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

FORM 10-KSB

(Mark One)

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

For the fiscal year ended December 31, 2007

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

For the transition period from [    ]

Commission file number 000-25579

PLURIS ENERGY GROUP INC.(Name of small business issuer in its charter)

|Nevada                                                               | 87-0571853                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|Suite 2703  550 Pacific Street                                      |                                     
|Vancouver, British Columbia, Canada                                  | V6Z 3G2                             
|(Address of principal executive offices)                             | (Zip Code)                          

Issuer's telephone number 604.607.1677

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Nil                 | Nil                                      

Securities registered pursuant to Section 12(g) of the Act:

Common Shares, $0.001 par value(Title of class)

Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. [   ]

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [   ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [   ]

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

State issuers revenues for its most recent fiscal year. $Nil

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked prices of such
common equity, as of a specified date within 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.)

10,568,160 common shares at $0.50(1)per common share = $5,284,080

(1)Represents the average of the bid and ask closing
prices on the OTC Bulletin Board on March 17, 2008. Used only for the
purpose of this calculation.

State the number of shares outstanding of each of the issuers
classes of equity stock, as of the latest practicable date.

28,623,391 common shares issued and outstanding as of March
31, 2008. 4,600,000 Series A preferred shares issued and outstanding as of
March 31, 2008

Transitional Small Business Disclosure Format (Check one): Yes
[   ]   No [X]

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PART I

Item
1.           Description of
Business.

This annual report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as may, should,  expects, plans, anticipates,
believes, estimates, predicts, potential or continue or the negative
of these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled Risk Factors, that may
cause our or our industrys actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States dollars
and are prepared in accordance with United States Generally Accepted Accounting
Principles. In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States dollars. All references to common
shares refer to shares of our common stock.

As used in this annual report, the terms we, us, our, and
Pluris means Pluris Energy Group Inc. and our wholly owned subsidiaries,
Pluris Energy Group Inc., a British Virgin Islands corporation and Petrogen,
Inc., a Colorado corporation, unless otherwise indicated.

Corporate Overview

We were incorporated under the laws of the State of Nevada on
December 3, 1997 under the name Hadrosaurus Resources, Inc.. On January 20,
1998, we filed an amendment to the articles of incorporation changing our name
to Hadro Resources, Inc. On February 12, 2003, subsequent to the acquisition
of Petrogen, Inc. (Petrogen), we filed an amendment to the articles of
incorporation changing our name to Petrogen Corp.

On October 11, 2002, effective February 12, 2003, Hadro
Resources, Inc. (now known as Petrogen Corp.), Petrogen, and the shareholders of
Petrogen (the Petrogen Shareholders) entered into a share exchange agreement
(the Share Exchange Agreement). Pursuant to the terms of the Share Exchange
Agreement, we acquired from the Petrogen Shareholders one hundred percent (100%)
of the issued and outstanding shares of common stock of Petrogen and issued
7,000,000 shares of our restricted common stock to the Petrogen Shareholders in
proportion to their respective holdings in Petrogen.

Effective September 12, 2006, we completed a merger with our
subsidiary, Pluris Energy Group Inc., which we incorporated solely to effect the
name change. As a result, we changed our name from Petrogen Corp. to Pluris
Energy Group Inc. We changed the name of our company to better reflect the
direction and business of our company. The name change became effective with
NASDAQ OTC Bulletin Board at the opening of market and trading on September 12,
2006 under the new symbol PEYG.

On September 12, 2006, we effected a five (5) for one (1)
reverse stock split of our authorized, issued and outstanding common stock. As a
result, our authorized capital was decreased from 100,000,000 shares of common
stock with a par value of $0.001 to 20,000,000 shares of common stock with a par
value of $0.001. Our issued and outstanding share capital decreased from
68,249,605 shares of common stock to 13,649,921 shares of common stock.

On or about September 18, 2006, our board of directors
unanimously approved an amendment to our Articles of Incorporation, pursuant to
which our authorized share capital would be increased from 20,000,000 shares of

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common stock to 250,000,000 shares of common stock and to
create 100,000,000 preferred shares. On or about September 29, 2006, our
shareholders holding a majority of the total issued and outstanding shares of
our common stock gave approval to the amendment to our Articles of Incorporation
pursuant to a written consent. The increase in our authorized capital and the
creation of the preferred shares was filed with the Nevada Secretary of State on
November 21, 2006.

The purpose of increasing our authorized capital to 250,000,000
shares of common stock is to optimize the long term future growth potential of
our organization on a share structure basis without requiring additional
shareholder approvals to enable for the long term expansion of our business
mandate. Specifically this will provide for other equity financing requirements
we may have for the long term as well as for the development, expansion and
additional acquisition of international oil and gas properties that fit within
our mandated business objectives.

Our executive office is located at Suite 2703  550 Pacific
Street, Vancouver, British Columbia, Canada and our telephone number is
604.607.1677.

Our Current Business

We are an independent energy company specializing in the
development of international and domestic business opportunities including, but
not limited to, the acquisition, exploration and development of oil and natural
gas properties in South America; primarily in the region of Argentina. We are,
together with our wholly owned subsidiaries, Petrogen, Inc. and Pluris BVI, a
junior domestic upstream and midstream oil and natural gas development and
production company focused on acquiring, developing, producing and refining oil
and natural gas reserves in South American high impact hydrocarbon rich areas.
Our core business strategy was redefined in mid-2006 to acquire non-operated and
operated working interests in oil and gas fields throughout South America and
particularly Argentina that display significant hydrocarbon reserves and
development and expansion opportunities in both the traditional fossil fuels
that can provide high yield returns on income opportunities in the energy
industry for our shareholders.

Argentina

On August 18, 2006, our company entered into a share purchase
agreement (the SPA) with four individuals to purchase all the issued and
outstanding shares of San Enrique Petrolera, S.A. (SEPSA), incorporated under
the laws of Argentina. The SEPSA acquisition marks our first step in engaging
our newly mandated business plans to acquire a working interest in producing oil
and gas properties located in Argentinas hydrocarbon regions. SEPSAs interests
include five hydrocarbon producing properties located in three of Argentinas
five oil and gas producing basins. In order to secure the rights to purchase
SEPSA, an escrow agreement (the Escrow) was entered into among our company,
SEPSA and Deutsch Bank Trust Company Americas, New York (DB), whereby we
issued a $3,225,000 convertible, non-retractable redeemable unsecured bond (the
Bond) in the name of Pluris Energy Group Inc., a British Virgin Islands
corporation (Pluris BVI), which has been placed into the Escrow at DB. Terms
of the Escrow stipulate certain conversion provisions of the Bond predicated
upon the performance of both SEPSA and our company. Terms under the SPA pursuant
to the Bond stipulate that in the event that we do not perform under the SPA
terms agreed upon between us and SEPSA, that ownership of the Bond can be
transferred from Pluris BVI to SEPSA. Currently, we believe that we have
performed specific to the terms of the SPA as it relates to the Bond
stipulations there under and there is no matter that could be or has been raised
by us or SEPSA that would result in our having to transfer ownership of the Bond
to SEPSA. In the event that the Bond is transferred from our company to SEPSA,
SEPSA will retain certain privileges of Bond conversion into common shares of
our company at prices ranging from $3.25 per common share to $9.25 per common
share. The Bond is due in five years time at an interest rate of LIBOR plus 5%,
with a floor of 10.5% and a ceiling of 13%. Interest on the Bond can be paid in
common share equity of our company at our companys discretion. This Bond will
not be considered issued and outstanding for accounting purposes until such time
as the Bond is transferred to SEPSA.

One of the five properties owned by SEPSA, known as Tierra Del
Fuego (TDF) is the subject of a Joint Venture agreement (the JV) with four
other JV participants, each of which possesses a Rights of First Refusal (the
ROFR) to purchase SEPSAs interest in TDF under a match or pass status. In
October of 2006, SEPSA provided the four JV participants to TDF, notification of
our company having won the bid to purchase SEPSA, and under such notification,
those JV participants were provided with 30 days to match our companys
allocation on the

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TDF property, or pass on their ROFR, thereafter enabling us to
complete our acquisition of SEPSA, inclusive of all or part of SEPSAs interests
in the TDF property. Prior to the end of that 30 day notification period, two of
the four JV participants commenced proceedings against SEPSA in the Argentine
Commercial Courts seeking intermediary action in regard to their rights under
the terms of the JVs ROFR. On March 22, 2007 we were advised by SEPSA that as
an outcome to those proceedings, two injunctions were imposed by the Argentina
National Commercial Court of Appeals on behalf of Apco Argentina Inc. (Apco)
and Antrim Energy Inc. (Antrim) prohibiting the sale of SEPSAs shares to our
company until such time as the ROFR issues between SEPSA, Apco and Antrim are
resolved.

As a result of the Injunctions imposed by Apco and Antrim,
based upon the confirmation by the National Commercial Court of Appeals of the
injunctions, on April 23, 2007, we informed SEPSAs shareholders that they
should abstain from selling or disposing in any manner to any third party any of
SEPSAs shares that SEPSA has undertaken to sell to our company under the terms
of the SPA and that SEPSA should abstain from disposing any of the assets it
owned at the time the SPA was signed. In response, SEPSA informed our company of
its unilateral repudiation of the SPA, stating that as an effect of the
injunctions imposed by Apco and Antrim, certain terms of the SPA were triggered,
rendering the SPA terminated. We maintain that the terms of the SPA clearly
stipulate that any dispute arising under the SPA must be mutually addressed
between us and SEPSA through the International Chamber of Commerce, Paris,
France. Therefore, we commenced an arbitral action against SEPSA through The
Secretariat of the Court, International Court of Arbitration, International
Chamber of Commerce, Paris, France (the ICC), requesting the ICC to enforce
SEPSAs obligations under the terms agreed upon in the SPA and to sell 100% of
the shares of SEPSA and that their other obligations set forth under the SPA are
in full force and effect and to award damages incurred by us. In December of
2007, SEPSA and our company agreed to Terms of Reference (the TOR), whereby
SEPSA and our company mandated to the ICC the specific issues that the ICC
should address related to both parties complaints and to what issues the ICC
should make declarations under pursuant to the arbitral proceedings between
SEPSA and our company. Under the TOR, SEPSA, our company and the ICC agreed to a
specific schedule whereby our company and SEPSA must submit to the ICC specific
requested materials at specific dates in order to move the arbitral process
towards a conclusion. As at the date of this filing, both our company and SEPSA
have filed our respective offerings of evidence related to our specific claims
against one another. SEPSA and our company are awaiting a reply from the ICC
arbitral tribunal as to what evidence will be accepted by the tribunal for
further definition and renderings. We have claimed damages for loss of revenue
from July 1, 2006 through to the current date; loss of business opportunity
related to increases to the values of assets owned and/or controlled by SEPSA
and loss of out of pocket expenses from the inception of our efforts to win the
bid for and complete the acquisition of SEPSA. SEPSA has filed a counter claim
for recovery of its legal expenses and translation fees incurred to date related
to the dispute between it and our company. There is no determination as to the
length of time necessary for the ICC to make any final determinations pursuant
to the TOR and, in that regard; we do not know what those final determinations
may be. We believe that our position related to the claim we filed against SEPSA
is substantive and that the issues pertaining to and being sought for resolution
by us through the arbitral proceedings between us and SEPSA can be resolved, and
that completion of the acquisition of SEPSA by us could occur.

We have recently chosen to suspend the placement schedule
related to underwriting our offering of a $65,000,000 convertible,
non-retractable, redeemable, unsecured bond instrument (the $65M Bonds) until
such time as the outcome of the ROFR issues, injunctions and arbitral
proceedings are clear, pursuant to which we will consider recommencing the
offering wherein the capital raised will be used to close the acquisition of
SEPSA and finance the acquisition of additional international revenue producing
oil and gas assets located in South America. To date, no proceeds have been
accepted from this offering and therefore, we have no current payment burdens
associated with the offering. When the legal issues surrounding SEPSA have been
resolved or at a time when we are able to enter into a new business opportunity
agreement that establish our rights to purchase a similar revenue producing
asset base to that of SEPSA, we will consider re-establishing offering of the
$65M Bonds.

On October 31, 2007, we entered into a letter of intent (the
LOI) with Clear S.R.L. (Clear), of Comodoro Rivadavia, Argentina, whereby we
were granted the exclusive right to purchase and develop up to 100% of Clears
186 square kilometre Cerro Negro concession, located in the Chubut Province,
Golfo San Jorge Basin, Argentina. Under the terms of the LOI, we have the right
to purchase Cerro Negro for an agreed upon price, subject to the satisfactory
outcome of due diligence performed by us related to Cerro Negro, which includes
commercial, financial, geologic, geophysical and petroleum engineering analysis.
Upon our satisfaction of the due diligence

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review performed by us and our agents as described, we retain
  the right to provide to Clear our binding offer to purchase Cerro Negro, the
  terms of which shall be memorialized through a mutually acceptable Purchase
  and Sale Agreement (the PSA) negotiated between us and Clear. Upon
  entering into the PSA, we will have a specified period of time pursuant to the
  terms of the PSA to complete the acquisition of Cerro Negro. Upon completion
  of the acquisition of Cerro Negro, if and when this occurs, we intend to commence
  drilling, development and expansion of Cerro Negro concession. At the date of
  this filing, we have completed our due diligence review over the Cerro Negro
  acquisition opportunity, and are at the final stages of negotiating the mutually
  acceptable PSA, which we anticipate to execute shortly. In connection with the
  LOI for the purchase and development of Clears Cerro Negro concession,
  our subsidiary Pluris BVI issued an US$840,000 convertible, non-retractable
  redeemable unsecured bond (the CN Bond) to Pluris BVI as security
  under the LOI. In the event that we do not perform under the LOI, ownership
  of the CN Bond can be transferred from Pluris BVI to Clear. At the date of this
  filing, we believe that our performance under the terms of the LOI as it relates
  to the CN Bond has been effectively undertaken and we further believe that pursuant
  to those undertakings being effectively administered by us according to the
  terms of the LOI, there are no matters there from that could result in our having
  to transfer ownership of the CN Bond to Clear. The CN Bond may be converted
  into common shares of our company at prices ranging from $3.25 per common share
  to $9.25 per common share. The CN Bonds maturity date is September 30,
  2011 and the interest rate is LIBOR plus 5%, with a floor of 10.5% and a ceiling
  of 13%. Interest under the CN bond can be converted into common shares of our
  company at our discretion. If we complete the acquisition of Cerro Negro as
  planned and/or continue to perform under the terms of the LOI, the CN Bond is
  to be returned to our treasury and cancelled.

On December 21, 2007, we entered into a letter of intent acquisition
  agreement (the Agreement) to acquire 100% of the shares of a Buenos
  Aires, Argentina based oil development and production company (the BAO).
  BAO controls leasehold interests primarily located in the Neuquén Basin,
  Rio Negro Province, Argentina. Under the terms of the Agreement, we have the
  right to purchase 100% of the shares of BAO at an agreed upon price (that we
  are contractually obliged to not disclose until completion of the acquisition
  of BAO occurs), subject to the satisfactory outcome of due diligence related
  to BAO performed by us, which includes corporate, commercial, financial, geologic,
  geophysical and petroleum engineering analysis. Upon our satisfaction of the
  due diligence review performed by us and our agents as above described, we have
  agreed with BAO to negotiate and execute a mutually acceptable Share Purchase
  Agreement (the BAO SPA) among our company, BAO and the shareholders
  of BAO. Upon consummation of the BAO SPA, if and when this occurs, we intend
  to commence drilling, development and expansion of the BAO leasehold interests
  in the Neuquén Basin.

United States

Our principal geographic area of focus lies within the onshore
and offshore Texas Gulf Coast region, with core assets presently located in the
Emily Hawes Field and the Tiller Ranch Field in the Texas Gulf Coast. We have
acquired the rights in our two core properties spanning over approximately 2,554
net acres. However, in moving toward our new core business mandate of acquiring
non-operated and operated working interests in proven oil and gas producing
properties in South America, specifically Argentina, Management engaged the
services of Petroleum Listing Service of Houston, Texas (PLS) to list Emily
Hawes Field and Tiller Ranch Field for sale on a competitive bid basis. On March
8, 2007, we completed the sale of our entire interest in the Emily Hawes Field
in Calhoun County, Texas and the Matagorda Island Pipeline to Darcy Energy LLC,
for cash proceeds of $500,000. Additionally, we have spent considerable time and
effort assessing divestiture opportunities related to our Mississippi and
Wyoming properties. In this regard, we have made preliminary arrangements with
the Mississippi State Oil and Gas Board to commence plugging and abandonment
operations of our Mississippi interests and further, have allowed our leases to
lapse on our Wyoming interests. Our company retains no plugging and abandonment
liabilities for our Wyoming interest. Additionally, we have previously held
options and rights of first refusal to develop some 15,000 gross acres of
prospects in the Texas Permian Basin region, namely the Adams Ranch Field and
the Harrell Ranch Field (the Permian Basin Fields). After assessing certain
risks and economic variables related to the Permian Basin Fields and the general
area geologically as a potential investment for ongoing potential hydrocarbon
development, management elected to allow the options and rights of first refusal
to develop the Permian Basin Properties to lapse. Management has no further
plans at this time to attempt to re-engage in opportunities to develop potential
prospects in the State of Texas. We plan to develop our new mandate to acquire
passive income opportunities through the acquisition of non-operated and
operated producing oil and gas interests in international high profile regions,
and specifically within South American regions of Argentina to build a strategic

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base of proven hydrocarbon reserves and production
opportunities that represent outstanding growth opportunities for our
shareholders over the immediate, near and long term.

On September 10, 2007, we received a demand notice (the
Demand) for the immediate payment of a Senior Secured Convertible Note (the
Note) in the amount of $75,000 plus accrued interest. The Note carried a
guaranteed security agreement (GSA) over the assets of one of our
subsidiaries, Petrogen, Inc. (Petrogen) as collateral to the GSA. Due to the
financial circumstances of Petrogen at the time of receipt of the Demand, the
Note could not be repaid. After Petrogens default under the Note, the Note
holder exercised its right to accept the collateral described in the GSA in full
satisfaction of Petrogens obligation to the Note holder. The Note holder sent
to Petrogen a properly authenticated proposal to accept Petrogens collateral in
full satisfaction of the above described debt as required by the TEXAS BUSINESS
& COMMERCE CODE, §9.620. On October 8, 2007 our company and Petrogen
consented to the proposal, also required under the statute. The Note holders
subsequent acceptance of the collateral in full satisfaction of the obligation
it secures: (a) discharges Petrogens, obligation to the extent consented to by
Petrogen; (b) transfers to the secured party all of Petrogens rights in the
collateral; (c) discharges the security interest lien over Petrogen; and (d)
terminates any subordinate security interest or other subordinate liens over
Petrogen by other third party creditors. The collateral is now the Note holders
property. In this regard, Petrogen no longer owns any assets in the United
States and any remaining financial obligations of Petrogen are subject to the
conditions set forth under the TEXAS BUSINESS & COMMERCE CODE, §9.620 and
§9.622, and as such, we will be preparing Petrogen for wind-up and dissolution,
which we anticipate should occur by the second quarter of 2008. On April 8,
2008, Petrogen was wound-up and dissolved through filing for the dissolution
with the Colorado Secretary of State.

We plan to develop our new mandate to acquire operated and
non-operated oil and gas development opportunities through the acquisition of
interests in international high profile regions, and specifically within South
American regions of Argentina to build a strategic base of proven hydrocarbon
reserves and fossil fuel production opportunities that represent outstanding
growth possibilities for our shareholders over the immediate, near and long
term.

Research and Development

No research and development expenditures have been incurred,
either on our account or sponsored by customers, during the past three years.

Employees

As of March 31, 2008, we do not employ any persons on a
full-time or on a part-time basis. Mr. Sacha Spindler, our Chief Executive
Officer, and Mr. Sam Sen, our President, are primarily responsible for all of
our day-to-day operations. Other services are provided by outsourcing and
management contracts. As the need arises and funds become available, however,
management may seek employees as necessary in our best interests.

Competition

We operate in a highly competitive industry, competing with
major oil and gas companies, independent producers and institutional and
individual investors, which are actively seeking oil and gas properties
throughout the world together with the equipment, labor and materials required
to operate properties. Most of our competitors have financial resources, staff
and facilities substantially greater than ours. The principal area of
competition is encountered in the financial ability to acquire good acreage
positions and drill wells to explore for oil and gas, then, if warranted, drill
production wells and install production equipment. Competition for the
acquisition of oil and gas wells is intense with many oil and gas properties and
or leases or concessions available in a competitive bidding process in which we
may lack technological information or expertise available to other bidders.
Therefore, we may not be successful in acquiring and developing profitable
properties in the face of this competition. No assurance can be given that a
sufficient number of suitable oil and gas wells will be available for
acquisition and development.

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Government Regulation

General

The production and sale of oil and gas are subject to various
federal, state and local governmental regulations, which may be changed from
time to time in response to economic or political conditions and can have a
significant impact upon overall operations. Matters subject to regulation
include discharge permits for drilling operations, drilling bonds, reports
concerning operations, the spacing of wells, unitization and pooling of
properties, taxation, abandonment and restoration and environmental protection.
These laws and regulations are under constant review for amendment or expansion.
From time to time, regulatory agencies have imposed price controls and
limitations on production by restricting the rate of flow of oil and gas wells
below actual production capacity in order to conserve supplies of oil and gas.
Changes in these regulations could require us to expend significant resources to
comply with new laws or regulations or changes to current requirements and could
have a material adverse effect on us.

Oil and Gas Regulation

The governmental laws and regulations which could have a
material impact on the oil and gas exploration and production industry are as
follows:

Drilling and Production

Our operations are subject to various types of regulation at
federal, state, local and Native American tribal levels. These types of
regulation include requiring permits for the drilling of wells, drilling bonds
and reports concerning operations. Most states, and some counties,
municipalities and Native American tribes, in which we operate also regulate one
or more of the following: (i) the location of wells; (ii) the method of drilling
and casing wells; (iii) the rates of production or allowables; (iv) the
surface use and restoration of properties upon which wells are drilled and other
third parties; (v) the plugging and abandoning of wells; and (vi) notice to
surface owners and other third parties.

State laws regulate the size and shape of drilling and spacing
units or proration units governing the pooling of oil and natural gas
properties. Some states allow forced pooling or integration of tracts to
facilitate exploration while other states rely on voluntary pooling of lands and
leases. In some instances, forced pooling or unitization may be implemented by
third parties and may reduce our interest in the unitized properties. In
addition, state conservation laws establish maximum rates of production from oil
and natural gas wells, generally prohibit the venting or flaring of natural gas
and impose requirements regarding the ratability of production. These laws and
regulations may limit the amount of natural gas and oil we can produce from our
wells or limit the number of wells or the locations at which we can drill.
Moreover, each state generally imposes a production or severance tax with
respect to the production and sale of oil, natural gas and natural gas liquids
within its jurisdiction.

Natural Gas Sales Transportation

Historically, federal legislation and regulatory controls have
affected the price of the natural gas we produce and the manner in which we
market our production. The Federal Energy Regulatory Commission (FERC) has
jurisdiction over the transportation and sale for resale of natural gas in
interstate commerce by natural gas companies under the Natural Gas Act of 1938
and the Natural Gas Policy Act of 1978.

FERC also regulates interstate natural gas transportation rates
and service conditions, which affects the marketing of natural gas that we
produce, as well as the revenues we receive for sales of our natural gas.
Commencing in 1985, FERC promulgated a series of orders, regulations and rule
makings that significantly fostered competition in the business of transporting
and marketing gas. Today, interstate pipeline companies are required to provide
nondiscriminatory transportation services to producers, marketers and other
shippers, regardless of whether such shippers are affiliated with an interstate
pipeline company. Under FERCs current regulatory regime, transmission services
must be provided on an open-access, non-discriminatory basis at cost-based rates
or at market-based rates if the transportation market at issue is sufficiently
competitive.

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Mineral Act

The Mineral Leasing Act of 1920 (Mineral Act) prohibits
direct or indirect ownership of any interest in federal onshore oil and gas
leases by a foreign citizen of a country that denies similar or like
privileges to citizens of the United States. Such restrictions on citizens of a
non-reciprocal country include ownership or holding or controlling stock in a
corporation that holds a federal onshore oil and gas lease. If this restriction
is violated, the corporation's lease can be canceled in a proceeding instituted
by the United States Attorney General. Although the regulations of the Bureau of
Land Management (which administers the Mineral Act) provide for agency
designations of non-reciprocal countries, there are presently no such
designations in effect.

Environmental Regulation

Our activities will be subject to existing federal, state and
local laws and regulations governing environmental quality and pollution
control. Our operations will be subject to stringent environmental regulation by
state and federal authorities including the Environmental Protection Agency
(EPA). Such regulation can increase the cost of such activities. In most
instances, the regulatory requirements relate to water and air pollution control
measures.

Waste Disposal

The Resource Conservation and Recovery Act (RCRA), and
comparable state statutes, affect oil and gas exploration and production
activities by imposing regulations on the generation, transportation, treatment,
storage, disposal and cleanup of hazardous wastes and on the disposal of
non-hazardous wastes. Under the auspices of the EPA, the individual states
administer some or all of the provisions of RCRA, sometimes in conjunction with
their own, more stringent requirements. Drilling fluids, produced waters, and
most of the other wastes associated with the exploration, development, and
production of crude oil, natural gas, or geothermal energy constitute solid
wastes, which are regulated under the less stringent non-hazardous waste
provisions, but there is no guarantee that the EPA or the individual states will
not adopt more stringent requirements for the handling of non-hazardous wastes
or categorize some non-hazardous wastes as hazardous for future regulation.

Comprehensive Environmental Response, Compensation and
Liability Act

The federal Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA) imposes joint and several liability for costs of
investigation and remediation and for natural resource damages, without regard
to fault or the legality of the original conduct, on certain classes of persons
with respect to the release into the environment of substances designated under
CERCLA as hazardous substances (Hazardous Substances). These classes of
persons or potentially responsible parties include the current and certain past
owners and operators of a facility or property where there is or has been a
release or threat of release of a Hazardous Substance and persons who disposed
of or arranged for the disposal of the Hazardous Substances found at such a
facility. CERCLA also authorizes the EPA and, in some cases, third parties to
take actions in response to threats to the public health or the environment and
to seek to recover the costs of such action. Although CERCLA generally exempts
petroleum from the definition of Hazardous Substances in the course operations,
we may in the future generate wastes that fall within CERCLA's definition of
Hazardous Substances. We may also in the future become an owner of facilities on
which Hazardous Substances have been released by previous owners or operators.
We may in the future be responsible under CERCLA for all or part of the costs to
clean up facilities or property at which such substances have been released and
for natural resource damages.

Air Emissions

Our operations are subject to local, state and federal
regulations for the control of emissions of air pollution. Major sources of air
pollutants are subject to more stringent, federally imposed permitting
requirements. Administrative enforcement actions for failure to comply strictly
with air pollution regulations or permits are generally resolved by payment of
monetary fines and correction of any identified deficiencies. Alternatively,
regulatory agencies could require us to forego construction, modification or
operation of certain air emission sources.

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Clean Water Act

The Clean Water Act (CWA) imposes restrictions and strict
controls regarding the discharge of wastes, including produced waters and other
oil and natural gas wastes, into waters of the United States, a term broadly
defined. Permits must be obtained to discharge pollutants into federal waters.
The CWA provides for civil, criminal and administrative penalties for
unauthorized discharges of oil, hazardous substances and other pollutants. It
imposes substantial potential liability for the costs of removal or remediation
associated with discharges of oil or hazardous substances. State laws governing
discharges to water also provide varying civil, criminal and administrative
penalties and impose liabilities in the case of a discharge of petroleum or its
derivatives, or other hazardous substances, into state waters. In addition, the
EPA has promulgated regulations that may require us to obtain permits to
discharge storm water runoff. In the event of an unauthorized discharge of
wastes, we may be liable for penalties and costs.

We believe that we are in substantial compliance with current
applicable environmental laws and regulations.

RISK FACTORS

Much of the information included in this annual report includes
or is based upon estimates, projections or other forward-looking statements.
Such forward-looking statements include any projections or estimates made by us
and our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions, or other future
performance suggested herein. We undertake no obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of such statements.

Such estimates, projections or other forward-looking
statements involve various risks and uncertainties as outlined below. We
caution readers of this annual report that important factors in some cases have
affected and, in the future, could materially affect actual results and cause
actual results to differ materially from the results expressed in any such
estimates, projections or other forward-looking statements. In evaluating us,
our business and any investment in our business, readers should carefully
consider the following factors.

Risks Related to Our Business

Our business is difficult to evaluate because we have a
limited operating history.

In considering whether to invest in our common stock, you
should consider that there is only limited historical financial and operating
information available on which to base your evaluation of our performance. Our
inception was November 15, 2001 and, as a result, we have a limited operating
history.

We have a history of operating losses and there can be no
assurances we will be profitable in the future. We have a history of operating
losses, expect to continue to incur losses, and may never be profitable.
Further, we have been dependent on sales of our equity securities and debt
financing to meet our cash requirements. We have incurred losses from continuing
operations totaling approximately $16, 882,265from inception to December 31,
2007 and incurred losses from discontinued operations totaling approximately
$5,690,405 for the same period. As of December 31, 2007, we had an accumulated
deficit of $22, 572,260and a working capital deficit of $2,333,0082. Further, we
do not expect positive cash flow from operations in the near term. There is no
assurance that actual cash requirements will not exceed our estimates. In
particular, additional capital may be required in the event that: (i) the costs
to acquire additional leases are more than we currently anticipate; (ii)
drilling and completion costs for additional wells increase beyond our
expectations; or (iii) we encounter greater costs associated with general and
administrative expenses or offering costs.

Our development of and participation in an increasingly larger
number of oil and gas prospects have required and will continue to require
substantial capital expenditures. The uncertainty and factors described
throughout this section may impede our ability to economically find, develop,
exploit, and acquire natural gas and oil reserves. As a

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result, we may not be able to achieve or sustain profitability
or positive cash flows from operating activities in the future.

Our independent auditors report contains an explanatory
paragraph expressing substantial doubt about our ability to continue as a going
concern..

We have received a going concern opinion from our independent
auditors report. The independent auditors report accompanying our December 31,
2007 and 2006 consolidated financial statements contains an explanatory
paragraph expressing substantial doubt about our ability to continue as a going
concern. The consolidated financial statements have been prepared on the
assumption that our company will continue as a going concern, which contemplates
that we will realize our assets and satisfy our liabilities and commitments in
the ordinary course of business. Our ability to continue as a going concern is
dependent on raising additional capital to fund our operations and ultimately on
generating future profitable operations. There can be no assurance that we will
be able to raise sufficient additional capital or eventually have positive cash
flow from operations to address all of our cash flow needs. If we are not able
to find alternative sources of cash or generate positive cash flow from
operations, our business and shareholders will be materially and adversely
affected.

We will require additional funding in the future.

We will require additional funding in the future. Based upon
our historical losses from operations, we will require additional funding in the
future. If we cannot obtain capital through financings or otherwise, our ability
to execute our development plans and achieve production levels will be greatly
limited. Our current development plans require us to make capital expenditures
for the exploration and development of our oil and natural gas properties.
Historically, we have funded our operations through the issuance of equity and
short-term debt financing arrangements. We may not be able to obtain additional
financing on favorable terms, if at all. Our future cash flows and the
availability of financing will be subject to a number of variables, including
potential production and the market prices of oil and natural gas. Further, debt
financing could lead to a diversion of cash flow to satisfy debt-servicing
obligations and create restrictions on business operations. If we are unable to
raise additional funds, it would have a material adverse effect upon our
operations.

Our acquisitions may not be successful.

