**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
        10-KSB/A**





**For
      Annual and Transition Reports pursuant to Section 13 or 15(d) of
      the**


**Securities
      Exchange Act of 1934 (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, 2005**





o
            **Transition
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**






**Commission
      File Number 1-11248**





**SUNRISE
      ENERGY RESOURCES, INC.**


(Name
      of
      Registrant as specified in its charter)





**Delaware**
            
            **84-0938688**(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification Number)





551
                Fifth Avenue, Suite 601New
                York, New York
            
            10017(Address
                of principal executive office)
            
            (Zip
                Code)




**Registrant’s
      telephone number, including area code: (212) 973-0063**




Securities
      registered pursuant to Section 12(b) of the Act: None




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




Check
      weather the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act o




Note
      -
      Checking the box above will not relieve any registrant required to file reports
      pursuant to Section 13 or 15(d) of the Exchange Act from their obligations
      under
      those Sections.




SEC
                2337 (12-05)
            **Persons
                who are to respond to the collection of information contained in
                this form
                are not required to respond unless the form displays a currently
                valid OMB
                control number.**




Check
      whether the Registrant (1) has filed all reports required to be filed by Section
      13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
      months (or for such shorter period that the Registrant was required to file
      such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes x No o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not 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-K or any amendment to
      this
      Form 10-K. o







1




Indicate
      by check mark weather the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x




State
      issuer’s revenues for its most recent fiscal year: $1,762,631




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates as of March 27, 2006 within past 60 days:
      $16,474,573.





As
      of
      March 27, 2006, the Registrant had 17,161,014 shares of common stock issued
      and
      outstanding, or committed for issuance, of which, issuance of 10,640,914 and
      161,014 shares is subject to the closing of the transactions to acquire
      Registrant’s operating subsidiaries.




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




2





**SUNRISE
      ENERGY RESOURCES, INC.FORM**


**10-KSB**


**TABLE
      OF CONTENTS**





**Part
      I.**





Item
                1.
            
            Description
                of BusinessItem
                2.
            
            Description
                of PropertiesItem
                3.
            
            Legal
                ProceedingsItem
                4.
            
            Submission
                of Matters to a Vote of Security
                Holders




**Part
      II.**




Item
                5.
            
            Market
                for Common Equity and Related Stockholder
                MattersItem
                6.
            
            Management’s
                Discussion and Analysis of Financial
                Conditionand
                Results of OperationsItem
                7.
            
            Financial
                Statements and Supplementary DataItem
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting
                andFinancial
                DisclosureItem
                8a.
            
            Controls
                and Procedures




**Part
      III.**




Item
                9.
            
            Directors,
                Executive Officers, Promoters and Control
                PersonsItem
                10.
            
            Executive
                CompensationItem
                11.
            
            Security
                Ownership of Certain Beneficial Owners and
                Managementand
                Related Stockholders MattersItem
                12.
            
            Certain
                Relationships and Related
                TransactionsItem
                13.
            
            Principal
                Accountant Fees and Services




**Part
      IV.**




Item
                14.
            
            Exhibits,
                Financial Statement Schedules and Reports on Form
                8-KSignaturesCertifications




3
 *Table
            of Contents*




**PART
      I.**




**ITEM
                1.**
            **DESCRIPTION
                OF BUSINESS**




This
      Annual Report contains forward looking statements (as such term is defined
      in
      the Private Securities Litigation Reform Act of 1995). All statements, other
      than statements of historical fact, contained in this report are forward looking
      statements, including, without limitation, statements regarding the future
      financial position, business strategy, proposed acquisitions, budgets,
      litigation, projected costs and plans and objectives of or involving Sunrise
      or
      EP. Sunrise Shareholders can identify many of these statements by looking for
      words such as “believe”, “expects”, “will”, “intends”, “projects”,
“anticipates”, “estimates”, “continues” or similar words or the negative
      thereof. There can be no assurance that the plans, intentions or expectations
      upon which these forward looking statements are based will occur. Forward
      looking statements are subject to risks, uncertainties and assumptions,
      including those discussed elsewhere in this report. Although Sunrise believes
      that the plans, intentions and expectations represented in such forward looking
      statements are reasonable, there can be no assurance that such plans, intentions
      and expectations will prove to be correct. Some of the risks which could affect
      future results and could cause results to differ materially from those expressed
      in the forward looking statements contained herein include: risks inherent
      in
      the future prices for oil and natural gas, political and regulatory risks,
      risks
      inherent in currency exchange rates, risks inherent in the prices for services
      and government fiscal regimes and the risk that actual results will vary from
      the results forecasted and such variations may be material.




The
      information contained in this report, including the information set forth under
      “Risk Factors”, identifies additional factors that could affect the operating
      results and performance of Sunrise. We urge you to carefully consider those
      factors.




The
      forward looking statements contained herein are expressly qualified in their
      entirety by this cautionary statement. The forward looking statements included
      in this Report are made as at the date of this Annual Report and Sunrise
      undertakes no obligation to publicly update such forward looking statements
      to
      reflect new information, subsequent events or otherwise.




As
      used
      in this annual report, the terms "we", "us", "our", "Company" and "Sunrise"
      means Sunrise Energy Resources, Inc. and its consolidated subsidiary, unless
      otherwise indicated.




All
      dollar amounts refer to US dollars unless otherwise indicated.




The
      following discussion should be read in conjunction with our financial statements
      and the related notes that appear elsewhere in this annual report.




**COMPANY
      OVERVIEW**




Sunrise
      Energy Resources, Inc. (“Sunrise” or the “Company”) was incorporated in the
      State of Delaware on April 1 1991. We are engaged in the development and
      production of oil and gas properties. Our business activities are primarily
      conducted in Ukraine and our primary oil and gas property is located in Kharkov
      Region. Our activities on the property are governed by License number 2489
      issued by the Ukrainian State Licensing Agency, on July 2, 2004 for a period
      of
      5 years, which is further subject to the fulfillment of the license agreement
      investment terms. In addition to the above mentioned license, in 2004 we were
      granted License Number 2581 and License Number 2507 for the
      exploration and development of the Rogan and Rakitnyansk sites for a period
      of 5
      years. During 2005 we have conducted a series of geological tests on the new
      licenses awarded to EP in order to establish the most efficient development
      scenario.




All
      of
      the operating activities of Sunrise Energy Resources Inc. are conducted through
      its wholly owned subsidiary, TOV Energy-Servicing Company Esko Pivnich (“Esko
      Pivnich”), a Ukrainian Closed Joint Stock Company (CJSC) established on January
      20, 2000 under the laws of Ukraine. The primary business activities of Esko
      Pivnich are oil and gas exploration, production and distribution in the country
      of Ukraine. On October 4, 2004 Sunrise Energy Resources Inc. and certain
      stockholders of Sunrise Energy Resources Inc. entered into a Stock Purchase
      Agreement and Plan of Reorganization with the shareholders of Esko Pivnich
      (the
“Agreement”). Pursuant to the Agreement, Sunrise Energy Resources Inc. has
      acquired all of the outstanding common stock of Esko Pivnich, an oil and gas
      production and development company incorporated and operating in Ukraine. In
      addition, certain stockholders of Sunrise Energy Resources Inc. sold 5.0 million
      shares to shareholders of Esko Pivnich (“EP Shareholders”), and the Company also
      issued 10,479,900 shares to certain EP Shareholders. As a result of the
      transaction, Sunrise holds Esko Pivnich as a wholly-owned subsidiary and
      Company’s business focuses on oil and gas production and development in
      Ukraine.





4
 *Table
            of Contents*





On
      or
      about January 31, 2005, NetWest Securities Corp has filed with the NASD Form
      15c-211 and related information on behalf of the Company to act as a market
      maker for the Company’s securities. On or about May 23, 2005, Company’s common
      shares were approved for trading on the OTCBB under the symbol SEYR.




As
      of
      December 31, 2005, EP did not have any proved reserves as defined in Rule
      4-10(a) of Regulation S-X. Sunrise plans to engage an internationally recognized
      petroleum engineering once our properties are properly delineated to perform
      an
      independent valuation of the reserves in accordance with the above mentioned
      SEC
      guidelines.




On
      January 20, 2006, Sunrise Energy Resources, Inc. executed a share purchase
      agreement with the shareholders of Pari, Ltd. The board of directors of Sunrise
      Energy Resources, Inc. approved the transaction on February 9, 2006. At the
      time
      of Pari acquisition, the latter did not have any proved reserves as defined
      in
      Rule 4-10(a) of Regulation S-X..




**Availability
      of Reports**




Sunrise’s
      Annual Report on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current Reports
      on Form 8-K and amendments to those reports filed or furnished pursuant to
      Section 13 (a) or 15 (a) of the Securities Act of 1934 are available from the
      Securities and Exchange Commission and can be found on the SEC’s website at www.sec.gov .




**Strategy**




Our
      business strategy is to expand production of the Karaikozovsk’s property
      following the completion of workovers on the existing wells. In addition, we
      plan to drill two other wells on the property to increase production. We intend
      to continue conducting geological tests on the new licenses awarded to EP in
      order to establish the most efficient development scenario of the above
      properties. We intend to increase our reserves, production and cash flow through
      (a) the acquisition and development of oil and gas properties (b) exploring
      for
      new reserves on the existing properties; and (c) optimizing production and
      value
      from the existing reserve base.




**Drilling
      Activity**




During
      the 2005, EP carried out the necessary workovers on the existing Wells #2 and
      #3
      on the Karaikozovsk’s property and launching these wells into commercial
      production. In 2005 the Company entered into an agreement with
      Chernigivneftegazgeologia, a Ukrainian oil&gas engineering contractor to
      drill a new production Well #21. The anticipated construction costs of around
      US$1.2 million are expected to be financed out of the operating cashflow, vendor
      loans and bank loans.




**Customers**




During
      2005 EP produced approximately 39 MBBLS of crude oil, respectively. In addition,
      EP produced 59 MMCF of natural gas during 2005. In 2004, EP did not have any
      production due to the expiration of its previous development license, which
      was
      renewed in early 2005. The produced Oil & Gas were separated and primed to
      pipeline grade at Kachanozovskiy refinery and sold to end-buyers, which were
      mostly independent oil & gas traders.




**Competition**




The
      oil
& gas industry is highly competitive, and our future plans can be adversely
      affected by competition from larger and more established oil & gas
      companies. We compete for reserve acquisitions, exploration licenses,
      concessions and marketing agreements against companies with financial resources
      that may significantly exceed ours.




The
      Ukrainian government may take broad actions to overhaul the current oil &
gas regulations, which could allow the entry into the market of additional
      oil
& gas companies, thus increasing the current competition and changing the
      business climate. However, these changes would also allow EP to further develop
      its current properties as well as apply for additional licenses, while using
      our
      advantages of operating experience, distribution channels and qualified
      personnel to further advance our plans.




5
 *Table
            of Contents*




**Government
      Regulation**




Our
      operations are subject to various levels of governmental controls and
      regulations in the United States and in Ukraine.  We attempt to comply with
      all legal requirements in the conduct of our operations and employ business
      practices that we consider to be prudent under the circumstances in which we
      operate.  It is not possible for us to separately calculate the costs of
      compliance with environmental and other governmental regulation as such costs
      are an integral part of our operations.




In
      Ukraine legislation affecting the oil and gas industry is under constant review,
      and may be amended to address industry trends and governmental objectives. 
Pursuant to such legislation, various governmental departments and agencies
      have
      issued extensive rules and regulations that affect the oil and gas industry,
      some of which carry substantial penalties for failure to comply.  These
      laws and regulations can have a significant impact on the industry by increasing
      the cost of doing business and, consequentially, can adversely affect our
      profitability.  Inasmuch as new legislation affecting the industry is
      commonplace and existing laws and regulations are frequently amended or
      reinterpreted, we are unable to predict the future cost or impact of complying
      with such laws and regulations.




**Regulations
      Governing Ukrainian Companies**




Our
      operating subsidiary Esko Pivnich was organized in the form of a Closed Joint
      Stock Company (“CJSC”). Ukrainian CJSC companies are corporate entities with
      limited liability similar to that awarded to corporations formed under US law.
      Shareholders of Ukrainian joint stock companies are generally not liable for
      debts and obligations of the company. In limited liability companies, any
      transfer of shares by a shareholder to a third party is subject to the
      pre-emptive right of the other shareholders to acquire such shares at the price
      offered to a third party.




Under
      Ukrainian law, a simple majority of voting shares is sufficient to control
      adoption of most resolutions. Resolutions concerning amendment of the company’s
      charter, reorganizations (including mergers and/or acquisitions), liquidation,
      increase in authorized shares, and certain other “significant” transactions
      require the approval of the shareholders holding two thirds of the outstanding
      shares.




A
      Ukrainian limited liability company has no obligation to pay dividends to the
      holders of common shares. Any dividends paid to the shareholders must be
      recommended by the board of directors and subsequently approved by a majority
      vote of shareholders. If approved, dividends may be paid on a quarterly
      basis.




**Regulations
      Governing Ukrainian Production Sharing Agreements**




Production
      Sharing Agreements (PSA) in Ukraine are made between the State and a particular
      investor (normally an oil & gas company). According to such PSAs the State
      assigns to the investor the right to explore and extract mineral resources
      in
      the designated subsoil area(s) and to perform the works set forth in the
      agreement for a specified period of time. In return, the investor undertakes
      to
      perform the assigned works at its own cost and risk, with further compensation
      of the costs and receipt of payment (remuneration) in the form of a portion
      of
      the profit production.




The
      State
      guarantees to the investor the issuance, in compliance with established
      procedures, of approvals, quotas, permits (licenses) to use subsoil and carry
      out business activity associated with the proposed exploration deposits, acts
      for the provision of mining allocations, documents certifying the right to
      use
      the land, as well as other permits related to the use of subsoil, and
      performance of the works stipulated by the PSA.




Profit
      production (or “profit interest”) means the portion of the actual production
      which is shared between the investor and the State, and is defined as the
      difference between produced production and cost-recovery production, which
      is
      defined as portion of the produced production which is transferred to the
      Company for its ownership as reimbursement of its costs.




Title
      to
      all production produced under the agreement remains with the State until such
      time as the minerals are extracted and have been measured in accordance with
      the
      terms of the PSA. Once extracted and measured, the portion allocated to the
      Company is transferred to the Company and is lawfully owned by the
      Company.




The
      Company has the right to freely dispose of the portion of its allocated
      production pursuant to the terms and conditions set forth in the PSA, which
      include: to sell in Ukraine, export, exchange, transfer free of charge and
      perform any other operations with such production. Such production shall not
      be
      subject to licensing or quotas during export, or similar restrictions during
      its
      sale in the territory of Ukraine.




6
 *Table
            of Contents*




**Taxation
      in Ukraine**




As
      a
      Ukrainian resident entity, Esko Pivnich is subject to all applicable Ukrainian
      taxes, many of which currently impose a significant burden on profits. The
      most
      significant Ukrainian taxes and duties affecting Esko Pivnich
      include:




1.20%
      value added tax,
      applicable only to domestic sale of goods in Ukraine. No value added tax is
      payable for goods exported to the West from Ukraine and denominated in foreign
      currency.




2.25%
      income tax which
      includes 6% federal income tax, 17% regional income tax and 2% local income
      tax;




3.Withholding
      tax on
      dividends payable to Sunrise Energy Resources Inc as the overseas shareholder
      of
      Esko Pivnich. The tax must be withheld by Esko Pivnich from any amount
      distributed to Sunrise Energy Resources Inc. The current rate of withholding tax
      on dividends payable to corporate foreign shareholders is 15%. However, such
      dividends are subject to and must be made in accordance with regulations
      contained in the United States - Ukraine tax treaty which limits the tax on
      dividends payable to Sunrise to 5% (as long as Sunrise holds more than a 10%
      interest in Esko Pivnich);




4.A
      number of payroll
      related taxes and duties, such as Statutory Pension Fund, Social Insurance
      Fund,
      Unemployment Fund, and Emergency Insurance Fund. The official rates applicable
      to the respective funds in 2005 and in the nearest future are set out
      below:





**Name**
            
            **%
                rate accrued on the net payroll and payable by the
                Company**
            
            **%
                rate accrued on the total payroll and payable by the
                employee**Statutory
                Pension Fund
            
            
            32.3
            %
            
            2.0
            %Social
                Insurance Fund
            
            
            2.90
            %
            
            1.0
            %Unemployment
                Fund
            
            
            1.60
            %
            
            0.5
            %Emergency
                Insurance Fund
            
            
            2.62
            %
            
            0.5
            %Personal
                Income Tax
            
            
            --
            
            
            13.0
            %**Total
                payable**
            
            
            **39.42**
            **%**
            
            **17.0**
            **%**





5.At
      present, three main
      taxes are levied on extracted oil and gas in Ukraine. While the rates and
      computation technique underwent certain changes during 2002-2006, the applicable
      rates during 2005 were as follows:





**Name**
            
            **Rate
                per 1 Bbl accrued on the total produced OIL**
            
            **Rate
                per 1 MCF accrued on the total produced GAS**Exploration
                Tax
            
            $
            15.0
            
            $
            0.02Mineral
                Resource Tax
            
            $
            0.67
            
            $
            0.05Mineral
                Usage Tax
            
            $
            0.27
            
            $
            0.01**Total**
            
            **$**
            **15.94**
            
            **$**
            **0.08**





The
      Ukrainian tax system is undergoing a major review. New tax laws, including
      those
      applicable to value-added tax and income tax, were introduced and/or reviewed
      in
      the last four years. The cost of legal and accounting advice attributable to
      keeping up with changes in the Ukrainian tax laws has been steadily increasing.
      Similarly, penalties for violations, even inadvertent ones, have also gradually
      increased over the above-mentioned period. These and other regulations could
      affect our profitability and the amounts charged to us on
      production.




**Offices
      and Employees**




Sunrise
      Energy Resource, Inc. carries its operations in the United States from its
      headquarters located in New York City at 551 Fifth Avenue, Suite 601, New York,
      NY 10017. EP’s offices in Ukraine are located at the following address: 10a
      Ryleeva St., Kiev, Ukraine. The Company currently has 46 full time employees,
      the majority of which are located in Ukraine with the remaining personnel
      located in Sunrise offices in New York.




7
 *Table
            of Contents*




**Risk
      Factors**




The
      following offers a brief overview of some of the risk factors to be considered
      in relation to the business of Sunrise, including its related subsidiaries.
      Specific risk factors to be considered include, but are not limited to, the
      following:




*Risks
      and Issues Associated with Sunrise*




An
      investment in Sunrise is highly speculative, involves a considerable degree
      of
      risk and is suitable only for persons or entities which have very substantial
      financial means and who can afford to hold their ownership interests for an
      indefinite period of time. While various oil and gas investment opportunities
      are abundant, potential investors should consider the risks that pertain to
      oil
      and gas development projects in general, and ventures in Ukraine in
      particular.




*Technical
      Risk*




Return
      on
      investment is dependent upon successful oil and gas production from EP’s
      projects. Sunrise may experience a revenue decrease due to overestimation of
      reserves and oil or gas production profiles or higher capital costs or operating
      costs. However, the opposite may occur if reserves or production profiles are
      underestimated or if the costs are less than forecast. Sunrise may also suffer
      reduced revenues because of product transportation difficulties, or project
      delays, neither of which are foreseen. The reserve data set forth in this Annual
      Report, including the Statement of Reserves, is believed to represent only
      the
      most reliable estimates currently available. Estimation of reserves is
      inherently inexact and the accuracy of any reserve estimate is a function of
      the
      quality of available data, engineering and geological interpretation, judgment,
      production projections, maintenance and development capital, and other
      uncertainties inherent in estimating quantities of recoverable oil and gas.
      Thus, there can be no guarantee that estimates of the quantities of oil and
      gas
      disclosed in the Statement of Reserves will be produced.




