**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
   **FORM
        10-KSB**
  
  (Mark
        One)
  x
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
  For
        the
        fiscal year ended **December
        31, 2005**
  o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
  For
        the
        transition period from  to
  Commission
        file number **0-31444**
  
 **Altus
                  Explorations, Inc.**(Name
                  of small business issuer in its
                  charter)
 
 **Nevada**
              
              **98-0361119**(State
                  or other jurisdiction of incorporation or organization)
              
              (I.R.S.
                  Employer Identification No.)
 
 **Suite
                  100 - 8900 Germantown Road**
                **Olive
                  Branch, Mississippi**
              
              **38654**(Address
                  of principal executive offices)
              
              (Zip
                  Code)
  Issuer's
        telephone number **662.893.7376**
  Securities
        registered pursuant to Section 12(b) of the Act:
  Title
                  of each class
              
              Name
                  of each exchange on which registered**Nil**
              
              **Nil**
  Securities
        registered pursuant to Section 12(g) of the Act:
  **Common
                  Shares, par value $0.001**(Title
                  of class)
  Check
        whether the issuer is not required to file
        reports pursuant to Section 13 or 15(d) of the Exchange Act.  o
  Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.
 Yes x No o
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B is not contained in this form, and no disclosure will be
        contained, to the best of registrant’s knowledge, in definitive proxy or
        information statements incorporated by reference in Part III of this Form
        10-KSB
        or any amendment to this Form 10-KSB. o
  
 
  Registrant
        is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o;   Nox
  Registrant’s
        revenues for its most recent fiscal year were $74,421.
  The
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates computed based on the average bid and asked prices as of April
        14, 2006, was approximately $1,709,235.
  The
        number of shares outstanding of the issuer’s common equity as of April 14, 2006,
        was 46,572,792
        shares of common stock, par value par value $.001.
  DOCUMENTS
        INCORPORATED BY REFERENCE
  If
          the
          following documents are incorporated by reference, briefly describe them
          and
          identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
          which
          the document is incorporated: (1) any annual report to security holders;
          (2) any
          proxy or information statement; and (3) any prospectus filed pursuant to
          Rule
          424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed
          documents should be clearly described for identification purposes (e.g.,
          annual
          report to security holders for fiscal year ended December 24,
          1990).
  Transitional
        Small Business Disclosure Format (Check one):   Yes o ;   No x
  