Our acquisitions may not be successful. As part of our growth
strategy, we intend to acquire additional oil and gas production properties.
Such acquisitions may pose substantial risks to our business, financial
condition, and results of operations. In pursuing acquisitions, we will compete
with other companies, many of which have greater financial and other resources
to acquire attractive properties. Even if we are successful in acquiring
additional properties, some of the properties may not produce revenues at
anticipated levels or failure to conduct drilling on prospects within specified
time periods may cause the forfeiture of the lease in that prospect. There can
be no assurance that we will be able to successfully integrate acquired
properties, which could result in substantial costs and delays or other
operational, technical, or financial problems. Further, acquisitions could
disrupt ongoing business operations. If any of these events occur, it would have
a material adverse effect upon our operations and results from operations.

Our exploratory and development drilling and production
operations may not be successful.

Our exploratory and development drilling and production
operations may not be successful. There can be no assurance that our future
drilling activities will be successful, and we cannot be sure that our overall
drilling success rate or our production operations within a particular area will
not decline. We may not recover all or any portion of our capital investment in
the wells or the underlying leaseholds. Unsuccessful drilling activities would
have a material adverse effect upon our results of operations and financial
condition. The cost of drilling, completing, and operating wells is often
uncertain, and a number of factors can delay or prevent drilling operations
including: (i) unexpected drilling conditions; (ii) pressure or irregularities
in formation; (iii) equipment failures or accidents; (iv) adverse weather
conditions; and (iv) shortages or delays in availability of drilling rigs and
delivery of equipment.

Further, coal beds from which gas is produced may frequently
contain water, which may hamper any production of gas in commercial quantities.
The amount of gas that can be commercially produced depends upon the coal
quality,

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the original gas content of the coal seam, the thickness of the
seam, the reservoir pressure, the rate at which gas is released from the coal,
and the existence of any natural fractures through which the gas can flow to the
well bore. However, coal beds frequently contain water that must be removed in
order for the gas to detach from the coal and flow to the well bore. The average
life of a coal bed well is only five to six years. Ability to remove and dispose
of sufficient quantities of water from the coal seam will determine whether or
not production of gas can occur in commercial quantities.

There is no guarantee that the potential drilling locations
that we have or acquire in the future will ever produce oil or natural gas,
which could have a material adverse effect upon our results of operations.

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our
operations.

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our operations.A decline in the price of our common stock could result in a reduction in
the liquidity of our common stock and a reduction in our ability to raise
additional capital for our operations. Because our operations to date have been
principally financed through the sale of equity securities, a decline in the
price of our common stock could have an adverse effect upon our liquidity and
our continued operations. A reduction in our ability to raise equity capital in
the future would have a material adverse effect upon our business plan and
operations, including our ability to continue our current operations. If our
stock price declines, we may not be able to raise additional capital or generate
funds from operations sufficient to meet our obligations.

We are a new entrant into the oil and gas industry.

We are a new entrant into the oil and gas industry without a
profitable operating history.Since November 15, 2001 (inception), our
activities have been limited to organizational efforts, obtaining working
capital and acquiring and developing a very limited number of properties. As a
result, there is limited information regarding production or revenue generation.
As a result, our future revenues may be limited.

As of the date of this annual report, the Tiller Ranch and the
Emily Hawes Field are the oil and gas properties where most of our drilling
capital resources have been employed. However, we have shifted our future
development focus towards acquiring non-operated and operated working interests
in international producing oil and gas fields in the South American region of
Argentina. These prospects are still in the development stage, and estimates
made at this time as to proved or probable oil and natural gas reserves cannot
be guaranteed that sufficient reserves will be maintained or new reserves
discovered for production. The absence of reporting a sustained production
history provides risk regarding independent reserve estimates. Property lease
positions in other locations that have been acquired by us are unproven, having
little to no production, which prevents us from assigning any proved or probable
reserves to these other properties.

No assurance of the accuracy of the estimates of oil and gas
reserves.

There is no assurance of the accuracy of the estimates of oil
and gas reserves. Reserve estimates are based upon various assumptions,
including assumptions relating to oil and gas prices, drilling and operating
expenses, production levels, capital expenditures, taxes and availability of
funds. No one can measure underground accumulations of oil and natural gas in an
exact way. As a result, estimated quantities of proved reserves, projections of
future production rates, and the timing of development expenditures may be
incorrect. Any significant variance from these assumptions to actual figures
could greatly affect our estimates of reserves, the economically recoverable
quantities of oil and natural gas attributable to any particular group of
properties, the classifications of reserves based on risk of recovery, and
estimates of the future net cash flows.

Further, the present value of future net cash flows from any
proved reserves is not necessarily the same as the current market value of any
estimated oil and natural gas reserves. Actual future net cash flows from oil
and natural gas properties also will be affected by factors such as: (i) actual
prices we receive for oil and natural gas; (ii) the amount and timing of actual
production; (iii) supply of and demand for oil and natural gas; and (iv) changes
in governmental regulations or taxation.

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The timing of both production and incurrence of expenses in
connection with the development and production of oil and natural gas properties
will affect the timing of actual future net cash flows from proved reserves, and
thus their actual present value. In addition, any discount factor used when
calculating discounted future net cash flows may not be the most appropriate
discount factor based on interest rates in effect from time to time and risks
associated with us or the oil and natural gas industry in general. Actual future
production, oil and gas prices, revenues, taxes, development expenditures,
operating expenses and quantities of recoverable oil and gas reserves will most
likely vary from those estimates and any significant variance could have a
material adverse effect on our future results from operations.

Unless we replace our oil and gas reserves, our reserves and
production will decline.

Unless we replace our oil and natural gas reserves, our
reserves and production will decline, which would adversely affect our business,
financial condition and results of operations.Producing oil and natural
gas reservoirs generally are characterized by declining production rates that
vary depending upon reservoir characteristics and other factors. Thus, our
future oil and natural gas reserves and production and, therefore, our cash flow
and income are highly dependent on our success in efficiently developing and
exploiting our current reserves and economically finding or acquiring additional
recoverable reserves. We may not be able to develop, find or acquire additional
reserves to replace our current and future production at acceptable costs.

Prospects that we decide to drill may not yield natural gas
or oil in commercially viable quantities.

Prospects that we decide to drill may not yield natural gas or
oil in commercially viable quantities.Our prospects are in various
stages of evaluation, ranging from prospects that are ready to drill to
prospects that will require substantial additional seismic data processing and
interpretation. However, the use of seismic data and other technologies and the
study of producing fields in the same area will not enable us to know
conclusively prior to drilling and testing whether natural gas or oil will be
present or, if present, whether natural gas or oil will be present in sufficient
quantities to recover drilling or completion costs or to be economically viable.
If we drill wells that we identify as dry holes in our current and future
prospects, our drilling success rate may decline and materially harm our
business. In sum, the cost of drilling, completing and operating any wells is
often uncertain and new wells may not be productive.

We are substantially dependent upon our acquisition plans
related to hydrocarbon interests in Argentina.

We are substantially dependent upon our acquisition plans
related to hydrocarbon interests in Argentina, which causes our risk to be
concentrated.As a result, we may be disproportionately exposed to the
impact of delays or interruptions of production from these wells caused by
significant governmental regulation, transportation capacity constraints,
curtailment of production or interruption of transportation of natural gas
produced from the wells.

Properties that we acquire may not produce as
projected.

Properties that we buy may not produce as projected and we may
be unable to determine reserve potential, identify liabilities associated with
the properties or obtain protection from sellers against them.One of our
growth strategies is to capitalize on opportunistic acquisitions of oil and
natural gas reserves. However, our reviews of acquired properties are inherently
incomplete because it generally is not feasible to review in depth every
individual property involved in each acquisition. A detailed review of records
and properties may not necessarily reveal existing or potential problems, nor
will it permit a buyer to become sufficiently familiar with the properties to
assess fully their deficiencies and potential. Further, environmental problems,
such as ground water contamination, are not necessarily observable even when an
inspection is undertaken. Acquiring properties with liabilities would have a
material adverse effect upon our results of operations.

The potential profitability of oil and gas ventures depends
upon factors beyond our control.

The potential profitability of oil and gas ventures depends
upon factors beyond our control.The potential profitability of oil and
gas properties is dependent upon many factors beyond our control. For instance,
world prices and markets for oil and gas are unpredictable, highly volatile,
potentially subject to governmental fixing, pegging,

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controls, or any combination of these and other factors, and
respond to changes in domestic, international, political, social, and economic
environments. Additionally, due to worldwide economic uncertainty, the
availability and cost of funds for production and other expenses have become
increasingly difficult, if not impossible, to project. These and other changes
and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations.
A productive well may become uneconomic in the event water or other deleterious
substances are encountered which impair or prevent the production of oil and/or
gas from the well. In addition, production from any well may be unmarketable if
it is impregnated with water or other deleterious substances. The marketability
of oil and gas, which may be acquired or discovered will be affected by numerous
factors beyond our control. These factors include, but are not limited to, the
proximity and capacity of oil and gas pipelines and processing equipment, market
fluctuations of prices, taxes, royalties, land tenure, allowable production and
environmental protection. These factors cannot be accurately predicted and the
combination of these factors may result in us not receiving an adequate return
on our invested capital.

We are dependent upon transportation and storage services
provided by a third party.

We are and will continue to be dependent upon transportation
and storage services provided by third parties.We will be dependent on
the transportation and storage services offered by various interstate and
intrastate pipeline companies for the delivery and sale of our oil and gas
supplies. Both the performance of transportation and storage services by
interstate pipelines and the rates charged for such services are subject to the
jurisdiction of the Federal Energy Regulatory Commission or state regulatory
agencies. An inability to obtain transportation and/or storage services at
competitive rates could hinder our processing and marketing operations and/or
affect our sales margins.

Our results of operation are dependent upon market
prices.

Our results of operations are dependent upon market prices for
oil and natural gas, which fluctuate widely and are beyond our control.Our revenue, profitability, and cash flow depend upon the prices and demand
for oil and natural gas. The markets for these commodities are very volatile and
even relatively modest drops in prices can significantly affect our financial
results and impede our growth. Prices received also will affect the amount of
future cash flow available for capital expenditures and may affect our ability
to raise additional capital. Lower prices may also affect the amount of natural
gas and oil that can be economically produced from reserves either discovered or
acquired.

Factors that can cause price fluctuations include: (i) the
level of consumer product demand; (ii) weather conditions; (iii) domestic and
foreign governmental regulations; (iv) the price and availability of alternative
fuels; (v) technical advances affecting energy consumption; (vi) proximity and
capacity of oil and gas pipelines and other transportation facilities; (vii)
political conditions in natural gas and oil producing regions; (viii) the
domestic and foreign supply of natural gas and oil; (ix) the ability of members
of Organization of Petroleum Exporting Countries to agree to and maintain oil
price and production controls; (x) the price of foreign imports; and (xi)
overall domestic and global economic conditions.

The availability of a ready market for our oil and gas
depends upon numerous factors beyond our control.

The availability of a ready market for our oil and gas depends
upon numerous factors beyond our control, including the extent of domestic
production and importation of oil and gas, the relative status of the domestic
and international economies, the proximity of our properties to gas gathering
systems, the capacity of those systems, the marketing of other competitive
fuels, fluctuations in seasonal demand and governmental regulation of
production, refining, transportation and pricing of oil, natural gas and other
fuels.

The oil and gas industry involves many operating risks that
can cause substantial losses.

The oil and gas industry in which we operate involves many
operating risks that can cause substantial losses.Our drilling
activities are subject to many risks, including the risk that we will not
discover commercially productive reservoirs. Drilling for oil and natural gas
can be unprofitable, not only from dry holes, but from productive wells that do
not produce sufficient revenues to return a profit. In addition, our drilling
and producing operations may be curtailed, delayed or canceled as a result of
other factors, including: (i) fires; (ii) explosions; (iii) blow-outs and

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surface cratering; (iv) uncontrollable flows of underground
natural gas, oil, or formation water; (v) natural disasters; (vi) facility and
equipment failures; (vii) title problems; (viii) shortages or delivery delays of
equipment and services; (ix) abnormal pressure formations; and (x) environmental
hazards such as natural gas leaks, oil spills, pipeline ruptures and discharges
of toxic gases.

If any of these events occur, we could incur substantial losses
as a result of: (i) injury or loss of life; (ii) severe damage to and
destruction of property, natural resources or equipment; (iii) pollution and
other environmental damage; (iv) clean-up responsibilities; (v) regulatory
investigation and penalties; (vi) suspension of our operations; or (vii) repairs
necessary to resume operations. If we were to experience any of these problems,
it could affect well bores, gathering systems and processing facilities, any one
of which could adversely affect our ability to conduct operations. We may be
affected by any of these events more than larger companies, since we have
limited working capital. We currently do not maintain liability insurance on
bodily injury, which would include coverage for pollution, environmental damage
and chemical spills. For other risks, we may further elect not to obtain
insurance if we believe the cost of available insurance is excessive relative to
the risks presented. In addition, pollution and environmental risks generally
are not fully insurable. If a significant accident or other event occurs and is
not covered by insurance, it could adversely affect operations. Moreover, even
if we obtained insurance in the future, we cannot provide assurance that we
would be able to maintain adequate insurance at rates considered reasonable.

The oil and gas industry is highly competitive.

The oil and gas industry is highly competitive and there is no
assurance that we will be successful in acquiring the leases.The oil and
natural gas industry is intensely competitive, and we compete with other
companies that have greater resources. Many of these companies not only explore
for and produce oil and natural gas, but also carry on refining operations and
market petroleum and other products on a regional, national or worldwide basis.
These companies may be able to pay more for productive oil and natural gas
properties and exploratory prospects or define, evaluate, bid for and purchase a
greater number of properties and prospects than our financial or human resources
permit. In addition, these companies may have a greater ability to continue
exploration activities during periods of low oil and natural gas market prices.
Our larger competitors may be able to absorb the burden of present and future
federal, state, local and other laws and regulations more easily than we can,
which would adversely affect our competitive position. Our ability to acquire
additional properties and to discover reserves in the future will be dependent
upon our ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment. In addition, because we have
fewer financial and human resources than many companies in our industry, we may
be at a disadvantage in bidding for exploratory prospects and producing oil and
natural gas properties.

There can be no assurance we will be able to obtain drilling
equipment.

There can be no assurance we will be able to obtain drilling
equipment to meet our drilling requirements. We may experience delays in
obtaining drilling rigs due to the high drilling demand in the areas where we
have been concentrating our oil and gas targeted production and leasing
programs. There can be no assurance that we will be able to obtain the requisite
drilling equipment to meet our planned drilling initiatives according to our
timetable. In the event that we are unable to obtain drilling equipment to
conduct our exploration operations, it could have a material adverse effect upon
our business and our results of operations.

The marketability of natural resources will be affected by
numerous factors.

The marketability of natural resources will be affected by
numerous factors beyond our control which may result in us not receiving an
adequate return on invested capital to be profitable or viable.The
marketability of natural resources which may be acquired or discovered by us
will be affected by numerous factors beyond our control. These factors include
market fluctuations in oil and gas pricing and demand, the proximity and
capacity of natural resource markets and processing equipment, governmental
regulations, land tenure, land use, regulation concerning the importing and
exporting of oil and gas and environmental protection regulations. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in us not receiving an adequate return on invested
capital to be profitable or viable.

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Oil and gas operations are subject to comprehensive
regulation.

Oil and gas operations are subject to comprehensive regulation
which may cause substantial delays or require capital outlays in excess of those
anticipated causing an adverse effect on us. Oil and gas operations are subject
to federal, state, and local laws relating to the protection of the environment,
including laws regulating removal of natural resources from the ground and the
discharge of materials into the environment. Oil and gas operations are also
subject to federal, state, and local laws and regulations which seek to maintain
health and safety standards by regulating the design and use of drilling methods
and equipment. Various permits from government bodies are required for drilling
operations to be conducted; no assurance can be given that such permits will be
received. Environmental standards imposed by federal, provincial, or local
authorities may be changed and any such changes may have material adverse
effects on our activities. Moreover, compliance with such laws may cause
substantial delays or require capital outlays in excess of those anticipated,
thus causing an adverse effect on us. Additionally, we may be subject to
liability for pollution or other environmental damages which we may elect not to
insure against due to prohibitive premium costs and other reasons. To date we
have not been required to spend material amounts on compliance with
environmental regulations. However, we may be required to do so in the future
and this may affect our ability to expand or maintain our operations.

Exploration and production activities are subject to
environmental regulations.

Exploration and production activities are subject to certain
environmental regulations which may prevent or delay the commencement or
continuance of our operations.In general, our exploration and production
activities are subject to certain federal, state and local laws and regulations
relating to environmental quality and pollution control. Such laws and
regulations increase the costs of these activities and may prevent or delay the
commencement or continuance of a given operation. Compliance with these laws and
regulations has not had a material effect on our operations or financial
condition to date. Specifically, we are subject to legislation regarding
emissions into the environment, water discharges and storage and disposition of
hazardous wastes. In addition, legislation has been enacted which requires well
and facility sites to be abandoned and reclaimed to the satisfaction of state
authorities. However, such laws and regulations are frequently changed and we
are unable to predict the ultimate cost of compliance. Generally, environmental
requirements do not appear to affect us any differently or to any greater or
lesser extent than other companies in the industry.

We believe that our operations comply in all material respects
with all applicable environmental regulations. However, we are not insured
against all possible environmental risks.

Any change to government regulation/administrative practices
may have a negative impact on our ability to operate and our
profitability.

Any change to government regulation/administrative practices
may have a negative impact on our ability to operate and our profitability.The laws, regulations, policies or current administrative practices of any
government body, organization or regulatory agency in the United States or any
other jurisdiction, may be changed, applied or interpreted in a manner which
will fundamentally alter our ability to carry on business. The actions, policies
or regulations, or changes thereto, of any government body or regulatory agency,
or other special interest groups, may have a detrimental effect on us. Any or
all of these situations may have a negative impact on our ability to operate
and/or our profitably.

We may be unable to retain key employees or
consultants.

We may be unable to retain key employees or consultants or
recruit additional qualified personnel.Our extremely limited personnel
means that we would be required to spend significant sums of money to locate and
train new employees in the event any of our employees resign or terminate their
employment with us for any reason. Due to our limited operating history and
financial resources, we are entirely dependent on the continued service of Mr.
Sacha Spindler, our Chief Executive Officer, and Mr. Sam Sen, our President.
Further, we do not have key man life insurance on either of these individuals.
We may not have the financial resources to hire a replacement if one or both of
our officers were to die. The loss of service of either of these employees could
therefore significantly and adversely affect our operations.

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Certain of our officers and directors may be subject to
conflicts of interest.

Our officers and directors may be subject to conflicts of
interest.Certain of our officers and directors serve only part time and
are subject to conflicts of interest. Certain of these officers and directors
each devote part of his working time to other business endeavors. These business
endeavors as well as other business opportunities should be presented to the
company. Such conflicts include deciding how much time to devote to our affairs,
as well as what business opportunities should be presented to the company.
Because of these relationships, our officers and directors may be subject to
conflicts of interest.

Risks Related to our Common Stock

Sales of a substantial number of share or our common stock
into the public market may result in significant downward pressure on the price
of our common stock.

Sales of a substantial number of shares of our common stock
into the public market by certain stockholders may result in significant
downward pressure on the price of our common stock and could affect your ability
to realize the current trading price of our common stock. Sales of a substantial
number of shares of our common stock in the public market by certain
stockholders could cause a reduction in the market price of our common stock. As
of March 31, 2008, we have 28,623,391 shares of common stock issued and
outstanding. There are 16,033,197 outstanding shares of our common stock that
are restricted securities as that term is defined in Rule 144 under the
Securities Act. Although the Securities Act and Rule 144 place certain
prohibitions on the sale of restricted securities, restricted securities may be
sold into the public market under certain conditions. Further, as of December
31, 2007, there are an aggregate of 1,099,178 stock options and 976,553 warrants
outstanding.

Any significant downward pressure on the price of our common
stock as certain stockholders sell their shares of our common stock could
encourage short sales by the selling stockholders or others. Any such short
sales could place further downward pressure on the price of our common stock.

The trading price of our common stock on the OTC Bulletin
Board has been and may continue to fluctuate significantly.

The trading price of our common sock on the OTC Bulletin Board
has been and may continue to fluctuate significantly and stockholders may have
difficulty reselling their shares. During fiscal years ended December 31, 2007
and December 31, 2006, our common sock has traded as low as $0.17 and as high as
$1.24. In addition to volatility associated with OTC Bulletin Board securities
in general, the value of your investment could decline due to the impact of any
of the following factors upon the market price of our common stock: (i) changes
in the world wide price for oil or natural gas; (ii) disappointing results from
our discovery or development efforts; (iii) failure to meet our revenue or
profit goals or operating budget; (iv) decline in demand for our common stock;
(v) downward revisions in securities analysts' estimates or changes in general
market conditions; (vi) technological innovations by competitors or in competing
technologies; (vii) lack of funding generated for operations; (viii) investor
perception of our industry or our prospects; and (ix) general economic trends.

In addition, stock markets have experienced extreme price and
volume fluctuations and the market prices of securities have been highly
volatile. These fluctuations are often unrelated to operating performance and
may adversely affect the market price of our common stock. As a result,
investors may be unable to sell their shares at a fair price and you may lose
all or part of your investment.

Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations which may limit a stockholders
ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions

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with assets in excess of $5,000,000 or individuals with a net
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
jointly with their spouse. 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 in a form prepared by the SEC
which 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. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customers confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these 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 disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a stockholder's ability
to buy and sell our stock.

In addition to the penny stock rules described above, FINRA
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.

Additional issuances of equity securities may result in dilution
  to our existing shareholders.

Additional issuances of equity securities may result in
dilution to our existing stockholders. Our Articles of Incorporation authorize
the issuance of 250,000,000 shares of common stock and 100,000,000 shares of
preferred stock. The board of directors has the authority to issue additional
shares of our capital stock to provide additional financing in the future and
the issuance of any such shares may result in a reduction of the book value or
market price of the outstanding shares of our common stock. If we do issue any
such additional shares, such issuance also will cause a reduction in the
proportionate ownership and voting power of all other stockholders. As a result
of such dilution, if you acquire shares of our common stock, your proportionate
ownership interest and voting power could be decreased. Further, any such
issuances could result in a change of control.

As of March 6, 2006, our board of directors authorized and
approved the adoption of Performance Stock Incentive Plan (the Performance
Stock Incentive Plan), pursuant to which an aggregate of 6,000,000 restricted
shares of our common stock were issued to certain officers, directors and
consultants. The 6,000,000 restricted shares of common stock are subject to an
escrow and can be acquired by the respective individual upon achievement by us
of certain milestones. See Item 5. Market for Common Equity and Related
Stockholders Matters and Item 10. Executive Compensation.

Other Risks

Nevada law and our Articles of Incorporation may protect our
directors from certain types of lawsuits.

Nevada law and our Articles of Incorporation may protect our
directors from certain types of lawsuits. Nevada law provides that our
officers and directors will not be liable to us or our stockholders for monetary
damages for all but certain types of conduct as officers and directors. Our
Bylaws permit us broad indemnification powers to all persons against all damages
incurred in connection with our business to the fullest extent provided or
allowed by law. The exculpation provisions may have the effect of preventing
stockholders from recovering damages against our officers

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and directors caused by their negligence, poor judgment or other
  circumstances. The indemnification provisions may require us to use our limited
  assets to defend our officers and directors against claims, including claims
  arising out of their negligence, poor judgment, or other circumstances.

Because some of our officers and directors are located in
non-U.S. jurisdictions, you may have no effective recourse against the non U.S.
officers and directors for misconduct and may not be able to enforce judgement
and civil liabilities against our officers, directors, experts and agents.

Some of our directors and officers are nationals and/or
residents of countries other than the United States, specifically Canada, and
all or a substantial portion of such persons assets are located outside the
United States. As a result, it may be difficult for investors to enforce within
the United States any judgments obtained against our officers or directors,
including judgments predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof.

Item
2.           Description of
Property.

Our principal executive office is located at Suite 2703  550
Pacific Street, Vancouver, British Columbia, Canada V6Z 3G2; our telephone
number is 604.607.1677. Our office consists of 1,250 square feet and is rented
on a month-to-month basis at a cost of CAD $2,800 per month. We believe that our
office space and facilities are sufficient to meet our present needs and do not
anticipate any difficulty securing alternative or additional space, as needed,
on terms acceptable to us.

Item
3.           Legal
Proceedings.

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

On September 15, 2004, a lawsuit was filed by Petroguard
Company, Inc. (Petroguard) against Petrogen and a director of Petrogen. The
claims made by Petroguard in its complaint alleged conversion, unjust
enrichment, fraud, and negligent representation regarding the geologic and
geophysical interpretations of a three-dimensional seismic survey of
approximately 135 square miles constituting Esperitu-Santo Bay and most of
Matagorda Island, and that Petrogen wrongfully obtained the seismic survey.
Petroguard claimed injunctive relief including a cease and desist order against
Petrogen. Petrogen responded in its answer to the complaint denying receipt of
the seismic data as alleged and counterclaiming that Petrogen was in possession
of some related data that is not three-dimensional, which it properly acquired
from a third party. In August 2006, this lawsuit was settled by mutual release
and mutual dismissal. Neither party was required to pay any amount.

On October 20, 2004 we commenced an action against X-Clearing
Corp. (X-Clearing), our previous transfer agent, in the District Court for the
City and County of Denver, State of Colorado for return of our stock record
documents. X-Clearing filed an answer and counterclaim asserting that we were
liable to X-Clearing for certain legal expenses incurred by X-Clearing Corp. in
prosecuting an action against the Depository Trust Company, which legal expenses
are undeterminable. On October 3, 2006 the District Court of the City and County
of Denver, State of Colorado ordered X-Clearing to return our stock record
documents and for us to reimburse X-Clearing $5,283 of legal fees incurred by
X-Clearing while acting as our transfer agent.

On September 18, 2006, a lawsuit was filed by Jack Cowley
Supply Co. Inc. (Cowley) in the District Court of the 79th Judicial District,
Jim Wells County, Texas against Petrogen for unpaid goods. Petrogen. has
responded in its answer to the complaint denying that any of the goods were
ordered by Petrogen or any of its representatives. The outcome and the loss, if
any from this legal proceeding, is presently not determinable and no provision
for loss have been provided in the financial statements.

On April 30, 2007, we commenced an arbitral action against
SEPSA through the ICC requesting the ICC to enforce SEPSAs obligations under
the terms agreed upon in the SPA and to sell to our company 100% of the shares
of

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SEPSA and to award damages incurred by us related to our out of
pocket expenses, loss of business opportunity and loss of revenue. SEPSA
subsequently filed a counter claim with the ICC seeking awards for legal fees
and translation costs related to this dispute.

We operate in the field of oil and gas exploration and are
therefore subject to state and federal environmental regulations. Due to the
diversity of these regulations compliance at all times cannot be assured.

Item
4.           Submissions of
Matters to a Vote of Security Holders.

None.

PART II

Item
5.           Market for Common
Equity and Related Stockholder Matters and Small Business Issuer Purchases of
Equity Securities.

Our common stock is quoted for trading on the OTC Bulletin
Board1 under the symbol PEYG. The following table sets forth the
high and low sales prices for our common stock for each quarter within the last
two fiscal years.

Quarter Ended
    High
    LowMarch 31, 2006 June 30, 2006 September 30, 2006
      December 31, 2006 March 31, 2007 June 30, 2007 September
      30, 2007 December 31, 2007
    $0.61 $0.47 $0.95 $0.58 $1.15
      $0.67 $0.60 $1.24
    $0.40 $0.24 $0.17 $0.25 $0.32
      $0.33 $0.29 $0.35


> (1) Over-the-Counter market quotations reflect
>         inter-dealer prices without retail mark-up, mark-down or commission, and
>         may not represent actual transactions.

On March 31, 2008, the shareholders list for our common stock
showed 137 registered stockholders and 28,623,391 shares issued and outstanding.

Dividends

We have not declared any dividends since incorporation and do
not anticipate that we will do so in the foreseeable future. Our directors will
determine if and when dividends should be declared and paid in the future based
on our financial position at the relevant time. All shares of our common stock
are entitled to an equal share of any dividends declared and paid.

Recent Sales of Unregistered Securities

We did not sell any equity securities which were not registered
under the Securities Act during the year ended December 31, 2007 that were not
otherwise disclosed on our quarterly reports on Form 10-QSB or our current
reports on Form 8-K filed during the year ended December 31, 2007.

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- 21 -

Equity Compensation Plan Information

The following table provides a summary of the securities
authorized for issuance under Equity Compensation Plans, the weighted average
price and number of securities remaining available for issuance, all as at
December 31, 2007.

|                                                                 |                         |                      | Number of securities   
|---------------------------------------------------------------- | ----------------------- | -------------------- | -----------------------
|                                                                 |                         |                      | remaining available for
|                                                                 |                         |                      | future issuance under  
|                                                                 | Number of securities to | Weighted average     | equity compensation    
|                                                                 | be issued upon exercise | exercise price of    | plans (excluding       
|                                                                 | of outstanding options, | outstanding options, | securities reflected in
|                                                                 | warrants and rights     | warrants and rights  | column (a))            
|                                                                 | (a)                     | (b)                  | (c)                    
|                                                                 |                         |                      |                        
|Equity compensation plans approved by
      security holders     | 2,700,731               | $0.52                | 4,532,787              
|                                                                 |                         |                      |                        
|Equity compensation plans not approved by security
      holders | Nil                     | $Nil                 | Nil                    
|Total                                                            | 2,700,731               |                      | 4,532,787              

Purchase of Equity Securities by the Issuer and Affiliated
Purchasers

We did not purchase any of our shares of common stock or other
securities during the year ended December 31, 2007.

Item
6.           Management
Discussion and Analysis and Results of Operation.

The following discussion should be read in conjunction with our
audited consolidated financial statements and the related notes for the year
ended December 31, 2007 and the factors that could affect our future financial
condition and results of operations. Historical results may not be indicative of
future performance.

The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this annual report, particularly in the
section entitled Risk Factors beginning on page 9 of this annual report.

RESULTS OF OPERATION

Following a period of poor financial performance and continued
losses on our United States oil and gas operations, during the forth quarter of
2007 we commenced a process to sell our United States oil and gas properties. As
a result, the results of operations on the United States properties have been
classified as a loss from discontinued operations in the consolidated statements
of operations. The consolidated statements of cash flows for the years ended
December 31, 2007 and 2006 and from November 15, 2001 (inception) to December
31, 2007 for operating activities and investing activities have been separated
between continuing and discontinued operations. Certain figures in the
consolidated statements of cash flows from November 15, 2001 (inception) to
December 31, 2007 have been reclassified for purposes of comparability.

For the years ended December 31, 2007 and December 31, 2006

Our losses from operations for the year ended December 31, 2007
were approximately $ 6,550,849compared to $2,273,443 for the year ended December
31, 2006 (an increase of $3,982,406 or 175%). We incurred operating expenses of
$6,550,849 (2006: $2,273,443) consisting of $9,956 in depreciation, $760,938 in
general and administrative, $129,112in interest expense, $1,111,650 in
management and consulting fees  related party, $4,026,806 in management and
consulting fees  stock based compensation and $512,387 in professional fees.

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- 22 -

General and administrative expenses increased by $266,325 (54%)
for the year ended December 31, 2007 compared to general and administrative
expenses for the year ended December 31, 2006 due to the increase in consultants
and overhead used in the Argentina acquisitions. General and administrative
expenses generally include corporate overhead, financial and administrative
contractual services, marketing and consulting costs. The management and
consulting fees to related parties increased by $185,284 (20%) as a result of an
increase in bonuses awarded in 2007. The stock based compensation related to
management increased by $3,613,406 (874%) due to the granting of stock options
and stock appreciation rights under the new Equity Incentive Plan filed in July,
2007. Professional fees increased by $154,089 (43%) due to the legal dispute on
the San Enrique acquisition.

