   President  of  the  Company  and  by  a  company
                  controlled by the current President of the Company.  As at May
                  31, 2004,  $2,235  remained unpaid and is included in accounts
                  payable and accrued liabilities.

         (b)      During the 2003  fiscal year the  Company  wrote-off  accounts
                  receivable of $138,319 for unpaid joint  interest  billings to
                  Halo.  During the 2004 fiscal year,  the Company  negotiated a
                  settlement  with Halo and third  parties in which it  received
                  15,000 Halo shares and $12,912 cash, recognizing a recovery of
                  $24,162.

         (c)      The Company has received  ongoing  advances from a shareholder
                  and from a private  corporation owned by the current President
                  of  the  Company.  As  at  May  31,  2004,  $127,548  remained
                  outstanding. The advances are non-interest bearing and are due
                  and payable on June 30, 2005.
                                      F-11

                                      -62-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


7.       RELATED PARTY TRANSACTIONS (continued)

         (d)      During the 2002  fiscal  year the  Company  provided a loan of
                  $55,300 to a former President of the Company to acquire 87,500
                  common shares of the Company (the "Loan Shares").  The Company
                  received a promissory  note for the loan. The promissory  note
                  is non-interest  bearing and is repayable either in part or in
                  full as required by the Company upon the  disposition  of part
                  or all of the Loan  Shares.  During the 2002  fiscal  year the
                  Company  received a partial  payment of $7,900.  As at May 31,
                  2004,  75,000 Loan Shares  remain  pledged as security for the
                  $47,400 promissory note. This amount has been charged to share
                  capital.


8.       INCOME TAXES

         As at May 31, 2004, the Company has accumulated  non-capital  losses of
         approximately   $321,000  and   cumulative   exploration   expenses  of
         approximately  $30,000 carried forward for Canadian income tax purposes
         and are  available  to  reduce  taxable  income of  future  years.  The
         non-capital   losses  expire  commencing  in  2009  through  2010.  The
         cumulative exploration expenses can be carried forward indefinitely.

         Future income tax benefits  which may arise as a result of these losses
         have  not  been  recognized  in  these  financial  statements  as their
         realization is unlikely.


9.       SEGMENTED INFORMATION

         During the 2004 and 2003  fiscal  years,  the  Company  operated in one
         industry segment,  the exploration for and the development of petroleum
         and natural gas. As at May 31, 2004,  the Company only holds  corporate
         assets in Canada. Identifiable assets, revenues and net loss in each of
         these geographic areas are as follows:

<TABLE>
<CAPTION>

                                                                       2004
                                                   --------------------------------------------
                                                   IDENTIFIABLE                         NET
                                                       ASSETS         REVENUES     INCOME (LOSS)
                                                         $               $                 $
        <S>                                        <C>             <C>             <C>

         Oil and gas operations - United States               -          98,904          77,682
         Oil and gas operations - Canada                      -               -         (30,191)
         Corporate - Canada                             137,713               -         131,667
                                                   ------------    ------------    ------------
                                                        137,713          98,904         179,158
                                                   ============    ============    ============
</TABLE>

<TABLE>
<CAPTION>

                                                                       2003
                                                   --------------------------------------------
                                                   IDENTIFIABLE                         NET
                                                       ASSETS         REVENUES     INCOME (LOSS)
                                                         $               $               $
        <S>                                        <C>             <C>             <C>

         Oil and gas operations - United States          71,879          22,064        (838,245)
         Corporate - Canada                              63,654               -        (234,236)
                                                   ------------    ------------    ------------
                                                        135,533          22,064      (1,072,481)
                                                   ============    ============    ============
</TABLE>

                                      F-12

                                      -63-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


9.       SEGMENTED INFORMATION (continued)


<TABLE>
<CAPTION>

                                                                       2002
                                                   --------------------------------------------
                                                   IDENTIFIABLE                         NET
                                                       ASSETS         REVENUES     INCOME (LOSS)
                                                         $               $               $
        <S>                                        <C>             <C>             <C>