  **Glossary
        of Oil and Gas Terms**
 
 The
        following are abbreviations and definitions of certain terms commonly used
        in
        the oil and gas industry and this information statement:
  ***Bbl.*** One
        stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to
        oil or
        other liquid hydrocarbons.
  ***Bcf.*** One
        billion cubic feet of gas.
  ***Bcfe:***  One
        billion cubic feet of gas equivalent, calculated by multiplying the number
        of
        barrels of oil by a conversion factor of six.
  ***BOE.*** One
        stock tank barrel equivalent of oil, calculated by converting gas volumes
        to
        equivalent oil barrels at a ratio of 6 Mcf to 1 Bbl of oil.
  ***“Carried”
        Working interest.*** A
        working interest in an oil and gas lease that gives the owner of the interest
        the right to drill for and produce oil and gas on the leased acreage and,
        but
        does not require the owner to pay a share of the costs of drilling. The owner’s
        share of drilling costs is “carried” by another party. A “carried” working
        interest owner generally is required to pay its proportionate share of
        production costs.
  ***Development
        well.*** A
        well drilled within the proved area of an oil or gas reservoir to the depth
        of a
        stratigraphic horizon known to be productive.
  ***Differential.*** An
        adjustment to the price of oil or natural gas from an established spot market
        price or index to reflect differences in the location of the oil or natural
        gas.
 Also commonly referred to as location basis.
  ***Exploratory
        well.*** A
        well drilled to find and produce oil or gas in an unproved area, to find
        a new
        reservoir in a field previously found to be productive of oil or gas in another
        reservoir, or to extend a known reservoir.
  ***Farm-In
        / Farm-Out.*** **** An
        agreement between a participant who brings a property into the venture and
        another participant who agrees to spend an agreed amount to explore and develop
        the property and has no right of reimbursement but may gain a vested interest
        in
        the venture. A “Farm-In” describes the position of the participant who agrees to
        spend the agreed-upon sum of money to gain a vested interest in the venture.
        A
“Farm-Out” describes the position of the participant who brings a property into
        the venture and grants a interest in the venture to the participant who spends
        an agreed-sum of money to earn its interest in the venture.
  ***Gas.*** Natural
        gas.
  ***Gross
        acres.*** The
        total acres in which a person or entity has a working interest.
  ***Gross
        oil and gas wells.*** The
        total wells in which a person or entity owns a working interest.
  ***MBbl.*** One
        thousand barrels of oil or other liquid hydrocarbons.
  ***MBOE.*** ** One
        thousand BOE.
  ***Mcf.*** One
        thousand cubic feet of gas.
  ***MMBbl.*** ** One
        million barrels of oil or other liquid hydrocarbons.
  ***MMBOE.*** One
        million BOE.
  ***MMcf.*** One
        million cubic feet of gas.
  ***Net
        acres.*** Gross
        acres multiplied by the Company’s net revenue interest in the acreage.
  ***Net
        oil and gas wells*** .    Gross
        wells multiplied by the Company’s net revenue interest in the well.
  ***Net
        production.*** Production
        that is owned, less royalties and production due others.
  4
  ***Net
        revenue interest.*** Our
        share of revenues after satisfaction of all royalty and other non-cost-bearing
        interests.
  ***NYMEX.*** New
        York Mercantile Exchange.
  ***Oil.*** Crude
        oil, condensate and natural gas liquids.
  ***Operator.*** The
        individual or company responsible for the exploration and/or exploitation
        and/or
        production of an oil or gas well or lease.
  ***PV-10.*** The
        pre-tax present value, discounted at 10% per year, of estimated future net
        revenues from the production of proved reserves, computed by applying sales
        prices in effect as of the dates of such estimates and held constant throughout
        the productive life of the reserves (except for consideration of price changes
        to the extent provided by contractual arrangements), and deducting the estimated
        future costs to be incurred in developing, producing and abandoning the proved
        reserves (computed based on current costs and assuming continuation of existing
        economic conditions).
  ***Proved
        reserves.*** Per
        Article 4-10(a)(2) of Regulation S-X, the SEC defines proved oil and gas
        reserves as the estimated quantities of crude oil, natural gas, and natural
        gas
        liquids which geological and engineering data demonstrate with reasonable
        certainty to be recoverable in future years from known reservoirs under existing
        economic and operating conditions, i.e., prices and costs as of the date
        the
        estimate is made. Prices include consideration of changes in existing prices
        provided only by contractual arrangements, but not on escalations based upon
        future conditions.
  Reservoirs
        are considered proved if economic productivity is supported by either actual
        production or conclusive formation test. The area of a reservoir considered
        proved includes: (i) that portion delineated by drilling and defined by gas-oil
        and/or oil-water contacts, if any; and (ii) the immediately adjoining portions
        not yet drilled, but which can be reasonably judged as economically productive
        on the basis of available geological and engineering data. In the absence
        of
        information on fluid contacts, the lowest known structural occurrence of
        hydrocarbons controls the lower proved limit of the reservoir.
  Reserves
        which can be produced economically through application of improved recovery
        techniques (such as fluid injection) are included in the “proved” classification
        when successful testing by a pilot project, or the operation of an installed
        program in the reservoir, provides support for the engineering analysis on
        which
        the project or program was based.
  Estimates
        of proved reserves do not include: (i) oil that may become available from
        known
        reservoirs but is classified separately as “indicated additional reserves”; (ii)
        crude oil, natural gas, and natural gas liquids, the recovery of which is
        subject to reasonable doubt because of uncertainty as to geology, reservoir
        characteristics, or economic factors; (iii) crude oil, natural gas, and natural
        gas liquids, that may occur in undrilled prospects; and (iv) crude oil, natural
        gas, and natural gas liquids, that may be recovered from oil shales, coal,
        gilsonite and other such sources.
  ***Proved
        developed reserves.*** Proved
        developed oil and gas reserves are reserves that can be 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 recovery techniques for supplementing the natural forces
        and
        mechanisms of primary recovery should be included as “proved developed reserves”
only after testing by a pilot project or after the operation of an installed
        program has confirmed through production response that increased recovery
        will
        be achieved.
  ***Proved
        undeveloped reserves.*** Proved
        undeveloped oil and gas reserves are reserves that are expected to be recovered
        from new wells on undrilled acreage, or from existing wells where a relatively
        major expenditure is required for recompletion. Reserves on undrilled acreage
        shall be limited to those drilling units offsetting productive units that
        are
        reasonably certain of production when drilled. Proved reserves for other
        undrilled units can be claimed only where it can be demonstrated with certainty
        that there is continuity of production from the existing productive formation.
        Under no circumstances should estimates for proved undeveloped reserves be
        attributable to any acreage for which an application of fluid injection or
        other
        improved recovery technique is contemplated, unless such techniques have
        been
        proved effective by actual tests in the area and in the same
        reservoir.
  5
  ***Royalty.*** An
        interest in an oil and gas lease that gives the owner of the interest the
        right
        to receive a portion of the production from the leased acreage (or of the
        proceeds of the sale thereof), but generally does not require the owner to
        pay
        any portion of the costs of drilling or operating the wells on the leased
        acreage. Royalties may be either landowner’s royalties, which are reserved by
        the owner of the leased acreage at the time the lease is granted, or overriding
        royalties, which are usually reserved by an owner of the leasehold in connection
        with a transfer to a subsequent owner.
  ***Standardized
        measure.*** The
        present value, discounted at 10% per year, of estimated future net revenues
        from
        the production of proved reserves, computed by applying sales prices in effect
        as of the dates of such estimates and held constant throughout the productive
        life of the reserves (except for consideration of price changes to the extent
        provided by contractual arrangements), and deducting the estimated future
        costs
        to be incurred in developing, producing and abandoning the proved reserves
        (computed based on current costs and assuming continuation of existing economic
        conditions). Future income taxes are calculated by applying the statutory
        federal and state income tax rate to pre-tax future net cash flows, net of
        the
        tax basis of the properties involved and utilization of available tax
        carryforwards related to oil and gas operations.
  ***Upstream.*** The
        portion of the oil and gas industry focused on acquiring, exploiting,
        developing, exploring for and producing oil and gas.
  ***Working
        interest.*** An
        interest in an oil and gas lease that gives the owner of the interest the
        right
        to drill for and produce oil and gas on the leased acreage and requires the
        owner to pay a share of the costs of drilling and production operations.
  6
  **PART
        I**
  **Item
                  1.**
              **Description
                  of Business.**
  This
        annual report contains forward-looking statements as that term is defined
        in the
        Private Securities Litigation Reform Act of 1995. These statements relate
        to
        future events or our future financial performance. In some cases, you can
        identify forward-looking statements by terminology such as "may", "should",
        "expects", "plans", "anticipates", "believes", "estimates", "predicts",
        "potential" or "continue" or the negative of these terms or other comparable
        terminology. These statements are only predictions and involve known and
        unknown
        risks, uncertainties and other factors, including the risks in the section
        entitled "Risk Factors", that may cause our or our industry's actual results,
        levels of activity, performance or achievements to be materially different
        from
        any future results, levels of activity, performance or achievements expressed
        or
        implied by these forward-looking statements.
  Although
        we believe that the expectations reflected in the forward-looking statements
        are
        reasonable, we cannot guarantee future results, levels of activity, performance
        or achievements. Except as required by applicable law, including the securities
        laws of the United States, we do not intend to update any of the forward-looking
        statements to conform these statements to actual results.
  Our
        financial statements are stated in United States Dollars (US$) and are prepared
        in accordance with United States Generally Accepted Accounting Principles.
        In
        this annual report, unless otherwise specified, all dollar amounts are expressed
        in United States dollars. All references to "common shares" refer to the
        common
        shares in our capital stock.
  As
        used
        in this annual report, the terms "we", "us", "our", and "Altus" mean Altus
        Explorations Inc., unless otherwise indicated.
  *Our
        Current Business*
  We
        are an
        independent resource company primarily engaged in the exploration for,
        development and production of natural gas and oil reserves physically located
        in
        Texas. Our participation in individual prospects is comprised of
        non-operating working interests.  So as to effectively allocate our limited
        capital resources amongst multiple prospect opportunities and in order to
        limit
        our exploration and development risk associated with any one prospect, we
        develop opportunities both through directly funding our proportionate share
        of
        capital requirements for a prospect; and through farming out our interest
        in a
        prospect and receiving a “carried” working interest in a prospect. A “carried”
working interest allows us to gain an interest in a prospect, while third
        parties fund our share of the capital expenditure requirements.
  Our
        current portfolio of oil and gas opportunities is comprised of our participation
        in the development of lease acreage located in Wharton County, Texas.
  Our
        ability to progress the exploration and development of oil and natural gas
        opportunities in the past and in the future is heavily dependent on our ability
        to secure financing sufficient to allow us to fund our initiatives, to meet
        operating and working capital requirements, and to act on future opportunities
        as they arise.
  Our
        oil
        and gas initiatives undertaken during the year 2005 included the exploration
        and
        development of the following prospect opportunities:
  **Southeast
        Kansas Lake Creek Prospects**
  In
        2003,
        we  acquired prospect acreage located within the Cherokee basin of
        Southeast Kansas. In July 2004, we farmout the Lake Creek Prospect Acreage
        to
        Orbit Energy, LLC. The farmout agreement provides for us to receive from
        Orbit
        $10,000 per well drilled in the Lake Creek Prospect Acreage together with
        a
        25.0% “carried” working interest in each well drilled. The Lake Creek No. 1 well
        was completed and commenced commercial production on January 18, 2005. Our
        working interest in this well is 25.0%, and net revenue interest totals
        18.75%.
  7
  In
        December 2004, we amended this farmout agreement with Orbit to provide us
        the
        right to continue to participate in the drilling and development of prospect
        acreage located outside the original Lake Creek Prospect Acreage with a working
        interest of up to 25.0%, of which 10.0% was to be “carried” by Orbit. The Lake
        Creek No. 2 and No. 3 wells were drilled during the 1 st quarter
        2005, and commenced commercial production during the 2 nd quarter
        2005. The Lake Creek No. 4 well was drilled and commenced commercial production
        during the 2 nd quarter
        2005. Our working interest in each well is 10.0% and net revenue interest
        is
        7.5%.
  On
        January 19, 2005, we amended our farmout agreement with Orbit to provide
        us the right to continue to participate in Phase II of the drilling and
        development program of acreage outside the original Lake Creek Prospect Acreage
        with a non-operating working interest up to 25% in each well drilled. We
        participated in the drilling of the Lake Creek No. 5 and No. 8 wells during
        the
        2 nd quarter
        2005, and the wells commenced commercial production in the 2 nd quarter.
        Our participation was at a 10.0% working interest level (with a 7.5% net
        revenue
        interest), for which we were responsible for funding our proportionate share
        of
        drilling and completion costs totalling $75,000 per well or $150,000 in
        total.
  The
        financing necessary to fund our capital investment in the Lake Creek No.
        5 and
        No. 8 wells was provided by CodeAmerica under our loan agreement with them
        dated
        February 4, 2005. Our total net revenues generated during the year 2005 from
        our
        Kansas Lake Creek Prospect interests was $43,285, with net production volumes
        of
        230 barrels oil and 4,308 Mcf natural gas. We had no revenues in year 2004
        from
        our Lake Creek interests.
  Our
        investment in the Kansas Lake Creek acreage was transferred to CodeAmerica
        in
        satisfaction of the outstanding note payable due to CodeAmerica together
        with
        accrued interest which totalled $263,932 at December 31, 2005. All borrowings
        under the CodeAmerica note were secured by all of our assets and the note
        was
        the primary source of funding for Altus’ investment in the Lake Creek oil and
        gas investment. The present value of discounted future net cash flows for
        our
        interest in the Kansas Lake Creek Prospect totalled approximately $15,000
        at
        December 31, 2005.
  **Wharton
        County, Texas**
  In
        July
        2004, we entered into a letter of intent with CodeAmerica to purchase certain
        lease acreage located in Wharton County, Texas. The letter of intent provided
        us
        the right to acquire lease acreage in Wharton County at a purchase price
        of
        $250.00 per acre or $210,250 in total. The consummation of the lease acquisition
        was contingent on the execution of a final purchase and sale agreement and
        on us
        remitting payment to CodeAmerica for the lease acreage. Had the acquisition
        been
        accomplished, we would have held, until payout, an 85% working interest and
        an
        associated 61.2% net revenue interest in revenues produced. We would have
        been
        responsible for 100% of the capital expenditures required to drill, complete
        and
        interconnect the associated reserves.
  The
        project developers are in the process of finalizing financing to effect the
        drilling and completion of the subject Wharton County acreage. As consideration
        for certain front end development and evaluation costs incurred by us in
        connection with the lease acreage, on November 9, 2005, we entered into a
        letter
        agreement between us and CodeAmerica that provides us a 2.0% “carried” working
        interest (and an associated 1.525% net revenue interest) in the drilling
        and
        completion of the initial four Wilcox formation wells drilled on the lease
        acreage. This allows us to participate in the reserve development without
        having
        to raise the financing that would be needed to fund a working interest owner’s
        proportionate share of capital investment and cash calls made by the operator,
        if we did not have a “carried” working interest.
  The
        operator’s estimate of gross proved undeveloped reserves for two initial wells
        are approximately 3.1 Bcfe gross per well, or our net of approximately 46,940
        Mcf per well of proved undeveloped reserves to our net interest in each
        well.
  8
  **Freestone
        County, Texas**
  During
        the year 2003, we acquired a 10% non-operating working interest in the T.E.
        Lane
        gas unit located in Freestone County, Texas. The T.E. Lane unit commenced
        gas
        production in January 2004 from the Bossier formation and was drilled to
        a depth
        of approximately 15,400 feet. In March 2004 we increased our non-operating
        interest in the T.E. Lane gas unit to 20%, and acquired from CodeAmerica
        its
        100% interest held in lease acreage contiguous to the T.E. Lane unit. The
        March
        2004 acquisitions were funded through the issuance of 4,040,726 of our common
        shares to CodeAmerica. The acquisitions were effected based on the estimated
        fair market value of the reserves, which were determined through projected
        future discounted cash flow analyses (including projected future capital
        expenditure requirements to drill and complete four direct offset wells to
        the
        T.E. Lane gas unit).
  Production
        from the T.E. Lane gas unit was shut in by the operator during the 4 th quarter
        2005 while the operator conducted tests and analyses, in anticipation of
        further
        workover procedures. The T.E. Lane operator has not been successful in restoring
        the gas unit’s production due to “downhole” mechanical problems. The operator
        indicates that it is possible that restoring production associated with our
        20%
        non-operating interest in the well may not be economically feasible. Our
        proportionate share of net production from the T.E. Lane well for the year
        2005
        was 5,293 Mcf which generated revenues associated with our net revenue interest
        totalling $31,136 for the year. Our net production and revenues in 2004 from
        the
        Lane well totalled 7,613 Mcf and $25,510, respectively.
  To
        date
        the acquired undrilled acreage adjacent to the T.E. Lane well was being held
        by
        the Lane well production, while we sought financing to fund the drilling
        and
        development of the offsetting acreage to which proved undeveloped reserve
        classification has been assigned. With the Lane well not under production,
        the
        underlying oil and gas leases will expire if not renewed or delay rental
        payments are not made.
  The
        cost
        to drill and complete a single 15,000 foot deep well in the undrilled acreage
        to
        the Bossier formation is estimated to be approximately $3.2 million per well.
        Our initiatives to date to secure financing to fund the drilling and development
        of the Freestone County unproved acreage have not been successful. Small
        cap
        independent exploration and production companies, such as Altus, are inherently
        capital constrained in their ability to raise sufficient financing to drill
        and
        develop all their prospects, and they are challenged to diversify their drilling
        risk across many prospects in order for the company not to be solely dependent
        one or a few individual prospects.
  With
        the
        absence of current production coupled with the expiration of oil and gas
        leases,
        and our limited access to capital at the level required to fund the drilling
        of
        very deep and expensive wells in the undrilled Freestone County acreage,
        we have
        concluded that our investment in the Freestone County acreage is impaired
        as
        defined under Statement of Financing Accounting Standards (“SFAS”) No. 144 -
        Accounting for the Impairment or Disposal of Long-Lived Assets, and have
        recorded an impairment loss of $1,118,493 to reduce the carrying value of
        our
        oil and gas property in Freestone County to its estimated net realizable
        value
        of zero at year end 2005.
  ***United
        States Natural Gas and Oil Industry***
  The
        natural gas and oil industry in the United States is highly competitive,
        experiences significant commodity price volatility and is subject to substantial
        local, state and federal regulations concerning matters such as permitting,
        drilling and environmental requirements. We are primarily targeting the
        exploration, exploitation, development and production of natural gas reserves
        to
        meet the U.S. consumers' robust appetite for energy.
  Several
        natural gas forecasts project continuing declining levels of domestic natural
        gas production and reserves in the lower 48 states while demand for natural
        gas
        is forecast to continue to grow. The growth in demand is heavily driven by
        increasing levels of gas-fired power generation to meet conversion of existing
        power generation facilities to a cleaner burning fuel source, and by new
        generation facility construction that are primarily natural gas-fired electric
        generation units.
  Studies
        indicate that insufficient natural gas reserve development in the U.S., combined
        with steep production decline rates of existing proved developed reserves
        have
        created natural gas consumers and market concerns over the adequacy and
        reliability of natural gas in the U.S., particularly during peak consumption
        periods. The United States Department of Energy, Energy Information Agency,
        projects that substantial increases in the imports of natural gas into the
        U.S.
        primarily in the form of liquefied natural gas ("LNG") will be required to
        supplement the growing gap between demand for natural gas and available domestic
        supplies to meet that demand within the U.S.
  9
  Although
        there is a role for LNG to supplement domestic gas supply shortfalls in the
        U.S., due to commercial and operational conditions and characteristics of
        LNG,
        we do not believe that LNG imports can adequately offset and compensate for
        declining natural gas reserve levels in the U.S. Additionally, we do not
        believe
        that imports can replace the compelling need to continue natural gas domestic
        reserve exploration and development. This area of reserve exploration and
        development is our principal strategic target area.
  The
        U.S.
        oil industry is heavily dominated by major integrated oil and gas companies
        and
        numerous independent oil companies. Many of these companies possess and employ
        financial and human resources substantially greater than ours. Prices for
        oil
        production and production levels are subject to wide fluctuations and depend
        on
        numerous factors beyond a companies control including economic conditions,
        foreign imports and political condition in the U.S. and in oil producing
        rich
        countries, actions of OPEC, and governmental and legislative regulation and
        policies.
  ***Competition***
  The
        oil
        and gas industry is intensely competitive. We compete with numerous individuals
        and companies, including many major oil and gas companies, which have
        substantially greater technical, financial and operational resources and
        staffs.
        Accordingly, there is a high degree of competition for desirable oil and
        gas
        leases, suitable properties for drilling operations and necessary drilling
        equipment, as well as for access to funds. We cannot predict if the necessary
        funds can be raised or that any projected work will be completed. Our budget
        anticipates our acquisition of additional acreage. This acreage may not become
        available or if it is available for leasing, that we may not be successful
        in
        acquiring the leases. There are other competitors that have operations in
        same
        areas and the presence of these competitors could adversely affect our ability
        to acquire additional leases.
  ***Market
        Prices of Oil and Natural Gas***
  The
        market prices of oil and natural gas have historically fluctuated widely
        and are
        affected by numerous global factors beyond our control. A decline in such
        market
        prices may have an adverse effect on revenues we receive from the sale of
        oil
        and gas. A decline in prices will also reduce our exploration efforts and make
        it more difficult to raise capital. Decreases in natural gas and oil prices
        could have an adverse effect on the carrying value of our proved reserves
        and
        our revenues, profitability and cash flow.
  As
        we
        build our sustained commodity production levels, we will evaluate and anticipate
        that we may use various over-the-counter and publicly traded derivative
        instruments to hedge a portion of our exposure to price fluctuations.
  ***Government
        Regulations and Supervision***
  Our
        oil
        and gas operations are subject to various United States federal, state and
        local
        governmental regulations. Matters subject to regulation include discharge
        permits for drilling operations, drilling and abandonment bonds, reports
        concerning operations, the spacing of wells, and pooling of properties and
        taxation. From time to time, regulatory agencies have imposed price controls
        and
        limitations on production by restricting the rate of flow of oil and gas
        wells
        below actual production capacity in order to conserve supplies of oil and
        gas.
        The production, handling, storage, transportation and disposal of oil and
        gas,
        by-products thereof, and other substances and materials produced or used
        in
        connection with oil and gas operations are also subject to regulation under
        federal, state, provincial and local laws and regulations relating primarily
        to
        the protection of human health and the environment. To date, expenditures
        related to complying with these laws, and for remediation of existing
        environmental contamination, have not been significant in relation to the
        results of operations of our company. The requirements imposed by such laws
        and
        regulations are frequently changed and subject to interpretation, and we
        are
        unable to predict the ultimate cost of compliance with these requirements
        or
        their effect on our operations.
  ***Product
        Research and Development***
  10
  Our
        business plan is focused on the long-term exploration and development of
        our
        recently acquired oil and gas interests, as well as the exploration and
        development of our mineral properties. We do not anticipate that we will
        expend
        any significant funds on product research over the twelve months.
  ***Employees***
  Currently
        there are no full time or part-time employees of our company (other than
        our
        directors and officers who, at present, have not signed employment or consulting
        agreements with us). We do not expect any material changes in the number
        of
        employees over the next 12 month period (although we may enter into employment
        or consulting agreements with our officers or directors). We do and will
        continue to outsource contract employment as needed.
  However,
        if we are successful in our initial and any subsequent drilling programs
        we may
        retain additional employees as it becomes economically warranted to do so.
  ***Purchase
        or Sale of Equipment***
  We
        do not
        intend to purchase any significant equipment over the twelve
        months.
  **RISK
        FACTORS**
  Much
        of
        the information included in this quarterly report includes or is based upon
        estimates, projections or other "forward-looking statements". Such
        forward-looking statements include any projections or estimates made by us
        and
        our management in connection with our business operations. While these
        forward-looking statements, and any assumptions upon which they are based,
        are
        made in good faith and reflect our current judgment regarding the direction
        of
        our business, actual results will almost always vary, sometimes materially,
        from
        any estimates, predictions, projections, assumptions, or other future
        performance suggested herein. We undertake no obligation to update
        forward-looking statements to reflect events or circumstances occurring after
        the date of such statements.
  Such
        estimates, projections or other "forward-looking statements" involve various
        risks and uncertainties as outlined below. We caution readers of this quarterly
        report that important factors in some cases have affected and, in the future,
        could materially affect actual results and cause actual results to differ
        materially from the results expressed in any such estimates, projections
        or
        other "forward-looking statements". In evaluating us, our business and any
        investment in our business, readers should carefully consider the following
        factors.
  ***We
        have limited operating history and losses that we expect to continue into
        the
        future.***
  We
        have
        not yet realized any significant revenues. We have limited operating history
        upon which an evaluation of our future success or failure can be made. Our
        net
        loss since inception is $(1,275,449). Our ability to achieve and maintain
        profitability and positive cash flow is dependent upon the
        following:
  -
              Our
                  ability to locate a profitable resource
                  property;
  -
              Our
                  ability to generate revenues; and
  -
              Our
                  ability to reduce exploration costs.
  Based
        upon current plans, we expect to incur operating losses in future periods.
        This
        will happen because there are expenses associated with exploration of our
        oil
        and gas interests. We may not be successful in generating revenues in the
        future. Failure to generate revenues will cause us to go out of business.
  ***If
        we do not raise enough money for exploration, we will have to delay exploration
        or go out of business.***
  We
        are in
        an early development stage and we need additional financing before we are
        able
        to continue our exploration efforts. We are working to arrange financing,
        but we
        may be unable to raise financing. If we are not able to raise any financing
        we
        will have to delay our exploration or go out of business.
  11
  ***We
        may not have access to all of the supplies and materials we need to begin
        exploration that could cause us to delay or suspend operations.***
  Competition
        and unforeseen limited sources of supplies and equipment in the energy industry
        could result in occasional spot shortages of supplies or the lack of
        availability of required equipment, such as drilling rigs.
  ***We
        do not have enough money to complete the explorations proposed in properties
        and
        consequently may have to cease or suspend our operations unless we are able
        to
        raise additional financing.***
  We
        do not
        have enough money to commence first stages of the exploration and development
        of
        all of our prospects. We will require additional funding to complete subsequent
        phases of exploration and development. Because we are conducting exploration
        on
        undeveloped projects, we do not know how much we will have to spend to find
        out
        if there is oil and gas on our property. It could cost as little as $1,000,000
        and as much as $10,000,000 to find out. If it turns out that we are not able
        to
        raise enough money to complete our exploration program, we will try to raise
        additional funds from a public offering, a private placement or loans. At
        the
        present time, we are pursuing initiatives to raise additional money, but
        there
        are no assurances that we would be able to raise additional money in the
        future.
        If we need additional money and cannot raise it, we will have to suspend
        or
        cease operations.
  ***We
        have a limited operating history and if we are not successful in continuing
        to
        grow our business, then we may have to scale back or even cease our ongoing
        business operations.***
  We
        have
        no history of substantial revenues from operations and hold primarily interests
        in undeveloped reserves and exploration prospects. We have yet to generate
        positive earnings and there can be no assurance that we will ever operate
        profitably. Our company has a limited operating history and must be considered
        in the development stage. Our success is significantly dependent on a successful
        acquisition, drilling, completion and production program. Our company's
        operations will be subject to all the risks inherent in the establishment
        of a
        developing enterprise and the uncertainties arising from the absence of a
        significant operating history. We may be unable to locate recoverable reserves
        or operate on a profitable basis. We are in the development stage and potential
        investors should be aware of the difficulties normally encountered by
        enterprises in the development stage. If our business plan is not successful,
        and we are not able to operate profitably, investors may lose some or all
        of
        their investment in our company.
  ***Because
        of the early stage of development and the nature of our business, our securities
        are considered highly speculative.***
  Our
        securities must be considered highly speculative, generally because of the
        nature of our business and the early stage of our development. We are engaged
        in
        the business of exploring and, if warranted, developing commercial reserves
        of
        oil and gas. Our properties are in the exploration stage only and are without
        known reserves of oil and gas. Accordingly, we have not generated any revenues
        nor have we realized a profit from our operations to date and there is little
        likelihood that we will generate any revenues or realize any profits in the
        short term. Any profitability in the future from our business will be dependent
        upon locating and developing economic reserves of oil and gas, which itself
        is
        subject to numerous risk factors as set forth herein. Since we have not
        generated any revenues, we will have to raise additional monies through the
        sale
        of our equity securities or debt in order to continue our business
        operations.
  ***As
        our properties are in the exploration and development stage there can be
        no
        assurance that we will establish commercial discoveries on our
        properties.***
  Exploration
        for technically and commercially recoverable reserves of oil and gas is subject
        to a number of risk factors. Few properties that are explored are ultimately
        developed into producing oil and/or gas wells. Even if reserves located are
        technically recoverable, they may not be commercially recoverable in the
        existing market.
  12
  ***The
        potential profitability of oil and gas ventures depends upon factors beyond
        the
        control of our company***
  The
        potential profitability of oil and gas properties is dependent upon many
        factors
        beyond our control. For instance, world prices and markets for oil and gas
        are
        unpredictable, highly volatile, potentially subject to governmental fixing,
        pegging, controls, or any combination of these and other factors, and respond
        to
        changes in domestic, international, political, social, and economic
        environments. Additionally, due to worldwide economic uncertainty, the
        availability and cost of funds for production and other expenses have become
        increasingly difficult, if not impossible, to project. These changes and
        events
        may materially affect our financial performance.
  Adverse
        weather conditions can also hinder drilling operations. A productive well
        may
        become uneconomic in the event water or other deleterious substances are
        encountered which impair or prevent the production of oil and/or gas from
        the
        well. In addition, production from any well may be unmarketable if it is
        impregnated with water or other deleterious substances. The marketability
        of oil
        and gas which may be acquired or discovered will be affected by numerous
        factors
        beyond our control. These factors include the proximity and capacity of oil
        and
        gas pipelines and processing equipment, market fluctuations of prices, taxes,
        royalties, land tenure, allowable production and environmental protection.
        These
        factors cannot be accurately predicted and the combination of these factors
        may
        result in our company not receiving an adequate return on invested
        capital.
  ***Competition
        in the oil and gas industry is highly competitive and there is no assurance
        that
        we will be successful in acquiring the leases.***
  The
        oil
        and gas industry is intensely competitive. We compete with numerous individuals
        and companies, including many major oil and gas companies, which have
        substantially greater technical, financial and operational resources and
        staffs.
        Accordingly, there is a high degree of competition for desirable oil and
        gas
        leases, suitable properties for drilling operations and necessary drilling
        equipment, as well as for access to funds. We cannot predict if the necessary
        funds can be raised or that any projected work will be completed. Our budget
        anticipates our acquisition of additional acreage. This acreage may not become
        available or if it is available for leasing, that we may not be successful
        in
        acquiring the leases. There are other competitors that have operations in
        same
        areas and the presence of these competitors could adversely affect our ability
        to acquire additional leases.
  ***The
        marketability of natural resources will be affected by numerous factors beyond
        our control which may result in us not receiving an adequate return on invested
        capital to be profitable or viable.***
  The
        marketability of natural resources which may be acquired or discovered by
        us
        will be affected by numerous factors beyond our control. These factors include
        market fluctuations in oil and gas pricing and demand, the proximity and
        capacity of natural resource markets and processing equipment, governmental
        regulations, land tenure, land use, regulation concerning the importing and
        exporting of oil and gas and environmental protection regulations. The exact
        effect of these factors cannot be accurately predicted, but the combination
        of
        these factors may result in us not receiving an adequate return on invested
        capital to be profitable or viable.
  ***Oil
        and gas operations are subject to comprehensive regulation which may cause
        substantial delays or require capital outlays in excess of those anticipated
        causing an adverse effect on our company.***
  Oil
        and
        gas operations are subject to federal, state, and local laws relating to
        the
        protection of the environment, including laws regulating removal of natural
        resources from the ground and the discharge of materials into the environment.
        Oil and gas operations are also subject to federal, state, and local laws
        and
        regulations which seek to maintain health and safety standards by regulating
        the
        design and use of drilling methods and equipment. Various permits from
        government bodies are required for drilling operations to be conducted; no
        assurance can be given that such permits will be received. Environmental
        standards imposed by federal, provincial, or local authorities may be changed
        and any such changes may have material adverse effects on our activities.
        Moreover, compliance with such laws may cause substantial delays or require
        capital outlays in excess of those anticipated, thus causing an adverse effect
        on us. Additionally, we may be subject to liability for pollution or other
        environmental damages which it may elect not to insure against due to
        prohibitive premium costs and other reasons. To date we have not been required
        to spend any material amount on compliance with environmental regulations.
        However, we may be required to do so in future and this may affect our ability
        to expand or maintain our operations.
  13
  ***Exploration
        and production activities are subject to certain environmental regulations
        which
        may prevent or delay the commencement or continuance of our
        operations.***
  In
        general, our exploration and production activities are subject to certain
        federal, state and local laws and regulations relating to environmental quality
        and pollution control. Such laws and regulations increase the costs of these
        activities and may prevent or delay the commencement or continuance of a
        given
        operation. Compliance with these laws and regulations has not had a material
        effect on our operations or financial condition to date. Specifically, we
        are
        subject to legislation regarding emissions into the environment, water
        discharges and storage and disposition of hazardous wastes. In addition,
        legislation has been enacted which requires well and facility sites to be
        abandoned and reclaimed to the satisfaction of state authorities. However,
        such
        laws and regulations are frequently changed and we are unable to predict
        the
        ultimate cost of compliance. Generally, environmental requirements do not
        appear
        to affect us any differently or to any greater or lesser extent than other
        companies in the industry.
  We
        believe that our operations comply, in all material respects, with all
        applicable environmental regulations.
  Our
        operating partners maintain insurance coverage customary to the industry;
        however, we are not fully insured against all possible environmental
        risks.
  ***Exploratory
        drilling involves many risks and we may become liable for pollution or other
        liabilities which may have an adverse effect on our financial
        position.***
  Drilling
        operations generally involve a high degree of risk. Hazards such as unusual
        or
        unexpected geological formations, power outages, labor disruptions, blow-outs,
        sour gas leakage, fire, inability to obtain suitable or adequate machinery,
        equipment or labour, and other risks are involved. We may become subject
        to
        liability for pollution or hazards against which it cannot adequately insure
        or
        which it may elect not to insure. Incurring any such liability may have a
        material adverse effect on our financial position and operations.
  ***Any
        change to government regulation/administrative practices may have a negative
        impact on our ability to operate and our
        profitability.***
  The
        laws,
        regulations, policies or current administrative practices of any government
        body, organization or regulatory agency in the United States or any other
        jurisdiction, may be changed, applied or interpreted in a manner which will
        fundamentally alter the ability of our company to carry on our
        business.
  The
        actions, policies or regulations, or changes thereto, of any government body
        or
        regulatory agency, or other special interest groups, may have a detrimental
        effect on us. Any or all of these situations may have a negative impact on
        our
        ability to operate and/or our profitably.
  ***We
        do not own any resource properties. We hold working and revenue interests
        in
        various oil and gas leases***
  We
        do not
        own any resource properties. We hold working and royalty interests in oil
        and
        gas leases in Texas and Kansas. Unless we are able to pay our proportionate
        share of costs associated with our working interests, our interest in the
        leases
        may be diluted or lost entirely.
  ***Because
        the SEC imposes additional sales practice requirements on brokers who deal
        in
        our shares that are penny stocks, some brokers may be unwilling to trade
        them.
        This means that you may have difficulty in reselling your shares and may
        cause
        the price of the shares to decline.***
  Our
        shares qualify as penny stocks and are covered by Section 15(g) of the
        Securities Exchange Act of 1934, which imposes additional sales practice
        requirements on broker/dealers who sell our securities in this offering or
        in
        the aftermarket. In particular, prior to selling a penny stock, broker/dealers
        must give the prospective customer a risk disclosure document that: contains
        a
        description of the nature and level of risk in the market for penny stocks
        in
        both public offerings and secondary trading; contains a description of the
        broker/dealers' duties to the customer and of the rights and remedies available
        to the customer with respect to violations of such duties or other requirements
        of Federal securities laws; contains a brief, clear, narrative description
        of a
        dealer market, including "bid" and "ask" prices for penny stocks and the
        significance of the spread between the bid and ask prices; contains the toll
        free telephone number for inquiries on disciplinary actions established pursuant
        to section 15(A)(i); defines significant terms used in the disclosure document
        or in the conduct of trading in penny stocks; and contains such other
        information, and is in such form (including language, type size, and format),
        as
        the SEC requires by rule or regulation. Further, for sales of our securities,
        the broker/dealer must make a special suitability determination and receive
        from
        you a written agreement before making a sale to you. Because of the imposition
        of the foregoing additional sales practices, it is possible that brokers
        will
        not want to make a market in our shares. This could prevent you from reselling
        your shares and may cause the price of the shares to decline.
  14
  ***Our
        officers and directors beneficially own a total of 450,000 shares of our
        company. They may sell some of their shares in the future, which could cause
        the
        price of our common stock to fall, which will reduce the value of your shares.***
  Our
        officers and directors beneficially own a total of 450,000 shares of stock,
        which is .1% of the issued and outstanding number of shares. Subject to all
        holding periods under applicable securities laws, they will likely sell a
        portion or all of their stock in the future. If they do sell their stock
        into
        the market, the sales may cause the market price of the stock to
        drop.
  ***Trading
        of our stock may be restricted by the SEC's Penny Stock Regulations which
        may
        limit a stockholder's ability to buy and sell our stock.***
  The
        U.S.
        Securities and Exchange Commission has adopted regulations which generally
        define "penny stock" to be any equity security that has a market price (as
        defined) less than $5.00 per share or an exercise price of less than $5.00
        per
        share, subject to certain exceptions. Our securities are covered by the penny
        stock rules, which impose additional sales practice requirements on
        broker-dealers who sell to persons other than established customers and
        "accredited investors". The term "accredited investor" refers generally to
        institutions with assets in excess of $5,000,000 or individuals with a net
        worth
        in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
        with their spouse. The penny stock rules require a broker-dealer, prior to
        a
        transaction in a penny stock not otherwise exempt from the rules, to deliver
        a
        standardized risk disclosure document in a form prepared by the SEC which
        provides information about penny stocks and the nature and level of risks
        in the
        penny stock market. The broker-dealer also must provide the customer with
        current bid and offer quotations for the penny stock, the compensation of
        the
        broker-dealer and its salesperson in the transaction and monthly account
        statements showing the market value of each penny stock held in the customer's
        account. The bid and offer quotations, and the broker-dealer and salesperson
        compensation information, must be given to the customer orally or in writing
        prior to effecting the transaction and must be given to the customer in writing
        before or with the customer's confirmation. In addition, the penny stock
        rules
        require that prior to a transaction in a penny stock not otherwise exempt
        from
        these rules, the broker-dealer must make a special written determination
        that
        the penny stock is a suitable investment for the purchaser and receive the
        purchaser's written agreement to the transaction. These disclosure requirements
        may have the effect of reducing the level of trading activity in the secondary
        market for the stock that is subject to these penny stock rules. Consequently,
        these penny stock rules may affect the ability of broker-dealers to trade
        our
        securities. We believe that the penny stock rules discourage investor interest
        in and limit the marketability of, our common stock.
  