For the year ended December 31, 2007, we incurred other
expenses of approximately $85,285 compared to other expenses of $90,000 incurred
for the year ended December 31, 2006 (a decrease of $4,715 or 5%). The other
expenses incurred for the year ended December 31, 2007 consisted of: (i) $60,000
(2006: $90,000) in write-down of other investment; and (ii) $25,285 (2005: $nil)
in write-down of fixed assets The loss from operations combined with other
expenses resulted in a loss from continuing operations of $6,636,134 (2006:
$2,363,443).

For the year ended December 31, 2007, we incurred expenses from
discontinued operations of approximately $869,093 compared to expenses from
discontinued operations of $3,344,258 incurred for the year ended December 31,
2006 (a decrease of $2,475,165 or 74%). The results of oil and gas operations
for the year ended December 31, 2007 consisted of: (i) $23,012 (2006: $320,607)
in gas sales; (ii) $165 (2006: $14,220) in depletion; (iii) $nil (2006:
$626,250) in financing fees; (iv) $44,371 (2006: $252,666) in lease operating
expenses; (v) $808,487 (2006: $2,025,232) from the impairment of oil and gas
properties; and (vi) $39,082 (2006: $746,497) in general and administrative
expenses, resulting in a net loss of $869,093 (2006: $3,344,258).

GT Venture Management AG (GTV) derives remuneration from us
as compensation for management and consulting services rendered by Mr. Spindler,
our Chief Executive Officer and a director. During the year ended December 31,
2007, management fees of $360,000 were incurred by us for said services. In May
2007, GTV converted $3,000 of unpaid fees into 3,000,000 Series A preferred
shares issued to Mr. Spindler. In June 2007, GTV converted $140,000 of unpaid
fees into a private placement consisting of 560,000 units at $0.25 per unit. In
December 2007, GTV exercised 1,250,000 stock appreciation rights which resulted
in $875,000 owing to it. We settled this debt plus an additional $75,000 owing
to Mr. Spindler for the exercise of 100,000 stock appreciation rights granted to
him for services provided by him as a director of our company, by issuing
1,250,000 common shares for the exercise of 1,250,000 stock options at $0.50,
100,000 common shares for the exercise of 100,000 stock options at $0.45 granted
to Mr. Spindler, and 560,000 common shares for the exercise of 560,000 share
purchase warrants at $0.50. At December 31, 2007, GTV is owed $44,181 by our
company. Our company is committed to pay GTV $30,000 in management fees per
month for the services of this officer.

Mr. Russell, one of our former directors, derived remuneration
from us as compensation for management services rendered. During the year ended
December 31, 2007, consulting fees of $7,900 were incurred by us to Mr. Russell.
In May 2007, Mr. Russell converted $200 of unpaid fees into 200,000 Series A
preferred shares. On August 22, 2007, Mr. Russell resigned, no severance fees
were paid and none are owed. At December 31, 2007, Mr. Russell is owed $Nil for
unpaid fees.

Mr. Sam Sen, our President and Chief Operating Officer,.derives
  remuneration from us as compensation for management and consulting services
  rendered , During the year ended December 31, 2007, management fees of $216,000
  were incurred by us for said services of which $13,500 was allocated to discontinued
  operations for work relating to the US oil and gas properties. In May 2007,
  Mr. Sen converted $1,200 of unpaid fees into 1,200,000 Series A preferred shares.
  In June 2007, Mr. Sen converted $30,000 of unpaid fees into a private placement
  consisting of 120,000 units at $0.25 per unit. In December 2007, Mr. Sen exercised
  750,000 stock appreciation rights which resulted in $525,000 owing to it. We
  settled this debt by issuing 750,000 common shares for the exercise of 750,000
  stock options at $0.50, 120,000 common shares for the exercise of 120,000 share
  purchase warrants at $0.50 and 75,000 common shares for the remaining $90,000.
  At December 31, 2007, Mr. Sen is owed $98,300 for management fees. The Company
  is committed to pay Mr. Sen $18,000 in management fees per month.

Mr. Perryman, one of our directors, derives remuneration from
us as compensation for consulting services rendered. During the year ended
December 31, 2007, consulting fees of $9,000 plus a bonus of $45,000 were
incurred by us to Mr. Perryman. In May 2007, Mr. Perryman converted $400 of
unpaid fees into 400,000 Series A preferred shares. In

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- 23 -

June 2007, Mr. Perryman converted $45,000 of unpaid fees into a
private placement consisting of 180,000 units at $0.25 per unit. At December 31,
2007, Mr. Perryman is owed $2,600 for unpaid fees. We are committed to pay Mr.
Perryman $1,000 per month.

Mr. Fiddler, our former Chief Financial Officer, derived
remuneration from us as compensation for management services rendered. During
the year ended December 31, 2007, management fees of $66,000 were incurred by us
to Mr. Fiddler. At December 31, 2007, Mr. Fiddler is owed $7,500 for management
fees due. We are committed to pay Mr. Fiddler $5,500 in management fees per
month. This agreement can be terminated by our company at any time by providing
30 days written notice. On January 24, 2008, this officer resigned but agreed to
remain as a consultant until our company found a suitable replacement.

Our net loss for the year ended December 31, 2007 was
$7,505,227or $0.51 per share compared to a net loss of $5,707,701 or $0.73 per
share for the year ended December 31, 2006. The weighted average number of
shares outstanding was 14,595,840 at December 31, 2007, compared to 7,845,043 at
December 31, 2006.

LIQUIDITY AND CAPITAL RESOURCES

Our financial statements have been prepared assuming that we
will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should we be unable to continue in
operation.

As at December 31, 2007

As at December 31, 2007, our current assets were $162,790 and
our current liabilities were $2,495,872, resulting in working capital deficit of
$2,333,082. As at December 31, 2007, current assets were comprised of: (i)
$25,257 in cash; (ii) $38,781 in restricted cash; (iii) $2,225 in accounts
receivable; and (iv) $76,889 in prepaids and deposits.

As at December 31, 2007, our total assets were $235,889
comprised of: (i) $162,790 in current assets; (ii) $79,117 in unproved oil and
gas properties available for sale (net of depletion); (iii) $13,620 in furniture
and equipment (net of depreciation). The decrease in total assets at December
31, 2007 from fiscal year ended December 31, 2007 was primarily due to the
impairment of our oil and gas properties.

As at December 31, 2007, current liabilities were comprised of:
(i) $1,606,230 in accounts payable and accrued liabilities; (ii) $200,230 in
share based compensation liability; (iii) $399,375 in notes payable; (iv)
$102,520 in private placement subscription proceeds; (v) $79,117 in loans
payable; and (vi) $108,400 in amounts due to related parties.

As at December 31, 2007, our total liabilities were $
2,495,872, all consisting of current liabilities. The decrease in total
liabilities at December 31, 2007 compared to fiscal year ended December 31, 2006
was due primarily to the partial conversion and repayment of the convertible
notes.

Stockholders' equity decreased from ($315,196) at December 31,
2006 to ($ 2,240,345) at December 31, 2007.

For the year ended December 31, 2007, net cash used in
continuing operating activities was $1,482,343 compared to net cash used in
continuing operating activities of $1,503,755 for the year ended December 31,
2006. Net cash used in continuing operating activities for the year ended
December 31, 2007 was comprised of a net loss of $6,636,134 (2006: $2,363,443)
and adjusted primarily by: (i) expenses paid by the issuance of shares of
$102,000 (2006: $705,972); (ii) stock based compensation of $4,026,806 (2006:
$413,400); (iii) accrued management fees of $139,527 (2006: $Nil); and (iv)
accounts payable and accrued liabilities of $727,545 (2006: $434,687).

For the year ended December 31, 2007, net cash used in
discontinued operating activities was $48,908 compared to net cash used in
discontinued operating activities of $678,556 for the year ended December 31,
2006 resulting in net cash used in operating activities of $1,531,251 (2006:
$2,182,311).

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- 24 -

Our cash flow used in continuing investing activities for the
year ended December 31, 2007 was $4,070 compared to net cash from continuing
investing activities of $19,654 for the year ended December 31, 2006. The net
cash from continuing investing activities during the year ended December 31,
2007 was primarily from the purchase of office furniture and equipment. The
change in net cash from investing activities for the year ended December 31,
2007 was primarily due to the sale of other investments that occurred in 2006.

For the year ended December 31, 2007, net cash from
discontinued investing activities was $486,500 compared to net cash used in
discontinued investing activities of $492,847 for the year ended December 31,
2007 resulting in net cash from investing activities of $482,430 (2006: $473,193
in cash used).

Cash flows from financing activities for the year ended
December 31, 2007 was $944,638 compared to cash flow from financing activities
of $1,967,224 for the year ended December 31, 2006. The net cash flow from
financing activities for the year ended December 31, 2007 was primarily
comprised of: (i) $742,420 (2006: $971,410) in proceeds on sale of common stock
including subscriptions received; (ii) $18,500 (2006: $51,804) in warrants;
(iii) ($45,001) (2006: $123,936) in advances from related parties; (iv) $6,219
(2006: $nil) in restricted cash; (v) $357,250 (2006: ($14,926)) in notes
payable; and (vi) ($134,750) (2006: $835,000) in loans payable. The decrease in
net cash from financing activities for the year ended December 31, 2007 was
primarily the result of the partial repayment of the loans payable.

MATERIAL COMMITMENTS

On January 1, 2007, we entered into five five-year-term
management consulting agreements. Of the five, three were with directors and/or
officers of our Company, or their private companies. The agreements provide for
remuneration on a monthly basis totalling $66,000. We have the right in all of
the five consulting agreements to terminate the agreements without cause by
providing 30 days written notice. Upon termination of our agreement with GT
Venture Management AG (GTV), we are required to pay a severance of 24 months
of monthly fees within 10 business days of the termination date plus an
additional severance cash payment equating to the value of 5% of the Gross
Market Capital Increase in our Company from January 1, 2007 until the date of
the termination of this agreement. Upon termination of our agreement with
Landmark Management Services SA (LMS), we are required to pay a severance of 6
months of monthly fees within 10 business days of the termination date. In
addition to the equity awards agreed upon by us under the Equity Incentive Plan
between GTV and LMS, we are required to accrue sums equivalent to the gross tax
payable by reason of receipts of those equity awards granted and exercised under
those material commitments to GTV and LMS. Of these five agreements entered into
by the Company, two have terminated; the remaining three agreements provide for
the granting of a total of 16,700,000 stock options and 16,700,000 stock
appreciation rights, in aggregate, over the five year terms of the agreements.
As of December 31, 2007, 2,300,000 stock options and 2,300,000 stock
appreciation rights have been granted, the remaining 14,400,000 options and
14,400,000 stock appreciation rights vest over the remaining term ending January
1, 2012.

On July 1, 2007, we entered into a five-year-term management
consulting agreement with our senior geologist, Jose Bereskyj. The agreement
provides for a signing bonus of $20,000, the issuance of 100,000 shares of
unrestricted common stock and a monthly remuneration of $10,000. We have the
right to terminate the agreement without cause by providing 30 days written
notice. Upon termination of the agreement, we are required to pay this
consultant severance of 6 months of monthly fees within 10 business days of the
termination date. This agreement provides for the granting of 2,225,000 stock
options and 2,225,000 stock appreciation rights, in aggregate, over the five
year term. As of December 31, 2007, 250,000 stock options and 250,000 stock
appreciation rights have been granted, the remaining 1,975,000 stock options and
1,975,000 stock appreciation rights vest over the remaining term ending July 1,
2012.

In connection with the oil and gas exploration, development and
production expenses and other overhead costs incurred, we and/or our subsidiary
incurred liability or borrowed funds pursuant to various contractual
arrangements representing the following material commitments.

During the year ended December 31, 2007, we issued ten
promissory notes totalling $420,000 which are unsecured and due on demand. These
notes bear a fixed interest charge of $52,500 for a total owing of $472,500.
During the first quarter of 2007, we repaid three promissory notes totalling
$65,000 plus fixed interest charges of $8,125. As of

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- 25 -

December 31, 2007, seven promissory notes totalling $355,000
plus fixed interest charges of $44,375 remain outstanding, the aggregate of the
notes and fixed interest charges total $399,375.

Effective April 28, 2006 we entered into three convertible loan
agreements which were secured by the assets of our subsidiary Petrogen. The
loans bear interest at LIBOR plus 5% per annum, and interest is payable each
quarter commencing six months after the first receipt of funds. The first note
of $275,000 was due on April 1, 2007, and was converted into 1,375,000 common
shares on May 7, 2007. The second note of $275,000 was due on June 13, 2007, and
converted into 1,375,000 common shares on June 25, 2007. The remaining note of
$285,000 was due one year after receipt of funds, being September 7, 2007. On
March 14, 2007, $134,750 was repaid in cash and on September 26, 2007, $75,000
was converted into 375,000 common shares, leaving a balance of $75,250 plus
$3,867 in accrued interest.

On September 10, 2007, we received a demand notice (the
Demand) for the immediate payment of the Note in the amount of $75,250 plus
$3,867 of accrued interest. The Note carried a guaranteed security agreement
(GSA) over the assets of Petrogen as collateral to the GSA. Petrogen defaulted
under the Note, whereby the Note holder exercised its right to accept the
collateral described in the GSA in full satisfaction of Petrogens obligation
under the Note. The Note holder sent to Petrogen a properly authenticated
proposal to accept Petrogens collateral in full satisfaction of the above
described debt as required by the TEXAS BUSINESS & COMMERCE CODE, §9.620. On
October 8, 2007 our company and Petrogen consented to the proposal. The Note
holders subsequent acceptance of the collateral in full satisfaction of the
obligation it secures: (a) discharges Petrogens, obligation to the extent
consented to by Petrogen.; (b) transfers to the secured party all of Petrogens
rights in the collateral; (c) discharges the security interest lien over
Petrogen; and (d) terminates any subordinate security interest or other
subordinate liens over Petrogen by other third party creditors, as described
under TEXAS BUSINESS & COMMERCE CODE §9.622. Once title has been legally
transferred from Petrogen to the note holder, Petrogen will no longer owns any
assets in the United States and as such, will be preparing Petrogen for wind-up
and dissolution. As of December 31, 2007, legal title to the properties has not
been transferred to the Note holder. We anticipate transferring these properties
during the second quarter of 2008.

During 2008 and as of the date of this filing, we issued five
promissory notes totalling $445,000 plus fixed interest charges of $55,625 which
are unsecured, due on demand, and bear interest at 12.5% .

On March 28, 2008, we entered into an Amendment Agreement
pursuant to certain promissory notes (the Promissory Note Amendment Agreement)
whereby terms of those promissory notes issued by us totalling $515,000 plus
interest of $64,375 committed by us during 2007 and 2008 were amended providing
for conversion into units (the Units) of our Company for all of or portions of
the principle and interest accrued under those promissory notes at the time of
conversion, whereby conversion of such accruals would be convertible for the
Units, those Units of which are comprised of one common share of our Company
priced at $.35 and one common share purchase warrant, each warrant of which is
exercisable commencing 90 days subsequent to the conversion of accruals under
those promissory notes for two years from the date of conversion at an exercise
price of $.70 per exercised warrant share.

On March 31, 2008, a total of $466,875 (interest of $51,875) of
promissory notes described under the Promissory Note Amendment Agreement were
converted into 1,333,928 units of our Company, wherein we issued 1,333,928
common shares of our Company at a rate of $.35 per common share, the holders
thereof which retain the right commencing 90 days from the date of the
conversion to exercise up to 1,333,928 common share purchase warrants of our
Company at a rate of $.70 per exercised warrant share for a period of two years
subsequent to the date of conversion; March 30, 2010.

Cash Requirements

Over the next twelve months we intend to acquire oil and gas
properties in Argentina. We anticipate that we will incur the following costs
and operating expenses over the next twelve months, excluding the acquisition
costs related to the our acquisition of San Enrique Petrolera S.A., as
follows:

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- 26 -

Estimated Funding Required During the Next Twelve MonthsExpenses
    AmountManagement fees
    $750,000Oil & gas
      exploration expenses and holding costs
    3,000,000Professional fees
    400,000Investor relations
      & sales related
    500,000Rent, utilities
      and insurance
    100,000Other general
      administrative expenses
    250,000Total
    $5,000,000


We will require additional funds to implement our growth
strategy in exploration operations. These funds may be raised through equity
financing, debt financing, or other sources, which may result in further
dilution in the equity ownership of our shares. There is still no assurance that
we will be able to maintain operations at a level sufficient for an investor to
obtain a return on his investment in our common stock. Further, we may continue
to be unprofitable.

Going Concern

Due to our being an exploration stage company and not having
generated revenues, in their Notes to our financial statements for the year
ended December 31, 2007, our independent auditors included an explanatory
paragraph regarding concerns about our ability to continue as a going concern.

As at December 31, 2007, the Company has a working capital
deficiency of $2,333,082 and we have historically incurred losses, and through
December 31, 2007 have incurred losses of $22,227,670 from our inception.
Because of these historical losses, we will require additional working capital
to develop our business operations. We intend to raise additional working
capital through private placements, public offerings, bank financing and/or
advances from related parties or shareholder loans.

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

There are no assurances that we will be able to either: (1)
achieve a level of revenues adequate to generate sufficient cash flow from
operations; or (2) obtain additional financing through either private
placements, public offerings and/or bank financing necessary to support our
working capital requirements. To the extent that funds generated from operations
and any private placements, public offerings and/or bank financing are
insufficient, we will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if available, will be
on terms acceptable to us. If adequate working capital is not available we may
not increase our operations.

These conditions raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should we be unable to continue as a going concern.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.

---

- 27 -

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been presented in
United States dollars and prepared in accordance with United States Generally
Accepted Accounting Principles (US GAAP).

Principles of Consolidation

The consolidated financial statements include the accounts of
our company and our wholly-owned subsidiaries, Petrogen and Pluris Energy Group,
Inc. All significant intercompany transactions and account balances have been
eliminated.

Oil and Gas Properties

We follow the full cost method of accounting for our oil and
gas operations whereby all cost related to the acquisition of petroleum and
natural gas interests are capitalized. Such costs include land and lease
acquisition costs, annual carrying charges of non-producing properties,
geological and geophysical costs, costs of drilling and equipping productive and
non-productive wells, and direct exploration salaries and related benefits. In
addition, we are the operator of our properties and as per our contracts with
third party working interest partners, we charge them operator fees. These
operator fees represent a reimbursement of general and administration expenses
which have been allocated to the exploration and maintenance of the Emily Hawes
Field property. Proceeds from the disposal of oil and gas properties are
recorded as a reduction of the related capitalized costs without recognition of
a gain or loss unless the disposal would result in a change of 20 percent or
more in the depletion rate. We operate in one cost center, being the U.S.A.

To date we have commenced initial production of gas but has not
yet quantified proven reserves from evaluations from third party independent
reservoir engineers. Depletion and depreciation of the carrying value of
unproved oil and gas properties are computed using the unit-of-production method
based on the estimated reserves of oil and gas as determined by management.

Estimated future removal and site restoration costs are
provided over the life of proven reserves on a unit-of-production basis. Costs,
which include the cost of production equipment removal and environmental
clean-up, are estimated each period by management based on current regulations,
costs, technology and industry standards. The charge is included in the
provision for depletion and depreciation and the actual restoration expenditures
are charged to the accumulated provision accounts as incurred.

We apply a ceiling test to capitalized costs to ensure that
such costs do not exceed estimated future net revenues from production of proven
reserves at year end market prices less future production, administrative,
financing, site restoration, and income tax costs plus the lower of cost or
estimated market value of unproved properties. If capitalized costs are
determined to exceed estimated future net revenues, an impairment of the
carrying value is charged in the period.

Use of Estimates and Assumptions

Preparation of our financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from
those estimates. Significant areas requiring managements estimates and
assumptions are reviewing the carrying values of oil and gas properties for
impairment, determining fair value for stock based compensation, asset
retirement obligations and the valuation of deferred tax assets.

Foreign Currency Translation

The financial statements are presented in United States
dollars. In accordance with Statement of Financial Accounting Standard (SFAS)
No. 52, "Foreign Currency Translation", foreign denominated monetary assets and

---

- 28 -

liabilities are translated to their United States dollar
equivalents using foreign exchange rates which prevailed at the balance sheet
date. Revenue and expenses are translated at average rates of exchange during
the period. Related translation adjustments are reported as a separate component
of stockholders' equity, whereas gains or losses resulting from foreign currency
transactions are included in results of operations.

Net Earnings (Loss) per Common Share

Basic earnings (loss) per common share include no dilution and
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Dilutive earnings
(loss) per share reflect the potential dilution of securities that could share
in our earnings. Diluted loss per share figures are equal to those of basic loss
per share for each period since the effects of convertible notes, stock options
and warrants have been excluded as they are anti-dilutive. The 6,000,000 shares
held in escrow do not form part of this computation.

Stock-Based Compensation

On January 1, 2006, we adopted SFAS No. 123 (revised 2004)
(SFAS No. 123R), Share-Based Payment, which addresses the accounting for
stock-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprises equity
instruments or that may be settled by the issuance of such equity instruments.
In January 2005, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 107, which provides supplemental implementation
guidance for SFAS No. 123R. SFAS No. 123R eliminates the ability to account for
stock-based compensation transactions using the intrinsic value method under
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and instead requires that such transactions be accounted for using a
fair-value-based method. The Company uses the Black-Scholes-Merton (BSM)
option-pricing model to determine the fair-value of stock-based awards under
SFAS No. 123R.

Income Taxes

We follow the liability method of accounting for income taxes
as set forth in SFAS No. 109, Accounting for Income Taxes. Under this method,
deferred income tax assets and liabilities are recognized for the estimated tax
consequences attributable to differences between the financial statement
carrying values and their respective income tax basis (temporary differences).
The effect on deferred income tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the date of enactment
or substantial enactment. A valuation allowance is provided for deferred tax
assets if it is more likely than not that we will not realize the future
benefit, or if future deductibility is uncertain.

Fair Value of Financial Instruments

In accordance with the requirements of SFAS No. 107, we have
determined the estimated fair value of financial instruments using available
market information and appropriate valuation methodologies. The fair value of
financial instruments classified as current assets or liabilities including
cash, restricted cash, accounts receivable, notes receivable, prepaids and
deposits, accounts payable and accrued liabilities, advances and loans payable,
debenture payable and amounts due to related parties approximate carrying values
due to the short-term maturity of the instruments.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2008, the FASB issued SFAS No. 161, Disclosures
about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161
is intended to improve financial reporting about derivative instruments and
hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity's financial position, financial
performance, and cash flows. SFAS 161 achieves these improvements by requiring
disclosure of the fair values of derivative instruments and their gains and
losses in a tabular format. It also provides more information about an entity's
liquidity by requiring disclosure of derivative features that are credit
risk-related. Finally, it requires cross-referencing within footnotes to enable
financial statement users to locate important

---

- 29 -

information about derivative instruments. SFAS 161 will be
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, will be adopted by the Company beginning in
the first quarter of 2009. The Company does not expect there to be any
significant impact of adopting SFAS 161 on its financial position, cash flows
and results of operations.

In December 2007, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141R, Business Combinations. This statement replaces
SFAS 141 and defines the acquirer in a business combination as the entity that
obtains control of one or more businesses in a business combination and
establishes the acquisition date as the date that the acquirer achieves control.
SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date. SFAS 141R also requires the
acquirer to recognize contingent consideration at the acquisition date, measured
at its fair value at that date. This statement is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December
15, 2008. Earlier adoption is prohibited. The adoption of this statement is not
expected to have a material effect on our financial statements.

In December 2007, the FASB issued SFAS No. 160,
Non-controlling Interests in Consolidated Financial Statements Liabilities  an
Amendment of ARB No. 51. This statement amends ARB 51 to establish accounting
and reporting standards for the Non-controlling interest in a subsidiary and for
the deconsolidation of a subsidiary. This statement is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Earlier adoption is prohibited. The adoption of this
statement is not expected to have a material effect on our future reported
financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities. This Statement permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. We currently assessing the impact of
SFAS No. 159 on our financial position and results of operations.

Item
7.           Financial
Statements.

Our financial statements are stated in United States dollars
and are prepared in accordance with United States Generally Accepted Accounting
Principles.

| | Report of Independent Registered Public Accounting Firm
        dated March 28, 2008.                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                 
| | Consolidated Balance Sheets as of December 31, 2007 and
        2006.                                                                                                           
| |                                                                                                                                                                                 
| | Consolidated Statements of Operations for the years ended
        December 31, 2007 and 2006 and for the period from November 15, 2001 (inception)
        to December 31, 2007.
| |                                                                                                                                                                                 
| | Consolidated Statements of Cash Flows for the years ended
        December 31, 2007 and 2006 and for the period from November 15, 2001 (inception)
        to December 31, 2007.
| |                                                                                                                                                                                 
| | Consolidated Statement of Stockholders Equity (Deficit)
        for the period from November 15, 2001(inception) to December 31, 2007                                          
| |                                                                                                                                                                                 
| | Notes to the Consolidated Financial Statements.                                                                                                                                 

---

- F1 -







PLURIS ENERGY GROUP INC.
  (An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007











|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|-------------------------------------------------------
|                                                       
|CONSOLIDATED BALANCE SHEETS                            
|                                                       
|CONSOLIDATED STATEMENTS OF OPERATIONS                  
|                                                       
|CONSOLIDATED STATEMENTS OF CASH FLOWS                  
|                                                       
|CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT        
|                                                       
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS             

---

- F2 -



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and Board of Directors of Pluris Energy Group
  Inc.

We have audited the accompanying consolidated balance sheet of
  Pluris Energy Group Inc. (an exploration stage company) as at December 31, 2007
  and 2006 and the related consolidated statements of operations, stockholders
  deficit and cash flows for the years then ended and for the period from November
  15, 2001 (inception) through December 31, 2007. 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 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. The Company is not required
  to have, nor were we engaged to perform, an audit of its internal control over
  financial reporting. Our audits included consideration of internal control over
  financial reporting as a basis for designing audit procedures that are appropriate
  in the circumstances, but not for the purpose of expressing an opinion on the
  effectiveness of the Companys internal control over financial reporting.
  Accordingly, we express no such opinion. An audit also includes examining, on
  a test basis, evidence supporting the amounts and disclosures in the financial
  statements. An audit also includes assessing the accounting principles used
  and significant estimates made by management, as well as evaluating the overall
  financial statement presentation. We believe that our audits provide a reasonable
  basis for our opinion.

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  December 31, 2007 and 2006 and the results of its operations and its cash flows
  for the years then ended and for the period from November 15, 2001 (inception)
  through December 31, 2007 in conformity with accounting principles generally
  accepted in the United States of America.

The accompanying consolidated financial statements have been
  prepared assuming that the Company will continue as a going concern. As discussed
  in Note 1 to the financial statements, the Company has not generated revenues
  since inception, has incurred losses in developing its business, and further
  losses are anticipated. The Company requires additional funds to meet its obligations
  and the costs of its operations. These factors raise substantial doubt about
  the Companys ability to continue as a going concern. Managements
  plans in this regard are described in Note 1. The financial statements do not
  include any adjustments that might result from the outcome of this uncertainty.



"DMCL"

DALE MATHESON CARR-HILTON LABONTE LLP 
  CHARTERED ACCOUNTANTS

Vancouver, Canada 
  March 24, 2008, except for Note 14 which is as of April 10, 2008



---

- F3 -

PLURIS ENERGY GROUP INC. 
  (An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

|                                                                               |   | December 31, |   |   | December 31, |  
|------------------------------------------------------------------------------ | - | ------------ | - | - | ------------ | -
|                                                                               |   | 2007         |   |   | 2006         |  
|                                                                               |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|ASSETS                                                                         |  
|CURRENT ASSETS                                                                 |   |              |   |   |              |  
|Cash                                                                           | $ | 25,257       |   | $ | 129,440      |  
|Restricted cash                                                                |   | 38,781       |   |   | 45,000       |  
|Receivables                                                                    |   | 2,225        |   |   | 16,059       |  
|Prepaids and deposits                                                          |   | 96,527       |   |   | 34,051       |  
|                                                                               |   |              |   |   |              |  
|                                                                               |   | 162,790      |   |   | 224,550      |  
|                                                                               |   |              |   |   |              |  
|SECURITIES HELD FOR TRADING (Note 4)                                           |   | -            |   |   | 60,000       |  
|FURNITURE AND EQUIPMENT, net of depreciation
      of $48,347 (2006 - $38,391) |   | 13,620       |   |   | 44,791       |  
|PROPERTY HELD FOR SALE                                                         |   |              |   |   |              |  
|Oil and gas properties,
      unproved (Note 3)                                |   | 79,117       |   |   | 1,372,755    |  
|                                                                               |   |              |   |   |              |  
|                                                                               | $ | 255,527      |   | $ | 1,702,096    |  
|                                                                               |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                 |  
|                                                                               |   |              |   |   |              |  
|CURRENT LIABILITIES                                                            |   |              |   |   |              |  
|Accounts payable
      and accrued liabilities                                 | $ | 1,606,230    |   | $ | 932,192      |  
|Share based compensation liability
      (Note 11)                             |   | 200,230      |   |   | -            |  
|Notes payable (Note
      5)                                                   |   | 399,375      |   |   | 73,620       |  
|Private placement subscription proceeds
      (Note 9)                         |   | 102,520      |   |   | -            |  
|Loans payable (Note
      6)                                                   |   | 79,117       |   |   | 856,625      |  
|Due to related parties (Note 8)                                                |   | 108,400      |   |   | 154,855      |  
|                                                                               |   |              |   |   |              |  
|                                                                               |   | 2,495,872    |   |   | 2,017,292    |  
|                                                                               |   |              |   |   |              |  
|CONTINGENCIES AND COMMITMENTS (Notes 1, 7, and 13)                             |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|STOCKHOLDERS DEFICIT (Note 9)                                                 |   |              |   |   |              |  
|Common stock, $0.001
      par value, 250,000,000 shares authorized            |   |              |   |   |              |  
|28,159,824
      (2006  16,889,234) shares issued and outstanding             |   | 28,160       |   |   | 16,889       |  
|Additional paid-in
      capital                                               |   | 20,273,438   |   |   | 14,689,954   |  
|Preferred stock, $0.001 par value,
      100,000,000 shares authorized         |   |              |   |   |              |  
|4,600,000 (2006  NIL) issued and outstanding                                  |   | 4,600        |   |   | -            |  
|Subscriptions receivable                                                       |   | -            |   |   | (25,000      | )
|Common stock purchase
      warrants                                           |   | 26,127       |   |   | 70,404       |  
|Deficit accumulated during the exploration stage                               |   | (22,572,670  | ) |   | (15,067,443  | )
|                                                                               |   |              |   |   |              |  
|                                                                               |   | (2,240,345   | ) |   | (315,196     | )
|                                                                               |   |              |   |   |              |  
|                                                                               | $ | 255,527      |   | $ | 1,702,096    |  
|                                                                               |   |              |   |   |              |  
|Subsequent Events (Note 14)                                                    |   |              |   |   |              |  

