# U.S.
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM
10-KSB

For
Annual and Transition Reports pursuant to Section 13 or 15(d) of theSecurities
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 endedDecember 31, 2005

|[  ] | Transition Report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934
|---- | ---------------------------------------------------------------------------------------------

# Commission
File Number 1-11248

SUNRISE
ENERGY SERVICES, INC.(Name of Registrant as specified
in its charter)

|                                     | 
|------------------------------------ | 
|Delaware                             | 
|(State or other jurisdiction
     of | 
|incorporation or organization)       | 

|                                                       | 
|------------------------------------------------------ | 
|551 Fifth Avenue, Suite 601                            | 
|New York, New York                                     | 
|(Address of principal executive office)                | 
|5353 Memorial Drive, Suite 4012                        | 
|Houston, TX 77007                                      | 
|(Former name or address, if changed since last report) | 

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

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

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.

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 [   ]

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. [   ]

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

---

SUNRISE
ENERGY RESOURCES, INC.FORM 10-KSBTABLE OF CONTENTS

Part
I.

|Item 1. |  | Description of Business                             |  | 3  | 
|------- |  | --------------------------------------------------- |  | -- | 
|Item 2. |  | Description of Properties                           |  | 13 | 
|Item 3. |  | Legal Proceedings                                   |  | 16 | 
|Item 4. |  | Submission of Matters to a Vote of Security Holders |  | 17 | 

Part
II.

|Item 5.  |  | Market for Common Equity and Related Stockholder Matters        |  | 17 | 
|-------- |  | --------------------------------------------------------------- |  | -- | 
|Item 6.  |  | Managements Discussion and Analysis of Financial Condition     | 
|         |  | and Results of Operations                                       |  | 18 | 
|Item 7.  |  | Financial Statements and Supplementary Data                     |  | 29 | 
|Item 8.  |  | Changes in and Disagreements with Accountants on Accounting and | 
|         |  | Financial Disclosure                                            |  | 30 | 
|Item 8a. |  | Controls and Procedures                                         |  | 30 | 

Part
III.

|Item 9.  |  | Directors, Executive Officers, Promoters and Control Persons   |  | 31 | 
|-------- |  | -------------------------------------------------------------- |  | -- | 
|Item 10. |  | Executive Compensation                                         |  | 34 | 
|Item 11. |  | Security Ownership of Certain Beneficial Owners and Management | 
|         |  | and Related Stockholders Matters                               |  | 35 | 
|Item 12. |  | Certain Relationships and Related Transactions                 |  | 36 | 
|Item 14. |  | Principal Accountant Fees and Services                         |  | 36 | 

Part
IV.

|Item 13.       |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K |  | 37 | 
|-------------- |  | --------------------------------------------------------------- |  | -- | 
|Signatures     |  |                                                                 |  | 38 | 
|Certifications |  |                                                                 |  | 42 | 

2

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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.

3

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On or
about January 31, 2005, Nevwest 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s estimated total proved reserves were around 7.8
million barrels of oil (MMBBLS). All of these reserves are located in the
Karaikozovsks field in Ukraine. The present value of estimated future net
reserves before income taxes discounted at 10% per annum based on market prices
at the end of 2005, with assumptions held constant throughout the estimated
production life of the reserves (10% Present Value) was around $21
million. The amount of the reserves stated in accordance with the Ukrainian
statutory guidelines has been appraised by Ukraines State Reserve
Committee and the net present value of such reserves has been calculated by
EPs specialists. The amount and valuation of the above reserves have not
been restated in accordance with the SEC guidelines and have not been reviewed
by an independent internationally recognized petroleum engineering company.
Sunrise plans to engage an internationally recognized petroleum engineering
company in 2006 to perform an independent valuation and restatement of the
reserves in accordance with the above mentioned SEC guidelines for the reserves
included in the Karaikozovsks and other licenses.

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.

According  to
the  Ukrainian  Government  Reserve  Report,  Pari,  Ltd.  has  proven  reserves  of
approximately  106.2  BCF of gas in  Niklovitskoe  field located in Lviv region of
Western  Ukraine and 4.1 BCF in  Sheremetyevskoye  field located in Chernovtsi  region of
Western  Ukraine.  Pari, Ltd. holds an exploration  license that expires in July 2009 for
the above  properties and the following other  undeveloped  properties  located  in
Western  Ukraine:  Peremyshlyanskaya,  Chukvinskaya  in  Lviv  region,  and  Pilipovskaya
in  Ivano-Frankivsk region. In total, the possible reserves of Pari, Ltd. amount to
approximately 24 MMBBLS.

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 and produce
proven recoverable reserves. We intend to continue conducting geological tests
on the new licenses awarded to EP in order to establish the most efficient
development scenario. We will 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.

4

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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.

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.

5

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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.