  ***We
        do not expect to declare or pay any dividends.***
  We
        have
        not declared or paid any dividends on our common stock since our inception,
        and
        we do not anticipate paying any such dividends for the foreseeable
        future.
  ***Anti-Takeover
        Provisions***
  We
        do not
        currently have a shareholder rights plan or any anti-takeover provisions
        in our
        By-laws. Without any anti-takeover provisions, there is no deterrent for
        a
        take-over of our company, which may result in a change in our management
        and
        directors.
  15
  ***Our
        By-laws contain provisions indemnifying our officers and directors against
        all
        costs, charges and expenses incurred by them.***
  Our
        By-laws contain provisions with respect to the indemnification of our officers
        and directors against all costs, charges and expenses, including an amount
        paid
        to settle an action or satisfy a judgment, actually and reasonably incurred
        by
        him, including an amount paid to settle an action or satisfy a judgment in
        a
        civil, criminal or administrative action or proceeding to which he is made
        a
        party by reason of his being or having been one of our directors or
        officers.
  **Item
                  2.**
              **Description
                  of Property.**
  Our
        principal offices are located at Suite 100, 8900 Germantown Road, Olive Branch,
        Mississippi 38654. Our telephone number is 662-893-7376. We lease our office
        space from McDowell & Son on a month to month basis and pay our
        proportionate share of monthly rent totalling $1,600. During the fiscal year
        ending December 31, 2005, we paid $19,200 for rent.
  The
        properties in which we hold our interests do not have any productive natural
        or
        oil wells at the date hereof.
  ***Our
        Oakcrest Prospect Property***
  As
        of
        December 31, 2005 we hold a 2.0% “carried” working interest, and an associated
        1.525% net revenue interest, in the drilling and development of the initial
        four
        wells in the Wilcox formation located in the Edgar Survey 93, and the J.
        Borden
        Survey, Abstract 9 in Wharton County Texas.
  ***Our
        Texas Freestone County Property***
  As
        of
        December 31, 2005 we hold a 20% working interest in the T.E. Lane Gas Unit,
        and
        100% working interests in ten leases covering approximately 526.1 gross acres
        in
        Freestone County, Texas. The leases are more particularly described as Texas
        State lease numbers FRTX0001-00 to 01; FRTX0003-00 to 04; and FRTX0004-00
        to
        01.
  ***Our
        Kansas Properties***
  We
        hold a
        working interest in leases covering approximately 3,000 acres in the Chatauqua
        and Elk Counties of Kansas. The property is more particularly described by
        the
        following townships and ranges:
  T31S;
        R9E
        (All) - T32S; R8E (Sec.'s 1-2-3-10-11-12-13-14-15-22-23-24-34-35 & 36) -
        T32S; R9E (All) - T32S; R10E (All) - T33S; R8E (Sec.'s
        1-2-3-10-11-12-13-14-15-22-23-24-25-26-27-34-35 & 36) - T33S; R9E (All) -
        T34S; R8E (Sec.'s
        1-2-3-4-9-10-11-12-13-14-15-16-21-22-23-24-25-26-27-28-33-34-35 & 36) -
        T34S; R9E (All) - T35S; R8E (Sec.'s 1-2-3-10-11-12-13-14 & 15) and T35S; R9E
        (Sec.'s 1 through 13 inclusive).
  Effective
        December 31, 2005 our interests in the Kansas leases were transferred to
        CodeAmerica in full satisfaction of amounts due by Altus to CodeAmerica for
        principal and accrued interest under its Loan Agreement with
        CodeAmerica..
  **Item
                  3.**
              **Legal
                  Proceedings.**
  We
        know
        of no 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 any
        registered beneficial shareholder are an adverse party or has a material
        interest adverse to us.
  **Item
                  4.**
              **Submissions
                  of Matters to a Vote of Security
                  Holders.**
  None.
  16
  **PART
        II**
  **Item
                  5.**
              **Market
                  for Common Equity and Related Stockholder
                  Matters.**
  On
        January 13, 2003, our common stock received approval for quotation on the
        National Association of Securities Dealers Inc.'s Over-the-Counter Bulletin
        Board under the name "Altus Explorations, Inc." and under the symbol "ATUX".
        The
        following table reflects the high and low bid information for our common
        stock
        for each fiscal quarter during the fiscal years ended December 31, 2003,
        2004
        and 2005. The bid information was obtained from Yahoo! Finance and reflects
        inter-dealer prices, without retail mark-up, markdown or commission, and
        may not
        necessarily represent actual transactions.
  