*Market
      risk*




In
      the
      event of successful development of additional oil and gas reserves, the
      marketing of Sunrise’s production of oil and gas from such reserves may be
      dependent on market fluctuations and the availability of processing and refining
      facilities and transportation infrastructure, including access to shipping
      facilities, pipelines and pipeline capacity at economic tariff rates over which
      Sunrise may have limited or no control. Pipelines may be inadequately maintained
      and subject to capacity constraints and economic tariff rates may be increased
      with little or no notice and without taking into account producer concerns.
      In
      addition, EP’s ability to export oil and gas may depend on obtaining licenses
      and quotas, the granting of which may be at the discretion of the relevant
      regulatory authorities. There may be delays in obtaining such export licenses
      and quotas leading to the income receivable by Sunrise from the export of oil
      and gas being adversely affected




We
      may
      require significant time to achieve positive cash flow from operations. Until
      such time we will rely almost exclusively on external equity and debt financing
      to service our working capital and capital expenditure requirements including
      but not limited to approximately $4 million that will need to be raised in
      2006
      to meet the workover costs and new well drilling.  The
      Company undertook significant efforts to raise the above financing in 2005
      and
      expects that the financing will be raised during the first half of
      2006.




*Reliance
      on strategic relationships*




In
      conducting its business, Sunrise will rely on continuing existing strategic
      relationships and forming new ones with other entities in the oil and gas
      industry, such as joint venture parties and certain regulatory and governmental
      departments **.** There
      can
      be no assurance that its existing relationships will continue to be maintained
      or that new ones will be successfully formed. Sunrise’s existing assets in
      Ukraine are subject to agreements with Ukrnafta and the PSA for the Karaikozovsk
      field.




*Well
      Concentration*




The
      majority of EP’s production comes from its interests in a very small number of
      oil and gas producing wells. This situation is expected to continue during
      2006.
      Under EP’s development plans for the Karaikozovsk field, well concentration is
      expected to reduce significantly in 2006 and thereafter. While EP’s production
      remains concentrated from a relatively small number of wells, the loss or
      long-term disabling of any one well could have a material adverse affect on
      Sunrise’s overall production.




8
 *Table
            of Contents*




*Competition*




A
      number
      of other oil and gas companies operate, and are allowed to bid for exploration
      and production licenses and other services, in Ukraine and other countries
      in
      which Sunrise may operate in the future, thereby providing competition to EP.
      Larger companies, in particular, may have access to greater resources than
      Sunrise which may give them a competitive advantage.




*Prices
      for oil and gas*




The
      demand for, and price of, oil and gas is highly dependent on a variety of
      factors, including international supply and demand, the level of consumer
      demand, weather conditions, the price and availability of alternative fuels,
      actions taken by governments and international cartels, and global economic
      and
      political developments. International oil prices have fluctuated widely in
      recent years and may continue to fluctuate significantly in the future. The
      Company believes it may benefit significantly due to the recent changes in
      Ukrainian market for gas. In addition, and although not foreseen, the Ukrainian
      government may oblige domestic producers to sell oil or gas to the state or
      domestic purchasers at prices well below international levels for indeterminate
      periods of time.




*Currency
      Exchange Risk*




Domestic
      sales of oil and gas in Ukraine are made in local currency (Hryvnia) and then
      converted to US$. The US$: Hryvnia exchange rate may move adversely to affect
      oil and gas prices. In addition, there can be no assurance that the Ukrainian
      authorities may not introduce price stabilization mechanisms which adversely
      affect oil and gas prices in US$ terms for EP. While many of Sunrise’s financial
      obligations are denominated in United States dollars, a number of foreign
      currency effects may arise from exchange rate movements. Sunrise does not engage
      in active speculative hedging to minimize exchange rate risk.




*Economic
      and political risk*




Sunrise’s
      operations are in Ukraine where there may be a number of associated risks over
      which it will have no, or limited, control. These may include contract
      renegotiation, contract cancellation, economic, social, or political instability
      or change, hyperinflation, currency non-convertibility or instability and
      changes of laws affecting foreign ownership, government participation, taxation,
      working conditions, rates of exchange, exchange control, exploration licensing
      and petroleum export licensing and export duties as well as government control
      over domestic oil and gas pricing.




*Legal
      systems*




Ukraine
      and other jurisdictions in which Sunrise might operate in the future may have
      less developed legal systems than more established economies which could result
      in risks such as (i) effective legal redress in the courts of such
      jurisdictions, whether in respect of a breach of law or regulation, or in an
      ownership dispute, being more difficult to obtain; (ii) a higher degree of
      discretion on the part of governmental authorities; (iii) the lack of judicial
      or administrative guidance on interpreting applicable rules and regulations;
      (iv) inconsistencies or conflicts between and within various laws, regulations,
      decrees, orders and resolutions; or (v) relative inexperience of the judiciary
      and courts in such matters. In certain jurisdictions the commitment of local
      business people, government officials and agencies and the judicial system
      to
      abide by legal requirements and negotiated agreements may be more uncertain,
      creating particular concerns with respect to EP’s licenses and agreements for
      business. These may be susceptible to revision or cancellation and legal redress
      may be uncertain or delayed. There can be no assurance that joint ventures,
      licenses, license applications or other legal arrangements will not be adversely
      affected by the actions of government authorities or others and the
      effectiveness of and enforcement of such arrangements in these jurisdictions
      cannot be assured.




9
 *Table
            of Contents*




*Drilling
      and operating risks*




Exploration,
      development and production activities may be delayed or adversely affected
      by
      factors outside the control of Sunrise. These include adverse climatic
      conditions, the performance of joint venture or farm-in partners on whom EP
      may
      be or may become reliant, compliance with governmental requirements, shortage
      or
      delays in installing and commissioning plant and equipment or import or customs
      delays. Problems may also arise due to the quality or failure of locally
      obtained equipment or interruptions to services (such as power, water, fuel
      or
      transport or processing capacity) or technical support which result in failure
      to achieve expected target dates for exploration or production and/or result
      in
      a requirement for greater expenditure. Drilling may involve unprofitable
      efforts, not only with respect to dry holes and non-commercial wells, which
      are
      wells that, though yielding some oil or gas, are not sufficiently productive
      to
      justify commercial development or cover operating and other costs. Completion
      of
      a well does not ensure a profit on the investment or recovery of drilling,
      completion and operating costs. Substantial operational risks are involved
      in
      the drilling for, development of and production from oil and gas fields,
      including blow-outs, cratering, explosions, pollution, seepage or leaks, fire,
      earthquake activity, unusual or unexpected geological conditions and other
      hazards which may delay, or ultimately prevent, the exploitation of such fields
      or may result in cost overruns or substantial losses to Sunrise due to
      substantial environmental pollution or damage, personal injury or loss of life,
      clean up responsibilities, regulatory investigation and penalties or suspension
      of operations. Such hazards can also severely damage or destroy equipment,
      surrounding areas or property of third parties. Damage or loss occurring as
      a
      result of such risks may give rise to claims against EP and/or
      Sunrise.




*Environmental
      Regulation*




The
      Government of Ukraine, the Ministry of Natural Resources, and other competent
      agencies establish special rules, restrictions and standards for enterprises
      conducting activities affecting the Ukrainian environment. A principle of
      Ukrainian environmental law is that any environmental damage caused by an
      unlawful activity (i.e. activity conducted in violation of existing standards
      and restrictions) must be fully compensated. As far as Sunrise is aware, the
      operations at the Karaikozovsk field have been conducted by Ukrnafta’s
      subsidiary companies under the PSA, in compliance with all applicable Ukrainian
      environmental rules, regulations and legislation. Furthermore, Sunrise is not
      aware of any claims, demands, proceedings or other actions against Sunrise
      or EP
      in respect of environmental matters.




*Uninsured
      Risks*




There
      may
      be circumstances where Sunrise’s insurance or that of the operator of a field
      will not cover or be adequate to cover the consequences of certain events or
      where the Company may become liable for pollution or other operational hazards
      against which it either cannot insure or may have elected not to have insured
      on
      account of high premium costs or otherwise. Moreover, there can be no assurance
      that Sunrise will be able to maintain adequate insurance in the future at rates
      the Board of Directors consider reasonable. Thus, Sunrise may become subject
      to
      liability for hazards which cannot be insured against or against which it may
      elect not to be insured because of high premium costs or other commercial
      reasons. There can be no assurance that Sunrise will be able to obtain insurance
      at reasonable rates (or at all), or that any coverage it obtains will be
      adequate and available to cover any such claims.




*Dependence
      on Key Personnel*




Sunrise
      is dependent on the services of certain key executives and personnel for its
      success. While Sunrise may enter into employment contracts with those persons,
      the retention of their services cannot be guaranteed. In addition, EP may find
      it difficult to recruit new executives and employees. The business may suffer
      if
      Sunrise fails to attract, hire or retain the necessary personnel or to retain
      existing employees.




*Risks
      Associated with International Operations*




We
      are
      subject to risks inherent to international operations, including adverse
      governmental actions, political risks and expropriation of assets, loss of
      revenues and the risk of civil unrest or war. Our primary oil and gas properties
      are located in Ukraine, which until 1990 was part of the Soviet Union. Ukraine
      retains many of the laws and customs from the former Soviet Union, but has
      developed and is continuing to develop its own legal, regulatory and financial
      systems. As the political and regulatory environment changes, we may face
      uncertainty with respect to the interpretation of our agreements and in the
      event of dispute, may have limited recourse within the current or future legal
      and political system.




In
      accordance with Ukrainian Oil and Gas legislation, properties can be developed
      and produced only in a form of a Production Sharing Agreements with a division
      of the Ukrainian state owned company, Ukrnafta. EP develops the Karaikozovsk’s
      property in accordance and subject to the terms of its PSA with
      Okhtyrkaneftegaz, which is the local subsidiary of Ukrnafta.




10
 *Table
            of Contents*




*Transferability
      of our common shares*




Sunrise
      Energy Resources` common stock is listed on the OTC Bulletin Board quotation
      system under the symbol SEYR.OB. On or about February 1, 2005 NevWest
      Securities, a NASD member firm filed Form 15c211 with the NASD to initiate
      quotation of our post transaction stock on the OTCBB quotation
      system.  Our
      common stock began quotation on the OTC Bulletin Board on or about May 23,
      2005.




*Control
      by our Offices and Directors*




In
      the
      aggregate, our executive officers and directors control approximately 65% of
      the
      outstanding shares of our common stock.  These stockholders, acting
      together, would be able to significantly influence matters requiring stockholder
      approval.




**Unregistered
      Sales of Equity Securities**




As
      part
      of the transaction described above, in exchange of the EP shares, Registrant
      has
      issued 10,479,900 shares to a purchaser outside the United States who was the
      holder of the majority of the outstanding stock of Esko Pivnich. The sale of
      the
      shares is exempt from registration under Section 4(2) of the Securities Act
      of
      1933, as amended, as the purchaser had full information concerning the business
      and affairs of Registrant and all certificates issued bear appropriate
      restrictive legends. No underwriter was involved in the transaction.




**Amendments
      to Articles of Incorporation or Bylaws; Change in Name**




As
      described in Company’s Quarterly Report on Form 10-QSB for the quarter ended
      September 30, 2004, the Company amended and restated its Certificate of
      Incorporation effective October 1, 2004. A copy of the Amended and Restated
      Certificate of Incorporation was filed as an exhibit to the Form
      10-QSB.




The
      Amended and Restated Certificate of Incorporation increased the Company’s
      authorized Capital from 10,000,000 shares of $1.00 par value common stock to
      77,500,000 million shares, par value $0.01, of which up to 2,500,000 shares
      may
      be designated as preferred shares, par value $0.001. In addition, the name
      of
      the Company was changed from Sunrise Energy Services, Inc. to Sunrise Energy
      Resources, Inc.




**ITEM
                2.**
            **DESCRIPTION
                OF PROPERTY**




Our
      facilities consist of offices in New York City and Kiev, Ukraine, as well as
      some production properties on the territory of Ukraine. Our executive office
      in
      New York is located at 551 Fifth Avenue, Suite 601, New York, NY 10017, and
      consists of office space obtained under a sub-lease arrangement with Thor
      Capital, LLC. We are in the process of locating a long-term lease to accommodate
      our offices and personnel in New York.




Company’s
      offices in Ukraine are located at 10a Ryleeva Street Kiev, Ukraine. In addition,
      the Company’s subsidiary owns two operating wells, oil storage bunkers, workers
      accommodation huts, motor vehicles and supporting infrastructure and rents
      oil
      rigs.




Petroleum
      industry in Ukraine




Domestic
      Ukrainian extraction represents 21% - 24% (or 18 billion cu m) of demand for
      natural gas and 10% — 12% (or 4 million ton) of demand for crude oil. The
      supply-demand gap is addressed by imports. The imports mainly come from the
      neighboring Russia as well as from Kazakhstan and Turkmenistan which transship
      their oil & gas via Russia.




With
      its
      extensive network of oil and natural gas pipelines, Ukraine is a key transit
      state for Russian oil and natural gas exports bound for Europe. The continued
      increase in oil and natural gas production in Russia and in the Caspian Sea
      region should enable Ukraine to capture additional transit business from these
      regions. Ukraine is also looking to capture additional oil transit revenues
      by
      constructing the Pivdenny oil terminal and Odessa-Brody pipeline.




At
      present, Ukraine’s annual demand stands at around 70 billion cubic meters of
      natural gas and 32-34 million tons of crude oil. Average annual oil and gas
      extractions amount to 18 billion cubic meters of natural gas and 4 million
      tons
      of crude oil. Therefore, Ukraine’s extraction covers around 21-24% of the
      domestic demand for natural gas and 10-12% of the demand for crude oil. This
      internal demand stimulates domestic production in an effort to displace imports
      that primarily come from Russia and Turkmenistan.




11
 *Table
            of Contents*




There
      are
      three petroliferous provinces in Ukraine. They are located in the West (the
      Carpathian region), in the east (the Dnipro-Donetsk region), and in the south
      (the Black Sea and the Crimea region). According to various estimates, Ukraine’s
      hydrocarbon resources amount to approximately 7-8 billion tons of fuel
      equivalent. Ukraine counts at least 300 potentially economically viable oil
      and
      gas fields, of which around 200 have been developed.




Exploration
      and Producing Licenses




During
      2004 the Company received geological and exploration license agreements to
      develop the Karaikozovsk’s, Rogan and Rakitnyansk fields. Particular information
      with respect to each of these licenses is listed in the following
      table:




**No.**
                
                **Date**
                  **issued**
                
                **Period**
                
                **Block**
                
                **Location**
                
                **Acreage**
                  **(acres)**
                
                **Activities**#
                    2489
                
                Dated
                    2 July 2004
                
                Valid
                    for:
                  5
                    (five) years
                
                Karaikozovsk
                    Field Geographical coordinates:
                  Northern
                    latitude:
                  1.50000'50"
                  2.50002'10"
                  3.49057'10"
                  4.49057'00"
                  Eastern
                    longitude: 35001'40"
                  35010'30"
                  35013'00"
                  35006'20"
                
                Administrative
                    district: Kharkiv Administrative region: Krasnokutsk Reference
                    location:
                  10
                    km south of Krasnokutsk
                
                20,000
                
                Geological
                    Exploration Including
                  commercial
                    and investigative mining development of natural gas, crude
                    oil#
                    2581
                
                Dated
                    18 October 2004
                
                Valid
                    for:
                  5
                    (five) years
                
                Rogan
                    Field Geographical coordinates:
                  Northern
                    latitude:
                  1.
                    49054’50”
                  2.
                    49053’30”
                  3.
                    49051’20”
                  4.
                    49053’30”.
                  Eastern
                    longitude: 36030’40”
                  36042’10”
                  36039’50”
                  36029’00”
                
                Administrative
                    district: Kharkiv Administrative region: Kharkiv, Chuguev reference
                    location: 2 km west of Krasnokutsk
                
                12,850
                
                Geological
                    exploration including commercial and investigative mining development
                    of
                    natural gas, crude oil#
                    2507
                
                Dated
                    22 October 2004
                
                Valid
                    for:
                  5
                    (five) years
                
                Rakitnyansk
                    Field
                  Geographical
                    coordinates: Northern latitude:
                  1.49054’20”
                  2.49052’50”
                  3.49051’00”
                  4.49053’10
                  Eastern
                    longitude:
                  35048’50”
                  25056’00”
                  35056’00”
                  35047’00”
                
                Administrative
                    district: Kharkiv Administrative region: Novodolazk,
                    Valkiv
                
                7,900
                
                Geological
                    exploration including commercial and investigative mining development
                    of
                    natural gas, crude oil773076
                  Series
                    AA
                
                Dated
                    28 October
                
                November
                    5 2004 -
                  November
                    5 2009
                
                Type
                    of activity: prospecting (exploring) of natural resources geological
                    support of geo-exploration works.
                  Drilling
                    of wells for prospecting (exploration) purposes of oil and natural
                    gas.
                    Assembly and disassembly of drilling equipment for purposes of
                    prospecting
                    (exploring) of oil and gas.
                  Investigative
                    and commercial mining of oil and gas deposits cementing of stabilizing
                    columns, major repairs, conservation and plugging of oil and
                    gas
                    wells.#775113
                  Series
                    AA
                
                Dated
                    28 October
                
                October
                    28 2004 -
                  October
                    2009
                
                Construction
                    activities#
                    867363
                  Series
                    AA
                
                Dated
                    10 November
                
                November
                    21 2004 -
                  November
                    20 2009
                
                Supplying
                    of natural gas on an unregulated tariff basis




12
 *Table
            of Contents*


The
          following amounts of investments are required in accordance with the terms
          of
          the exploration licenses agreements:


License
            
            **Periods**
            
            **Amount**Karaikozovsk
            
            
            2005-2009
            
            $
            4,241,584Rakitnyansk
            
            
            2005-2009
            
            
            3,938,614Rogan
            
            
            2005-2009
            
            
            2,922,772**Total**
            
            
            
            
            **$**
            **11,102,970**





As
      at
      December 31, 2005, the Company expended $999,220 all of which was related to
      Karaikozovsk license.




Productive
          Wells
  As
                  at December 31, 2005, the Company had the following number of productive
                  wells and wells in progress.**Property**
                
                Karaikozovsk
                
                Rogan
                
                Rakitnyansk
                
                Total**Gross
                    Basis*****Oil***Productive
                    Wells
                
                2
                
                -
                
                -
                
                2Wells
                    in Progress
                
                1
                
                -
                
                -
                
                1***Gas***Productive
                    Wells
                
                2
                
                -
                
                -
                
                2Wells
                    in Progress
                
                1
                
                -
                
                -
                
                1**Net
                    basis*****Oil***Productive
                    Wells
                
                1.6
                
                -
                
                -
                
                1.6Wells
                    in Progress
                
                0.8
                
                -
                
                -
                
                0.8***Gas***Productive
                    Wells
                
                1.6
                
                -
                
                -
                
                1.6Wells
                    in Progress
                
                0.8
                
                -
                
                -
                
                0.8
 
 Note:
                    In accordance with the production sharing agreementPSA # 35/970-SD
                    dated
                    August 19, 2004Esko-Pivnich
                    had 80% working interest in Karaikozovsk property.