         Oil and gas operations - United States         938,125               -        (353,335)
         Corporate - Canada                             319,546               -        (287,609)
                                                   ------------    ------------    ------------
                                                      1,257,671               -        (640,944)
                                                   ============    ============    ============
</TABLE>


10.      SUPPLEMENTARY CASH FLOW INFORMATION

         Non-cash  operating  and  investing  activities  were  conducted by the
         Company as follows:

<TABLE>
<CAPTION>

                                                                       2004            2003            2002
                                                                         $               $               $
        <S>                                                       <C>             <C>             <C>

         Operating activities

              Net assets purchased on corporate reorganization                -               -        (285,303)
              Recoveries of other assets                                 11,250               -               -
                                                                   ------------    ------------    ------------
                                                                         11,250               -        (285,303)
                                                                   ============    ============    ============

         Investing activity

              Additions to marketable securities                        (11,250)              -               -
                                                                   ============    ============    ============

         Financing activity

              Issuance of common shares on corporate reorganization           -               -         285,303
                                                                   ============    ============    ============


         Other supplementary cash flow information:

                                                                       2004            2003            2002
                                                                         $               $               $

         Interest paid in cash                                                -               -               -
                                                                   ============    ============    ============
         Income taxes paid in cash                                            -               -               -
                                                                   ============    ============    ============
</TABLE>











                                      F-13

                                      -64-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


11.      DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
         ACCOUNTING PRINCIPLES

         (a)      The consolidated financial statements of the Company have been
                  prepared  according  to Canadian  GAAP which differ in certain
                  material respects from US GAAP.  Material  differences between
                  Canadian  and US  GAAP  and  their  effect  on  the  Company's
                  consolidated financial statements are summarized in the tables
                  below.
<TABLE>
<CAPTION>

                                                                       2004            2003            2002
                                                                         $               $               $
                <S>                                               <C>             <C>             <C>

                  Consolidated Statements of Operations
                      and Comprehensive Income

                  Earnings (loss) for the year
                      Canadian GAAP                                     179,158      (1,072,481)       (640,944)
                      Write-down of investment (i)                            -               -          68,236
                                                                   ------------    ------------    ------------
                                                                        179,158      (1,072,481)       (572,708)
                  Other Comprehensive Income
                      Unrealized holding gain (loss) on available
                         for sale marketable securities (i)             38,400          48,000         (42,000)
                                                                   ------------    ------------    ------------
                  Comprehensive earnings (loss) for the year            217,558      (1,024,481)       (614,708)
                                                                   ============    ============    ============

                      Earnings (loss) per share basic and
                         fully diluted - US GAAP                          $0.11          $(0.54)         $(0.38)
                                                                   ============    ============    ============

</TABLE>

<TABLE>
<CAPTION>

                                                                       2004            2003
                                                                         $               $
                <S>                                               <C>             <C>

                  Consolidated Balance Sheets

                  Total Assets
                      Canadian GAAP                                     137,713         135,533
                      Cumulative unrealized holding gains on
                           available for sale securities (i)             89,161          50,236
                                                                   ------------    ------------
                      US GAAP                                           226,874         185,769
                                                                   ============    ============

                  Total Liabilities
                      Canadian GAAP                                     142,637         319,615
                                                                   ------------    ------------
                      US GAAP                                           142,637         319,615
                                                                   ============    ============

                  Shareholders' Equity (Deficiency)
                      Canadian GAAP                                      (4,924)       (184,082)
                      Cumulative unrealized holding gains on
                           available for sale securities (i)             89,161          50,236
                                                                   ------------    ------------
                      US GAAP                                            84,237        (133,846)
                                                                   ============    ============

</TABLE>

                                      F-14

                                      -65-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


11.      DIFFERENCES  BETWEEN  CANADIAN  AND UNITED  STATES  GENERALLY  ACCEPTED
         ACCOUNTING PRINCIPLES (continued)

                  (i)      Marketable securities

                           US GAAP  requires  marketable  securities  which  are
                           classified  as  available  for sale to be  carried at
                           fair value, as determined by quoted  published market
                           prices, with unrealized losses and gains on available
                           for sale  securities  to be  included  as a  separate
                           component of shareholders'  equity. In addition,  net
                           realized  gains and losses on  security  transactions
                           would be  determined  on the specific  identification
                           cost  basis  and  included  in the  determination  of
                           earnings for the year.