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

---

- F4 -

PLURIS ENERGY GROUP INC.(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                |   |              |   |   |              |   |   | November 15,   |  
|--------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | -------------- | -
|                                                                |   |              |   |   |              |   |   | 2001           |  
|                                                                |   | Year Ended   |   |   | Year Ended   |   |   | (Inception) to |  
|                                                                |   | December 31, |   |   | December 31, |   |   | December 31,   |  
|                                                                |   | 2007         |   |   | 2006         |   |   | 2007           |  
|                                                                |   |              |   |   |              |   |   |                |  
|EXPENSES                                                        |   |              |   |   |              |   |   |                |  
|Depreciation                                                    | $ | 9,956        |   | $ | 15,034       |   | $ | 48,347         |  
|General and administrative                                      |   | 760,938      |   |   | 494,613      |   |   | 2,427,551      |  
|Interest expense                                                |   | 129,112      |   |   | 65,732       |   |   | 361,559        |  
|Loss on settlement of debt                                      |   | -            |   |   | -            |   |   | 239,448        |  
|Management and consulting fees (Note 8
      and 11)            |   | 1,111,650    |   |   | 926,366      |   |   | 3,742,911      |  
|Management and consulting
      fees  stock based compensation |   |              |   |   |              |   |   |                |  
|(Notes 10 and 11)                                               |   | 4,026,806    |   |   | 413,400      |   |   | 7,469,201      |  
|Professional fees                                               |   | 512,387      |   |   | 358,298      |   |   | 2,000,163      |  
|                                                                |   |              |   |   |              |   |   |                |  
|LOSS FROM OPERATIONS                                            |   | (6,550,849   | ) |   | (2,273,443   | ) |   | (16,289,180    | )
|                                                                |   |              |   |   |              |   |   |                |  
|OTHER EXPENSES                                                  |   |              |   |   |              |   |   |                |  
|Non-recurring costs of share exchange                           |   | -            |   |   | -            |   |   | (417,800       | )
|Impairment of fixed assets                                      |   | (25,285      | ) |   | -            |   |   | (25,285        | )
|Write-down
      of other investment                            |   | (60,000      | ) |   | (90,000      | ) |   | (150,000       | )
|                                                                |   | (85,285      | ) |   | (90,000      | ) |   | (593,085       | )
|                                                                |   |              |   |   |              |   |   |                |  
|LOSS FROM CONTINUING OPERATIONS                                 |   | (6,636,134   | ) |   | (2,363,443   | ) |   | (16,882,265    | )
|                                                                |   |              |   |   |              |   |   |                |  
|DISCONTINUED OPERATIONS                                         |   |              |   |   |              |   |   |                |  
|Results
      of oil and gas operations                         |   | (869,093     | ) |   | (3,344,258   | ) |   | (5,690,405     | )
|                                                                |   | (869,093     | ) |   | (3,344,258   | ) |   | (5,690,405     | )
|                                                                |   |              |   |   |              |   |   |                |  
|NET LOSS                                                        | $ | (7,505,227   | ) | $ | (5,707,701   | ) | $ | (22,572,670    | )
|                                                                |   |              |   |   |              |   |   |                |  
|BASIC AND DILUTED NET LOSS PER SHARE                            | $ | (0.51        | ) | $ | (0.73        | ) |   |                |  
|                                                                |   |              |   |   |              |   |   |                |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                      |   | 14,595,840   |   |   | 7,845,043    |   |   |                |  

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

---

- F5 -

PLURIS ENERGY GROUP INC. 
  (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                        |   |              |   |   |              |   |   | November 15,     |  
|----------------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ---------------- | -
|                                                                        |   | Year ended   |   |   | Year ended   |   |   | 2001 (inception) |  
|                                                                        |   | December 31, |   |   | December 31, |   |   | to December 31,  |  
|                                                                        |   | 2007         |   |   | 2006         |   |   | 2007             |  
|                                                                        |   |              |   |   |              |   |   |                  |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                    |   |              |   |   |              |   |   |                  |  
|Net loss from continuing operations                                     | $ | (6,636,134   | ) | $ | (2,363,443   | ) | $ | (16,882,265      | )
|Non-cash items:                                                         |   |              |   |   |              |   |   |                  |  
|- depreciation                                                          |   | 9,956        |   |   | 15,034       |   |   | 48,347           |  
|- accrued interest receivable                                           |   | -            |   |   | (245         | ) |   | (263             | )
|- accrued interest expense                                              |   | 74,699       |   |   | 35,861       |   |   | 192,277          |  
|- loss on settlement of debt                                            |   | -            |   |   | -            |   |   | 239,448          |  
|- accrued management fees                                               |   | 139,527      |   |   | -            |   |   | 224,027          |  
|- non-recurring costs of share
      exchange                           |   | -            |   |   | -            |   |   | 417,800          |  
|- stock-based compensation                                              |   | 4,026,806    |   |   | 413,400      |   |   | 7,469,201        |  
|- expenses paid by the issuance
      of shares                         |   | 102,000      |   |   | 705,972      |   |   | 2,205,994        |  
|- loss on write down of other investments and
      fixed assets        |   | 85,285       |   |   | 90,000       |   |   | 175,285          |  
|- receivables                                                           |   | 13,834       |   |   | 55,681       |   |   | 67,775           |  
|- prepaids and deposits                                                 |   | (25,861      | ) |   | 22,110       |   |   | (59,912          | )
|- accounts payable and accrued liabilities                              |   | 727,545      |   |   | (434,687     | ) |   | 1,722,639        |  
|-
      advances payable                                                |   | -            |   |   | 43,438       |   |   | -                |  
|Net cash used in continuing operations                                  |   | (1,482,343   | ) |   | (1,503,755   | ) |   | (4,179,647       | )
|Net cash
      used in discontinued operations                          |   | (48,908      | ) |   | (678,556     | ) |   | (1,832,441       | )
|NET CASH USED IN OPERATING
      ACTIVITIES                             |   | (1,531,251   | ) |   | (2,182,311   | ) |   | (6,012,088       | )
|                                                                        |   |              |   |   |              |   |   |                  |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                    |   |              |   |   |              |   |   |                  |  
|Purchase of furniture and equipment                                     |   | (4,070       | ) |   | (10,346      | ) |   | (87,252          | )
|Pre reverse acquisition advances from Petrogen
      Corp.              |   | -            |   |   | -            |   |   | 100,000          |  
|Cash acquired on reverse acquisition of Petrogen
      Inc.             |   | -            |   |   | -            |   |   | 868              |  
|Proceeds
      on sale of other investments                             |   | -            |   |   | 30,000       |   |   | 30,000           |  
|Net cash from (used in) continuing investing activities                 |   | (4,070       | ) |   | 19,654       |   |   | 43,616           |  
|Net cash
      from (used in) discontinued investing activities         |   | 486,500      |   |   | (492,847     | ) |   | (2,618,447       | )
|NET CASH FROM (USED
      IN) INVESTING ACTIVITIES                      |   | 482,430      |   |   | (473,193     | ) |   | (2,574,831       | )
|                                                                        |   |              |   |   |              |   |   |                  |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                    |   |              |   |   |              |   |   |                  |  
|Proceeds on sale of common stock including subscriptions
      received |   | 742,420      |   |   | 971,410      |   |   | 5,836,870        |  
|Warrants                                                                |   | 18,500       |   |   | 51,804       |   |   | 88,904           |  
|Restricted cash                                                         |   | 6,219        |   |   | -            |   |   | (38,781          | )
|Notes payable                                                           |   | 357,250      |   |   | (14,926      | ) |   | 305,404          |  
|Loans payable                                                           |   | (134,750     | ) |   | 835,000      |   |   | 700,250          |  
|Debenture payable                                                       |   | -            |   |   | -            |   |   | (138,302         | )
|Loans receivable                                                        |   | -            |   |   | -            |   |   | 925,000          |  
|Cash advances from former related parties                               |   | -            |   |   | -            |   |   | 318,990          |  
|Advances
      from (to) related parties                                |   | (45,001      | ) |   | 123,936      |   |   | 613,841          |  
|NET CASH FLOWS FROM
      FINANCING ACTIVITIES                          |   | 944,638      |   |   | 1,967,224    |   |   | 8,612,176        |  
|                                                                        |   |              |   |   |              |   |   |                  |  
|(DECREASE) INCREASE IN CASH                                             |   | (104,183     | ) |   | (688,280     | ) |   | 25,257           |  
|CASH, BEGINNING                                                         |   | 129,440      |   |   | 817,720      |   |   | -                |  
|                                                                        |   |              |   |   |              |   |   |                  |  
|CASH, ENDING                                                            | $ | 25,257       |   | $ | 129,440      |   | $ | 25,257           |  

Other non-cash transactions: Refer to Note 15.

|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |   |   |  |   |       |  |   |       | 
|------------------------------------------------- | - | - |  | - | ----- |  | - | ----- | 
|Interest paid                                     | $ | - |  | $ | 2,875 |  | $ | 2,875 | 
|Income taxes paid                                 | $ | - |  | $ | -     |  | $ | -     | 

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

---

- F6 -

PLURISENERGYGROUPINC.
  
  (AnExplorationStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSDEFICITFOR THEPERIODFROMNOVEMBER15, 2001(DATEOFINCEPTION)TODECEMBER31, 2007

|                                                                          |              |  |   |            |  |   |           |   |   |                    |   |   |            |   |   | Deficit       |   |   |            |  
|------------------------------------------------------------------------- | ------------ |  | - | ---------- |  | - | --------- | - | - | ------------------ | - | - | ---------- | - | - | ------------- | - | - | ---------- | -
|                                                                          |              |  |   |            |  |   |           |   |   |                    |   |   |            |   |   | Accumulated   |   |   | Total      |  
|                                                                          | Common Stock |  |   | Additional |  |   |           |   |   | Share              |   |   | during the |   |   | Stockholders |  
|                                                                          | Number of    |  |   |            |  |   | Paid-in   |   |   | Obligation to      |   |   | Purchase   |   |   | Exploration   |   |   | Equity     |  
|                                                                          | Shares       |  |   | Amount     |  |   | Capital   |   |   | issue
      shares |   |   | Warrants   |   |   | Stage         |   |   | (Deficit)  |  
|                                                                          |              |  |   |            |  |   |           |   |   |                    |   |   |            |   |   |               |   |   |            |  
|Stock issued for cash, November 15, 2001 (Date
      of Inception)        | 1,304,311    |  | $ | 1,304      |  | $ | (1,194    | ) | $ | -                  |   | $ | -          |   | $ | -             |   | $ | 110        |  
|Stock issued for cash, May 3, 2002                                        | 1,186        |  |   | 1          |  |   | (1        | ) |   | -                  |   |   | -          |   |   | -             |   |   | -          |  
|Stock Issued for oil and gas property, May
      20, 2002                 | 8,893        |  |   | 9          |  |   | (8        | ) |   | -                  |   |   | -          |   |   | -             |   |   | 1          |  
|Stock Issued for services, June 3, 2002                                   | 28,458       |  |   | 28         |  |   | 11,972    |   |   | -                  |   |   | -          |   |   | -             |   |   | 12,000     |  
|Stock issued for cash, July 8, 2002                                       | 11,857       |  |   | 12         |  |   | 24,988    |   |   | -                  |   |   | -          |   |   | -             |   |   | 25,000     |  
|Subscriptions received for 32,000 units, August 9, 2002                   | -            |  |   | -          |  |   | -         |   |   | 8,000              |   |   | -          |   |   | -             |   |   | 8,000      |  
|Stock Issued for services, August 13, 2002                                | 5,929        |  |   | 6          |  |   | 2,494     |   |   | -                  |   |   | -          |   |   | -             |   |   | 2,500      |  
|Stock issued for subscriptions received in prior period, October
      7, |              |  |   |            |  |   |           |   |   |                    |   |   |            |   |   |               |   |   |            |  
|2002                                                                      | 3,794        |  |   | 4          |  |   | 7,996     |   |   | (8,000             | ) |   | -          |   |   | -             |   |   | -          |  
|Stock issued for cash, November 26, 2002                                  | 35,572       |  |   | 36         |  |   | 29,964    |   |   | -                  |   |   | -          |   |   | -             |   |   | 30,000     |  
|Net loss for the period November 15, 2001
      to December 31, 2002      | -            |  |   | -          |  |   | -         |   |   | -                  |   |   | -          |   |   | (193,562      | ) |   | (193,562   | )
|                                                                          |              |  |   |            |  |   |           |   |   |                    |   |   |            |   |   |               |   |   |            |  
|Petrogen, Balance, December 31, 2002                                      | 1,400,000    |  |   | 1,400      |  |   | 76,211    |   |   | -                  |   |   | -          |   |   | (193,562      | ) |   | (115,951   | )
|Stock issued for acquisition costs, February 12, 2003                     | 60,000       |  |   | 60         |  |   | (60       | ) |   | -                  |   |   | -          |   |   | -             |   |   | -          |  
|Reverse acquisition of Petrogen Corp., February
      12, 2003            | 415,658      |  |   | 416        |  |   | (350,483  | ) |   | -                  |   |   | 357,800    |   |   | -             |   |   | 7,733      |  
|Stock issued for exercise of options, March 21, 2003                      | 200,000      |  |   | 200        |  |   | 499,800   |   |   | -                  |   |   | -          |   |   | -             |   |   | 500,000    |  
|Obligation to issue 10,000 shares                                         | -            |  |   | -          |  |   | -         |   |   | 5,000              |   |   | -          |   |   | -             |   |   | 5,000      |  
|Stock-based compensation, options granted on September 10,
      2003     | -            |  |   | -          |  |   | 362,230   |   |   | -                  |   |   | -          |   |   | -             |   |   | 362,230    |  
|Stock issued for exercise of options, September
      29, 2003            | 47,000       |  |   | 47         |  |   | 63,703    |   |   | -                  |   |   | -          |   |   | -             |   |   | 63,750     |  
|Obligation to issue shares reclassification                               | -            |  |   | -          |  |   | -         |   |   | (5,000             | ) |   | -          |   |   | -             |   |   | (5,000     | )
|Stock-based compensation, options granted
      on November 1, 2003       | -            |  |   | -          |  |   | 360,215   |   |   | -                  |   |   | -          |   |   | -             |   |   | 360,215    |  
|Warrants expired                                                          | -            |  |   | -          |  |   | 101,500   |   |   | -                  |   |   | (101,500   | ) |   | -             |   |   | -          |  
|Net loss                                                                  | -            |  |   | -          |  |   | -         |   |   | -                  |   |   | -          |   |   | (2,097,187    | ) |   | (2,097,187 | )
|Balance, December 31, 2003                                                | 2,122,658    |  | $ | ,2,123     |  | $ | 1,113,116 |   | $ | -                  |   | $ | 256,300    |   | $ | (2,290,749    | ) | $ | (919,210   | )

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

---

- F7 -

PLURISENERGYGROUPINC.
  
  (AnExplorationStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSDEFICITFOR THEPERIODFROMNOVEMBER15, 2001(DATEOFINCEPTION)TODECEMBER31, 2007

|                                                              |              |   |   |            |   |   |           |  |   |                    |  |   |          |   |   | Deficit       |   |   |            |  
|------------------------------------------------------------- | ------------ | - | - | ---------- | - | - | --------- |  | - | ------------------ |  | - | -------- | - | - | ------------- | - | - | ---------- | -
|                                                              |              |   |   |            |   |   |           |  |   |                    |  |   |          |   |   | Accumulated   |   |   | Total      |  
|                                                              | Common Stock |   |   | Additional |   |   |           |  |   | Share              |  |   | during   |   |   | Stockholders |  
|                                                              | Number of    |   |   |            |   |   | Paid-in   |  |   | Obligation to      |  |   | Purchase |   |   | Exploration   |   |   | Equity     |  
|                                                              | Shares       |   |   | Amount     |   |   | Capital   |  |   | issue
      shares |  |   | Warrants |   |   | Stage         |   |   | (Deficit)  |  
|                                                              |              |   |   |            |   |   |           |  |   |                    |  |   |          |   |   |               |   |   |            |  
|Balance, December 31, 2003                                    | 2,122,658    |   | $ | ,2,123     |   | $ | 1,113,116 |  | $ | -                  |  | $ | 256,300  |   | $ | (2,290,749    | ) | $ | (919,210   | )
|Stock issued for exercise of options, January 14, 2004        | 40,000       |   |   | 40         |   |   | 39,960    |  |   | -                  |  |   | -        |   |   | -             |   |   | 40,000     |  
|Stock issued for exercise of options, January
      20, 2004  | 75,000       |   |   | 75         |   |   | 75,925    |  |   | -                  |  |   | -        |   |   | -             |   |   | 76,000     |  
|Stock cancelled, January 30, 2004                             | (10,000      | ) |   | (10        | ) |   | 10        |  |   | -                  |  |   | -        |   |   | -             |   |   | -          |  
|Stock issued for exercise of options, February
      11, 2004 | 329,000      |   |   | 329        |   |   | 387,171   |  |   | -                  |  |   | -        |   |   | -             |   |   | 387,500    |  
|Stock based compensation, options granted on March 4, 2004    | -            |   |   | -          |   |   | 947,550   |  |   | -                  |  |   | -        |   |   | -             |   |   | 947,550    |  
|Stock issued for exercise of options, April
      30, 2004    | 237,000      |   |   | 237        |   |   | 425,013   |  |   | -                  |  |   | -        |   |   | -             |   |   | 425,250    |  
|Stock issued for exercise of options, May 18, 2004            | 50,000       |   |   | 50         |   |   | 62,450    |  |   | -                  |  |   | -        |   |   | -             |   |   | 62,500     |  
|Stock issued for exercise of options, May
      21, 2004      | 261,920      |   |   | 262        |   |   | 327,139   |  |   | -                  |  |   | -        |   |   | -             |   |   | 327,401    |  
|Stock issued for exercise of options, June 1, 2004            | 4,000        |   |   | 4          |   |   | 4,996     |  |   | -                  |  |   | -        |   |   | -             |   |   | 5,000      |  
|Stock issued for exercise of options, June
      16, 2004     | 59,000       |   |   | 59         |   |   | 73,691    |  |   | -                  |  |   | -        |   |   | -             |   |   | 73,750     |  
|Stock based compensation, options granted on March 4, 2004    | -            |   |   | -          |   |   | 176,950   |  |   | -                  |  |   | -        |   |   | -             |   |   | 176,950    |  
|Stock issued for exercise of options, August
      12, 2004   | 200,000      |   |   | 200        |   |   | 299,800   |  |   | -                  |  |   | -        |   |   | -             |   |   | 300,000    |  
|Stock issued for settlement of debenture, August 18, 2004     | 586,938      |   |   | 587        |   |   | 938,514   |  |   | -                  |  |   | -        |   |   | -             |   |   | 939,101    |  
|Stock issued for cash, September 21, 2004                     | 1,476,800    |   |   | 1,476      |   |   | 1,637,424 |  |   |                    |  |   | 182,100  |   |   | -             |   |   | 1,821,000  |  
|Stock based compensation, options granted on July 22, 2004    | -            |   |   | -          |   |   | 852,050   |  |   | -                  |  |   | -        |   |   | -             |   |   | 852,050    |  
|Stock issued for exercise of options, October
      12, 2004  | 6,000        |   |   | 6          |   |   | 8,994     |  |   | -                  |  |   | -        |   |   | -             |   |   | 9,000      |  
|Stock issued for exercise of options, November 1, 2004        | 4,000        |   |   | 4          |   |   | 5,996     |  |   | -                  |  |   | -        |   |   | -             |   |   | 6,000      |  
|Stock issued for exercise of options, November
      8, 2004  | 2,000        |   |   | 2          |   |   | 2,998     |  |   | -                  |  |   | -        |   |   | -             |   |   | 3,000      |  
|Stock based compensation, options granted on October 1, 2004  | -            |   |   | -          |   |   | 70,100    |  |   | -                  |  |   | -        |   |   | -             |   |   | 70,100     |  
|Warrants expired                                              | -            |   |   | -          |   |   | 256,300   |  |   | -                  |  |   | (256,300 | ) |   | -             |   |   | -          |  
|Net loss                                                      | -            |   |   | -          |   |   | -         |  |   | -                  |  |   | -        |   |   | (4,003,722    | ) |   | (4,003,722 | )
|                                                              |              |   |   |            |   |   |           |  |   |                    |  |   |          |   |   |               |   |   |            |  
|Balance, December 31, 2004                                    | 5,444,316    |   | $ | 5,444      |   | $ | 7,706,147 |  | $ | -                  |  | $ | 182,100  |   | $ | (6,294,471    | ) | $ | 1,599,220  |  

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

---

- F8 -

PLURISENERGYGROUPINC.
  
  (AnExplorationStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSDEFICITFOR THEPERIODFROMNOVEMBER15, 2001(DATEOFINCEPTION)TODECEMBER31, 2007

|                                                                |              |  |   |            |  |   |           |   |   |                    |  |   |          |  |   | Deficit       |   |   |           | 
|--------------------------------------------------------------- | ------------ |  | - | ---------- |  | - | --------- | - | - | ------------------ |  | - | -------- |  | - | ------------- | - | - | --------- | 
|                                                                |              |  |   |            |  |   |           |   |   |                    |  |   |          |  |   | Accumulated   |   |   | Total     | 
|                                                                | Common Stock |  |   | Additional |  |   |           |   |   | Share              |  |   | during   |  |   | Stockholders |  
|                                                                | Number of    |  |   |            |  |   | Paid-in   |   |   | Obligation to      |  |   | Purchase |  |   | Exploration   |   |   | Equity    | 
|                                                                | Shares       |  |   | Amount     |  |   | Capital   |   |   | issue
      shares |  |   | Warrants |  |   | Stage         |   |   | (Deficit) | 
|                                                                |              |  |   |            |  |   |           |   |   |                    |  |   |          |  |   |               |   |   |           | 
|Balance, December 31, 2004                                      | 5,444,316    |  | $ | 5,444      |  | $ | 7,706,147 |   | $ | -                  |  | $ | 182,100  |  | $ | (6,294,471    | ) | $ | 1,599,220 | 
|Stock issued for exercise of options, April 4, 2005             | 250,000      |  |   | 250        |  |   | 374,750   |   |   | -                  |  |   | -        |  |   | -             |   |   | 375,000   | 
|Stock issued for services, April 5, 2005                        | 6,000        |  |   | 6          |  |   | 14,694    |   |   | -                  |  |   | -        |  |   | -             |   |   | 14,700    | 
|Stock issued for exercise of options, May 1, 2005               | 49,468       |  |   | 49         |  |   | 146,121   |   |   | -                  |  |   | -        |  |   | -             |   |   | 146,170   | 
|Stock issued for services, May 1, 2005                          | 84,200       |  |   | 84         |  |   | 153,066   |   |   | -                  |  |   | -        |  |   | -             |   |   | 153,150   | 
|Stock issued for acquisition of pipeline, May 1, 2005           | 35,000       |  |   | 35         |  |   | 87,465    |   |   | -                  |  |   | -        |  |   | -             |   |   | 87,500    | 
|Stock issued for finders fees, May 1,
      2005               | 125,680      |  |   | 126        |  |   | (126      | ) |   | -                  |  |   | -        |  |   | -             |   |   | -         | 
|Stock issued for private placement, May 1, 2005                 | 24,000       |  |   | 24         |  |   | 26,976    |   |   | -                  |  |   | 3,000    |  |   | -             |   |   | 30,000    | 
|Stock based compensation, options granted
      on May 2, 2005  | -            |  |   | -          |  |   | 48,700    |   |   | -                  |  |   | -        |  |   | -             |   |   | 48,700    | 
|Stock issued for services, May 16, 2005                         | 1,090        |  |   | 1          |  |   | 1,999     |   |   | -                  |  |   | -        |  |   | -             |   |   | 2,000     | 
|Stock issued for exercise of options, June
      1, 2005        | 40,000       |  |   | 40         |  |   | 99,960    |   |   | -                  |  |   | -        |  |   | -             |   |   | 100,000   | 
|Stock issued for private placement, June 1, 2005                | 12,000       |  |   | 12         |  |   | 13,488    |   |   | -                  |  |   | 1,500    |  |   | -             |   |   | 15,000    | 
|Stock issued for conversion of debt, June
      2, 2005         | 47,006       |  |   | 47         |  |   | 82,213    |   |   | -                  |  |   | -        |  |   | -             |   |   | 82,260    | 
|Stock issued for services, June 2, 2005                         | 2,100        |  |   | 2          |  |   | 3,673     |   |   | -                  |  |   | -        |  |   | -             |   |   | 3,675     | 
|Stock based compensation, options granted
      on July 1, 2005 | -            |  |   | -          |  |   | 211,200   |   |   | -                  |  |   | -        |  |   | -             |   |   | 211,200   | 
|Stock issued for services, September 1, 2005                    | 273,600      |  |   | 274        |  |   | 587,966   |   |   | -                  |  |   | -        |  |   | -             |   |   | 588,240   | 
|Stock issued for services, September 7, 2005                    | 1,000        |  |   | 1          |  |   | 2,499     |   |   | -                  |  |   | -        |  |   | -             |   |   | 2,500     | 
|Stock issued for services, September 12, 2005                   | 23,200       |  |   | 23         |  |   | 42,897    |   |   | -                  |  |   | -        |  |   | -             |   |   | 42,920    | 
|Stock issued for services, September 29, 2005                   | 600          |  |   | 1          |  |   | 2,129     |   |   | -                  |  |   | -        |  |   | -             |   |   | 2,130     | 
|Stock issued for exercise of options, September 29, 2005        | 4,000        |  |   | 4          |  |   | 4,996     |   |   | -                  |  |   | -        |  |   | -             |   |   | 5,000     | 
|Stock issued for exercise of options, October
      6, 2005     | 12,000       |  |   | 12         |  |   | 29,988    |   |   | -                  |  |   | -        |  |   | -             |   |   | 30,000    | 
|Stock issued for conversion of debt, October 6, 2005            | 10,000       |  |   | 10         |  |   | 36,490    |   |   | -                  |  |   | -        |  |   | -             |   |   | 36,500    | 
|Stock issued for conversion of debt, October
      12, 2005     | 7,000        |  |   | 7          |  |   | 13,993    |   |   | -                  |  |   | -        |  |   | -             |   |   | 14,000    | 
|                                                                |              |  |   |            |  |   |           |   |   |                    |  |   |          |  |   |               |   |   |           | 
|Balance carried forward                                         | 6,452,260    |  | $ | 6,452      |  | $ | 9,691,284 |   | $ | -                  |  | $ | 186,600  |  | $ | (6,294,471    | ) | $ | 3,589,865 | 

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

---

- F9 -

PLURISENERGYGROUPINC.
  
  (AnExplorationStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSDEFICITFOR THEPERIODFROMNOVEMBER15, 2001(DATEOFINCEPTION)TODECEMBER31, 2007

|                                                             |              |  |   |            |  |   |            |  |   |               |   |   |               |  |   |          |   |   | Deficit       |   |   |            |  
|------------------------------------------------------------ | ------------ |  | - | ---------- |  | - | ---------- |  | - | ------------- | - | - | ------------- |  | - | -------- | - | - | ------------- | - | - | ---------- | -
|                                                             |              |  |   |            |  |   |            |  |   |               |   |   |               |  |   |          |   |   | Accumulated   |   |   | Total      |  
|                                                             | Common Stock |  |   | Additional |  |   |            |  |   | Share         |   |   | Share         |  |   | during   |   |   | Stockholders |  
|                                                             | Number of    |  |   |            |  |   | Paid-in    |  |   | Obligation to |   |   | subscriptions |  |   | Purchase |   |   | Exploration   |   |   | Equity     |  
|                                                             | Shares       |  |   | Amount     |  |   | Capital    |  |   | issue shares  |   |   | receivable    |  |   | Warrants |   |   | Stage         |   |   | (Deficit)  |  
|                                                             |              |  |   |            |  |   |            |  |   |               |   |   |               |  |   |          |   |   |               |   |   |            |  
|Balance carried forward                                      | 6,452,260    |  | $ | 6,452      |  | $ | 9,691,284  |  | $ | -             |   | $ | -             |  | $ | 186,600  |   | $ | (6,294,471    | ) | $ | 3,589,865  |  
|Stock issued for exercise of options, October 18, 2005       | 16,533       |  |   | 17         |  |   | 44,983     |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 45,000     |  
|Stock issued for exercise of options, October
      24, 2005 | 83,223       |  |   | 83         |  |   | 160,196    |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 160,279    |  
|Stock issued for services, October 26, 2005                  | 1,700        |  |   | 2          |  |   | 5,609      |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 5,611      |  
|Stock issued for exercise of options, November
      7, 2005 | 6,000        |  |   | 6          |  |   | 7,494      |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 7,500      |  
|Stock issued for conversion of debt, November 7, 2005        | 2,383        |  |   | 3          |  |   | 7,147      |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 7,150      |  
|Stock issued for services, November 7, 2005                  | 2,380        |  |   | 2          |  |   | 7,137      |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 7,139      |  
|Stock issued for conversion of debt, November 28, 2005       | 10,221       |  |   | 10         |  |   | 24,517     |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 24,527     |  
|Beneficial conversion feature on warrants
      (Note 4)     | -            |  |   | -          |  |   | 245,600    |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 245,600    |  
|Share purchase warrants from acquisition of working interest | -            |  |   | -          |  |   | -          |  |   | -             |   |   | -             |  |   | 18,600   |   |   | -             |   |   | 18,600     |  
|Obligation to issue shares                                   | -            |  |   | -          |  |   | -          |  |   | 59,250        |   |   | -             |  |   | -        |   |   | -             |   |   | 59,250     |  
|Net loss                                                     | -            |  |   | -          |  |   | -          |  |   | -             |   |   | -             |  |   | -        |   |   | (3,065,271    | ) |   | (3,065,271 | )
|                                                             |              |  |   |            |  |   |            |  |   |               |   |   |               |  |   |          |   |   |               |   |   |            |  
|Balance, December 31, 2005                                   | 6,574,700    |  |   | 6,575      |  |   | 10,193,967 |  |   | 59,250        |   |   | -             |  |   | 205,200  |   |   | (9,359,742    | ) |   | 1,105,250  |  
|Stock issued for private placement, January
      24, 2006   | 202,467      |  |   | 202        |  |   | 314,348    |  |   | -             |   |   | -             |  |   | 34,950   |   |   | -             |   |   | 349,500    |  
|Stock issued for debt settlement, January 24, 2006           | 38,328       |  |   | 38         |  |   | 105,363    |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 105,401    |  
|Stock issued for services, January 24, 2006                  | 106,000      |  |   | 106        |  |   | 291,394    |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 291,500    |  
|Stock issued for private placement, January 26, 2006         | 340,000      |  |   | 340        |  |   | 412,160    |  |   | -             |   |   | -             |  |   | 12,500   |   |   | -             |   |   | 425,000    |  
|Stock issued for warrants, January 26, 2006                  | 89,507       |  |   | 90         |  |   | 223,677    |  |   | -             |   |   | -             |  |   | (22,377  | ) |   | -             |   |   | 201,390    |  
|Stock issued for termination agreement, January 26, 2006     | 15,000       |  |   | 15         |  |   | 59,235     |  |   | (59,250       | ) |   | -             |  |   | -        |   |   | -             |   |   | -          |  
|Stock issued for debt settlement, January
      26, 2006     | 4,444        |  |   | 4          |  |   | 12,218     |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 12,222     |  
|Stock issued for services, January 26, 2006                  | 7,000        |  |   | 7          |  |   | 18,893     |  |   | -             |   |   | -             |  |   | -        |   |   | -             |   |   | 18,900     |  
|Stock issued for private placement, February,
      2006     | 17,416       |  |   | 18         |  |   | 39,168     |  |   | -             |   |   | -             |  |   | 4,354    |   |   | -             |   |   | 43,540     |  
|                                                             |              |  |   |            |  |   |            |  |   |               |   |   |               |  |   |          |   |   |               |   |   |            |  
|Balance carried forward                                      | 7,394,862    |  | $ | 7,395      |  | $ | 11,670,423 |  | $ | -             |   | $ | -             |  | $ | 234,627  |   | $ | (9,359,742    | ) | $ | 2,552,703  |  

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

---

- F10 -

PLURISENERGYGROUPINC.
  