Overview
      of Regional Geology




The
          Company’s most explored and developed reserve is located in the Karaikozovsk
          property. All of Sunrise’s activities in 2003 were concentrated in the first
          production sharing agreement covering the development and exploration of
          this
          filed and the license granted to EP in relation to this property. The
          Karaikozovsk field is located along the northern border of the Dnieper-Donetsk
          depression. The uplift was discovered in 1957-1958 and involved structural
          drilling and mapping of the area. Additional studying of the area continued
          by
          conducting geophysical work in 1963 which reflected horizons of Mesozoic,
          Permian, Upper Carboniferous, and in 1971 - by middle and Lower Carboniferous.
          Through the detailed seismic investigations conducted in 1972-1973, the
          uplift
          was prepared for exploration drilling, which began in 1976. In 1981 Well
          #2 was
          tasted on the Serpukhovian deposits (producing horizons S-5, S-5a at depths
          4981-5196 m). These tests resulted in a flow rate of 75 cu.m/day, using
          10mm
          choke. In 1982 the field was registered on the state balance.


The
      total
      number of wells drilled in the area included: 12 wildcats and prospecting wells
      of which two proved commercially viable. The rocks carbonate-terrigenous
      thickness was uncovered from Quaternary to Lower Carboniferous (Visean
      stage).




13
 *Table
              of Contents*




The
          tectonic breakthrough divides the deposit into two parts: Lyubivsk and
          Karaikozovsk.


Proved
      reserves




The
      Company does not currently have any proved reserves within the meaning of
      Regulation S-X of the Securites and Exchange Commission.




**ITEM 3.**
            **LEGAL
                PROCEEDINGS**




Other
      than as set forth below, there are no outstanding legal proceedings material
      to
      the Company to which Sunrise or any of Sunrise’s assets are subject, nor are
      there any such proceedings known to be contemplated. Management believes that
      the resolution of all business matters which would have a material impact on
      the
      Company’s financial position or operating results have been
      recorded.




JSC
      Ukrneft, Okhtyrkaneftegaz




In
      2003
      the Company initiated legal proceedings against JSC Ukrneft, Okhtyrkaneftegaz,
      with respect to certain advance payments made by EP in 2002, which totaled
      $198,880. The payments were made in order to complete certain construction
      work
      under the terms of the PSA # 01-SD, dated April 26, 2000 (see: Notes 4 and
      6 of
      the Consolidated Financial Statements). In April 2004 after the conclusion
      of
      legal proceedings in courts of first and appellate levels, the Supreme Court
      of
      Ukraine ordered Okhtyrkaneftegaz to pay the outstanding balance without further
      delays. As of March 27, 2006 the balance had not been paid. The Company
      plans to cancel PSA # 01-SD and
      to
      offset this amount against amounts payable to JSC Ukrneft and its subsidiary
      Okhtirkaneftegas in 2006.




Taxes




During
      2004 the Company was examined by the State Tax Inspection of Podolsk region,
      Kiev, and was assessed additional VAT and Profit tax fines and penalties in
      the
      aggregate amount of $598,324 related to 2003 and 2002 years. The amounts were
      accrued in the respective consolidated financial statements in full (See Note
      23
      of the Consolidated Financial Statements). “Esko-Pivnich” has appealed and won,
      but the tax administration has submitted another appeal to the Supreme Civil
      Court of Kiev. The Supreme Civil Court had addressed the suit back to Civil
      Court of Kiev and appointed a committee to conduct an accounting investigation
      which was exercised in February 2006. Since the investigation no hearings took
      place. Since the appeal has been won and had become effective, the Company
      believes there is a 100% of winning the case. However, because the government
      of
      Ukraine has not paid this balance and the political situation is uncertain,
      the
      liability has not been removed or reversed.




We
      know
      of no other material, active or pending legal proceedings against us, nor are
      we
      involved as a plaintiff in any material proceedings or pending litigation.
      There
      are no proceedings in which any of our directors, officers or affiliates, or,
      to
      the best of our knowledge, any registered or beneficial shareholders are an
      adverse party or have a material interest adverse to us in a matter concerning
      Sunrise or our operations.




**ITEM 4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS**




No
      matters were submitted to a vote of security holders during the year ended
      December 31, 2005. The only matter submitted to a vote of our security holders
      during the year ended December 31, 2004, was a proposal for the Amendment and
      Restatement of the Company’s Certificate of Incorporation, which was approved by
      a written consent of holders holding a total of more than 90% of the outstanding
      shares. The Amended and Restated Certificate of Incorporations became effective
      September 30, 2004.




14
 *Table
              of Contents*




**PART
      II:**




**ITEM 5.**
            **MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS**




Sunrise
      Energy Resources` common stock is listed on the OTC Bulletin Board quotation
      system under the symbol SEYR.OB. On or about February 1, 2005 NevWest
      Securities, a NASD member firm filed Form 15c211 with the NASD to initiate
      quotation of our post transaction stock on the OTCBB quotation
      system.  Our
      common stock began quotation on the OTC Bulletin Board on or about May 23,
      2005.




The
      following quotations reflect the high and low bids for our common stock based
      on
      inter-dealer prices, without retail mark-up, mark-down or commission and may
      not
      represent actual transactions. The high and low bid prices of our common stock
      (obtained from Bloomberg) for the periods indicated below are as
      follows:




OTC
      Bulletin Board




Quarter
                ended
            
            High
            
            LowJune
                30, 2005
            
            $
                0.2
            
            $
                0.2September
                30, 2005
            
            $
                2.03
            
            $
                1.75December
                31, 2005
            
            $
                0.7
            
            $
                0.7




Computershare
      Trust Company Inc., located at 350 Indiana Street Suite 800 Golden Colorado
      80401 (Tel 303-262-0600 Fax 303-262-0700) is the registrar and transfer agent
      for our common shares.




As
      of
      March 27, 2006, we had 17,161,014 shares of common stock outstanding or
      committed for issuance, and approximately 1,400 stockholders of record. This
      number of stockholders does not include stockholders who hold our securities
      in
      street name.




*Dividend
      Policy*




We
      have
      not declared or paid any cash dividends since inception. Although there are
      no
      restrictions that limit our ability to pay dividends on our common shares,
      we
      intend to retain our future earnings for use in our operations and expansion
      of
      our business and do not intend to pay any cash dividends in the foreseeable
      future. We do not anticipate that cash dividends will be issued in the
      foreseeable future.




*Changes
      in Securities*




The
      Amended and Restated Certificate of Incorporation became effective October
      1,
      2004 and increased Company’s authorized Capital from 10,000,000 shares of $1.00
      par value common stock to 77,500,000 million shares, par value $0.01, of which
      up to 2,500,000 shares may be designated as preferred shares, par value $0.001.
      In addition, the name of the Company was changed from Sunrise Energy Services,
      Inc. to Sunrise Energy Resources, Inc.




As
      part
      of the transactions described above, Sunrise Energy Resources, Inc. has issued
      and delivered to the EP and Pari Shareholders a total of 10,479,900 and 161,014
      shares of it’s common stock, respectively. The sale and subsequent transfer of
      the shares is exempt from registration under Section 4(2) of the Securities
      Act
      of 1933, as amended, as the purchaser had full information concerning the
      business and affairs of Company and all certificates issued bear appropriate
      restrictive legends. No underwriter was involved in the transaction.




**ITEM6.**
            **MANAGEMENT
                DISCUSSION AND ANALYSIS OF PRINCIPAL CONDITIONS AND
                OPERATIONS**




***Risk
      Factors***




***(SEE
      ALSO DISCUSSION OFCERTAIN RISK FACTORS IN ITEM 1 OF THIS ANNUAL
      REPORT)***




15
 *Table
              of Contents*


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.




Such
      estimates, projections or other “forward looking statements” involve various
      risks and uncertainties as outlined below. We caution the reader 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”.




Our
      common shares are considered speculative during our search for new and
      additional business opportunities. Prospective investors should consider
      carefully the risk factors set out below and elsewhere in this
      Report.




Exploration
      and Development Risks




Our
      success is dependent on finding, developing and producing economic quantities
      of
      oil and gas.  Our future drilling operations may not be successful in
      finding and producing economic reserves.  We are also subject to other
      operating risks normally associated with the exploration, development and
      production of oil and gas.  These risks include high pressure or
      irregularities in geological formations, blowouts, cratering, fires, shortages
      or delays in obtaining equipment and qualified personnel, equipment failure
      or
      accidents, and adverse weather conditions, such as winter snowstorms. 
These risks can result in unfavorable events, or they may result in higher
      costs
      and operating delays.  We maintain very limited insurance coverage and such
      coverage may not be effective to fully compensate for these risks.  In many
      cases, such coverage is either not available or is not cost-effective in light
      of our operations in Ukraine.




Oil
      and Gas reserve risks




Proved
      oil and gas reserves are the estimated quantities of natural gas, crude oil
      and
      condensate that geological and engineering data demonstrate with reasonable
      certainty to be recoverable in future years from known reservoirs under existing
      economic and operating conditions. Reserves are considered proved if economical
      production is supported by either actual production or conclusive formation
      tests. Reserves that can be produced economically through application of
      improved recovery techniques are included in the “proved” classification when
      successful testing by a pilot project or the operation of an installed program
      in the reservoir provides support for the engineering analysis on which the
      project or program is based. Proved developed oil and gas reserves can be
      expected to be recovered through existing wells with existing equipment and
      operating methods.




Sunrise
      emphasizes that the volumes of reserves are estimates which, by their nature,
      are subject to revision. These estimates were made using available geological
      and reservoir data, as well as production performance data. These estimates
      are
      reviewed annually and revised, either upward or downward, as warranted by
      additional performance data. In addition, our reserves are contained in
      carbonate reservoirs, and there is substantial uncertainty with regard to
      carbonate reservoirs as compared to sandstone reservoirs.




We
      are
      currently in the process of engaging an independent petroleum engineering firm
      to review our estimates of proved reserves.




Marketing
      and oil prices




Our
      future success is dependent on being able to transport and market our production
      either within Ukraine or preferably through export to international
      markets.  Thus, our revenues could be adversely affected by issues which
      are outside of our control relating to the crude oil transportation
      infrastructure both within and outside Ukraine. The exportation of oil from
      Ukraine depends on access to transportation routes, primarily pipeline systems,
      which can have limited available capacity and are subject to other
      restrictions.  Pipeline access is the preferred and most cost effective
      method to sell crude oil production to world export market, and thus the Company
      is subject to the risk that unless the Company obtains access to pipelines
      to
      transfer crude oil out of Ukraine, the price at which the Company sells its
      crude oil may remain well below world market prices.  We currently do not
      have a long-term contract for the transportation or sale of our crude oil. 
We are producing our oil into the early production facility where it is
      temporarily stored until it transferred to particular buyers. Our longer-term
      plans include the shipment of oil by pipeline.  We would expect the
      implementation of these plans to result in higher realized prices than our
      current marketing arrangements, but we cannot be assured that we will be
      successful in implementing these plans.




16
 *Table
              of Contents*


The
      prices we have received thus far for the sale of our crude oil are significantly
      less than the full world market price for crude oil. The Company believes the
      primary reason we have not received the full world market price is because
      we
      have not yet been able to produce crude oil in sufficient quantities to attract
      customers that supply the world oil markets.  Unless and until such time as
      we are able to produce crude oil in sufficient quantities to attract such
      customers the price at which we are able to sell our production may be
      significantly lower than the full world market price, and the Company will
      be at
      a competitive disadvantage compared to other exploration and production
      companies that receive full world market price for their crude oil.




In
      addition, prices of oil and gas are subject to significant volatility in
      response to changes in supply, market uncertainty and a variety of other factors
      beyond our control.  There are currently no economic markets for our
      natural gas production and our gas reserves have been given no value in the
      future net cash flow data presented in this Report.




Limited
      operating history; anticipated losses; uncertainly of future
      results




The
      Company has a limited operating history upon which an evaluation of its
      prospects can be made. There can be no assurance that the Company will
      effectively execute its business plan or manage any growth of the business,
      or
      that the Company’s future operating and financial forecast will be met. Future
      development and operating results will depend on many factors, including access
      to adequate capital, the demand for the Company’s products, the level of product
      and price competition, the Company’s success in setting up and expanding
      distribution channels, and whether the Company can control costs. Many of these
      factors are beyond the control of the Company. In addition, the Company’s future
      prospects must be considered in light of the risks, expenses, and difficulties
      frequently encountered in establishing a new business in the oil and gas
      industry, which is characterized by intense competition, rapid technological
      change, highly litigious competitors and significant regulation.




Political
      Risks




The
      market in Ukraine is monitored by the government, which could impose taxes
      or
      restrictions at any time which would make operations unprofitable and infeasible
      and cause a write-off of capital investment in Ukrainian
      opportunities.




A
      number
      of factors, beyond the Company’s control and the effect of which cannot be
      accurately predicted may affect the marketing of the Company’s operations. These
      factors include political policy on foreign ownership, political policy to
      open
      the doors to foreign investors, and political policy on oil and gas production
      and exports.




Risks
      Associated with International Markets




The
      Company transactions have thus far been entirely within Ukraine. However, the
      future success of the Company will depend in part on its ability to generate
      sales on international markets. There can be no assurance, however, that the
      Company will be successful in generating these sales. In addition, these will
      be
      subject to a number of risks, including: foreign currency risk; the risks that
      agreements may be difficult or impossible to enforce and receivables difficult
      to collect through a foreign country’s legal system; foreign customers may have
      longer payment cycles; or foreign countries could impose withholding taxes
      or
      otherwise tax the Company’s foreign income, impose tariffs, embargoes, or
      exchange controls, or adopt other restrictions on foreign trade. In addition,
      the laws of certain countries do not protect the Company’s offerings to the same
      extent as the laws of the United States. The Company has taken steps to mitigate
      these risks through profit sharing agreements with domestic Ukrainian companies,
      but there can be no assurance in the adequacy of these protection
      measures.




Although
      not all of our present officers or directors are key to our continuing
      operations, we rely upon the continued service and performance of these officers
      and directors, and our future success depends on the retention of these people,
      whose knowledge of our business and whose technical expertise would be difficult
      to replace. At this time, none of our officers or directors is bound by
      employment agreements, and as a result, any of them could leave with little
      or
      no prior notice.




Competition
      for qualified individuals is likely to be intense, and we may not be able to
      attract, assimilate, or retain additional highly qualified personnel in the
      future. The failure to attract, integrate, motivate and retain these employees
      could harm our business.


17
 *Table
              of Contents*


Regulation




Although
      we will be subject to regulation under the Securities Exchange Act of 1934,
      management believes that we will not be subject to regulation under the
      Investment Company Act of 1940, insofar as we will not be engaged in the
      business of investing or trading in securities. In the event that we engage
      in
      business combinations which result in us holding passive investment interests
      in
      a number of entities, we could be subject to regulation under the Investment
      Company Act of 1940, meaning that we would be required to register as an
      investment company and could be expected to incur significant registration
      and
      compliance costs. We have obtained no formal determination from the Securities
      and Exchange Commission as to the status of our company under the Investment
      Company Act of 1940 and, consequently, any violation of such act would subject
      us to material adverse consequences.




Exposure
      to foreign exchange rate fluctuations




With
      the
      majority of our operations being located in Ukraine, the majority of our
      revenues and expenses are denominated in Ukrainian hrivnas. Some of our revenues
      in 2005 may also be denominated in Euro and the US dollars. We currently do
      not
      and do not plan in the near future to engage in hedging our exposure to changing
      foreign exchange rates. Any unfavorable changes in the relevant foreign exchange
      rates may have a material effect on our financials and performance.




Indemnification
      of Directors, Officers and Others




Our
      by-laws contain provisions with respect to the indemnification of our officers
      and directors against all expenses (including, without limitation, attorneys’
fees, judgments, fines, settlements, and other amounts actually and reasonably
      incurred in connection with any proceeding arising by reason of the fact that
      the person is one of our officers or directors) incurred by an officer or
      director in defending any such proceeding to the maximum extent permitted by
      Delaware law.




Insofar
      as indemnification for liabilities arising under the Securities Act of 1933
      may
      be permitted to directors, officers and controlling persons of our company
      under
      Delaware law or otherwise, we have been advised that the opinion of the
      Securities and Exchange Commission is that such indemnification is against
      public policy as expressed in the Securities Act of 1933 and is, therefore,
      unenforceable.




Future
      Dilution




Our
      statutory documents authorize the issuance of 75,000,000 common shares, each
      with a par value of $0.001. In the event that we are required to issue any
      additional shares or enter into private placements to raise financing through
      the sale of equity securities, investors’ interests in our Company will be
      diluted and investors may suffer dilution in their net book value per share
      depending on the price at which such securities are sold. If we issue any such
      additional shares, such issuances also will cause a reduction in the
      proportionate ownership and voting power of all other shareholders. Further,
      any
      such issuance may result in a change in our control.




Anti-Takeover
      Provisions




We
      do not
      currently have a shareholder rights plan or any anti-takeover provisions in
      our
      By-laws or corporate charter. Without any anti-takeover provisions, there is
      no
      deterrent for a take-over of the Company, which may result in a change in our
      management and directors.




Reports
      to Security Holders




Under
      the
      securities laws of Delaware, we are not required to deliver an annual report
      to
      our shareholders but we intend to send an annual report to our
      shareholders.




**Discussion
      and Analysis of Financial Condition**




**Introduction**




The
      following discussion and analysis addresses changes in our financial condition
      and results of operations during the years ended December 31, 2005 and
      2004.




There
      is
      limited or no comparability for revenue and operating expense to the comparable
      periods in 2003 and 2004, as sales and production were suspended in spring
      2003
      and were resumed only in January 2005.


18
 *Table
              of Contents*


Management’s
      key objectives for 2005 were:




°
              Complete
                  the workovers on Well #2 and Well#3 on the Karaikozovsk’s
                  field; °
                Commence
                      the construction of separation units on Well #2 and Well#3
                      on the
                      Karaikozovsk’s field;
 °
                Commence
                    conduction of geological and research works on Rogan and Rakitnyansk
                    properties;
  We
          believe that these key objectives were achieved in 2005. Our 2006 strategy
          for
          Karaikozovsk’s field includes completion of drilling workovers on Well #21. In
          addition, we will continue the exploration activities on Rogan and Rakitnyansk
          properties aiming to establish the optimal reservoir development
          scenarios.




**Current
      Activities**




During
      2005, our production was limited to Well #2 and Well#3 of Karaikozovsk’s
      deposit.  During the year we produced 31MBBLS from Well #2 and 8.7MBBLS
      from Well #3. The reduced production from Well #3 was caused by a reservoir
      pressure maintenance difficulties as well as increased downtime and lower flow
      rates caused by an exceptionally cold weather in January and December of 2005.
      On or around June 21, 2005 the Company completed scheduled workovers and repairs
      on Well #3.




On
      or
      around May 31, 2005 Esko-Pivnich, the Company's wholly-owned operating
      subsidiary completed the construction of a new storage and separation facility
      with a total storage capacity of approximately 200 tons (1,460 bbls). The new
      facility commenced operations on July 15, 2005. The new facility is designed
      to
      decrease the Company's operating expenses, resulting from reduced fees that
      were
      previously paid to Okhtirkaneftegaz, the state-owned Oil &Gas Company for
      similar services. In addition, the launch of the new facilities will enable
      the
      Company to reduce crude losses during extraction, separation and storage.