 **Quarter
                  Ended**(1)
              **High**(2)
              **Low**(2)March
                  31, 2003
              0.01
              0.01June
                  30, 2003
              0.02
              0.02September
                  30, 2003
              0.02
              0.02December
                  31, 2003
              2.00
              0.00March
                  31, 2004
              3.60
              0.80June
                  30, 2004
              1.60
              0.79September
                  30, 2004
              0.97
              0.41December
                  31, 2004
              0.50
              0.19March
                  31, 2005
              0.95
              0.23June
                  30, 2005
              0.80
              0.22September
                  30, 2005
              0.35
              0.16December
                  31, 2005
              0.22
              0.05
  (1) Our
        common stock received approval for quotation on January 13, 2003. The first
        trade occurred December 10, 2003.
  (2) On
        November 6, 2003, we affected an 8 for 1 forward split of our common stock
        and
        on February 24, 2004 we effected a 4 for 1 forward split, as a result all
        stock
        prices have been adjusted on a post-split basis.
  On
        Arpil
        14, 2006, the closing price for the common stock as reported by the quotation
        service operated by the OTC Bulletin Board was $.055 per share.
  As
        of
        April 14, 2006, there were 52 holders of record of our common stock with
        19,904,043 shares held in street name through Cede & Co.. As of such date,
        46,572,792 common shares were issued and outstanding.
  Our
        common shares are issued in registered form. The Nevada Agency and Trust
        Company, 50 Liberty Street, Suite 880, Reno, Nevada 89501 (Telephone:
        775.322.0626; Facsimile: 775.322.5623 is the registrar and transfer agent
        for
        our common shares. We have no other exchangeable securities.
  17
  *Dividend
        Policy*
  We
        have
        not paid any cash dividends on our common stock and have no present intention
        of
        paying any dividends on the shares of our common stock. Our current policy
        is to
        retain earnings, if any, for use in our operations and in the development
        of our
        business. Our future dividend policy will be determined from time to time
        by our
        board of directors.
  *Recent
        Sales of Unregistered Securities*
  For
        the
        twelve month period ended December 31, 2005, we issued 3,978,466 shares of
        common stock which were exempt from registration under the Securities Act
        of
        1933. All securities issued during 2005 are “restricted securities” within the
        meaning of the Securities Act. No securities were issued during the year
        2004.
  On
        September 23, 2005 we issued 1,718,750 shares pursuant to Excalibur’s exercise
        of its right to convert its convertible loan of $250,000 plus accrued interest,
        originally made to the Company on September 20, 2004, to common shares at
        a
        conversion rate of $.16 per share. The securities were issued pursuant to
        the
        exemption from registration provided by Section 4(2) of the Securities Act
        of
        1933 for non “U.S. Persons” as defined by Regulation S of the Securities Act.
  On
        February 17, 2006 the Board of Directors approved the issuance of a total
        of
        2,259,716 common shares with a par value of $.001 in capital stock of the
        Company to former officers and directors of the Company in satisfaction of
        accounts payables due to Milton Cox, Bassam Nastat and Don Sytsma, or their
        affiliates, for unpaid services and amounts paid by them on the behalf of
        the
        Company totalling $238,078 as of December 30, 2005. The conversion of payables
        to common stock was based on a conversion rate of two times (2) of the weighted
        average price per share for the last ten (10) trading days of December 2005,
        or
        a conversion rate $.10536 per share. The securities were issued pursuant
        to the
        exemption from registration provided “Accredited Investor” as the term is
        defined in Regulation D under the Securities Act of 1933.
  18
  **Item
                  6.**
              **Management
                  Discussion and Analysis and Plan of
                  Operation.**
  ***Results
        of Operations.***
  We
        incurred losses from continuing operations for the years ended December 31,
        2005
        and 2004 of $1,962,541 and $3,849,324, respectively. Losses associated with
        the
        investment in the Freestone oil and gas prospect and general and administrative
        expenses are the principal components of our losses in 2005 and 2004.
  In
        2005,
        we incurred an impairment loss (noncash) of $1,118,493 associated with the
        writedown of the Freestone properties to its estimated net realizable value
        of
        zero based on the substantial costs necessary to develop this acreage and
        Altus’
inability at the present time to fund such costs. We issued 2,259,716 shares
        of
        common stock for amounts due to former directors and officers which totalled
        $238,078 associated with unpaid services fees and expenses paid on our behalf.
        We also incurred non cash charges to general and administrative expense of
        $222,199 for the fair value amortization of stock options issued in 2004.
        In
        connection with settling and fully satisfying outstanding borrowings including
        accrued interest of $263,932 to CodeAmerica as of December 31, 2005, we
        transferred our interests in the Kansas Lake Creek Prospect to CodeAmerica.
        In
        connection with the transfer we recorded a noncash loss on the disposition
        totalling $108,788.
  In
          2004,
          we recorded noncash charges to general and administrative expense of $3,384,071
          to reflect the difference between the fair value of the Freestone properties
          acquired from CodeAmerica on March 31, 2004 and CodeAmerica’s historical cost
          basis in the properties. The acquisition was funded through the issuance
          of
          4,040,726 common shares to CodeAmerica at the date of acquisition with
          a value
          of $4,187,000. The acquisition was originally recorded at the fair value
          of the
          properties acquired. Pursuant to SEC requirements, the acquisition of assets
          from a related party should have been recorded at the historical net cost
          basis
          of the seller which was $1,002,929. In accordance with SEC requirements
          the
          difference between fair market value of the properties and the seller’s cost
          basis was recorded to the 2004 statement of operations and statements of
          cash
          flow as share based compensation to a related party.
  ***Financial
        Condition, Liquidity and Capital Resources***
  Our
        ability to secure capital financing sufficient to fund large scale drilling
        and
        development programs has historically been very limited. In connection with
        the
        reassessment of our strengths; an inventory of oil and gas opportunities;
        and
        our current financial position we have taken steps to strengthen our financial
        position, prioritize our oil and gas prospects, and direct our limited resources
        to oil and gas prospects that are consistent with our ability to raise capital
        funding. We engaged an economist to evaluate the carrying value and potential
        impairment of certain of our oil and gas investments carried on our books
        as of
        year end 2005. The evaluation resulted in our recording noncash impairment
        losses of our oil and gas investments located in Freestone County, Texas
        totalling $1,118,493 and costs incurred in the evaluation of possible prospects
        in Louisiana and Alaska totalling $150,332 at December 31, 2005. ( *See
        Item 1 - Description of Business)* .
  As
        of
        December 30, 2005 Altus had accounts payables due to former officers and
        directors of the Company totalling $238,078 related to unpaid services and
        amounts paid by them on behalf of the Company. In conjunction with our
        initiatives to settle our obligations, on February 17, 2006, our Board of
        Directors approved the issuance of a total of 2,259,716 common shares with
        a par
        value of $.001 in common stock of the Company to former officers and directors
        of the Company in satisfaction of $238,078 accounts payables due to them
        as of
        December 30, 2005. The conversion of payables to common stock was effective
        December 30, 2005, and was based on a conversion rate of two times (2) the
        weighted average price per share for the last ten (10) trading days of December
        2005, or a conversion rate $0.10536 per share. Also in connection with our
        initiatives to settle and satisfy our outstanding obligations at December
        31,
        2005, we transferred our interests in the Kansas Lake Creek Prospect to
        CodeAmerica in exchange for the outstanding principal and accrued interest
        totalling $263,932 under our loan agreement with CodeAmerica..
  At
        December 31, 2005, we had cash of $411, and negative working capital of
        ($39,900). Accounts payable due to non-related parties totalled $48,803 related
        principally to legal and accounting costs incurred in connection with being
        a
        public company.
  Proceeds
        from borrowings of $242,600 under the CodeAmerica loan agreement were primarily
        used to fund our $150,000 investment made in the Kansas Lake Creek No. 5
        and No.
        8 wells drilled and completed in the 2 nd quarter
        2005. Our working interest in the wells was 10.0% with a net revenue interest
        of
        7.5%. The balance of funds borrowed from CodeAmerica were used for working
        capital. Effective December 31, 2005 the outstanding principal and accrued
        interest under the CodeAmerica loan agreement was fully satisfied with the
        transfer of our interests in the Kansas Lake Creek Prospect to
        CodeAmerica.
  19
  On
        September 20, 2005, Excalibur gave notice of its election to convert its
        outstanding loan including accrued interest totalling $275,000 into 1,718,750
        common shares at a conversion rate of $.16 per common share (which represented
        90% of the average closing price of Altus common shares for five trading
        days
        prior to Excalibur’s notice of election to convert the loan to Altus common
        shares).
  Our
        primary asset at December 31, 2005, is our non-operating working and revenue
        interest in the Oakcrest Prospect located in Wharton County, Texas which
        totalled $30,467 at December 31, 2005. This compares to oil and gas properties
        at December 31, 2004 of $1,542,742. The reduction in oil and gas properties
        from
        2004 to 2005 is associated with: a) depletion and amortization during 2005
        totalling $20,730; b) the impairment loss of the Freestone County, Texas
        property and write off of costs incurred during 2004 in connection with
        evaluating prospects in Louisiana and Alaska which in the aggregate totalled
        $1,268,825 at December 31, 2005; c) reduction in our oil and gas properties
        of
        $372,720 associated with the transfer of our Kansas Lake Creek acreage to
        CodeAmerica in satisfaction of the outstanding loan balance due them at December
        31, 2005; and d) offset with $150,000 capital expenditures during year 2005.
  In
        January 2004, the T.E. Lane gas unit commenced commercial production. Our
        net
        share of revenues from the unit for the year ending December 31, 2005 totalled
        $31,136 with net production volumes of 5,293 Mcf. In 2004 we had $25,510
        in net
        revenues and 7,613 Mcf from our net interest in the well. The T.E. Lane well
        is
        currently not producing, and it is not economic for us to restore production.
  In
        2005
        we participated in the drilling and completion of six wells in the Lake Creek
        Prospect located in Kansas. Our interests in the first 4 wells were “carried”
working interests and had 25.0% royalty burdens. We funded our 10.0%
        proportionate share of capital expenditures in the 5 th and
        6 th wells
        drilled totalling $150,000. Our total net revenue for 2005 from the Lake
        Creek
        Prospect was $43,285 with net production of 230 barrels oil and 4,308 Mcf
        of
        natural gas. In conjunction with our initiatives to settle and satisfy our
        outstanding obligations at December 31, 2005, we transferred our interests
        in
        the Kansas Lake Creek Prospect to CodeAmerica in exchange for the outstanding
        principal and accrued interest totalling $263,932 under our loan agreement
        with
        CodeAmerica..
  Natural
        gas and oil exploration, drilling and development activities requires
        substantial capital resources, and we historically have not been able to
        secure
        sufficient financing to act on oil and gas investment opportunities as they
        are
        identified. If we are unsuccessful in obtaining financing and fail to achieve
        and sustain a profitable level of operations, we may be unable to fully
        implement our business plans or continue operations. Future financing through
        equity, debt or other sources could result in the dilution of Company equity,
        increase our liabilities, and/or restrict the future availability and use
        of
        cash resources. Additionally, there can be no assurance that adequate financing
        will be available to us when needed or, if available, that it can be obtained
        on
        commercially reasonable terms. If we are not able to obtain the additional
        financing on a timely basis, we will be unable to execute our business plans,
        and will be required to scale back the pace and magnitude of our oil and
        gas
        prospects drilling and development initiatives. We also may not be able to
        meet
        our vendor and service provider obligations as they become due. In such event,
        we will be forced to scale down or perhaps even cease our
        operations.
  *Cash
        Requirements*
  During
        the twelve month period ending December 31, 2006, we project total cash
        requirements of approximately $480,000. .
  We
        have
        allocated $200,000 in our capital budget to use in our assessment of oil
        and gas
        opportunities, as they are identified in order to allow us to evaluate whether
        the opportunities are economic, consistent with our strategic direction and
        within our technical and financial capacity to participate in the investment.
  On
        an
        annualized basis, we estimate that we will expend approximately $180,000
        on
        operating, general and administrative expenses, and estimate working capital
        requirements of $100,000.
  20
  Based
        on
        our budgeted plan of operation, our current available cash will not be
        sufficient to fund planned capital expenditures, operating and working capital
        requirements for the year 2006. We are evaluating options to raise equity
        or
        debt financing through private placements and other means sufficient to sustain
        the continuing evaluation and development of our oil and natural gas reserve
        opportunities. There are no assurances, however, that we will be able to
        raise
        sufficient financing to meet our needs in the future.
  In
        the
        event that we are unable to raise additional financing, and fail to generate
        significant operating cash flow, we will be required to modify our exploration,
        and reserve drilling and development plan accordingly. We may raise funds
        through equity financing, debt financing, or other sources, which could result
        in dilution in the equity ownership of our shares. There is still no assurance
        that we will be able to maintain operations at a level sufficient for an
        investor to obtain a return on his investment. Further, until we are able
        to
        raise additional capital, we expect to continue to be unprofitable.
  Over
        the
        next twelve months we intend to use all available funds to continue the
        exploration and development of oil and gas opportunities, and our estimated
        funding needs for the next twelve months are summarized below: ****
  Estimated
        Funding Required During the Twelve Month Period Ending December 31,
        2006
  Operating,
                      General and Administrative costs
                  
                  $
                  180,000Exploration,
                      Drilling and Development ExpendituresEvaluation
                      of Exploration and Development Prospects
                  
                  $
                  200,000Working
                      Capital
                  
                  $
                  100,000**Total**
                  
                  **$**
                  **480,000**
  *Product
        Research and Development*
  Our
        business plan is focused on the exploration and development of our oil and
        gas
        interests.
  We
        do not
        anticipate that we will expend any significant funds on research and development
        over the next twelve months.
  *Purchase
        of Significant Equipment*
  We
        do not
        intend to purchase any significant equipment over the next twelve
        months.
  *Employees*
  Currently
        we have no full time or part-time employees. We utilize short term contractors
        as necessary. Our directors and officers provide services on a month to month
        basis pursuant to oral arrangements, but have not signed employment or
        consulting agreements with us. We do not expect any material changes in the
        number of employees over the next 12 month period. We may enter formal written
        service agreements with our directors and officers in the future. We expect
        to
        continue to outsource contract employment as needed. Depending on the level
        of
        success of our exploration and development initiatives, we may retain full
        or
        part-time employees in the future.
  *Going
        Concern*
 
 The
        accompanying financial statements have been prepared assuming we will continue
        as a going concern. As shown in the accompanying financial statements, we
        incurred a net loss of $1,962,541 during  2005. Our future is dependent
        upon our ability to obtain financing and upon future profitable operations
        from
        the development of our oil and gas properties. Management plans to fund
        operations through equity offerings, financings, mergers, joint ventures
        or
        other means available to us. There can be no assurance that we will be able
        to
        complete a transaction or complete a transaction on terms favorable to the
        Company or its shareholders. The financial statements do not include any
        adjustments relating to the recoverability and classification of recorded
        assets, or the amounts of and classification of liabilities that might be
        necessary in the event the Company cannot continue in existence. These
        conditions raise substantial doubt about our ability to continue as a going
        concern.
  21
  We
        intend
        to raise additional financing to fund our capital expenditure and working
        capital needs into year 2006 through private placements, public offerings
        and/or
        bank financing. While we have had dialog and discussions with specific potential
        investors; no definitive written agreements have yet been reached.
  *Recently
        Issued Accounting Standards*
  In
        December 2004, the FASB issued Statement No. 123(R) (“FAS 123(R)”). In addition,
        in March 2005 the Securities and Exchange Commission (“SEC”) issued Staff
        Accounting Bulletin Topic 14, “Share-Based Payment” (SAB 107) which provides
        interpretations regarding the interaction between FAS 123(R) and certain
        SEC
        rules and regulations and provided the staff’s views regarding the valuation of
        share-based payment arrangements for public companies. FAS 123(R) focuses
        primarily on accounting for transactions in which an entity obtains employee
        services in share-based payment transactions, including stock option awards.
        FAS
        123(R) revises FASB Statement No. 123, Accounting for Stock-Based Compensation
        and supersedes APB Opinion No. 25. FAS 123(R) will require us to measure
        the
        cost of employee services received in exchange for stock option awards based
        on
        the grant-date fair value of such awards. That cost will be recognized over
        the
        period during which an employee is required to provide service in exchange
        for
        the award, which is usually the vesting period. We will report such costs
        as
        part of our general and administrative expenses.
  On
        April 14, 2005, the SEC announced amended compliance dates for
        FAS 123(R). The SEC previously required companies to adopt this standard no
        later than July 1, 2005, but the new rules now require us to adopt
        FAS  123(R) as of the beginning of the first annual reporting period that
        begins after December 15, 2005, which will be our calendar year ending December
        31, 2006. We will recognize the cumulative effect of initially applying this
        statement as of the effective date for the calendar year ending December
        31,
        2006. This cumulative effect of adopting FAS 125(R) will not be significant
        as
        all previously issued and outstanding stock options under our 2004 Stock
        Option
        Plan were vested by approval of the Board of Directors as of December 30,
        2005.
  APPLICATION
        OF CRITICAL ACCOUNTING POLICIES
  Our
        financial statements and accompanying notes are prepared in accordance with
        generally accepted accounting principles in the United States. Preparing
        financial statements requires management to make estimates and assumptions
        that
        affect the reported amounts of assets, liabilities, revenue, and expenses.
        These
        estimates and assumptions are affected by management's application of accounting
        policies. We believe that understanding the basis and nature of the estimates
        and assumptions involved with the following aspects of our consolidated
        financial statements is critical to an understanding of our balance sheet,
        the
        statements of operations and stockholders' equity, and the cash flows statements
        included elsewhere in this filing.
  22
  **Item
                  7.**
              **Financial
                  Statements.**
  Our
        financial statements are stated in United States Dollars (US$) and are prepared
        in accordance with United States Generally Accepted Accounting
        Principles.
  The
        Independent Auditor's Report of Malone & Bailey, P:C for the audited
        financial statements for the years ended December 31, 2005 and 2004 is included
        herein immediately preceding the audited financial statements.
  ***Altus
        Explorations, Inc. (audited):***
  Independent
        Auditor's Report, dated April 14, 2006
  Balance
        Sheets as at December 31, 2005 and 2004
  Statements
        of Operations for the years ended December 31, 2005 and December 31, 2004
  Statements
        of Changes in Stockholders' Equity for the year ended December 31, 2005 and
        December 31, 2004
  Statements
        of Cash Flows for the years ended December 31, 2005 and December 31, 2004
  Notes
        to
        the Financial Statements
  23
  **INDEPENDENT
        AUDITORS’ REPORT**
 
 To
        the
        Board of Directors
 Altus
        Explorations, Inc.
 Olive
        Branch, Mississippi
 
 We
        have
        audited the accompanying balance sheets of Altus Explorations, Inc. as of
        December 31, 2005 and 2004, and the related statements of operations,
        stockholders’ deficit, and cash flows for each of the two years then ended.
        These financial statements are the responsibility of the Company’s management.
        Our responsibility is to express an opinion on these financial statements
        based
        on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide 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 Altus Explorations, Inc. as
        of
        December 31, 2005 and 2004, and the results of its operations and its cash
        flows
        for each of the two years then ended in conformity with accounting principles
        generally accepted in the United States of America.
 