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 tothe 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 netpayroll and payable by theCompany | % rate accrued on thetotal payroll and payableby the employee
|------------------------ | ---------------------------------------------------------- | -------------------------------------------------------------
|Statutory Pension Fund   |                                                            | 32                                                           
|Social Insurance Fund    |                                                            | 2                                                            
|Unemployment Fund        |                                                            | 1                                                            
|Emergency Insurance Fund |                                                            | 2                                                            
|Personal Income Tax      |                                                            |                                                             
|                         |                                                            |                                                              
|Total payable            |                                                            | 39                                                           
|                         |                                                            |                                                              

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

|Name                 | Rate per 1 Bblaccrued on the totalproducedOIL | Rate per 1 MCFaccrued on the totalproducedGAS
|-------------------- | --------------------------------------------- | ---------------------------------------------
|Exploration Tax      |                                               | $     15                                     
|Mineral Resource Tax |                                               | $       0                                    
|Mineral Usage Tax    |                                               | $       0                                    
|                     |                                               |                                              
|Total                |                                               | $     15                                     
|                     |                                               |                                              

6

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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.

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.

We
calculate the value of the reserves which represents aggregate future net cash
flows from anticipated production based on market prices at year-end. The
calculation is performed in accordance with Statement of Financial Accounting
Standards (SFAS) No. 69, Disclosures about Oil and Gas producing
Activities. Disclosure of this value and related reserves has been
prepared in accordance with SEC Regulation S-X Rule 4-10 and is presented in
Note 23 of the Notes to Consolidated Financial Statements.

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

7

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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.

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.

8

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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.

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.

9

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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.

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.

10

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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.

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:

11

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|No.     | Dateissued | Period         | Object | Location     | Activities
|------- | ---------- | -------------- | ------ | ------------ | ----------
|#2489   |            | Dated 2        |        | Valid        |           
|        |            | July 2004 for: |        | Geographical |           
|        |            |                |        | 5 (five)     |           
|        |            |                |        | years        |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|#2581   |            | Dated 18       |        | Valid        |           
|        |            | October        |        | for:         |           
|        |            | 2004           |        | 5 (five)     |           
|        |            |                |        | years        |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|#2507   |            | Dated 22       |        | Valid        |           
|        |            | October        |        | for:         |           
|        |            | 2004           |        | 5 (five)     |           
|        |            |                |        | years        |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|773076  |            | Dated 28       |        | November     |           
|Series  |            | October        |        | 5 2004      |           
|AA      |            |                |        | November     |           
|        |            |                |        | 5 2009       |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|        |            |                |        |              |           
|#775113 |            | Dated 28       |        | October      |           
|Series  |            | October        |        | 28 2004     |           
|AA      |            |                |        | October      |           
|        |            |                |        | 2009         |           
|#867363 |            | Dated 10       |        | November     |           
|Series  |            | November       |        | 21 2004     |           
|AA      |            |                |        | November     |           
|        |            |                |        | 20 2009      |           
|        |            |                |        |              |           

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

|                          | Periods | Amount   
|------------------------- | ------- | ---------
|Karaikozovsk’s field |         | 2005-2009
|Rakitnyansk field         |         | 2005-2009
|Rogan field               |         | 2005-2009
|Total                     |         |          
|                          |         |          

12

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Overview of
Regional Geology

The
Companys most explored and developed reserve is located in the
Karaikozovsks 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).

The tectonic
breakthrough divides the deposit into two parts: Lyubivskiy and Karaikozovsky.

Proved
reserves

The
proven reserves reported by the Ukrainian State Reserves Committee were as
follows:

|Provenreserves byproductivelayer |  | Well #2 | Well #3 | Total |  |      
|-------------------------------- |  | ------- | ------- | ----- |  | -----
|
|C-4                              |  |        |         |      |  |     
|C-4a                             |  |        |         |      |  | 2,752
|C-5                              |  | 1,482   |         | 2,240 |  | 2,986
|C-5a                             |  | 423     |         | 630   |  |     
|                                 |  |         |         |       |  |      
|                                 |  | 1,905   |         | 2,870 |  | 5,738
|                                 |  |         |         |       |  |      

Source:
Ukrainian State Reserve Committee

The
Karaikozovsks deposit currently has 2 producing wells internally coded #2
and #3. These wells exhibited the following flow rates:

Well #2

Well
#2 had a daily flow rate of around 70 tons of oil per day and 18 thousand tones
of natural gas per day tested on 10mm choke.

Well #3

The
producing horizon C-5 of Well #3 yielded daily flow rates of 183 tons of oil per
day and 47.1 thousand tones of by-product gas per day.

At
present, Well #3 flows from the productive layer C4a. After 3 years of operation
it will be transferred to productive layer C5. It is envisaged that the
condensate layers will be accessed through a new well #21.

13

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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.

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.

14

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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 | Low    
|------------------ | ---- | -------
|June 30, 2005      |      | $     0
|September 30, 2005 |      | $     2
|December 31, 2005  |      | $     0
|                   |      |        

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.

15

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ITEM 6.
MANAGEMENT DISCUSSION AND ANALYSIS OF PRINCIPAL CONDITIONS AND OPERATIONS

Risk
Factors

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

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. The value under their review is
supposed to represents estimated future net cash flows, and is based on prices
at year-end calculated in accordance with Statement of Financial Accounting
Standards (SFAS) No. 69, Disclosures about Oil and Gas producing
Activities. Disclosure of this value and related reserves has been
prepared in accordance with SEC Regulation S-X Rule 4-10 and is presented in
Note 27 of the Notes to Consolidated Financial Statements.