The
      Company entered into an agreement with Chernigivneftegazgeologia, a Ukrainian
      oil&gas engineering contractor to drill a new production Well #21. The
      anticipated construction costs of around US$1.2 million are expected to be
      financed out of the operating cashflow, vendor loans and bank loans.




On
      January 20, 2006, Sunrise Energy Resources, Inc. executed a share purchase
      agreement with the shareholders of Pari, Ltd. The board of directors of Sunrise
      Energy Resources, Inc. approved the transaction on February 9, 2006.




**Results
      of Operations**




Oil
      and gas production and revenue




With
      the
      exception of testing flow runs, no commercial volumes were produced from
      Karaikozovsk property during the year ended December 31, 2004 pending the
      issuance of the new operating license and the conclusion of new production
      sharing agreement (see above for additional discussion). The crude oil extracted
      under the test runs conducted during 2004 amounted to 2.552 Bbls of which
      approximately 1.585 Bbls remained in the Company’s inventory at year
      end.  The
      crude
      oil balance as of December 31, 2005 amounted to 533 Bbls.




During
      the year ended December 31, 2005, Esko Pivnich produced 39,264 barrels (“Bbls”)
      of crude oil and 52,269 thousands of cubic feet (“MCFs”) of natural gas,
      respectively. Crude oil and gas production during the first and second quarters
      2005 was generally limited to well#2 of Karaikozovsk field as commercial
      production from Well#3 was just establishing. Well#3 was launched into
      commercial production in the third quarter 2005.




We
      recognize revenue from the sale of oil when the purchaser takes delivery of
      the
      oil at the field. During the year ended December 31, 2005 Esko Pivnich sold
      its
      internally produced 40,316 Bbls of crude oil at the average prices of $42 per
      barrel translating into net revenues from sales of internally produced oil
      of
      $1,709,644. Also for the respective period of 2005 the Company sold 52,269
      MCFs
      of internally produced gas at average prices of $0.89 translating into revenues
      of $52,987




Additionally
      in 2005 we sold 2,160 bbls of purchased crude oil at the average price of $59
      per barrel translating into revenues of $127,849.


19
 *Table
              of Contents*


During
      the year ended December 31, 2004, we sold (by physical delivery to the
      purchaser) 8,782 Bbls of crude oil, kept by the Company in inventory as of
      December 31, 2003. Average price of crude oil sold in 2004 was approximately
      $22.42 per Bbl which translated into net revenues of $196,891.




All
      sales
      agreements were short-term in nature, with the extension option by mutual
      agreement of the parties. Our crude oil and natural gas sales are sold at the
      pipeline measuring node and are not subject to transportation
      costs.




Provided
          below is the analysis of the average selling prices and production costs
          during
          2003-2005 period.
 For
                      the years Ended
                  
                  12/31/2005
                  
                  12/31/2004
                  
                  12/31/2003Production1,
                      2Oil,
                      BBLS
                  
                  
                  31,411
                  
                  
                  n/a
                  
                  
                  22,694Natural
                      Gas, MCF
                  
                  
                  41,815
                  
                  
                  n/a
                  
                  
                  94,192Barrels
                      of Oil Equivalent, BOE4
                  
                  
                  38,380
                  
                  
                  n/a
                  
                  
                  38,393Average
                      sales priceOil,
                      $/BBL
                  
                  
                  42.00
                  
                  
                  22.42
                  
                  
                  19.65Natural
                      Gas, $/MCF
                  
                  
                  0.89
                  
                  
                  n/a
                  
                  
                  1.33Average
                      oil and natural gas cost of production, $/BOE3
                  
                  
                  27.68
                  
                  
                  n/a
                  
                  
                  16.27
 1The
                      Company did not have any production in 2004 while the sales
                      in that year
                      resulted from 12/31/2003 inventory.2Calculated
                      on the net production basis (net to the Company) based on 80%
                      working
                      interest in Karaikozovsk property.3Includes
                      direct lifting costs (labor, repairs and maintenance, materials
                      and
                      supplies), expensed workover costs and the administrative costs
                      of field
                      production personnel, insurance and ad valorem taxes.4Natural
                      gas is converted to oil equivalent at the rate of 6MCF of gas
                      equaling 1
                      BOE.
  Exploration
  Exploration
            expense, which includes geological and geophysical expense and the cost
            of
            unsuccessful exploratory wells, is recorded as an expense in the period
            incurred
            under the successful efforts method of accounting. During 2005 and 2004,
            we
            incurred $265,253 and $26,986, respectively in exploration expenses that
            were
            comprised of geological and research services of $122,099 (2004: $25,737)
            and
            extraction services rendered by third parties of $143,154 (2004: $1,249).
            The
            increase in 2005 as compared to 2004 was primarily due to the fact that
            the new
            license for Karaikozovsk property was issued only in July 2004.


The
      Company expects significant exploration expense in 2006-2008 due to the new
      operating licenses obtained in 2004, including licenses for two new fields,
      Rogan and Rakitnyansk, and significant investment obligations attached to them,
      based on the concluded license agreement with the Ministry of Resources of
      Ukraine (see above).




During
      2005 and 2004, the Exploration and Resource taxes, levied per barrel of crude
      oil produced by the Company amounted to $439,510 and $49,216, respectively.
      For
      the same periods the exploration and resource taxes levied per thousand of
      cubic
      feet of produced gas amounted to $11,140 and $none, respectively.




20
 *Table
              of Contents*


Depreciation,
      depletion and amortization




Depreciation,
          depletion and amortization (“DD&A”) of oil and gas properties will be
          calculated under the “units of production” method, following the successful
          efforts method of accounting, as described in Note 1 of the Notes to
          Consolidated Financial Statements, once appropriate reserve report has
          been
          obtained in compliance with the SEC requirements. At the present time,
          capitalizable assets are being depreciated using the “straight line” method over
          the estimated useful lives of the above assets.


Oil
      and
      gas production equipment and work over costs contributed the most into the
      depreciation expense for the year ended December 31, 2005 and 2004 in total
      amounts of $318,109 and $256,528. The main increase in the depreciation expense
      in 2005 as compared to 2004 was primarily due to the launching of storage and
      separation facility as well as due to workover costs capitalized in
      2005.




Sales,
      general and administrative expenses




Sales,
      general and administrative expenses in 2005 increased to $715,885 from $126,406
      in 2004 mainly due to the increase in payroll and payroll related taxes in
      amounts of $215,474 (2004: $38,244), legal and other professional services
      of
      $218,176 (2004: $28,514), transportation expenses of $98,150 (2004: $6,235),
      as
      well as office rent of $54,293 (2004: $22,851), respectively. The significant
      increase in sales, general and administrative expenses in 2005 as compared
      to
      2004 was caused by the extended operations of the Company and increase in the
      number of the personnel employed.




Interest
      expenses




Interest
      expense for the years ended December 31, 2005 and 2004, was $142,527 and
      $51,036, respectively.




Interest
      expense for the years ended December 31, 2005 and 2004 related to the credit
      line facility obtained from AB Clearing House at 26% per annum. Also in 2005
      interest expense was due to long term loan obtained from Zaccam Trading, related
      party at 3% and interest accrued on amounts received from former shareholders
      at
      weighted average 2005 LIBOR rate.




Proceeds
      were used mainly for immediate working capital requirements. In 2004 the LZ
      Group paid the Company $75,280 in interest related to the period prior to the
      reassignment of the short term loan from Vabank.




**Liquidity
      and Capital Resources**




Since
      inception, we have financed our operations from private sources. We anticipate
      continuing losses in the near future while Esko Pivnich establishes steady
      production of oil and gas in Ukraine. As at December 31, 2005 the Company had
      total current assets of $1,952,589 and total current liabilities of $3,446,181.
      As at December 31, 2005, the Company had cash balances of $3,419 and a working
      capital deficit of $1,493,592.




We
      are
      currently discussing various financing options with private investors that
      include Company shareholders however, no assurance can be provided as to if,
      when and in what amount such new financing may be received by the Company.
      Failure to timely receive such financing may cause us to significantly curtail
      or altogether suspend our capital expenditure program. This may, in turn, have
      material adverse effect on our production activities.




Cash
      flow




Cash
      (used in) / provided by operating activities for the years ended December 31,
      2005 and 2004 amounted to $439,327 and $(262,819), respectively. Significant
      cash inflow in 2005, as compared to 2004, was primarily caused by the increase
      in trade accounts payable of $204,466 (2004: decrease of $317,628), other
      accounts payable and accruals of $384,742 (2004: $202,412), prepayments for
      oil
      and gas of $416,049 (2004: $84,818) and taxes payable of $149,947 (2004:
      $260,893). Although there was a significant cash outflow mostly due to increase
      in trade accounts receivable of $70,892 (2004: decrease of $251,744), other
      accounts receivable and prepayments of $242,679 (2004: $439,482) as well as
      increase in inventories of $123,235 (2004: decrease of $22,569). Main operating
      activities were suspended in 2004 providing no base for operating cash flows
      comparison with 2005.




In
      2004
      cash provided by financing activities in amount of $489,974 was used to service
      the negative cash flow from operations. In 2005 cash provided by financing
      activities in amount of $279,900 was due to the long term loan received.




21
 *Table
              of Contents*


During
      2005 and 2004, the Company invested in workovers a total amount of $747,599
      and
      $163,489, respectively, which was financed by shareholder loans and long term
      loan. Significant decrease in capital expenditure in 2004 was caused by the
      temporary suspension of the production due to the renewal of the production
      sharing and main operating license agreements.




Cash
      Requirements




The
          Company anticipates it will require around $4,000,000 to implement its
          capital
          expenditure program for Karaikozovsk property including the completion
          of
          separators and new well drilling. The Company believes it will be able
          to raise
          these funds through equity and debt financing; however, there is no guarantee
          that such funds will be raised and no certainty as to when such funds may
          be
          raised.


**Income
      Taxes, Net Operating Losses and Tax Credits**




Currently,
      the Company is liable for Ukrainian income tax at a rate of 25% of the pre-tax
      earnings as defined by the Ukrainian income tax law. The taxation system in
      Ukraine is evolving as the central government transforms itself from a command
      to a market-oriented economy. Based on current tax law and the United States
—
Ukraine income tax treaty, the income tax paid in Ukraine will be creditable
      tax
      when determining the Company’s US income taxes payable, if any.




**Critical
      Accounting Policies and Recent Accounting Pronouncements**




We
      have
      identified the policies below as critical to our business operations and the
      understanding of our financial statements.  The impact of these policies
      and associated risks are discussed throughout Management’s Discussion and
      Analysis where such policies affect our reported and expected financial
      results.  A complete discussion of our accounting policies is included in
      Note 1 of the Notes to Consolidated Financial Statements.




Functional
      and Reporting Currency




The
      reporting currency of the accompanying consolidated financial statements is
      the
      US dollars. Ukrainian entities use Ukrainian Hrivna (UAH) as their functional
      currency since their most revenues and operating expenses are denominated in
      Ukrainian Hrivnas. The Ukrainian Hrivna is not a fully convertible currency
      outside of the territory of the Ukraine. The translation of Hrivna denominated
      assets and liabilities into US dollars for the purpose of these consolidated
      financial statements does not indicate that the Company could or will in the
      future realize or settle in US dollars the translated values of these
      assets and liabilities.




The
      prevailing exchange rate at December 31, 2005 was approximately 1 U.S.
      dollar to 5.050 Ukrainian Hrivnas. For the years ended December 31, 2005 and
      2004, the average exchange rate for 1U.S. dollar was 5.1116 and 5.3064,
      Ukrainian Hrivnas, respectively.




Principles
      of Consolidation




The
      consolidated financial statements incorporate the financial statements of
      Sunrise Energy Resources Inc. and other enterprises, where the Company, directly
      or indirectly exercises control. Control is achieved where the Company has
      the
      power to govern the financial and operating policies of an invested enterprise
      so as to obtain benefits from its activities.




All
      significant intercompany transactions, balances and unrealized gains (losses)
      on
      transactions are eliminated on consolidation.




Use
      of
      Estimates




The
      preparation of financial statements in accordance with United States generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosures of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could materially differ from these
      estimates.




22
 *Table
              of Contents*




Oil
      and Gas Reserve Information




At
      present, the Company does not have proved reserves as defined in Rule 4-10(a)
      of
      Regulation S-X.




Successful
      Efforts Method of Accounting




We
      will
      follow the successful efforts method of accounting for our investments in oil
      and gas properties, as more fully described in Note 1 of the Notes to
      Consolidated Financial Statements following the completion of construction
      works
      on well #21 and launching it into commercial production.  This accounting
      method has a pervasive effect on our reported financial position and results
      of
      operations.




Revenue
      Recognition




For
      revenue from product sales, the Company recognizes revenue in accordance with
      SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial
      Statements” (“SAB 104”). SAB 104 requires that four basic criteria must be met
      before revenue can be recognized: (1) persuasive evidence of an arrangement
      exists; (2) delivery has occurred; (3) the selling price is fixed and
      determinable; and (4) collectibility is reasonably assured.




Criterion
      (1) is met as every delivery is covered by a separate contract and the title
      passes to the customer only upon customer’s acceptance at point of destination,
      which is in compliance with criterion (2). Determination of criteria (3) and
      (4)
      are based on management’s judgments regarding the fixed nature of the selling
      prices of the products delivered and the collectibility of those amounts.
      Provisions for discounts and rebates to customers, and other adjustments are
      provided for in the same period the related sales are recorded. The Company
      defers any revenue for which the product has not been delivered and accepted
      by
      its customers. In accordance with the Company’s standard contract terms, once
      delivered and accepted the product cannot be returned and no claims can be
      presented to the Company. The Company recognizes revenue on gross
      basis.




**Going
      Concern**




The
      Company’s consolidated financial statements have been presented on the basis
      that it is a going concern, which contemplates the realization of assets and
      satisfaction of liabilities in the normal course of business. As shown in the
      consolidated financial statements, the Company incurred a net loss of $586,795
      during the year ended December 31, 2005, and, as of December 31, 2005, the
      Company’s current liabilities exceeded its current assets by $1,493,592.
      Additionally, to fully develop the area covered by the Licenses, the Company
      needs substantial additional funding.




In
      view
      of the matters described in the preceding paragraph, recoverability of a major
      portion of the recorded asset amounts shown in the accompanying balance sheet
      is
      dependent upon continued operations of the Company, which in turn is dependent
      upon the Company’s ability to meet its financing requirements on a continuing
      basis, primarily by the Company’s ability to raise additional funds in equity
      markets, and to succeed in its future operations. The consolidated financial
      statements do not include any adjustments relating to the recoverability and
      classification of recorded asset amounts or amounts and classification of
      liabilities that might be necessary should the Company be unable to continue
      its
      existence.




Management
      has taken the following steps to revise its operating and financial
      requirements, which it believes are sufficient to provide the Company with
      the
      ability to continue in existence.


·
              The
                  Company plans to continue to raise additional capital in the equity
                  markets as significant source of funding the development of the
                  Licenses.
 
 ·
              Based
                  on its expected production capabilities from the expenditures that
                  will be
                  made as a result of equity and debt financing, the Company believes
                  that
                  it could generate adequate cash flow. Additional funding requirements
                  may
                  also be necessary before the Company is able to rely solely on
                  the
                  production from the licensed properties for the cash flow of the
                  Company.




Accordingly,
      our independent auditors included an explanatory paragraph in their report
      on
      the December 31, 2005 financial statements regarding concerns about our ability
      to continue as a going concern. Our financial statements contain additional
      note
      disclosures describing the circumstances that lead to this disclosure by our
      independent auditors.




23
 *Table
            of Contents*




**ITEM 7.**
            **FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA**




Our
      consolidated financial statements are stated in United States dollars and are
      prepared in accordance with United States generally accepted accounting
      principles. The Report of Independent Registered Public Accounting Firm, John
      A.
      Braden & Co.P.C., of the consolidated financial statements of Sunrise Energy
      Resources, Inc., and its subsidiary (the “Company”) for the year ended December
      31, 2005 is included herein immediately preceding the audited consolidated
      financial statements for the respective periods.




* *Former
      name of Sunrise Energy Resources, Inc. as filed in information statement on
      from
      14f-1 on January 3, 2005, pursuant to Section 14fc of the Act reporting the
      Company’s plan to complete the acquisition and modify the control of the Company
      and the make up of the Board of Directors.*




**SUNRISE
      ENERGY RESOURCES, INC.**


**CONSOLIDATED
      FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**





IndexReport
                of Independent Registered Public Accounting Firm - John A. Braden
&
                Co., P.C
            
            F-1Consolidated
                Balance Sheets
            
            F-2Consolidated
                Statement of Operations and Comprehensive Loss
            
            F-3Consolidated
                Statements of Changes in Stockholders’ Equity (Capital
                Deficit)
            
            F-4Consolidated
                Statements of Cash Flows
            
            F-5Notes
                to the Consolidated Financial Statements
            
            F-5-F-27




24
 *Table
            of Contents*




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




TO
      THE
      DIRECTORS AND STOCKHOLDERS OF SUNRISE ENERGY RESOURCES, INC AND
      SUBSIDIARIES:




We
      have
      audited the accompanying consolidated balance sheet of Sunrise Energy Resources,
      Inc. and Subsidiaries (“the Company”) as of December 31, 2005, and the related
      consolidated statements of operations and comprehensive loss, changes in
      stockholders’ equity and cash flows for the years ended December 31, 2005 and
      December 31, 2004. 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 audit.




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 audit 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 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 audit provides
      a
      reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Sunrise Energy Resources, Inc
      and
      Subsidiaries at December 31, 2005, and the related consolidated results of
      their
      operations and cash flows for the years ended December 31, 2005 and December
      31,
      2004, 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 shown in the financial
      statements, the Company incurred a net loss of $586,795 during the years ended
      December 31, 2005, and, as of December 31, 2005, the Company’s current
      liabilities exceeded its current assets by $1,493,592. These factors, among
      others, including the Company’s ability to develop the properties for which the
      Company has licenses, as discussed in Note 1 to the financial statements, raise
      substantial doubt about the Company’s ability to continue as a going concern.
      Management’s plans in regard to these matters are also described in Note 1. The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.




As
        stated
        in footnote 27, the consolidated statement of changes in stockholder’s equity
        has been restated to give effect to the reverse acquisition on a proforma
        basis
        as of 2003 and the statement of cashflows for 2004 has been restated to
        reclassify transactions related to the reverse
        acquisition.