 As
        discussed in Note 2 to the financial statements, Altus's recurring losses
        from
        operations and the need to raise additional financing in order to fund its
        oil
        and gas exploration and development activity and satisfy vendors and other
        creditor obligations, raise substantial doubt about its ability to continue
        as a
        going concern. Management’s plans as to these matters are also described in Note
        2. The 2005 financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 As
        described in Note 10, the financial statements for 2004 have been
        restated.
 
 Malone
        & Bailey, PC
 www.malone-bailey.com
 Houston,
        Texas
 
 April
        14,
        2006
  24
  ALTUS
        EXPLORATIONS, INC.
 BALANCE
        SHEETS
 
 December
                  31,2005
              
              2004ASSETS
              
              
              
              (Restated)Current
                  assetsCash
              
              $
              411
              
              $
              4,500Accrued
                  receivable and accrued revenues
              
              
              4,863
              
              
              -Total
                  current assets
              
              
              5,274
              
              
              4.500Oil
                  and natural gas properties, full cost methodSubject
                  to amortization, net
              
              
              30,467
              
              
              1,542,742Other
                  property and equipment, net
              
              
              4,725
              
              
              8,997TOTAL
                  ASSETS
              
              $
              40,466
              
              $
              1,556,239LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                  liabilities:Accounts
                  payable
              
              $
              38,410
              
              $
              12,258Accounts
                  payable - related party
              
              
              6,764
              
              
              26,520Accrued
                  interest
              
              
              -
              
              
              7,055Convertible
                  debt
              
              
              -
              
              
              250,000Note
                  payable - related party
              
              
              -
              
              
              37,850Total
                  current liabilities
              
              
              45,174
              
              
              333,683CommitmentsSTOCKHOLDERS'
                  EQUITY (DEFICIT):Common
                  stock, $.001 par value, 800,000,000 shares authorized, 46,572,792
                  shares,
                  and 42,594,326 issued and outstanding at December 31, 2005 and
                  2004,
                  respectively
              
              
              46,573
              
              
              42,594Additional
                  paid in capital
              
              
              5,978,973
              
              
              5,247,675Retained
                  deficit
              
              
              (6,030,254
              )
              
              (4,067,713
              )Total
                  stockholders' equity (deficit)
              
              
              (4,708
              )
              
              1,222,556TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
              
              $
              40,466
              
              $
              1,556,239
  *The
        accompanying notes are an integral part of these statements.*
 25
  **ALTUS
        EXPLORATIONS, INC.**
 **STATEMENTS
        OF OPERATIONS**
 **For
        the Years Ended December 31, 2005 and 2004**
 
 
 Years
                  Ended
                December
                  31,2005
              
              2004(Restated)Revenues
              
              $
              74,421
              
              $
              25,510Operating
                  expensesLease
                  operating
              
              
              47,796
              
              
              20,048Compensation
                  expense to related party
              
              
              -
              
              
              3,384,071Loss
                  on disposition properties
              
              
              108,788
              
              
              -Impairment
                  of oil and gas investments
              
              
              1,268,825
              
              
              -General
                  and administrative
              
              
              547,274
              
              
              421,755Depreciation
                  and depletion
              
              
              25,003
              
              
              14,065Total
                  operating expenses
              
              
              1,997,686
              
              
              3,839,939Loss
                  from operations
              
              
              1,920,265
              
              
              3,814,429Interest
                  expense
              
              
              39,276
              
              
              34,895Net
                  loss
              
              $
              (1,962,541
              )
              $
              (3,849,324
              )Net
                  loss per share:Basic
                  and diluted
              
              $
              (0.05
              )
              $
              (0.09
              )Weighted
                  average shares outstanding:Basic
                  and diluted
              
              
              42,881,569
              
              
              41,600,705
  *The
        accompanying notes are an integral part of these
        statements.*
  26
  **ALTUS
        EXPLORATIONS, INC.**
 **STATEMENTS
        OF STOCKHOLDERS' DEFICIT**
 **For
        the Years Ended December 31, 2005 and 2004**
 
 Common
                  StockShares
              
              Amount
              
              Additional
                  paid
                in
                  capital
              
              Accumulated
                Deficit
              
              Subscription
                Receivable
              
              TotalBalance,December
                  31, 2003
              
              
              38,553,600
              
              
              38,553
              
              
              1,030,427
              
              
              (218,389
              )
              
              (500,000
              )
              
              350,591Proceeds
                  from subscription receivable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              500,000
              
              
              500,000Issuance
                  of common stock for oil and gas properties and share based
                  compensation
              
              
              4,040,726
              
              
              4,041
              
              
              4,182,959
              
              
              -
              
              
              -
              
              
              4,187,000Beneficial
                  conversion from convertible debt
              
              
              -
              
              
              -
              
              
              27,777
              
              
              -
              
              
              -
              
              
              27,777Stock
                  option fair value amortization
              
              
              -
              
              
              -
              
              
              6,512
              
              
              -
              
              
              -
              
              
              6,512Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,849,324
              )
              
              -
              
              
              (3,849,324
              )Balance,December
                  31, 2004 (Restated)
              
              
              42,594,326
              
              $
              42,594
              
              $
              5,247,675
              
              $
              (4,067,713
              )
              $
              -
              
              $
              1,222,556Issuance
                  of common stock in connection with conversion of payables due related
                  parties
              
              
              2,259,716
              
              
              2,260
              
              
              235,818
              
              
              -
              
              
              -
              
              
              238,078Issuance
                  of common stock in connection with conversion of Excalibur
                  Note
              
              
              1,718,750
              
              
              1,719
              
              
              273,281
              
              
              -
              
              
              -
              
              
              275,000Stock
                  option fair amortization
              
              
              -
              
              
              -
              
              
              222,199
              
              
              -
              
              
              -
              
              
              222,199Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,962,541
              )
              
              -
              
              
              (1,962,541
              )Balance,December
                  31, 2005
              
              
              46,572,792
              
              $
              46,573
              
              $
              5,978,973
              
              $
              (6,030,254
              )
              $
              -
              
              $
              (4,708
              )
 
 *The
        accompanying notes are an integral part of these
        statements.*
  27
  **ALTUS
        EXPLORATIONS, INC.**
 **STATEMENTS
        OF CASH FLOWS**
 **For
        the Years Ended December 31, 2005 and 2004**
 
 Year
                  Ended
                December
                  31,2005
              
              2004(Restated)CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (1,962,541
              )
              $
              (3,849,324
              )Adjustments
                  to reconcile net deficit to cash used by operating
                  activities:Share
                  based compensation
              
              
              -
              
              
              3,384,071Impairment
                  of oil and gas properties
              
              
              1,268,825
              
              
              -Loss
                  on disposition of oil and gas properties
              
              
              108,788
              
              
              -Beneficial
                  conversion - convertible debt
              
              
              -
              
              
              27,777Depreciation,
                  depletion and amortization
              
              
              25,002
              
              
              14,065Write
                  off note payable - related party
              
              
              (3,250
              )
              
              -Stock
                  option intrinsic value amortization
              
              
              222,199
              
              
              6,512Net
                  change in:Accounts
                  receivable and accrued revenues
              
              
              (4,862
              )
              
              -Accounts
                  payable and accrued expenses
              
              
              26,152
              
              
              (28,917
              )Accounts
                  payable - related parties
              
              
              218,322
              
              
              26,520Accrued
                  interest - convertible loan
              
              
              17,945
              
              
              7,055Accrued
                  interest - note payable related party
              
              
              21,332
              
              
              -CASH
                  FLOWS USED IN OPERATING ACTIVITIES
              
              
              (62,089
              )
              
              (412,241
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchase
                  of property and equipment
              
              
              -
              
              
              (9,050
              )Investment
                  in oil and gas properties
              
              
              (150,000
              )
              
              (389,972
              )CASH
                  FLOWS USED IN INVESTING ACTIVITIES
              
              
              (150,000
              )
              
              (399,022
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  from subscription receivable
              
              
              -
              
              
              500,000Proceeds
                  from note payable - related party
              
              
              208,000
              
              
              34,600Proceeds
                  from note payable - convertible loan
              
              
              -
              
              
              250,000CASH
                  FLOWS PROVIDED BY FINANCING ACTIVITIES
              
              
              208,000
              
              
              784,600NET
                  INCREASE (DECREASE) IN CASH
              
              
              (4,089
              )
              
              (26,663
              )Cash,
                  beginning of period
              
              
              4,500
              
              
              31,163Cash,
                  end of period
              
              $
              411
              
              $
              4,500Cash
                  paid for:Interest
              
              
              -
              
              
              -Income
                  taxes
              
              
              -
              
              
              -Supplemental
                  Non-cash Disclosures:Conversion
                  of note payable-convertible loan
              
              $
              275,000
              
              $
              -Conversion
                  of accounts payable to related parties
              
              
              238,078
              
              
              -Common
                  stock for working interests in oil and gas properties
              
              $
              -
              
              $
              802,929
 
 *The
        accompanying notes are an integral part of these
        statements.*
  28
  **ALTUS
        EXPLORATIONS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
  **NOTE
        1 - SUMMARY OF ACCOUNTING POLICIES**
 
 Nature
        of
        business
 
 Altus
        Explorations, Inc. was incorporated in Nevada on November 2, 2001. Altus
        is
        engaged in the acquisition and exploration for oil and natural gas.
 
 Altus
        was
        previously in the development stage. 2004 is the first year during which
        Altus
        is considered an operating company and is no longer in the development
        stage.
 
 Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements, and the reported amounts of revenues and expenses
        during the reporting periods. Actual results could materially differ from
        those
        estimates.
  Cash
        and
        Cash Equivalents
  Cash
        and
        cash equivalents include cash and all highly liquid financial instruments
        with
        purchased maturities of three months or less.
 
 Property
        and Equipment
 
 Property
        and equipment is valued at cost. Additions are capitalized and maintenance
        and
        repairs are charged to expense as incurred. Gains and losses on dispositions
        of
        equipment are reflected in operations. Depreciation is provided using the
        straight-line method over the estimated useful lives of the assets, which
        are
        three years for computers and seven years for furniture.
 
 Impairment
        of Assets
 
 Altus
        reviews the carrying value of its long-lived assets annually or whenever
        events
        or changes in circumstances indicate that the historical cost-carrying value
        of
        an asset may no longer be appropriate. Altus assesses recoverability of the
        carrying value of the asset by estimating the future net cash flows expected
        to
        result from the asset, including eventual disposition. If the future net
        cash
        flows are less than the carrying value of the asset, an impairment loss is
        recorded equal to the difference between the asset's carrying value and fair
        value.
  Income
        Taxes
  Income
        taxes are computed using the asset and liability method. Under the asset
        and
        liability method, deferred income tax assets and liabilities are determined
        based on the differences between the financial reporting and tax bases of
        assets
        and liabilities and are measured using the currently enacted tax rates and
        laws.
        A valuation allowance is provided for the amount of deferred tax assets that,
        based on available evidence, are not expected to be realized.
  Basic
        and
        Diluted Loss per Share
  29
  Basic
        earnings per share are presented in accordance with Financial Accounting
        Standards Statement 128, and are calculated on the basis of the weighted
        average
        shares outstanding during the year. Diluted earnings per share include the
        impact of common stock equivalents using the treasury stock method when the
        effect is dilutive. There were no dilutive securities during the periods
        presented.
  Oil
        and
        Gas Properties
  Altus
        follows the full cost method of accounting for its oil and gas properties.
        Under
        this method, all productive and non-productive exploration and development
        costs
        incurred for the purpose of finding oil and gas reserves are capitalized.
        Such
        capitalized costs include lease acquisition, geological and geophysical work,
        delay rentals, drilling, completing and equipping oil and gas wells, together
        with internal costs directly attributable to property acquisition, exploration
        and development activities.
  The
        costs
        of the Company's oil and gas properties, including the estimated future costs
        to
        develop proved reserves, are depreciated using a composite units-of-production
        rate based on estimates of proved reserves. Investments in unproved properties
        and major development projects are not amortized until proved reserves
        associated with the projects can be determined or until impairment occurs.
        If
        the results of an assessment indicate that the properties are impaired, then
        the
        amount of the impairment is added to the capitalized costs to be amortized.
        Net
        capitalized costs are limited to a capitalization ceiling, calculated on
        a
        quarterly basis as the sum of the present value, discounted at 10%, of estimated
        future net revenues from proved reserves, based on current economic and
        operating conditions, plus the lower of cost or estimated fair value of unproved
        properties, less related income tax effects.
  Sales
        of
        proved and unproved properties are accounted for as adjustments of capitalized
        costs with no gain or loss recognized, unless such adjustments would
        significantly alter the relationship between capitalized costs and proved
        oil
        and gas reserves.
 
 Depreciation
        and depletion of oil and gas properties is computed using the unit-of-production
        method based on estimated proven reserves. All costs, including an estimate
        of
        future development, restoration, dismantlement and abandonment costs, are
        included in the depreciable base. The costs of investments in unproved
        properties are excluded from the calculation until the costs are evaluated
        and
        proved reserves established.
 
 Revenue
        and Cost Recognition
 
 Altus
        uses the sales method of accounting for natural gas and oil revenues. Under
        this
        method, revenues are recognized based on the actual volumes of gas and oil
        sold
        to purchasers. The volume sold may differ from the volumes to which Altus
        is
        entitled based on our interest in the properties. Costs associated with
        production are expensed in the period incurred.
 
 Concentrations
 
 Trade
        accounts receivables are generated from companies with significant oil and
        gas
        marketing activities, which would be impacted by conditions or occurrences
        affecting that industry. In 2005, approximately 42% of oil and gas revenues
        were
        attributable to one customer. Altus performs ongoing credit evaluations of
        its
        customers and, generally, requires no collateral. Altus is not aware of any
        significant credit risk relating to its customers and has not experienced
        any
        credit loss associated with such receivables. Substantially all Altus’
receivables were collected shortly after December 31, 2005.
 
 New
        Accounting Standards
  30
  In
        December 2004, the FASB issued SFAS No.123R, "Accounting for Stock-Based
        Compensation" (“SFAS No. 123R”). SFAS No.123R establishes standards for the
        accounting for transactions in which an entity exchanges its equity instruments
        for goods or services. This Statement focuses primarily on accounting for
        transactions in which an entity obtains employee services in share-based
        payment
        transactions. SFAS No.123R requires that the fair value of such equity
        instruments be recognized as expense in the historical financial statements
        as
        services are performed. Prior to SFAS No.123R, only certain pro forma
        disclosures of fair value were required. SFAS No.123R shall be effective
        for
        small business issuers as of the beginning of the first interim or annual
        reporting period that begins after December 15, 2005. Altus will adopt SFAS
        No.
        123R as of January 1, 2006. There is no cumulative effect of adopting FAS
        123(R)
        because all previously issued and outstanding stock options under Altus’s 2004
        Stock Option Plan were vested by approval of the Board of Directors as of
        December 30, 2005.
 
 Stock
        Options
 
 In
        January 2004, the Board of Directors approved the “2004 Stock Option Plan” and
        reserved 5,483,040 shares of Altus’ common stock for issuance in the form of
        incentive and non-qualified stock options to employees, consultants, officers
        and directors of Altus. On November 19, 2004, Altus issued incentive
        non-qualified stock options to consultants, contract service providers, officers
        and Board members for Altus common shares totalling 4,325,000 shares. The
        options when originally issued provided for vesting over a four-year period;
        are
        exercisable for a period of 10 years; and have an exercise price of $.425
        per
        share. On December 30, 2005, the Board of Directors approved the vesting
        of all
        issued and outstanding stock options issued under the 2004 Stock Option Plan.
 