16

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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.

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.

17

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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.

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.

18

---

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.

Managements
key objectives for 2005 were:

|o |  | Complete
the workovers on Well #2 and Well#3 on the  Karaikozovsks field;
|- |  | --------------------------------------------------------------------------

|o |  | Commence
the construction of separation units on Well #2 and  Well#3 on the Karaikozovsks
field;
|- |  | -------------------------------------------------------------------------------------------------

|o |  | 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.  According  to the  Ukrainian  Government
Reserve  Report,  Pari,  Ltd.  has  proven  reserves  of  approximately  106.2  BCF of
gas in  Niklovitskoe  field located in Lviv region of Western  Ukraine and 4.1 BCF in
Sheremetyevskoye  field located in Chernovtsi  region of  Western  Ukraine.  Pari, Ltd.
holds an exploration  license that expires in July 2009 for the above  properties and the
following other  undeveloped  properties  located  in  Western  Ukraine:
Peremyshlyanskaya,  Chukvinskaya  in  Lviv  region,  and  Pilipovskaya  in
Ivano-Frankivsk region. In total, the possible reserves of Pari, Ltd. amount to
approximately 24 MMBBLS.

Results
of Operations

Oil and gas
production and revenue -

With
the exception of testing flow runs, no commercial volumes were produced from
Karaikozovsks 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s field as commercial production from Well#3 was just
establishing. Well#3 was launched into commercial production in the third
quarter 2005.

19

---

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.

uring
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.

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s 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.

Depreciation,
depletion and amortization

Depreciation,
depletion and amortization (DD&A) of oil and gas properties is
calculated under units of production method, following the successful efforts
method of accounting, as described in Note 1 of the Notes to Consolidated
Financial Statements.

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.

20

---

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.

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s 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.

21

---

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.

Oil
and Gas Reserve Information

The
information regarding our oil and gas reserves, the changes thereto and the
estimated future net cash flows are dependent upon engineering, price and other
assumptions used in preparing our annual reserve study. The above estimates were
prepared by the Company and have not been certified by a qualified independent
petroleum engineering firm. The Company plans to engage such appropriately
qualified engineering firm to certify the estimates of our oil and gas reserves
in accordance with applicable engineering standards and in accordance with
Securities and Exchange Commission guidelines. Changes in prices and cost
levels, as well as the timing of future development costs, may cause actual
results to vary significantly from the data presented. Our oil and gas reserve
data represent estimates only and are not intended to be a forecast or fair
market value of our assets.

Our
oil and gas reserve data and estimated future net cash flows have been prepared
assuming we are successful in timely renewal of operating license agreements and
negotiating production sharing terms which will allow constant production rates
for the expected 10 year period. In accordance with the effective PSA, the
profit sharing rate payable by the Company after the initial investment has been
recovered equals 20%. (See above detailed description of the main terms of the
standardized production sharing agreements concluded with the State of Ukraine).
Also in 2005 the Company expects the completion of construction of own gas
separation facilities that will allow significantly reduce the cost of services
currently purchased under the production sharing agreement (PSA) from the
state-owned entity with which we are a contract partner, Okhtirkaneftegas.

Production
sharing agreements are customarily awarded upon determination that the field is
capable of commercial rates of production and that the applicant has complied
with the other terms of its license and exploration contract. However, we are
not guaranteed the right to a license renewal and production sharing agreements
in the future. If we are not successful in negotiating operating license renewal
and a production sharing agreements on acceptable terms, it will materially
change our oil and gas reserve data and estimated future net cash flows.

22

---

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.

|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.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

---

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 STATEMENTSDECEMBER 31, 2005,
AND 2003

|Index                                                                               |  |          | 
|----------------------------------------------------------------------------------- |  | -------- | 
|Report of Independent Registered Public Accounting Firm - John A. Braden & Co., P.C |  | F-1      | 
|Consolidated Balance Sheets                                                         |  | F-2      | 
|Consolidated Statement of Operations and Comprehensive Loss                         |  | F-3      | 
|Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)        |  | F-4      | 
|Consolidated Statements of Cash Flows                                               |  | F-5      | 
|Notes to the Consolidated Financial Statements                                      |  | F-6-F-24 | 

24

---

---

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.