John
        A.
        Braden & Company, PC
  Houston,
        Texas
 March
          27,
          2006 except for note 27 which is as of January 23, 2007


25
 *Table
            of Contents*




**SUNRISE
          ENERGY RESOURCES INC.**
 **CONSOLIDATED
          BALANCE SHEETS (Restated)**
 **(Expressed
          in US Dollars)**


**December
                  31, 2005**ASSETSCURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              3,419Accounts
                  receivable - related party
              
              
              720,797Other
                  accounts receivable and prepayments
              
              
              760,797Other
                  accounts receivable - related party
              
              
              122,574Inventories
              
              
              159,266Taxes
                  receivable
              
              
              185,736Total
                  current assets
              
              
              1,952,589NONCURRENT
                  ASSETSProperty,
                  plant and equipment, net
              
              
              951,025Long-term
                  financial investments
              
              
              1,980Deferred
                  tax asset
              
              
              73,319**TOTAL
                  ASSETS**
              
              **$**
              **2,978,913**LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              218,104Accounts
                  payable - related party
              
              
              592,554Taxes
                  payable
              
              
              905,731Short
                  term bank loans
              
              
              514,851Short
                  term notes payable
              
              
              19,598Other
                  accounts payable and accruals
              
              
              414,577Other
                  accounts payable - related party
              
              
              244,191Prepayments
                  for oil and gas
              
              
              500,867Interest
                  payable
              
              
              17,711Profit
                  interest payable
              
              
              17,997Total
                  current liabilities
              
              
              3,446,181Long-term
                  payable
              
              
              745,247Commitments
                  and Contingencies (Note 23)
              
              
              --STOCKHOLDERS’
                  EQUITYCommon
                  Stock, $.001 par value, 75,000,000 authorized, 17,000,000 issued
                  and
                  outstanding
              
              
              17,000Additional
                  Paid-in-Capital
              
              
              (15,623
              )Retained
                  earnings (Accumulated deficit)
              
              
              (1,181,700
              )Accumulated
                  other comprehensive income - foreign currency
              
              
              (32,192
              )Total
                  stockholders' equity (deficit)
              
              
              (1,212,515
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              **$**
              **2,978,913**




26
 *Table
            of Contents*





**SUNRISE
      ENERGY RESOURCES INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
      LOSS**


**(Expressed
      in US Dollars except share amounts)**





**For
                the years ended December 31****2005**
            
            **2004**REVENUESProduced
                oil & gas
            
            $
            1,762,631
            
            $
            196,891Purchased
                oil & gas
            
            
            127,849
            
            
            -1,890,480
            
            
            196,891COST
                OF SALES
            
            
            (127,561
            )
            
            -1,762,919
            
            
            196,891Operating
                expenses
            
            
            (1,010,008
            )
            
            (182,870
            )Depreciation
                expense
            
            
            (318,109
            )
            
            (256,528
            )Other
                operating expenses
            
            
            (83,933
            )
            
            (310,643
            )Sales,
                general and administrative expenses
            
            
            (715,885
            )
            
            (126,406
            )OPERATING
                LOSS
            
            
            (365,016
            )
            
            (679,556
            )OTHER
                INCOME (EXPENSE)Interest
                income
            
            
            484
            
            
            80,328Interest
                expense
            
            
            (142,527
            )
            
            (51,036
            )Foreign
                exchange (loss) gain
            
            
            (1,254
            )
            
            321Other
                expenses
            
            
            (16,018
            )
            
            (94
            )(LOSS)
                INCOME BEFORE TAX
            
            
            (524,331
            )
            
            (650,037
            )INCOME
                TAX
            
            
            (62,464
            )
            
            57,556NET
                LOSS
            
            $
            (586,795
            )
            $
            (592,481
            )Other
                comprehensive lossForeign
                currency translation loss
            
            
            (32,192
            )
            
            -COMPREHENSIVE
                LOSS
            
            
            (618,987
            )
            
            (592,481
            )BASIC
                LOSS (EARNINGS) PER SHARE
            
            $
            (0.04
            )
            $
            (0.04
            )WEIGHTED
                AVERAGE COMMON SHARES OUTSTANDING
            
            
            17,000,000
            
            
            17,000,000





27
 *Table
            of Contents*




**SUNRISE
            ENERGY RESOURCES INC.**
 **CONSOLIDATED
            STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
            (RESTATED)**
 **(CAPITAL
            DEFICIT)**
 **(Expressed
            in US Dollars except share amounts)**
  **Common**
                        
                        **Accumulated**
                        
                        **Retained**
                        
                        **Additional**
                        
                        **Total****Stock**
                        
                        **Other**
                        
                        **Earnings**
                        
                        **Paid-in**
                        
                        **Stockholder's****Comprehensive**
                        
                        
                        
                        **Capital**
                        
                        **Equity****Shares**
                        
                        **Amount**
                        
                        **(Loss)**
                        
                        **(Accumulated**
                        
                        
                        
                        **(Capital****Deficit)**
                        
                        
                        
                        **Deficit)****BALANCE,
                            DECEMBER 31, 2002 (RESTATED)**
                        
                        
                        **10,479,900**
                        
                        **$**
                        **10,480**
                        
                        
                        **-**
                        
                        **$**
                        **535,507**
                        
                        **$**
                        **(9,103**
                        **)**
                        **$**
                        **536,884**Net
                            (loss) for the year
                        
                        
                        -
                        
                        
                        -
                        
                        
                        
                        
                        
                        (487,045
                        )
                        
                        
                        
                        
                        (487,045
                        )**BALANCE,
                            DECEMBER 31, 2003 (RESTATED)**
                        
                        
                        **10,479,900**
                        
                        
                        **10,480**
                        
                        
                        **-**
                        
                        
                        **48,462**
                        
                        
                        **(9,103**
                        **)**
                        
                        **49,839**Common
                            Stock of the accounting target outstanding on the reverse
                            merger date**(RESTATED)**
                        
                        
                        6,520,100
                        
                        
                        6,520
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (6,520
                        )
                        
                        -Pre-acquisition
                            deficit of Sunrise Energy Resources, Inc.
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        $
                        (50,886
                        )
                        
                        -
                        
                        
                        (50,886
                        )Net
                            (loss) for the year
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (592,481
                        )
                        
                        -
                        
                        
                        (592,481
                        )**BALANCE,
                            DECEMBER 31, 2004**
                        
                        
                        **17,000,000**
                        
                        
                        **17,000**
                        
                        
                        **-**
                        
                        
                        **(594,905**
                        **)**
                        
                        **(15,623**
                        **)**
                        
                        **(593,528**
                        **)**Net
                            loss for the year
                        
                        
                        **-**
                        
                        
                        **-**
                        
                        
                        -
                        
                        
                        (586,795
                        )
                        
                        -
                        
                        
                        (586,795
                        )Comprehensive
                            loss for the year
                        
                        
                        **-**
                        
                        
                        **-**
                        
                        
                        (32,192
                        )
                        
                        -
                        
                        
                        -
                        
                        
                        (32,192
                        )**BALANCE,
                            DECEMBER 31, 2005**
                        
                        
                        **17,000,000**
                        
                        **$**
                        **17,000**
                        
                        **$**
                        **(32,192**
                        **)**
                        **$**
                        **(1,181,700**
                        **)**
                        
                        **(15,623**
                        **)**
                        **$**
                        **(1,212,515**
                        **)**


28
 *Table
            of Contents*




**SUNRISE
          ENERGY RESOURCES INC.**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS (RESTATED)**
 **(Expressed
          in US Dollars)**
  **For
                      the years ended December 31****2005**
                  
                  **2004**
                    **(RESTATED)****CASH
                      PROVIDED BY (USED IN) OPERATING ACTIVITIES:**Net
                      loss
                  
                  $
                  (586,795
                  )
                  $
                  (592,481
                  )Adjustments
                      to reconcile net loss to net cash used in operating
                      activities:Depreciation
                      expense
                  
                  
                  318,109
                  
                  
                  256,528Loss
                      on disposal of fixed assets
                  
                  
                  27,199
                  
                  
                  18,541Provision
                      for doubtful accounts
                  
                  
                  58,542
                  
                  
                  4,910Deferred
                      tax (gain)
                  
                  
                  (56,101
                  )
                  
                  (57,669
                  )Net
                      accrued interest
                  
                  
                  3,964
                  
                  
                  (5,022
                  )Changes
                      in assets and liabilities:(Increase)
                      decrease in accounts receivable
                  
                  
                  (70,892
                  )
                  
                  251,744(Increase)
                      in other accounts receivable and  prepayments
                  
                  
                  (242,679
                  )
                  
                  (439,482
                  )(Increase)
                      decrease in inventories
                  
                  
                  (123,235
                  )
                  
                  22,569(Increase)
                      decrease in taxes receivable
                  
                  
                  (61,700
                  )
                  
                  47,048Increase
                      (decrease) in accounts payable
                  
                  
                  204,466
                  
                  
                  (329,785
                  )Increase
                      in taxes payable
                  
                  
                  149,947
                  
                  
                  260,893Increase
                      in other accounts payable and accruals
                  
                  
                  384,742
                  
                  
                  161,741Increase
                      in prepayments for oil and gas
                  
                  
                  416,049
                  
                  
                  84,818Increase in
                      profit interest payable
                  
                  
                  17,711
                  
                  
                  --439,327
                  
                  
                  (315,647
                  )**CASH
                      PROVIDED BY FINANCING ACTIVITIES:**Long
                      term loans received
                  
                  
                  279,900
                  
                  
                  --Short
                      term loans received
                  
                  
                  --
                  
                  
                  489,974279,900
                  
                  
                  489,974**CASH
                      USED IN INVESTING ACTIVITES:**Purchase
                      of property, plant and equipment
                  
                  
                  (747,599
                  )
                  
                  (163,489
                  )Cash
                      inflow on the acquisition of Sunrise Energy Resources Inc.
                  
                  
                  --
                  
                  
                  1,942(747,599
                  )
                  
                  (161,547
                  )**EFFECT
                      OF EXCHANGE RATE CHANGES**
                  
                  
                  16,709
                  
                  
                  343**INCREASE
                      (DECREASE) IN CASH:**
                  
                  
                  (11,663
                  )
                  
                  13,123**CASH,
                      at the beginning of the period**
                  
                  
                  15,082
                  
                  
                  1,959**CASH,
                      at the end of the period**
                  
                  
                  3,419
                  
                  $
                  15,082**INCOME
                      TAX PAID**
                  
                  $
                  117,224
                  
                  $
                  113**INTEREST
                      PAID**
                  
                  $
                  123,157
                  
                  $
                  51,046




29
 *Table
            of Contents*





**1.**
            **NATURE
                OF BUSINESS**




All
      of
      the operating activities of Sunrise Energy Resources Inc. are conducted through
      its wholly owned subsidiary, TOV Energy-Servicing Company Esko Pivnich (“Esko
      Pivnich”), a Ukrainian Closed Joint Stock Company (CJSC) established on January
      20, 2000 under the laws of Ukraine. The primary business activities of Esko
      Pivnich are oil and gas exploration, production and distribution in the country
      of Ukraine.




The
      current principal activities of Esko Pivnich are conducted in the form of
      production sharing agreements (PSA), which as of December 31, 2005
      included the following:




**Operating
                Entity**
            
            **Principal
                Activity**
            
            **Country
                of incorporation**
            
            **Capital
                Contribution,**
              **%**
            
            **Profit
                Sharing,**
              **%**Esko
                Pivnich
            
            Marketing
                and distribution of crude oil and natural gas
            
            Ukraine
            
            -
            
            -PSA
                # 01-SD dated April 26, 2000
            
            Extraction
                of crude oil and natural gas
            
            Ukraine
            
            100%
            
            60%PSA
                # 35/970-SD dated August 19, 2004
            
            Extraction
                of crude oil and natural gas
            
            Ukraine
            
            80%
            
            80%




In
      addition, during the periods presented, the Company purchased and resold oil
      and
      gas as a trading company.




Sunrise
      Energy Resources Inc. is currently registered at the following address: 551
      Fifth Avenue, Suite 601, New York, New York 10017.




Esko
      Pivnich is registered at the following address: 10a Rileeva St., Kiev,
      Ukraine.  The
      company conducts its operations from the same address.




The
      number of employees of the Company at December 31, 2005 and 2004 was 46 and
      20,
      respectively.




**2.**
            **PRESENTATION
                OF CONSOLIDATED FINANCIAL STATEMENTS**




***Basis
      of Presentation***  ***-*** These
      consolidated financial statements have been prepared by the Company in
      accordance with accounting principles generally accepted in the United States
      of
      America (“US GAAP”).




***Going
      concern —*** The
      Company’s consolidated financial statements have been presented on the basis
      that it is a going concern, which contemplates the realization of assets and
      satisfaction of liabilities in the normal course of business. As shown in the
      consolidated financial statements, the Company incurred a net loss of $586,795
      during the year ended December 31, 2005, and, as of December 31, 2005, the
      Company’s current liabilities exceeded its current assets by $1,493,592.
      Additionally, to fully develop the area covered by the Licenses, the Company
      needs substantial additional funding.






In
      view
      of the matters described in the preceding paragraph, recoverability of a major
      portion of the recorded asset amounts shown in the accompanying balance sheet
      is
      dependent upon continued operations of the Company, which in turn is dependent
      upon the Company’s ability to meet its financing requirements on a continuing
      basis, primarily by the Company’s ability to raise additional funds in equity
      markets, to maintain present financing, and to succeed in its future operations.
      The consolidated financial statements do not include any adjustments relating
      to
      the recoverability and classification of recorded asset amounts or amounts
      and
      classification of liabilities that might be necessary should the Company be
      unable to continue in existence.




Management
      has taken the following steps to revise its operating and financial
      requirements, which it believes are sufficient to provide the Company with
      the
      ability to continue in existence.





30
 *Table
            of Contents*




o
            The
                Company plans to continue to raise additional capital in the equity
                markets as significant source of funding the development of the
                Licenses.




o
            Based
                on its expected production capabilities from the expenditures that
                will be
                made as a result of equity and debt financing, the Company believes
                that
                it could generate adequate cash flow. Additional funding requirements
                may
                also be necessary before the Company is able to rely solely on the
                production from the licensed properties for the cash flow of the
                Company.




***Use
      of Estimates and Assumptions***  ***-*** The
      preparation of consolidated financial statements in conformity with US GAAP
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities, revenues and expenses and the disclosure
      of
      contingent assets and liabilities. Due to the inherent uncertainty in making
      those estimates, actual results reported in future periods could differ from
      such estimates.




***Functional
      and Reporting Currency -*** The
      reporting currency of the accompanying consolidated financial statements is
      the
      US dollars. Ukrainian entities use Ukrainian Hrivna (UAH) as their functional
      currency since their most revenues and operating expenses are denominated in
      Ukrainian Hrivnas. The Ukrainian Hrivna is not a fully convertible currency
      outside of the territory of the Ukraine. The translation of Hrivna denominated
      assets and liabilities into US dollars for the purpose of these consolidated
      financial statements does not indicate that the Company could or will in the
      future realize or settle in US dollars the translated values of these
      assets and liabilities.





The
      prevailing exchange rate at December 31, 2005 was approximately 1 U.S.
      dollar to 5.0500 Ukrainian Hrivnas. For the years ended December 31, 2005 and
      2004, the average exchange rate for 1U.S. dollar was 5.1116 and 5.3064 Ukrainian
      Hrivnas, respectively.




**3.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**




***Basis
      of Consolidation -*** The
      consolidated financial statements incorporate the financial statements of
      Sunrise Energy Resources Inc. and other enterprises, where the Company, directly
      or indirectly exercises control. Control is achieved where the Company has
      the
      power to govern the financial and operating policies of an investee enterprise
      so as to obtain benefits from its activities. All significant intercompany
      transactions, balances and unrealized gains (losses) on transactions are
      eliminated on consolidation.




***Revenue
      Recognition*** **** ***-*** **** For
      revenue from product sales, the Company recognizes revenue in accordance with
      SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial
      Statements” (“SAB 104”). SAB 104 requires that four basic criteria must be met
      before revenue can be recognized: (1) persuasive evidence of an arrangement
      exists; (2) delivery has occurred; (3) the selling price is fixed and
      determinable; and (4) collectibility is reasonably assured.




Criterion
      (1) is met as every delivery is covered by a separate contract and the title
      passes to the customer only upon customer’s acceptance at point of destination,
      which is in compliance with criterion (2). Determination of criteria (3) and
      (4)
      are based on management’s judgments regarding the fixed nature of the selling
      prices of the products delivered and the collectibility of those amounts.
      Provisions for discounts and rebates to customers, estimated returns and
      allowances, and other adjustments are provided for in the same period the
      related sales are recorded. The Company defers any revenue for which the product
      has not been delivered and accepted by its customers. In accordance with the
      Company’s standard contract terms, once delivered and accepted the product
      cannot be returned and no claims can be presented to the Company. The Company
      recognizes revenue on gross basis.




The
          Company has revenue from the sale of petroleum products produced from the
          properties for which the Company has production sharing agreements (Note
          4 and
          Note 23) and from products purchased from third parties. At present, the
          Company
          has been unable to estimate the quantity of its proved reserves. We plan
          to
          estimate our proved reserves for Karaikozovsk property once we complete
          Well #21
          of Karaikozovsk block.
 
 ***Property,
          Plant and Equipment*** - As of
          the dates of the financial statements most assets capitalized are directly
          related to above ground storage, distribution and production facilities.
          The
          Company has adopted the policy of accounting for oil and gas properties
          using
          the successful efforts method of accounting whereby property acquisitions,
          successful exploratory wells, all development costs, and support equipment
          and
          facilities are capitalized. Unsuccessful exploratory wells are expensed
          when a
          well is determined non-productive. Other exploratory expenditures, including
          geological and geophysical costs are expensed as incurred. Depreciation,
          depletion and amortization of capitalized costs is calculated based on
          useful
          economic life of the resulting assets. Capitalized Lease/Concession acquisition
          costs are depreciated over the life of the related drilling
          rights.




31
 *Table
            of Contents*


Production
        and related overhead costs are expensed as incurred. Depreciation of assets
        not
        directly associated with oil production and certain workover costs on properties
        has been calculated on a straight-line basis over the economic lives of such
        assets, estimated to be in the following ranges:




Property
                    and Equipment
              2
                  yearsOffice
                  Improvements
              4
                  -
                  5 yearsComputer
                  Equipment
              3
                  years




The
      gain
      or loss arising on the disposal or retirement of an asset is determined as
      the
      difference between the sales proceeds and the carrying amount of the asset
      and
      is recognized in the income statement.




In
      accordance with SFAS 144, we test our long-lived assets for impairment by
      comparing the carrying value of the assets with the undiscounted expected
      cashflows from the investments. In the event, the aggregate undiscounted
      expected cashflows from the investments are below the carrying value of the
      above investments, the unamortized costs of such fixed assets will be reduced
      to
      their fair value. Simultaneously, we will recognize the impairment loss as
      the
      amount by which the fair value of the investments exceeds their carrying
      value.




We
          assess
          unproved properties on an annual basis to determine whether they have been
          impaired. If we drill a dry well on a property and elect to abstain from
          further
          drilling on this property, the above property will be deemed impaired and
          we
          will recognize the impairment loss. Costs related to infrastructure are
          evaluated by the management based on continuing valuation and future benefit
          to
          the Company. If such assets are determined to have lost value, we will
          recognize
          impairment at the time.
 
 As
          of
          December 31, 2005 and December 31, 2004 the Company had capitalized the
          following exploratory well costs that were pending the determination of
          proved
          reserves.
 2005
                
                2004Beginning
                    balance at January 1
                
                $
                116,031
                
                $
                -Additions
                        to capitalized exploratory well costs pending the
                        determination of proved reserves
                
                
                137,220
                
                
                116,031Reclassifications
                    to wells, facilities, and equipment based on the determination
                    of proved
                    reservesEnding
                    balance at December 31
                
                **$**
                **253,250**
                
                **$**
                **116,031**
 
 The
          following table provides an aging of capitalized exploratory well costs
          based on
          the date the drilling was completed and the number of projects for which
          exploratory well costs have been capitalized for a period greater than
          one year
          since the completion of the drilling.
 2005
                
                2004Capitalized
                        exploratory well costs that have been capitalized
                        for a period of one year or less
                
                $
                137,220
                
                $
                116,031Capitalized
                        exploratory well costs that have been capitalized
                        for a period greater than one year
                
                
                116,031Balance
                    at December 31
                
                **$**
                **253,250**
                
                **$**
                **116,031**Number
                        of projects that have exploratory well costs that have
                        been capitalized for a period greater than one year
                
                
                1
                
                
                1
 
 The
          above
          disclosures do not include the drilling costs of Well #21 of Karaikozovsk
          property that was not completed as at December 31, 2005. Well #2 and #3
          are
          deemed to be part of the same project as the wells will be operated with
          shared
          infrastructure once Well #21 is completed, We intend to estimate the reserves
          of
          Karaikozovsk block upon completion of drilling of Well
          #21,




32
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              of Contents*


***Leasing***  ***-*** Leases
      are classified as finance leases whenever the terms of the lease transfer
      substantially all the risk and rewards of ownership to the lessee. All other
      leases are classified as operating leases.