                  (ii)     Stock option plan for employees and directors

                           The  Company has a stock  option plan which  reserves
                           common  shares for issuance to  directors,  employees
                           and  consultants.  During  the 2003  fiscal  year the
                           Company  adopted,  on a prospective  basis,  the fair
                           value method of accounting for stock options  granted
                           to   directors,    employees   and   consultants   as
                           recommended by Section 3870 STOCK-BASED  COMPENSATION
                           AND  OTHER  STOCK  BASED  PAYMENTS  of  the  Canadian
                           Institute  of  Chartered  Accountants'  Handbook.  No
                           options  were  granted  to  directors,  employees  or
                           consultants  during the 2004 and 2003  fiscal  years.
                           Had compensation costs for the Company's stock option
                           plan been  determined  based on the fair value at the
                           grant date for awards  during  the 2002  fiscal  year
                           consistent   with  the  provisions  of  Statement  of
                           Financial  Accounting Standards ("SFAS") No. 123, the
                           Company's  earnings  (loss) and  earnings  (loss) per
                           share  would  have  been  increased  to the  proforma
                           amounts indicated below:

                                                                       2002
                                                                         $

                           Earnings (loss) - as reported
                                             under US GAAP             (614,708)
                           Earnings (loss) - proforma                  (694,758)

                           Earnings (loss) per share
                                           - as reported under US GAAP   $(0.38)
                           Earnings (loss) per share - proforma          $(0.43)

                           The fair market  value of each  option  granted to an
                           employee  or  director  is  estimated  on the date of
                           grant using the Black - Scholes  Option Pricing Model
                           with the following assumptions used for grants during
                           the 2002 fiscal year:

                                                                       2002

                           Risk-free interest rate                     3.14%
                           Expected volatility                          125%
                           Expected lives                             3 years



                                      F-15

                                      -66-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


11.      DIFFERENCES  BETWEEN  CANADIAN  AND UNITED  STATES  GENERALLY  ACCEPTED
         ACCOUNTING PRINCIPLES (continued)

                  (iii)    Private Placements of Common Stock

                           The  Company  conducts  the  majority  of its  equity
                           financings  pursuant to private  placements.  US GAAP
                           does not permit a discount  from the  estimated  fair
                           value, or the market price,  as appropriate.  US GAAP
                           requires the  recognition of the estimated fair value
                           or market  value of the  Company's  common stock as a
                           credit to share capital,  with a charge to operations
                           for the  portion of the  discount  relating to equity
                           financings  conducted  with officers and directors of
                           the Company and a charge to shareholders'  equity, as
                           a capital distribution,  for the discount relating to
                           the remaining portion of the equity financings.

                           Under  US GAAP,  share  capital,  as at May 31,  2004
                           would increase by $315,721  (2003 - $315,721;  2002 -
                           $315,721).  There is no net  change to  shareholders'
                           equity.

                  (iv)     Income Tax

                           Under Canadian GAAP,  deferred tax assets relating to
                           the   potential    benefit   of   income   tax   loss
                           carryforwards  are not  recognized  unless  there  is
                           reasonable  assurance of  realization of the benefit.
                           US GAAP provides similar treatment,  but requires the
                           benefit be  recognized  and a valuation  allowance be
                           recognized to fully offset the deferred tax asset.

                           Provision  for  (benefit  from)  income taxes for the
                           2004 fiscal year is as follows:

                                                               $          RATE
                           Current
                           Federal and provincial            71,000      39.62%
                           Net operating carryforward       (71,000)     39.62%
                                                            -------     -------
                                                                  -           -
                                                            =======     =======

                           As at May 31,  2004,  the Company has fully  reserved
                           the   $128,000   tax   benefit  of   operating   loss
                           carryforwards,  by a valuation  allowance of the same
                           amount,  because the likelihood of realization of the
                           tax benefit  cannot be  determined.  Of the total tax
                           benefit,  $nil is  attributable  to the  2004  fiscal
                           year.