John A.
Braden & Company, PCHouston, Texas March 27, 2006

F-1

---

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

|                                                                            | December 31,2005
|--------------------------------------------------------------------------- | ----------------
|ASSETS                                                                      |                 
|CURRENT ASSETS                                                              |                 
|Cash and cash equivalents                                                   |                 
|Accounts receivable - related party                                         |                 
|Other accounts receivable and prepayments                                   |                 
|Other accounts receivable - related party                                   |                 
|Inventories                                                                 |                 
|Taxes receivable                                                            |                 
|                                                                            |                 
|Total current assets                                                        |                 
|NONCURRENT ASSETS                                                           |                 
|Property, plant and equipment, net                                          |                 
|Long-term financial investments                                             |                 
|Deferred tax asset                                                          |                 
|                                                                            |                 
|TOTAL ASSETS                                                                |                 
|                                                                            |                 
|                                                                            |                 
|LIABILITIES AND STOCKHOLDERS EQUITY                                        |                 
|CURRENT LIABILITIES                                                         |                 
|Accounts payable                                                            |                 
|Accounts payable - related party                                            |                 
|Taxes payable                                                               |                 
|Short term bank loans                                                       |                 
|Short term notes payable                                                    |                 
|Other accounts payable and accruals                                         |                 
|Other accounts payable -  related party                                     |                 
|Prepayments for oil and gas                                                 |                 
|Interest  payable                                                           |                 
|Profit interest payable                                                     |                 
|                                                                            |                 
|Total current liabilities                                                   |                 
|Long-term payable                                                           |                 
|Commitments and Contingencies (Note 23)                                     |                 
|STOCKHOLDERS EQUITY                                                        |                 
|Common Stock, $.001 par value, 75,000,000 authorized, 17,000,000 issued and |                 
|outstanding                                                                 |                 
|Additional Paid in Capital                                                  |                 
|Retained earnings (Accumulated deficit)                                     |                 
|Accumulated other comprehensive income - foreign currency                   |                 
|                                                                            |                 
|Total stockholders equity (deficit)                                        |                 
|                                                                            |                 
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                  |                 
|                                                                            |                 

The accompanying
notes are an integral part of the consolidated financial statements.

F-2

---

SUNRISE
ENERGY RESOURCES INC. CONSOLIDATED STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE LOSS
(Expressed in US Dollars except share amounts)

|                                           | For the years ended December 31 |               
|------------------------------------------ | ------------------------------- | --------------
|
|REVENUES                                   |                                 |               
|Produced oil & gas                         |                                 | $   1,762,631 
|Purchased oil & gas                        |                                 | 127,849       
|                                           |                                 |               
|                                           |                                 | 1,890,480     
|COST OF SALES                              |                                 | (127,561      
|                                           |                                 |               
|                                           |                                 | 1,762,919     
|                                           |                                 |               
|Operating expenses                         |                                 | (1,010,008    
|Depreciation expense                       |                                 | (318,109      
|Other operating expenses                   |                                 | (83,933       
|Sales, general and administrative expenses |                                 | (715,885      
|                                           |                                 |               
|OPERATING LOSS                             |                                 | (365,016      
|                                           |                                 |               
|OTHER INCOME (EXPENSE)                     |                                 |               
|Interest income                            |                                 | 484           
|Interest expense                           |                                 | (142,527      
|Foreign exchange (loss) gain               |                                 | (1,254        
|Other  expenses                            |                                 | (16,018       
|                                           |                                 |               
|(LOSS) INCOME BEFORE TAX                   |                                 | (524,331      
|                                           |                                 |               
|INCOME TAX                                 |                                 | (62,464       
|                                           |                                 |               
|NET LOSS                                   |                                 | $    (586,795 
|                                           |                                 |               
|Other comprehensive loss                   |                                 |               
|Foreign currency translation loss          |                                 | (32,192       
|                                           |                                 |               
|COMPREHENSIVE LOSS                         |                                 | (618,987      
|                                           |                                 |               
|                                           |                                 |               
|BASIC LOSS (EARNINGS) PER SHARE            |                                 | $       (0.035
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |                                 | 17,000,000    
|                                           |                                 |               

The accompanying
notes are an integral part of the consolidated financial statements.

F-3

---

SUNRISE
ENERGY RESOURCES INC.CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
EQUITY (CAPITAL DEFICIT)(Expressed in US Dollars except share amounts)

|                                              | CommonStock | Accumulated  Other  Comprehensive | Retained  Earnings  (Accumulated | Additional   Paid-in | Total  Stockholders  Equity  (Capital |         
|--------------------------------------------- | ----------- | --------------------------------- | -------------------------------- | -------------------- | -------------------------------------- | --------
|
|BALANCE, DECEMBER 31, 2002                    |             | 137,700                           |                                  | $   1,377            |                                        |        
|                                              |             |                                   |                                  |                      |                                        |         
|Net (loss) for the year                       |             |                                  |                                  |                     |                                        |        
|                                              |             |                                   |                                  |                      |                                        |         
|                                              |             |                                   |                                  |                      |                                        |         
|BALANCE, DECEMBER 31, 2003                    |             | 137,700                           |                                  | 1,377                |                                        |        
|                                              |             |                                   |                                  |                      |                                        |         
|                                              |             |                                   |                                  |                      |                                        |         
|Common Stock, $.001 par value, 75,000,000     |             |                                   |                                  |                      |                                        |         
|authorized, 17,000,000 issued and outstanding |             | 17,000,000                        |                                  | 17,000               |                                        |        
|To give effect to the acquisition of EP as of |             |                                   |                                  |                      |                                        |         
|December 31, 2004                             |             | (137,700                          | )                                | (1,377               | )                                      |        
|Pre acquisition (deficit) of Sunrise Energy   |             |                                   |                                  |                      |                                        |         
|Resources Inc.                                |             |                                  |                                  |                     |                                        |        
|Net (loss) for the year                       |             |                                  |                                  |                     |                                        |        
|                                              |             |                                   |                                  |                      |                                        |         
|BALANCE, DECEMBER 31, 2004                    |             | 17,000,000                        |                                  | 17,000               |                                        |        
|                                              |             |                                   |                                  |                      |                                        |         
|Net loss for the year                         |             |                                  |                                  |                     |                                        |        
|Comprehensive loss for the year               |             |                                  |                                  |                     |                                        | (32,192 
|                                              |             |                                   |                                  |                      |                                        |         
|BALANCE, DECEMBER 31, 2005                    |             | 17,000,000                        |                                  | $ 17,000             |                                        | $(32,192
|                                              |             |                                   |                                  |                      |                                        |         
|                                              |             |                                   |                                  |                      |                                        |         