There
      were no assets held under financial leases. Operating leases are expensed in
      the
      period in which they are incurred.




***Inventories***  ***-*** Inventories are stated at the lower of cost or net realizable value. Cost
      comprises direct cost of extracted oil and gas, its transportation and handling
      physically in the pipelines or storages prior to the delivery for sale.
      Inventory also includes various supplies and spare parts.




Cost
      is
      calculated using weighted average method. Net realizable value represents the
      estimated selling price less all estimated costs to completion and costs to
      be
      incurred in marketing, selling and distribution.




***Accounts
      Receivable -*** Accounts
      receivable are stated at their net realizable value after deducting provisions
      for uncollectible amounts.




***Cash
      and Cash Equivalents -*** Cash
      include petty cash and cash held on current bank accounts. Cash equivalents
      include short-term investments with an original maturity of three months or
      less
      that are readily convertible to known amount of cash which are subject to
      insignificant risk of changes in value. Cash and cash equivalents as of December
      31, 2004 consisted mainly of the UAH and USD denominated current
      accounts.




***Loans
      and Other Borrowings***  ***-*** All
      loans and borrowings are recorded at the proceeds received, net of direct issue
      costs.




***Borrowing
      Costs***  ***-*** Borrowing costs are recognized as an expense in the period in which they are
      incurred.




***Trade
      and Other Payables***  ***-*** Liabilities for trade and other amounts payable are stated at their nominal
      value.




***Value
      added tax on purchases and sales -*** Value
      added taxes (VAT) related to sales is payable to tax authorities upon collection
      of receivables from customers. VAT on purchases is offset against VAT collected
      from sales. The tax authorities permit the settlement of VAT on a net basis. VAT
      related to sales and purchases which have not been settled at the balance sheet
      date, (VAT deferred) is recognized in the balance sheet on a gross basis and
      disclosed separately as a current asset and liability. Where provision has
      been
      made against debtors deemed to be uncollectible bad debt expense is recorded
      for
      the gross amount of the debtor, including VAT. The related VAT deferred
      liability is maintained until the debtor is settled or until the debtor is
      written off for statutory accounting purposes.




***Income
      Taxes***  ***-*** Income
      tax has been computed based on the results for the year as adjusted for items
      that are non-assessable or non-tax deductible.




The
      Company has adopted Financial Accounting Standards No. 109 (“SFAS 109”), under
      which the deferred tax is accounted for using the balance sheet liability method
      in respect of temporary differences arising from differences between the
      carrying amount of assets and liabilities in the consolidated financial
      statements and the corresponding tax basis used in the computation of taxable
      profit. Deferred tax liabilities are generally recognized for all taxable
      temporary differences and deferred tax assets are recognized to the extent
      that
      it is probable that taxable profits will be available against which deductible
      temporary differences can be utilized. Deferred tax assets and liabilities
      are
      offset when they relate to income taxes levied by the same taxation authority
      and the Company intends to settle its tax assets and liabilities on a net
      basis.




Deferred
      tax is calculated at rates that are expected to apply to the period when the
      asset is realized or the liability is settled. It is charged or credited to
      the
      income statement, except when it relates to items credited or charged directly
      to equity, in which case the deferred tax is also dealt with in
      equity.




***Fair
      value of Financial Instruments —*** The
      Company’s financial instruments consist of cash, accounts receivable, accounts
      payable and accrued liabilities. Unless otherwise noted, it is management’s
      opinion that the Company is not exposed to significant interest, currency or
      credit risks arising from these financial instruments. The fair value of
      financial instruments approximate their carrying values due to the immediate
      or
      short term maturity of these financial instruments.




33
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***Earnings
      (Loss) per Share -*** Earnings
      (loss) per share are computed in accordance with SFAS No. 128, “Earnings Per
      Share”. Basic earnings (loss) per share are calculated by dividing the net
      income (loss) available to common stockholders by the weighted average number
      of
      shares outstanding during the year. Diluted earnings per share reflect the
      potential dilution of securities that could share in earnings of an entity.
      In a
      loss year, dilutive common equivalent shares are excluded from the loss per
      share calculation as the effect would be anti-dilutive.




Because
      the reverse merger was effective December 31, 2004 the 2004 earnings (loss)
      per
      share is calculated as if the total shares as of the end of the year were
      outstanding during the entire year. Prior period earnings (loss) per share
      are
      not presented.




***Comprehensive
      Income -*** Statement
      of SFAS 130, “Reporting Comprehensive Income,” establishes standards for
      reporting and displaying of comprehensive income, its components and accumulated
      balances. Comprehensive income is defined to include all changes in equity
      except those resulting from investments by owners and distributions to owners.
      Among other disclosures, SFAS 130 requires that all items that are required
      to
      be recognized under current accounting standards as components of comprehensive
      income be reported in a financial statement that is displayed with the same
      prominence as other financial statements. Foreign exchange measurement gains
      and
      losses of the Company are reflected in Comprehensive gains and
      losses.




Prior
      to
      September 30, 2005, foreign exchange measurement losses were immaterial. They
      have been included in net income and loss as of December 31, 2004. In 2005
      they
      are shown as a factor of comprehensive income.




***Retirement
      Benefit Costs***  ***-*** The
      operating divisions of the Company situated in Ukraine contribute to the state
      pension, medical and social insurance and employment funds on behalf of all
      its
      current employees. Any related expenses are recognized in the income statement
      as incurred.




***Segment
      Reporting***  ***-*** The
      Company’s business operations are located in Ukraine and relate primarily to
      marketing and distribution of crude oil and natural gas products. Therefore,
      business activities are subject to the same risks and returns and addressed
      in
      the consolidated financial statements of the Company as one reportable
      segment.




***Reclassifications
      -*** Certain
      reclassifications were done to the 2003 consolidated financial statements in
      order to present comparative figures in line with 2005 and 2004 consolidated
      financial statements.




***New
      accounting pronouncements*** ** —
In
      May
      2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections.
      SFAS No. 154 replaces Accounting Principles Board Opinion No. 20, Accounting
      changes, and SFAS No. 3, Reporting Accounting Changes in Internal Financial
      Statements, and changes the requirements for the accounting for and reporting
      of
      a change in accounting principle. SFAS No. 154 requires retrospective
      application of changes in accounting principle to the prior periods` financial
      statements, unless it is impracticable to determine either the period-specific
      effects or the cumulative effect of the change. SFAS No. 154 is effective for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. The Company adopts SFAS No. 154 on January 1, 2006.
      Any
      impact on the Company’s consolidated results of operations and earnings per
      share will be dependent on the amount of any accounting changes or corrections
      of errors whenever recognized.




**4.**
            **PRODUCTION
                SHARING AGREEMENTS**




***PSA
      # 01-SD dated April 26, 2000***




In
          August
          2000 the Company together with the state owned geological enterprise
          Poltavaneftegasgeologiya executed a production sharing agreement (“PSA”) to
          start exploration and development of Karaikozovsk field located in Krasnokutsk
          area of Kharkov region. Under the terms of PSA Poltavaneftegasgeologiya
          acted as
          the holder of the main geological and exploration licenses to develop
          Karaikozovsk field and the Company was a major investor, having contributed
          into
          the establishment of PSA approximately $596,188.


In
      November 2000 a subsidiary of JSC Ukrneft, Okhtirkaneftegas, joined the PSA.
      Okhtirkaneftegas owned two wells in Karaikozovsk area, the operational usage
      of
      which were contributed into the PSA. Also, Okhtirkaneftegas was to provide
      PSA
      with certain exploration and capital repair services to be paid at external
      market rates.




In
      May
      2003, due to the expiration of main geological and exploration licenses held
      by
      Poltavaneftegasgeologiya, all exploration and development activities on
      Karaikozovsk’s field were temporarily suspended.




34
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              of Contents*


***PSA
      # 35/970-SD dated August 19, 2004***


The
          Company filed an application with the Ukrainian State Committee of Mineral
          Resources to continue the exploration and development of Karaikozovsk field
          and
          in July 2004 the Company obtained the main geological and exploration license
          for the period of 5 years.
 
 In
          August
          2004 the Company together with Okhtirkaneftegas, contributed approximately
          $1,503 and $376 into the establishment of new PSA to continue exploration
          and
          development of Karaikozovsk field.




**5.**
              **ACCOUNTS
                  RECEIVABLE**related party


Accounts
      receivable as of December 31, 2005, consisted of the following:




**12/31/2005**CJSC
                Infox, related party
            
            
            720,797**Total**
            
            **$**
            **720,797**




Accounts
      receivable as of December 31, 2005 consists of $720,797 receivable from CJSC
      Infox, a related party that resulted from several crude oil shipments which
      took
      place in 2004 and 2003. No provision for bad debts has been recorded for these
      accounts. Management of the Company believes this amount will be paid during
      2006.




**6****.**
            **OTHER
                ACCOUNTS RECEIVABLE AND PREPAYMENTS**




Other
      accounts receivable and prepaids as of December 31, 2005 were as
      follows:




**12/31/2005****Other
                accounts receivable and prepayments, net**
            
            
            **760,797**Pari,
                related party
            
            
            122,574**Total**
            
            
            **883,371**





Other
      accounts receivable and prepayments as at December 31, 2005 is comprised mostly
      of advances paid to Vixen JLM and Okhtirkaneftegas in amount of $511,069 and
      $198,880, respectively .




The
      advance paid to Vixen JLM relates to well casings for construction workovers.
      The amount paid to Okhtirkaneftegas is currently pending litigation (Note 23),
      though no provision was accrued on it based on the management estimates of
      the
      possibility to offset such amount through cancellation of PSA# 01-SD agreement
      with Okhtirkaneftegas during 2006.




**7.**
            **INVENTORIES**




Inventories
      as of December 31, 2005 consisted of the following:




**12/31/2005**Crude
                oil - at cost
            
            $
            130,159Other
                consumables and spare parts
            
            
            29,107**Total**
            
            **$**
            **159,266**





Inventories
      as of December 31, 2005 were represented by the balances of crude oil produced
      internally and crude oil purchased in amounts of 533 bbls and 2,190 bbls,
      respectively. Balance of crude oil purchased in amount of $112,014 was
      dispatched to customer on December 30, 2005. No revenue was recognized on this
      transaction in 2005 as the Company reflects revenue when the customer takes
      delivery. The respective amount was physically received by customer in 2006.
      The
      amount of $29,107 represents certain spare parts destined for technical
      maintenance of oil&gas facilities.




35
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**8.**
            **TAXES
                RECEIVABLE**




Taxes
      receivable as of December 31, 2005 consisted of the following:




**12/31/2005**VAT
                receivable
            
            $
            152,095Other
                tax prepaid
            
            
            33,641**Total**
            
            **$**
            **185,736**




Taxes
      receivable balance as of December 31, 2005 is represented by VAT receivable
      and
      other advance tax payments. VAT receivable was discounted at 15% annual rate
      based on average six months turnover period.




**9.**
            **PROPERTY,
                PLANT AND EQUIPMENT**




Property,
      plant and equipment as of December 31, 2005 consisted of the
      following:




**12/31/2005**Oil
                & gas facilities improvements and work over costs
            
            $
            1,761,265Office
                equipment
            
            
            14,072Construction
                in progress
            
            
            161,4161,936,753Accumulated
                Depreciation
            
            
            (985,728
            )**Net
                Book Value**
            
            **$**
            **951,025**




**10.**
            **LONG-TERM
                FINANCIAL INVESTMENT**




Long-term
      investment as of December 31, 2005 represents 10 common shares of JSC “Ukrneft”
at par value of 0.25 UAH accounted for at cost, which approximates their fair
      market value.




**11.**
            **INCOME
                TAX**




The
      Company’s provision for income tax for the year ended December 31, 2005 is as
      follows:




**12/31/2005**Current
                tax
            
            $
            117,224Deferred
                tax (gain)
            
            
            (54,760
            )**Total
                income tax expense (benefit)**
            
            **$**
            **62,464**




Deferred
      taxes reflect the net tax effects of temporary differences between the carrying
      amounts of assets and liabilities for financial reporting purposes and the
      amounts used for tax purposes.




36
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The
      change for the year in the Company’s deferred tax position is as
      follows:




**12/31/2005**Net
                asset (liability) at the beginning of the period
            
            $
            17,218Charged
                to income for the period
            
            
            56,101**Net
                asset at the end of the period**
            
            **$**
            **73,319**




The
      tax
      effect on the major temporary differences that give rise to the deferred tax
      assets as at December 31, 2005 is presented below:




**12/31/2005****Temporary
                differences that give rise to deferred tax assets**Provision
                for doubtful receivables
            
            $
            106,092Valuation
                of VAT receivable
            
            
            13,442Low
                value items written off
            
            
            9,175Difference
                in depreciable value of property, plant and equipment due to expensing
                in
                prior period allowed by Ukrainian law
            
            
            164,565**Total**
            
            **$**
            **293,274**




The
      deferred tax assets as at December 31, 2005, calculated at effective Ukrainian
      income tax rate of 25%, consist of the following:




**12/31/2005****Deferred
                tax assets**Provision
                for doubtful receivables
            
            $
            26,523Valuation
                of VAT receivable
            
            
            3,361Low
                value items written off
            
            
            2,294Difference
                in depreciable value of property, plant and equipment due to expensing
                in
                prior period under Ukrainian law
            
            
            41,141**Total**
            
            **$**
            **73,
                319**




The
      taxation charge for the year is different from that which would be obtained
      by
      applying the Ukrainian statutory income tax rate to the net loss before income
      tax. Below is a reconciliation of theoretical income tax at 25% to the actual
      benefit recorded in the Company’s income statement:




**12/31/2005**(Loss)
                before income tax and minority interest
            
            $
            (315,834
            )Theoretical
                income tax benefit at statutory rate of 25%
            
            
            (78,959
            )Adjustments
                due to:Tax
                effect of expenses that are not deductible in determining taxable
                profit
            
            
            141,423**Income
                tax (benefit)**
            
            **$**
            **62,464**




37
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As
      of
      December 31, 2005 the Company had no loss carry forward for Ukrainian statutory
      income tax purposes. For United States income tax purposes, the Company has
      a
      net operating loss carry forward of $1,174,000 which expires in 2024. As a
      result, the company has a deferred tax asset of $399,000 which is fully reserved
      because of the uncertainty of realization.




**12.**
            **ACCOUNTS
                PAYABLE**




Accounts
      payable as of December 31, 2005 consisted of the following:




**12/31/2005****Accounts
                payable**
            
            $
            218,104CJSC
                Infox, related party
            
            
            592,554**Total**
            
            **$**
            **810,658**




Third
      parties accounts payable balances as of December 31, 2005 were comprised mostly
      of payable to Okhtirkaneftegas and Kachanovskiy GPZ for services in amounts
      of
      $180,707 and $25,240, respectively.




The
      amount of $592,554 payable to the related party, CJSC Infox, as of December
      31,
      2005, is related to well reconstruction and repair services, provided by third
      party service companies and paid by CJSC Infox on behalf of the
      Company.




**13.**
            **TAXES
                PAYABLE**




Taxes
      payable as of December 31, 2005 and consisted of the following:




**12/31/2005**Fines
                and penalties
            
            $
            598,324VAT
            
            
            233,149Exploration
                tax
            
            
            33,684Profit
                tax
            
            
            29,526Resource
                Tax
            
            
            6,699Social
                insurance
            
            
            4,237Personal
                Income Tax
            
            
            112**Total**
            
            **$**
            **905,731**




Taxes
      payable as of December 31, 2005 represent fines and penalties accrued in
      connection with litigation described in Note 23, and VAT payable relates mostly
      to sales made in 2005. Based on the current Ukrainian law VAT payable may not
      be
      offset against VAT receivable.  As
      discussed in note 23, although the Company has prevailed in litigation about
      this issue. However, the government continues to appeal and has not reversed
      the
      liability. Consequently, the company has not reversed the liability and does
      not
      plan to do so until this issue is completely resolved.




**14.**
            **SHORT-TERM
                BANK LOANS**




Short-term
      bank loans as of December 31, 2005 consisted of the following:




**%,
                currency**
            
            **12/31/2005**AB
                Clearing House
            
            
            26%,
                Ukrainian Hrivnas
            
            $
            514,851**Total
                dated Sept. 17, 2004 due March, 2005**
            
            
            
            
            **$**
            **514,851**




38
 *Table
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  The
        loan
        from AB Clearing House outstanding as at December 31, 2005 is secured by
        the
        Company’s title to well casings purchased under an agreement dated July 20,
        2004.  Proceeds
        of the loans were used mainly for immediate working capital
        requirements.




Interest
      expense for the years ended December 31, 2005 was incurred in respect of the
      credit line facility obtained from AB Clearing House in the amount of $134,389,
      which represented the interest rate of 26% per annum (See also Notes 18 and
      26).




**15.**
            **SHORT
                TERM NOTES PAYABLE**




Notes
      payable as of December 31, 2005 consisted of the following:




**12/31/2005**Astark
            
            $
            14,258Sipay
            
            
            5,340**Total**
            
            **$**
            **19,598**




Promissory
      notes issued in November 2002 at no interest and payable not earlier than
      November 5, 2005 represent amounts payable to Astark and Sipay. As of
      December 31, 2005, Astark and Sipay, the issuers of the notes had not called
      for
      the repayment of the respective amounts. Any valuation adjustment due to the
      lack of interest has not been calculated, but it is not considered to have
      a
      material effect on the financial statements.




**16.**
            **OTHER
                ACCOUNTS PAYABLE AND ACCRUALS**




Other
      accounts payable and accruals as of December 31, 2005 consisted of the
      following:




**12/31/2005**Fort
                Trade PP
            
            
            46,337Other
                accounts payable
            
            
            368,240**Total**
            
            **$**
            **414,577**Advances
                from former shareholders
            
            
            244,191**Total**
            
            **$**
            **658,768**




Other
      accounts payable and accruals as of December 31, 2005 mostly consisted of
      non-recurring research and development, geological and exploration works, as
      well as payroll, short term advances to employees and other prepayments for
      repair and constructions services.





Amount
      of
      $244,191 represents advances from shareholders with no specific terms paid
      to
      the Company mostly during 2005 (See also Note 18).




**17.**
            **PREPAYMENTS
                FOR OIL AND GAS**




Prepayments
      for oil and gas as of December 31, 2005 consisted of the following:




**12/31/2005****Prepayments
                for oil and gas**
            
            **$**
            **500,867**




As
      at
      December 31, 2005 prepayments for oil and gas were mostly comprised of $248,303
      and $195,733 payable to Angronafta and Torpeda PP, respectively.