 In
        November 2004 options totalling 800,000 shares were issued to Altus consultants
        and contract service providers. The options were valued at $228,720 using
        the
        Black-Scholes option pricing model. The unamortized fair value of the stock
        options issued to consultants and contract service providers totalled $179,332
        at the date of accelerated vesting of December 30, 2005. The remaining
        unamortized fair value was recorded as a non-cash charge to compensation
        expense
        for the year ended December 31, 2005. Common stock options issued to Altus’
officers and directors in November 2004 totalled 3,525,000 common shares,
        and in
        connection with the Board of Directors’ approval to vest all outstanding options
        under the 2004 Stock Option Plan as of December 30, 2005, these options were
        also fully vested at December 31, 2005.
 
 The
        fair
        value of the options granted under the 2004 Stock Option Plan was derived
        based
        on Altus’s share price at the time of issuance of the options and an exercise
        price of $.425 per share. Financial Accounting Statements 123 and 123(R)
        do not
        permit the re-calculation of the fair value of options granted to affect
        for
        changes in the share price. The following table illustrates the proforma
        effect
        on net income and earnings per share if Altus had applied the fair value
        recognition provisions of FASB Statement No. 123, *Accounting
        for Stock-Based Compensation* ,
        to all
        stock-based employee compensation associated with stock options issued to
        consultants and contract service providers and to directors and officers
        under
        the 2004 Stock Option Plan. The fair value presented in the proforma table
        was
        calculated based on the share price and exercise price at the time of original
        issuance of the stock options in November 2004.
 
 Year
                  Ended December 31,2005
              
              2004Net
                  loss, as reported
              
              $
              (1,962,541
              )
              $
              (3,849,324
              )Add:
                  Stock based intrinsic value included in report loss
              
              
              222,199
              
              
              6,512Less:
                  Total stock-based employee compensation expense determined under
                  the fair
                  value based method for all awards
              
              
              (979,102
              )
              
              (28,694
              )Pro-forma
                  net loss
              
              $
              (2,719,444
              )
              $
              (3,871,506
              )Basis
                  and diluted net loss per shareAs
                  reported
              
              $
              (0.05
              )
              $
              (0.09
              )Pro-forma
              
              $
              (0.06
              )
              $
              (0.09
              )
  31
  The
        fair
        value of each option granted is estimated on the date of grant using the
        Black-Scholes option-pricing model with the following weighted average
        assumptions: dividend yield $0, expected volatility of 117%, risk-free interest
        rate of 1.5%, and expected lives of 10 years.
  NOTE
        2 -
        GOING CONCERN
 
 Altus'
        financial statements have been presented on the basis that it will continue
        as a
        going concern, which contemplates the realization of assets and satisfaction
        of
        liabilities in the normal course of business. Altus has incurred net losses
        of
        $1,962,541 and $3,849,324 for the years ended December 31, 2005 and 2004.
        This
        condition raises substantial doubt about Altus' ability to continue as a
        going
        concern. The financial statements do not include any adjustments to reflect
        the
        possible future effects on the recoverability and classification of assets
        or
        the amounts and classification of liabilities that may result from the outcome
        of these uncertainties.
 
 Altus
        is
        working to secure additional financing to fund its oil and gas exploration
        and
        development activities and to meet its obligations and working capital
        requirements over the next twelve months.
 
 There
        are
        no assurances that Altus will be able to either (1) achieve a level of revenues
        adequate to generate sufficient cash flow from operations; or (2) obtain
        additional financing through either private placement, public offerings or
        bank
        financing necessary to support Altus' working capital requirements. To the
        extent that funds generated from operations and any private placements, public
        offerings or bank financing are insufficient, Altus will have to raise
        additional working capital. No assurance can be given that additional financing
        will be available, or if available, will be on terms acceptable to Altus.
        If
        adequate working capital is not available Altus may be required to curtail
        or
        cease its operations.
 
 NOTE
        3 -
        INCOME TAXES
 
 Deferred
        income taxes are recorded at the expected tax rate of 34%. Statement of
        Financial Accounting Standards No. 109 “Accounting for Income Taxes” requires
        that deferred tax assets be reduced by a valuation allowance if it is more
        or
        likely than not that some portion or all of the deferred tax asset will not
        be
        realized.
 
 2005
              
              2004Deferred
                  tax asset attributable to:Net
                  operating loss
              
              $
              875,000
              
              $
              232,000Less:
                  valuation allowance
              
              
              (875,000
              )
              
              (232,000
              )Total
              
              $
              -
              
              $
              -
 
 2005
        and
        2004 net operating loss carryforwards begin to expire in 2021.
 
 NOTE
        5 -
        CONVERTIBLE DEBT
  32
  Convertible
        debt is an unsecured one-year 10% term loan borrowed from Excalibur Investment
        Corp. on September 20, 2004.
  Excalibur
        had the right to convert either a portion of or the total outstanding amount
        of
        the loan plus accrued interest upon notice to us, at a price per share equal
        to
        the lesser of 90% of the (a) average closing bid price of the shares as listed
        on a principal market, as quoted by Bloomberg L.P. for the five trading days
        immediately preceding the date the loan was advanced to us; or (b) average
        closing bid price of the shares as listed on a principal market, as quoted
        by
        Bloomberg L.P. for the five trading days immediately preceding the date we
        receive notice of conversion from Excalibur. On September 23, 2005, Altus
        issued
        1,718,750 common shares pursuant to Excalibur’s exercise of its right to convert
        its loan at a conversion rate of $0.16 per share.
 
 NOTE
        6 -
        RELATED PARTY TRANSACTIONS
 
 *CodeAmerica
        Loan Agreement and Sale of Kansas Property*
 
 On
        January 1, 2005, Altus entered into a Loan Agreement with CodeAmerica
        Investments LLC, a company owned by our former President, Milton Cox, to
        provide
        funds principally to develop its Kansas Lake Creek oil and gas properties
        and to
        meet its working capital requirements. At the date of the Loan Agreement,
        Altus
        had advances from CodeAmerica totalling $34,600 which were included in the
        loan
        balance. The loan provided for an interest rate of 10% per annum and was
        due on
        demand. The Loan Agreement was secured by all present and after acquired
        assets
        of the Company that are not otherwise pledged or used as collateral for other
        financing transactions of the Company.
  At
        December 31, 2005, Altus had a balance due to CodeAmerica under the Loan
        Agreement totalling $242,600 plus accrued interest of $21,332. The outstanding
        balance due CodeAmerica under the Loan Agreement as of December 31, 2005
        was
        extinguished through the transfer of Altus’ interests in the Kansas Lake Creek
        acreage to CodeAmerica. The estimated present value of discounted future
        net
        cash flows for Altus’ interest in the Kansas Lake Creek Prospect totalled
        approximately $15,000 at December 31, 2005.
 
 *Accounts
        Payables to Former Officers and Directors of Company*
  At
        December 31, 2005, Altus had accounts payables due to former officers and
        directors of the Company totalling $238,078 for unpaid services and amounts
        paid
        by them on behalf of Altus. In connection with the restructuring of Altus’
financial position, on February 17, 2006, Altus issued a total of 2,259,716
        common shares to former officers and directors in satisfaction of the $238,078
        accounts payable to them. The conversion of payables to common stock was
        based
        on a conversion rate of two times (2) of the weighted average price per share
        for the last ten (10) trading days of December 2005, or a conversion rate
        $0.10536 per share.
 
 *Orbit
        Energy, L.L.C.*
 
 Orbit
        Energy, L.L.C. serves as the operator of the Kansas Lake Creek Prospect.
        On
        November 18, 2005 the President and Chief Operating Officer of Orbit, Greg
        Thompson, was appointed as a Director of Altus. On February 1, 2006, Greg
        Thompson was named President of Altus. For the year ended December 31, 2005,
        Altus’s net share of operator fees paid to Orbit for the operation of the Lake
        Creek wells totalled $11,250.
 
 *Oil
        and Gas Property Purchase*
  33
  In
        October 2003, Altus acquired a 10% working interest in the T.E. Lane gas
        unit
        located in Freestone County, Texas from CodeAmerica for a price of $200,000.
  On
        March
        31, 2004, Altus purchased undivided working interests in certain oil and
        gas
        leases located in Freestone County, Texas from CodeAmerica for 4,040,726
        shares
        of common stock with a fair value of $4,187,000 on the date of acquisition.
        The
        acquisition was initially and erroneously recorded at the fair value of the
        properties at the date of the acquisition. Prior to the Agreement, Altus
        held a
        10% undivided working interest in the T.E. Lane gas unit proved developed
        reserves and in the offsetting acreage proved undeveloped reserves. With
        the
        March 2004 acquisition, Altus increased its undivided working interest in
        the
        T.E. Lane gas unit to 20%, and its interest in the offsetting proved undeveloped
        acreage to 100%. The existing and acquired acreage are subject to a 28% royalty
        on production revenues. See Note 10 for the restatement discussion.
 
 
 NOTE
        7 -
        ASSET RETIREMENT OBLIGATIONS
 
 In
        2001,
        the FASB issued SFAS 143, “Accounting for Asset Retirement Obligations” which
        was adopted by Altus in 2002 when Altus first acquired oil and gas properties.
        SFAS 143 requires entities to record the fair value of a liability for asset
        retirement obligations (“ARO”) in the period in which it is incurred and a
        corresponding increase in the carrying amount of the related long-lived asset.
        The present value of the estimated asset retirement cost is capitalized as
        part
        of the carrying amount of the long-lived asset and is depreciated over the
        useful life of the asset. Altus accrues an abandonment liability associated
        with
        its oil and gas wells when those assets are placed in service. The ARO is
        recorded at its estimated fair value and accretion is recognized over time
        as
        the discounted liability is accreted to its expected settlement value. Fair
        value is determined by using the expected future cash outflows discounted
        at
        Altus’s risk-free interest rate. No market risk premium has been included in
        Altus’ calculation of the ARO balance. Altus’s net ARO liability at December 31,
        2005 is zero as estimated salvage value of property and equipment exceeds
        the
        expected retirement obligation.
 
 NOTE
        8 -
        COMMITMENTS
 
 Altus
        leases office space on a month to month basis at the rate of $1,600 per month.
        Altus has no lease agreement and is not obligated to continue occupancy should
        it choose to vacate the premises. Total rent expense paid in 2005 and 2004
        was
        $19,200 and $19,100, respectively.
 
 NOTE
        9 -
        COMMON STOCK AND WARRANTS
  On
        February 17, 2006, Altus issued 2,259,716 common shares to former officers
        and
        directors in satisfaction of accounts payable due to Milton Cox, Bassam Nastat
        and Don Sytsma for unpaid services and amounts paid by them on the behalf
        of
        Altus totalling $238,078. The conversion of payables to common stock was
        based
        on a conversion rate of two times (2) of the weighted average price per share
        for the last ten (10) trading days of December 2005, or a conversion rate
        $0.10536 per share.
  On
        September 23, 2005, Altus issued 1,718,750 common shares pursuant to Excalibur’s
        exercise of its right to convert its convertible loan of $250,000 plus accrued
        interest of $25,000. The loan was originally made to the Company on September
        20, 2004, at a conversion rate of $0.16 per share.
  On
        March
        31, 2004 Altus purchased CodeAmerica’s undivided working interests in certain
        oil and gas leases located in Freestone County, Texas for 4,040,726 common
        shares valued at approximately $4.2 million. See Notes 6 and 8.
  34
  On
        February 10, 2004 Altus approved a 4 for 1 stock split. The financial statements
        and footnotes have both been adjusted to show this split. The articles of
        incorporation were also amended to bring the authorized shares from 200,000,000
        to 800,000,000. All share and per share amounts have been adjusted to reflect
        the retroactive effect of the stock split.
  **NOTE
        10 - RESTATEMENT**
  Altus
        restated its balance sheet, statements of operations and cash flows to reflect
        a
        revision to the prior accounting treatment for the acquisition of oil and
        gas
        properties from a related party. In October 2003, Altus acquired a 10% working
        interest in the T.E. Lane gas unit located in Freestone County, Texas from
        CodeAmerica for $200,000. On March 31, 2004, Altus purchased undivided working
        interests in certain oil and gas leases located in Freestone County, Texas
        from
        CodeAmerica valued at $4,187,000 through the issuance of 4,040,726 shares
        with a
        then current market value of $4,187,000 on the date of acquisition.
  The
        acquisitions were originally recorded at the fair value of the properties
        at the
        date of the acquisition. Pursuant to SEC requirements, an acquisition of
        assets
        from related parties under common control are required to be recorded at
        the
        historical cost basis of the seller, net of depreciation, depletion and
        amortization, of the related party seller which was $1,002,929. In conjunction
        with the revision in accounting treatment for asset acquisitions from related
        parties, a charge of $3,384,071 was made to year 2004 income, with a
        corresponding reduction to Altus’ investment in oil and gas properties on its
        balance sheets to reflect the difference between the fair market value of
        the
        properties acquired and CodeAmerica’s cost basis in the properties.
  In
        all
        other material respects, the financial statements are unchanged. Following
        is a
        summary of the restatement adjustments:
  
 For
                  the Year
                ended
                December
                  31,
                2004As
                  Reported
              
              Adjustments
              
              As
                  Restated**Summary
                  Balance Sheet**Total
                  current assets
              
              $
              4,500
              
              
              
              
              $
              4,500Property,
                  plant and equipment
              
              
              8,997
              
              
              
              
              
              8,997Oil
                  and gas properties
              
              
              4,926,813
              
              
              (3,384,071
              )
              
              1,542,742Total
                  assets
              
              
              4,940,310
              
              
              (3,384,071
              )
              
              1,556,239Total
                  liabilities
              
              
              333,683
              
              
              
              
              
              333,683Common
                  stock
              
              
              42,595
              
              
              
              
              
              42,595Additional
                  paid in capital
              
              
              5,247,674
              
              
              
              
              
              5,247,674Accumulated
                  deficit
              
              
              (683,642
              )
              
              (3,384,071
              )
              
              (4,067,713
              )Total
                  Stockholder's equity
              
              
              4,606,627
              
              
              (3,384,071
              
              
              1,222,556Total
                  liabilities and stockholder's equity
              
              
              4,490,310
              
              
              (3,384,071
              )
              
              1,106,239
  35
  **Summary
                  statements of operations**Revenues
              
              
              25,510
              
              
              
              
              
              25,510Operating
                  expensesLease
                  operating
              
              
              20,048
              
              
              
              
              
              20,048General
                  and administrative (excluding compensation expense)
              
              
              421,755
              
              
              
              
              
              421,755Compensation
                  expense
              
              
              
              
              
              3,384,071
              
              
              3,384,071Depreciation
                  and depletion
              
              
              14,065
              
              
              
              
              
              14,065Interest
              
              
              34,895
              
              
              
              
              
              34,895Net
                  loss
              
              
              (465,253
              )
              
              (3,384,071
              )
              
              (3,849,324
              )Basic
                  and Diluted Earnings (loss) per share
              
              $
              (0.00
              )
              $
              (0.09
              )
              $
              (0.09
              )
 
 36
  SUPPLEMENTAL
        INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
 (UNAUDITED)
 
 The
        standardized measure of discounted future net cash flows is computed by applying
        year-end prices of oil and gas to the estimated future production of proved
        oil
        and gas reserves, less estimated future expenditures (based on year-end costs)
        to be incurred in developing and producing the proved reserves, less estimated
        future income tax expenses (based on year-end statutory tax rates) to be
        incurred on pre-tax net cash flows less tax basis of the properties and
        available credits, and assuming continuation of existing economic conditions.
        The estimated future net cash flows are then discounted using a rate of 10
        percent per year to reflect the estimated timing of the future cash
        flows.
 