  (AnExplorationStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSDEFICITFOR THEPERIODFROMNOVEMBER15, 2001(DATEOFINCEPTION)TODECEMBER31, 2006

|                                                            |              |  |   |            |  |   |            |  |   |               |  |   |               |   |   |          |   |   | Deficit       |   |   |            |  
|----------------------------------------------------------- | ------------ |  | - | ---------- |  | - | ---------- |  | - | ------------- |  | - | ------------- | - | - | -------- | - | - | ------------- | - | - | ---------- | -
|                                                            |              |  |   |            |  |   |            |  |   |               |  |   |               |   |   |          |   |   | Accumulated   |   |   | Total      |  
|                                                            | Common Stock |  |   | Additional |  |   |            |  |   | Share         |  |   | Share         |   |   | during   |   |   | Stockholders |  
|                                                            | Number of    |  |   |            |  |   | Paid-in    |  |   | Obligation to |  |   | subscriptions |   |   | Purchase |   |   | Exploration   |   |   | Equity     |  
|                                                            | Shares       |  |   | Amount     |  |   | Capital    |  |   | issue shares  |  |   | receivable    |   |   | Warrants |   |   | Stage         |   |   | (Deficit)  |  
|                                                            |              |  |   |            |  |   |            |  |   |               |  |   |               |   |   |          |   |   |               |   |   |            |  
|Balance carried forward                                     | 7,394,862    |  | $ | 7,395      |  | $ | 11,670,423 |  | $ | -             |  | $ | -             |   | $ | 234,627  |   | $ | (9,359,742    | ) | $ | 2,552,703  |  
|Stock issued for services, February 9, 2006                 | 100          |  |   | -          |  |   | 1,350      |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 1,350      |  
|Escrow stock issued March 1, 2006                           | 6,000,000    |  |   | 6,000      |  |   | 24,000     |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 30,000     |  
|Stock issued for exercise of options, March 7, 2006         | 140,000      |  |   | 140        |  |   | 413,260    |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 413,400    |  
|Expired warrants, March 31, 2006                            | -            |  |   | -          |  |   | 137,556    |  |   | -             |  |   | -             |   |   | (137,556 | ) |   | -             |   |   | -          |  
|Stock issued for exercise of options, April 17, 2006        | 86,060       |  |   | 86         |  |   | 142,638    |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 142,724    |  
|Stock issued for exercise of options, April
      26, 2006  | 6,000        |  |   | 6          |  |   | 7,494      |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 7,500      |  
|Stock issued for debt settlement, June 28, 2006             | 22,500       |  |   | 23         |  |   | 44,977     |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 45,000     |  
|Stock issued for private placement, August
      9, 2006    | 12,525       |  |   | 12         |  |   | 30,210     |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 30,222     |  
|Stock issued for exercise of options, September 22, 2006    | 1,000,000    |  |   | 1,000      |  |   | 559,001    |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 560,001    |  
|Stock issued for private placement, December
      29, 2006 | 2,040,397    |  |   | 2,040      |  |   | 725,952    |  |   | -             |  |   | (25,000       | ) |   | -        |   |   | -             |   |   | 702,992    |  
|Stock issued for warrants, December 29, 2006                | 106,667      |  |   | 107        |  |   | 266,560    |  |   | -             |  |   | -             |   |   | (26,667  | ) |   | -             |   |   | 240,000    |  
|Stock issued for debt settlement, December
      29, 2006   | 30,123       |  |   | 30         |  |   | 21,433     |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 21,463     |  
|Stock issued for services, December 29, 2006                | 50,000       |  |   | 50         |  |   | 18,850     |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 18,900     |  
|Beneficial conversion feature on loan payable               | -            |  |   | -          |  |   | 626,250    |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 626,250    |  
|Net loss                                                    | -            |  |   | -          |  |   | -          |  |   | -             |  |   | -             |   |   | -        |   |   | (5,707,701    | ) |   | (5,707,701 | )
|                                                            |              |  |   |            |  |   |            |  |   |               |  |   |               |   |   |          |   |   |               |   |   |            |  
|Balance, December 31, 2006                                  | 16,889,234   |  |   | 16,889     |  |   | 14,689,954 |  |   | -             |  |   | (25,000       | ) |   | 70,404   |   |   | (15,067,443   | ) |   | (315,196   | )
|Received subscription receivable, January
      23, 2007    | -            |  |   | -          |  |   | -          |  |   | -             |  |   | 25,000        |   |   | -        |   |   | -             |   |   | 25,000     |  
|Stock issued for note interest, March 14, 2007              | 54,955       |  |   | 55         |  |   | 21,570     |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 21,625     |  
|Expired warrants, March 31, 2007                            | -            |  |   | -          |  |   | 51,804     |  |   | -             |  |   | -             |   |   | (51,804  | ) |   | -             |   |   | -          |  
|Stock issued for note interest, May 7, 2007                 | 27,743       |  |   | 28         |  |   | 20,571     |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 20,599     |  
|Stock issued for note conversion, May 7, 2007               | 1,375,000    |  |   | 1,375      |  |   | 273,625    |  |   | -             |  |   | -             |   |   | -        |   |   | -             |   |   | 275,000    |  
|                                                            |              |  |   |            |  |   |            |  |   |               |  |   |               |   |   |          |   |   |               |   |   |            |  
|Balance carried forward                                     | 18,346,932   |  | $ | 18,347     |  | $ | 15,057,524 |  | $ | -             |  | $ | -             |   | $ | 18,600   |   | $ | (15,067,443   | ) | $ | 27,028     |  

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

---

- F11 -

PLURISENERGYGROUPINC.
  
  (AnExplorationStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSDEFICITFOR THEPERIODFROMNOVEMBER15, 2001(DATEOFINCEPTION)TODECEMBER31, 2007

|                                                                       |              |  |   |            |  |   |            |  |   |           |   |   |               |  |   |          |   |   | Deficit       |   |   |            |  
|---------------------------------------------------------------------- | ------------ |  | - | ---------- |  | - | ---------- |  | - | --------- | - | - | ------------- |  | - | -------- | - | - | ------------- | - | - | ---------- | -
|                                                                       |              |  |   |            |  |   |            |  |   |           |   |   |               |  |   |          |   |   | Accumulated   |   |   | Total      |  
|                                                                       | Common Stock |  |   | Additional |  |   |            |  |   | Share     |   |   | Share         |  |   | during   |   |   | Stockholders' |  
|                                                                       | Number of    |  |   |            |  |   | Paid-in    |  |   | Preferred |   |   | subscriptions |  |   | Purchase |   |   | Exploration   |   |   | Equity     |  
|                                                                       | Shares       |  |   | Amount     |  |   | Capital    |  |   | Shares    |   |   | receivable    |  |   | Warrants |   |   | Stage         |   |   | (Deficit)  |  
|                                                                       |              |  |   |            |  |   |            |  |   |           |   |   |               |  |   |          |   |   |               |   |   |            |  
|Balance carried forward                                                | 18,346,932   |  | $ | 18,347     |  | $ | 15,057,524 |  | $ | -         |   | $ | -             |  | $ | 18,600   |   | $ | (15,067,443   | ) | $ | 27,028     |  
|Issued 4,800,000 shares of preferred stock                             |              |  |   |            |  |   |            |  |   | 4,800     |   |   |               |  |   |          |   |   |               |   |   | 4,800      |  
|Expired warrants, June 1, 2007                                         | -            |  |   | -          |  |   | 18,600     |  |   | -         |   |   | -             |  |   | (18,600  | ) |   | -             |   |   | -          |  
|Stock issued for private placement, June 15, 2007                      | 347,000      |  |   | 347        |  |   | 173,153    |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 173,500    |  
|Stock issued for debt, June 15, 2007                                   | 207,733      |  |   | 208        |  |   | 72,499     |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 72,707     |  
|Stock issued for note conversion, June 25, 2007                        | 1,375,000    |  |   | 1,375      |  |   | 273,625    |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 275,000    |  
|Stock issued for private placement, June 28,
      2007                | 1,684,000    |  |   | 1,684      |  |   | 377,216    |  |   | -         |   |   | -             |  |   | 42,100   |   |   | -             |   |   | 421,000    |  
|Stock issued for exercise of options, August 14, 2007                  | 900,000      |  |   | 900        |  |   | 314,100    |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 315,000    |  
|Stock issued for services, September 10, 2007                          | 100,000      |  |   | 100        |  |   | 56,900     |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 57,000     |  
|Cancelled 200,000 shares of preferred stock                            |              |  |   |            |  |   | 200        |  |   | (200      | ) |   |               |  |   |          |   |   |               |   |   | -          |  
|Stock issued for note conversion, September
      26, 2007             | 375,000      |  |   | 375        |  |   | 74,625     |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 75,000     |  
|Stock issued for note interest, September 26, 2007                     | 7,574        |  |   | 7          |  |   | 3,576      |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 3,583      |  
|Stock issued for private placement, September
      28, 2007           | 731,429      |  |   | 732        |  |   | 193,268    |  |   | -         |   |   | -             |  |   | 6,000    |   |   | -             |   |   | 200,000    |  
|Stock issued for exercise of options for cash, October 16,
      2007  | 100,000      |  |   | 100        |  |   | 24,900     |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 25,000     |  
|Stock issued for exercise of options, November
      26, 2007          | 132,822      |  |   | 133        |  |   | 55,137     |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 55,270     |  
|Stock issued for exercise of options, December 14, 2007                | 2,575,000    |  |   | 2,575      |  |   | 1,279,925  |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 1,282,500  |  
|Stock issued for exercise of warrants, December
      14, 2007         | 878,876      |  |   | 879        |  |   | 460,532    |  |   | -         |   |   | -             |  |   | (21,973  | ) |   | -             |   |   | 439,438    |  
|Stock issued for private placement, December 14, 2007                  | 224,000      |  |   | 224        |  |   | 84,676     |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 84,900     |  
|Stock issued for exercise of options for cash,
      December 14, 2007 | 50,000       |  |   | 50         |  |   | 24,950     |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 25,000     |  
|Stock issued for debt, December 14, 2007                               | 124,458      |  |   | 124        |  |   | 149,226    |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 149,350    |  
|Stock based compensation                                               | -            |  |   | -          |  |   | 1,578,806  |  |   | -         |   |   | -             |  |   | -        |   |   | -             |   |   | 1,578,806  |  
|Net loss                                                               | -            |  |   | -          |  |   | -          |  |   | -         |   |   | -             |  |   | -        |   |   | (7,505,227    | ) |   | (7,505,227 | )
|                                                                       |              |  |   |            |  |   |            |  |   |           |   |   |               |  |   |          |   |   |               |   |   |            |  
|Balance, December 31, 2007                                             | 28,159,824   |  | $ | 28,160     |  | $ | 20,273,438 |  | $ | 4,600     |   | $ | -             |  | $ | 26,127   |   | $ | (22,277,670   | ) | $ | (2,240,345 | )

---

- F12 -

|PLURIS ENERGY GROUP INC.                  
|------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31,
      2007                   

NOTE 1  NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Pluris Energy Group Inc. (formerly Petrogen Corp.) (the Company
  or Pluris) was incorporated in the State of Nevada. Its current
  mandate is to become an international oil and gas company engaged in the acquisition
  of producing oil and gas assets in Argentina. Pluris is currently positioned
  with three acquisition opportunities representing over 430,000 net acres of
  producing oil and gas assets situated within three Argentine hydrocarbon regions.

During the third quarter of 2006, the Company changed its principal
  focus to the acquisition and development of oil and gas properties in Argentina.
  In August 2006, the Company entered into an agreement to purchase all the issued
  and outstanding shares of San Enrique Petrolera, S.A. (SEPSA), incorporated
  under the laws of Argentina. Refer to Note 7. As a result of the geographic
  change in the Companys focus, the properties in the USA have been or will
  be listed for sale or otherwise disposed of and accordingly have been classified
  as discontinued operations since December 31, 2006. Refer to Note 3.

In November 2007, the Company entered into a Letter of Intent
  agreement with Clear S.R.L., of Comodoro Rivadavia, Argentina ("Clear"), whereby
  the Company retains the exclusive right to purchase and develop up to 100% of
  Clear's 186 square kilometer Cerro Negro concession, Chubut Province, Golfo
  San Jorge Basin, Argentina ("Cerro Negro"). Refer to Note 7.

In December 2007, the Company entered into a Letter of Intent
  agreement to acquire 100% of the shares of a Buenos Aires, Argentina based oil
  development and production company which hold leasehold assets primarily located
  in the Neuquén Basin, Rio Negro Province, Argentina. Refer to Note 7.

Going ConcernThese financial statements have been prepared in accordance with generally
  accepted accounting principles in the United States of America with the on-going
  assumption applicable to a going concern which contemplates the realization
  of assets and the satisfaction of liabilities and commitments in the normal
  course of business.

As at December 31, 2007, the Company has a working capital deficiency
  of $2,333,082 and has realized significant losses to date. The Companys
  continuance of operations is contingent on raising additional capital, settling
  its outstanding debts and on the future acquisition and successful development
  of oil and gas properties. Accordingly, these factors raise substantial doubt
  about the Companys ability to continue as a going concern. Management
  anticipates that advances from certain significant shareholders and funding
  from private placements will form the primary source of short-term funding for
  the Company during the next twelve months.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of PresentationThese consolidated financial statements have been presented in United States
  dollars and prepared in accordance with United States Generally Accepted Accounting
  Principles (US GAAP).

Principles of ConsolidationThe consolidated financial statements include the accounts of the Company
  and its wholly-owned subsidiaries, Petrogen Inc. (Petrogen), and Pluris
  Energy Group, Inc. (Pluris BVI). All significant intercompany transactions
  and account balances have been eliminated.

---

- F13 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Securities Held for TradingThe Company does not hold securities in other companies for investment purposes.
  Any securities received as payment for or settlement of debt are classified
  as held for sale.

Oil and Gas PropertiesThe Company follows the full cost method of accounting for its oil and gas
  operations whereby all cost related to the acquisition of petroleum and natural
  gas interests are capitalized. Such costs include land and lease acquisition
  costs, annual carrying charges of non-producing properties, geological and geophysical
  costs, costs of drilling and equipping productive and non-productive wells,
  and direct exploration salaries and related benefits. In addition, the Company
  is the operator of its properties and as per its contract with third party working
  interest partners, the Company charges them operator fees. These operator fees
  represent a reimbursement of general and administration expenses which have
  been allocated to the exploration and maintenance of the Emily Hawes Field property.
  Proceeds from the disposal of oil and gas properties are recorded as a reduction
  of the related capitalized costs without recognition of a gain or loss unless
  the disposal would result in a change of 20 percent or more in the depletion
  rate. The Company operates in one cost center, being the U.S.A.

To date the Company has commenced initial production of gas but
  has not yet quantified proven reserves from evaluations from third party independent
  reservoir engineers. Depletion and depreciation of the carrying value of unproved
  oil and gas properties are computed using the unit-of-production method based
  on the estimated reserves of oil and gas as determined by management.

Estimated future removal and site restoration costs are provided
  over the life of proven reserves on a unit-of-production basis. Costs, which
  include the cost of production equipment removal and environmental clean-up,
  are estimated each period by management based on current regulations, costs,
  technology and industry standards. The charge is included in the provision for
  depletion and depreciation and the actual restoration expenditures are charged
  to the accumulated provision accounts as incurred.

The Company applies a ceiling test to capitalized costs to ensure
  that such costs do not exceed estimated future net revenues from production
  of proven reserves at year end market prices less future production, administrative,
  financing, site restoration, and income tax costs plus the lower of cost or
  estimated market value of unproved properties. If capitalized costs are determined
  to exceed estimated future net revenues, an impairment of the carrying value
  is charged in the period.

Use of Estimates and AssumptionsPreparation of the Companys financial statements in conformity with
  US GAAP requires management to make estimates and assumptions that affect certain
  reported amounts and disclosures. Accordingly, actual results could differ from
  those estimates. Significant areas requiring managements estimates and
  assumptions are reviewing the carrying values of oil and gas properties for
  impairment, determining fair value for stock based compensation, asset retirement
  obligations and the valuation of deferred tax assets.

Furniture and EquipmentFurniture and equipment are stated at cost. Depreciation is computed on
  a declining balance basis at 20-30% per year.

Foreign Currency TranslationThe financial statements are presented in United States dollars. In accordance
  with Statement of Financial Accounting Standard (SFAS) No. 52, "Foreign
  Currency Translation", foreign denominated monetary assets and liabilities are
  translated to their United States dollar equivalents using foreign exchange
  rates which prevailed at the balance sheet date. Revenue and expenses are translated
  at average rates of exchange during the period. Related translation adjustments
  are reported as a separate component of stockholders' equity, whereas gains
  or losses resulting from foreign currency transactions are included in results
  of operations

Net Earnings (Loss) per Common ShareBasic earnings (loss) per common share include no dilution and is computed
  by dividing income available to common stockholders by the weighted average
  number of common shares outstanding for the period. Dilutive earnings (loss)
  per share reflect the potential dilution of securities that could share in the
  earnings of the Company. Diluted loss per share figures are equal to those of
  basic loss per share for each period since the effects of convertible notes,
  stock options and warrants have been excluded as they are anti-dilutive. The
  6,000,000 shares held in escrow do not form part of this computation - see Note
  10.

---

- F14 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue RecognitionOil and natural gas revenues are recorded using the sales method whereby
  the Company recognizes oil and natural gas revenue based on the amount of oil
  and gas sold to purchasers when title passes, the amount is determinable and
  collection is reasonably assured. Actual sales of gas are based on sales, net
  of the associated volume charges for processing fees and for costs associated
  with delivery, transportation, marketing, and royalties in accordance with industry
  standards. Operating costs and taxes are recognized in the same period of which
  revenue is earned.

Stock-Based CompensationOn January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS
  No. 123R), Share-Based Payment, which addresses the accounting for stock-based
  payment transactions in which an enterprise receives employee services in exchange
  for (a) equity instruments of the enterprise or (b) liabilities that are based
  on the fair value of the enterprises equity instruments or that may be
  settled by the issuance of such equity instruments. In January 2005, the Securities
  and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107,
  which provides supplemental implementation guidance for SFAS No. 123R. SFAS
  No. 123R eliminates the ability to account for stock-based compensation transactions
  using the intrinsic value method under Accounting Principles Board (APB) Opinion
  No. 25, Accounting for Stock Issued to Employees, and instead requires
  that such transactions be accounted for using a fair-value-based method. The
  Company uses the Black-Scholes-Merton (BSM) option-pricing model
  to determine the fair-value of stock-based awards under SFAS No. 123R.

Income TaxesThe Company follows the liability method of accounting for income taxes
  as set forth in SFAS No. 109, Accounting for Income Taxes.
  Under this method, deferred income tax assets and liabilities are recognized
  for the estimated tax consequences attributable to differences between the financial
  statement carrying values and their respective income tax basis (temporary differences).
  The effect on deferred income tax assets and liabilities of a change in tax
  rates is recognized in income in the period that includes the date of enactment
  or substantial enactment. A valuation allowance is provided for deferred tax
  assets if it is more likely than not that the Company will not realize the future
  benefit, or if future deductibility is uncertain.

In June 2006, the FASB issued Interpretation No. 48, Accounting
  for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
  (FIN 48). FIN 48 clarifies the accounting for uncertainty in income
  taxes by prescribing a two-step method of first evaluating whether a tax position
  has met a more likely than not recognition threshold and, second, measuring
  that tax position to determine the amount of benefit to be recognized in the
  financial statements. FIN 48 provides guidance on the presentation of such positions
  within a classified balance sheet as well as on de-recognition, interest and
  penalties, accounting in interim periods, disclosure and transition. FIN 48
  is effective for fiscal years beginning after December 15, 2006. The adoption
  of this statement did not have an effect on the Company's financial statements.

Fair Value of Financial Instruments 
  In accordance with the requirements of SFAS No. 107, the Company has determined
  the estimated fair value of financial instruments using available market information
  and appropriate valuation methodologies. The fair value of financial instruments
  classified as current assets or liabilities including cash, restricted cash,
  accounts receivable, notes receivable, prepaids and deposits, accounts payable
  and accrued liabilities, advances and loans payable, debenture payable and amounts
  due to related parties approximate carrying values due to the short-term maturity
  of the instruments.

Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, Disclosures about
  Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is
  intended to improve financial reporting about derivative instruments and hedging
  activities by requiring enhanced disclosures to enable investors to better understand
  their effects on an entity's financial position, financial performance, and
  cash flows. SFAS 161 achieves these improvements by requiring disclosure of
  the fair values of derivative instruments and their gains and losses in a tabular
  format. It also provides more information about an entity's liquidity by requiring
  disclosure of derivative features that are credit risk-related. Finally, it
  requires cross-referencing within footnotes to enable financial statement users
  to locate important information about derivative instruments. SFAS 161 will
  be effective for financial statements issued for fiscal years and interim periods
  beginning after November 15, 2008, will be adopted by the Company beginning
  in the first quarter of 2009. The Company does not expect there to be any significant
  impact of adopting SFAS 161 on its financial position, cash flows and results
  of operations.

---

- F15 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements continued

On December 21, 2007, the Securities and Exchange Commission
  issued Staff Accounting Bulletin No. 110, (SAB 110). SAB 110 provides
  guidance to issuers on the method allowed in developing estimates of expected
  term of plain vanilla share options in accordance with SFAS No.
  123(R), Share-Based Payment. The staff will continue to accept,
  under certain circumstances, the use of a simplified method beyond December
  31, 2007 which amends question 6 of Section D.2 as included in SAB 107, Valuation
  of Share-Based Payment Arrangements for Public Companies, which stated
  that the simplified method could not be used beyond December 31, 2007. SAB 110
  is effective January 1, 2008. The Company does not anticipate that the adoption
  of SAB 110 will have any effect on its financial statements.

In December 2007, the Financial Accounting Standards Board (FASB)
  issued SFAS No. 141R, Business Combinations. This statement replaces
  SFAS 141 and defines the acquirer in a business combination as the entity that
  obtains control of one or more businesses in a business combination and establishes
  the acquisition date as the date that the acquirer achieves control. SFAS 141R
  requires an acquirer to recognize the assets acquired, the liabilities assumed,
  and any non-controlling interest in the acquiree at the acquisition date, measured
  at their fair values as of that date. SFAS 141R also requires the acquirer to
  recognize contingent consideration at the acquisition date, measured at its
  fair value at that date. This statement is effective for fiscal years, and interim
  periods within those fiscal years, beginning on or after December 15, 2008.
  Earlier adoption is prohibited. The adoption of this statement is not expected
  to have a material effect on the Company's financial statements.

In December 2007, the FASB issued SFAS No. 160, Non-controlling
  Interests in Consolidated Financial Statements Liabilities  an Amendment
  of ARB No. 51. This statement amends ARB 51 to establish accounting and
  reporting standards for the Non-controlling interest in a subsidiary and for
  the deconsolidation of a subsidiary. This statement is effective for fiscal
  years, and interim periods within those fiscal years, beginning on or after
  December 15, 2008. Earlier adoption is prohibited. The adoption of this statement
  is not expected to have a material effect on the Company's future reported financial
  position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair
  Value Option for Financial Assets and Financial Liabilities. This Statement
  permits entities to choose to measure many financial assets and financial liabilities
  at fair value. Unrealized gains and losses on items for which the fair value
  option has been elected are reported in earnings. SFAS No. 159 is effective
  for fiscal years beginning after November 15, 2007. The Company is currently
  assessing the impact of SFAS No. 159 on its financial position and results of
  operations.

NOTE 3  PROPERTY HELD FOR SALE

December 31,
      
      
      Activity
      
      
      December 31,
      
      
      Activity
      
      
      December 31,2005
      
      
      in the year
      
      
      2006
      
      
      in the year
      
      
      2007Oil and Gas Properties, UnprovedAcquisition costs (proceeds
        on sale)
      $
      868,146
      
      $
      -
      
      $
      868,146
      
      $
      (500,000
      )
      $
      368,146Exploration costs
      
      1,903,856
      
      
      761,267
      
      
      2,665,123
      
      
      15,014
      
      
      2,680,1372,772,002
      
      
      761,267
      
      
      3,533,269
      
      
      (484,986
      )
      
      3,048,283Less accumulated depletion and impairment
      
      121,062
      
      
      2,039,452
      
      
      2,160,514
      
      
      808,652
      
      
      2,969,166$
      2,650,940
      
      $
      (1,278,185
      )
      $
      1,372,755
      
      $
      (1,293,638
      )
      $
      79,117


Following a period of poor financial performance and continued
  losses on its United States oil and gas operations, during 2006 the Company
  commenced a process to sell its United States oil and gas properties. Accordingly,
  the results of operations on the United States properties are classified as
  loss from discontinued operations in the consolidated statements of operations
  and the assets have been classified on the consolidated balance sheets as property
  held for sale. The consolidated statements of cash flows for the year ended
  December 31, 2007 and 2006 and from November 15, 2001 (inception) to December
  31, 2007 for operating activities and investing activities have been separated
  between continuing and discontinued operations.

During the year ending December 31, 2007, the Company incurred
  exploration costs of $15,014 on its properties, sold the Emily Hawes Field and
  Matagorda Pipeline properties for $500,000, and depleted the properties by $165.
  An impairment charge of $806,973 was recorded during the year ended December
  31, 2007 to reflect the estimated net realizable value of the Tiller Ranch property
  as described below. The Company also recorded additional impairment of $1,514
  on its other properties that were written down to nil in the year ending December
  31, 2007.

---

- F16 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 3  PROPERTY HELD FOR SALE (CONTINUED)

The loss from discontinued operations is summarized as follows:

|                                           |   | Year ended   |   |   | Year ended   |   |   | November 15, 2001 |  
|------------------------------------------ | - | ------------ | - | - | ------------ | - | - | ----------------- | -
|                                           |   | December 31, |   |   | December 31, |   |   | (Inception) to    |  
|                                           |   | 2007         |   |   | 2006         |   |   | December 31, 2007 |  
|                                           |   |              |   |   |              |   |   |                   |  
|Revenue - gas sales                        | $ | 23,012       |   | $ | 320,607      |   | $ | 542,632           |  
|                                           |   |              |   |   |              |   |   |                   |  
|Operating expenses                         |   |              |   |   |              |   |   |                   |  
|Depletion                                  |   | 165          |   |   | 14,220       |   |   | 25,643            |  
|Financing fees                             |   | -            |   |   | 626,250      |   |   | 871,850           |  
|Lease operating expenses                   |   | 44,371       |   |   | 252,666      |   |   | 342,487           |  
|Impairment of oil and gas
      properties |   | 808,487      |   |   | 2,025,232    |   |   | 2,943,523         |  
|General
      and administrative           |   | 39,082       |   |   | 746,497      |   |   | 2,049,534         |  
|                                           |   |              |   |   |              |   |   |                   |  
|                                           |   | 892,105      |   |   | 3,664,865    |   |   | 6,233,037         |  
|                                           |   |              |   |   |              |   |   |                   |  
|Results of US oil
      and gas operations | $ | (869,093     | ) | $ | (3,344,258   | ) | $ | (5,690,405        | )

Emily Hawes Field, Calhoun County, TexasAt December 31, 2006, the Company wrote down the property by $998,679 leaving
  a carrying cost after depletion of $421,377, its working interest (WI)
  remained at 64.125% . On March 8, 2007, the Company completed the sale of its
  entire 64.125% working interest in the Emily Hawes Field to Darcy for cash proceeds
  of $421,377. See Matagorda Island Pipeline.

Matagorda Island PipelineOn March 30, 2005, the Company entered into a purchase agreement to purchase
  the natural gas transmission pipeline located on Matagorda Island, Calhoun County,
  Texas. At December 31, 2006, the Company had capitalized acquisition costs of
  $92,500 and recorded depletion of $13,877 leaving a net book value of $78,623.
  On March 8, 2007, the Company completed the sale of its entire interest in the
  Matagorda Island Pipeline to Darcy for cash proceeds of $78,623. See Emily Hawes
  Field.

Tiller RanchOn June 3, 2005, pursuant to an assignment of lease agreement, the Company
  acquired a 100% WI and 70% net revenue interest (NRI) in the Tiller
  Ranch Lease consisting of 822 acres located within the Tom Graham Field, Jim
  Wells County, Texas. As of September 30, 2006, the Company sold a 24% WI (16.80%
  NRI) for proceeds of $660,000. The net proceeds were used to offset the costs
  of drilling and developing the property in the last quarter of 2005. After the
  sales to the individual investors, the Company held a 76.0% WI and a 53.2% NRI
  (resulting in 49.697% net of all sales) in the Tiller Ranch Lease.

At December 31, 2007, the Company recorded an impairment charge
  of $806,973 on the capitalized acquisition and development costs of $888,207
  and recorded depletion of $2,117 leaving a net book value of $79,117 as a result
  of the default and subsequent settlement of a collateral note payable. See Note
  6.

Baxterville Field, MississippiEffective November 12, 2002, Petrogen entered into an agreement with US
  Gas Systems, Inc. (USG) of Mississippi, whereby Petrogen agreed to recomplete
  four existing well-bores upon six hundred acres of the USG Dunn and Swan Tracts
  of North Baxterville Field, Marion County, Mississippi. The Company has assessed
  all possible divestiture opportunities related to Baxterville Field over the
  course of the last 18 months and has entered into a preliminary understanding
  with the Mississippi State Oil and Gas Board to commence the work necessary
  to plug and abandon the property. As a result the Company has recorded an impairment
  of the capitalized expenditures of $418,139 at December 31, 2006. The Company
  has estimated and accrued $119,400 of asset retirement obligations in order
  to plug and abandon this property as well as the S.J. Hooper #1 Wellbore described
  below.

S.J. Hooper #1 Wellbore, Baxterville Field, MississippiEffective October 25, 2002, Petrogen entered into a Letter of Intent with
  Crown Royalties of Louisiana, Inc. of Mississippi, whereby Petrogen acquired
  a 100% WI and 77% NRI in the S.J. Hooper #1 for cash consideration of $22,500.
  At December 31, 2006, the Company recorded an impairment of all the capitalized
  expenditures of $52,054.

Enos Creek Field, WyomingEffective October 31, 2002, Petrogen acquired from Coronado Oil Company
  LLC a 100% WI and a 77.5% NRI in the Brown Government Lease, located in the
  Enos Creek gas field, Hot Springs County, Wyoming. The Company has allowed the
  property leases to lapse after unsuccessfully assessing possible divestiture
  opportunities related to the property over the course of the past 18 months.
  As a result the Company recorded an impairment of all the capitalized expenditures
  of $334,487 at December 31, 2006.

---

- F17 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 4 SECURITIES HELD FOR SALE

During the year ended December 31, 2006, the Company had a receivable
  from a private company for $180,000 which was settled by the issuance of 720,000
  common shares of this private company at fair value of $0.25 per share and classified
  as securities held for sale. During the year ended December 31, 2006, 240,000
  shares were sold back to the private company at $0.125 per share for proceeds
  of $30,000. The remaining 480,000 shares were written down to the estimated
  fair value of $0.125 per share, resulting in a loss of $90,000 during the year
  ended December 31, 2006. As of December 31, 2007, due to the uncertainty of
  realization, the Company recorded an impairment loss of $60,000 representing
  the carrying value of the remaining 480,000 shares.

NOTE 5  NOTES PAYABLE

Effective July 1, 2005, the Company issued a promissory note
  in the amount of $70,000 in settlement of an unpaid account payable which is
  unsecured and due on demand. The note bore interest at 18% per annum. At December
  31, 2007, the note was paid in full (2006: $22,953).

Effective June 1, 2006, the Company issued a promissory note
  in the amount of $50,000 which was unsecured and due on demand. The note bore
  interest at 10% per annum. On June 15, 2007, the Company issued 157,691 common
  shares at $0.35 per share to retire the outstanding balance of the note, including
  principal and interest, of $55,192.

During the year ending December 31, 2007, the Company issued
  ten promissory notes totaling $420,000 which are unsecured, due on demand, and
  bear interest at 12.5% . During the first quarter of 2007 the Company repaid
  three promissory notes totaling $65,000 plus fixed interest charges of $8,125.
  As of December 31, 2007, seven promissory notes totaling $355,000 plus accrued
  interest charges of $44,375 remain outstanding, for a total of $399,375.