39
 *Table
              of Contents*


**18.**
            **INTEREST
                PAYABLE**




Interest
      payable as of December, 31 2005, consisted of the following:




**12/31/2005**Short
                term loan - AB Clearing House
            
            $
            11,369Interest
                accrued on advances received from former shareholders
            
            
            4,175Long
                term loan - Zaccam Trading, related party
            
            
            2,167**Total**
            
            **$**
            **17,711**




As
      of
      December 31, 2005, interest payable to AB Clearing House and Zaccam Trading
      relates to credit line facility at 26% per annum (See also Notes 14, 16, 20
      and
      26) and long term loan at 3% per annum (Note 20) obtained in 2005, respectively.
      Interest accrued on amounts payable to former shareholders represents weighted
      average LIBOR rate for the year ended 2005.




**19.**
            **PROFIT
                INTEREST PAYABLE**




Profit
      interest payable as of December 31, 2005 consisted of the
      following:




**12/31/2005**Poltavaneftegasgeologiya
            
            **$**
            **17,997**




Profit
      interest payable was accrued and partially paid by the Company in respect to
      profits earned for 2002 year in accordance with PSA # 01-SD dated April 26,
      2000
      (Note 23).




**20.**
            **LONG-TERM
                PAYABLE**




Long
      term
      payable as of December 31, 2005, consisted of the following:




**Issue
                date/ Effective date**
            
            **Due
                not earlier than**
            
            **12/31/2005**Fort
                Trade
            
            
            Nov,
                2004
            
            
            Nov-
                2009
            
            $
            465,347Zaccam
                Trading, Ltd.
            
            
            March
                5, 2005
            
            
            March
                5, 2015
            
            
            279,900**Total**
            
            
            
            
            
            
            
            **$**
            **745,247**





As
      of
      December 31, 2005, amount of $465,347 represents interest free note payable
      for
      geological and research services rendered by Fort Trade during 2004.





Long
      term
      payable to Zaccam Trading, Ltd., related party as of December 31, 2005
      represents uncollateralized credit line facility with limit of indebtedness
      of
      $5,000,000 bearing 3% per annum charged on actual sum of debt and payable
      annually (See also Note 18).




**21.**
            **SHAREHOLDERS’
                EQUITY**




On
      or
      about October 4, 2004 the Company entered into a Stock Purchase Agreement and
      Plan of Reorganization for the acquisition of Esko Pivnich, the Company’s
      operating subsidiary. The transaction was entered into by Sunrise Energy
      Services, Inc., the Company’s predecessor, and EP and its shareholders. Under
      the terms of the Agreement, the shareholders of Esko Pivnich gained the right
      to
      acquire a total of approximately 91% of Sunrise’s shares.




40
 *Table
              of Contents*




The
      current consolidated financial statements account for the transaction in
      accordance with SFAS 141 “Business Combinations” under the “reverse acquisition”
treatment, whereby Esko Pivnich is considered to be the actual acquirer, and
      Sunrise Energy Services Inc., the dormant shell entity or the nominal acquirer.




Effective
      October 4, 2004, the Company and certain of its shareholders entered into a
      Stock Purchase Agreement and Plan of Reorganization (the “Agreement”) with the
      shareholders of Esko Pivnich to acquire all of the outstanding shares of EP.
      Pursuant to the Agreement, certain stockholders of the Company sold 5.0 million
      shares to shareholders of Esko Pivnich (“EP Shareholders”), and the Company also
      issued 10,479,900 shares to certain of EP’s Shareholders.




Net
      assets of the acquired entity, Sunrise Energy Resources, Inc. (formerly known
      as
      Sunrise Energy Services, Inc.) as at December 31, 2004, were as
      follows:




**12/31/2004**Cash
            
            $
            1,942Accounts
                Payable
            
            
            (12,157
            )Advances
                from former shareholders
            
            
            (35,000
            )Other
                accounts payable
            
            
            5,671**100%
                of Net Assets**
            
            **$**
            **(50,886**
            **)**Less
                cash balances held as at December 31, 2004
            
            
            (1,942
            )**Total
                liabilities assumed**
            
            **$**
            **(52,828**
            **)****Cash
                inflow on reverse acquisition**
            
            **$**
            **1,942**




No
      dividends were declared or paid by the Company during the year ended December
      31, 2005.




**22.**
            **RELATED
                PARTIES**




Related
      parties include shareholders and entities under common ownership. Transactions
      with related parties are performed on terms that are comparable to those
      available to unrelated parties. For details of related party balances
      outstanding as of December 31, 2005 and 2004 see Notes 5, 6, 12, 16, 18 and
      20.




Our
      related parties include CJSC Infox and Zaccam Trading, Ltd. Although Pari LLC
      was acquired in the first quarter of 2006, it is presented as a “related party”
in Company’s consolidated financial statements as of December 31, 2005.




During
      the year ended December 31, 2005, we have received a long term loan of $279,900
      from Zaccam Trading, Ltd. The proceeds received were used mainly for
      construction workovers on well #21 (Notes 20 and 18).




As
      of
      December 31, 2005, amount of $720,797 receivable from CJSC Infox, related party,
      was comprised from several crude oil shipments which took place in 2004 and
      2003. Amount of $592,554 payable to the related party, CJSC Infox, related
      to
      wells’ reconstruction and repair services, provided by third party service
      companies and paid by CJSC Infox on behalf of the Company.




Included
      in the income statement for the years ended December 31, 2005 and 2004, and
      otherwise not disclosed anywhere in the current consolidated financial
      statements, are the following transactions with related parties:




**2005**
            
            **2004**Interest
                income from Infox
            
            --
            
            $
                1,922




41
 *Table
              of Contents*




**23.**
            **COMMITMENTS
                AND CONTINGENCIES**




***Licenses’
      commitments -*** During
      2005 the Company received geological and exploration license agreements to
      develop Karaikozovsk’s, Rogan and Rakitnyansk fields. The following amounts of
      investments are to be incurred under the terms of those agreements during the
      periods indicated in the table below:




**Period**
            
            **Amount**Rogan
                field
            
            
            2005-2009
            
            
            2,922,772Rakitnyansk
                field
            
            
            2005-2009
            
            
            3,938,614Karaikozovsk
                field
            
            
            2005-2009
            
            
            4,241,584**Total**
            
            
            
            
            **$**
            **11,102,970**





As
      at
      December 31, 2005, the Company expended $999,220 all of which was related to
      Karaikozovsk license.




***Environmental
      remediation -*** Under
      the
      laws of Ukraine the Company is obligated to conform to certain environmental
      remediation obligations related to the oil and gas production activities. This
      amount can not be estimated but is considered to not be material.




***Lease
      commitments -*** The
      Company leases office space on a year by year basis and the rent is disclosed
      in
      other notes. The Company’s future lease commitments as of December 31, 2005 are
      as follows:




**2006**Office
                rent
            
            $
            60,002**Total**
            
            **$**
            **60,002**




***Litigation***  ***-*** The
      Company has been and continues to be the subject of legal proceedings and
      adjudications from time to time. Management believes that the resolution of
      all
      business matters which will have a material impact on the Company’s financial
      position or operating results have been recorded.




*JSC
      Ukrneft, Okhtirkaneftegas*  *-* ****** In
      2003
      the Company filed a claim against JSC Ukrneft, Okhtirkaneftegas, in respect
      to
      the advance paid by the Company in 2002 in amount of $198,880 to complete
      certain capital construction works under the terms of PSA # 01-SD dated April
      26, 2000 (Notes 4 and 6). In April 2004 after the number of hearings by the
      courts of different levels, the Supreme Court of Ukraine ordered
      Okhtirkaneftegas to pay outstanding balance without further delays. As of March
      27, 2006 the balance had not been paid. Company plans to cancel PSA # 01-SD
      and
      to offset this amount against amounts payable to JSC Ukrneft and its subsidiary
      Okhtirkaneftegas in 2006.




*Taxes
      -* During
      2004 the Company was examined by the State Tax Inspection of Podolsk region,
      Kiev, and was assessed additional VAT and Profit tax fines and penalties in
      the
      aggregate amount of $598,324 related to 2003 and 2002 years. The amounts were
      accrued in the respective consolidated financial statements in full. “Esko
      Pivnich” appeal and won but the tax administration has submitted another appeal
      to the Supreme Civil Court of Kiev. The Supreme Civil Court had addressed the
      suit back to Civil Court of Kiev and appointed a committee to conduct an
      accounting investigation which was exercised in February 2006. Since the
      investigation no hearings took place. Since the appeal has been won and became
      effective, there is a 100% of winning the case. However, because the government
      of Ukraine has not paid this balance and the political situation is uncertain,
      the liability has not been removed or reversed.




***Ukrainian
      Tax and Regulatory Environment***  ***-*** The
      government of Ukraine continues to reform the business and commercial
      infrastructure in its transition to a market economy. As a result laws and
      regulations affecting businesses continue to change rapidly. These changes
      are
      characterized by poor drafting, different interpretations and arbitrary
      application by the authorities. In particular taxes are subject to review and
      investigation by a number of authorities enabled by law to impose fines and
      penalties. While the Company believes it has provided adequately for all tax
      liabilities based on its understanding of the tax legislation, the above facts
      may create tax risks for the Company.




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**24.**
            **RISK
                MANAGEMENT POLICIES**




Management
      of risk is an essential element of the Company’s operations. The main risks
      inherent to the Company’s operations are those related to credit risk exposures,
      market movements in foreign exchange rates and in interest rates. A description
      of the Company’s risk management policies in relation to those risks
      follows.




***Credit
      risk*** **** ***-*** **** The
      Company is exposed to credit risk which is the risk that one party to a
      financial instrument will fail to discharge an obligation and cause the other
      party to incur a financial loss.




The
      Company structures the levels of credit risk it undertakes by placing limits
      on
      the amount of risk accepted in relation to one customer, or groups of customers.
      Limits on the level of credit risk by customer are approved quarterly by the
      Credit Committee.




Our
      sales
      to customers in excess of 5% were as follows:




**12/31/2005**
            
            **12/31/2004**Agrotemp
                (oil produced)
            
            $
            415,440
            
            
            -Ukrtatnafta
                (oil produced)
            
            
            278,997
            
            
            -Varadero
                (oil produced)
            
            
            254,765
            
            
            -Torpeda
                PP (oil produced)
            
            
            215,131
            
            
            -Agronafta
                (oil produced)
            
            
            214,324
            
            $
            26,854AlphaNafta
                (oil produced)
            
            
            163,937
            
            
            -Torpeda
                PP (oil resold)
            
            
            73,067
            
            
            -CJSC
                Ukrnafta (oil produced)
            
            
            -
            
            
            170,037Other
            
            
            275,095
            
            
            -**Total**
            
            **$**
            **1,890,480**
            
            **$**
            **196,891**




***Currency
      risk -*** Currency
      risk is defined as the risk that the value of a financial instrument will
      fluctuate due to changes in foreign exchange rates.




The
      Credit Committee sets limits on the level of exposure by currencies (primarily
      Ukrainian Hrivna and US Dollar), by entities and in total.




***Interest
      rate risk -*** Interest
      rate risk arises from the possibility that changes in interest rates will affect
      the value of the financial instruments.




Currently,
      the Company management approach to the interest risk limitation is borrowing
      at
      fixed rates and for short periods.




**25.**
            **CONCENTRATION
                OF BUSINESS RISK**




The
      Company’s operating activities are limited to Ukraine. Laws and regulations
      affecting businesses operating in Ukraine are subject to rapid changes and
      the
      Company’s assets and operations could be at risk due to negative changes in the
      political and business environment.




**26.**
            **SUBSEQUENT
                EVENTS**




On
      March
      9, 2006, the Company had repaid the short term loan outstanding as at December
      31, 2005 in amount of $514,851 obtained from AB Clearing House and respective
      interest in amount of $11,369 that was accrued in 2005 and not repaid as of
      December 31, 2005 (See also Notes 14 and 18).




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  **27.
            RECONCILIATION OF CERTAIN PREVIOUSLY REPORTED AMOUNTS**
  The
            following schedules contain the reconciliation of the amounts reported
            in
            previous filings to restated amounts reported hereunder. The consolidated
            statement of changes in stockholder’s equity has been restated for 2003 and 2004
            to reflect the proforma effect of the reverse acquisition which occurred
            in
            2004. In addition, certain items on the consolidated statement of cashflows
            related to the reverse acquisition for 2004 have also been
            reclassified.
  Consolidated
                      Statement of cashflows
                  
                  **12/31/2005**
                  
                  **12/31/2004**Cash
                      provided by (used in) operating activitiesAs
                      reported in 10-KSB/A filed on 11/7/2006
                  
                  $
                  439,327
                  
                  $
                  (262,819
                  )Adj.:
                      Removal of Sunrise Energy Resources deficit less cash
                      balance
                  
                  
                  
                  
                  
                  (52,828
                  )As
                      restated
                  
                  **$**
                  **439,327**
                  
                  **$**
                  **(315,647**
                  **)**Cash
                      provided by financing activitiesAs
                      reported in 10-KSB/A filed on 11/7/2006
                  
                  $
                  279,900
                  
                  $
                  491,916Adj.:
                      Reclassification of Sunrise Energy Resources cash balance
                  
                  
                  
                  
                  
                  (1,942
                  )As
                      restated
                  
                  **$**
                  **279,900**
                  
                  **$**
                  **(489,974**
                  **)**Cash
                      used in investing activitiesAs
                      reported in 10-KSB/A filed on 11/7/2006
                  
                  $
                  (747,599
                  )
                  $
                  (216,317
                  )Adj.:
                      Removal of Sunrise Energy Resources deficit less cash
                      balance
                  
                  
                  
                  
                  
                  52,828Adj.:
                      Reclassification of Sunrise Energy Resources cash balance
                  
                  
                  
                  
                  
                  1,942As
                      restated
                  
                  **$**
                  **(747,599**
                  **)**
                  **$**
                  **(161,547**
                  **)**
 
 The
            above
            adjustments to the cashflow statement were necessary to remove all non-cash
            items in conformity with SFAS 95.


**28.**
              **OIL
                  AND GAS DISCLOSURES (UNAUDITED)**




The
      following information is presented in accordance with the Statement of Financial
      Accounting Standards No. 69, Disclosure about Oil and Gas Producing Activities
      (SFAS No. 69).




**(A)
      Costs Incurred in Oil and Gas Exploration and Development
      Activities** .
      The
      following costs were incurred in oil and gas exploration and development
      activities during the years ended December 31, 2005 and 2004 have been included
      in cost of sales.




**12/31/2005**
            
            **12/31/2004**Exploration
                costs
            
            $
            265,253
            
            $
            26,986**Total**
            
            **$**
            **265,253**
            
            **$**
            **26,986**




The
      above
      costs were expensed as incurred.




**(B)
      Results of operations from Producing Activities** .
      Results
      of operations from producing activities for the years ended December 31, 2005
      and 2004 are presented below.




**For
                the years ended**
              **December
                31,****2005**
            
            **2004**Sales
                of Oil and Gas produced
            
            $
            1,762,631
            
            $
            196,891Production
                expenses (including depreciation expense)
            
            
            (1,049,461
            )
            
            (412,412
            )Exploration
                costs
            
            
            (265,253
            )
            
            (26,986
            )Income
                tax expense
            
            
            (117,224
            )
            
            --Total
                expenses
            
            
            (1,431,938
            )
            
            (439,398
            )**Total**
            
            **$**
            **330,693**
            
            **$**
            **(242,507**
            **)**




44
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**(C)
      Proved Oil and Gas Reserves** .




At
          present, we have not been able to estimate the quantity of proved reserves
          within the meaning of Rule 4-10(a) of Regulation S-X. We plan to estimate
          our
          proved reserves for Karaikozovsk property once we complete Well #21 of
          Karaikozovsk block.




**ITEM 8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**




Our
      Board
      of Directors approved the engagement of Independent Registered Public Accounting
      Firm - John A. Braden & Company, PC, of Houston, Texas (“John A. Braden
& Co., P.C.”) as our independent accountants. The Company Corporation has
      appointed John A. Braden & Co., P.C.. on November 1, 2004 to audit the
      Company's financial statements for the year ending December 31,
      2005.




John
      A.
      Braden & Co., P.C.‘s report on the financial statements of the Company for
      the year ended December 31, 2005 did not contain an adverse opinion or
      disclaimer of opinion, and was not qualified or modified as to uncertainty,
      audit scope, or accounting principles, except in respect to an explanatory
      paragraph concerning the Company’s ability to continue as a going
      concern.




During
      the most recent fiscal year and any subsequent interim periods preceding the
      date of this report there were no:




(a)
      disagreements between the Company and John A. Braden & Co., P.C. on any
      matter of accounting principles or practices, financial statement disclosure,
      or
      auditing scope or procedure which, if not resolved to the satisfaction of John
      A. Braden & Co, P.C. would have caused them to make reference to the subject
      matter of the disagreement or disagreements in their report on the financial
      statements for such year;





(b)
      reportable events involving John A. Braden & Co., P.C. that would have
      required disclosure under Item 304(a)(iv)(A) of Regulation S-B; or





(c)
      written or oral consultations between the Company and John A. Braden & Co.,
      P.C. regarding either the specific application of accounting principles or
      the
      type of audit opinion that might be rendered on the Company 's financial
      statements that was considered an important factor by the Company in reaching
      a
      decision as to an accounting, auditing or financial reporting issue, or any
      matter that was the subject of a disagreement or a reportable event, that would
      have required disclosure under Item 304 (a)(2) of Regulation S-B.





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**ITEM
                8a.**
            **CONTROLS
                AND PROCEDURES**




The
      Company’s Principal executive officers and principal financial officer, based on
      their evaluation of the Company’s disclosure controls and procedures (as defined
      in Rules 13a-14 ( c ) of the Securities Exchange Act of 1934) as of December
      31,
      2005 have concluded that the Company’s disclosure controls and procedures are
      adequate and effective to ensure that material information relating to the
      Company’s and their consolidated subsidiary is recorded, processed , summarized
      and reported within the time periods specified by the SEC’ s rules and forms,
      particularly during the period in which this annual report has been
      prepared.




The
      Company’s principal executive officers and principal financial officer have
      concluded that there were no changes in the Company’s internal controls over the
      financial reporting or in other factors during the last fiscal year that have
      materially affected or are reasonably likely to materially affect these controls
      as of the end of the period covered by this report based on such evaluation,
      and
      that there was no significant deficiencies or material weaknesses in the
      Company’s internal controls.




**PART
      III**




**ITEM 
9.**
            **DIRECTORS
                AND EXECUTIVE OFFICERS OF COMPANY**




*Directors
      and Executive Officers*




All
      directors of our company hold office until the next annual meeting of the
      shareholders or until their successors have been elected and qualified. The
      officers of our company are appointed by our board of directors and hold office
      until their death, resignation or removal from office.




**Name**
              
              **Position**
              
              **Age**
              
              **Date
                  elected or appointed**Konstantin
                    Tsiryulnikov
              
              CEO,
                  Sunrise Energy Resources, Inc.
              
              27
              
              December
                  - 2004David
                  A. Melman
              
              Independent
                  Director of Sunrise Energy Resources Inc
              
              63
              
              1997Roman
                  Livson
              
              CFO,
                  Sunrise Energy Resources, Inc.
              
              35
              
              2005Leon
                  Golden
              
              Independent
                  Director, Sunrise Energy Resources, Inc.
              