 Proved
        Developed and Undeveloped Gas Reserves, at year end (net):
 
 For
                  the Years Ended December 31,2005
                **(Mcf)**
              
              2004
                **(Mcf)**Beginning
                  of year
              
              
              8,825,702
              
              
              130,000Purchases
                  of minerals in place
              
              
              -
              
              
              8,732,039Extensions,
                  discoveries and improved recovery
              
              
              104,062
              
              
              -Sale
                  of reserves
              
              
              (4,494
              )
              
              -Production
              
              
              (10,981
              )
              
              (5,989
              )Revision
                  of previous estimates
              
              
              (8,820,409
              )
              
              (30,348
              )End
                  of Year
              
              
              93,880
              
              
              8,825,702Proved
                  Developed Reserves at End of Year
              
              
              -
              
              
              185,702
 
 Standardized
        Measure of Discounted Future Net Cash Flows:
 
 December
                  31,2005
              
              2004Future
                  cash inflows
              
              $
              845,575
              
              $
              36,172,013Future
                  production costs
              
              
              (98,353
              )
              
              (2,011,092
              )Future
                  development costs
              
              
              -
              
              
              (12,500,000
              )Future
                  income taxes
              
              
              -
              
              
              (6,559,664
              )Future
                  net cash flows
              
              
              747,222
              
              
              15,101,25710%
                  annual discount for estimated timing of cash flows
              
              
              (156,948
              )
              
              (3,065,110
              )Standardized
                  Measure of Discounted Future Net Cash Flows
              
              $
              590,274
              
              $
              12,036,147
 
 Changes
        in Standardized Measure of Discounted Future Net Cash Flows:
 
 For
                  the Years Ended December 31,2005
              
              2004Beginning
                  of the year
              
              $
              12,036,147
              
              $
              312,167Purchase
                  of mineral in place
              
              
              -
              
              
              4,187,000Extensions,
                  discoveries and improved recovery, less related costs
              
              
              263,964
              
              
              1,212,313Development
                  costs incurred during the year
              
              
              150,000
              
              
              389,973Sales
                  of oil and gas produced, net of production costs
              
              
              (26,625
              )
              
              (5,642
              )Disposition
                  of properties
              
              
              (383,499
              )
              
              -Accretion
                  of discount
              
              
              (688,476
              )
              
              -Net
                  changes in future production costs
              
              
              (1,912,739
              )
              
              -Net
                  change in estimated future development costs
              
              
              (12,500,000
              )
              
              12,500,000Revision
                  of previous quantity estimates
              
              
              -
              
              
              -Revision
                  in estimated timing of cash flows
              
              
              (2,908,162
              )
              
              -Net
                  change in income taxes
              
              
              6,559,664
              
              
              (6,559,664
              )End
                  of the Year
              
              $
              590,274
              
              $
              12,036,147
  37
 **Item
                    8.**
                **Changes
                    In and Disagreements with Accountants on Accounting and Financial
                    Disclosure.**
  Lopez,
          Blevins, Bork & Associates, L.L.P. (LBB) was dismissed on March 27, 2006 as
          our independent auditors. LBB's audit reports as of December 31, 2004 and
          2003
          and for each of the two years then ended on our financial statements did
          not
          contain an adverse opinion or disclaimer of opinion, or qualification or
          modification as to uncertainty, audit scope, or accounting principles,
          except
          with respect to our ability to continue as a going concern.
  During
          the two most recent fiscal years ended December 31, 2004 and 2003 and in
          the
          subsequent interim periods through the date of dismissal, there were no
          disagreements with LBB on any matters of accounting principles or practices,
          financial statement disclosure, or auditing scope and procedures which,
          if not
          resolved to the satisfaction of LBB would have caused LBB to make reference
          to
          the matter in their report. LBB furnished us with a letter addressed to
          the
          Commission stating that it agreed with the above statements. Malone &
Bailey, PC was engaged on March 27, 2006 as our principal accountant to
          audit
          our financial statements. The decision to change accountants was approved
          by the
          Board of Directors.
  The
          managing shareholder of LBB used to work for M&B until July 5, 2004, and
          M&B was our auditors for 2004 and prior years. Subsequent to July 5, 2004
          and through March 27, 2006, neither Altus nor anyone on our behalf consulted
          with Malone & Bailey, PC regarding either the application of accounting
          principles to a specified transaction, either completed or proposed, or
          the type
          of audit opinion that might be rendered on our consolidated financial
          statements, nor has Malone & Bailey, PC provided to us a written report or
          oral advice regarding such principles or audit opinion or any matter that
          was
          the subject of a disagreement or reportable events set forth in Item 304(a)(iv)
          of Regulation S-B with our former accountant.
  **Item
                    8A.**
                **Controls
                    and Procedures.**
  As
          required by Rule 13a-15 under the Exchange Act, as of the end of the period
          covered by this report, being December 31, 2005, we have performed an evaluation
          of the effectiveness of the design and operation of our disclosure controls
          and
          procedures. This evaluation was performed under the supervision and with
          the
          participation of our management, including our president and chief executive
          officer. Based upon that evaluation, our chief executive officer and chief
          financial officer concluded that our disclosure controls and procedures
          were not
          effective as of the end of the period covered by this report. The deficiency
          included our failure to originally account correctly for the Freestone
          property
          purchase at the cost basis of the seller, who was a related party. The
          deficiency resulted from our lack of accounting personnel due to our limited
          financial resources. We are seeking additional financing to obtain the
          necessary
          resources to execute our business plan including personnel and other resources
          to improve our disclosure controls and procedures. There
          have been no changes in our internal controls over financial reporting
          that
          occurred during our most recent fiscal quarter that have materially affected,
          or
          are reasonably likely to materially affect our internal controls over financial
          reporting.
 
 We
          intend
          to improve our internal controls in an effort to remediate these deficiencies
          through the following efforts: 1) implementing better controls and
          procedures over the accounting for acquisition of properties and 2) improving
          training of our accounting staff. We are continuing our efforts to improve
          and
          strengthen our control processes and procedures to fully remedy these
          deficiencies. Our management and directors will continue to work with our
          auditors and other outside advisors to ensure that our controls and procedures
          are adequate and effective.
 **Item
                  8B.**
              **Other
                  Information**
  None.
  38
  **PART
        III**
  **Item
                  9.**
              **Directors,
                  Executive Officers, Promoters and Control Persons; Compliance with
                  Section
                  16(a) of the Exchange Act.**
  *Directors
        and Executive Officers, Promoters and Control Persons*
  As
        at
        April 14, 2006, our directors and executive officers, their ages, positions
        held, and duration of such, are as follows:
  **Name**
              **Position
                  Held with our Company**
              **Age**
              **Date
                  First**
                **Elected
                  or Appointed**Greg
                  A Thompson
              Director,
                  President and Secretary
              51
              November
                  18, 2005Darrell
                  Parlee
              Director
                  and Treasurer
              40
              June
                  17, 2005Dion
                  Burkard
              Director
              58
              February
                  3, 2006
  *Business
        Experience*
  The
        following is a brief account of the education and business experience during
        at
        least the past five years of each director, executive officer and key employee,
        indicating the principal occupation during that period, and the name and
        principal business of the organization in which such occupation and employment
        were carried out.
  **Greg
        A. Thompson**
  Mr.
        Thompson became a director on November 18, 2005, and president on February
        1,
        2006.
  Mr.
        Thompson has 25 years of diversified experience in oil & gas production,
        operations, contracts, marketing, transportation, and financial instruments.
        Mr.
        Thompson is the president and chief operating officer for Orbit Energy LLC.
        From
        2001-2002, he was general manager, oil & gas sales for Coast Energy Group
        and from 1998-1999, he was manager national oil & gas accounts for Columbia
        Energy Services. HFrom 1996-1998, he was Director-Oil & Gas Division for
        TexPar Energy, Inc. From 1993-1996, Mr. Thompson held the position of Vice
        President, Oil & Gas Marketing with Teco Energy Marketing (Now PG&E
        Energy Services)  From 1989-1993, he was Vice President, Oil & Gas
        Marketing for Graham Resources Corp., and from 1979-1989, he was Director,
        Oil
& Gas Marketing for United Gas Pipeline Co., a Division of Occidental
        Petroleum.
  **Darrell
        Parlee**
  Mr.
        Parlee became treasurer on June 17, 2005 and a director on February 3, 2006.
 
 Mr.
        Parlee 16 years experience in the oil and gas industry. During his career,
        he
        has held accounting positions with oil and gas exploration and development
        companies in Canada and the United States. Mr. Parlee graduated in 1988 from
        the
        Southern Alberta Institute of Technology with a business / marketing degree.
        He
        also holds additional certificates in Joint Venture Contracts, Joint Venture
        Accounting and Production Revenue Accounting.
 
 **Dion
        Burkard**
  Mr.
        Burkard became a director on February 3, 2006.
  Mr.
        Burkard has 20 years business development experience in oil field production
        equipment and pipeline design, has extensive management experience and field
        operating experience, and is a certified environmental inspector. He currently
        is a vice president of SCS Energy Services, responsible for marketing and
        business development. From 1995 - 1999 he was field service superintendent
        for
        Diamond Oil and Gas. Prior to that he was president of an environmental firm
        providing Phase I and Phase II environmental site assessments for institutions,
        insurance companies and for various governmental agencies.
  39
  *Committees
        of the Board*
  Currently
        our company has the following committees:
  ·
              Audit
                  Committee;
  ·
              Nominating
                  and Corporate Governance Committee; and
  ·
              Compensation
                  Committee.
  Our
        Audit
        Committee is currently made up of Greg A. Thompson, Darrell Parlee and Dion
        Burkard. The Audit Committee is governed by the Audit Committee Charter adopted
        by the board of directors on February 27, 2004.
  Our
        Nominating and Corporate Governance Committee is currently made up of Greg
        A.
        Thompson, Darrell Parlee and Dion Burkard The Nominating and Corporate
        Governance Committee is governed by the Nominating and Corporate Governance
        Committee Charter adopted by the board of directors on February 27,
        2004.
  Our
        Compensation Committee is currently made up of Greg A. Thompson, Darrell
        Parlee
        and Dion Burkard The Compensation Committee is governed by the Compensation
        Committee Charter adopted by the board of directors on February 27,
        2004.
  *Family
        Relationships*
  There
        are
        no family relationships between any of our directors or executive officers.
  *Involvement
        in Certain Legal Proceedings*
  Other
        than as discussed below, none of our directors, executive officers, promoters
        or
        control persons has been involved in any of the following events during the
        past
        five years:
  1.
        any
        bankruptcy petition filed by or against any business of which such person
        was a
        general partner or executive officer either at the time of the bankruptcy
        or
        within two years prior to that time;
  2.
        any
        conviction in a criminal proceeding or being subject to a pending criminal
        proceeding (excluding traffic violations and other minor offences);
  3.
        being
        subject to any order, judgment, or decree, not subsequently reversed, suspended
        or vacated, of any court of competent jurisdiction, permanently or temporarily
        enjoining, barring, suspending or otherwise limiting his involvement in any
        type
        of business, securities or banking activities; or
  4.
        being
        found by a court of competent jurisdiction (in a civil action), the Commission
        or the Commodity Futures Trading Commission to have violated a federal or
        state
        securities or commodities law, and the judgment has not been reversed,
        suspended, or vacated.
  *Audit
        Committee Financial Expert*
  Our
        Board
        of Directors has determined that it does not have a member of its audit
        committee that qualifies as an "audit committee financial expert" as defined
        in
        Item 401(e) of Regulation S-B, and is "independent" as the term is used in
        Tem
        7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as
        amended.
  40
  We
        believe that the members of our Board of Directors are collectively capable
        of
        analyzing and evaluating our financial statements and understanding internal
        controls and procedures for financial reporting. In addition, we believe
        that
        retaining an independent director who would qualify as an "audit committee
        financial expert" would be overly costly and burdensome and is not warranted
        in
        our circumstances given the early stages of our development and the fact
        that we
        have not generated significant revenues to date.
  *Section
        16(a) Beneficial Ownership Compliance*
  Section
        16(a) of the Securities Exchange Act requires our executive officers and
        directors, and persons who own more than 10% of our common stock, to file
        reports regarding ownership of, and transactions in, our securities with
        the
        Securities and Exchange Commission and to provide us with copies of those
        filings. Based solely on our review of the copies of such forms received
        by us,
        or written representations from certain reporting persons, we believe that
        during fiscal year ended December 31, 2005, all filing requirements applicable
        to its officers, directors and greater than ten percent beneficial owners
        were
        complied with.
  *Code
        of Ethics*
  Effective
        February 27, 2004, our company's board of directors adopted a Code of Business
        Conduct and Ethics that applies to, among other persons, members of our Board
        of
        Directors, our company's officers including our president (being our principal
        executive officer) and our company's chief financial officer (being our
        principal financial and accounting officer), contractors, consultants and
        advisors. As adopted, our Code of Business Conduct and Ethics sets forth
        written
        standards that are designed to deter wrongdoing and to promote:
  (1)
        honest and ethical conduct, including the ethical handling of actual or apparent
        conflicts of interest between personal and professional
        relationships;
  (2)
        full,
        fair, accurate, timely, and understandable disclosure in reports and documents
        that we file with, or submit to, the Securities and Exchange Commission and
        in
        other public communications made by us;
  (3)
        compliance with applicable governmental laws, rules and
        regulations;
  (4)
        the
        prompt internal reporting of violations of the Code of Business Conduct and
        Ethics to an appropriate person or persons identified in the Code of Business
        Conduct and Ethics; and
  (5)
        accountability for adherence to the Code of Business Conduct and
        Ethics.
  Our
        Code
        of Business Conduct and Ethics requires, among other things, that all of
        our
        company's personnel shall be accorded full access to our president and secretary
        with respect to any matter which may arise relating to the Code of Business
        Conduct and Ethics. Further, all of our company's personnel are to be accorded
        full access to our company's board of directors if any such matter involves
        an
        alleged breach of the Code of Business Conduct and Ethics by our Company
        officers.
  41
  In
        addition, our Code of Business Conduct and Ethics emphasizes that all employees,
        and particularly managers and/or supervisors, have a responsibility for
        maintaining financial integrity within our company, consistent with generally
        accepted accounting principles, and federal, provincial and state securities
        laws. Any employee who becomes aware of any incidents involving financial
        or
        accounting manipulation or other irregularities, whether by witnessing the
        incident or being told of it, must report it to his or her immediate supervisor
        or to our company's president or secretary. If the incident involves an alleged
        breach of the Code of Business Conduct and Ethics by the president or secretary,
        the incident must be reported to any member of our board of directors. Any
        failure to report such inappropriate or irregular conduct of others is to
        be
        treated as a severe disciplinary matter. It is against our company policy
        to
        retaliate against any individual who reports in good faith the violation
        or
        potential violation of our company's Code of Business Conduct and Ethics
        by
        another.
  Our
        Code
        of Business Conduct and Ethics is filed herewith with the Securities and
        Exchange Commission as Exhibit 14.1 to this annual report. We will provide
        a
        copy of the Code of Business Conduct and Ethics to any person without charge,
        upon request. Requests can be sent to: Altus Explorations, Inc., Suite 100,
        8900
        Germantown Road, Olive Branch, Mississippi 38654.
  **Item
                  10.**
              **Executive
                  Compensation.**
  The
        following table summarizes the compensation of key executives during the
        last
        three complete fiscal years. No other officers or directors received annual
        compensation in excess of $100,000 during the last three complete fiscal
        years.
 SUMMARY
                    COMPENSATION TABLEAnnual
                    Compensation
                Long
                    Term Compensation(1)Awards
                PayoutsName
                    and Principal
                  Position
                Year
                Salary
                Bonus
                Other
                  Annual
                  Compen-
                  sation(1)
                Securities
                  Underlying
                  Options/
                  SARs
                  Granted
                Restricted
                  Shares
                    or
                  Restricted
                  Share
                  Units
                LTIP
                  Payouts
                All
                    Other
                  Compen-
                  sationGreg
                    Thompson(2)
                  President,
                    Secretary
                  Director
                2005
                  2004
                  2003
                $Nil
                  $Nil
                  $Nil
                Nil
                  Nil
                  Nil
                Nil
                  Nil
                  Nil
                Nil
                  100,000(3)
                  Nil
                Nil
                  Nil
                  Nil
                Nil
                  Nil
                  Nil
                Nil
                  Nil
                  NilDarrell
                    Parlee(4)
                  Treasurer
                    and Director
                2005
                  2004
                  2003
                $11,450
                  $25,941
                  $Nil
                $Nil
                  $Nil
                  $Nil
                Nil
                  Nil
                  Nil
                Nil
                  100,000(5)
                  Nil
                Nil
                  Nil
                  Nil
                Nil
                  Nil
                  Nil
                Nil
                  Nil
                  Nil
  (1) The
        value
        of perquisites and other personal benefits, securities and property for the
        Named Executive Officers that do not exceed the lesser of $50,000 or 10%
        of the
        total of the annual salary and bonus is not reported herein.
  (2) Greg
        Thompson became a director on November 18, 2005 and our president on February
        1,
        2006.
  (3) Greg
        Thompson was granted stock options to purchase up to 100,000 common shares
        of
        our company on November 19, 2004. The options are exercisable at a price
        of
        $0.425 per share until November 19, 2014. The options are fully vested as
        of
        December 31, 2005.
  (4) Darrell
        Parlee became our treasurer on June 17, 2005 and a director on February 3,
        2006.
  (5) Darrell
        Parlee was granted stock options to purchase up to 100,000 common shares
        of our
        company on November 19, 2004. The options are exercisable at a price of $0.425
        per share until November 19, 2014. The options are fully vested as of December
        31, 2005.
  *Employment/Consulting
        Agreements*
  We
        have
        consulting agreements with certain former officers and directors to provide
        services to company as required at rates to be agreed. .
  *Long-Term
        Incentive Plans*
  There
        are
        no arrangements or plans in which we provide pension, retirement or similar
        benefits for directors or executive officers, except that our directors and
        executive officers may receive stock options at the discretion of our board
        of
        directors. We do not have any material bonus or profit sharing plans pursuant
        to
        which cash or non-cash compensation is or may be paid to our directors or
        executive officers, except that stock options may be granted at the discretion
        of our board of directors.
  42
  We
        have
        no plans or arrangements in respect of remuneration received or that may
        be
        received by our executive officers to compensate such officers in the event
        of
        termination of employment (as a result of resignation, retirement, change
        of
        control) or a change of responsibilities following a change of control, where
        the value of such compensation exceeds $60,000 per executive
        officer.
  *Stock
        Option Plan*
  On
        January 28, 2004 we established a stock option plan pursuant to which 5,483,040
        common shares were reserved for issuance.
  Stock
        options become exercisable at dates determined by the Board of Directors
        at the
        time of granting the option and have initial terms of ten years.
  *Stock
        Options/SAR Grants*
  During
        the year ended December 31, 2005, no options were granted to directors or
        executive officers. During the year ended December 31, 2004 we granted the
        following stock options to our current and former directors and executive
        officers:
 Options/SAR
        Grants in Year-Ended December 31, 2004
 Name
              Number
                  of
                Securities
                Underlying
                Options/
                SARs
                Granted
                (#)
              %
                  of Total
                Options/
                SARs
                Granted
                  to
                Employees
                in
                  Fiscal
                Year(1)
              Exercise
                Price
                ($/Share)
              Expiration
                  DateGreg
                  Thompson
              100,000
              2.31%
              $0.425
              November
                  19, 2014Darrell
                  Parlee
              100,000
              2.31%
              $0.425
              November
                  19, 2014Milton
                  Cox
              1,175,000
              27.17%
              $0.425
              November
                  19, 2014Donald
                  Sytsma
              1,175,000
              27.17%
              $0.425
              November
                  19, 2014Bassam
                  Nastat
              1,175,000
              27.17%
              $0.425
              November
                  19, 2014
 