NOTE 6  LOANS PAYABLE

Effective April 28, 2006 the Company entered into three convertible
  loan agreements which were secured by the assets of the Companys subsidiary
  Petrogen. The loans bear interest at LIBOR plus 5% per annum, and interest is
  payable each quarter commencing six months after the first receipt of funds.
  The first note of $275,000 was due on April 1, 2007, and was converted into
  1,375,000 common shares on May 7, 2007. The second note of $275,000 was due
  on June 13, 2007, and converted into 1,375,000 common shares on June 25, 2007.
  The remaining note of $285,000 was due one year after receipt of funds, being
  September 7, 2007. On March 14, 2007, $134,750 was repaid in cash and on September
  26, 2007, $75,000 was converted into 375,000 common shares, leaving a balance
  of $75,250 plus $3,867 in accrued interest.

These convertible loan agreements had a ratchet provision adjusting
  the conversion price downward based on any subsequent equity issuances at prices
  less than the original conversion price of $1.00 per share (post-reverse split).
  The original conversion price was $1.00 but was adjusted to $0.20 pursuant to
  a private placement at $0.20 per common share during the year ended December
  31, 2006. In connection with this provision, the Company recorded in 2006 the
  beneficial conversion feature resulting from the repricing of the conversion
  feature as non-cash financing fees of $626,250 which represents the difference
  between the original conversion price and the adjusted conversion price.

The first interest payment on all loans of $21,463 due on October
  28, 2006 was paid by the Company on December 29, 2006 by issuing an aggregate
  of 30,123 common shares to the secured parties.

During the year ended December 31, 2007, the Company issued an
  aggregate of 90,272 common shares to the secured parties for the accrued interest
  outstanding at December 31, 2006 of $21,625, March 31, 2007 of $20,599, and
  June 30, 2007 of $3,583

On September 10, 2007, the Company received a demand notice (the
  Demand) for the immediate payment of the Note in the amount of $75,250
  plus $3,867 of accrued interest. The Note carried a guaranteed security agreement
  (GSA) over the assets of Petrogen as collateral to the GSA. Petrogen
  defaulted under the Note, whereby the Note holder exercised its right to accept
  the collateral described in the GSA in full satisfaction of Petrogens
  obligation under the Note. The Note Holder sent to Petrogen a properly authenticated
  proposal to accept Petrogens collateral in full satisfaction of the above
  described debt as required by the TEXAS BUSINESS & COMMERCE CODE, §9.620.
  On October 8, 2007 the Company and Petrogen consented to the proposal. The Note
  holders subsequent acceptance of the collateral in full satisfaction of
  the obligation it secures: (a) discharges Petrogens, obligation to the
  extent consented to by Petrogen.; (b) transfers to the secured party all of
  Petrogens rights in the collateral; (c) discharges the security interest
  lien over Petrogen and (d) terminates any subordinate security interest or other
  subordinate liens over Petrogen by other third party creditors, as described
  under TEXAS BUSINESS & COMMERCE CODE §9.622. Once title has been legally
  transferred from Petrogen to the note holder, Petrogen will no longer owns any
  assets in the United States and as such, will be preparing Petrogen for wind-up
  and dissolution. As of December 31, 2007, legal title to the properties has
  not been transferred to the note holder. The Company anticipates transferring
  these properties during the second quarter of 2008.

---

- F18 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 7  ACQUISITIONS

SAN ENRIQUE PETROLERA S.A.

On August 18, 2006, the Company entered into a share purchase
  agreement (SPA) with four individuals to purchase all the issued
  and outstanding shares of San Enrique Petrolera, S.A. (SEPSA), incorporated
  under the laws of Argentina. SEPSAs interests include five hydrocarbon
  producing properties located in three of Argentinas five oil and gas producing
  basins. In order to secure the rights to purchase SEPSA, an Escrow Agreement
  (the Escrow) was entered into between the Company, SEPSA and Deutsch
  Bank Trust Company Americas, New York (DB), whereby the Company
  issued a $3,225,000 convertible, non-retractable redeemable unsecured bond (the
  Bond) in the name of Pluris Energy Group Inc., which has been placed
  into the Escrow at DB. Terms of the Escrow stipulate certain conversion provisions
  of the Bond predicated upon the performance of both SEPSA and the Company. In
  the event that the Bond is transferred from the Company to SEPSA, SEPSA will
  retain certain privileges of Bond conversion into common shares of the Company
  at prices ranging from $3.25 per common share to $9.25 per common share. The
  Bond is due in five years time at an interest rate of LIBOR plus 5%, with a
  floor of 10.5% and a ceiling of 13%. Interest on the Bond can be paid in common
  share equity of the Company at the Companys discretion. This Bond will
  not be considered issued and outstanding for accounting purposes until such
  time as the Bond is transferred to SEPSA.

One of the five properties owned by SEPSA, known as Tierra Del
  Fuego (TDF) is the subject of a Joint Venture agreement (the JV)
  with four other JV participants, each of which possesses a Right of First Refusal
  (the ROFR) to purchase SEPSAs interest in TDF under a match
  or pass status. In October of 2006, SEPSA provided the four JV participants
  to TDF, notification of the Company having won the bid to purchase SEPSA, and
  under such notification, those JV participants were provided with 30 days to
  match the Companys allocation on the TDF property, or pass on their ROFR,
  thereafter enabling the Company to complete its acquisition of SEPSA, inclusive
  of all or part of SEPSAs interests in the TDF property. Prior to the end
  of that 30 day notification period, two of the four JV participants commenced
  proceedings against SEPSA in the Argentine Commercial Courts seeking intermediary
  action pursuant to their rights under the terms of the JVs ROFR. On March
  22, 2007 the Company was advised by SEPSA that as an outcome to those proceedings,
  two injunctions were imposed by the Argentina National Commercial Court of Appeals
  on behalf of Apco Argentina Inc. (Apco) and Antrim Energy Inc. (Antrim)
  prohibiting the sale of SEPSAs shares to Pluris until such time as the
  ROFR issues between SEPSA, Apco and Antrim are resolved.

As a result of the injunctions imposed by Apco and Antrim, based
  upon the confirmation by the National Commercial Court of Appeals of the injunctions,
  on April 23, 2007, the Company informed SEPSAs shareholders that they
  should abstain from selling or disposing in any manner to any third party any
  of the Shares that SEPSA have undertaken to sell to the Company under the terms
  of the SPA and that SEPSA should abstain from disposing any of the assets it
  owned at the time the SPA was signed. In response, SEPSA informed the Company
  of its unilateral repudiation of the SPA, stating that as an effect of the injunctions
  imposed by Apco and Antrim, the SPA could be terminated. The Company maintains
  that the terms of the SPA clearly stipulate that any dispute arising under the
  SPA must be mutually addressed between the Company and SEPSA through the International
  Chamber of Commerce, Paris, France. Therefore, the Company commenced an arbitral
  action against SEPSA through The Secretariat of the Court, International Court
  of Arbitration, International Chamber of Commerce, Paris, France (the ICC),
  requesting the ICC to enforce SEPSAs obligations under the terms agreed
  upon in the SPA and to sell 100% of the shares of SEPSA and that their other
  obligations set forth under the SPA are in full force and effect and to award
  damages incurred by the Company. In December of 2007, SEPSA and the Company
  completed the execution of Terms of Reference (the TOR), whereby
  under the TOR, SEPSA and the Company mandated to the ICC the specific issues
  that the ICC should address related to both parties complaints and to what issues
  the ICC should make declarations under pursuant to the arbitral proceedings
  between SEPSA and the Company. Under the TOR, there is a specific schedule that
  has been agreed upon between SEPSA, the Company and the ICC, whereby the Company
  and SEPSA must submit to the ICC, specific requested materials at specific dates
  in order to move the arbitral process towards a conclusion. As at the December
  31, 2007, both SEPSA and the Company have filed their respective offerings of
  evidence related to their specific claims and the parties are awaiting a reply
  from the ICC arbitral tribunal as to what evidence that has been offered by
  both parties will be accepted by the tribunal. The Company has claimed damages
  in the form of loss of revenue from July 1, 2006 through to the current date;
  loss of business opportunity related to increases to the values of assets owned
  and/or controlled by SEPSA and loss of out of pocket expenses from the inception
  of the Companys efforts to win the bid and complete the acquisition of
  SEPSA. SEPSA has filed a counter claim for recovery of legal expenses and translation
  fees incurred to date related to the dispute between it and the Company. There
  is no determination as to the length of time necessary for the ICC to make any
  final determinations pursuant to the TOR and in that regard; the Company does
  not know what those final determinations may be. The Company believes that its
  position related to the claim it has filed against SEPSA is substantive and
  that the issues pertaining to and being sought for resolution by the Company
  through the arbitral proceedings between SEPSA and the Company can be resolved,
  and that completion of the acquisition of SEPSA by the Company could occur.

---

- F19 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

CLEAR S.R.L.

In November 2007, the Company entered into a Letter of Intent
  agreement (LOI) with Clear S.R.L. ("Clear")., whereby the Company
  retains the exclusive right to purchase and develop up to 100% of Clear's 186
  square kilometer Cerro Negro concession, Chubut Province, Golfo San Jorge Basin,
  Argentina ("Cerro Negro"). Under the terms of the agreement between Clear and
  the Company, the Company has the right to purchase Cerro Negro subject to the
  satisfactory outcome of due diligence related to Cerro Negro performed by the
  Company, which includes commercial, financial, geologic, geophysical and petroleum
  engineering analysis. Upon the Companys satisfaction of the due diligence,
  the Company and Clear shall negotiate and execute a mutually accepted Purchase
  and Sale Agreement (the PSA) between the Company and Clear. Subsequent
  to December 31, 2007, the Company satisfactorily completed the due diligence
  and in collaboration with Clear, has moved into the final negotiations related
  to the drafting of a mutually agreeable PSA which is anticipated to be executed
  within the second quarter of 2008. Upon closing of the PSA, the Company will
  have a specified period of time pursuant to the terms of the PSA to complete
  the acquisition of Cerro Negro and will immediately thereafter commence drilling,
  development and expansion of Cerro Negro.

In connection with the purchase and development of Clears
  Cerro Negro concession, the Company subsidiary Pluris BVI issued a US$840,000
  convertible, non-retractable redeemable unsecured bond (the CN Security
  Bond) as a security instrument pursuant to the terms of the LOI. Terms
  under the LOI pursuant to the CN Security Bond stipulate that in the event that
  the Company does not perform according to the LOI terms, the CN Security Bond
  will be transferred to Clear. The CN Security Bond may be converted into common
  shares of the Company at prices ranging from $3.25 per common share to $9.25
  per common share. The CN Security Bonds maturity date is September 30,
  2011 and the interest rate is LIBOR plus 5%, with a floor of 10.5% and a ceiling
  of 13%. Interest under the CN Security Bond can be converted into common shares
  of the Company at its discretion. If the Company completes the acquisition of
  Cerro Negro or if the parties are unable to reach a definitive PSA, the CN Security
  Bond will be returned to the Companys treasury and cancelled. At December
  31, 2007 the Company maintains ownership of the Bond. The CN Security Bond will
  not be considered issued and outstanding for accounting purposes until such
  time as the CN Security Bond is transferred to Clear.

Completion of the Cerro Negro acquisition by the Company is subject
  to agreement on final terms of the PSA being reached by Clear and the Company
  and the Company raising the funds necessary to complete the transaction.

BUENOS AIRES OIL & GAS COMPANY

In December 2007, the Company entered into a LOI to acquire 100%
  of the shares of a Buenos Aires, Argentina based oil development and production
  company (the BAO) as a wholly owned operating subsidiary to the
  Company, which holds leasehold interests primarily located in the Neuquén
  Basin, Rio Negro Province, Argentina. Under the terms of the LOI, the Company
  has the right to purchase 100% of the shares of BAO subject to the satisfactory
  outcome of due diligence related to BAO performed by the Company, which includes
  corporate, commercial, financial, geologic, geophysical and petroleum engineering
  analysis. Upon the Companys satisfaction under the due diligence, the
  Company and BAO shall negotiate and execute a mutually acceptable SPA.. Completion
  of the BAO acquisition by the Company is subject to satisfactory completion
  of due diligence, agreement on final terms of the SPA which shall remain confidential
  until completion and the Company raising the funds necessary to complete the
  transaction

---

- F20 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 8  RELATED PARTY TRANSACTIONS

During the year ended December 31, 2007, management fees of $360,000
  (2006: $265,866) were incurred to a private company, which provides the services
  of a director and officer of the Company. The Company is committed to pay this
  party $30,000 in management fees per month. In May 2007, this officer converted
  $3,000 of unpaid fees into 3,000,000 Series A preferred shares. In June 2007,
  this party converted $140,000 of unpaid fees into a private placement consisting
  of 560,000 units at $0.25 per unit. In December 2007, this party exercised 1,250,000
  stock appreciation rights which resulted in $875,000 owing to this party. The
  Company settled this debt plus an additional $75,000 owing to the officer and
  director for the exercise of 100,000 stock appreciation rights by issuing 1,250,000
  common shares for the exercise of 1,250,000 stock options at $0.50, 100,000
  common shares for the exercise of 100,000 stock options at $0.45 granted directly
  to the officer, and 560,000 common shares for the exercise of 560,000 share
  purchase warrants at $0.50. At December 31, 2007 this party is owed $nil by
  the Company (2006: $105,162 was owed by the Company). The agreement with this
  party can be terminated by the Company at any time by providing 60 days written
  notice. Upon termination of the agreement, the Company is required to pay this
  party severance of 24 months of monthly fees within 10 business days of the
  termination date plus an additional severance cash payment equating to the value
  of 5% of the Gross Market Capital Increase in the Company from January 1, 2007
  until the date of the termination of this agreement.

During the year ended December 31, 2007, consulting fees of $7,900
  (2006: $18,000) were incurred to a director of the Company. In May 2007, this
  director converted $200 of unpaid fees into 200,000 Series A preferred shares.
  On August 22, 2007, this director resigned; no severance fees were paid and
  none are owed. At December 31, 2007, this director is owed $NIL (2006: $1,000)
  for unpaid fees. Pursuant to the terms of a Shareholders Agreement entered into
  between this director and the Company related to the issuance of the Series
  A preferred shares, subsequent to the resignation of this director, 200,000
  Series A preferred shares have been returned to the Companys treasury
  and cancelled.

During the year ended December 31, 2007, management fees of $216,000
  (2006: $120,000) were incurred to an officer and director of the Company, of
  which $13,500 was allocated to discontinued operations for work relating to
  the US oil and gas properties. The Company is committed to pay this party $18,000
  in management fees per month. In May 2007, this officer converted $1,200 of
  unpaid fees into 1,200,000 Series A preferred shares. In June 2007, this party
  converted $30,000 of unpaid fees into a private placement consisting of 120,000
  units at $0.25 per unit. In December 2007, this party exercised 750,000 stock
  appreciation rights which resulted in $525,000 owing to this party. The Company
  settled this debt by issuing 750,000 common shares for the exercise of 750,000
  stock options at $0.50, 120,000 common shares for the exercise of 120,000 share
  purchase warrants at $0.50 and the issuance of 75,000 common shares for the
  remaining $90,000. At December 31, 2007, this party is owed $98,300 (2006: $20,500)
  for unpaid management fees. This agreement can be terminated by the Company
  at any time by providing 60 days written notice. Upon termination of the agreement,
  the Company is required to pay this party severance of 6 months of monthly fees
  within 10 business days of the termination date.

During the year ended December 31, 2007, management fees of $66,000
  (2006: $64,000) were incurred to an officer of the Company. At December 31,
  2007, this officer is owed $7,500 (2006: $NIL) for management fees due. The
  Company is committed to pay this officer $5,500 in management fees per month.
  This agreement can be terminated by the Company at any time by providing 30
  days written notice. On January 24, 2008, this officer resigned but agreed to
  remain as a consultant until the Company found a suitable replacement.

During the year ended December 31, 2007, management fees of $9,000
  (2006: $NIL) plus a bonus of $45,000 (2006: $7,000) were incurred to a director
  of the Company. In May 2007, this director converted $400 of unpaid fees into
  400,000 Series A preferred shares. In June 2007, this director converted $45,000
  of unpaid fees into a private placement consisting of 180,000 units at $0.25
  per unit. At December 31, 2007, this director is owed $2,600 (2006: $NIL) for
  unpaid fees. The Company is committed to pay this director $1,000 per month.
  This agreement can be terminated by the Company at any time by providing 30
  days written notice.

During the year ended December 31, 2007, consulting fees of $7,500
  (2006: $30,000) were incurred to a relative of a director of the Company. In
  June 2007, this consultant converted $30,000 of unpaid fees into a private placement
  consisting of 120,000 units at $0.25 per unit. At December 31, 2007, this individual
  is owed $NIL (2006: $22,500) for consulting fees due. This consulting agreement
  expired on March 31, 2007 and no further fees are due.

At December 31, 2007, the Company recorded an accrued liability
  of $421,250, which is included in management and consulting fees, related to
  the exercise of SARs by two officers of the Company in accordance with certain
  provisions for tax indemnities in the officers management consulting agreements.

All related party transactions are in the normal course of business
  and are measured at the exchange amount, which is the amount of consideration
  established and agreed to by the related parties. Other related party transactions
  are disclosed in Note 9.

---

- F21 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 9  CAPITAL STOCK

Common SharesEffective September 12, 2006, the Company completed a five for one reverse
  stock split of the authorized, issued and outstanding common stock. As a result,
  the authorized capital has decreased from 100,000,000 shares of common stock
  with a par value of $0.001 to 20,000,000 shares of common stock with a par value
  of $0.001. The issued and outstanding share capital has decreased from 68,249,605
  shares of common stock to 13,649,921 shares of common stock. All references
  to the issuance, granting, and exercising of common stock, stock options and
  warrants and loss per share amounts in these financial statements have been
  adjusted to reflect the effect of the five for one reverse stock split. The
  Company then increased its authorized capital to 250,000,000 share of common
  stock.

The Company has estimated the fair value of attached warrants
  to unit private placements to be 10% of the private placement proceeds. In 2006,
  five of eleven private placements had warrants attached and the total proceeds
  from these private placements were $518,040; therefore 10% or $51,804 was allocated
  to the 291,549 warrants granted.

The Company has estimated the fair value of the attached warrants
  to be 10% of the private placement proceeds. Two of the private placements had
  warrants attached and the total proceeds from these private placements were
  $481,000; 10% or $48,100 was allocated to the 1,855,429 warrants granted.

Private Placement ProceedsDuring the fourth quarter of 2007, the Company entered into seven subscription
  agreements to purchase of common shares of the Company at prices ranging from
  $0.25 - $0.60 per share. The total amount of shares subscribed is 335,567 for
  total cash proceeds of $102,520. The Company expects to close and issue the
  shares during the first quarter of 2008. Theses funds are considered unsecured
  non interest bearing loans until the shares are issued.

WarrantsA summary of the Companys warrants outstanding and the changes for
  2007 and 2006 are as follows:

|                                      |  |             |   |   | Weighted |  |  | Weighted   | 
|------------------------------------- |  | ----------- | - | - | -------- |  |  | ---------- | 
|                                      |  |             |   |   | Average  |  |  | Average    | 
|                                      |  | Warrants    |   |   | Exercise |  |  | Remaining  | 
|                                      |  | Outstanding |   |   | Price    |  |  | Life       | 
|                                      |  |             |   |   |          |  |  |            | 
|Balance, December 31, 2005            |  | 761,400     |   | $ | 2.25     |  |  |            | 
|Issued                                |  | 291,549     |   |   | 4.46     |  |  |            | 
|Exercised
      / Cancelled / Expired |  | (746,400    | ) |   | -        |  |  |            | 
|                                      |  |             |   |   |          |  |  |            | 
|Balance, December 31, 2006            |  | 306,549     |   |   | 4.32     |  |  | 0.09 years | 
|Issued                                |  | 1,855,429   |   |   | 0.52     |  |  |            | 
|Exercised
      / Cancelled / Expired |  | (1,185,425  | ) |   | 0.50     |  |  |            | 
|                                      |  |             |   |   |          |  |  |            | 
|Balance December, 2007                |  | 976,553     |   | $ | 0.54     |  |  | 1.33 years | 

The 976,553 warrants are exercisable as follows; 805,124 warrants
  at $0.50 per share until June 28, 2009, 71,429 warrants at $0.70 per share until
  July 25, 2008 and 100,000 warrants at $0.70 per share until July 11, 2008.

Preferred SharesIn May 2007, three directors, (one of whom is also an officer) and another
  officer converted $4,800 of unpaid fees into 4,800,000 Series A, $0.001 par
  value, preferred shares. Each preferred share will have 10 votes, whereas each
  common share has only one vote. In the event the Company at any time or from
  time to time after the original date of issuance of the Series A Preferred Stock
  shall declare or pay any dividend or make any other distribution on the Corporations
  common stock payable in common stock or effect a subdivision of the outstanding
  shares of Common Stock (by reclassification or otherwise than by payment of
  a dividend in Common Stock), then the number of votes per share of Series A
  Preferred Stock shall be proportionately increased, concurrently with the effectiveness
  of such stock dividend, stock distribution or subdivision. Otherwise, the Series
  A preferred shares do not participate in any assets or dividends
  of the Company. Each of the four holders of the series A preferred
  shares as described have entered into an agreement with the Company (the Shareholder
  Agreement) that stipulates that at any time the holder thereof discontinues
  acting as an officer or director of the Company for any reason whatsoever, whether
  by mutually agreed upon termination of tenure, dismissal for cause or without
  cause, etc., the departing director or officer will immediately therewith return
  to treasury, those series A preferred shares issued in the name
  of said officer or Director for cancellation. On August 22, 2007, one of the
  Directors resigned and as a result, 200,000 preferred shares with a value of
  $200 were cancelled. As of December 31, 2007, the Company had 4,600,000 Series
  A preferred shares outstanding. See Note 8.

---

- F22 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 10  STOCK OPTION PLANS

On April 27, 2007, the Company repriced 192,000 stock options
  from prices ranging from $1.50 to $3.75 per share to $0.75 per share with expiry
  dates ranging from May 2, 2008 to July 22, 2014 and recorded additional stock
  based compensation expense of $9,000. The Company estimated the additional fair
  value by applying the fair value method using the Black-Scholes option pricing
  model using an expected life of the remaining term of the option, a risk-free
  interest rate of 4.87% and an expected volatility of 117%.

During the year ended December 31, 2007, the Company granted
  a total of 4,765,000 stock options to directors, officers and consultants of
  the Company at exercise prices ranging from $0.25 - $0.57 per common share with
  expiry dates ranging from April 26, 2008 to April 26, 2017. Of these stock options
  3,885,000 vested and 880,000 vest over a one year period. The Company estimated
  the fair value of the 4,765,000 stock options granted by applying the fair value
  method using the Black-Scholes option pricing model using an expected life of
  one to ten years, a risk-free interest rate of 4.87% and an expected volatility
  of 116% - 117% resulting in a stock-based compensation expense of $1,703,700
  of which $1,569,807 was expensed to December 31, 2007 and the remaining $124,893
  will be expensed on vesting.

During the year ended December 31, 2006, the Company granted
  a total of 1,140,000 stock options to directors, officers and consultants of
  the Company at exercise prices ranging from $0.35 to $1.50 per common share
  under the amended 2004 Stock Option Plan. These stock options vested immediately.
  The Company estimated the fair value of the 140,000 stock options granted at
  $1.50 by applying the fair value method using the Black-Scholes option pricing
  model using an expected life of one year, a risk-free interest rate of 4% and
  an expected volatility of 82% resulting in a stock-based compensation expense
  of $203,400. The Company also estimated the fair value of the 1,000,000 stock
  options granted at $0.35 to be $210,000 being the difference between the market
  price and the exercise price on the date of grant as these options were granted
  and exercised immediately to settle outstanding bonuses to certain officers,
  directors and consultants.

On March 6, 2006 the board of directors approved the adoption
  of a Performance Stock Incentive Plan  2006 (the PSIP
  2006) with an effective date of March 1, 2006 (the Effective Date).
  The terms of the PSIP 2006 provide that a total of 6,000,000 shares will be
  issued in escrow and subject to the following terms:

|(a) | a total of 700,000 escrowed performance shares can be
        purchased from escrow at a price of $2.50 per share commencing one year
        from the Effective Date for up to five years, the granting of which is
        subject to the discretion of the Board of Directors. The original value
        of this award was estimated to be $1,116,000. However, to date, no specific
        awards under this provision have been granted by the Board of Directors
        and accordingly no stock based compensation has been recorded.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(b) | a total of 900,000 escrowed performance shares can be
        purchased from escrow at a price of $5.00 per share on or before the first
        thee years after the Effective Date, if the Companys assets increase
        by 50%, the market share price of the Companys common stock achieves
        a minimum of $6.25, and the Company financial statements reflect a minimum
        of $3,000,000 profit before taxes, depletion, amortization and stock based
        compensation charges;                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(c) | a total of 1,200,000 escrowed performance shares can
        be purchased from escrow at a price of $6.25 per share on or before the
        first five years after the Effective Date, if the Companys assets
        increase by 100%, the market share price of the Companys common
        stock achieves a minimum of $10.00, and the Company financial statements
        reflect a minimum of $6,000,000 profit before taxes, depletion, amortization
        and stock based compensation charges;                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(d) | a total of 1,500,000 escrowed performance shares can
        be purchased from escrow at a price of $7.50 per share on or before the
        first seven years after the Effective Date, if the Companys assets
        increase by 200%, the market share price of the Companys common
        stock achieves a minimum of $15.00, and the Company financial statements
        reflect a minimum of $9,000,000 profit before taxes, depletion, amortization
        and stock based compensation charges; and                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(e) | a total of 1,700,000 escrowed performance shares can
        be purchased from escrow at a price of $10.00 per share on or before the
        first seven years after the Effective Date, if the Companys assets
        increase by 400%, the market share price of the Companys common
        stock achieves a minimum of $20.00, and the Company financial statements
        reflect a minimum of $15,000,000 profit before taxes, depletion, amortization
        and stock based compensation charges.                                

Effective July 18, 2007, the Company adopted an Equity
  Incentive Plan (the EIP), the maximum aggregate number of
  shares of Common Stock that may be issued and sold under all Awards granted
  under the EIP shall be equal to 20% of the issued and outstanding common stock
  (on a fully diluted basis). To date the Company has registered 2,000,000 common
  shares under a Form 8 Registration Statement filed with the United States Securities
  and Exchange Commission.

---

- F23 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 10  STOCK OPTION PLANS (CONTINUED)

A summary of the options outstanding is as follows:

|                                    |  | Number of  |   |  |               |  |  | Exercise |  |  |             |  |   | Weighted Average |  |  | Remaining        |  |   | Aggregate       | 
|----------------------------------- |  | ---------- | - |  | ------------- |  |  | -------- |  |  | ----------- |  | - | ---------------- |  |  | ---------------- |  | - | --------------- | 
|                                    |  | Options    |   |  | Date of Issue |  |  | Price    |  |  | Expiry Date |  |   | Exercise Price   |  |  | Contractual Life |  |   | Intrinsic Value | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Outstanding, December 31, 2005      |  | 1,026,055  |   |  |               |  |  |          |  |  |             |  | $ | 2.20             |  |  | 4.47 years       |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Granted during the period           |  | 140,000    |   |  | 01-Jan-06     |  |  | 1.50     |  |  | 01-Jan-07   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 1,000,000  |   |  | 22-Sep-06     |  |  | 0.35     |  |  | 22-Sep-11   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Exercised during the period         |  | (140,000   | ) |  |               |  |  | 1.50     |  |  | 07-Mar-06   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (40,777    | ) |  |               |  |  | 1.25     |  |  | 10-Sep-06   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (13,222    | ) |  |               |  |  | 1.25     |  |  | 04-Mar-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (6,000     | ) |  |               |  |  | 1.25     |  |  | 04-Mar-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (20,000    | ) |  |               |  |  | 1.50     |  |  | 22-Jul-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (12,060    | ) |  |               |  |  | 3.75     |  |  | 22-Jul-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (1,000,000 | ) |  |               |  |  | 0.35     |  |  | 22-Sep-11   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Expired/cancelled during the period |  | (77,600    | ) |  |               |  |  | 2.50     |  |  | 12-Feb-06   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (60,000    | ) |  |               |  |  | 2.50     |  |  | 10-Sep-06   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (29,067    | ) |  |               |  |  | 3.75     |  |  | 10-Sep-06   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (120,000   | ) |  |               |  |  | 1.25     |  |  | 01-Nov-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (112,000   | ) |  |               |  |  | 1.25     |  |  | 01-Nov-13   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Outstanding, December 31, 2006      |  | 535,329    |   |  |               |  |  |          |  |  |             |  | $ | 2.51             |  |  | 4.30 years       |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Expired/cancelled during the period |  | (28,080    | ) |  |               |  |  | 1.25     |  |  | 04-Mar-07   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (98,532    | ) |  |               |  |  | 2.50     |  |  | 04-Mar-07   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (75,000    | ) |  |               |  |  | 3.75     |  |  | 04-Mar-07   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (14,777    | ) |  |               |  |  | 1.25     |  |  | 04-Mar-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (14,000    | ) |  |               |  |  | 1.25     |  |  | 04-Mar-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (40,000    | ) |  |               |  |  | 2.50     |  |  | 04-Mar-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (7,940     | ) |  |               |  |  | 3.75     |  |  | 22-Jul-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (20,000    | ) |  |               |  |  | 5.00     |  |  | 22-Jul-14   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (45,000    | ) |  |               |  |  | 2.50     |  |  | 1-Jul-15    |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (100,000   | ) |  |               |  |  | 0.45     |  |  | 26-Apr-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Granted during the period           |  | 300,000    |   |  | 27-Apr-07     |  |  | 0.45     |  |  | 26-Apr-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 2,400,000  |   |  | 27-Apr-07     |  |  | 0.50     |  |  | 26-Apr-17   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 350,000    |   |  | 27-Apr-07     |  |  | 0.50     |  |  | 26-Apr-12   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 250,000    |   |  | 01-Jul-07     |  |  | 0.50     |  |  | 26-Apr-12   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 45,000     |   |  | 01-Sep-07     |  |  | 0.35     |  |  | 31-May-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 120,000    |   |  | 01-Augl-07    |  |  | 0.54     |  |  | 31-Jul-10   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 900,000    |   |  | 19-Jul-07     |  |  | 0.35     |  |  | 19-Jul-12   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 60,000     |   |  | 24-Jul-07     |  |  | 0.57     |  |  | 31-Jul-10   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 100,000    |   |  | 22-Aug-07     |  |  | 0.35     |  |  | 21-Aug-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 90,000     |   |  | 01-Sep-07     |  |  | 0.45     |  |  | 30-Aug-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 100,000    |   |  | 01-Oct-07     |  |  | 0.25     |  |  | 01-Oct-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | 50,000     |   |  | 01-Nov-07     |  |  | 0.50     |  |  | 01-Nov-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Exercised during the period         |  | (900,000   | ) |  |               |  |  | 0.35     |  |  | 19-Jul-12   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (100,000   | ) |  |               |  |  | 0.45     |  |  | 26-Apr-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (175,000   | ) |  |               |  |  | 0.50     |  |  | 26-Apr-12   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (2,300,000 | ) |  |               |  |  | 0.50     |  |  | 26-Apr-17   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (45,000    | ) |  |               |  |  | 0.35     |  |  | 31-May-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (87,822    | ) |  |               |  |  | 0.45     |  |  | 30-Aug-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (100,000   | ) |  |               |  |  | 0.25     |  |  | 01-Oct-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  | (50,000    | ) |  |               |  |  | 0.50     |  |  | 01-Nov-08   |  |   |                  |  |  |                  |  |   |                 | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Outstanding, December 31, 2007      |  | 1,099,178  |   |  |               |  |  |          |  |  |             |  | $ | 0.53             |  |  | 3.93 years       |  | $ | 237,903         | 
|                                    |  |            |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  |   |                 | 
|Exercisable, December 31, 2007      |  | 781,678    |   |  |               |  |  |          |  |  |             |  |   |                  |  |  |                  |  | $ | 162,028         | 

---

- F24 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 10  STOCK OPTION PLANS (CONTINUED)

A summary of the status of the Companys unvested shares
  as of December 31, 2007, and changes during the year ended December 31, 2007,
  is presented below:

|                                    |  |                  |  |   | Weighted-Average | 
|----------------------------------- |  | ---------------- |  | - | ---------------- | 
|                                    |  |                  |  |   | Grant-Date       | 
|Unvested shares                     |  | Number of Shares |  |   | Fair
      Value | 
|Unvested at January 1, 2007         |  | -                |  | $ | -                | 
|Granted                             |  | 4,765,000        |  |   | 0.46             | 
|Vested                              |  | 4,447,500        |  |   | 0.51             | 
|Unvested at December
      31, 2007 |  | 317,500          |  | $ | 0.51             | 

NOTE 11  STOCK APPRECIATION RIGHTS

The Company has authorized the granting of stock appreciation
  rights (SARs). A SAR can be awarded to directors, officers, and
  consultants that entitle these grantees to receive cash or shares of common
  stock, or a combination of both, with each right having a value on the date
  the stock appreciation right is exercised equal to the excess of the market
  value of a share of common stock at the time of exercise over the base price
  per share set forth on the grant date.