The accompanying
notes are an integral part of the consolidated financial statements.

F-4

---

SUNRISE
ENERGY RESOURCES INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in US
Dollars)

|                                                                            | For the years ended December 31 |          
|--------------------------------------------------------------------------- | ------------------------------- | ---------
|
|CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:                            |                                 |          
|Net loss from continuing operations for the period                          |                                 | $(586,795
|Adjustments to reconcile net loss from continuing operations to net cash in |                                 |          
|operating activities:                                                       |                                 |          
|Depreciation expense                                                        |                                 | 318,109  
|Loss on disposal of fixed assets                                            |                                 | 27,199   
|Provision for doubtful accounts                                             |                                 | 58,542   
|Deferred tax (gain)                                                         |                                 | (56,101  
|Net accrued interest                                                        |                                 | 3,964    
|Changes in assets and liabilities:                                          |                                 |          
|(Increase) decrease in accounts receivable                                  |                                 | (70,892  
|(Increase) in other accounts receivable and  prepayments                    |                                 | (242,679 
|(Increase) decrease in inventories                                          |                                 | (123,235 
|(Increase) decrease in taxes receivable                                     |                                 | (61,700  
|Increase (decrease) in accounts payable                                     |                                 | 204,466  
|Increase in taxes payable                                                   |                                 | 149,947  
|Increase in other accounts payable and accruals                             |                                 | 384,742  
|Increase in prepayments for oil and gas                                     |                                 | 416,049  
|Increase in profit interest payable                                         |                                 | 17,711   
|                                                                            |                                 |          
|                                                                            |                                 | 439,327  
|                                                                            |                                 |          
|CASH PROVIDED BY FINANCING ACTIVITIES:                                      |                                 |          
|Long term loans received                                                    |                                 | 279,900  
|Short term loans received                                                   |                                 |         
|                                                                            |                                 |          
|                                                                            |                                 | 279,900  
|                                                                            |                                 |          
|CASH USED IN INVESTING ACTIVITY:                                            |                                 |          
|Purchase of property, plant and equipment                                   |                                 | (747,599 
|Reacquisition (deficit) of Sunrise Energy Resources Inc.                    |                                 |         
|Effect of exchange rate changes                                             |                                 | 16,709   
|                                                                            |                                 |          
|INCREASE (DECREASE) IN CASH:                                                |                                 | (11,663  
|CASH, at the beginning of the period                                        |                                 | 15,082   
|                                                                            |                                 |          
|CASH, at the end of the period                                              |                                 | 3,419    
|                                                                            |                                 |          
|INCOME TAX PAID                                                             |                                 | $ 117,224
|                                                                            |                                 |          
|                                                                            |                                 |          
|                                                                            |                                 |          
|INTEREST PAID                                                               |                                 | $ 123,157
|                                                                            |                                 |          

The accompanying
notes are an integral part of the consolidated financial statements.

F-5

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 ofincorporation | CapitalContribution,% | ProfitSharing,%
|--------------------- | ------------------ | ----------------------- | --------------------- | ---------------
|Esko Pivnich          |                    | Marketing and           |                       | Ukraine        
|                      |                    | distribution of crude   |                      
|                      |                    | oil and natural gas     |                      
|PSA # 01-SD dated     |                    | Extraction of crude     |                       | Ukraine        
|April 26, 2000        |                    | oil and natural gas     |                      
|PSA # 35/970-SD dated |                    | Extraction of crude     |                       | Ukraine        
|August 19, 2004       |                    | oil and natural gas     |                      

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.

F-6

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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.

|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.

Property,
Plant and Equipment  Oil and gas properties are accounted
for 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 to be non-productive. Other exploratory
expenditures, including geological and geophysical costs are expensed as
incurred. Depreciation, depletion and amortization of capitalized costs of oil
and gas properties is calculated using the unit-of-production method based upon
proved reserves for the cost of property acquisitions and proved developed
reserves for exploration and development costs. As of the date of these
consolidated financial statements no such costs were incurred.