 (1) The
        denominator (of 4,325,000) was arrived at by calculating the net total number
        of
        new options awarded to directors, officers, employee and consultants during
        the
        year ended December 31, 2004. There were 800,000 stock options granted to
        non-employees during the year ended December 31, 2004.
  There
        were no stock options exercised during the year ended December 31,
        2005.
  In
        anticipation of the adoption of FAS 123(R) for the Company’s calendar year
        ending December 31, 2006, the Board of Directors approved the vesting of
        all
        issued and outstanding stock options issued under the 2004 Stock Option Plan
        as
        of December 30, 2005.
  *Directors
        Compensation*
  We
        reimburse our directors for expenses incurred in connection with attending
        board
        meetings but did not pay director's fees or other cash compensation for services
        rendered as a director in the year ended December 31, 2004.
  We
        have
        no present formal plan for compensating our directors for their service in
        their
        capacity as directors, although in the future, such directors are expected
        to
        receive compensation and options to purchase shares of common stock as awarded
        by our board of directors or (as to future options) a compensation committee
        which may be established in the future. Directors are entitled to reimbursement
        for reasonable travel and other out-of-pocket expenses incurred in connection
        with attendance at meetings of our board of directors. The board of directors
        may award special remuneration to any director undertaking any special services
        on behalf of our company other than services ordinarily required of a director.
        Other than indicated in this annual report, no director received and/or accrued
        any compensation for his or her services as a director, including committee
        participation and/or special assignments.
  43
  *Report
        on Executive Compensation*
  Our
        compensation program for our executive officers is administered and reviewed
        by
        our board of directors. Historically, executive compensation consists of
        a
        combination of base salary and bonuses. Individual compensation levels are
        designed to reflect individual responsibilities, performance and experience,
        as
        well as the performance of our company. The determination of discretionary
        bonuses is based on various factors, including implementation of our business
        plan, acquisition of assets, development of corporate opportunities and
        completion of financing.
  **Item
                  11.**
              **Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters.**
  *Beneficial
        Ownership*
  The
        following table sets forth, as of March 31, 2006, certain information with
        respect to the beneficial ownership of our common shares by each shareholder
        known to us to be the beneficial owner of 5% of our common shares, and by
        each
        of our officers and directors. Each person has sole voting and investment
        power
        with respect to the common shares, except as otherwise indicated. Beneficial
        ownership consists of a direct interest in the common shares, except as
        otherwise indicated.
  
 Name
                  and Address of
                Beneficial
                  Owner
              Amount
                  and Nature of
                Beneficial
                  Ownership
              Percentage
                of
                  Class(1)Milton
                  Cox
                7227
                  Winchester Road, #258
                Memphis,
                  TN 38118
                USA
              8,931,137(2)
              19.18%Bassam
                  Nastat
                5831
                  Winch Street
                Burnaby,
                  BC V5B 2J4
                Canada
              5,771,344
              12.39%Greg
                  A. Thompson
                11123
                  Tupper Lake Drive
                Houston,
                  TX 77042
                USA
              350,000
              NilDarrell
                  Parlee
                4801
                  Woodway Drive #305W
                Houston,
                  TX 77056
              100,000
              NilDion
                  Burkard
                2003
                  Charlotte Estates Drive
                Austin,
                  TX 78744
              Nil
              NilSterling
                  Management of Belize
                5
                  Park Avenue
                Orange
                  Walk Town
                Belize
                  City, Belize
              4,000,000
              8.59Directors
                  and Officers
                (as
                  a group)
              450,000
              .97%
 
 (1) Based
        on
        46,572,792 shares outstanding as of March 31, 2006 and, as to a specific
        person,
        shares issuable pursuant to the conversion or exercise, as the case may be,
        of
        currently exercisable or convertible debentures, share purchase warrants
        and
        stock options.
 (2) Of
        these
        shares, 2,931,137 are owned by CodeAmerica Investments, LLC, a company wholly
        owned by Mr. Cox.
  44
  *Changes
        in Control*
  We
        are
        unaware of any contract or other arrangement the operation of which may at
        a
        subsequent date result in a change in control of our company.
  **Item
                  12.**
              **Certain
                  Relationships and Related
                  Transactions.**
  Other
        than as described under the heading "Executive Compensation", or as set forth
        below, there are no material transactions with any of our directors, officers
        or
        control person that have occurred during the last fiscal year.
 
 In
        October 2003, Altus acquired a 10% working interest in the T.E. Lane gas
        unit
        located in Freestone County, Texas from CodeAmerica Investments, L.L.C.
        ("CodeAmerica"), a company owned by the Director, CEO and President of Altus
        on
        the date of the acquisition, for a price of $200,000. In March 2004, Altus
        increased its working interest in the T.E. Lane gas unit to 20% and acquired
        a
        100% working interest in offsetting acreage to the producing T.E. Lane gas
        unit.
        All interests are subject to a 28% royalty burden on production.
 
 The
        purchase was made from CodeAmerica at fair market value, based on known
        technical and economic parameters at the time of acquisition, which was
        determined to be $4,187,000 through utilization of discounted cash flow
        analyses, applying a 10% discount rate to proved developed producing reserves
        and a 16% discount rate for proved undeveloped reserves. The purchase was
        affected through the issuance of 4,040,726 common shares valued at $1.036
        per
        common share at the time of acquisition. See Note 6.to the Financial
        Statements.
 
 On
        January 1, 2005, Altus entered into a Loan Agreement with CodeAmerica
        Investments LLC (“CodeAmerica”), a company owned by our former President, Milton
        Cox, for CodeAmerica to advance funds to Altus to meet its operating and
        working
        capital requirements. The loan provides for an interest rate of 10% per annum.
        The Loan Agreement provides that the loan will be due within five days of
        demand
        for payment by CodeAmerica, and is secured by all present and after acquired
        assets of the Company that are not otherwise pledged or used as collateral
        for
        other financing transactions of the Company.
  The
        Company’s oil and gas investment in Kansas Lake Creek Prospects was transferred
        to CodeAmerica as of December 31, 2005 in satisfaction of the outstanding
        note
        payable due by Altus to CodeAmerica together with accrued interest which
        totalled $263,932 at year end. All borrowings under the CodeAmerica note
        were
        originally secured by all present and after acquired assets of the Company
        that
        were not otherwise pledged or used as collateral for other financing
        transactions of the Company. Altus borrowings from CodeAmerica under the
        note
        were the primary source of funding for Altus’ investment in the Lake Creek
        Prospect. The year end 2005 standardized measure of discounted future net
        cash
        flows for the Company’s interest in the Kansas Lake Creek Prospect totaled
        approximately $15,000.
 
  We
        have
        consulting agreements with certain former officers and directors to provide
        services to company as required at rates to be agreed. .
  None
        of
        our directors, executive officers, future directors, 5% shareholders, or
        any
        members of the immediate families of the foregoing persons have been indebted
        to
        us during the last fiscal year or the current fiscal year in an amount exceeding
        $60,000.
  **Item
                  13.**
              **Exhibits.**
  *Exhibits
        required by Item 601 of Regulation S-B*
  **(3)** **Articles
        of Incorporation and Bylaws**
  3.1 Articles
        of Incorporation (incorporated by reference to our SB2 Registration Statement
        filed January 29, 2002).
  45
  3.2 Bylaws
        (incorporated by reference to our SB2 Registration Statement filed January
        29,
        2002).
  3.3 Certificate
        of Forward Stock Split filed with Nevada Secretary of State on November 6,
        2003.
        (incorporated by reference from our Annual Report on Form 10-KSB, filed on
        April
        13, 2004)
  3.4 Certificate
        of Change Pursuant to NRS 78.209 filed with the Nevada Secretary of State
        on
        February 2, 2004. (incorporated by reference from our Annual Report on Form
        10-KSB, filed on April 13, 2004)
  **(10)** **Material
        Contracts**
  10.1 Letter
        of
        Intent between Orbit Energy, LLC and Altus Explorations Inc. dated October
        22,
        2003 (incorporated by reference from our Current Report on Form 8-K, filed
        on
        November 6, 2003 and amended on November 26, 2003).
  10.2 Assignment
        of Bill and Sale between CodeAmerica Investments, LLC and Altus Explorations
        Inc. dated October 22, 2003 (incorporated by reference from our Current Report
        on Form 8-K, filed on November 6, 2003 and amended on November 26,
        2003).
  10.3 2004
        Stock Option Plan (incorporated by reference from our Registration Statement
        of
        Form S-8, filed on February 27, 2004)
  10.4 Lease
        Purchase and Sale Agreement between CodeAmerica Investments, LLC and Altus
        Explorations Inc. dated March 31, 2004. (incorporated by reference from our
        Current Report on Form 8-K, filed on April 13, 2004)
  10.5 Convertible
        Loan Agreement between Excalibur Investment Corp. and Altus Explorations
        Inc.
        dated September 20, 2004. (incorporated by reference from our Current Report
        on
        Form 8-K, filed on September 29, 2004)
  10.6 Amendment
        to the Lake Creek Prospect Farmout Agreement with Orbit Energy LLC.
        (incorporated by reference from our Current Report on Form 8-K, filed on
        December 23, 2004)
  10.7 Loan
        Agreement between Altus Explorations Inc. and CodeAmerica Investments LLC
        dated
        February 4, 2005 (incorporated by reference from our Current Report on Form
        8-K
        filed on February 8, 2004)
  10.8 Letter
        Agreement between Altus Explorations, Inc. and CodeAmerica Investments LLC
        dated
        November 9, 2005 reference Altus’ “carried” working interest in Oakcrest
        Prospect, Wharton County, Texas.
  10.9 Letter
        Agreement between Altus Explorations, Inc. and CodeAmerica Investments LLC
        dated
        April 14, 2006 reference settlement and full satisfaction of principal and
        interest amounts due by Altus to CodeAmerica pursuant to its Loan Agreement
        through the transfer of Altus’ interests in the Kansas Lake Creek Prospect to
        CodeAmerica.
  **(14)** **Code
        of Ethics**
  14.1 Code
        of
        Business Conduct and Ethics (incorporated by reference from our Annual Report
        on
        Form 10-KSB, filed on April 13, 2004)
  **(31)** **Section
        302 Certifications**
  31.1 Certification
        of Greg Thompson
  31.2 Certification
        of Darrell Parlee
  **(32)** **Section
        906 Certification**
  32.1 Certification
        of Greg Thompson
  32.2 Certification
        of Darrell Parlee
  46
  **Item
                  14.**
              **Principal
                  Accountant Fees and
                  Services**
  *Audit
        Fees*
  The
        aggregate fees billed by Malone & Bailey, PC for professional services
        rendered for the audit of our annual financial statements included in our
        Annual
        Report on Form 10-KSB for the fiscal year ended December 31, 2005 and 2004
        were
        $15,000 and $6,000, respectively.
  The
        aggregate fees billed by Lopez, Blevins, Bork & Associates, L.L.P for
        professional services rendered for the audit of our annual financial statements
        included in our Annual Report on Form 10-KSB for the fiscal year ended December
        31, 2004 were approximately $12,500.
  *Audit
        Related Fees-Zero*
  *Tax
        Fees-Zero*
   We
        do not
        use Malone & Bailey, PC for financial information system design and
        implementation. These services, which include designing or implementing a
        system
        that aggregates source data underlying the financial statements or generates
        information that is significant to our financial statements, are provided
        internally or by other service providers. We do not engage Malone & Bailey,
        PC to provide compliance outsourcing services.
  Effective
        May 6, 2003, the Securities and Exchange Commission adopted rules that require
        that before Malone & Bailey, PC is engaged by us to render any auditing or
        permitted non-audit related service, the engagement be:
  ·
              approved
                  by our audit committee (which consists of entire Board of Directors);
                  or
  ·
              entered
                  into pursuant to pre-approval policies and procedures established
                  by the
                  audit committee, provided the policies and procedures are detailed
                  as to
                  the particular service, the audit committee is informed of each
                  service,
                  and such policies and procedures do not include delegation of the
                  audit
                  committee's responsibilities to
                  management.
  The
        audit
        committee pre-approves all services provided by our independent auditors.
        The
        pre-approval process has just been implemented in response to the new rules,
        and
        therefore, the audit committee does not have records of what percentage of
        the
        above fees were pre-approved. However, all of the above services and fees
        were
        reviewed and approved by the audit committee either before or after the
        respective services were rendered.
  The
        audit
        committee has considered the nature and amount of fees billed by Malone &
Bailey, PC and believes that the provision of services for activities unrelated
        to the audit is compatible with maintaining Malone & Bailey, PC's
        independence.
  47
  **SIGNATURES**
  Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the registrant has duly caused this report to be signed on its behalf
        by
        the undersigned, thereunto duly authorized.
  **ALTUS
        EXPLORATIONS INC.**
   By:
        /s/
        Greg Thompson
 Greg
        Thompson, President, Secretary and Director
  Date:
        April 17, 2006
  
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report has
        been
        signed below by the following persons on behalf of the registrant and in
        the
        capacities and on the dates indicated.
  By:/s/
        Greg Thompson
 Greg
        Thompson, President Secretary and Director
 (Principal
        Executive Officer)
    By:
        /s/
        Darrell Parlee
 Darrell
        Parlee, Treasurer and Director
 (Principal
        Financial Officer and Principal Accounting Officer)
  
 Date:
        April 17, 2006