Since the SARs could be settled by cash, the Company must recognize
  the related liability in accordance with SFAS 123 (R) which requires that the
  liability be measured at fair value and revalued at each reporting date through
  final settlement. Fair value is calculated using the same assumptions and option
  pricing model that is used to compute the fair value of stock options.

During the year ending December 31, 2007, the Company granted
  3,885,000 SARs to directors, officers and consultants of the Company at exercise
  prices ranging from $0.35 - $0.50 per right with expiry dates ranging from April
  26, 2008 to July 19, 2017. Of these SARs 3,185,000 vested immediately and 700,000
  vest quarterly over a one year period. The Company estimated the fair value
  on granting of the 3,885,000 SARs by applying the fair value method using the
  Black-Scholes option pricing model using an expected life of one to ten years,
  a risk-free interest rate of 4.87% and an expected volatility of 116% - 117%
  resulting in a stock-based compensation expense of $1,413,000 of which $1,336,599
  was expensed to December 31, 2007 and the remaining $76,401 will be expensed
  on vesting.

During the year, 100,000 SARs expired after the resignation of
  a director.

In November, 2007, 3,160,000 SARs were exercised at exercise
  prices ranging from $0.35 - $0.50 per right. The fair value of the SARs on the
  dates of exercise was $2,248,500, resulting in an additional stock-based compensation
  expense of $911,901. The fair value at the date of exercise was determined by
  multiplying the number of SARs exercised by the difference between the market
  price of common stock at the date of exercise and the exercise price of the
  SARs.

The total SARs liability of $2,248,500 was settled by the exercise
  of options and warrants held by certain holders where payment was applied against
  the SARs liability owing (a total of $2,095,920), cash of $2,500 and the issuance
  of 124,458 shares at the market price of $1.20 for $149,350, leaving a balance
  owing of $730.

At December 31, 2007, the Company recorded an accrued liability
  of $421,250, which is included in management and consulting fees, related to
  the exercise of SARs by two officers of the Company in accordance with certain
  provisions for tax indemnities in the officers management consulting agreements.

At December 31, 2007 a total of 625,000 SARs granted were unexercised,
  of which 237,500 were unvested. The Company estimated the fair value of the
  625,000 SARs at December 31, 2007 by applying the fair value method using the
  Black-Scholes option pricing model using an expected life of one-quarter to
  three years, a risk-free interest rate of 4.87% and an expected volatility of
  116% - 117% resulting in a fair value of $285,250. This resulted in an additional
  stock-based compensation expense of $84,100 for a total of $199,500 accrued
  on vested and unexercised SARs at December 31, 2007, and an additional $9,349
  for a total of $85,750 which will be expensed on vesting.

The Company is committed to issue an aggregate of 16,575,000
  additional SARs as per outstanding management and consulting agreements entered
  into during 2007. Refer to Note 13.

---

- F25 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 11  STOCK APPRECIATION RIGHTS (CONTINUED)

A summary of the stock appreciation rights is as follows:

|                                    |  | Number of  |   |  | Date of   |  |  | Exercise |  |  |             |  |   | Weighted Average |  |  | Weighted Average           |  |   | Aggregate       | 
|----------------------------------- |  | ---------- | - |  | --------- |  |  | -------- |  |  | ----------- |  | - | ---------------- |  |  | -------------------------- |  | - | --------------- | 
|                                    |  | SAR        |   |  | Issue     |  |  | Price    |  |  | Expiry Date |  |   | Exercise Price   |  |  | Remaining Contractual Life |  |   | Intrinsic Value | 
|                                    |  |            |   |  |           |  |  |          |  |  |             |  |   |                  |  |  |                            |  |   |                 | 
|Balance, December 31, 2006          |  | -          |   |  |           |  |  |          |  |  |             |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  |            |   |  |           |  |  |          |  |  |             |  |   |                  |  |  |                            |  |   |                 | 
|Granted during the year             |  | 300,000    |   |  | 27-Apr-07 |  |  | 0.45     |  |  | 26-Apr-08   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | 2,000,000  |   |  | 27-Apr-07 |  |  | 0.50     |  |  | 26-Apr-17   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | 750,000    |   |  | 27-Apr-07 |  |  | 0.50     |  |  | 26-Apr-12   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | 250,000    |   |  | 01-Jul-07 |  |  | 0.50     |  |  | 26-Apr-12   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | 45,000     |   |  | 01-Sep-07 |  |  | 0.35     |  |  | 31-May-08   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | 250,000    |   |  | 19-Jul-07 |  |  | 0.35     |  |  | 19-Jul-12   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | 200,000    |   |  | 19-Jul-07 |  |  | 0.35     |  |  | 19-Jul-17   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | 90,000     |   |  | 01-Sep-07 |  |  | 0.45     |  |  | 30-Aug-08   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  |            |   |  |           |  |  |          |  |  |             |  |   |                  |  |  |                            |  |   |                 | 
|Exercised / expired during the year |  | (200,000   | ) |  |           |  |  | 0.45     |  |  | 26-Apr-08   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | (2,000,000 | ) |  |           |  |  | 0.50     |  |  | 26-Apr-17   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | (475,000   | ) |  |           |  |  | 0.50     |  |  | 26-Apr-12   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | (45,000    | ) |  |           |  |  | 0.35     |  |  | 31-May-08   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | (90,000    | ) |  |           |  |  | 0.45     |  |  | 30-Aug-08   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | (250,000   | ) |  |           |  |  | 0.35     |  |  | 19-Jul-12   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  | (200,000   | ) |  |           |  |  | 0.35     |  |  | 19-Jul-17   |  |   |                  |  |  |                            |  |   |                 | 
|                                    |  |            |   |  |           |  |  |          |  |  |             |  |   |                  |  |  |                            |  |   |                 | 
|Balance, December 31, 2007          |  | 625,000    |   |  |           |  |  |          |  |  |             |  | $ | 0.49             |  |  | 3.68
      years           |  |   |                 | 
|                                    |  |            |   |  |           |  |  |          |  |  |             |  |   |                  |  |  |                            |  |   |                 | 
|Exercisable, December 31, 2007      |  | 387,500    |   |  |           |  |  |          |  |  |             |  | $ | 0.49             |  |  | 3.29
      years           |  | $ | 101,875         | 

At December 31, 2007 the Company has an outstanding liability
  on the vested portion of the outstanding SARs and the estimated fair value of
  the unvested portion of the SARs is $85,750. The Company has commitments to
  grant additional SARs to certain officers and directors. Refer to Note 13.

NOTE 12  INCOME TAXES

As at December 31, 2007, the Company and its subsidiaries have
  net operating loss carryforwards of approximately $16,000,000 that result in
  deferred tax asset. These loss carryforwards will expire, if not utilized, through
  2021. Management believes that the realization of the benefits from these deferred
  tax assets is uncertain and accordingly, a full deferred tax asset valuation
  allowance has been provided and no deferred tax asset has been recorded.

The Companys income tax provisions differ from the expected
  amounts determined by applying the appropriate combined effective tax rate to
  the Companys net income before taxes. The significant components of these
  differences are as follows:

| |                                                           |   | December 31, |   |   | December 31, |  
| | --------------------------------------------------------- | - | ------------ | - | - | ------------ | -
| |                                                           |   | 2007         |   |   | 2006         |  
| | Net Operating Loss                                        |   | $            |   |   | $            |  
| | Net loss per financial statements                         | $ | (7,505,227   | ) | $ | (5,707,701   | )
| | Add / (deduct):                                           |   |              |   |   |              |  
| | Stock based compensation                                  |   | 1,778,306    |   |   | 413,400      |  
| | Depreciation, net of depreciation for income tax purposes |   | 5,241        |   |   | 15,034       |  
| | Financing fees                                            |   | -            |   |   | 626,250      |  
| | Impairment of oil and gas properties                      |   | (2,135,036   | ) |   | 2,025,232    |  
| | Write-down of other investments and assets                |   | 60,000       |   |   | 90,000       |  
| | Non deductible meals and entertainment                    |   | 4,318        |   |   | 5,563        |  
| |                                                           |   |              |   |   |              |  
| | Taxable loss for the year                                 |   | (7,792,398   | ) |   | (2,532,222   | )
| | Federal and state statutory rate                          |   | 35%          |   |   | 35%          |  
| | Expected tax recovery                                     |   | (2,727,339   | ) |   | (886,278     | )
| | Valuation allowance                                       |   | 2,727,339    |   |   | 886,278      |  
| | Income tax expense                                        | $ | -            |   | $ | -            |  

---

- F26 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 12  INCOME TAXES (CONTINUED)

The tax effects of temporary differences that give rise to significant
  components of future income tax assets and liabilities are as follows:

| |                                               |   | December 31, |   |   | December 31, |  
| | --------------------------------------------- | - | ------------ | - | - | ------------ | -
| |                                               |   | 2007         |   |   | 2006         |  
| |                                               |   |              |   |   |              |  
| | Deferred income tax assets:                   |   |              |   |   |              |  
| | Operating losses available for future periods | $ | 5,822,182    |   | $ | 3,094,843    |  
| | Property and equipment                        |   | 6,601        |   |   | 13,437       |  
| | Oil and gas properties                        |   | -            |   |   | 708,831      |  
| | Other investments                             |   | 52,500       |   |   | 31,500       |  
| |                                               |   |              |   |   |              |  
| |                                               |   | 5,881,283    |   |   | 3,848,611    |  
| | Valuation allowance                           |   | (5,881,283   | ) |   | (3,848,611   | )
| |                                               |   |              |   |   |              |  
| | Net deferred income
      tax assets          | $ | -            |   | $ | -            |  

The Company has not filed income tax returns for several years
  for the consolidated group in the United States. The taxing authorities prescribe
  penalties for failing to file certain tax returns and supplemental disclosures.
  Upon filing there could be penalties and interest assessed. Such penalties vary
  by jurisdiction and by assessing practices and authorities. As the Company has
  incurred losses since inception there would be no known or anticipated exposure
  to penalties for income tax liability. However, certain jurisdictions may assess
  penalties for failing to file returns and other disclosures and for failing
  to file other supplementary information associated with foreign ownership, debt
  and equity positions.

Inherent uncertainties arise over tax positions taken, or expected
  to be taken, with respect to intercompany charges and allocations, financing
  charges, fees, related party transactions, tax credits, tax based incentives
  and stock based transactions.

Management has considered the likelihood and significance of
  possible penalties associated with its current and intended filing positions
  and has determined, based on their assessment, that such penalties, if any,
  would not be expected to be material.

Disclosure concerning certain carry-forward tax pools, temporary
  and permanent timing differences in tax basis versus reported amounts may be
  impacted by assessing practices and tax code regulations when income tax returns
  are filed up to date. As a 100% valuation allowance has been provided against
  deferred tax assets reported in these financial statements, there would be no
  significant net impact to the current and deferred income tax disclosures or
  reconciliations reported.

Although management is currently not able to make a measurable
  provision for possible liability for penalties and interest, if any, at this
  time, the Company may be liable for such amounts upon assessment.

NOTE 13  CONTINGENCIES AND COMMITMENTS

The Company operates in the field of oil and gas exploration
  and is therefore subject to state and federal environmental regulations. Due
  to the diversity of these regulations compliance at all times cannot be assured.

On April 30, 2007, the Company commenced an arbitral action against
  SEPSA through the ICC requesting the ICC to enforce SEPSAs obligations
  under the terms agreed upon in the SPA and to sell to the Company 100% of the
  shares of SEPSA and to award damages incurred by the Company related to its
  out of pocket expenses, loss of business opportunity and loss of revenue. SEPSA
  subsequently filed a counter claim with the ICC seeking awards in the form of
  its legal fees and translation costs related to the dispute. Refer to Note 7.

In addition, the Company is subject to other claims and litigation
  arising in the ordinary course of business. Management considers that any liability
  from any reasonably foreseeable disposition of such other claims and litigation,
  individually or in the aggregate, would not have a material adverse effect on
  the consolidated financial position or results of operations.

The outcome and the loss, if any, from these legal proceedings
  is presently not determinable and no provision for loss has been provided in
  the financial statements.

---

- F27 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 13  CONTINGENCIES AND COMMITMENTS (CONTINUED)

On January 1, 2007, the Company entered into five five-year-term
  management consulting agreements. Of the five, three were with directors and/or
  officers of the Company, or their private companies. The agreements provide
  for remuneration on a monthly basis totalling $66,000. The Company has the right
  in all of the five consulting agreements to terminate the agreements without
  cause by providing 30 days written notice. Upon termination of one of the agreements,
  the Company is required to pay a certain officer severance of 24 months of monthly
  fees within 10 business days of the termination date plus an additional severance
  cash payment equating to the value of 5% of the Gross Market Capital Increase
  in the Company from January 1, 2007 until the date of the termination of this
  agreement. Upon termination of another of the agreements with a certain officer,
  the Company is required to pay this officer severance of 6 months of monthly
  fees within 10 business days of the termination date. In addition to the equity
  awards agreed upon under the EIP between consulting companies providing the
  services of certain officers to and on behalf of the Company, the Company will
  accrue sums equivalent to the gross tax payable by reason of receipts of equity
  awards granted and exercised under the EIP. Of these five agreements entered
  into by the Company, two have terminated; the remaining three agreements provide
  for the granting of a total of 16,700,000 stock options and 16,700,000 stock
  appreciation rights, in aggregate, over the five year terms of the agreements.
  As of December 31, 2007, 2,300,000 stock options and 2,300,000 stock appreciation
  rights have been granted, the remaining 14,400,000 options and 14,400,000 stock
  appreciation rights vest over the remaining term ending January 1, 2012.

On July 1, 2007, the Company entered into a five-year-term management
  consulting agreement. The agreement provides for a signing bonus of $20,000,
  the issuance of 100,000 shares of unrestricted common stock and a monthly remuneration
  of $10,000. The Company has the right to terminate the agreement without cause
  by providing 30 days written notice. Upon termination of the agreement, the
  Company is required to pay this consultant severance of 6 months of monthly
  fees within 10 business days of the termination date. This agreement provides
  for the granting of 2,225,000 stock options and 2,225,000 stock appreciation
  rights, in aggregate, over the five year term. As of December 31, 2007, 250,000
  stock options and 250,000 stock appreciation rights have been granted, the remaining
  1,975,000 stock options and 1,975,000 stock appreciation rights vest over the
  remaining term ending July 1, 2012.

NOTE 14  SUBSEQUENT EVENTS

On March 1, 2008, the Company entered into a one year term agreement
  for provision of services to the Company. The Company is committed to paying
  a monthly fee of $3,000 and to provide 100,000 options of the Company and 100,000
  stock appreciation rights of the Company. The agreement automatically renews
  for four consecutive one-year terms unless either party terminates the agreement
  by providing thirty days written notice. The Company can terminate the agreement
  without cause by providing 30 days written notice.

On March 28th, 2008, the Company issued 335,567 common
  shares for $102,520 in private placement proceeds received during the fourth
  quarter of 2007, The Company also issued 128,000 common shares for $64,000 in
  private placement proceeds received during the first quarter of 2008. This private
  placement unit offering consisted of 128,000 units at $0.50 per unit, each unit
  consisting of one common share and one share purchase warrant; each warrant
  is exercisable into one common share at an exercise price of $0.75 for one year.

Subsequent to December 31, 2007, the Company received $445.000
  by way of five promissory notes which are unsecured, due on demand, and bear
  a flat interest charge of 12.5% .

On March 28, 2008, the Company entered into an Amendment Agreement
  (the Promissory Note Amendment Agreement) whereby terms of certain
  promissory notes issued by the Company totaling $515,000 plus interest of $64,375
  were amended providing for conversion into units (the Units) of
  the Company for all of or portions of the principal and interest accrued under
  those promissory notes at the time of conversion. Each Unit would be comprised
  of one common share of the Company priced at $0.35 and one common share purchase
  warrant. Each warrant is exercisable commencing 90 days subsequent to the conversion
  of accruals under those promissory notes for two years from the date of conversion
  at an exercise price of $0.70 per exercised warrant share.

On March 31, 2008, a total of $466,875 (including interest of
  $51,875) of promissory notes described under the Promissory Note Amendment Agreement
  were converted into 1,333,928 units of the Company. The Company issued 1,333,928
  common shares at a price of $0.35 per common share and the holders retain the
  right commencing 90 days from the date of the conversion to exercise up to 1,333,928
  common share purchase warrants of the Company at a price of $0.70 per exercised
  warrant share to March 30, 2010.

On April 8, 2008, the Companys US subsidiary, Petrogen
  was wound-up and dissolved through filing for dissolution with the Colorado
  Secretary of State. All outstanding financial obligations, security interest
  liens, subordinate security interests, other subordinate liens and/or outstanding
  amounts invoiced to and/or held over Petrogen, if any, by third party creditors
  of Petrogen, have been fully discharged and terminated, resulting in the wind-up
  being completed with no further outstanding financial obligations. See Note
  6.

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- F28 -

|PLURIS ENERGY GROUP INC.                      
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER 31, 2007                             

NOTE 15  OTHER NON-CASH TRANSACTIONS

During the year ended December 31, 2007, the Company issued 90,272
  common shares for settlement of accrued loan interest of $45,807, issued 3,125,000
  common shares for the conversion of two convertible notes valued at $625,000,
  issued 332,191 common shares for the settlement of $222,057 of debt, issued
  1,184,000 common shares for a private placement for non-cash proceeds of $296,000
  which is the aggregate of $81,000 in unpaid consulting fees and $215,000 in
  unpaid management fees, issued 900,000 common shares for the exercise of stock
  options for non cash proceeds of $315,000, issued 100,000 common shares for
  services valued at $57,000, issued 2,707,822 common shares for the exercise
  of stock options in settlement of stock appreciation rights valued at $1,337,770,
  and issued 878,876 common shares for the exercise of share purchase warrants
  in settlement of stock appreciation rights valued at $439,438. Related to the
  exercise of SARs by certain officers and directors of the Company, an accrued
  liability of $579,250 has been recorded in accordance with certain provisions
  for tax accruals in the officers management consulting agreements.

During the year ending December 31, 2006 the Company issued 1,092,060
  common shares for the exercise of stock options for non cash proceeds of $500,224
  of which $150,224 was utilized to off-set debt owing to a director and to another
  related party and $350,000 was utilized to off-set management bonuses; 95,395
  common shares for the settlement of debt of $184,086 of which $89,000 was utilized
  to off-set debts owing to a director and to an officer; 163,500 common shares
  to certain officers, directors and consultants for bonuses totalling $330,650;
  and 15,000 common shares valued at $59,250 under a termination agreement.

---

- 30 -

Item
8.           Changes In and
Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item
8A.        Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, we have
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the period covered by
this annual report, being December 31, 2007. This evaluation was carried out
under the supervision and with the participation of our management, including
our companys chief executive officer and chief financial officer.

Based on this evaluation, our companys chief executive officer
and chief financial officer have concluded that our disclosure controls and
procedures as at December 31, 2007 were not effective to provide reasonable
assurance that information required to be disclosed in reports we file and
submit under the Exchange Act is recorded, processed, summarized and reported as
and when required and that it is accumulated and communicated to our management,
including the chief executive officer and chief financial officer, as
appropriate, to allow timely decisions regarding required disclosure.

We have identified, developed and begun to implement remedial
measures in light of the findings of our companys chief executive officer and
chief financial officer assessment of the effectiveness of disclosure controls
and procedures over financial reporting, to strengthen our company's disclosure
controls and procedures. Our companys chief executive officer and chief
financial officer are currently developing a plan and timetable for the
implementation of remedial measures intended to strengthen our disclosure
controls and procedures. Upon finalization and board approval of the plan, our
companys chief executive officer and chief financial officer intend to
implement the plan.

In light of the conclusion that our company's disclosure
controls and procedures were ineffective as of December 31, 2007, we have
applied procedures and processes as necessary to ensure the reliability of our
financial reporting in regards to this annual report. Accordingly, management
believes, based on its knowledge, that: (i) this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading with respect to the period covered by this
report; and (ii) the financial statements, and other financial information
included in this annual report, fairly present in all material respects our
financial condition, results of operations and cash flows as at, and for, the
periods presented in this annual report.

Managements report on internal control over financial
reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over
financial reporting is a process to provide reasonable assurance regarding the
reliability of our companys financial reporting for external purposes in
accordance with United States accounting principles generally accepted. Our
internal control over financial reporting includes maintaining records that in
reasonable detail accurately and fairly reflect our transactions and
dispositions of our assets; providing reasonable assurance that transactions are
recorded as necessary for preparation of our financial statements in accordance
with generally accepted accounting principles; providing reasonable assurance
that receipts and expenditures are made in accordance with authorizations of
management and our directors; and providing reasonable assurance that
unauthorized acquisition, use or disposition of our assets that could have a
material effect on our financial statements would be prevented or detected on a
timely basis. Because of its inherent limitations, internal control over
financial reporting may not provide absolute assurance that a misstatement of
our financial statements would be prevented or detected.

In order to evaluate the effectiveness of internal control over
financial reporting as required by Section 404 of the Sarbanes-Oxley Act,
management conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework and criteria established in
Internal Control  Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). This evaluation included
review

---

- 31 -

of the documentation of controls, evaluation of the design
effectiveness of controls, testing of the operating effectiveness of controls
and a conclusion on this evaluation. Based upon that evaluation, we have
concluded that, during the period covered by this report, such internal controls
and procedures were not effective to detect the inappropriate application of US
GAAP rules as described below. This was due to deficiencies that existed in the
design or operation of our internal control over financial reporting that
adversely affected our internal controls and that may be considered to be
material weaknesses.

The matters involving internal controls and procedures that the
Companys management considered to be material weaknesses under the standards of
the Public Company Accounting Oversight Board were: (1) lack of a functioning
audit committee and lack of a majority of independent directors on the Companys
board of directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; (3) insufficient
written policies and procedures for accounting and financial reporting with
respect to the requirements and application of US GAAP and SEC disclosure
requirements; and (4) ineffective controls over period end financial disclosure
and reporting processes.

The aforementioned material weaknesses were identified by the
Companys Chief Executive Officer and Chief Financial Officer in connection with
the audit of our financial statements as of December 31, 2007 and these findings
were reported to our management and board of directors. Management of the
Company believes that the material weaknesses set forth in (2), (3) and (4)
above did not affect the Companys financial results. However, management
believes that the lack of a functioning audit committee and a lack of a majority
of independent directors on the Companys board of directors resulting in the
ineffective oversight in the establishment and monitoring of required internal
controls and procedures can result in material deficiencies in the Companys
determination to its financial statements for future years.

We are committed to improving our financial organization. As
part of this, we will create a position to segregate duties consistent with
control objectives and will increase our personnel resources and technical
accounting expertise within the accounting function when funds are available to
the Company by doing the following: i) appointing one or more independent
directors to our board of directors who shall additionally be appointed to the
audit committee of the Company resulting in a fully functioning audit committee
who will undertake the oversight in the establishment and monitoring of required
internal controls and procedures; and ii) preparing and implementing sufficient
written policies and checklists which will set forth procedures for accounting
and financial reporting with respect to the requirements and application of US
GAAP and SEC disclosure requirements.

Management believes that the appointment of one or more
independent directors, who shall be appointed to a fully functioning audit
committee, will remedy the lack of a functioning audit committee and a lack of a
majority of independent directs on the Companys board. In addition, management
believes that preparing and implementing sufficient written policies and
checklists will remedy that following material weaknesses: (i) insufficient
written policies and procedures for accounting and financial reporting with
respect to the requirements and application of the US GAAP and SEC disclosure
requirements; and (ii) ineffective controls over period end financial close and
reporting processes.

Further, management believes that the hiring of additional
personnel who have the technical expertise and knowledge will result in the
proper segregation of duties and provide more checks and balances within the
department. Additional personnel will also provide the cross training needed to
support the Company if personnel turn-over issues within the department occur.
This, coupled with the appointment of additional independent directors will
greatly decrease any control and procedure issues that the Company may encounter
in the future.

We will continue to monitor and evaluate the effectiveness of
our internal controls and procedures and our internal controls over financial
reporting on an ongoing basis and are committed to taking further action and
implementing additional enhancements or improvements, as necessary and as funds
allow. This annual report does not include an attestation report of the
Companys registered public accounting firm pursuant to the temporary rules of
the Securities and Exchange Commission.

Item
8B.        Other Information.

None.

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- 32 -

PART III

Item
9.           Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act.

Directors and Executive Officers, Promoters and Control
Persons

Our directors, executive officers and other significant
employees, their ages, positions held and duration each person has held that
position, are as follows:

Name
      Position Held with the Company
      Age
      Date First Elected or AppointedSacha H. Spindler
    Chief Executive Officer, Chairman
      and Director
    45
    February 12, 2003S. Sam Sen
    President and Chief Operating Officer
    48
    February 1, 2005Justin Perryman
    Director
    39
    October 7, 2005


Business Experience

The following is a brief account of the education and business
experience of each director, executive officer and key employee during at least
the past five years, indicating each person's principal occupation during the
period, and the name and principal business of the organization by which he was
employed.

Sacha H. Spindler

Sacha Spindler was appointed as our Chairman of the Board, a
director and the Chief Executive Officer on February 12, 2003. As a successful
business entrepreneur and venture capitalist, Mr. Spindler has over 27 years of
experience in all aspects of business management, corporate development, finance
and venture capital markets. Prior to founding our company, Mr. Spindler was
instrumental in the formation and subsequent growth of several start-up
companies in the high technology, resource and oil and gas industries. Among his
demonstrated strengths, Mr. Spindler possesses in-depth knowledge of the equity
markets and investment industry, as well as a strong fundamental background in
the responsibilities of corporate development and operations. During the past 10
years, Mr. Spindler has successfully applied his knowledge and expertise in the
areas of finance, structure, negotiations and business development to companies
in the oil and gas industry.

Soumitra (Sam) Sen

Sam Sen has been our President since February 1, 2005. Mr. Sen
brings over twenty-six years of senior business and technical experience in the
energy industry. Prior to joining our Company, Mr. Sen served in the capacities
of Project Manager, Worldwide Business Development and New Venture Development
with Anadarko Petroleum. Prior to Anadarko, Mr. Sen worked with leading
multi-national oil companies such as Unocal, Suncor and Gulf Canada Resources,
where he held positions ranging from project geologist to business development
manager. Throughout his accomplished career, Mr. Sen has established a
successful track record in the commercial analysis, negotiation, support, and
capture of value-adding upstream, midstream, downstream, and acquisition and
divestiture projects ranging in size from $10 million to over $1 billion. Mr.
Sen is recognized for his strong technical background and was the lead geologist
on exploration teams responsible for hydrocarbon discoveries of up to 100 MMBOE
(gross) reserves. Mr. Sen received his MBA from the Warwick Business
School/Wolsey Hall, Oxford U.K., as well as a BSc (Honors) in Geology from
Carleton University, Canada. He holds memberships in industry associations
including the AAPG, AIPN and APEGGA, and is a professional geologist.

---

- 33 -

Justin Perryman

Justin Perryman was appointed as one of our directors on
October 7, 2005. Mr. Perryman brings over 14 years of legal, finance, corporate
and trade business experience. Mr. Perryman is an accomplished attorney-at-law
possessing specialized skills in the area of general corporate and business law
with extensive experience working for publicly listed companies as well as oil
& gas companies. In addition to his demonstrated skill and practice as an
attorney-at-law, Mr. Perryman also has a compliment of extensive entrepreneurial
knowledge and expertise in the fields of international trade, corporate finance
and investment banking. Mr. Perryman received his Juris Doctor and Masters in
International Business degree from the Washington University School of Law,
specializing in international and domestic banking and corporate and securities
law.

Mr. Perryman is also a captain in the United States Army, Texas
Army National Guard Office of the Judge Advocate General, 36th
Infantry Division.

Identification of Certain Significant Employees

Other than our executive officers, there is no other person who
is expected to make a significant contribution to our business.

Family Relationships

There are no family relationships between any director or
executive officer.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

| | 1. | any bankruptcy petition filed by or against any business
      of which such person was a general partner or executive officer either at
      the time of the bankruptcy or within two years prior to that
  time;                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                
| | 2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offences);                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                
| | 3. | being subject to any order, judgment, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities; or
| |    |                                                                                                                                                                                                                                                                                                                                
| | 4. | being found by a court of competent jurisdiction (in a
      civil action), the Commission or the Commodity Futures Trading Commission
      to have violated a federal or state securities or commodities law, and the
      judgment has not been reversed, suspended, or
vacated.                                           

Compliance with Section 16(a) of the Securities and Exchange
Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our executive officers and directors and persons who own more
than 10% of a registered class of our equity securities to file with the
Securities and Exchange Commission initial statements of beneficial ownership,
reports of changes in ownership and annual reports concerning their ownership of
our common stock and other equity securities, on Forms 3, 4 and 5 respectively.
Executive officers, directors and greater than 10% shareholders are required by
the Securities and Exchange Commission regulations to furnish us with copies of
all Section 16(a) reports they file.

Based solely on our review of the copies of such forms received
by us, or written representations from certain reporting persons that no Form 5s
were required for those persons, we believe that, during the year ended December

---

- 34 -

31, 2007, all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with,
with the exception of the following:

Name
      Number ofLate Reports
      Number of Transactions NotReported on a Timely Basis
      Failure to FileRequested FormsS. Sam Sen
    3(1)
    10
    NilSacha H. Spindler
    4(1)
    16
    NilBrian
      Fiddler(2)
    3(1)
    5
    NilJustin Perryman
    5(1)
    27
    NilTimothy G.
      Russell(3)
    2(1)
    3
    Nil


(1)****The named officer, director or greater than 10% shareholder, as
applicable, filed a late Form 4 - Statement of Changes in Beneficial Ownership.

(2)****Mr. Fiddler resigned as our chief financial officer on January 24, 2008.

(3)****Mr. Russell resigned as a director of our company on August 22, 2007.

Code of Ethics

On May 23, 2005, we adopted a code of business conduct and
ethics policy (the Code of Ethics). The adoption of the Code of Ethics allows
us to: (i) describe our core values and beliefs; (ii) provide the foundation for
all business conduct; and (iii) provide guidance to each of our directors and
officers to assist them in recognizing and dealing with ethical issues and
risks, providing mechanisms to report unethical conduct and helping foster a
culture of honesty and accountability. A copy of the Code of Ethics may be
obtained from our Secretary at no charge upon request.