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:

F-7

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

|Oil and Gas Facilities |  | 3 years     | 
|---------------------- |  | ----------- | 
|Improvements and       | 
|Workover Costs         | 
|Office Improvements    |  | 4 - 5 years | 
|Computer 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.

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.

F-8

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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.

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.

F-9

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

---

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s
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s 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.

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s
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s field.

5. 
ACCOUNTS RECEIVABLE related party

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

|                          | 12/31/2005
|------------------------- | ----------
|CJSC Infox, related party |           
|                          |           
|Total                     |           
|                          |           

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              |           
|                              |           
|Pari, related party           |           
|                              |           
|Total                         |           
|                              |           

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.

F-10

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

7.   
INVENTORIES

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

|                                  | 12/31/2005
|--------------------------------- | ----------
|Crude oil - at cost               |           
|Other consumables and spare parts |           
|                                  |           
|Total                             |           
|                                  |           

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.

8.   
TAXES RECEIVABLE

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

|                  | 12/31/2005
|----------------- | ----------
|VAT receivable    |           
|Other tax prepaid |           
|                  |           
|Total             |           
|                  |           

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                                 |           
|Office equipment                           |           
|Construction in progress                   |           
|                                           |           
|                                           |           
|Accumulated Depreciation                   |           
|                                           |           
|Net Book Value                             |           
|                                           |           

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.

F-11

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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                        |           
|Deferred tax (gain)                |           
|                                   |           
|Total income tax expense (benefit) |           
|                                   |           

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.

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                                |           
|Charged to income for the period          |           
|                                          |           
|Net asset at the end of the period        |           
|                                          |           

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      |           
|Valuation of VAT receivable             |           
|Low value items written off             |           
|Difference in depreciable value of      |           
|property, plant and equipment due to    |           
|expensing in prior period allowed by    |           
|Ukrainian law                           |           
|                                        |           
|Total                                   |           
|                                        |           

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

|                                              | 12/31/2005
|--------------------------------------------- | ----------
|Deferred tax assets                           |           
|Provision for doubtful receivables            |           
|Valuation of VAT receivable                   |           
|Low value items written off                   |           
|Difference in depreciable value of            |           
|property, plant and equipment due to          |           
|expensing in prior period under Ukrainian law |           
|                                              |           
|Total                                         |           
|                                              |           

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:

F-12

---

|                                               | 12/31/2005
|---------------------------------------------- | ----------
|(Loss) before income tax and minority interest |           
|Theoretical income tax benefit at statutory    |           
|rate of 25%                                    |           
|Adjustments due to:                            |           
|Tax effect of expenses that are not            |           
|deductible in determining taxable profit       |           
|                                               |           
|Income tax (benefit)                           |           
|                                               |           

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          |           
|                          |           
|CJSC Infox, related party |           
|                          |           
|Total                     |           
|                          |           

Third
parties accounts payable balances as of December 31, 2005 were comprised mostly
of payable to Okhtirkaneftegas and Kachanozovsky 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 |           
|VAT                 |           
|Exploration tax     |           
|Profit tax          |           
|Resource Tax        |           
|Social insurance    |           
|Personal Income Tax |           
|                    |           
|Total               |           
|                    |           

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.

F-13

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

14.   
SHORT-TERM BANK LOANS

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

|                           | %, currency | 12/31/2005  
|-------------------------- | ----------- | ------------
|                           |             | 26%Ukrainian
|AB Clearing House          |             | Hrivnas     
|                           |             |             
|Total dated Sept. 17, 2004 |            
|due March, 2005            |             |             
|                           |             |             

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 |           
|Sipay  |           
|       |           
|Total  |           
|       |           

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                     |           
|Other accounts payable            |           
|                                  |           
|Total                             |           
|                                  |           
|Advances from former shareholders |           
|                                  |           
|Total                             |           
|                                  |           

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).

F-14

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

17.   
PREPAIMENTS 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 |           
|                            |           

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.

18.   INTEREST
PAYABLE

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

|                                           | 12/31/2005
|------------------------------------------ | ----------
|Short term loan - AB Clearing House        |           
|Interest accrued on advances received from |           
|former shareholders                        |           
|Long term loan - Zaccam Trading, related   |           
|party                                      |           
|                                           |           
|Total                                      |           
|                                           |           

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 |           
|                         |           

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 | Duenot earlierthan | 12/31/2005
|------------- | ------------------------- | ------------------ | ----------
|Fort Trade    |                           | Nov, 2004          |           
|Zaccam        |                           |                    |           
|Trading, Ltd. |                           | March 5, 2005      |           
|              |                           |                    |           
|Total         |                           |                    |           
|              |                           |                    |           

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).

F-15

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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.

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. Since no fair market value can be determined for
the issuers stock, no goodwill was recognized on the reverse acquisition.

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                               |           
|Accounts Payable                   |           
|Advances from former shareholders  |           
|Other accounts payable             |           
|                                   |           
|100% of Net Assets                 |           
|                                   |           
|Less cash balances held as at      |           
|December 31, 2004                  |           
|                                   |           
|Preacquisition deficit             |           
|                                   |           
|                                   |           
|Cash inflow on reverse acquisition |           
|                                   |           

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 |      | --  

F-16

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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
|Rakitnyansk field     |        | 2005-2009
|Karaikozovsks  field |        | 2005-2009
|                      |        |          
|Total                 |        |          
|                      |        |          

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 |     
|            |     
|Total       |     
|            |     

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.