                  (v)      Functional Currency

                           The  Company's  functional  currency is the  Canadian
                           dollar.

                  (vi)     Development Stage Company

                           As of May 31,  2004,  the  Company  is  considered  a
                           development stage company as defined by SFAS No. 7.

         (b)      The Company's consolidated statements of cash flow comply with
                  US GAAP.

                                      F-16

                                      -67-

<PAGE>


                           BARADERO RESOURCES LIMITED
                     (FORMERLY CALIFORNIA EXPLORATION LTD.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED MAY 31, 2004, 2003 AND 2002
            (EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED)


11.      DIFFERENCES  BETWEEN  CANADIAN  AND UNITED  STATES  GENERALLY  ACCEPTED
         ACCOUNTING PRINCIPLES (continued)

         (c)      New Accounting Standards

                  In May 2003, the Financial Accounting Standards Board ("FASB")
                  issued  Statement No. 150,  "ACCOUNTING FOR CERTAIN  FINANCIAL
                  INSTRUMENTS  WITH  CHARACTERISTICS  OF  BOTH  LIABILITIES  AND
                  EQUITY" ("SFAS No. 150"),  which addresses how to classify and
                  measure certain financial  instruments with characteristics of
                  both liabilities (or assets in some circumstances) and equity.
                  SFAS No. 150 is effective  for financial  instruments  entered
                  into  or  modified  after  May  31,  2003,  and  otherwise  is
                  effective  at  the  beginning  of  the  first  interim  period
                  beginning  after June 15,  2003.  Adoption  of SFAS No. 150 on
                  July 1, 2003 had no impact on the Company's financial position
                  and results of operations.

                  In  January  2003,  the  FASB  issued  Interpretation  No.  46
                  "CONSOLIDATION OF VARIABLE  INTEREST  ENTITIES" ("FIN No. 46")
                  (revised  December 2003). FIN No. 46 clarifies the application
                  of Accounting Research Bulletin No. 51 "CONSOLIDATED FINANCIAL
                  STATEMENTS" to only certain entities in which equity investors
                  do not have the  characteristics  of a  controlling  financial
                  interest  or do not  have  sufficient  equity  at risk for the
                  equity  to   finance   its   activities   without   additional
                  subordinated  financial support from other parties. FIN No. 46
                  applies  immediately  to variable  interest  entities  created
                  after  January 31, 2003,  and the variable  interest  entities
                  obtained  after that date.  It applies at the end of the first
                  annual  reporting  period  beginning  after June 15, 2003,  to
                  variable  interests  in which an  enterprise  holds a variable
                  interest which was acquired before February 1, 2003.  Adoption
                  of FIN No. 46 on  January 1, 2004 will not  materially  impact
                  the Company's financial position or results of operations.

                  A similar guideline has been introduced in Canada,  Accounting
                  Guideline 15 "CONSOLIDATION  OF VARIABLE  INTEREST  ENTITIES".
                  This guideline applies to annual and interim periods beginning
                  on or after  November 1, 2004.  The Company is  continuing  to
                  evaluate the potential impact of Accounting Guideline 15.

                  In July  2003,  the  CICA  released  Section  1100  "GENERALLY
                  ACCEPTED ACCOUNTING PRINCIPLES".  This new section establishes
                  standards for financial reporting in accordance with generally
                  accepted accounting principles.  It describes what constitutes
                  Canadian GAAP and its sources,  replacing "FINANCIAL STATEMENT
                  CONCEPTS" paragraph  1000.59-61.  Also, in July 2003, the CICA
                  released  Section  1400,   "GENERAL   STANDARDS  OF  FINANCIAL
                  STATEMENT   PRESENTATION".   This   section   clarifies   what
                  constitutes  fair  presentation  in  accordance  with Canadian
                  GAAP.  Both these  sections  are  effective  for fiscal  years
                  beginning  on or after  October  1,  2003 and the  Company  is
                  currently evaluating their impact.










                                      F-17


                                      -68-

<PAGE>