              44
              
              December
                  - 2004Abraham
                  Bennun
              
              Independent
                  Director of Sunrise Energy Resources Inc
              
              34
              
              December
                  - 2004Vyacheslav
                  Chuchminov
              
              CEO,
                  Esko Pivnich
              
              47
              
              June
                  - 2002Taras
                  Burdeniy
              
              CFO,
                  Esko Pivnich
              
              27
              
              June
                  - 2002Mrs.
                  Raissa Volodarskaya
              
              Chief
                  Accountant
              
              57
              
              April
                  - 2002




***Directors
      and Key Personnel***




***Mr.
      Konstantin Tsirulnikov,*** President, ****** CEO,
      of
      Sunrise Energy Resources (Age 27). Mr. Tsiryulnikov is president of Odessa
      Consulting (Canada), and has extensive experience in international business
      relating to the former Soviet Union countries, concentrating in the Oil and
      Gas
      industry. Mr. Tsiryulnikov also serves as the manager of international relations
      for the L.Z. Group (Canada). Mr. Tsiryulnikov holds an International Business
      Certificate from the Kyiv Financial Institute and a B.S. degree from the
      University of Toronto.




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Mr.
      Tsiryulnikov is the son of Eduard Tsiryulnikov, Halton Impex Corp.‘s sole
      shareholder. As provided below, Halton Impex is a privately owned company,
      which
      will own 65% of the issued shares of the Company as part of the
      Transaction.




***Mr.
      David A. Melman,*** Director
      of Sunrise Energy Resources and former CEO and CFO. Mr. Melman, age 62, has
      been
      President and sole director of the Company since 1997. Since May 2000, Mr.
      Melman has been the Chief Executive Officer and director of XCL Ltd (OTC Pink
      Sheets), an oil and gas company headquartered in Lafayette, Louisiana, presently
      being restructured. Since June 2001, Mr. Melman has served as Chief Executive
      Officer and director of Republic Resources, Inc. (OTC Pink Sheets), a company
      engaged in the containment and remediation of contaminated groundwater. Since
      February 2004, Mr. Melman has been a director of Omni Energy Services, Inc.
      (NASDAQ), a company providing an array of services to the oil and gas industry.
      Mr. Melman holds a B.S. degree in economics, and J.D. and LLM law
      degrees.




***Mr.
      Roman Livson,*** CFO
      (Age
      35). ****** Mr.
      Livson has served as the managing director of Thor Capital Group, Inc. heading
      its investment banking department since its foundation in 2002. Prior to that
      he
      headed the investment banking department of Thor United Corp. He brings to
      the
      company a valuable expertise in the Eastern European energy sector. Mr. Livson
      worked for Coopers and Lybrand from 1994-1998 and received a Master's degree
      in
      Mathematics of Finance from Columbia University in 2002. Mr. Livson will
      continue to serve as the managing director of Thor Capital Group,
      Inc.




***Mr.
      Leon Golden,*** Independent director of Sunrise Energy Resources (Age 43). Mr. Golden is a
      certified public accountant with over 17 years of experience. For the past
      two
      years, Mr. Golden has had his own CPA practice in New York City, and prior
      to
      that he worked as a public accountant for another New York City CPA Firm for
      fifteen years. Mr. Golden serves on the board of directors of ABDC
      (OTCBB--ABDV). Mr. Golden holds a B.S. degree in Accounting from Brooklyn
      College.




***Mr.
      Abraham Bennun,*** Independent director - of Sunrise Energy Resources Inc. (Age 33). Mr. Bennun
      has
      financial and legal background relating to several industries, one of which
      is
      the Oil and Gas industry. Earlier this year Mr. Bennun joined Thor Capital
      Group, Inc. (Moscow Office) and serves as a Senior Vice President of the firm.
      Prior to joining Thor Capital, Mr. Bennun worked as an associate at Kronish
      Lieb
      Weiner & Hellman, LLP (New York). From February 1997 to March 1999, Mr.
      Bennun worked as an advisor with the Official Receiver, Justice Department
      of
      Israel.




Mr.
      Bennun holds a LLB degree from Cardiff University School of Law (UK), and a
      LLM
      degree in Banking, Finance and Corporate Law from Fordham University
      (N.Y.).




***Mr.
      Chuchminov Vyacheslav,*** CEO,
      Esko Pivnich - (Age 46). Mr. Chuchminov has been serving as the Chief Executive
      Officer of Esko-Pivnich since May 2002. Prior to that, he served in senior
      management positions of Alchevsk Coking Plant and Communar Coking Plant. Mr.
      Chuchminov graduated from the Dnepropetrovsk Metallurgy Institute in 1979 with
      a
      Master's degree of Chemical Engineer. Mr. Chuchminov brings over 20 years
      experience of running various Ukrainian enterprises in the commodities
      sector.




***Mr.
      Taras Burdeniy,*** CFO,
      Esko Pivnich — (Age 26). Prior to his nomination as CFO of Esko Pivnich Mr
      Burdeniy had been serving as the Cost Accountant of the Company since June
      2002.
      Immediately prior to that he graduated from Kiev National Economics
      University.




***Mrs.
      Raissa Volodarskaya,*** Chief
      Accountant, Esko Pivnich - (Age 56). Mrs. Volodarskaya has been serving as
      the
      Chief Accountant of Esko-Pivnich since April 2002. Prior to that she worked
      as
      the Chief Accounting Officer of Bivex Ltd. Mrs Volodarskay has extensive
      experience in industrial tax and financial accounting in Ukraine having worked
      as Chief Accountant for 20 years in a number of medium sized
      companies.




***Mr.
      Anatoliy Dyagterev,*** Operations Director - Esko Pivnich (Age 38). Mr. Dyagterev serves as the
      Operations Director in Esko Pivnich from June 2002. Prior to than he worked
      as
      Chief Engineer, Technical and Productions Director in a number of Ukrainian
      oil
& gas companies, including the subsidiary of Ukrnafta, Poltavagasdobicha.
      Mr. Dyagterev graduated from Moscow Gubkin Institute of Oil & Gas in 1984
      with a Master's degree of Well - drilling Engineer.




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***Mr.
      Vladimir Moroz*** ,
      Chief
      Engineer, Esko Pivnich (Age 38). Mr. Moroz joined the Company as Chief Engineer
      of Esko-Pivnich in October 2004. In 2002-2004 he worked as Chief Engineer in
      the
      State Emergency Service of Ukraine. Prior to that, in 1995 - 2002 he was the
      Deputy Director on Science in the NTP “Burovaya Tekhnika” Mr. Moroz graduated
      from Ivano-Frankovsk Institute of the Oil&Gas in 1992 with a Master’s degree
      of Well - drilling Engineer. Also, in 2001 he got the Master’s Degree in Poltava
      Technical University on the Accounting and Audit Department.




***Mr.
      Viktor Dvornichenko,*** Chief
      Technologist, Esko Pivnich - (Age 52). Mr. Dvornichenko has been serving as
      the
      Chief Technologist of Esko-Pivnich since June 2002. Prior to that, since 1998
      he
      served as Technical and Commercial Director in a number of medium size oil
&
gas production companies in Ukraine, including ZAO “Ukrainian neftepromislovaya
      company” and OOO “Ukragroneft”. In 1995-1998 he served as Deputy Manager of the
      Export-Import department of Ukrnafta. Mr. Dvornichenko graduated from
      Ivano-Frankovsk Institute of the Oil & Gas in 1978 with a Master's degree of
      Well - drilling Engineer.




***Mr.
      I.V. Ivanets*** (Age
      46)
      joined the Company in December 2002 as an Oil & Gas extraction engineer.
      Prior to that he worked as a geology engineer for
      Khantymansiyskneftegazgeologiya, a geological survey and drilling contractor
      in
      the oil rich Khanty-Mansiysk region of neighbouring Russian
      Federation.




**COMMITTEES
      OF THE BOARD OF DIRECTORS**




The
      Board
      of Directors has a Compensation Committee and an Audit Committee. The Audit
      Committee currently consists of two directors Leon Golden and David Melman.
      The
      Compensation Committee is made up of Mr. Golden and Mr. Bennun.




The
      purpose of the Compensation Committee is to review the Company’s compensation of
      its executives, to make determinations relative thereto and to submit
      recommendations to the board of Directors with respect thereto in order to
      ensure such officers and directors receive adequate and fair
      compensation.




During
      the fiscal year ending 2005, the Audit Committee was responsible for the general
      oversight of audit, legal compliance and potential conflict of interest matters,
      including (a) recommending the engagement and termination of the independent
      public accountants to audit the financial statements of the Company, (b)
      overseeing the scope of the external audit services, (c) reviewing adjustments
      recommended by the independent public accountant and addressing disagreements
      between the independent public accountants and management, (d) reviewing the
      adequacy of internal controls and management’s handling of identified material
      inadequacies and reportable conditions in the internal controls over financial
      reporting and compliance with laws and regulations, and (e) supervising the
      internal audit function, which may include approving the selection, compensation
      and termination of internal auditors.




For
      the
      fiscal year ended 2005, the Board of Directors conducted discussions with
      management and the independent auditor regarding the acceptability and the
      quality of the accounting principles used in the reports in accordance with
      Statements on Accounting Standards (SAS) No. 61. These discussions included
      the
      clarity of the disclosures made therein, the underlying estimates and
      assumptions used in the financial reporting and the reasonableness of the
      significant judgments and management decisions made in developing the financial
      statements. The Audit Committee also discussed the other items with the auditors
      required by SAS No. 61 as amended. In addition, the Board of Directors discussed
      with the independent auditor the matters in the written disclosures required
      by
      Independence Standards Board Standard No. 1.




For
      the
      fiscal year ended 2005, the Board of Directors have also discussed with
      management and its independent auditors issues related to the overall scope
      and
      objectives of the audits conducted, the internal controls used by the Company,
      and the selection of the Company’s independent auditor.




Pursuant
      to the reviews and discussions described above, the Board of Directors
      recommended that the audited financial statements be included in the Annual
      Report on Form 10-KSB for the fiscal year ended December 31, 2005 for filing
      with the Securities and Exchange Commission.




Audit
      Committee Financial Expert




Our
      Board
      of Directors has determined that Mr. Leon Golden is an “audit committee
      financial expert”. Members of our Audit Committee are independent under SEC
      Rule 10A-3.




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Code
      of
      Ethics




The
      Company has adopted its Code of Ethics and Business Conduct for Officers,
      Directors and Employees that applies to all of the officers, directors and
      employees of the Company.




Compliance
      with Section 16(b) of the Exchange Act




Based
      solely on our review of Forms 3, 4, and 5, and amendments thereto which have
      been furnished to us, we believe that during the year ended December 31, 2005
      all of our officers, directors, and beneficial owners of more than 10% of any
      class of equity securities, timely filed, reports required by Section 16(a)
      of
      the Exchange Act of 1934, as amended.


**ITEM
                  10.**
              **EXECUTIVE
                  COMPENSATION**


During
      2005, the Company paid subsidiary’s senior management nominal rates which are
      comparable with the basic salaries in Ukraine. No salaries were paid for the
      newly nominated management of Sunrise Energy Resources Inc. The Company
      estimates the fair value of the management compensation for 2005 to be not
      materially different from these accrued ones:




**Name
                  and principal position**
              
              **Actual
                  salary**Konstantin
                  Tsirulnikov
              
              $40,500CEO
                  of Sunrise Energy Resources, Inc.Roman
                  Livson
              
              $26,000CFO
                  of Sunrise Energy Resources, Inc.Leon
                  Golden
              
              Nominal
                  subject to reviewIndependent
                  Director, Sunrise Energy Resources, Inc.Abraham
                  Bennun
              
              Nominal
                  subject to reviewIndependent
                  Director, Sunrise Energy Resources, Inc.David
                  A. MelmanIndependent
                  Director of Sunrise Energy Resources.Inc
              
              $11,000Vyacheslav
                  Chuchminov
              
              $2,000CEO,
                  Esko PivnichTaras
                  Burdeniy
              
              $2,000CFO,
                  Esko PivnichRaisa
                  Volodarskaya
              
              $3,000Chief
                  Accountant**Total**
              
              **$84,500**




The
      Company has not entered into any definitive compensation agreements with its
      senior management. There were no stock options outstanding as at December 31,
      2005.




**ITEM
                  11.**
              **SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**


The
      following tables sets forth, as of March 27, 2006, the number of and percent
      of
      our common stock beneficially owned by (a) all directors and nominees, naming
      them, (b) our executive officers, (c) our directors and executive officers
      as a
      group, without naming them, and (d) persons or groups known by us to own
      beneficially 5% or more of our common stock. Each person has sole voting and
      investment power with respect to the shares of common stock, except as otherwise
      indicated. Beneficial ownership consists of a direct interest in the shares
      of
      common stock, except as otherwise indicated.




49
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The
      following table sets forth for the fiscal year ended December 31, 2005, the
      individuals or entities known to the Company to beneficially own 5% or more
      of
      the Company’s outstanding shares of voting securities.




**Name
                Of Beneficial Owner**
            
            **Title
                of Class**
            
            **Number
                of Shares**
            
            **Percent
                of Class**Halton
                Impex Corp.
            
            Common
            
            11,143,235
                (1)
            
            65
                %627
                Lyons Lane,Oakville,Ontario
                L6J 5Z7CanadaMr.
                David A. Melman5353
                Memorial DriveSuite
                4012Houston
                Texas 77007
            
            Common
            
            200,184
                (2)
            
            1.17%




(1)
      Includes 10,479,900 shares to be transferred to Halton Impex Corp. under the
      terms of the Merger Agreement, in consideration of Halton Impex Corp.‘s shares
      in Esko Pivnich. The sale of the shares will be exempt from registration under
      Section 4(2) of the Securities Act of 1933, as amended, as the purchasers had
      full information concerning the business and affairs of Company and all
      certificates issued bear appropriate restrictive legends. No underwriter is
      involved in the transaction.




(2)
      Does
      not include the shares held by Midland Trust Company, Ltd. for which Mr. Melman
      held an irrevocable proxy to vote on certain matters. Mr. Melman disclaims
      any
      beneficial ownership of such shares.




*Security
      Ownership of Management*




The
      following table sets forth information concerning the beneficial ownership
      of
      the Company’s New Common Stock for the fiscal year ended December 31, 2005 by
      Mr. Konstantin Tsirulnikov, CEO of the Company, and Mr. Melman, Independent
      Director.




**Name
                and Address of Beneficial Owner**
            
            **Amount
                of Beneficial Interest**
            
            **Percent
                of Class**Mr.
                Konstantin Tsirulnikov
            
            65.00%
                (1)
            
            Common
                stockMr.
                David A. Melman
            
            1.17%
            
            Common
                stock





(1)
            Mr.
                Konstantin Tsirulnikov is the son of Mr. Eduard Tsirulnikov the sole
                shareholder of Halton Impex Corp.




**ITEM 
12.**
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS**




Except
      as
      discussed below and elsewhere in this Report, there have been no transactions,
      or proposed transactions, which have materially affected or will materially
      affect the Company in which any director, executive officer or beneficial holder
      of more than 10% of the outstanding common stock, or any of their respective
      relatives, spouses, associates or affiliates, has had or will have any direct
      or
      material indirect interest.




As
      at the
      date of this annual report, we do not have any policies in place with respect
      to
      whether we will enter into agreements with related parties in the
      future.




50
 *Table
            of Contents*




**ITEM 
13.**
            **PRINCIPAL
                ACCOUNTANT FEES AND SERVICES**




During
      2004 professional services were mostly rendered for the Company by John A.
      Braden and Co., P.C. accounting firm.




Total
      professional fees incurred by the Company for the years ended December 31,
      2004
      and 2003 consisted of the following:




**2005**
              **John
                A. Braden and Co.****, P.C.**
            
            **2004**
              **John
                A. Braden and Co., P.****C.**Audit
            
            
            50,000
            
            
            45,000Audit
                related
            
            
            --
            
            
            --Tax
            
            
            --
            
            
            --All
                other fees
            
            
            --
            
            
            --Total
            
            
            50,000
            
            
            45,000




**Audit
      Fees**




The
      Audit
      Fees for 2005 and 2004 were for services associated with the consolidated U.S.
      GAAP audits, and offering memoranda.




**Audit-Related
      Fees**




During
      2005 and 2004 we have not paid any Audit-Related Fees.




**Tax
      Fees**




During
      2005 and 2004 we have not paid any Tax-Fees.




**All
      Other Fees**




During
      2005 and 2004 we have not paid any other fees.




**Audit
      Committee Pre-Approval Policies and Procedures**




The
      Sarbanes-Oxley Act of 2002 required us to implement a pre-approval process
      for
      all engagements with our independent public accountants. In compliance with
      Sarbanes-Oxley requirements pertaining to auditor independence, our Audit
      Committee pre-approves the engagement terms and fees of John A. Braden and
      Co,
      P.C. for all audit and non-audit services, including tax services. Our Audit
      Committee pre-approved the engagement terms and fees of John A. Braden and
      Co.,
      P.C. for all services performed for the fiscal year ended December 31,
      2005.




**PART
      IV**




**ITEM 
14.**
            **EXHIBITS,
                FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON FORM
                8-K**




***Reports
      on Form 8-K***




A
      Current
      Report on Form 8-K filed by the Company on June 28, 2005, and Schedule 14F-1
      filed by the Company on January 6, 2005.




51
 *Table
            of Contents*




The
      following Consolidated Financial Statements pertaining to Sunrise Energy
      Resources are filed as part of this annual report:




Report
      of
      Independent Registered Public Accounting Firm - John Braden and Co., P.C. for
      the year ended December 31, 2005




Consolidated
      Balance Sheet as of December 31, 2005




Consolidated
      Statements of Changes in Stockholders’ Equity (Capital Deficit) for the years
      ended December 31, 2005 and 2004




Consolidated
      Statement of Operations and Comprehensive Loss for the years ended December
      31,
      2005 and 2004




Consolidated
      Statements of Cash Flows for the years ended December 31, 2005 and
      2004




Notes
      to
      the Consolidated Financial Statements for the year ended December 31,
      2005




**Exhibit
                Number******
            **Description**
            
            **Incorporation
                by Reference**3
            1
            Amended
                and Restated Certificate of Incorporation of the Company
            
            Filed
                as an exhibit to the Form 10-QSB for the quarter ended September
                30, 204;
                is incorporated herein by this reference.3
            2
            Bylaws
                of the Company
            
            Filed
                as an exhibit to the Form 10-QSB for the quarter ended September
                30, 2004;
                is incorporated herein by this reference.10
            1
            Shareholders
                Agreement.
            
            Filed
                as an exhibit to the Form 10-QSB for the quarter ended September
                30, 2004;
                is incorporated herein by this reference.14
            
            Code
                of Ethics
            
            *Filed
                Herewith*21
            1
            List
                of Subsidiaries
            
            *Filed
                Herewith*31
            1
            Rule
                13a-14(a) Certification of Chief Executive Officer
            
            *Filed
                Herewith*31
            1
            Rule
                13a-14(a) Certification of Chief Financial Officer
            
            *Filed
                Herewith*32
            1
            Section
                1350 Certification of Chief Executive Officer
            
            *Filed
                Herewith*32
            2
            Section
                1350 Certification of Chief Financial Officer
            
            *Filed
                Herewith*




**SIGNATURES**




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




Sunrise
                Energy Resources, Inc./s/
                Konstantin TsirulnikovKonstantin
                TsirulnikovPresident
                and Chief Executive Officer




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.




**Date**
            
            **Signature**
            
            **Title**






52