F-17

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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    
|AlphaNafta (oil produced)    |            | 163,937    
|Torpeda PP (oil resold)      |            | 73,067     
|CJSC Ukrnafta (oil produced) |            | --         
|Other                        |            | 275,095    
|                             |            |            
|Total                        |            | $1,890,480 
|                             |            |            

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).

27.   
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).

F-18

---

(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  
|                  |            |           
|Total             |            | $265,253  
|                  |            |           

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 endedDecember 31, |             
|------------------------------ | ------------------------------- | ------------
|
|Sales of Oil and Gas produced  |                                 | $ 1,762,631 
|Production expenses (including |                                 | (1,049,461  
|depreciation expense)          |                                
|Exploration costs              |                                 | (265,253    
|Income tax expense             |                                 | (117,224    
|                               |                                 |             
|Total expenses                 |                                 | (1,431,938  
|                               |                                 |             
|Total                          |                                 | $    330,693
|                               |                                 |             

(C)Estimated
Proved Oil and Gas Reserves. The Companys estimate of its net proved
and proved developed oil and gas reserves as at December 31, 2005 is as follows.
Proved oil and gas reserves are the estimated quantities of crude oil, natural
gas and natural gas liquids which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions; i.e. prices and
costs as of the date the estimate is made.

Prices
include consideration of changes in the existing prices provided only by
contractual arrangement, but not on escalation based on future conditions.
Proved developed reserves are reserves that can expected to be recovered through
existing wells with existing equipment and operating methods. Additional oil and
gas expected to be obtained through the application of fluid injection or other
improved mechanisms of primary recovery are included as proved developed
reserves only after testing by a pilot project or after the operation of an
installed program has confirmed through production response that increased
recovery will be achieved.

At
December 31, 2005 and 2004 the Companys proved reserves were as follows:

|                             | Liquids(MBBLS) | Gas(MMCF)
|---------------------------- | -------------- | ---------
|Balance at December 31, 2004 |                | 7,842    
|Production                   |                | (39      
|Balance at December 31, 2005 |                | 7,803    
|Production                   |               

F-19

---

SUNRISE
ENERGY RESOURCES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(D)Standardized
measure of Discounted Future Net Cashflows. Future oil, gas and condensate
sales, production and development costs have been estimated using prices and
costs in effect at the end of the years indicated, except in those instances
where the sale of oil and natural gas is covered by contracts, in which case,
the applicable contract prices, including fixed and determinable escalations,
were used for the duration of the contract. Thereafter, the current spot price
was used. All cash flow amounts net to the Company, including income taxes, are
discounted at 10%.

Future
income tax expenses are estimated using an estimated combined federal and local
income tax rate of 25% in Ukraine. Future general and administrative expenses
were estimated by the management based on the level of such expenses for similar
fields.

Changes
in demand for oil and natural gas, inflation and other factors make such
estimates inherently imprecise and subject to substantial revision. This table
should not be construed to be an estimate of the current market value of the
Companys proved reserves. Management does not rely upon the information
that follows in making investment decisions.

|                                                         | December 31,2005(In thousands) | December 31,2004(In thousands)
|-------------------------------------------------------- | ------------------------------ | ------------------------------
|Future oil and gas sales                                 |                                | $ 80,860                      
|Future production cash costs                             |                                | (29,129                       
|Future administrative expenses;                          |                                | (3,613                        
|Future development costs;                                |                                | (3,287                        
|Future income taxes                                      |                                | (10,721                       
|Future profit interest payable                           |                                | (4,889                        
|                                                         |                                |                               
|Future net cash flows                                    |                                | 29,221                        
|Future net cash flows                                    |                               
|10% annual discount for estimated                        |                               
|Timing of cash flows                                     |                                | (8,165                        
|                                                         |                                |                               
|Standardized measure of discounted future net cash flows |                                | $ 21,056                      

The
computation of the standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31, 2005 was based on the
average gas prices of approximately $2.5 per MCF and on average liquids prices
of approximately $50 per barrel net to Esko Pivnich.

The
table below provides analysis of changes in the Standardized measure of
Discounted Future Net Cashflows from Proved Reserves.

|                                                               | 2005(in thousands)
|-------------------------------------------------------------- | ------------------
|Standardized Measure at January 1, 2005                        |                   
|Sales of oil, natural gas and condensate, net of related costs |                   
|Revisions to estimate of proved reserves                       |                   
|Net changes in prices, development and production costs        |                   
|Quantities                                                     |                   
|Accretion of discount                                          |                   
|Net Change in Income Taxes                                     |                   
|Development costs incurred                                     |                   
|Changes in timing and other                                    |                   
|                                                               |                   
|Standardized Measure at December 31, 2005                      |                   
|                                                               |                   

The
reserves and the monetary values attached to them have not been reviewed or
audited by a third-party petroleum engineering firm. In addition, the above
figures do not reflect the reserves of Pari, LLC acquired by us during the first
quarter of 2006.