Insider Trading Policy

On May 23, 2005, we adopted an insider trading policy ( the
Insider Trading Policy). The establishment of the Insider Trading Policy
allows us to assist our officers and directors to ensure compliance with federal
securities laws which prohibit trading in the securities of a company on the
basis of inside information. Our insiders and officers receive, as part of
their compensation packages, shares of our restricted common stock for resale.
Pursuant to the terms and provisions of the Insider Trading Policy, there are
four blackout periods during which our directors and officers are prohibited
from trading in our securities, these blackout periods begin on March
31st, June 30th, September 30thand December
31stof each fiscal year and end when two full trading days have
passed on the N Over-the-Counter Bulletin Board stock market after we announce
our results for the preceding fiscal period through quarterly and annual filings
with the Securities and Exchange Commission.

Audit Committee

As of the date of this annual report, we have not appointed
members to an audit committee and, therefore, the respective role of an audit
committee has been conducted by our board of directors. When established, the
audit committee's primary function will be to provide advice with respect to our
financial matters and to assist our board of directors in fulfilling its
oversight responsibilities regarding finance, accounting, tax and legal
compliance. The audit committee's primary duties and responsibilities will be
to: (i) serve as an independent and objective party to monitor our financial
reporting process and internal control system; (ii) review and appraise the
audit efforts of our independent accountants; (iii) evaluate our quarterly
financial performance as well as our compliance with laws and regulations; (iv)
oversee management's establishment and enforcement of financial policies and
business practices; and (v) provide an open avenue of communication among the
independent accountants, management and our board of directors.

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- 35 -

The board of directors has considered whether the regulatory
provision of non-audit services is compatible with maintaining the principal
independent accountant's independence.

Item
10.         Executive Compensation.

The particulars of compensation paid to the following persons
(the Named Executive Officers):

- our principal executive officer;
- each of our two most highly compensated executive officers who were serving
  as executive officers at the end of the years ended December 31, 2007 and 2006
  and whose total compensation exceeds $100,000 per year; and
- up to two additional individuals for whom disclosure would have been
  provided under (b) but for the fact that the individual was not serving as our
  executive officer at the end of the most recently completed financial year,

who we will collectively refer to as the named executive
officers, of our years ended December 31, 2007 and 2006, is set out in the
following summary compensation table:

SUMMARY COMPENSATION
        TABLEName and Principal Position
      Year
      Salary ($)
      Bonus ($)
      Stock Awards ($)
      Option Awards ($)
      Non-Equity Incentive Plan Compensa- tion ($)
      Change in Pension Value
        and Nonqualified Deferred Compensation
        Earnings ($)
      All Other Compensa-
        tion ($)
      Total ($)(a)
      (b)
      (c)
      (d)
      (e)
      (f)
      (g)
      (h)
      (i)
      (j)Sacha H. Spindler(1)
        CEO, Chairman
      2007 
        2006
      Nil 
        Nil
      Nil 
        148,750
      Nil 
        Nil
      950,000 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      360,000 
        265,866
      1,310,000 
        414,616S. Sam Sen(1)
        President and COO
      2007 
        2006
      Nil 
        Nil
      Nil 
        353,250
      Nil 
        Nil
      525,000 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      216,000 
        120,000
      741,000 
        473,250Brian Fiddler(1)
        CFO
      2007 
        2006
      Nil 
        Nil
      Nil 
        36,250
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      66,000 
        64,000
      66,000 
        100,250


|(1) | In addition to the equity awards agreed upon under the
      Equity Incentive Plan, our company accrues sums on behalf of the officers
      equivalent to the gross tax payable by reason of receipts of equity awards
      granted and exercised.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                     
|(2) | Mr. Fiddler resigned as our chief financial officer on
      January 24, 2008.                                                                                                                                                                      

Outstanding Equity Awards at Fiscal Year-End

The particulars of unexercised options, stock that has not
vested and equity incentive plan awards for the Named Executive Officers as at
the year ended December 31, 2007, is set out in the following outstanding equity
awards table:

---

- 36 -

Options
        Awards
      Stock
        AwardsName
      NumberofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable
      NumberofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable
      EquityIncentivePlanAwards:NumberofSecuritiesUnderlyingUnexercisedUnearnedOptions(#)
      OptionExercisePrice($)
      OptionExpirationDate
      NumberofSharesorUnitsofStockThatHaveNotVested(#)
      MarketValueofSharesorUnitsofStockThatHave NotVested($)
      EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights
        ThatHave NotVested(#)
      EquityIncentivePlanAwards:Market orPayoutValue ofUnearnedShares,Units
        orOtherRightsThat HaveNot Vested($)(a)
      (b)
      (c)
      (d)
      (e)
      (f)
      (g)
      (h)
      (i)
      (j)Sacha H. 
        Spindler
      $  52,000 
        $100,000
      Nil 
        Nil
      Nil 
        Nil
      $0.75 
        $0.75
      Mar-04-14 
        Jul-22-14
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        NilBrian 
        Fiddler(1)
      $ 40,000 
        $ 75,000
      Nil 
        Nil
      Nil 
        25,000
      $0.75 
        $0.50
      May-02-08 
        Apr-26-12
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        25,000
      Nil 
        $6,250S. Sam Sen
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil


(1) ****Mr.
Fiddler resigned as our chief financial officer on January 24, 2008.

Director Compensation

The particulars of compensation paid to our directors for our
year ended December 31, 2007 is set out in the following director compensation
table:

Name
      FeesEarnedor Paid inCash($)
      StockAwards($)
      OptionAwards($)
      Non-EquityIncentivePlanCompensation($)
      Change in PensionValue andNonqualified DeferredCompensationEarnings
      AllOtherCompensation($)
      Total($)(a)
    (b)
    (c)
    (d)
    (e)
    (f)
    (g)
    (h)Timothy G. Russell(1)
    $7,900
    Nil
    Nil
    Nil
    Nil
    Nil
    $ 7,900Justin Perryman
    $9,000
    Nil
    Nil
    Nil
    Nil
    $45,000
    $54,000


(1) ****Mr.
Russell resigned as a director of our company on August 22, 2007.

Stock Option Plan

On July 23, 2004, our board of directors unanimously approved
and adopted a 2004 stock option plan (the Stock Option Plan), which provides
for the granting of up to 1,200,000 shares of common stock. The purpose of the
Stock Option Plan is to advance our interests and the interests of our
shareholders by affording our key personnel opportunity for investment and the
incentive advantages inherent in stock ownership. Pursuant to the provisions of
the Stock Option Plan, stock options (the Stock Options) will be granted only
to our key personnel, generally defined as a person designated by our board of
directors upon whose judgment, initiative and efforts we may rely including any
of our directors, officers, employees or consultants.

The Stock Option Plan is to be administered by our board of
directors, which shall determine: (i) the persons to be granted Stock Options
under the Stock Option Plan; (ii) the number of shares subject to each option,
the exercise

---

- 37 -

price of each Stock Option; and (iii) whether the Stock Option
shall be exercisable at any time during the option period of ten (10) years or
whether the Stock Option shall be exercisable in installments or by vesting
only. The Stock Option Plan provides authorization to our board of directors to
grant Stock Options to purchase a total number of shares of our common stock,
not to presently exceed 1,200,000 shares of common stock as at the date of
adoption by our board of directors of the Stock Option Plan. At the time a Stock
Option is granted under the Stock Option Plan, our board of directors shall fix
and determine the exercise price at which shares of our common stock may be
acquired; provided, however, that any such exercise price shall not be less than
that permitted under the rules and policies of any stock exchange or
over-the-counter market which is applicable to us.

In the event an optionee who is one of our directors or
officers ceases to serve in that position, any Stock Option held by such
optionee generally may be exercisable within up to ninety (90) calendar days
after the effective date that his position ceases, and after such 90-day period
any unexercised Stock Option shall expire. In the event an optionee who is one
of our employees or consultants ceases to be employed by us, any Stock Option
held by such optionee generally may be exercisable within up to sixty (60)
calendar days (or up to thirty (30) calendar days where the optionee provided
only investor relations services to the Company) after the effective date that
his employment ceases, and after such 60- or 30-day period any unexercised Stock
Option shall expire.

No Stock Options granted under the Stock Option Plan will be
transferable by the optionee, and each Stock Option will be exercisable during
the lifetime of the optionee subject to the option period of ten (10) years or
limitations described above. Any Stock Option held by an optionee at the time of
his death may be exercised by his estate within one (1) year of his death or
such longer period as the board of directors may determine.

Unless restricted by the option agreement, the exercise price
shall by paid by any of the following methods or any combination of the
following methods: (i) in cash; (ii) non-forfeitable, unrestricted or restricted
shares of common stock, which are already owned by the optionee and have a
market referenced value at the time of exercise that is equal to the Option
price; (iii) any other legal consideration that the board of directors may deem
appropriate, including without limitation any for of consideration authorized on
such basis as our board of directors may determine in accordance with the Stock
Option Plan; and (iv) any combination of the foregoing. Our board of directors
in its sole discretion may permit a so-called cashless exercise (net exercise
of the Stock Options).

The Stock Option Plan further provides that, subject to the
provisions of the Stock Option Plan and prior shareholder approval, our board of
directors may grant to any of our key personnel who is an employee eligible to
receive options one or more incentive stock options to purchase the number of
shares of our common stock allotted by the board of directors (the Incentive
Stock Options). The option price per share of our common stock deliverable upon
the exercise of an Incentive Stock Option shall be no less than fair market
value of a share of our common stock on the date of grant of the Incentive Stock
Option. In accordance with the terms of the Stock Option Plan, fair market
value of the Incentive Stock Option as of any date shall not be less than the
closing price for the shares of our common stock on the last trading day
preceding the date of grant. The option term of each Incentive Stock Option
shall be determined by our board of directors, which shall not commence sooner
than from the date of grant and shall terminate no later than ten (10) years
from the date of grant of the Incentive Stock Option, subject to possible early
termination as described above.

Performance Stock Incentive Plan

On March 6, 2006, our board of directors, pursuant to unanimous
consent, approved the adoption of a performance stock incentive plan  2006 (the
Performance Stock Incentive Plan) with an effective date of March 1, 2006 (the
Effective Date), pursuant to which shares of our restricted common stock will
be allocated and issued into escrow in the record name of certain officers,
directors and/or employees/consultants as incentives at an original issue price
of $0.001 par value per share (the Escrowed Performance Shares). The board of
directors deemed adoption and approval of the Performance Stock Incentive Plan
to be in our best interests and those interests of our shareholders based upon
an analysis of several factors including, but not limited to the following: (i)
to retain and attract the best available personnel as our directors, management,
advisers and consultants of the Company (the Participants) to enhance the
continued successful performance to date of our operational business plan by
management; (ii) to create inducements and incentives for the Participants based
on achievement of certain performance criteria to encourage maximization of our
further operational success and growth, thus creating substantial value for our
shareholders; (iii) to provide our management with a measure of control to
ensure continuity and successful future performance of

---

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our operational business plan goals; and (iv) to simultaneously
create combined operational efficiency of incentives for our management and
enhancement of our capital by associated realization costs. Based upon the terms
and provisions of the Performance Stock Incentive Plan:

| | (i)   | an aggregate of 700,000 Escrowed Performance Shares can
      be purchased pro-rata from escrow by a participant (the Participant) at
      a price of $2.50 per share commencing one year from the Effective Date for
      up to five years;                                                                                                                                                                                                                                                     
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (ii)  | an aggregate of 900,000 Escrowed Performance Shares can
      be purchased pro-rata from escrow by a Participant at a price of $5.00 per
      share on or before the first three years after the Effective Date, if our
      assets increase by 50%, the market share price of our common stock
      achieves a minimum of $6.25, and our financial statements reflect a
      minimum $3,000,000 profit before taxes, depletion, amortization and stock
      based compensation charges;        
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (iii) | an aggregate of 1,200,000 Escrowed Performance Shares can
      be purchased pro-rata from escrow by a Participant at a price of $6.25 per
      share on or before the first five years after the Effective Date, if our
      assets increase by 100%, the market share price of our common stock
      achieves a minimum of $10.00, and our financial statements show a minimum
      $6,000,000 profit before taxes, depletion, amortization and stock based
      compensation charges;        
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (iv)  | an aggregate of 1,500,000 Escrowed Performance Shares can
      be purchased pro-rata from escrow by a Participant at a price of $7.50 per
      share on or before the first seven years after the Effective Date, if our
      assets increase by 200%, the market share price of our common stock
      achieves a minimum of $15.00, and our financial statements show a minimum
      of $9,000,000 profit before taxes, depletion, amortization and stock based
      compensation charges; and
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (v)   | an aggregate of 1,700,000 Escrowed Performance Shares can
      be purchased pro-rata from escrow by a Participant at a price of $10.00
      per share on or before the termination date, if our assets increase by
      400%, the market share price of our common stock achieves a minimum of
      $20.00, and our financial statements show a minimum of $15,000,000 profit
      before taxes, depletion, amortization and stock based compensation
      charges.                            

The Escrowed Performance Shares shall participate as to all the
rights of a shareholder, including voting rights, except that until earned and
paid from escrow, the Escrowed Performance Shares shall not participate in
dividends, assets or other distributions. The Escrowed Performance Shares can be
purchased by the Participant: (i) cash; (ii) shares of common stock which are
already owned by the participant and have an aggregate market referenced value
as determined by the board; (iii) any other legal consideration that the board
may deem appropriate; and (iv) a cashless exercise based upon a certain formula.
Any Escrowed Performance Shares not earned during the specified time frame set
forth above may be carried forward. At termination of the Performance Stock
Incentive Plan, all Escrowed Performance Shares not earned will be cancelled and
returned to treasury.

On July 18, 2006, our board of directors, pursuant to unanimous
consent, approved the adoption of an Equity Incentive Plan (the EIP), that
provides for the granting of specific awards (the Awards), whereby the maximum
aggregate number of shares of our common stock that may be issued and sold under
all Awards granted under the EIP shall be equal to 20% of the issued and
outstanding common stock (on a fully diluted basis) on the date of any
particular grant. To date we have registered 2,000,000 common shares under a
Form S-8 Registration Statement filed with the United States Securities and
Exchange Commission under the EIP. Additionally, during 2007 we granted a total
of 4,765,000 options at prices ranging from $0.25 to $0.57 and a total of
3,885,000 stock appreciation rights (SARs) at prices ranging from $0.35 to
$0.50 under the EIP. During 2007, 3,157,822 SARs were exercised for a total
amount of proceeds due by us to the grantees of $2,248,500, those amounts of
which were used to offset the costs associated with the exercise of 2,707,822
options. We are committed during 2008 to grant to officers, directors and senior
management of our company an aggregate 3,275,000 options and 3,275,000 SARs.
Over the course of the remaining terms of contracts entered into by us for
specific officers and senior management, we are committed to grant 16,575,000
options and 16,575,000 SARs inclusive of the 2008 commitments described above.

---

- 39 -

Item
11.         Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters.

Beneficial Ownership

We have set forth in the following table certain information
regarding our shares of common stock beneficially owned as of March 17, 2008
for: (i) each shareholder we know to be the beneficial owner of 5% or more of
shares of our common stock; (ii) each of our executive officers and directors;
and (iii) all executive officers and directors as a group. Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person, we
have included shares for which the named person has sole or shared power over
voting or investment decisions. Except as otherwise noted below, the number of
shares beneficially owned includes common stock which the named person has the
right to acquire, through conversion or option exercise, or otherwise, within 60
days after March 31, 2008. Beneficial ownership calculations for 5% stockholders
are based solely on publicly filed Schedule 13Ds or 13Gs, which 5% stockholders
are required to file with the Securities and Exchange Commission. As of March
31, 2008, we had 28,623,391 common shares issued and outstanding.

To the best of our knowledge, there are no voting arrangements
with any of our other shareholders.

Name and Address of Beneficial Owner
      Amount and Nature ofBeneficial
      Ownership
      Percentageof
      Class(1)Sacha H. Spindler c/o 2703  550 Pacific
      Street Vancouver, BC V6Z 3G2
    7,124,262(2)common shares
    24.9%Soumitra (Sam) Sen c/o 2703  550 Pacific
      Street Vancouver, BC V6Z 3G2
    2,670,000(3)common shares
    9.3%Justin Perryman 21720 Kingsland Blvd.
      Suite 30 Katy, Texas 77450-2513
    773,898(4)common shares
    2.7%Directors and Executive Officers as a Group
    10,568,160(5)common shares
    36.9%


(1) ****Based
on 28,623,391 shares of common stock issued and outstanding as of March 31,
2008. Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Except as otherwise indicated, we believe that the beneficial owners of the
common stock listed above, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.

(2) ****This
figure includes: (i) 3,602,262 shares of common stock, of which 3,000,000 shares
are Escrowed Performance Shares subject to the terms and provisions of the
Performance Stock Incentive Plan; (ii) the assumption of the exercise of 152,000
Stock Options into 152,000 shares of common stock; (iii) 2,870,000 restricted
shares of common stock held by GT Venture Management, AG, a company wholly-owned
by Sacha Spindler; and (iv) the assumption of the exercise of 500,000 Warrants
into 500,000 restricted shares of common stock.

(3) ****This
figure includes 1,200,000 shares which are Escrowed Performance Shares subject
to the terms and provisions of the Performance Stock Incentive Plan.

---

- 40 -

(4)****This
figure includes 400,000 shares which are Escrowed Performance Shares subject to
the terms and provisions of the Performance Stock Incentive Plan and the
assumption of the exercise of 100,000 Stock Options into 100,000 restricted
shares of common stock.

(5)****This
figure includes: (i) 10,016,160 restricted shares of common stock, of which
4,800,000 shares are Escrowed Performance Shares subject to the terms and
provisions of the Performance Stock Incentive Plan; (ii) the assumption of the
exercise of 392,000 Stock Options into 392,000 shares of common stock and; (iii)
the assumption of the exercise of 500,000 warrants into 500,000 restricted
shares of common stock.

Changes in Control

We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.

Item
12.         Certain Relationships
and Related Transactions, and Director Independence..

Except as described below, no director, executive officer,
principal shareholder holding at least 5% of our common shares, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction, during the year ended December 31, 2007,
in which the amount involved in the transaction exceeded or exceeds the lesser
of $120,000 or one percent of the average of our total assets at the year end
for the last three completed fiscal years.

During the year ended December 31, 2007, management fees of
$360,000 (2006: $265,866) were incurred to a private company controlled by a
director and officer of our company. Our company is committed to pay this party
$30,000 in management fees per month. In May 2007, this director and officer
converted $3,000 of unpaid fees into 3,000,000 Series A preferred shares. In
June 2007, this director and officer converted $140,000 of unpaid fees into a
private placement consisting of 560,000 units at $0.35 per unit. In December
2007, this director and officer exercised 1,350,000 stock appreciation rights
which resulted in $950,000 owing to this director and officer. We settled this
debt by issuing 1,250,000 common shares for the exercise of 1,250,000 stock
options at $0.50, 100,000 common shares for the exercise of 100,000 stock
options at $0.45, and 560,000 common shares for the exercise of 560,000 share
purchase warrants at $0.50. At December 31, 2007 this party is owed $44,181 by
our company (December 31, 2006: $105,162 was owed by our company). The agreement
with this party can be terminated by our company at any time by providing 60
days written notice. Upon termination of the agreement, we are required to pay
this party severance of 24 months of monthly fees within 10 business days of the
termination date plus an additional severance cash payment equating to the value
of 5% of the Gross Market Capital Increase in our company from January 1, 2007
until the date of the termination of this agreement.

During the year ended December 31, 2007, consulting fees of
$7,900 (2006: $18,000) were incurred to a director of our company. In May 2007,
this director converted $200 of unpaid fees into 200,000 Series A preferred
shares. On August 22, 2007, this director resigned, no severance fees were paid
and none are owed. At December 31, 2007, this director is owed $Nil (December
31, 2006: $1,000) for unpaid fees. Pursuant to the terms of a Shareholders
Agreement entered into between this director and the Company related to the
issuance of the Series A preferred shares, subsequent to the resignation of this
director, 200,000 Series A preferred shares have been returned to the Companys
treasury and cancelled

During the year ended December 31, 2007, management fees of
$216,000 (2006: $120,000) were incurred to an officer and director of the
Company, of which $13,500 was allocated to discontinued operations for work
relating to the US oil and gas properties. The Company is committed to pay this
party $18,000 in management fees per month. In May 2007, this officer converted
$1,200 of unpaid fees into 1,200,000 Series A preferred shares. In June 2007,
this party converted $30,000 of unpaid fees into a private placement consisting
of 120,000 units at $0.25 per unit. In December 2007, this party exercised
750,000 stock appreciation rights which resulted in $525,000 owing to this
party. The Company settled this debt by issuing 750,000 common shares for the
exercise of 750,000 stock options at $0.50, 120,000 common shares for the
exercise of 120,000 share purchase warrants at $0.50 and the issuance of 75,000
common shares for the remaining $90,000. At December 31, 2007, this party is
owed $98,300 (2006: $20,500) for unpaid management fees. This agreement can be
terminated by the Company at any time by providing

---

- 41 -

60 days written notice. Upon termination of the agreement, the
Company is required to pay this party severance of 6 months of monthly fees
within 10 business days of the termination date.

During the year ended December 31, 2007, management fees of
$66,000 (2006: $64,000) were incurred to an officer of our company. At December
31, 2007, this officer is owed $7,500 (December 31, 2006: $Nil) for management
fees due. Our company is committed to pay this officer $5,500 in management fees
per month. This agreement can be terminated by our company at any time by
providing 30 days written notice. On January 24, 2008, this officer resigned but
agreed to remain as a consultant until we found a suitable replacement.

During the year ended December 31, 2007, consulting fees of
$7,500 (2006: $30,000) were incurred to a relative of a director of our company.
In June 2007, this consultant converted $30,000 of unpaid fees into a private
placement consisting of 120,000 units at $0.35 per unit. At December 31, 2007,
this individual is owed $Nil (December 31, 2006: $22,500) for consulting fees
due. This consulting agreement expired on March 31, 2007 and no further fees are
due.

During the year ended December 31, 2007, consulting fees of
$9,000 (2006: $NIL) plus a bonus of $45,000 (2006: $7,000) were incurred to a
director of our company. In May 2007, this director converted $400 of unpaid
fees into 400,000 Series A preferred shares. In June 2007, this director
converted $45,000 of unpaid fees into a private placement consisting of 180,000
units at $0.35 per unit. At December 31, 2007, this director is owed $2,600
(December 31, 2006: $Nil) for unpaid fees. Our company is committed to pay this
director $1,000 per month. This agreement can be terminated by our company at
any time by providing 30 days written notice.

Corporate Governance

We currently act with two (2) directors, consisting of Sacha
Spindler and Justin Perryman.

We have determined that Justin Perryman is an independent
director, as that term is used in Rule 4200(a)(15) of the Rules of NASDAQ Market
Place Rules.

Currently our audit committee consists of our entire board of
directors. We currently do not have nominating, compensation committees or
committees performing similar functions. There has not been any defined policy
or procedure requirements for shareholders to submit recommendations or
nomination for directors.

Audit Committee Financial Expert

Our board of directors has determined that it does not have a
member of its audit committee who qualifies as an audit committee financial
expert as defined in Item 407(d)(5)(ii) of Regulation S-B, and is independent
as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities
Exchange Act of 1934, as amended.

From inception to present date, we believe that the members of
our audit committee and the board of directors have been and are collectively
capable of analyzing and evaluating our financial statements and understanding
internal controls and procedures for financial reporting.

---

- 42 -

Item
13.         Exhibits.

Exhibits required by Item 601 of Regulation S-B

Exhibit Number and Exhibit Title

|(3)  | Articles of Incorporation and Bylaws                                                                                                                                                                                                                                                                           
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                
|3.1  | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form 10-SB filed on March 18, 1999).                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                
|3.2  | Bylaws (incorporated by reference from our Registration
      Statement on Form 10-SB filed on March 18, 1999).                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                
|3.3  | Articles of Merger filed with the Secretary of State of
      Nevada on August 31, 2006 (incorporated by reference from our Current
      Report on Form 8-K filed on September 12, 2006).                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                
|3.4  | Certificate of Change filed with the Secretary of State
      of Nevada on August 31, 2006 (incorporated by reference from our Current
      Report on Form 8-K filed on September 12, 2006).                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                
|3.5  | Certificate of Amendment to Articles of Incorporation
      filed with the Secretary of State of the State of Nevada on November 21,
      2006 (incorporated by reference from our Current Report on Form 8-K filed
      on December 4, 2006).                                                               
|     |                                                                                                                                                                                                                                                                                                                
|(10) | Material Contracts                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                
|10.1 | 2004 Stock Option Plan for Petrogen Corp. (incorporated
      by reference from our Annual Report on Form 10-KSB filed on April 14,
      2005)                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                
|10.2 | Amended Management Consulting Services Agreement among
      Petrogen Corp., Petrogen, Inc. and Sacha Spindler dated for reference
      effective February 12, 2003, executed effective August 18, 2003.
      (incorporated by reference from our Annual Report on Form 10-KSB filed on
      April 14, 2005)
|     |                                                                                                                                                                                                                                                                                                                
|10.3 | Purchase and Sale Agreement among Pluris Energy Group
      Inc., Petrogen Inc. and Darcy Energy LLC effective December 31, 2006
      (incorporated by reference from our Annual Report on Form 10-KSB filed on
      April 17, 2007)                                                                         
|     |                                                                                                                                                                                                                                                                                                                
|10.4 | Letter-in-Lieu of Transfer Order among Petrogen, Inc.,
      Darcy Energy LLC and Shoreline Gas Marketing Inc. dated March 7, 2007
      (incorporated by reference from our Annual Report on Form 10-KSB filed on
      April 17, 2007)                                                                       
|     |                                                                                                                                                                                                                                                                                                                
|10.5 | Notification Letter among Petrogen, Inc., Darcy Energy
      LLC and Northern Natural Gas Company dated March 7, 2007 (incorporated by
      reference from our Annual Report on Form 10-KSB filed on April 17, 2007)                                                                                          
|     |                                                                                                                                                                                                                                                                                                                
|10.6 | Assignment of Oil, Gas & Mineral Leases (incorporated
      by reference from our Annual Report on Form 10- KSB filed on April 17,
      2007)                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                
|10.7 | Consulting Agreement dated effective January 1, 2007 with
      GT Management AG (incorporated by reference from our Quarterly Report on
      Form 10-QSB filed on May 21, 2007)                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                
|10.8 | Consulting Agreement dated effective January 1, 2007 with
      Soumitra Sam Sen (incorporated by reference from our Quarterly Report on
      Form 10-QSB filed on May 21, 2007)                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                
|10.9 | Consulting Agreement dated effective January 1, 2007 with
      Brian Fiddler (incorporated by reference from our Quarterly Report on Form
      10-QSB filed on August 17, 2007)                                                                                                                              

---

- 43 -

|10.10 | Equity Incentive
        Plan dated effective July 18, 2007 (incorporated by reference from our
        Registration Statement on Form S-8 filed on July 18, 2007)                                                                                                                                                                                                                  
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|10.11 | Form of Subscription
        Agreement for Series A Preferred Shares with Soumitra Sam Sen, Timothy
        Russell, Sacha Spindler and Justin Perryman (incorporated by reference
        from our Quarterly Report on Form 10-QSB filed on August 17, 2007)                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|10.12 | Form of Debt
        Settlement Agreement with Peter Jensen and Devlin Jensen Law Firm (incorporated
        by reference from our Quarterly Report on Form 10-QSB filed on August
        17, 2007)                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|10.13 | Form of Subscription
        Agreement with GT Venture Management, AG, Frontline Capital Corporation,
        Rasmus Trading, SA, Justin Perryman, Soumitra Sam Sen and Homeland Enterprises
        Corp. (incorporated by reference from our Quarterly Report on Form 10-QSB
        filed on August 17, 2007)                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|10.14 | Consulting Agreement
        with KJM Capital Corporation (incorporated by reference from our Quarterly
        Report on Form 10-QSB filed on August 17, 2007)                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|10.15 | Form of Stock
        Option Agreement with Frontline Capital Corporation, KJM Capital Corporation,
        Alison M. Muir, Rasmus Trading Inc., Soumitra Sam Sen, Timothy G. Russell,
        GT Venture Management, AG, Sacha Spindler and Justin Perryman (incorporated
        by reference from our Quarterly Report on Form 10-QSB filed on August
        17, 2007)          
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|10.16 | Form of Stock
        Appreciation Rights Agreement with KJM Capital Corporation, Frontline
        Capital Corporation, Alison M. Muir, Rasmus Trading Inc., Soumitra Sam
        Sen, Timothy Russell, GT Venture Form 10-QSB filed on August 17, 2007)
        Management, AG, Sacha Spindler and Justin Perryman (incorporated by reference
        from our Quarterly Report on
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|(14)  | Code of Ethics                                                                                                                                                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|14.1  | Code of Business
        Conduct and Ethics (incorporated by reference from our Current Report
        on Form 8-K filed on May 26, 2005).                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|(21)  | Subsidiaries                                                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|      | Petrogen, Inc.,
        a Colorado company                                                                                                                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|      | Pluris Energy
        Group Inc., a British Virgin Islands company                                                                                                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|(31)  | Section 302
        Certifications                                                                                                                                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|31.1  | Section
        302 Certification of the Sarbanes-Oxley Act of 2002 of Sacha Spindler.                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|(32)  | Section 906
        Certification                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                     
|32.1  | Section
        906 Certification of the Sarbanes-Oxley Act of 2002 of Sacha Spindler.                                                                                                                                                                                                                                                                                              

Item
14.         Principal Accountant
Fees and Services.

Audit Fees

The aggregate fees billed by Dale Matheson Carr-Hilton LaBonte
LLP for professional services rendered for the audit of our annual financial
statements for review of our quarterly interim financial statements and in
connection

---

- 44 -

with statutory and regulatory filings were approximately
$70,320 for the year ended December 31, 2007 and $62,450 for the year ended
December 31, 2006. This category also includes the review of interim financial
statements and services in connection with registration statements and other
filings with the Securities and Exchange Commission.

Audit Related Fees

For the year ended December 31, 2007, Dale Matheson Carr-Hilton
LaBonte LLP billed $Nil for fees relating to the performance of the audit of our
financial statements which are not reported under the caption Audit Fees above
and $nil for the year ended December 31, 2006.

Tax Fees

For the year ended December 31, 2007, Dale Matheson Carr-Hilton
LaBonte LLP billed $Nil, for fees for tax compliance, tax advice and tax
planning services and $nil for the year ended December 31, 2006.

We do not use Dale Matheson Carr-Hilton LaBonte LLP for
financial information system design and implementation. These services, which
include designing or implementing a system that aggregates source data
underlying the financial statements or generates information that is significant
to our financial statements, are provided internally or by other service
providers. We do not engage Dale Matheson Carr-Hilton LaBonte to provide
compliance outsourcing services.

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Dale Matheson Carr-Hilton LaBonte LLP is
engaged by us to render any auditing or permitted non-audit related service, the
engagement be:

- approved by our audit committee; or
- entered into pursuant to pre-approval policies and procedures established
  by the board of directors, provided the policies and procedures are detailed
  as to the particular service, the board of directors is informed of each
  service, and such policies and procedures do not include delegation of the
  board of directors' responsibilities to management.

Our audit committee pre-approves all services provided by our
independent auditors. All of the above services and fees were reviewed and
approved by the audit committee either before or after the respective services
were rendered.

The audit committee has considered the nature and amount of fees
  billed by Dale Matheson Carr-Hilton LaBonte LLP and believes that the provision
  of services for activities unrelated to the audit is compatible with maintaining
  Dale Matheson Carr-Hilton LaBonte LLPs independence.

---

- 45 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

PLURIS ENERGY GROUP INC.

By: /s/ Sacha Spindler Sacha H. Spindler CEO, Chairman
and Director Principal Executive Officer and Principal Financial Officer
and Principal Accounting Officer)

Date: April 15, 2008.

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

By: /s/ Sacha Spindler Sacha H. Spindler CEO, Chairman
and Director Principal Executive Officer and Principal Financial Officer
and Principal Accounting Officer)

Date: April 15, 2008.

By: /s/ Justin Perryman Justin Perryman Director

Date: April 15, 2008.

---