F-20

---

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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 significant changes in the Companys internal
controls or in other factors that could significantly 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.

25

---

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 orappointed
|------------------------ | -------- | ----------------------------------- | ------------------------
|Konstantin Tsirulnikov   |          | CEO, Sunrise Energy Resources, Inc. |                         
|                         |          |                                     |                         
|David A. Melman          |          | Independent Director of Sunrise     |                         
|                         |          | Energy Resources Inc                |                         
|                         |          |                                     |                         
|Roman Livson             |          | CFO, Sunrise Energy Resources, Inc. |                         
|                         |          |                                     |                         
|Leon Golden              |          | Independent Director, Sunrise       |                         
|                         |          | Energy Resources, Inc.              |                         
|                         |          |                                     |                         
|Abraham Bennun           |          | Independent Director of Sunrise     |                         
|                         |          | Energy Resources Inc                |                         
|                         |          |                                     |                         
|Vyacheslav Chuchminov    |          | CEO, Esko Pivnich                   |                         
|                         |          |                                     |                         
|Taras Burdeniy           |          | CFO, Esko Pivnich                   |                         
|                         |          |                                     |                         
|Mrs. Raissa Volodarskaya |          | Chief Accountant                    |                         
|                         |          |                                     |                         

Directors
and Key Personnel

Mr. Konstantin
Tsirulnikov,President, CEO, of Sunrise Energy Resources (Age 27). Mr. Tsiryulnikov was
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.Sc. degree from the
University of Toronto.

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.

26

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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.

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.

27

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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.

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.

28

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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                               |              
|CEO of Sunrise Energy Resources, Inc.                |              
|                                                     |              
|Roman Livson                                         |              
|CFO of Sunrise Energy Resources, Inc.                |              
|                                                     |              
|Leon Golden                                          |              
|Independent Director, Sunrise Energy Resources, Inc. |              
|                                                     |              
|Abraham Bennun                                       |              
|Independent Director, Sunrise Energy Resources, Inc. |              
|                                                     |              
|David A. Melman                                      |              
|Independent Director of Sunrise Energy Resources.Inc |              
|                                                     |              
|Vyacheslav Chuchminov                                |              
|CEO, Esko Pivnich                                    |              
|                                                     |              
|Taras Burdeniy                                       |              
|CFO, Esko Pivnich                                    |              
|                                                     |              
|Raisa Volodarskaya                                   |              
|Chief Accountant                                     |              
|                                                     |              
|                                                     |              
|Total                                                |              
|                                                     |              
|                                                     |              

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.

29

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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 | Titleof Class | Numberof Shares | Percent ofClass
|------------------------ | ------------- | --------------- | ---------------
|Halton Impex Corp.       |               | Common          |                
|627 Lyons Lane,          |               |                 |                
|Oakville,                |               |                 |                
|Ontario L6J 5Z7          |               |                 |                
|Canada                   |               |                 |                
|                         |               |                 |                
|Mr. David A. Melman      |               |                 |                
|5353 Memorial Drive      |               |                 |                
|Suite 4012               |               |                 |                
|Houston Texas 77007      |               | Common          |                
|                         |               |                 |                

(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 ofBeneficial Owner | Amount of BeneficialInterest | Percent ofClass
|----------------------------------- | ---------------------------- | ---------------
|Mr. Konstantin Tsirulnikov          |                              | 65             
|Mr. David A. Melman                 |                              | 1              
|                                    |                              |                

|(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.

30

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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:

|               | 2005John A. Bradenand Co. , P.C. | 2004John A. Bradenand Co., P. C.
|-------------- | -------------------------------- | --------------------------------
|Audit          |                                  | 50,000                          
|Audit related  |                                  |                                
|Tax            |                                  |                                
|All other fees |                                  |                                
|               |                                  |                                 
|Total          |                                  | 50,000                          
|               |                                  |                                 
|               |                                  |                                 

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.

31

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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

|ExhibitNumber | Description | Incorporation by Reference           
|------------- | ----------- | -------------------------------------
|3.1           |             | Amended and Restated Certificate of  
|              |             | Incorporation of the Company         
|              |             |                                      
|3.2           |             | Bylaws of the Company                
|              |             |                                      
|              |             |                                      
|10.1          |             | Shareholders Agreement.              
|              |             |                                      
|              |             |                                      
|14            |             | Code of Ethics                       
|21.1          |             | List of Subsidiaries                 
|31.1          |             | Rule 13a-14(a) Certification of Chief
|              |             | Executive Officer                    
|31.2          |             | Rule 13a-14(a) Certification of Chief
|              |             | Financial Officer                    
|32.1          |             | Section 1350 Certification of Chief  
|              |             | Executive Officer                    
|32.2          |             | Section 1350 Certification of Chief  
|              |             | Financial Officer                    
|              |             |                                      

32

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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 Tsirulnikov
President 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     
|---------- | --------- | ----------
|__________ |           | __________

33

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